[Congressional Record Volume 145, Number 96 (Thursday, July 1, 1999)]
[House]
[Pages H5216-H5291]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL SERVICES ACT OF 1999
The SPEAKER pro tempore (Mr. LaHood). Pursuant to House Resolution
235 and rule XVIII, the Chair declares the House in the Committee of
the Whole House on the State of the Union for the consideration of the
bill, H.R. 10.
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In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the consideration of the bill
(H.R. 10) to enhance competition in the financial services industry by
providing a prudential framework for the affiliation of banks,
securities firms, and other financial service providers, and for other
purposes, with Mrs. Emerson in the chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the rule, the bill is considered as having
been read the first time.
Under the rule, the gentleman from Iowa (Mr. Leach), the gentleman
from New York (Mr. LaFalce), the gentleman from Virginia (Mr. Bliley),
and the gentleman from Michigan (Mr. Dingell) each will control 22\1/2\
minutes.
The Chair recognizes the gentleman from Iowa (Mr. Leach).
Mr. LEACH. Madam Chairman, I yield myself such time as I may consume.
(Mr. LEACH asked and was given permission to revise and extend his
remarks.)
Madam Chairman, I realize that feelings are imperfect with relation
to the rule debate. For all the frustration on the minority side, it is
more than matched by this Member whose advice was disregarded by the
Rules Committee on key amendments. Nonetheless the big picture is that
this is a good bill, good for individual citizens and the economy at
large. I ask all my colleagues to vote on the quality of the end
product, not the process of consideration which I acknowledge has been
imperfect.
In this regard, let me stress that the big picture is that financial
modernization legislation will save the public approximately $15
billion a year. It will provide increased services to individuals and
firms, particularly those in less comprehensively served parts of the
country. It will also allow U.S. financial companies to compete more
fully abroad.
The economy on a global basis is changing and we must be prepared to
lead market developments, rather than lose market share. In this
effort, the fundamental precept of the bill is to end the arbitrary
constraints on commerce implicit in the 65-year-old Glass-Steagall law.
Competition is the American way and enhanced competition is the
underlying precept of this bill.
In this regard, I'd like to address the issues of bigness and of
privacy. With regard to conglomeration which is proceeding at a pace
with which I am
[[Page H5217]]
deeply uncomfortable, it should be understood that the big are getting
bigger from the top down, utilizing regulatory fiat. What this bill
does is provide a modern regulation framework for change. It empowers
all equally. Smaller institutions will be provided the same competitive
tools that currently are only available to a few. Indeed, in a David
and Goliath world, H.R. 10 is the community bankers and independent
insurance agents' slingshot.
Finally, with regard to privacy, let me stress no financial services
bill in modern history has gone to this floor with stronger privacy
provisions. Importantly, pretext calling--the idea that someone can
call a financial institution and obtain your financial information--is
now effectively outlawed; medical records are protected; and
individuals are given powerful new rights to prevent financial
institutions from transferring or selling information to third parties.
Here, let me stress, if Congress subsequently passes more
comprehensive medical records provisions, they will be allowed to
bolster or supercede these safeguards and if HHS promulgates
regulations in this area they would augment the provisions of this
bill. Nothing in this act is intended to shackle Executive Branch
actions in this area.
In conclusion, I would like to thank my Democratic colleagues on the
Banking Committee and, in particular, John LaFalce and Bruce Vento, and
John Dingell of the Commerce Committee, whose support I have been
appreciative in the past and whose dissent I respect today; also my
friends Tom Bliley, Mike Oxley, David Dreier, John Boehner and so many
others, like Marge Roukema, Sue Kelly, Pat Toomey and Rick Lazio, whose
leadership has been so important to bringing this bill to the floor.
The legislation before the House is historic win-win-win legislation,
updating America's financial services system for the 21st Century.
It's a win for consumers who will benefit from more convenient and
less expensive financial services, from major consumer protection
provisions and from the strongest financial and medical privacy
protections ever considered by the Congress.
It's a win for the American economy by modernizing the financial
services industry and savings an estimated $15 billion in unnecessary
costs.
And, it's a win for America's international competition position by
allowing U.S. companies to compete more effectively for business around
the world and create more financial services jobs for Americans.
It would be an understatement to say that this has not been an easy,
nor a quickly-produced piece of legislation to bring before the House.
For many of the 66 years since the Congress enacted the Glass-
Steagall Act in 1933 to separate commercial banking from investment
banking, there have been proposals to repeal the act. The Senate has
thrice passed repeal legislation and last year the House approved the
105th Congress version of H.R. 10.
But, this year it appears that we may be closer than ever before to
final passage. The bill before us today is the result of months and
months of tough negotiation and compromise; among different
congressional committees, different political parties, different
industrial groupings and different regulators. No single individual or
group got all--or even most--of what it wanted. Equity and the public
interest have prevailed.
It should be remembered that while the work of Congress inevitably
involves adjudicating regulatory turf battles or refereeing industrial
groups fighting for their piece of the pie, the principal work of
Congress is the work of the people--to ensure that citizens have access
to the widest range of products at the lowest possible price; that
taxpayers are not put at risk; that large institutions are able to
compete against their larger international rivals; and that small
institutions can compete effectively against big ones.
We address this legislation in the shadow of major, ongoing changes
in the financial services sector, largely the result of decisions by
the courts and regulators, who have stepped forward in place of
Congress. Many of us have concern about certain trends in finance.
Whether one likes or dislikes what is happening in the marketplace, the
key is to ensure that there is fair competition among industry groups
and protection for consumers. In this regard, this bill provides for
functional regulation with state and federal bank regulators overseeing
banking activities, state and federal securities regulators governing
securities activities and the state insurance commissioners looking
over the operations of insurance companies and sales.
The benefits to consumers in this bill cannot be stressed more.
First, they will gain in improved convenience. This bill allows for
one-stop shopping for financial services with banking, insurance and
securities activities being available under one roof.
Second, consumers will benefit from increased competition and the
price advantages that competition produces.
Third, there are increased protections on insurance and securities
sales, a required disclosure on ATM machines and screens of bank fees
and a requirement that the Federal Reserve Board hold public hearings
on large financial services merger proposals.
Fourth, the Federal Home Loan Bank reform provisions expand the
availability of credit to farmers and small businesses and for rural
and low-income community economic development projects.
Fifth, the bill also contains major consumer privacy protections
making so-called pretext calling, in which a person uses fraudulent
means to obtain private financial information of another person, a
federal crime punishable by up to five years in jail and a fine of up
to $250,000; would wall off the medical records held by insurance
companies from transfer to any other party; and requires banks to
disclose their privacy policies to customers.
A bipartisan amendment developed by members of the Banking, Commerce
and Rules Committee will further enhance these protections and I urge
its adoption.
In closing, I'd like to emphasize again the philosophic underpinnings
of this legislation. Americans have long held concerns about bigness in
the economy. As we have seen in other countries, concentration of
economic power does not automatically lead to increased competition,
innovation or customer service.
But the solution to the problem of concentration of economic power is
to empower our smaller financial institutions to compete against large
institutions, combining the new powers granted in this legislation with
their personal service and local knowledge in order to maintain and
increase their market share.
For many communities, retaining their local, independent bank depends
upon granting that bank the power to compete against mega-giants which
are being formed under the current regulatory and legal framework.
H.R. 10 provides community banks with the tools to compete, not only
against large mega-banks but also against new technologies such as
Internet banking. Banks which stick with offering the same old accounts
and services in the same old ways will find their viability threatened.
Those that innovate and adapt under the provisions of this bill will be
extraordinarily well positioned to grow and serve their customer base.
Large financial institutions can already offer a variety of services.
But community banks are usually not large enough to utilize legal
loopholes like Section 20 affiliates or the creation of a unitary
thrift holding company to which large financial institutions--
commercial as well as financial--have turned.
By bolstering the viability of community-based institutions and
providing greater flexibility to them, H.R. 10 increases the percentage
of dollars retained in local communities. Community institutions are
further protected by a small, but important provision that prohibits
banks from setting up ``deposit production offices'' which gather up
deposits in communities without lending out money to people in the
community.
Additionally, the bill before us strengthens the Community
Reinvestment Act by making compliance with the act a condition for a
bank to affiliate with a securities firm or securities company. CRA is
also expanded to a newly created entity called Wholesale Financial
Institutions.
One of the most controversial provisions in H.R. 10 is the provision
in Title IV which prohibits commercial entities from establishing
thrifts in the future. Under current law, commercial entities are
already prohibited from buying or owning commercial banks. This
restriction between commercial banking and commerce is not only
maintained in H.R. 10 but extended to restrict future commercial
affiliations with savings associations.
The reason this restriction on commerce and banking is being expanded
is several fold. First, savings associations that once were exclusively
devoted to providing housing loans, have become more like banks,
devoting more of their assets to consumer and commercial loans. Hence
the appropriateness for comparability between the commercial bank and
thrift charter is self-evident.
Second, this provision must be viewed with the history of past
legislative efforts affecting the banking and thrift industries. The
S&L industry has tapped the U.S. Treasury for $140 billion to clean up
the 1980s S&L crisis. In 1996, savings associations received a multi-
billion dollar tax break to facilitate their conversion to a bank
charter. Also, in 1996, the S&Ls tapped the banking industry for $6 to
$7 billion to help pay over the next 30 years for
[[Page H5218]]
their FICO obligations, that part of the S&L bailout costs that
remained with the thrift industry.
During this time period, Congress has liberalized the qualified
thrift lending test and the restrictions on the Federal savings
association charter. These legislative changes are in addition to the
numerous advantages that the industry has historically enjoyed, such as
the broad preemption rights over state laws and more liberal branching
laws.
H.R. 10 continues the Congressional grant of benefits to the thrift
industry by repealing the SAIF special reserve, providing voluntary
membership by Federal savings associations in the Federal Home Loan
Bank System, allowing state thrifts to keep the term ``Federal'' in
their names, and allowing mutual S&L holding companies to engage in the
same activities as stock S&L holding companies.
Opponents of this provision correctly argue that commercial companies
that have acquired thrifts (so-called unitary thrift holding companies)
before and after the S&L debacles of the 1980s have not, for the most
part, caused taxpayer losses. However, the Federal deposit insurance
fund that was bailed out by the taxpayers applied to the entire thrift
industry including the unitary thrift holding companies. Three years
ago some $6 billion to $7 billion in thrift industry liabilities left
over from cleaning up the S&Ls were transferred to the commercial
banking industry with the understanding that sharing liabilities would
be matched by ending special provisions. This is another reason to
provide comparable regulation.
It is with this history and the assumption that decisions in this
bill are made in the context of a legislative continuum that the
provision in the bill was added to not only restrict the establishment
of new unitary thrift holding companies, but also to require that
commercial entities may not buy a thrift from an existing grandfathered
company without first getting Federal Reserve Board approval.
As we all know, there are complex issues involved in this
legislation, and there will be differing judgments by Members. One
thing we all may agree upon, however, is that Congress needs to
reassert its Constitutional role in determining what should be the laws
governing financial services, instead of allowing the regulators and
courts to usurp this responsibility.
If Congress turns its back on financial services modernization, we
should not fool ourselves that rapid evolution in the fields of
banking, securities and insurance will cease. It will not. Financial
services modernization will take place with or without Congressional
approval. Without this legislation, however, changes in financial
services will continue unabated, but they will take place in an ad hoc
manner through the courts and through regulatory fiat, and will not be
subject to the safeguards and prudential parameters established in this
legislation.
Now is the time for Congress, to step up to the challenge of
modernizing our nation's financial services sector for the 21st
century, to ensure that it remains competitive internationally, that it
is stable and poses the least possible threat to the taxpayer, and that
it provides quality service to all our citizens and communities.
Madam Chairman, I reserve the balance of my time.
Mr. LaFALCE. Madam Chairman, I yield myself 3 minutes.
(Mr. LaFALCE asked and was given permission to revise and extend his
remarks.)
Mr. LaFALCE. Madam Chairman, first, I want to thank the Chairman of
the Committee on Banking and Financial Services, the gentleman from
Iowa (Mr. Leach), for working collegially with so many of us on the
Democratic side of the aisle in order to produce a bipartisan bill out
of the Committee on Banking and Financial Services that could be signed
by the President and enacted into law. Each side had to give and take,
each side had to make tremendous amount of concessions, but we did in
order to advance the public interest and financial services
modernization.
{time} 1645
We produced a bill with a 51-8 vote, 21-6 on the Democratic side of
the aisle. The Democrats voted for it, however, in large part because
we were able to retain the strongest community reinvestment provisions,
because we were able to have strong consumer protection before and
beyond that, most especially provisions regarding redlining in the
insurance industry. Once that eroded, so too did a lot of the
Democratic support. And that is unfortunate. It is unfortunate.
There are other provisions that we are concerned about, too, and that
is the medical privacy language of the gentleman from Iowa (Mr.
Ganske). I am hopeful that if this bill passes those concerns that we
have can be dealt with in conference, and I look forward to a colloquy
with the gentleman from Iowa (Mr. Ganske) regarding his disposition on
that.
There are some amendments that have been offered that I do not think
should have been allowed that would create severe difficulties for me,
in particular, the amendment of the gentleman from Texas (Mr. Paul)
which would eviscerate the ability of law enforcement agencies to
enforce our anti-money-laundering statutes. The FBI is adamantly
opposed to that.
I also am adamantly opposed to the Bliley amendment that would be a
rip-off for the officers of mutual insurance companies at the expense
of policyholders. It would be a Federal intrusion on State law. It
would say to insurance officers, disregard your policyholders if they
want to convert. They are entitled to all the money, not their
policyholders. We must defeat the Bliley amendment if this bill is to
advance the way I would like it to advance.
I am hopeful that, at the conclusion of debate and at the conclusion
of the amendment process, we could advance to conference and then deal
with whatever problems are left in conference. But that remains to be
seen.
Mr. LaFALCE. Madam Chairman, I reserve the balance of my time.
Mr. BLILEY. Madam Chairman, I yield 5 minutes to the gentleman from
Ohio (Mr. Oxley), chairman of the Subcommittee on Finance and Hazardous
Material, the coach of our successful baseball team.
(Mr. OXLEY asked and was given permission to revise and extend his
remarks.)
Mr. OXLEY. Madam Chairman, I rise in support of H.R. 10, the
Financial Services Act of 1999.
This is indeed an historic occasion, something that many of us have
worked on for a number of years. As a matter of fact, this is by my
count the 10th time in the last 20 years that we have sought to bring
our financial laws into the modern world as we enter the 21st century.
So here is hoping that number 11 is the charm.
Building on the progress we made last year through the help of many
people that I see here on the floor, including our good friend, the
gentleman from Ohio (Mr. Boehner), the gentleman from Virginia
(Chairman Bliley), the gentleman from Iowa (Chairman Leach), the
gentleman from Michigan (Mr. Dingell), the gentleman from New York (Mr.
Towns) and others, that we passed this bill by one vote in the House.
I suspect this year it will be far different and it will be a large
vote, because the time has come for financial services modernization in
this Congress and indeed in this country.
We have arrived at a point where just about everybody, including
those on the opposite side of specific issues on the op-sub issue, for
example, agree that the country's financial regulations crafted during
the Depression years of the 1930s need to be brought up to date.
The Glass-Steagall Act has outlived its useful purpose. It now serves
only as the cause of inefficiency in the markets as our markets change
dramatically.
Madam Chairman, we have had a series of hearings, for example, in my
committee about what is going on with the securities industry and how
on-line brokerage has now become the most growing part of the
securities industry. That shows how things have changed in technology
and in markets and in consumer preference. And yet we continue to rely
on a 1930 statute known as Glass-Steagall that simply has outlived its
usefulness.
That means legislation that will provide for fair competition among
all players. And it also means not only modernizing the marketplace and
treating the consumer as the one who makes those kinds of decisions in
the marketplace to provide that consumer with a new array of services
and products, some products we probably have not even thought of or
that financial service institutions have not even thought of yet today
will be offered more and more to the consuming public and they are
going to be able to one-stop shop as they go into this financial
institution.
And ultimately it will not make any difference what it says on the
door because they are going to be able to buy
[[Page H5219]]
a wide variety of products in that area. And, yes, those functions will
be regulated by the regulators who know what that is all about. It is
called functional regulation. Or as chairman of the SEC Arthur Levitt
says, commonsense regulation in our marketplace is to protect the
consumer but not to constrict the marketplace so that people do not
have the ability to make decisions based on what is in their long-term
economic interest. It means legislation that will promote, not
jeopardize, the long-term stability of U.S. financial markets and the
interests of American taxpayers.
Americans are becoming increasingly active participants in our
booming securities markets and going on-line and investing, sometimes
around the clock, for their families' future, investing for their
education, for their children's education, investing for the future
that we have tried to encourage.
One of the frustrations, I guess, in our country over the years has
been that our savings rate has been far too low compared to some of our
other competing nations. This will give people the ability to make
long-term plans, to work with a financial institution that has the
ability for them to buy their banking products, to get their
securities, their 401(k), their savings, their insurance needs, all of
those, under one roof dealing with professionals that they trust and
that they know can provide them with the kind of economic security that
they have come to expect.
The change already taking place in the marketplace may make it
impossible for us to try Glass-Steagall reform a 12th time, and I would
implore the Members to understand that this may be our last really good
shot at bringing our laws up-to-date with what is happening in the
marketplace and what is happening with technology, and all of those
forces are now moving us so inextricably in that direction.
Because of the leadership of the gentleman from Iowa (Mr. Leach),
chairman of the Committee on Banking and Financial Services, because of
the leadership of the gentleman from Virginia (Mr. Bliley) chairman of
the Committee on Commerce, because of participation on the other side
of the aisle, it brings us here today.
Let us move forward. Let us support H.R. 10. Let us provide the kind
of modern financial institutions that all of us have come to expect.
Mr. DINGELL. Madam Chairman, I yield myself 4 minutes.
(Mr. DINGELL asked and was given permission to revise and extend his
remarks.)
Mr. DINGELL. Madam Chairman, this is a bad bill. We consider it under
a bad rule.
George Santayana said something which I thought was very interesting.
He said, ``He who does not learn from history is doomed to repeat it.''
It looks like this Congress is setting out to create exactly the same
situation which caused the 1929 crash. It looks like this Congress is
setting out to create the situation that caused the collapse of the
banks in Japan and Thailand by setting up op-subs and by setting up
monstrous conglomerates which will expose the American taxpayers and
American investors to all manner of mischief and to the most assured
economic calamity.
The bill is considered under a rule which does not afford either an
opportunity to offer all the amendments or to have adequate debate
thereof. But what does the bill do, among other things?
First all, it allows megamergers to create monstrous institutions
which could engage in almost any sort of financial action. It sets up
essentially, devices like the banks in Japan, which are in a state of
collapse at this time, banks in Korea and Thailand, which are in a
state of collapse, or banks in the United States, which could do
anything and which did anything and contributed in a massive way to the
economic collapse of this country in 1929 which was only cleared and
cured by World War II.
Some of the special abuses of this particular legislation need to be
noted. The Committee on Rules has stripped out an anti-redlining
provision which had been in the law and which is valuable, and it is
brazen and outrageous discrimination against women and minorities and
it sanctifies such actions by insurance companies and others within the
banks' financial holding companies which will be set up hereunder.
It attacks the privacy of American citizens. It allows unauthorized
dissemination of their personal financial information and records. It
guts the current protections for medical information now under State
law. And it hampers the ability of the Secretary of Health and Human
Services to adopt meaningful protections.
Every single health group in the United States and the AFL-CIO oppose
this provision because it guts the rights of Americans to know that
what they tell their doctor and what their doctor tells them is secure.
If we want to protect the security of our own financial records, we
should tremble at this bill. It contains laughable financial privacy
protections that tell a bank that it only has to disclose its privacy
policy if it happens to have one. In other words, if they are going to
give them the shaft, they should tell them. But they can do anything
they want in terms of the financial information which they give them
and which can be used to hurt them in their personal affairs.
The bill wipes out more than 1,700 essential State insurance laws
across the country. It creates no Federal regulator to fill the void.
So, as a result, their protections when they buy insurance are stripped
away.
Alan Greenspan, the chairman of the Federal Reserve, is properly
worried, and that should count for a lot. Let me read to my colleagues
what he said to the Committee on Commerce this year.
``I and my colleagues are firmly of the view that the long-term
stability of 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.'' And he goes on to state that he and his colleagues
``believe strongly that the operating subsidiary approach would damage
competition in and the vitality of our financial services industry and
poses serious risks for the American taxpayer.''
He noted that it creates a situation where banks and other financial
activities will be made too big to fail and that the taxpayers then
will be compelled to come in and bail them out.
So if my colleagues enjoyed the outrage of what the Committee on
Banking and Financial Services did to us on the savings and loan
reform, this, they should know, is a perfection of that. That cost us
about $500 billion. This, my colleagues can be assured, will cost us a
lot more.
I urge my colleagues to vote against this abominable legislation.
In case my colleagues have any questions about my views, I want to
clearly state for the record that I rise to condemn this bill. It is a
terrible piece of legislation and should cause Americans to quake at
the prospect of its passing.
If you value your civil rights, you should worry about this bill. The
Rules Committee stripped out an anti-redlining provision, offered by
our colleague Ms. Lee and agreed to by the Banking Committee. This
brazen act allows discrimination against women and minorities by
insurance companies within the bill's financial holding companies.
If you have had cancer or diabetes or depression or any other medical
condition that could affect your employment or lead to discrimination
against you, you should fear this bill. It contains a medical privacy
provision that actually sanctifies the unauthorized dissemination of
your personal medical information records. It guts many current
protections for medical information and hampers the ability of the
Secretary of Health and Human Services to adopt meaningful protections.
Legions of groups oppose this provision from the American Medical
Association to the AFL-CIO.
If you want to protect the privacy of your own personal financial
records, you should tremble at the prospect of this bill. The bill
contains laughable financial privacy protections that tell a bank to
disclose its privacy policy--if it has one. This bill deprives you of
the right to say no.
If you own insurance, you should worry if you bought it from a bank.
This bill wipes out more than 1,700 essential state insurance laws
across the country, with no federal regulator to fill the void.
If you are a taxpayer, you should recoil in horror at this bill. No
less an august person than Alan Greenspan is worried, and usually that
counts for a lot. Let me read to you what he said before the Commerce
Committee in April of this year:
I and my colleagues are firmly of the view that the long-
term stability of U.S. financial
[[Page H5220]]
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.
He reiterated these views to me on June 28 in a letter which I intend
to put into the Record, but I want to read just one part:
I and my colleagues on the Board believe strongly that the
operating subsidiary approach would damage competition in and
the vitality of our financial services industry and poses
serious risks for the American taxpayer. We have no doubt
that the holding company approach, adopted by the house last
year, passed by the Senate this year, and supported by each
previous Treasury and Administration for nearly 20 years, is
the prudent and safest way to modernize our financial
affiliation laws and does not sacrifice any of the benefits
of financial reform.
This bill greatly expands the authority of political appointees and
bureaucrats over banking and monetary policy. That worries Alan
Greenspan. It should worry all Americans.
In the earlier debate on the rule, several of my Republican
colleagues labeled our concerns as ``partisan.'' So be it! If the
Republicans want to accuse Democrats of caring about equal rights and
protection from discrimination under the Constitution, I'll proudly
stand with my Democratic colleagues. If the Republicans want to accuse
Democrats of standing for full and fair protection of Americans'
privacy rights, I'll proudly stand under that banner as well.
What I won't stand for is this abominable legislation. I support
responsible financial modernization. I do not support this bill. It is
a terrible piece of legislation and I urge the House to defeat it so we
can go back to the drawing board and write a good bill.
In closing, I would like to address an important technical matter and
explain the purpose of the Section 303 ``Functional Regulation of
Insurance'' reference to Section 13 of the Federal Reserve Act. That
reference is included to ensure that everyone that engages in the
business of insurance--including national banks selling insurance as
agents under the small-town sales provision commonly known as ``Section
92''--are subject to state regulation of those activities.
Some have argued that this reference is not meant to overrule the
Supreme Court's ruling in the Barnett Bank case. I want to make clear
that that statement is correct to the extent that the Commerce
Committee intended that all state functional regulation of the
insurance activities of financial institutions would be subject to the
preemption rules set forth in Section 104. Indeed, that is why there is
a specific reference to Section 104 at the end of Section 303. And
Section 104 incorporates the preemption standard articulated by the
Supreme Court in the Barnett Bank case and even specifically cites that
case.
The statement, however, is incorrect to the extent that it implies
that the Comptroller of the Currency remains free to issue his own set
of rules and regulations to govern small-town national bank insurance
sales activities. Although--as the Barnett Bank opinion recognizes--
Section 92 specifically authorizes the Comptroller to issue such
regulations, Section 303 makes clear that States are now the paramount
authority in the regulation of small-town national bank insurance sales
activities. Under Section 303, all state regulations of insurance sales
activities apply to small-town national bank insurance sales activities
under Section 92 unless those regulations are prohibited under the
Section 104 preemption standard.
Organizations Opposed to The Medical Records Provisions in H.R. 10
Physician Organizations
American Medical Association
American Psychiatric Association
American College of Surgeons
American College of Physicians/American Society of Internal
Medicine
American Academy of Family Physicians
American Psychological Association
Nurses Organizations
American Nurses Association
American Association of Occupational Health Nurses
Patient Organizations
National Breast Cancer Coalition
Consortium for Citizens with Disabilities/Privacy Working
Group
National Association of People with AIDS
AIDS Action
National Organization for Rare Disorders
National Mental Health Association
Myositis Association
Infectious Disease Society
Privacy/Civil Rights Organizations
Consumer Coalition for Health Privacy
American Civil Liberties Union
Center for Democracy and Technology
Bazwlon Center for Mental Health Law
Labor Organizations
AFL-CIO
American Federation of State, County and Municipal
Employees
Service Employees International Union
Senior and Family Organizations
American Association of Retired Persons
National Senior Citizens Law Center Planned Parenthood
Federation of America, Inc.
National Partnership for Women and Families
American Family Foundation
Other Organizations
American Association for Psychosocial Rehabilitation
American Counseling Association
American Lung Association
American Occupational Therapy Association
American Osteopathic Association
American Psychoanalytic Association
American Society of Cataract and Refractive Surgery
American Society of Clinical Psychopharmacology
American Society for Gastrointestinal Endoscopy
American Society of Plastic and Reconstructive Surgeons
American Thoracic Society
Anxiety Disorders Association of America
Association for the Advancement of Psychology
Association for Ambulatory Behavioral Health
Center for Women Policy Studies
Children & Adults with Attention-Deficit/Hyperactivity
Disorder
Corporation for the Advancement of Psychiatry
Federation of Behavioral, Psychological and Cognitive
Sciences
Intenational Association of Psychosocial Rehabilitation
Services
Legal Action Center
National Association of Alcoholism And Drug Abuse
Counselors
National Association of Developmental Disabilities Councils
National Association of Psychiatric Treatment Centers for
Children
National Association of Social Workers
National Council for Community Behavioral Healthcare
National Depressive and Manic Depressive Association
National Foundation for Depressive Illness
Renal Physicians Association
Additional Views
During the consideration of H.R. 10, an amendment was
offered to add a new section 351, entitled ``Confidentiality
of Health and Medical Information.'' While we support
increased protection for medical information, we opposed this
provision, because, unfortunately, the provision weakens
existing protections for medical confidentiality, and
establishes a number of poor precedents for private medical
information disclosure.
While the provision at first blush appears to place limits
on the disclosure of medical information, the lengthy list of
exceptions to these limits leaves the consumer with little,
if any protection. In fact, the provisions ends up
authorizing disclosure of information rather than limiting
it.
In medicine, the first principle is ``Do no harm.'' In
crafting a Federal medical privacy law, this principle
requires that state laws providing a greater level of
protection be left in place. Yet section 351 could preempt
the laws of 21 states that have enacted medical privacy laws.
While we agree that genetic information should also be
protected--in fact, should deserve a higher level of
protection--this provision could also preempt 36 state laws
which protect the confidentiality of genetic information.
The provision also lacks any right for the individual to
inspect and correct one's medical records. As a result, an
individual has greater rights to inspect and correct credit
information than medical records.
There is no requirement that the customer even be told that
his medical information is being provided to a third party.
Thus there is no way that the customer could prevent the
records from being disseminated if the customer believed that
statutory rights were being violated.
An individual has no right to seek redress if the rights
under this provision are violated. In fact, the customer is
unlikely to even know that the rights were violated. The only
enforcement authority is given to the states. If the
individual is unlikely to have knowledge of the transfer of
confidential medical records, it is hard to understand how
the state Attorney General would know to bring an action as
provided in subsection (b) of the provision. Even if the
state brings an action, it can only enjoin further
disclosures. The customer has no right to seek damages.
The provision places absolutely no restrictions on the
subsequent disclosure of medical records by anyone receiving
the records. Once the records are out the door for any of the
myriad exceptions in this provision, they are fair game for
anyone.
We agree that information should be disclosed only with the
consent of the customer, as provided in (a)(1), but this
right is rendered meaningless with the extensive laundry list
of exceptions that swallows this simple rule. We shall only
discuss a few of these exceptions.
The provision allows financial institutions to provide
medical records, including genetic information, for purposes
of underwriting. As a result, customers could find themselves
being uninsurable, or facing whopping rate increases for
health insurance, based upon their genetic information, or
health records. In addition, the information may be
inaccurate, but the customer cannot correct it.
The provision allows financial institutions to provide
medical records for ``research
[[Page H5221]]
projects.'' This term is undefined, and could include
marketing research, or nearly anything else. For example, a
customer's prescription drug information could be provided to
a drug company doing marketing research on candidates for a
new related drug.
Moreover, the provision establishes no research protections
for individually identifiable records. The majority of human
subject research studies conducted in this country are
subject to the Common Rule, a set of requirements for
federally-funded research. Analogous requirements apply to
clinical trials conducted pursuant to the FDA's product
approval procedures. The Common Rule dictates that a study
must be approved by an entity that specifically examines
whether the potential benefits of the study outweigh the
potential intrusion into an individual's private records and
whether the study includes strong safeguards to protect the
confidentiality of those records. Two weeks ago at a hearing
before the Health and Environment Subcommittee, witnesses
from the National Breast Cancer Coalition and the National
Organization for Rare Disorders testified that these Federal
standards should be extended to all research using
individually-identifiable medical records. Extending these
protections would strengthen confidence in the integrity of
the research community and encourage more individuals to
participate in studies. Because this provision establishes no
protections for individually-identifiable records, it could
actually stifle research.
The provision allows the disclosure of confidential medical
records ``in connection with'' a laundry list of
transactions, most of which have nothing to do with medical
records. The provision does not define who can receive the
records, but instead allows disclosure to anyone, so long as
it is ``in connection with'' a transaction. There was no
explanation at the markup why medical records should be
disclosed in connection with ``the transfer of receivables,
accounts, or interest therein.'' There is no definition of
``fraud protection'' or ``risk control'' for which the
provision also authorizes disclosure. The provision gives
carte blanche to financial institutions to disclose
confidential medical records for ``account administration''
or for ``reporting, investigating, or preventing fraud.''
Reporting to whom? An investigation by whom?
While most laws protecting medical records provide for
disclosure in compliance with criminal investigations, those
laws provide safeguards to permit the individual the
opportunity to raise legal issues. This provision does not.
In fact, as is the case with all other disclosures in this
provision, the consumer would not even be informed that the
information has been disclosed. Thus, a customer's medical
records could be disclosed to an opponent in a civil action
without the customer even knowing it.
Within hours of passage of this provision, we began
learning from patient groups and others who have fought to
improve the privacy rights of individuals that this provision
is seriously flawed. These concerns demonstrate why Congress
needs to deal comprehensively with the issue of medical
confidentiality, not in a slapdash amendment that has
received no scrutiny. The Health and Environment Subcommittee
of the Commerce Committee has already held a hearing on
medical privacy, and a Senate committee has held multiple
hearings on the subject. We look forward to enacting real
medical information privacy provisions that will truly
protect individuals. Unfortunately, this premature move by
the Committee will actually set back the health and medical
information privacy rights of all Americans.
John D. Dingell, Henry A. Waxman, Edward J. Markey, Rick
Boucher, Edolphus Towns, Frank Pallone, Jr., Sherrod
Brown, Bart Gordon, Peter Deutsch, Bobby L. Rush, Ron
Klink, Bart Stupak, Tom Sawyer, Albert R. Wynn, Gene
Green, Ted Strickland, Diana DeGette, Thomas M.
Barrett, and Lois Capps.
The Version of HR 10 Released by the House Rules Committee Sweeps Away
1,781 Essential State Insurance Laws Across the Country
State governments are solely responsible for regulating the
business of insurance in the United States.
The States regulate insurance in order to protect consumers
and supervise the solvency and stability of insurers and
agents.
The version of HR 10 released by the House Rules Committee
on June 24, 1999 will likely preempt many State consumer
protection and solvency laws needed to regulate the insurance
activities of banks and their affiliates.
------------------------------------------------------------------------
Number of
State laws
likely
preempted
State by the
House Rules
Committee
version of
H.R. 10
------------------------------------------------------------------------
Alabama.................................................... 33
Alaska..................................................... 30
Arizona.................................................... 35
Arkansas................................................... 41
California................................................. 43
Colorado................................................... 35
Connecticut................................................ 36
Delaware................................................... 32
Florida.................................................... 40
Georgia.................................................... 38
Hawaii..................................................... 28
Idaho...................................................... 31
Illinois................................................... 41
Indiana.................................................... 33
Iowa....................................................... 39
Kansas..................................................... 41
Kentucky................................................... 36
Louisiana.................................................. 37
Maine...................................................... 37
Maryland................................................... 36
Massachusetts.............................................. 32
Michigan................................................... 33
Minnesota.................................................. 36
Mississippi................................................ 32
Missouri................................................... 37
Montana.................................................... 36
Nebraska................................................... 36
Nevada..................................................... 36
New Hampshire.............................................. 28
New Jersey................................................. 41
New Mexico................................................. 31
New York................................................... 37
North Carolina............................................. 46
North Dakota............................................... 34
Ohio....................................................... 38
Oklahoma................................................... 31
Oregon..................................................... 39
Pennsylvania............................................... 35
Rhode Island............................................... 35
South Carolina............................................. 34
South Dakota............................................... 37
Tennessee.................................................. 37
Texas...................................................... 42
Utah....................................................... 34
Vermont.................................................... 32
Virginia................................................... 36
Washington................................................. 36
West Virginia.............................................. 34
Wisconsin.................................................. 33
Wyoming.................................................... 31
------------
Total................................................ 1,781
------------------------------------------------------------------------
Source: National Association of Insurance Commissioners
Board of Governors of the
Federal Reserve System,
Washington, DC, June 28, 1999.
Hon. John D. Dingell,
Ranking Minority Member, Committee on Commerce, House of
Representatives, Washington, DC.
Dear Mr. Dingell: This is in response to your request for
the Board's views on the operating subsidiary approach to
financial modernization contained in H.R. 10. As I have
testified, I, and my colleagues on the Board believe strongly
that the operating subsidiary approach would damage
competition in and the vitality of our financial services
industry and poses serious risks for the American taxpayer.
We have no doubt that the holding company approach, adopted
by the House last year, passed by the Senate this year, and
supported by each previous Treasury and Administration for
nearly 20 years, is the prudent and safest way to modernize
our financial affiliation laws and does not sacrifice any of
the benefits of financial reform.
The structure adopted by Congress for financial
modernization will prove decisive to the shape of our
financial system, the long term health of our economy, and
the level of protection afforded the American taxpayer long
into the next century. Thus, this decision on banking
structure is a policy matter of national importance. Allowing
national banks to engage through operating subsidiaries in
merchant banking, securities underwriting, and other newly
authorized financial activities is likely to have as profound
an impact on our entire financial sector as the 1982
legislation regarding the thrift industry.
The problem with the operating subsidiary approach is that
insured banks are supported by the U.S. Government and,
consequently, are able to raise funds at a materially lower
cost, which is equivalent to approximately half of the
interest spread on an investment grade loan. This subsidized
ability to raise lower cost funds provides banks and their
operating subsidiaries a decisive advantage over independent
securities, insurance and financial services firms. This
advantage will inevitably reduce competition and innovation
in and between these industries as it has in other countries
that have adopted the universal banking approach. In
addition, the experiences in Asia demonstrate that linking
financial markets more tightly to the health of the banking
system--as is inevitable under the operating subsidiary
approach--makes the economy more vulnerable to crises that
affect banks and makes the broader financial markets more
dependent on the protection and advantages of the federal
safety net.
The operating subsidiary approach also poses substantial
risks to the safety and soundness of our banking system and
to the American taxpayer. This derives from the fact that an
operating subsidiary of a bank is consolidated with, and
controlled by, the bank and the fate of the bank and its
subsidiary are inextricably interdependent. The measures
contained in H.R. 10 to address these risks are not adequate.
These measures are based on creating a regulatory accounting
system that is different from market accounting and on the
hope that operating subsidiaries can be quickly divested
before problems spread to the parent bank. We have learned
from the thrift crisis of the 1980s that regulatory
accounting can give a dangerously false sense of security
that only masks real problems. In addition, experience with
other subsidiaries of national banks illustrates that banks
can lose far more than they invest in an operating
subsidiary, that those losses can occur quickly and before
regulators have an opportunity to act, and that banks feel
forced to support their subsidiaries through capital
injections and liberal interpretations of the law. Troubled
operating subsidiaries are also very difficult to sell and
can result in prolonged exposure and expense to the parent
bank. In the heat of a crisis, the taxpayer cannot be
confident that regulatory constraints will prove entirely
effective.
In a world where mega-mergers are increasing the size of
banks on a stand-alone basis, the operating subsidiary
structure allows banks to increase their balance sheets in
even more dramatic fashion. This, on its own, may not be a
problem. However, the operating subsidiary structure focuses
all
[[Page H5222]]
losses from new activities--as well as the risks from the
bank's direct activities--on the bank itself. Thus, the
operating subsidiary structure leads to precisely the type of
organization that inspires too-big-to-fail concerns.
Some argue that H.R. 10 does nothing more than preserve
freedom of choice of management. However, this is not a
matter of choice for private enterprise. Rational management
will inevitably choose the operating subsidiary because it
allows the maximum exploitation of the cheaper funding
ability of the bank. Because this so-called ``choice''
involves the use of the sovereign credit of the United
States, it is a decision that should rest exclusively with
Congress.
It is also noteworthy that the holding company approach
does not in any way diminish the powers or attractiveness of
the national bank charter. The national bank charter has
flourished in recent years even though national banks are not
authorized today to conduct through operating subsidiaries
the broad new powers permitted in H.R. 10. Nor does the
holding company approach diminish the influence of the
Treasury over bank policy. Treasury continues to play a
significant and appropriate role through its oversight of all
national banks and thrifts.
On the other hand, the operating subsidiary approach would
damage the Federal Reserve's ability to address systemic
concerns in our financial system. This will occur as the
holding company structure atrophies because of the funding
advantage the operating subsidiary derives from the federal
safety net.
I and my colleagues are especially concerned because there
is no reason to take the risks associated with the operating
subsidiary approach. The holding company framework achieves
all the public and consumer benefits contemplated by H.R. 10
without the dangers of the operating subsidiary approach.
The Board has been a strong supporter of financial
modernization legislation for nearly 20 years. We are
seriously concerned, however, about the destructive effects
of the operating subsidiary approach for the long-term health
of the national economy and the taxpayer.
Sincerely,
Alan Greenspan.
Madam Chairman, I reserve the balance of my time.
Mr. LEACH. Madam Chairman, I yield 2 minutes to the gentlewoman from
New Jersey (Mrs. Roukema) the distinguished chairperson of the
Subcommittee on Financial Institutions, whose work on this bill is the
most important of any Member of this body, and I very very much
appreciate her friendship and leadership.
Mrs. ROUKEMA. Madam Chairman, I thank the chairman for yielding me
the time.
I certainly rise in support, strong support, of H.R. 10 and associate
myself with the commentary of the chairman at the beginning of this
discussion and completely disagree with the gentleman we just heard.
I have worked on this issue for a long time, and really it is very
clear. We are going beyond the 1930 laws, Glass-Steagall, far out-of-
date. Technology and market forces have broken down the barriers here,
and over the years we have just been letting the regulators and the
courts and creative industries deal with this.
It is now the time for us to catch up with the modern financial world
both domestically and globally and do what the Constitution requires us
to do and not abrogate our responsibility to the courts and other
Federal regulators.
I am most intent on saying that, is it a perfect bill? No. Can it be
after all these years of negotiation? Maybe not. Maybe. But, on the
other hand, only not perfect because we cannot get all these industries
to agree on every single thing. But we have compromises represented
here that strongly protect the fundamental principles that we should
have, and that is preserving the safety and soundness of the financial
system.
They are protected here. The Federal deposit system and the rest of
the Federal safety net. If we abandon this now, we are just saying it
is just going to evolve as the regulators or the courts would like them
to, without any statutory responsibility.
Do we provide for fair and equal competition? I believe we do in the
real world of financial institutions.
{time} 1700
I believe strongly that we have protected the consumers and enhanced
their choices in this bill. The new holding company structure that is
in this bill will be overseen by the Federal Reserve Board. H.R. 10
includes new consumer privacy. There will be an amendment on the floor
that will increase the consumer privacy that is in this bill and close
any of the loopholes that we can see.
I urge strong support for this bill.
Madam Chairman, I rise in strong support of H.R. 10, the Financial
Services Act and associate myself with the commentary of our Chairman,
Representative Leach, and urge my Colleagues to support this landmark
legislation.
As many of my colleagues know, I have long been and advocate for
passing financial modernization legislation. Markets are changing every
day. Technology and market forces have broken down the barriers between
insurance, securities and banking. Mega-merger deals like Citicorp/
Travelers, NationsBank/Bank of America, Bankers Trust/Deutsche Bank--
are being contemplated or announced daily.
We need to replace the outdated Glass-Steagall Act of the 1930s.
Glass-Steagall did its part in its day, but the financial world has
changed and we must have a financial system that is able to compete in
the modern world. Our current statutory framework has remained stuck in
the '30s because of Congress's reluctance to act, hampering the ability
of our financial institutions to compete. In the absence of
congressional action, federal agencies, the courts and the industry
have been forced to find loopholes and novel interpretations of the law
to allow financial institutions to adapt to an ever-changing
marketplace. Unfortunately, this has resulted in piecemeal regulatory
reform that may not be in the best interest of the U.S. financial
services industry as a whole.
As elected representatives of Congress, it is our constitutional duty
to make the important policy decisions that determine the structure and
legal authority under which our financial institutions will operate.
For Congress to not act today would be a serious abdication of our
responsibility.
Throughout this process, I have based my support for this bill on
some very fundamental principles:
It must:
(1) Preserve the safety and soundness of the financial system--
including the federal deposit system and the rest of the federal safety
net.
(2) Provide for fair and equal competition; and
(3) Protect consumers and enhance their choices.
H.R. 10 maintains these fundamental principles.
Much like the bill we passed last year, H.R. 10 creates a new holding
company structure under which entities that are financial in nature can
directly affiliate.
This new holding company will be overseen by the Federal Reserve
Board, but each affiliate will be regulated by its own ``functional''
regulator.
H.R. 10 includes important new consumer privacy provisions requiring
banking institutions to tell customers their policies for sharing
customer's financial information with bird parties for marketing
purposes. It would also makes ``pre-text calling'' illegal.
In addition, the bill prohibits all insurance companies (including
companies not affiliated under a Financial Holding Company) from
disclosing medical information to third parties--without prior consent.
In addition to these important privacy provisions, my colleagues and I
will later be offering an amendment that further enhances privacy
protection.
Finally, we have included legislation that I introduced which
provides important consumer ATM disclosures. These provisions mandate
clear ATM fee disclosures and guarantees the consumers rights to opt
out of a transaction before a fee is charged.
This legislation also includes language I proposed to allow new
Financial Holding Companies to retain or acquire commercial entities
that are ``complimentary'' to their current or future financial
activities. While I do not support full mixing of banking and commerce,
this amendment accepts the reality that the lines between financial and
commerce are blurring. At a time when we are allowing various financial
to affiliate and create new financial holding companies, it is prudent
to provide flexibility for companies to engaged in activities which may
not meet the definition of financial but are complimentary to the
financial activities. This provision stipulates that the investment in
the complimentary activity must remain small, and will be subject to
Federal Reserve review.
For those of us that serve on the Banking Committee, we are painfully
aware of how controversial the issues surrounding the financial
services industry can be. To say the least, various sectors of the
financial services industry have had different and often conflicting
views on how best to go about modernization, but H.R. 10 includes many
compromises between all of the interested parties, and it deserves our
support.
Did everyone get everything they wanted? No they did not. In fact, I
strongly oppose the operating subsidiary provisions included in this
bill. We must work to improve this regulatory structure in conference.
In addition, while I support the provisions in the bill that would
[[Page H5223]]
close the unitary thrift loophole, I do not support permitting the
transferability of unitary thrift holding companies to commercial
entities. The unitary thrift provisions included in this bill today do
not prohibit transfers to commercial entities.
In short, allowing the transferability of unitary thrifts to
commercial entities in the same as allowing full banking and commerce.
I do not support full banking and commerce and believe it could pose
serious safety and soundness risks to the deposit insurance fund.
We respect to the operating subsidiary, I am concerned that losses in
an operating subsidiary could ultimately affect the parent bank.
A case in point is the First Options/Continental Illinois problems in
the late 1980s--Continental Illinois lost considerable more than its
investment in First Options. While there are firewalls in place that
limit the amount of bank investment, in times of stress, firewalls
melt. Such was the case with First Options/Continental Illinois where
Continental Illinois injected millions of dollars to prevent the
failure of First Options.
Furthermore, the likely result of allowing bank operating
subsidiaries is that an independent securities industry will become a
thing of the past. The advantage that the U.S. economy has enjoyed is
that the credit and capital markets have grown up separately and are
strong with each having a great deal of depth.
Not having an independent securities industry will seriously
undermine these vitally important markets. Innovation will be stifled
and these markets will become less competitive. And importantly, it
will make it much harder on the U.S. economy to address economic
downturns because the securities system will become directly tie to the
health of the banking system. Any stresses on the banking system will
affect all of the capital markets. I, for one, do not want to see that
result, particularly because the simple answer is to allow banks and
securities firms to become sister companies through a holding company
which means the securities industry will not be tied directly to the
banking industry.
For these reasons I will continue to work to change the operating
subsidiary and unitary thrift provisions included in H.R. 10 as this
bill moves through conference. However, despite the problems I have
with these specific provisions, I believe that we must act today to
pass this landmark legislation. There is far too much in this bill that
warrants our support. We have come too far to turn back now.
If we fail to act today, we will lose the opportunity to reform our
financial system in a meaningful, rational way. It's now or never.
Years of good faith negotiation and compromise have gone into this
bill.
Support the passage of H.R. 10.
Mr. LaFALCE. Madam Chairman, I yield 3 minutes to the distinguished
gentleman from Minnesota (Mr. Vento) the ranking Democrat on the
Subcommittee on Financial Institutions and Consumer Credit.
Mr. VENTO. Madam Chairman, I rise in strong support of H.R. 10. This
is a good work product. This is a legislative product that finally
brings our statutory provisions of law in line with the current
developed financial entities and the future policy path that is
necessary to in fact fully engage our economy and our financial
institutions in serving our enterprise and serving the consumers of
this Nation.
The fact is that I think it is due to a lot of hard work on the part
of the gentleman from Iowa (Mr. Leach) and the gentleman from Virginia
(Mr. Bliley) and the gentleman from New York (Mr. LaFalce), so too the
work of the gentleman from Michigan (Mr. Dingell) who is in dissent
today.
Nevertheless, I think it follows a tradition and path that will, in
fact, put us in charge. I think, though, that we probably will not work
ourselves out of a job with this measure. There is much to do in many,
many aspects of it, but it does for the first time through the work
with the various enterprises, the industry, the banks, the securities
firms and the insurance firms that are already affiliating today under
court and under regulatory practices, it finally puts a statutory
policy path that Congress stipulates in place and one that is
effective. Of course there is a claim that there is $15 billion worth
of saving that inures to the benefit of our economy in terms of some of
the streamlining that takes place with this policy and law.
Do we like big banks and big financial institutions? Probably not.
But the fact is that the global marketplace that we compete in and that
we participate in today is actually bringing these together and about.
This is happening in the absence of this law. But what we are trying to
do is to try to put in place a legal framework to put back some
consumer voice, some public policy voice in that process that affects
consumers.
This bill has strengthened Community Reinvestment Act provisions.
This bill when the amendment on privacy is adopted, I think the banks
will have about the strongest privacy policy of any of the financial
entities commercial or otherwise that we have responsibility at the
national government for or, for that matter, even at the State level.
We know how important that issue is. The privacy provisions that will
finally be written into this bill are stronger than those that were in
the Commerce bill, stronger than those that were in the Banking
provision of H.R. 10.
Beyond that, I think that the bill provides many opportunities to
deal with antitrust issues, other issues such as supernotice
requirements for mergers, mandatory ATM fee disclosure. It provides the
opportunity for posted privacy policies. Some medical privacy. I think
we are going to have some debate about that today. Some would have us
believe that no policy is better than the policy that we have in this
bill, but we are trying to, in fact, do the right thing. As I said, it
deals with antitrust concentration.
As far as the operating subsidiary goes, I think we ought to look
very closely at Chairman Greenspan's comments because he pointed out in
1997 that operating subsidiaries pose no safety soundness problem in
terms of their operation. As a matter of fact, the Chairman of the
Federal Reserve Board regulates just such operating subsidiaries in the
States and in the foreign bank operation. These are safe, they are
sound, and I think this bill is a good bill and deserves our support.
H.R. 10 represents the changes in law that we need to catch up with
reality by mapping a path of true modernization for financial
institutions in the financial services marketplace for today and
tomorrow. We need to enhance the competitiveness of our financial
services sector and to move forward with predictable, certain, logical,
and uniform regulation.
As my colleagues are by now painfully aware, there are many
Democrats, some of whom supported the bill in the Banking Committee,
who can now no longer feel comfortable supporting this legislation.
Despite the partisan gamesmanship of the past 24 hours, I remain
committed to achieving comprehensive financial modernization through
the enactment of H.R. 10 into law, and thus hope that we can pass this
bill at the end of the day.
I have put a great deal of time, effort and energy working with my
Democratic Colleague and my Colleagues from across the aisle. We have
been laboring together for many years--three Congresses on this
particular version--crafting and perfecting a compromise on financial
modernization that will put the Congressional imprint on modernization.
Our Chairman, Mr. Leach, and the Ranking Member, Mr. LaFalce were able
to work together with Members such as myself and Mrs. Roukema to put
together a bill. The Administration, which was opposed to the bill
passed last year, was supportive of our Banking Committee product.
We have accomplished much of which we should be proud.
Back in March, the House Banking and Financial Services Committee
approved H.R. 10 on a strong bi-partisan basis, 51-8 with 21 Democratic
votes cast in support of the bill. Much of this Banking Committee
product has been carried forward in the product before us today.
Some important provisions are lacking or inadequate. We do not have
complete parity, for example, for affiliation between banks and
insurance and securities firms with regard to commercial activities. I
would preferred to have gone a little further on limiting Unitary
Thrift Holding Companies--indeed, we could have merged the bank and
thrift charters. I would have also hoped that we could have included
fair housing compliance on affiliates, low-cost banking accounts and
application of Community Reinvestment Act-like requirements on products
that are similar to bank products, such as mortgages product sold and
issued through affiliates.
On the main, however, we have a product that will remove the rusted
chains of Glass-Steagall, providing in its place a new financial
services infrastructure to keep U.S. companies competitive in the
global marketplace, while ensuring consumers the quality services and
protections they deserve. We remove the barriers preventing
affiliation. We provide financial services firms the choice of
conducting certain financial activities in bank holding company
affiliates or in subsidiaries of banks on a safe and sound basis.
Some today may say that the operating subsidiary is too risky. That
is just not the case.
[[Page H5224]]
Outgoing Treasury Secretary Robert Rubin, the Federal Deposit Insurance
Corporation, and four past Chairs of the FDIC have all explained how
the subsidiary structure protects the public interest as well as the
affiliate structure--and provides greater protection for the FDIC and
bank safety and soundness. Even Chairman Greenspan--the foremost
opponent of subsidiaries--acknowledged in 1997 testimony that the
subsidiary approach posed no safety and soundness problems.
By requiring bank to be well-capitalized even after investing capital
in a subsidiary, we are providing a proper cushion that is not the S&L
crisis all over again. Our national banks have been and should remain a
source of economic strength and a solid foundation to construct an
economic framework of growth. This bill will keep them vigorous and
viable, with or without a holding company structure and does not change
the balance between the national bank and state bank dual banking
charters, and regulation structure.
As I said earlier today, the focus of the lengthy and seemingly
endless public debate over this legislation has been the opening of the
financial services marketplace to new competition and the reduction of
barriers between financial services providers. It is equally important
that this bill is a positive step for our constituents and the
communities in which they live, as well.
In general, there are inherent benefits of being able to provide
streamlined, one-stop shopping with comprehensive services choices for
consumers. According to the Treasury Department, financial services
modernization could mean as much as $15 billion annually in savings to
consumers.
There are additional, specific and key positive consumer and
community provisions in the base text.
We have modernized the Community Reinvestment Act (CRA) in a positive
manner. And I am pleased that this bill will not contain provisions
that move us back in time for CRA. The CRA was enacted by Congress in
1977 to combat discrimination. The CRA encourages federally-insured
financial institutions to help meet the credit needs of their entire
communities by providing credit and deposit services in the communities
they serve on a safe and sound basis. According to the National
Community Reinvestment Coalition, the law has helped bring more than $1
trillion in commitments to these communities since its enactment.
Groups like LISC, Enterprise, Neighborhood Housing Services, and others
too plentiful to mention them all, use CRA to work with their local
financial institutions to make their communities better places to live.
CRA's success results from the effective partnership of municipal
leaders, local development advocacy organizations, and community-minded
financial institutions. By creating such partnerships, the CRA has
proven that local investment is not only good for business, but
critical to improving the quality of life for low- and moderate-income
constituents in the communities financial institutions serve.
Importantly, H.R. 10 ensures CRA will remain of central relevance in
a changing financial marketplace. It furthers the goals of the
Community Reinvestment Act by requiring that all of a holding company's
subsidiary depository institutions have at least a ``satisfactory'' CRA
rating in order to affiliate as a Financial Holding Company and in
order to maintain that affiliation, including appropriate enforcement.
In addition, H.R. 10 extends the CRA to the newly created Wholesale
Financial Institutions (``Woofies''). These provisions represent
substantial progress and a critical contribution to the overall balance
reflected in this bill.
Other positive provisions include the requirement that institutions
ensure that consumers are not confused about new financial products
along with strong anti-typing the anti-coercion provisions governing
the marketing of financial products; super notices to customers that
state that when banks sell non-deposit products they are not insured by
the Federal Deposit Insurance Corporation (FDIC) like traditional bank
accounts are insured; the requirement to maintain market-related data
and to produce an annual report on concentration of financial resources
to assure that community credit needs are being met; and the disclosure
to consumers of ATM fees, not only on the computer screen, but, also on
the ATM machine itself. Additionally, when issuing ATM cards, banks
must issue a warning that surcharges may be imposed by other parties.
I would also like to highlight an amendment of I advanced that has
been included with a minor change from Commerce committee, requiring
public meetings in the case of mega-mergers between banks which both
have more than $1 billion in assets where there may be a substantial
public impact because of the larger merger, providing our constituents
with the important opportunity to express their views regarding mega
mergers in their communities.
Importantly, the base text also includes required posted privacy
policies by depository institutions of financial holding companies to
clearly and conspicuously disclose to their customers their privacy
policies, specifying what their policies are with regard to a
customer's information. While an amendment later today will make vast
improvements for consumer privacy, with this provision, customers can
learn what a financial institution's policies are and could be clearly
informed of their rights under the Fair Credit Reporting Act to choose
not to have their information shared among affiliates.
Frankly, in this way, customers would be able to choose whether they
want to do business with institutions that have privacy policies with
which they disagree. If they don't like affiliate sharing or other
parts of the privacy policy that an institution has, they have the
benefit of living in a country with thousands of small community banks
and with other institutions even offering banking on the Internet.
I do want to note something on the medical privacy provisions in
Title III of the bill. Mindful of the deep concerns raised by our
colleagues on the Commerce Committee and many other outside the
Congress, I want to state that we do not want to preempt any
comprehensive medical privacy provision. We do not want to create
loopholes or set up consumers to be forced to disclosed private data
just to get insurance coverage. Neither, however, do we want to leave
wide open the possibility that within the confines of this new
affiliated structure this bill creates allowing insurance, banking and
securities firms to join, that they can learn private medical or
genetic information to base credit decisions upon.
I would hope that we will have an opportunity in time to
appropriately fix this provision and if that means limiting it to
situations where insurance and banks affiliate--so that within these
confines insurance companies which affiliate with a bank will keep
confidential customer's health and medical information. This represents
an initial effort to assure that health information cannot be used to
determine eligibility for credit or other financial services. It was
not our intent to undercut, circumvent of weaken--but rather to enhance
and protect, so let us work together in Conference to improve this if
the amendment sought by Mr. Waxman and Mr. Condit cannot be a part of
this process here today.
As I noted earlier in my statement, I had hoped that we could have
included a Banking committee reported provision to condition
affiliation of insurance companies with banks based on compliance with
an existing law--the Fair Housing Act. It is a productive provision
that more than suggests that companies who seek to expand their
opportunities are meeting the needs of communities and following the
law by not discriminating.
There have been settlement agreements and consent decrees between the
Department of Housing and Urban Development, the Department of Justice
and insurance entities that resulted from alleged violations of the
Fair Housing Act. What has resulted is changes in underwriting
guidelines (such as changes eliminating ``year the dwelling the built''
or ``minimum dollar amounts of coverage'' OR not denying coverage
SOLELY on the basis of information contained in credit reports) that
will better ensure the homeowners are not denied insurance--and quite
possibly the opportunity to become homeowners--because of
discrimination.
It is indeed unfortunate that neither the base text has not did the
rule allow as an amendment a provision to strengthen fair housing and
to eliminate discrimination. This provision could have been step
forward for consumers as much as requiring low-cost banking accounts
could have been. These provisions would have ensured that the benefits
of modernization would be more available to consumers of all economic
means. Low cost accounts could have taken a form similar to the ETA
accounts created by Treasury with little or no burden, and certainly no
credit risk borne by depository institutions.
Mr. Chairman, in closing, following more than 20 years of debate on
financial modernization, I think that we are close to achieving our
goal. And if not on the rule, on much of the substance of the bill
before us today, we have done so on a bipartisan basis. We have much to
do so we can get this bill through a Conference with Members of the
other body. Their bill has many provisions that are extremely
problematic for the Administration and for House Democrats, from
debilitating limitation on the national bank operating subsidiary to
outright gutting of the Community Reinvestment Act.
I ask my colleagues to join me in supporting H.R. 10. I want to thank
Chairman Leach, Ranking Member LaFalce, and Chairwoman Roukema and
their respective staff for all of their work and cooperation on this
important legislation.
Mr. BLILEY. Madam Chairman, I yield 2 minutes to the gentleman from
Ohio (Mr. Gillmor), the vice chairman of the committee.
(Mr. GILLMOR asked and was given permission to revise and extend his
remarks.)
[[Page H5225]]
Mr. GILLMOR. Madam Chairman, I thank the gentleman for yielding me
this time and I thank him for his leadership on this issue. I rise in
support of the bill.
Madam Chairman, this bill makes the most fundamental change in the
laws covering financial institutions in 60 years. It deals with a broad
scope of services, banking, insurance, securities. It also recognizes
the changes that have taken place in the economy over that period of
time and also the dramatic change in technology which has made possible
the offering of services now which would not have been possible before.
The financial combinations authorized by this bill can result in
significant savings in the delivery of financial services. But as
institutions are combined and as they become larger, it is essential
that there be safeguards for safety and soundness to protect both
consumers and taxpayers. This bill for the most part contains those
safeguards.
I am also happy that the bill before us contains several provisions I
sponsored in the Committee on Commerce. Among those was the requirement
that the Federal Reserve consider before approving mergers whether the
merged institution would be ``too big to fail.'' Mergers that are if
they fail so big that the taxpayers or the government will have to bail
them out simply should not be permitted.
The bill also contains a provision I introduced to prevent
discrimination against certain banks in the sale of title insurance,
and those regulatory restrictions I sponsored in last year's bill have
stayed in here called ``Fed Lite.''
Regrettably, it does not include some of the provisions I introduced
in the Committee on Commerce, which the committee approved, to protect
the privacy of customers of merged institutions. But I am happy that
those privacy provisions were made in order in the amendment to be
offered by the gentleman from Ohio (Mr. Oxley) later in this bill.
I urge the support of that amendment and I urge the support of the
bill.
Madam Chairman, I rise in support of the bill.
This bill makes the most fundamental change in the laws covering
financial institutions in over 60 years. It deals with the broad scope
of services--including banking, insurance and securities. It recognizes
the changes which have taken place in the economy in that time, and
also the dramatic change in technology which has made possible the
offering of services now which would not have been possible before.
This bill has the potential of expanding financial services to
consumers and creating more competition. The financial combinations
authorized by this bill can result in substantial savings in the
delivery of financial services. However, as institutions are combined,
and as they become larger, it is essential that there be safeguards for
safety and soundness to protect both consumers and taxpayers. The bill
for the most part contains those safeguards.
Two years ago as H.R. 10 was being considered in the previous
Congress, I was concerned with the broad expansion of certain
regulatory powers. My amendment in the Commerce Committee two years
ago, which was included in the current bill, created the functional
regulation framework for financial holding companies. The purpose of
this ``Fed Lite'' regulatory framework is to parallel the financial
services affiliate structure envisioned under this legislation. This
parallel regulatory structure eliminates the duplicative and burdensome
regulations on businesses not engaged in banking activities, and
importantly, preserves the role of the Federal Reserve as the
prudential supervisor over businesses that have access to taxpayer
guarantees and the federal safety net.
Besides numerous consumer protections, H.R. 10 also includes
important taxpayer protections. I am happy that the bill before us
contains certain provisions that I sponsored before the Commerce
Committee. Among those was the requirement that the Federal Reserve
consider before approving mergers whether the merged company will be
``too big to fail.'' Mergers that are so big that failure would result
in the government or taxpayers bailing them out should not be
permitted.
We are in the age of megamergers, and the creation of increasingly
large financial institutions. To give you an idea of how big, consider
that the recent merger of Citicorp and Travelers created a company with
$690 billion in assets. The merger of Bank of America and Nations Bank
left an institution with $614 billion. To put those figures in
prospective, the budget for the entire federal government is $1.8
trillion, or one thousand eight hundred billion.
There are clearly economic benefits to be gained from consolidation.
But the larger the potential for economic benefits, the larger the
potential costs become to the financial system, and the American
taxpayers, should the combined entity fail. Any substantial disruption
in the institution's operations would likely have a serious effect on
the financial markets.
There is currently no statutory requirement that the Fed explicitly
examine whether a combined entity would be too big to fail. The too big
to fail provision does not focus on limiting megamergers, but instead
maximizes the credibility of prudently managed large financial
institutions, which will benefit financial consumers and the American
taxpayers.
The bill before us also contains the provision I introduced to
prevent discrimination against certain banks in the sale of title
insurance. This amendment brings the special carve out for one kind of
insurance activity back in line with the purpose of financial
modernization--the consistent application of authority and restrictions
on title insurance activity for all banks.
The operating structure of the new financial entities created by this
bill is a crucial issue for the safety and soundness of our financial
system. The question is not how the financial institutions can best
offer and market their financial services and products. The fact is,
whether under an affiliate structure or an operating-subsidiary
structure, business will make it work either way. Instead, the question
is how to regulate the structure under which financial services and
products are offered and sold.
Under the holding company affiliate structure, if one business goes
broke, that failure will not affect the safety and soundness of the
bank in the holding company. But under the operating-subsidiary
structure, if a subsidiary of a bank goes broke, that can pose material
risk to the safety and soundness of the bank.
Banking regulators have indicated that they do not like deferring to
functional regulators for activities of bank subsidiaries. Do we want a
politicized federal banking regulator to regulate a structure that is
supposed to achieve competitive equality across the board for all
financial services? The bank holding company affiliate structure is the
best institutional vehicle that permits participation in financial
modernization with the least risk of transferring the safety net
subsidy.
Regrettably, this bill does not include all the provisions I
introduced in the Commerce Committee, and which the committee approved,
to protect the privacy of customers of these merged institutions.
However, I am pleased that most of my privacy protections were made in
order to be offered in an amendment later in the bill.
This amendment which I offered in committee was an important step
forward in protecting individual privacy. It protected consumer privacy
by regulating the disclosure and sharing of customer information by
financial institutions to third parties.
My amendment, which the committee adopted, required that a financial
institution not only disclose to a customer its policy about transfer
of non-public personal information about the customer to a third party,
it also requires that the customer have the opportunity to opt-out of
having personal information disclosed to a third party.
Privacy is more of a concern than it was in the past. George
Washington didn't have the privacy threats that face even the average
individual today. To obtain George Washington's private information you
would probably have had to break into Mount Vernon, and then have been
lucky enough to find the right papers in his desk or strong box. It is
now much easier to get anyone's personal information.
The simple reason for the much greater threat to privacy today is the
astounding growth of technology and information gathering. The
tremendous human benefits that have come from these advances also carry
with them unprecedented new threats to personal privacy. Personal
privacy needs reasonable protections, because personal privacy is an
important part of individual freedom.
Personal information is much more accessible now, even without the
person whose privacy is being invaded ever knowing. The sale and
transfer of personal information, without the individual's knowledge or
consent, is both widespread and growing.
Individual privacy is in danger from government, from business, and
even from individuals sitting at home with a computer. My amendment
recognizes those changes by providing in the area of financial
institutions reasonable and realistic privacy protections, without
unduly interfering with the normal and reasonable conduct of business.
Mr. DINGELL. Madam Chairman, I yield 2 minutes to the distinguished
gentleman from Michigan (Mr. Stupak).
Mr. STUPAK. Madam Chairman, I thank the gentleman for yielding me
this time.
[[Page H5226]]
The banking modernization bill could be a good bill, but I oppose the
selling out of your and my personal privacy. I oppose compromising my
privacy. Democrats oppose the selling of the privacy of all Americans.
All Democratic amendments on privacy have been rejected. And why?
Let us take a look at the Los Angeles Times editorial dated today,
``No Prescription for Privacy,'' and I quote:
``The House must defeat legislation that would allow health insurers
to sell medical records to other insurers without the consent or even
knowledge of the patients.
``Legislators usually become angry and defensive when ulterior
motives are ascribed to legislation. But if voters are to believe that
this measure is unrelated to the fact that the insurance industry was
the single largest soft-money donor to Republicans in 1997-98, then let
them explain how this anti-consumer amendment benefits those voters.''
Folks, they are selling you out. They are selling your privacy, not
just your financial privacy but now your medical privacy. When I go to
the bank, when I buy insurance, I provide information which is
personal, private. But this bill allows personal, private medical,
financial information. Every check I ever wrote, every medical decision
I ever made, they are going to sell it, and they are going to sell it
to the telemarketers, without my knowledge and without my consent.
I know the Republicans have said they will fix it later with
comprehensive privacy legislation. Later, later. But once they sell the
information, once it is out in the world, once it is out in this
electronic world we live in, they are going to pass a law then and say
you cannot have it. Are they going to recall it? Are they going to tell
every person, every business to recall the information? Plus once it is
paid for, you think businesses are not going to make copies and
continue to hold it?
Your privacy has been violated. Oh, they will stop all right. Will
they? Will they? Will they let their largest single soft-money
contributor to the GOP, the insurance industry, call it back? They will
not.
Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from
Alabama (Mr. Bachus), the distinguished subcommittee chairman.
Mr. BACHUS. Madam Chairman, in 1933, most of our U.S. highways were
gravel-topped, we had no controlled interstates like we do today,
controlled access four-lane highways; our railroads were operating
steam engines, diesels were still several years off; our airlines were
flying biplanes with three engines; and we had Glass-Steagall.
Today we have interstate highways, they have replaced our gravel U.S.
highways; we do not have any more steam engines, you have to go to
China to see one; but we still have Glass-Steagall.
Thank goodness that today we have a modern financial bill that is
before us to vote that will save the American people $15 billion a
year, that will increase privacy protections. You can tell your bank,
``No, I would rather not have that information released.'' Finally,
these two things:
It will increase our competitive ability against the world and the
global market, our financial firms, it will increase convenience for
Americans, and it will increase competition, lowering the cost of
insurance, mortgages and all financial services.
I urge the Members to vote ``yes'' on final passage and get us out of
the biplane, steam engine age.
1933. There were no interstate highways. In fact, there were no four-
lane limited-access highways in America. Most of our U.S. highways were
gravel; a few were dirt.
In 1933 steam engines pulled trains along America's railroads.
Diesels were still a decade away. Today's college graduates have never
seen a steam engine in revenue service on America's railroads. Want to
see a working steam engine. You had better take a quick trip to the
third world or remote areas of China, for instance, because the last
few in service are rapidly disappearing.
1933. Take a trip on a jet airplane. Hardly. They were decades away.
To get from city to city, if there was air service (and that was a big
if), you might climb aboard a tri-engine wood-framed biplane. Today you
can see that very aircraft of 1933 in the Smithsonian. Not even my
generation saw them in service.
However, such is not the case for our financial services laws. The
law which regulates and applies to the entire financial services
industry (banking, insurance and securities) today applied in 1933. In
fact, it was in 1933--not the year Albert Einstein became famous, but
the year he immigrated to America--that the law in effect today was
enacted by Congress. You may not recall that Congress or even the
events in Washington that year. The big political happening in 1933 was
Calvin Coolidge's funeral. You don't recall that event? The ``Three
Little Pigs'' was making its debut as one of Walt Disney's first
productions. It has been several years since Walt Disney died. But our
1933 financial services laws of that day live on today. Yes, like the
memory of Calvin Cooledge's funeral they are dog-eared and worn. And
every bit as inefficient as a steam engine would be on today's railroad
tracks or a tri-engine wood-frame biplane in service by today's
airlines. Imagine wanting to travel across country and finding not only
no controlled access highways, but only gravel-topped or dirt-topped
highways. What an inefficiency. What an inconvenience. What a cost to
the economy. How outmoded. That's exactly what America's financial
services community has to contend with today. The law is no more
intended for today's market than a Model T Ford. This is true of
today's outdated financial services laws. It is time to bring financial
modernization laws not only into the late 20th Century but revise them
for the fast-approaching 21st Century. H.R. 10 is such a law.
But H.R. 10 is more than just an updated or modern approach to
banking. It's an improvement over existing laws. All Americans today
would benefit from H.R. 10 in the following ways:
Greaer efficiency in competition will drive down prices of financial
services (loan rates, insurance premiums, etc.). Savings are estimated
at $15 billion a year. Seeing what competition can do in sports and
other businesses, it is time to find out in financial services.
Imagine our American financial firms having to compete effectively in
international markets restrained by laws of yesteryear. In a global
economy the ability of American financial firms to compete effectively
internationally is mandatory. They can only do so under modern laws
such as H.R. 10. Let's increase their effectiveness to compete
internationally. It is past due.
Americans not only love competition and low prices, but also
convenience. H.R. 10 promises better convenience and access to
financial products, more choices in both urban and rural America. Time
is money and convenience is paramount in today's fast-moving society.
After years of trying and failing, isn't it time this Congress finally
offered the convenience of modern banking to American consumers?
Convenience and more choices.
Not only does H.R. 10 offer improved ability for our companies to
compete in the world market, more competition and choice for the
American public, but it also promises increased privacy protections.
Under an amendment to be offered today, which I support, the American
banking customer can tell his local bank, ``I'd rather you did not show
that information outside the bank.'' Americans love their privacy and
what it protected.
For all of these reasons, it's time, no it's past time, to modernize
our financial services laws. Accomplish this and preserve American
financial leadership for the 21st Century by voting yes on final
passage of the Financial Services Act of 1999.
Mr. LaFALCE. Madam Chairman, I yield 2 minutes to the distinguished
gentlewoman from California (Ms. Waters).
Ms. WATERS. Madam Chairman, I rise in opposition to H.R. 10, the
Financial Services Act of 1999. I must oppose this legislation because
it distorts the intent of the members of the House Committee on Banking
and Financial Services who worked hard to develop a credible piece of
legislation that would cover the mergers of banks and commercial
interests.
Instead of respecting the bipartisan work of the House Committees on
Banking and Financial Services and Commerce, the House Committee on
Rules hijacked this bill. They stripped out the Lee anti-redlining
amendment that had been adopted in Banking and the Markey amendment was
stripped out on privacy that had been adopted in Commerce. I have never
seen this before. You vote, you get an amendment passed, and then the
Committee on Rules literally takes it out without a vote? The Committee
on Rules then denied a rule to have a debate on privacy. And, of
course, they denied my amendment on lifeline banking for low-income
consumers who do not have bank accounts with traditional banking
institutions.
The House Committee on Rules further added a dangerous amendment by
the gentleman from Iowa (Mr. Ganske) that allows private medical
record information to be given to subsidiaries
[[Page H5227]]
and sold to others. Then, to add insult to injury, the Committee on
Rules made in order an amendment by the gentleman from Texas (Mr.
Paul), the gentleman from Georgia (Mr. Barr) and the gentleman from
California (Mr. Campbell) that can only be identified as the Dope
Dealers and Money Launderers Act of 1999. The Paul amendment adjusts
the currency transaction reporting requirement from $10,000 to $25,000,
making it easier for drug dealers to spend and launder drug proceeds.
Let us go a little bit further. The gentleman from Virginia (Mr.
Bliley) will have Members believe that he is doing something about
domestic violence and protecting the victims. It is a trick. He is
allowing these mutual insurance companies to move out of their States
that do not allow them to take their proceeds away from the
policyholders and put them in the hands of the officers. He is trying
to make Members believe that he is doing something for women. Members
do not want their fingerprints on this bill. This is a bad one. Vote
``no.''
Mr. BLILEY. Madam Chairman, I yield 3 minutes to the gentleman from
New York (Mr. Lazio), a member of the Committee on Commerce and a
member of the Committee on Banking and Financial Services.
Mr. LAZIO. Madam Chairman, let me begin by congratulating and
thanking the gentleman from Virginia (Mr. Bliley) and the gentleman
from Iowa (Mr. Leach) for the stewardship of this fundamentally
important piece of legislation for the American economy, having
persevered through a number of different discussions and bringing this
to the verge of passing as an historic piece of legislation.
Let us go back for a moment to the early 1930s. The stock market
collapsed, the SEC did not exist, and there were few Federal securities
laws. In 3 years between 1930 and 1933, 8,000 banks went bankrupt and
American families lost $5 billion in deposits, an enormous sum at the
time.
To restore American confidence in our banks, Glass-Steagall erected a
wall between commercial banks and securities firms. Deposit insurance
was created so American families knew their financial nest egg was
safe. Glass-Steagall made sense, 60 years ago. But 60 years ago,
families kept the bulk of their savings in banks, earning low rates of
interest. Today, families invest in the stock market and 43 percent of
adults own a piece of the market because Americans in the 1990s seek
higher returns on their investments.
Consumer behavior changed because stocks and mutual funds achieved
superior long-term results, people began managing their own retirement
funds through individual retirement accounts, 401(k) plans and Keogh
plans. In short, Americans are no longer hiding their savings in their
mattresses.
{time} 1715
Today we stand at the center of an electronic revolution. On line
brokerage businesses are growing. Three securities legends teamed up to
create a rival to the New York Stock Exchange. Money moves from Tokyo
and back in an instant. A consumer can see and speak to a live teller
via the Internet. We simply no longer live in a depression era that
gave birth to Glass-Steagall.
With this bill, working families will have more choices. Do my
colleagues want an account with no commissions and pricing based on
household assets? Do my colleagues want to carry a credit card that has
no ATM fees for transactions worldwide? Do my colleagues want a e-
commerce link that has a rewards point program?
With this bill, small businesses will have a greater array of
products and services from which to choose. Do my colleagues want
convenient Internet access to their checking, savings and investment
activities? Do my colleagues want a discount for goods purchased
through e-commerce? Do my colleagues want global market intelligence
and unified accounting reporting?
This bill breaks the chains of Glass-Steagall that no longer serve
the interests of American families without sweeping us away in a tide
of economic euphoria. This bill intends to keep us as the caretakers of
a senior citizen's nest egg and to ensure that the life savings of
working families are not lost in economic downturns.
Congress should break down these barriers and encourage competition,
creating an environment for more innovative products and better prices.
I urge my colleagues, Democrats and Republicans, to let American
banking step into the 21st century. Support the Financial Services Act.
Mr. DINGELL. Madam Chairman, I yield 1\1/2\ minutes to the
distinguished gentlewoman from California (Mrs. Capps).
Mrs. CAPPS. Madam Chairman, I commend the ranking member, the
gentleman from Michigan (Mr. Dingell) and the gentleman from Florida
(Mr. Bliley) for their leadership on this bill. H.R. 10 would be a
much more efficient financial service bill, bringing greater choices
and lower prices for consumers, and that is a good thing. But this bill
has serious flaws that must be corrected. Most important, the language
regarding privacy of medical information has to be strengthened.
The American Nurses Association says this about H.R. 10:
The proposed language would, in fact, facilitate the broad sharing of
sensitive health and medical information without the consent of the
consumer.
H.R. 10, as it is now written, will allow an insurance company to
sell consumers personal health information. That is wrong. Patients
should be encouraged to share with their doctors, nurses, and
therapists all their health information. No diagnosis or treatment is
complete without it. But if patients cannot be sure that this sensitive
and personal information will be kept confidential, they will not be so
forthcoming, and that will hurt patient care and stifle research
projects.
Let us be clear. Privacy must never take a back seat to profits. We
must first fix these provisions and then pass an outstanding financial
services bill.
Mr. LEACH. Madam Chairman, I yield 1 minute to my great friend, the
gentleman from Nebraska (Mr. Bereuter).
(Mr. BEREUTER asked and was given permission to revise and extend his
remarks.)
Mr. BEREUTER. Madam Chairman, today marks a positive and long sought
milestone along the long journey to financial modernization. I commend
the chairman and the ranking member, the gentleman from New York (Mr.
LaFalce) and the Committee on Commerce leadership also for their
involvement and cooperation.
This bill is necessary to keep the United States in its preeminent
position in the world's financial marketplace. There are a number of
reasons to support. I am going to list just a few:
H.R. 10 illustrates that a Federal statutory change in financial law
is imperative.
Second, this measure will allow financial companies to offer a
diverse number of financial products to their consumers.
Third, this bill will have a distinct positive effect on consumers.
Fourth, the bill allows for no mixing of banking commerce through a
commercial basket.
Fifth, this measure will necessarily restrict unitary thrifts.
Sixth, the bill will avoid the threat of presidential veto by placing
the integrated financial activities in the operating subsidiary
structure.
Seventh, it balances the interests of a State in regulating insurance
with that ability of a national bank to sell insurance.
And Number 8, it strikes an equilibrium on the issue of securities.
My colleagues, I urge strong support for this legislation. It is a
long time coming. It is worth the effort.
First, a Federal statutory change in financial law is imperative
because Congress must call a halt to the recent trend of ad hoc
financial modernization through regulatory fiat and judicial consent.
Instead we need to modernize the nation's banking laws through statute.
As a matter of fact, on the first day of Banking Committee
consideration of financial modernization legislation in 1998, during
the 105th Congress, this Member stated: ``Once more, we start an effort
to modernize our financial institutions structure. It is an effort we
have tried before and must begin someplace. It should begin in the
House, and so I commend you, Chairman Leach, for launching this effort.
We need to do this. We need to face up to our responsibilities as a
legislative body. There is no doubt about that.''
Second, this Member supports H.R. 10 as it will allow financial
companies to offer a diverse number of financial services to the
consumer. This bill removes the legislative barriers within the Glass-
Stegall Act of 1933 and
[[Page H5228]]
the 1956 Bank Holding Company Act. As a result, H.R. 10 will allow
financial companies to offer a broad spectrum of financial services to
their customers, including banking, insurance, securities, and other
financial products through either a financial holding company or
through an operating subsidiary.
Banks, securities firms, and insurance companies will be able to
affiliate one another through this financial holding company model.
These entities will be able to engage in those activities which are
defined to be ``financial in nature'' which include: lending, other
traditional bank activities, insurance underwriting, financial and
investment services, securities underwriting and dealing, merchant
banking, and other activities.
In order for banks to be able to engage in the new financial
activities, the banks affiliated under the holding company or through
an operating subsidiary have to be well-capitalized, well-managed, and
have at least a satisfactory Community Reinvestment Act rating.
Third, this Member supports H.R. 10 because it is very pro-consumer.
It will increase choices for the consumer in the financial services
marketplace by creating an environment of greater competition. As a
result, financial modernization will allow consumers to be able to
choose from a variety of services from the same, convenient, financial
institution. Financial modernization will give consumers more options.
Whether it be in rural Nebraska, or in New York City, consumers of
financial products all across the United States deserve additional
competitive options. Moreover, under the current setting, many rural
communities are under-served in regards to their access to a broad
array of financial services. Financial modernization will help ensure
that the financial sector keeps pace with the ever-changing needs and
desires of the all-important consumer.
In addition, H.R. 10 will also allow financial institutions to
provide more affordable services to the consumer. Financial
modernization will result in additional competition and in efficiency
which in turn should result in lower prices for financial services to
the customer.
Fourth, this Member has been a fervent advocate of keeping banking
and commerce separate. In fact, this Member is quite pleased that H.R.
10 does not contain a ``commercial market basket'' which would have
allowed the very dangerous mix of commerce and banking--equity
positions by commercial banks. We must avoid the problems that the
Japanese have lately experienced because of such a dangerously volatile
mixture of commerce and banking in their banking institutions.
An amendment was initially filed, but not offered, in the House
Banking Committee in the 106th Congress which would have allowed for
the mixing of banking and commerce in a five percent market basket.
However, this Member believes in large part because of expressed strong
opposition, including vocal and effective opposition of this Member,
this amendment was withdrawn for consideration in the Committee.
Fifth, the issues of the unitary thrift charter is of significant
importance to Nebraska commercial banks. One of the reasons this Member
is unequivocally opposed to the existence of this unitary thrift
charter is because of its mixing of thrift activities with commercial
ventures. However, this is not the sole reason--it also results in an
extremely powerful variety of financial institutions that has an
uncompetitive advantage over other types of financial institutions. At
the H.R. 10, Banking Committee markup in the 106th Congress, I
expressed my desire to completely closing the unitary thrift loophole.
Financial modernization, H.R. 10, allows for no new unitary thrifts;
indeed it restricts commercial entities from purchasing grandfathered,
existing thrifts. There was a compromise in the legislation before us
which establishes an application process whereby the Federal Reserve
Board and the Office of Thrift Supervision will determine whether an
existing unitary thrift holding company may be sold to a commercial
firm. This Member wants that grandfather loophole closed altogether.
This Member also believes that the provisions on unitary thrifts in
H.R. 10 are better than the status quo which allows both new unitary
thrifts as well the unfettered transferability of existing thrifts to
commercial entities. A very recent example is Walmart's recent
application with the Office of Thrift Supervision to acquire a unitary
thrift in Oklahoma. Again, this Member wishes that H.R. 10 would go one
step further and prohibit the transferability of existing unitary
thrifts to commercial entities. If H.R. 10 passes, this Member is
hopeful that such a prohibition could be considered and adopted during
the probably House-Senate conference on H.R. 10. This Member would
reiterate that his concerns about unitary thrifts transferability
remains as a major concern regarding H.R. 10.
Sixth, this Member believes that, in order to avoid the President's
veto of H.R. 10, the operating subsidiary structure for these
integrated financial activities is the preferred financial structure to
adopt. As is well known among the Members of this body, the Treasury
Department desires the operating subsidiary structure. However, the
Federal Reserve Board desires the affiliate structure. Both sides of
this issue make compelling arguments for their positions on this
matter. However, among other important reasons, because of the threat
of a veto, this Member believes that the operating subsidiary is the
best structure for these integrated financial activities.
Seventh, this Member supports H.R. 10 because, it balances the
interest of a state in regulating insurance with that of the interests
of a national bank to sell insurance. At the outset, this Member notes
that he has a strong record of supporting states rights, especially in
the area of insurance regulation.
In that respect it is important to note that H.R. 10 preserves state
rights by providing that the state insurance regulator is the
appropriate functional regulator of insurance sales. Whether insurance
is sold by an independent agent or through a national bank, the state,
and only the state, is the functional regulator of insurance in both
instances. Moreover, H.R. 10 also does not unduly burden the ability of
national banks to be able to sell insurance.
Eighth, this Member supports H.R. 10 as it strikes an equilibrium
between the interests of securities firms with those banks that will be
allowed to sell securities under H.R. 10. This measure amends the 1934
Securities Exchange Act to provide functional regulation of bank
securities activities. As a general rule, securities activities under
H.R. 10 will continue to be regulated by the Securities and Exchange
Commission.
Financial modernization, H.R. 10, repeals the ``broker'' and
``dealer'' exemptions that banks have under Federal law, which subject
banks to the same regulation as all securities firms. In addition, H.R.
10 replaces the ``broker'' and ``dealer'' exemptions with other
exemptions which allow banks to be able to engage in their current
activities involving securities.
Lastly, this Member supports H.R. 10 as its passage is necessary to
keep the United States in its preeminent position in the world,
financial marketplace. U.S. financial institutions are among the most
competitive providers of financial products in the world. However, the
financial marketplace is currently undergoing three changes which are
altering the financial landscape of the world.
The first of those changes involves a technological revolution
including the internet through electronic banking. Technology is
blurring the distinction between financial products. The other two
changes include innovations in capital markets, and the globalization
of the financial services industry.
Financial modernization is the proper, appropriate step in this ever-
changing financial marketplace. Consequently, in order to maintain
American's financial institutions' competitive and innovative position
abroad, H.R. 10 needs to be enacted into law. In the absence of this
bill, the American banking system could suffer irreparable harm in the
world market as we will allow our foreign competitors to overtake U.S.
financial institutions in terms of innovative products and services. We
must simply not allow this to happen.
Therefore, for all these reasons, and many more than have been
addressed today by this Member's colleagues, we must, and will pass
H.R. 10. This Member urges his colleagues to support H.R. 10, the
Financial Modernization bill.
Mr. LaFALCE. Madam Chairman, I yield 2 minutes to the distinguished
gentleman from Vermont (Mr. Sanders).
Mr. SANDERS. Madam Chairman, I rise in strong opposition to this
bill. I support financial modernization if modernization means more
choices for consumers, more competition, greater safety and soundness,
stopping unfair bank fees and protecting consumers and underserved
communities. But Madam Chairman, I believe this legislation in its
current form will do more harm than good. It will lead to fewer banks
and financial service providers, increased charges in fees for
individual consumers and small businesses, diminish credit for rural
America and taxpayer exposure to potential loses should a financial
conglomerate fail. It will lead to more megamergers, a small number of
corporations dominating the financial service industry and further
concentration of economic power in this country.
It is no secret, Madam Chairman, that far bigger financial
institutions lead to bigger fees which total more than $18 billion last
year. The U.S. Public Interest Research Group and the Federal Reserve
Bank have conducted studies and confirm that bigger banks charge larger
fees, and there is no question in my mind that if this bill is
[[Page H5229]]
passed, that process will be accelerated.
This bill is in fact, however, good for big banks, but the big banks
are doing just fine without this bill. Government-insured banks earned
a record $18 billion in just the first 3 months of this year, 2.1
billion more than they earned in the same period last year. At a time
of increasing bank fees, increasing ATM surcharges, increasing credit
card fees, increasing minimum balance requirements, it is time for the
Congress to stand up for the consumers. The big banks are doing fine.
Let us protect the consumers. Let us vote no on this legislation.
Madam Chairman, I rise in opposition to the bill.
I support financial modernization--if modernization means more
choices for consumers; more competition; greater safety and soundness;
stopping unfair bank fees; and protecting consumers and under-served
communities.
But Madam Chairman, I believe this legislation, in its current form,
will do more harm than good. It will lead to fewer banks and financial
service providers; increased charges and fees for individual consumers
and small businesses; diminished credit for rural America; and taxpayer
exposure to potential losses should a financial conglomerate fail. It
will lead to more mega-mergers; and small number of corporations
dominating the financial service industry; and further concentration of
economic power in our country.
The banking industry is currently involved in some of the largest
mergers in history. Four of the top ten mergers last year involved bank
deals totaling almost $200 billion. Today, three-quarters of all
domestic bank assets are held by 100 large banks. And this bill, if
passed in its current form, will further accelerate the consolidation
of banking and financial assets that we have seen in recent years.
It is no secret, Madam Chairman, that bigger financial institutions
lead to bigger fees--which totaled more than $18 billion last year. The
U.S. Public Interest Research Group and the Federal Reserve Bank have
conducted studies and confirmed that bigger banks charge higher fees
than smaller banks and credit unions. The Public Interest Research
Group's 1997 study of deposit account fees at over 400 banks found that
big banks charge fees that are 15 percent higher than fees at small
banks. Credit union fees, by comparison, were half those of big banks.
And the Public Interest Research Group's 1998 ATM surcharging report
found that more big banks surcharge non-customers, and big-bank
surcharges are higher.
This bill is certainly good for the big banks of America, but the big
banks are doing fine even without this bill. Government-insured banks
earned a record $18 billion in just the first three months of this
year--$2.1 billion more than they earned in the same period last year.
Bank profits were also up $1.9 billion in the first three months of
this year--beating the previous record set in 1998. And, according to
the Federal Deposit Insurance Corporation, the increase in earnings was
led by the largest banks, while smaller banks saw their earnings
decline.
This bill has everything the big banks want, but it has little or
nothing for consumers. It does not modernize the Community Reinvestment
Act (CRA) by applying CRA requirements to new financial conglomerates.
It does not stop ATM surcharges. It does not safeguard stronger
consumer protection laws passed by the various States. It does not
provide the strong privacy provisions that will be needed with the
creation of large financial service conglomerates, It does not require
that banks serve low- and moderate-income consumers by offering basic,
lifeline accounts. And it does not even include provisions to protect
women and minorities from discrimination in homeowner's insurance and
mortgage services. These anti-discrimination provisions were included
in the version of the bill that was reported out the Banking Committee,
but they mysteriously disappeared from the bill when it came out of the
Rules Committee.
At a time of increasing bank fees, ATM surcharges, credit card fees,
increasing minimum balance requirements, discrimination against women
and minorities, and the loss of many locally-owned banks to large,
multi-billion dollar corporate institutions, Congress should consider
pro-consumer legislation to directly address those problems. But this
bill is not good for consumers, or small businesses, or taxpayers, or
under-served communities. I urge my colleagues to reject this bill.
Mr. BLILEY. Madam Chairman, I yield 2 minutes to the gentleman from
Iowa (Mr. Ganske), my friend and colleague.
Mr. GANSKE. Madam Chairman, I yield to the gentleman from New York
(Mr. LaFalce), my friend and colleague.
Mr. LaFALCE. Madam Chairman, I and many, many others have tremendous
concerns about the gentleman's amendment, two in particular.
Number one, we want to make sure that it does not in any way preclude
the authority of the Secretary of HHS to promulgate medical privacy
regulations subsequent to August 21, and it is imperative that that be
made explicit in conference.
Secondly, there are so many health provider organizations, the AMA,
the Nurses Association that have concerns primarily because of the
exceptions in the gentleman's amendment, and I want my colleague's
assurance that he will work for specific statutory language in
conference that will deal with both those problems.
Mr. GANSKE. Madam Chairman, I want to assure my friend that it was
not the intent of the language in this bill to preclude the Secretary
from being able to issue her regulations in August, and I will work
with the gentleman in conference to make that explicitly clear in
language, that nothing in this would preclude her from doing that.
Madam Chairman, I yield to the gentleman from Washington (Mr. Baird).
Mr. BAIRD. Madam Chairman, as a clinical psychologist myself and in
the gentleman's role as a physician I know that we are both concerned
about protecting the confidentiality of individual medical information.
I also know of the gentleman's hard work to craft language that would
limit the sharing of information between financial industry entities
and their subsidy areas.
However, it is my concern and the concern of other Members about the
confidentiality of sensitive health and medical information under the
listed exemptions of the current bill. To address those concerns I
would like to ask my colleague and good friend if he would agree to
support at conference inclusion of language to allow the exchange of
general economic and clinical information but prohibit the exchange of
personally identifying information such as the names, addresses, or
social securities of specific patients.
Mr. GANSKE. Madam Chairman, I appreciate the comments of my colleague
the gentleman from Washington (Mr. Baird). We both want privacy for
our patients. We also both want to see insurance function. I pledge to
work with my colleague and also the gentleman from Massachusetts (Mr.
Markey), the gentleman from California (Mr. Condit), the gentleman from
California (Mr. Waxman) to improve the provisions in this bill in
conference so that we can do both.
Mr. DINGELL. Madam Chairman, I yield 4 minutes to the gentleman from
Massachusetts (Mr. Markey).
Mr. MARKEY. Madam Chairman, the gentleman from Michigan (Mr.
Dingell), myself, many Members of this body over the last 14 years for
me have worked to produce this financial modernization bill. Many times
I have brought it out here on the floor. I can remember our final
meeting with President Bush and Secretary Baker back in 1990 where it
just came down to one final detail. We have been here many times
before. It is an important bill. But it is only half a bill because as
the financial revolution speeded up by the global technology
telecommunications revolution, hits our country, we need to provide
protections for ordinary people as well.
Yes, this bill gives ordinary Americans a window on Wall Street, but
simultaneously it gives Wall Street a window on each one of our living
rooms. The problem with the Republican bill is that it says that if
their checks, and let us just say for the sake of this discussion, they
you have had their checks in the same bank for the last 25 years, every
check my colleagues have written for your family. Now, after this bill
passes, that bank can now buy a brokerage or an insurance affiliate.
This legislation says that they can hand over all of my colleagues
checks for the last 25 years to the 300 or 400 brokers in their new
affiliate even though they have got a broker down the street who has
been their broker for the last 25 years. So every one of the checks
that my colleagues have written are now in the hands of 300 brokers in
town who my colleagues do not want to go through everything that they
have done financially for the last 25 years.
[[Page H5230]]
Now should people have the right to say, no, I do not want that? The
Republicans refuse to give that right. What they say is we are going to
give people notification that we are going to compromise their privacy.
That is like a burglar leaving behind a note saying what they have
stolen, giving notice, but my colleagues have no right to stop it.
Now, my colleagues, here is how the American people feel about this
issue. Question, AARP: ``Would you mind if a company did business with
sold information about you to another company?'' Ninety-two percent of
Americans would mind. I do not know who the other 7 percent are, but 92
percent would mind.
Now let us go to the next poll. The next poll is just as bad. Here is
the question: ``In the future banks, insurance companies, and
investment firms may be able to merge into a single company. If they
do, would you support or oppose these narrowly merged companies from
internally sharing information about your accounts or your insurance
policy?'' Eighty percent would oppose sharing. Eleven percent would
support it.
Eighty percent oppose. They want the right. This is the AARP.
And the final chart: Here is what a typical bank's policy says quite
simply: ``Even if you request to be excluded from affiliate sharing of
information, we will share this other information about you and your
products and services with each other to the extent permitted by law.''
We determine what the law is. If we do not pass a law, they are sharing
that information.
Madam Chairman, the world breaks into three categories, the
information peepers, and they are out there; now, with the new
technology, the information mining reapers who use these electronic
technologies to gather all parts of our life, medical, financial,
checking; and third, information keepers. They used to be our local
doctor, our local banker, but they have been purchased by multinational
banks, by multinational or by national HMOs.
The information keepers of the modern era are the United States
Congress. If we do not pass these laws today, the American people are
unprotected.
{time} 1730
Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from
California (Mr. Royce), my colleague and great friend.
Mr. ROYCE. Madam Chairman, we can create a financial structure that
provides lower costs, increased access, better services, and greater
convenience to consumers.
Every consumer in this country is connected in some way to the
financial services industry. Nearly every economic transaction involves
the exchange of money or the promise of a future exchange of money,
meaning that every day every consumer feels the weight of an outdated
and overburdened system of regulation in the form of higher costs.
The legislation we are voting on today provides consumers with
significant relief from these costs. Indeed, with the efficiencies that
could be realized from increased competition among banking, securities
and insurance providers under this legislation, the Treasury Department
tells us that consumers will ultimately save as much as 5 percent, or
$15 billion per year in the aggregate.
As a member of the House Committee on Banking and Financial Services,
I urge my colleagues to support this legislation.
Madam Chairman, we have the opportunity here today to accomplish what
no other Congress of the last 20 years has been able to, and that is to
modernize the depression era laws governing our financial services
sector. In doing so, we will create a structure that provides lower
costs, increased access, better services, and greater convenience to
consumers.
Every consumer is connected in some way to the financial services
industry. Nearly every economic transaction involves the exchange of
money or the promise of a future exchange of money--meaning that every
day, every consumer in this country feels the weight of an outdated and
overburdened system of regulation, in the form of higher costs.
The legislation we are voting on today provides consumers with
significant relief from these costs. Indeed, with the efficiencies that
could be realized from increased competition among banking, securities,
and insurance providers under this legislation, the Treasury Department
has estimated that consumers may ultimately save as much as 5 percent--
or $15 billion per year in the aggregate.
This monumental legislation is good for consumers and it is good for
America.
At this time, I would like to commend Rules Committee Chairman David
Dreier for his work on the compromise language for Title IV, and take a
few moments to clarify this language.
The Title IV of the Dreier substitute amendment to H.R. 10 requires
that certain companies with nonfinancial activities that propose to
acquire control of a savings association must notify the Board of
Governors of the Federal Reserve in the same manner as a notice of
nonbanking activities is filed with the Board under section 4(j) of the
Bank Holding Company Act of 1956. This notice would be in addition to
the application that is already filed with the Office of Thrift
Supervision. The Federal Reserve would have the opportunity to review
and take action on the notice prior to the applicable time periods
under section 4(j).
The Federal Deposit Insurance Corporation and the Office of Thrift
Supervision have testified that affiliations between commercial
companies and thrift institutions have not been a cause for regulatory
concern.
Thus, we do not intend or anticipate that the Federal Reserve Board
will treat the affiliation of commercial companies and savings
associations as giving rise, per se, to undue concentration of
resources, anti-competitive effects, conflicts of interest or unsound
banking practices.
Rather, it is intended that the Federal Reserve Board will examine
proposed transactions for unusual or extraordinary circumstances that
would have an adverse effect on a subsidiary savings association that
outweighs the public benefits of the transaction.
Again, as a member of the House Banking Committee, I urge my
colleagues to support this legislation.
Mr. LaFALCE. Madam Chairman, I yield 1\1/2\ minutes to the gentleman
from Texas (Mr. Bentsen), a distinguished member of the committee.
(Mr. BENTSEN asked and was given permission to revise and extend his
remarks.)
Mr. BENTSEN. Madam Chairman, this is, overall, a pretty good bill. It
starts to bring statutory law up to pace with where the marketplace is.
The markets, the financial markets in the United States, are the
strongest in the world, but the laws governing them are greatly
outdated.
As a result of financial disintermediation in the markets, we now see
different industries, banking and securities, securities and insurance,
banking and insurance. It is time to catch up with that.
This bill goes a long way in getting there. It does not create the
perfect holding company model, the perfect financial holding company
model, but it goes a long way to get there. I am very much appreciative
that we have included the operating subsidiary language, allowing banks
to decide what model they want to have, whether a national bank or a
holding company. I think this is very safe and sound.
In fact, one of my previous colleagues mentioned that the chairman of
the Federal Reserve even said that there was no safety and soundness
issue; at least 2 years ago he said that. Then he entered into a turf
battle and changed his position, but he has been known to change his
position before.
I think this is overall a good bill. There are a couple of problems
with it. Unfortunately, I think we are going backwards in putting
restrictions on unitary thrifts. We are bringing the Federal Reserve
into regulation of unitary thrifts where they have never been before. I
offered amendments in committee that would have addressed that in a
proper way, either with the FDIC, which has regulatory authority, or
bringing the OTS in. Unfortunately, the committee did not accept it.
It is ironic again that we made in order the Burr amendment which
goes the other direction for certain entities but we take it away from
thrifts.
Madam Chairman, thank you for giving me this opportunity to discuss
H.R. 10, financial modernization legislation. As a member of the House
Banking Committee, I strongly support this legislation and urge my
colleagues to support it. I believe that this comprehensive banking
reform legislation will bring new benefits to consumers by encouraging
competition between banking, securities, and insurance firms to create
a ``one-stop'' shopping for consumers.
Our markets today in the United States are the strongest financial
markets in the world and provide a robust market system for consumers.
Yet, our system has been restrained
[[Page H5231]]
by the Glass-Steagall law that requires financial companies to separate
their banking, securities, and insurance companies into different
companies. By repealing Glass-Steagall, Congress will bring new
competition to financial services so that consumers can purchase more
products. The net effect of this legislation will be to promote more
competition, create more products at lower prices, and better protect
American consumers. It allows federal law to catch-up to the fast paced
structural changes occurring in the financial marketplace.
While H.R. 10 does not necessarily produce the ``ideal'' financial
holding company model or charter, it does repeal portions of existing
regulatory constraints dating back to the Great Depression commensurate
with a market that has matured greatly through disintermediation
brought on by increased consumer wealth, sophistication, and access to
information. This proposal should not be viewed as a repudiation of
past regulatory regimes, but rather a maturing of such regimes.
While this bill is not perfect, it strikes a balance in this new
marketplace. First, H.R. 10 includes multiple structures for banking
entities through either a holding company-affiliate model or operating
subsidiary, which I have long supported and believe is adequately safe
and sound. In fact, the majority of bank regulators believe this model
is in some cases more safe than an affiliated holding company
structure. Second, the bill addresses in a prudent way the issue of
commerce and banking through a new ``complimentary to banking''
approach that I hope will meet my previous concerns that an outright
ban on commerce would limit future abilities to meet market demands and
product development. Finally, it continues the efforts of the Community
Reinvestment Act so that all sectors of our society can benefit equally
from capital formation and economic development. It is important that
these areas of H.R. 10 are not changed or watered down.
It is regrettable that the Rules Committee chose to strip the bill of
the Lee amendment addressing ``redlining'' by insurance companies.
Additionally, this bill inadequately addresses an issue that I have
long advocated related to the transferability of unitary thrift holding
companies. In the House Banking Committee, I successfully offered an
amendment that would ensure that grandfathered unitary thrift holding
companies can be sold and transferred. I strongly believe that we must
ensure this transferability in order to protect those unitary thrift
holding companies which have existed for more than 30 years on a sound
and safe manner.
Regrettably, the bill we are considering today includes a provision
that would make it more difficult for these transfers to be approved.
This bill would impose a new requirement that the Federal Reserve Board
should review any of these mergers. I believe that this Federal Reserve
Board review is unnecessary and unprecedented. As you may know, the
unitary thrift holding companies are regulated on the federal level by
the Office of Thrift Supervision. This new language, would for the
first time, subject unitary thrifts to federal regulatory oversight by
the Federal Reserve Board. I believe that this review process will
prevent transfers and would lower the value of unitary thrifts holding
companies. I am also concerned that the Federal Reserve will not be
required to provide a written record for their reasoning related to
reviews.
I filed three amendments in the House Rules Committee that would have
corrected this inequity.
Unfortunately, the House Rules Committee did not allow any of these
amendments to be considered today. My first amendment, which is also
jointly supported by Representatives Royce, Inslee, and Weller would
strike the Federal Reserve Board review process and restore the
language to the amendment that was adopted by the Housing Banking
Committee by a roll-call vote. I believe that this is the best option
and would ensure that transfers are reviewed by the Office of Thrift
Supervision.
The second amendment which is also sponsored by Representatives Royce
and Inslee would substitute the Federal Deposit Insurance Corporation
as the secondary reviewer in cases of unitary thrift holding companies
mergers. I believe that the FDIC is better equipped to review these
mergers, because they already have enforcement authority over
federally-chartered thrifts and have worked well with thrifts. This
amendment would also require that the review process should consider
reasonable criteria related to these reviews and that the final
decisions should be written so that parties would understand the
reasoning behind decisions.
The third amendment which was also sponsored by Representatives Royce
and Inslee would add the Office of Thrift Supervision to the current
Federal Reserve review process. This joint review would help to ensure
that grandfathered unitary thrift holding companies mergers have a fair
hearing of their cases and that all final decisions would be written. I
believe that the OTS, as the principal regulatory for unitary thrifts,
should be part of the final decision to approve such mergers. In a case
where OTS and the Federal Reserve do not agree, this amendment would
ensure that all final decisions would be written and would permit
owners to apply for judicial review of any decisions made.
I believe that all of my amendments would improve the current Federal
Reserve review included in this bill.
Unitary thrift holding companies have existed for more than 30 years.
During the thrift crisis of the 1980's, Congress acted to encourage
commercial companies to purchase insolvent thrifts. As a result, for
instance, Ford Motor Company infused more than $3 billion in one thrift
to prevent their failure.
Second, unitary thrift holding companies are safe and sound
institutions subject to strict regulatory standards as are all
federally insured thrifts. In fact, unitary thrift holding companies
must meet strict standards to stay in business. Unitary thrift holding
companies must meet the ``Qualified Thrift Lender (QTL)'' test in which
they purchase and provide mortgages. As opposed to banks, unitary
thrift holding companies are greatly limited in underwriting commercial
loans. And, Congress has prohibited loans from unitary thrift holding
companies to their non-banking affiliates. I believe that all of these
safety and soundness protections ensure that taxpayers are protected.
Third, the thrift business is specialized. As of the end of 1998,
there are only 547 thrift holding companies. Of these 547 thrift
holding companies, only 24, less than 5% are engaged in commercial
activities. If the unitary thrift holding company charter was so
valuable, you would expect that many companies would be applying for
this specialized charter. Yet, the evidence does not bear this out. A
powerful reason that limits the number of applicants is the qualified
thrift lending test and the commercial lending limits have done their
job; a thrift charter is only attractive to those companies prepared to
commit to residential real estate and credit card lending, and a few
other forms of consumer banking. For most companies, these restrictions
are sufficient to deter interest.
Fourth, nearly three-quarters of the recent holding company
applicants are acceptable to critics. A total of 75 companies with non-
banking interests has applied for the thrift charter since the
beginning of 1997. Of those, a total of 55 firms or 73 percent is
currently in the insurance and securities businesses and therefore
could not obtain a bank charter under current law. However, under H.R.
10, these firms would be eligible to convert a bank charter. Indeed,
the Travelers-Citigroup merger suggests that the bank charter would be
preferable and they would transfer their charter once this broader bank
charter is available. Travelers actually gave up its unitary thrift
holding company status in favor of becoming a bank holding company and
in the expectation of financial services reform legislation.
Finally, it is a question of equity. Congress allowed for the
creation and growth of the unitary thrift charter in the 1960s. To
retroactively close the market for those who have ``played by the
rules'' and pose no threat to safety and soundness of the Nation's
federally insured lending does not seem fair. And while H.R. 10 may
provide a new financial model we should at least hold harmless those
already in the program and not legislatively depreciate their value.
Congress has been down that road before with limited success. Such a
course deviates from the concepts of increased competition, economic
vibrancy and consumer choice that inspired the pending bills.
Finally, with respect to the issue of privacy, I believe that we have
structured strong, bipartisan financial privacy language which goes far
beyond existing law. For the first time transfer of specific account
information to third parties would be prohibited. Consumers could
``opt-out'' of other third party transfers and financial institutions
would be required to establish a financial privacy standard for its
customers. And while some questions remain with respect to the language
on medical privacy, this bill still goes far beyond current law.
Passing this does far more than doing nothing.
While this bill is not perfect, I strongly believe that we must act
to promote more competition and provide new products for consumers. I
strongly urge my colleagues to vote for H.R. 10.
Mr. BLILEY. Madam Chairman, I yield 3 minutes to the gentleman from
Florida (Mr. Stearns), a member of the Committee on Commerce.
(Mr. STEARNS asked and was given permission to revise and extend his
remarks.)
Mr. STEARNS. Madam Chairman, H.R. 10 would modernize America's
financial service industry. Now, the big debate seems to be on the
privacy protection. I think this bill contains very
[[Page H5232]]
important, very start-of-the-debate important, issues for protecting
the customers of the insurance industry, the banking industry and the
securities industries.
One of the most important provisions of this bill is this privacy
information.
Now, during consideration of this measure in the House Committee on
Commerce, many of us know the gentleman from Iowa (Mr. Ganske) offered
an amendment on health information confidentiality, a lot of debate on
it. We had a lot of debate on it. We talked about it, but all of us
felt that this was just the start. If we did nothing, if we could not
even get this debate started and we defeat this bill today, then we are
going to have no privacy.
So I think we should not let this small debate that we are having on
privacy stall the entire bill, because in the end we can amend and we
can work through HCFA and other places to create more privacy and
perhaps more to everyone's liking.
Think about it. If we allow a bank, an insurance company, to work
together and the insurance company does a check on a person's health
records, how does one know that those health records could not end up
in a bank? Or perhaps the bank, when applying for a loan, would use
some of the information from a person's health records? So that is why
I think what we offered in the full committee was important.
I was also able to have an amendment that offered the word genetic
information to include in that privacy information. So I say to the
Members on that side of the aisle, I think genetic information is
something that also should be protected.
Now, there are a lot of people that say we are going to stop the
Secretary of Health and Human Services from issuing regulations on this
issue as required under the Health Insurance Portability and
Accountability Act that we passed in 1996.
This language in this bill says nothing to stop the Secretary of HHS
from issuing regulations on this matter. In fact, Madam Chairman, the
cite reference in the bill, which is 264(c)(1), if we go to look at it,
is the very language, the very language that gives authority to Health
and Human Services to issue the regulations.
So, Madam Chairman, I think we should all come together. We have
looked at H.R. 10 until we are blue in the face. We have talked about
this. We should not let this be defeated today, trying to talk about
just the privacy. I think it is a first step, so I look forward to our
continuing discussion on this, and we can go back after we have passed
H.R. 10 to talk about medical records and confidentiality with a
separate piece of legislation.
So, in the meantime, I support the language we have in the bill today
protecting all Americans, consumers, so that their information is not
inappropriately shared.
Mr. DINGELL. Madam Chairman, I yield 3 minutes to the distinguished
gentlewoman from California (Ms. Eshoo).
Ms. ESHOO. Madam Chairman, I thank the ranking member, the very
distinguished ranking member of the House Committee on Commerce, the
gentleman from Michigan (Mr. Dingell), for yielding me this time.
Madam Chairman, I think I am going to leave my printed copy just on
the stand here because really I think everyone in the Chamber has their
minds made up about what kind of a vote they are going to cast on this
bill.
We are here as representatives for the American people. So my message
to the American people, whomever is tuned in, is what is it that we are
debating? What is it that we are fighting and arguing about which is so
important in this bill?
First of all, this is a bill to reshape financial services and how
they are delivered in our great Nation. It is an overhaul of laws that
need to be overhauled because they have not been touched really since
the Great Depression. So we know that there is a timeliness to this
effort and an importance attached to it.
I want to raise something to the American people, and the reason why
I come to the floor in my disappointment is because when I cast my
votes in the House Committee on Commerce I had every intention of
supporting this financial services bill.
This is not an excuse on my part, American people. I feel very
strongly about this.
What brings me to the floor is the issue of privacy, financial
privacy.
Now, if someone asks Mrs. Smith how much is in her money market
account, her first reaction is, why should I say? It is not anyone's
business.
Financial dealings and how we conduct our finances is very, very
private. Who we write our checks to, where they go, whether it is to a
doctor, should the bank manager know more or as much as our personal
physicians? I think not. I think it is the responsibility of the House
of Representatives, the House of the people, the people that are out
there, to protect their personal financial privacy.
That is what I am raising in this. Regardless of what anyone else
says, and whomever rises, when one reads the print, it says, we will
protect their financial privacy, dot, dot, dot, with all of these
following exceptions. I do not think this is good enough. I know we can
do better.
I think the American consumer deserves this kind of protection. In
fact, I think there is going to be like a prairie fire of objection
that moves across the country on this issue, because no one would
believe that their elected representative would not stand between them,
the constituent, and whatever financial institutions are out there. We
need them to do business with. But that our personal, private financial
information be sold and dealt away and possibly used against us? Come
on. We can do better than this. I would say thanks to Mr. and Mrs.
America. This is what brought me to the floor.
Mr. LEACH. Madam Chairman, I yield 2 minutes to the distinguished
gentleman from Ohio (Mr. Boehner), who has worked on this legislation
more than any noncommittee member in the history of the Congress. To
him I am grateful.
(Mr. BOEHNER asked and was given permission to revise and extend his
remarks.)
Mr. BOEHNER. Madam Chairman, I rise today in support of this landmark
piece of legislation. In one great cascade, it washes over decades of
obsolete law, congressional inattention and regulatory creep to give us
a modern and prudent legislative framework for one of our most
important and dynamic industries. I believe it is the most important
bill that we will debate in this Congress this year, and I strongly
urge its passage.
In a bill this complex, it is easy to miss the forest for the trees,
but the broad direction I think is what is most important. Our Nation's
financial services sector is the irrigation system for our economy. If
we remove outdated obstacles to innovation and greater efficiency in
the financial services industry, we are helping our entire economy
become more competitive, more vibrant and healthier.
It is important to recognize additional benefits of this legislation.
By putting in place a regulatory system that actually makes sense for
today's financial services industry, not the industry of 1933, we are
both making the industry more internationally competitive and reducing
the kinds of risks that led to bank and savings and loan failures of
the late 1980s.
By giving consumers the chance to do one-stop shopping for all of
their financial needs, we are giving them more control, better
information and better choices for their financial needs.
Madam Chairman, this really is a superb piece of legislation, crafted
with great care, with fairness and with patience. Let me say about
patience, of the four gentlemen, the two chairmen and the two ranking
members who I have had the pleasure to work with over the last 3 years
on this legislation, this is a great example of how the Congress can
work, when we agree on what the goals are and we work together and work
through all types of objections. The gentlemen that I have just pointed
out deserve a great deal of credit for a job well done.
Mr. LaFALCE. Madam Chairman, I yield 1\1/2\ minutes to a
distinguished member of the committee, the gentlewoman from Oregon (Ms.
Hooley).
Ms. HOOLEY of Oregon. Madam Chairman, I would like to thank my
distinguished ranking member, the gentleman from New York (Mr.
LaFalce), and the committee chair, the gentleman from Iowa (Mr. Leach),
for all of their hard work that they have done on this bill.
[[Page H5233]]
I rise today in support of H.R. 10, which, in fact, is good for the
ordinary citizen and, in fact, does provide more privacy protection
than they have ever had before. This bill uses the House banking bill
as its text base, which passed the Committee on Banking and Financial
Services 50 to 8. It had support of Democrats, Republicans and the
administration, who took painstaking work on this particular piece of
legislation to strike a compromise that is also supported by a diverse
sector of the financial services industry.
After 15 years of moving the ball down the field, it is time we put
it over the goal line. This bill preserves the Community Reinvestment
Act, which has brought billions of dollars of investment into our
underserved urban and rural communities and encompasses important
consumer protections.
While we may hear otherwise today, this bill has good privacy
measures in it. Today we have the opportunity to support an amendment
that would make those privacy sections even better. With the passage of
a strong privacy measure, I urge my colleagues to vote yes on H.R. 10.
Madam Chairman, this bill strengthens the safety and soundness of our
financial institutions. This bill gives consumers one-stop shopping.
This bill gives consumers better privacy protection. This bill saves
consumers money. This bill is good for the economy. Let us pass
stronger privacy amendments. Let us put the ball over the goal and pass
H.R. 10 today.
{time} 1745
Mr. BLILEY. Madam Chairman, I yield 5 minutes to the gentleman from
Iowa (Mr. Leach) for purposes of control.
Mr. DINGELL. Madam Chairman, I yield 3 minutes to the distinguished
gentleman from California (Mr. Waxman).
(Mr. WAXMAN asked and was given permission to revise and extend his
remarks.)
Mr. WAXMAN. Madam Chairman, I thank the gentleman for yielding time
to me.
Madam Chairman, the proponents of this bill say they have increased
privacy protection for health records, but in fact, every independent
expert that has reviewed the legislation has reached exactly the
opposite conclusion.
The medical record provisions in H.R. 10 are opposed by physician
organizations like the American Medical Association and the American
Psychiatric Association. They are opposed by nurses' organizations,
like the American Nurses' Association. They are opposed by patients
groups, like the National Association of People with AIDS and the
Consortium for Citizens With Disabilities, and they are opposed by
privacy experts, like the Consumer Coalition for Health Privacy and the
ACLU.
Why have they reached that conclusion, when the other side on this
issue say they have put something in the bill to protect medical
privacy? They have a provision saying an organization cannot give out
information without the consent or the direction of the customer, but
then they have this huge exception.
They can, however, give it without ever asking the customer to
insurance companies, who then can keep a whole database on a lot of
people's medical records. They can give it to people participating in
research projects. It does not say it is a scientific research project.
Anybody could say they have a research project and therefore they get
the medical data, and these groups can then turn around and sell it.
There is no restriction on them whatsoever from further disseminating
our personal medical records.
This idea that we have to give our consent is not very convincing
when an insurance company can say to us that in order to get insurance,
we have to sign a waiver that will allow them to do whatever they want
with our medical records, or we go without insurance.
I feel that this provision is a step backwards. The proponents say
they are following a democratic process. In fact, they snuck the
medical records provision into the legislation like a midnight prowler,
to use the words of the Los Angeles Times. There have been no hearings
on the implications of what we are doing.
In fact, we are not even allowed to offer amendments to this
provision. Under the rule, the gentleman from California (Mr. Condit),
who has been working on health privacy issues for 10 years, was even
denied a motion to strike.
It would be better to strike all the medical provisions, privacy
provisions that are in this bill out because they do such a disservice
to the idea that we are protecting people's privacy.
In 1949 George Orwell wrote a chilling novel called 1984 about a
society that denied its citizens privacy. It is 15 years later than Mr.
Orwell predicted, but today 1984 is becoming a reality. Doublespeak
reigns in this House, and Big Brother in the form of all-knowing
financial conglomerates is being brought to life.
I urge my colleagues to vote against the bill because of this
provision alone.
Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from
Florida (Mr. Weldon).
Mr. WELDON of Florida. Madam Chairman, we have heard that we should
should not make the perfect the enemy of the good. We have some people,
I believe, who would like to make the perfect the enemy of the very,
very, very good.
We are about to set history here. This body has attempted to pass and
enact into law reform of our financial services industry for I
understand a decade and a half, and we have a product that the vast
majority of stakeholders agree on.
The medical privacy provisions happen to be something that I am very
interested in as a physician, and I believe the language in this bill
is pretty good. Can it be made better? Yes. As a matter of fact, we put
provisions in the language that say if the administration passes
regulations that are stronger, these provisions expire. We have
language in there that says if this body enacts legislation signed by
the President that is stronger, these provisions expire.
So to oppose this bill now, at this point, when we have an extremely
good product here, a very, very good product on this to me is a
tremendous disservice. I believe that all of our colleagues on both
sides of the aisle should support this, because this is extremely good
for America.
Mr. LaFALCE. Madam Chairman, I yield 1 minute to the gentleman from
Texas (Mr. Sandlin).
(Mr. SANDLIN asked and was given permission to revise and extend his
remarks.)
Mr. SANDLIN. Madam Chairman, financial modernization is already
occurring in this country, and is here to stay. However, burdensome
regulatory barriers are hindering the efforts of our financial
institutions to compete globally through the development and delivery
of new financial products. This only exacerbates or makes worse the
problems within the financial services industry.
The bottom line is simple: Financial modernization is necessary and
will continue in this country as a result of market forces, even in the
absence of any sort of legislation. However, the success of American
firms and ultimately the strength of our economy is going to depend
upon passing a good bill, one that will ensure that financial
modernization occurs in an efficient manner, and protects the interests
of consumers as well as the safety and soundness of our financial
industries.
But as we debate these important issues, we must remember community
banks. People trust community banks. They know their community bankers.
We have recognized these institutions as an integral part of rural
America. We must not overlook them or jeopardize their future in any
way as we undertake this monumental legislation.
I believe this bill addresses the needs of Main Street as much as
Wall Street, and I urge Members to cast their vote in support of this
important legislation.
Mr. LEACH. Madam Chairman, I yield 2 minutes to the gentlewoman from
New York (Mrs. Kelly), who has worked so diligently on this bill.
Mrs. KELLY. Madam Chairman, I thank my good friend, the gentleman
from Iowa (Mr. Leach) for yielding time to me.
Madam Chairman, I rise in strong support of H.R. 10. I would like to
take
[[Page H5234]]
just a minute to talk about the provision in H.R. 10 regarding NARAB,
the National Association of Registered Agents and Brokers.
Under NARAB, States would be encouraged to streamline insurance agent
and broker licensing laws, creating reciprocity, uniformity, and
eliminating protectionist residency barriers. The NARAB provisions have
been designed to bring true modernization to insurance licensing, and
it is something that I believe that we really do need to have in the
United States of America today.
It is for the commonsense provisions in H.R. 10 like NARAB that we
all need to join together in support of H.R. 10.
Madam Chairman, I rise in strong support of H.R. 10. We have been
hearing the debates so far mostly focus on the more controversial
sections of the bill. Many of the benefits of H.R. 10 have been
heralded here today because they represent breakthroughs on issues that
have been contentious and seemingly irreconcilable for many years. Yet
there are other modernization provisions which are extremely valuable,
but have not been highly publicized because they have been essentially
non-controversial. I'd like to specifically point to the provisions
regarding NARAB--the National Association of Registered Agents and
Brokers.
Under the NARAB subtitle of Title III, states would be encouraged to
streamline insurance agent and broker licensing laws--creating
reciprocity, uniformity, and eliminating projectionist residency
barriers. If a majority of states fail to enact reciprocal licensing
laws within three years of enactment of this legislation, NARAB would
be created as a uniform, agent/broker licensing clearinghouse governed
by state insurance regulators.
I'd like to thank the bipartisan leadership of both the Banking and
Commerce Committees for including this provision in H.R. 10. Since I
raised this issue in the Banking Committee in 1997, the National
Association of Insurance Commissioners and individual states have
significantly ratcheted up their efforts to achieve licensing reform.
For many years prior, there were attempts to ease the burden and
unnecessary costs associated with multi-state licensing. But those
attempts failed to keep pace with consolidations in the insurance
industry, along with increasing financial services consolidation and
globalization of insurance markets. The NARAB provisions have been
designed to bring true modernization to insurance licensing laws, in
keeping with functional state insurance regulations.
Perhaps the most gratifying development on the licensing front in
recent months has been the increasing acceptance of NARAB by the NAIC
as a good incentive for licensing reform. NAIC President George Reider,
Kentucky Commissioner George Nichols, North Dakota Commissioner Glenn
Pomeroy and others have been doing a superb job in elevating uniform
and reciprocal licensing on the agendas of individual state
legislatures. They understand that barriers to competition from out-of-
state insurance agents and brokers is incompatible with today's
integrated financial institutions marketplace. Their commitment to
reform is real, and NARAB will be the assurance their efforts will
ultimately succeed.
Currently, there is no counterpart NARAB provision in the financial
services bill approved by the other body, and I look forward to working
with congressional conferees to assure that these important licensing
reforms can be achieved in the context of broad modernization
legislation.
It is for these common sense provisions that we all must join
together in support of H.R. 10.
I want to take a moment to thank Chairman Leach for his superior
leadership in steering H.R. 10 through committee. It was because of his
patience, thoughtfulness and considerable knowledge of the financial
service industry that this legislation has come to the floor with a
strong bipartisan support it now has. The gentleman from Iowa has also
had the assistance of an excellent staff at his side to assist his
considerable efforts. Just to name a few, Tony Cole, Gary Parker,
Laurie Schaffer and Alison Watson. There are so many more but I haven't
the time to name them all. Chairman Leach really does have the highest
standards for his staff and they have all lived up to those standards
set by the Chairman.
Secretary Rubin estimates that passage of this legislation will save
consumers $15 billion a year. The efficiencies created by this
legislation will allow financial institutions to stop wasting time and
money complying with out of date laws written in the 1930's and enable
them to better serve their customers in the 21st century.
H.R. 10 comes before us with the strong support of both parties and
the administration. Let's join together in ensuring that we preserve
this agreement by passing this rule with a strong bipartisan vote. I
thank the gentleman from California and his colleagues on the Rules
Committee for their good work on the rule and ask all of my colleagues
from both sides of the aisle to join me in voting for legislation years
in the making that will improve the lives of all Americans, H.R. 10.
Mr. LaFALCE. Madam Chairman, I yield 1\1/2\ minutes to the
gentlewoman from Indiana (Ms. Carson).
Ms. CARSON. Madam Chairman, I would like to thank the ranking member
for yielding me the time to engage the chairman of the committee, the
gentleman from Iowa (Mr. Leach) in a colloquy.
Madam Chairman, I would like the chairman's clarification with
respect to section 351 relating to the medical information
confidentiality provisions.
The rule report on page 371, line 7, subparagraphs 1, 2, and 3, I
read each as several separate clauses, and that following clause 1 and
before clause 2 there is an implied ``or'' that indicates that each of
these is to be read as separate clauses.
Mr. LEACH. Madam Chairman, will the gentlewoman yield?
Ms. CARSON. I yield to the gentleman from Iowa.
Mr. LEACH. The gentlewoman has raised a very important point. I fully
concur in her interpretation. That is exactly correct. I think it is an
important clarification for the Record.
Ms. CARSON. Madam Chairman, I appreciate the gentleman's comment.
Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from New
York (Mr. Sweeney).
(Mr. SWEENEY asked and was given permission to revise and extend his
remarks.)
Mr. SWEENEY. Madam Chairman, I thank the chairman for yielding time
to me.
Madam Chairman, I joined the Committee on Banking and Financial
Services, and my desire is to help spur economic growth in my
congressional district in upstate New York. In my mind, today is a
historic step in that direction. I am very proud to fully support H.R.
10, because financial services provide the basis for private investment
in new business that creates jobs.
We here in Congress have the responsibility to ensure that our
financial services law reflects and therefore does not stifle the level
of innovation and service in the financial services marketplace.
We have a responsibility to ensure that all participants in the
marketplace, from security brokers to community banks to independent
insurance agents, are given the opportunity to compete and thereby
provide the best service to our constituents.
So I urge support for this bill, H.R. 10, and confirm this House's
commitment to that responsibility.
Madam Chairman, I rise in strong support of H.R. 10 and commend the
hard work of its sponsors.
I joined the Banking Committee based on my desire to spur economic
growth in my Congressional district in Upstate, NY--by providing
businesses and entrepreneurs with the access to capital to create new
jobs. Therefore, I am pleased to speak in support of this important
legislation.
Financial services provide the basis for private investment in new
business that create jobs, for the protection of people's hard-earned
assets from catastrophic loss, and for the ability of Americans to save
and effectively plan for their retirements.
Given the importance of financial services as the base for our
economy, Congress has many responsibilities to ensure that our laws are
responsive to the everyday function of these essential markets.
We have a responsibility to ensure that our laws reflect, and
therefore do not stifle, the level of innovation and service in the
financial services marketplace.
We, as a Congress, have a responsibility to oversee those laws to
ensure that consumers are treated fairly in the marketplace, protected
from fraud and other potential abuses.
We have a responsibility to ensure that all participants in the
marketplace--from securities brokers, to the community banks, to
independent insurance agents--are given the opportunity to compete and
thereby provide the best possible service in the world.
H.R. 10 confirms this House's commitment to these responsibilities.
I commend the work of the Chairmen and the Ranking Members.
I urge your support of the bill.
Mr. LaFALCE. Madam Chairman, I yield 1\1/2\ minutes to the gentleman
from North Carolina (Mr. Price).
(Mr. PRICE of North Carolina asked and was given permission to revise
and extend his remarks.)
Mr. PRICE of North Carolina. Madam Chairman, I would like to engage
the managers from both sides, if I might, in a colloquy.
[[Page H5235]]
Mr. Chairman and Mr. ranking member, I first want to express my
appreciation to you for the hard work that you and your colleagues have
put into the drafting of this complex and necessary piece of
legislation.
I am a former member of the Committee on Banking and Financial
Services, and I am well acquainted with the difficulties that have to
be overcome just to bring a financial services modernization bill to
this floor. I do have a concern, however, that I hope the gentlemen
will spend some time addressing before bringing a conference report
back to the House.
The National Association of Insurance Commissioners and North
Carolina's Insurance Commissioner, Jim Long, have expressed to me a
concern with section 104 of this bill. This is a section that describes
under what circumstances State insurance law should be preempted in
order to ensure that financial institutions are not discriminated
against.
I know there are differing interpretations of this section as to what
sorts of State laws might be preempted. For example, North Carolina
just passed a Patients' Bill of Rights. This is legislation that is
very important to our citizens. I hope the gentlemen can assure me that
it is not the Committee's intention in this bill to allow financial
institutions that provide insurance products to be exempted from this
law or other important consumer protection statutes.
If there are remaining problems or ambiguities that need to be
cleared up, I hope the gentlemen will work during the conference to
clarify in what situations State insurance law should and should not be
preempted by this bill, and to make sure that functional regulation and
vital consumer protections are not compromised.
Mr. LEACH. Madam Chairman, will the gentleman yield?
Mr. PRICE of North Carolina. I yield to the gentleman from Iowa.
Mr. LEACH. Madam Chairman, let me say to the gentleman that the major
intent of the law is to maintain functional regulation, and the major
intent of the law is to have State regulation and law apply without
discrimination.
Mr. LaFALCE. Madam Chairman, will the gentleman yield?
Mr. PRICE of North Carolina. I yield to the gentleman from New York.
Mr. LaFALCE. Madam Chairman, I share the judgment of the chairman on
this particular question. That certainly is our intent, to prohibit
discriminatory action and to preserve the maximum amount of consumer
protection.
With respect to a State's Patients' Bill of Rights, I strongly
support a Federal Patients' Bill of Rights, and to the extent that the
State has acted similarly or more strongly, we would want to give
deference to such a bill of rights.
Certainly to the extent that it might need clarification, I am not
sure that it does, we would attempt to clarify that.
Mr. PRICE of North Carolina. I appreciate the gentlemen's assurances,
both the chairman and the ranking member, that it is not the intent of
this bill as drafted to compromise these essential consumer
protections, many of them administered by State insurance
commissioners, and that if there is any remaining ambiguity, that that
will be attended to in conference.
{time} 1800
Mr. BLILEY. Madam Chairman, I continue to reserve the balance of my
time.
Mr. DINGELL. Madam Chairman, I continue to reserve the balance of my
time.
Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from
Texas (Mr. Paul), one of the most thoughtful philosophers of the United
States Congress.
(Mr. PAUL asked and was given permission to revise and extend his
remarks.)
Mr. PAUL. Madam Chairman, I will take my one minute to address the
subject of privacy, because I do have an amendment that I think would
improve the protection of privacy.
We have had a lot of talk and indication on this side of the aisle
about protecting privacy. But I believe the understanding of what our
role is in protecting privacy, if it applied across the board, would
mean that politicians and political action committees could never rent
a list from the Sierra club or the American Civil Liberties Union.
But I am addressing the subject of Know Your Customer. At the same
time we hear these declarations for protection of privacy, we hear from
the same people that we cannot get rid of Know Your Customer.
Now, if one wants to really find something where one invades the
privacy of the individual citizen, it is this notion that the Federal
Government would dictate a profiling of every bank customer in this
country; and then, if that customer varied its financial activities at
any time, it could be reported to the various agencies of the Federal
Government. Now, that is privacy. That is what we have to stop. I ask
for support for my amendment.
Mr. LaFALCE. Madam Chairman, I yield 2 minutes to the very
distinguished Member of the committee, the gentlewoman from New York
(Mrs. Maloney).
Mrs. MALONEY of New York. Madam Chairman, I thank the gentleman from
New York for yielding me this time. It is long past due that we have a
bill that brings our financial services into the 21st Century.
We should be able to compete with other industrialized nations where
financial institutions have been allowed to merge and bring a wide
variety of products and services to their customers. The bill allows
the law to catch up with the reality of the international merger
movement.
Some of these mergers have taken place on the probability that
Congress will finally act so that financial services will no longer be
hamstrung by outdated restrictions of the 1930s. The bill allows
financial institutions to merge, but prevents banks from merging with
commercial businesses, and it requires functional regulation.
The Committee on Rules has changed what came out of our Committee on
Banking and Financial Services with tremendous bipartisan support. I
thank the gentleman from Iowa (Chairman Leach) and the gentleman from
New York (Mr. LaFalce), the ranking member, for their leadership.
Many of these changes are inappropriate and wrong, such as the
medical privacy provision, and they should be changed in conference.
While I will vote for this bill so that it can go to conference, my
final vote will be contingent on a bill that has strong privacy
provisions.
Also, we should be cognizant that the President will veto any bill
that does not contain strong CRA provisions, which I also fully
support, and are in the House bill.
Mr. BLILEY. Madam Chairman, I yield myself the balance of my time.
Madam Chairman, I want to take a moment first to recognize the hours
and hours of hard work contributed by my finance staff team, Linda
Rich, David Cavicke, Robert Gordon, Brian McCullough, and the trustee
clerks, Robert Simison and Mike Flood.
They were joined by diligent efforts of the minority staff, Consuela
Washington and Bruce Gwynn. These professionals performed above and
beyond the call of duty, and the committee is in their debt.
Glass-Steagall, Madam Chairman, was passed in 1933 in reaction to the
financial markets crash in the Great Depression. Those were extreme
times, and the American people demanded extreme measures to rescue them
from continuing economic crisis.
Just two years after Glass-Steagall was enacted, the law's primary
architect, the gentleman from Virginia named Carter Glass, realized
that Congress had gone too far, and he began an effort to undue the
damage that had been done.
Carter Glass may have been the first Congressman who tried to reform
Glass-Steagall, but he was not the last. In just the last 20 years,
there have been 11 efforts to modernize these archaic laws.
Last term, the Committee on Commerce Republicans and Democrats worked
with the Republican leadership of the Committee on Banking and
Financial Services to pass Glass-Steagall on the House floor for the
first time ever. I strongly supported that bill and was disappointed
that it faltered in the waning days of the Senate.
Today is a historic day. We join together here in the House to
approve legislation that is long overdue, and we are in a stronger
position than ever before to achieve our goal of modernizing financial
regulation in America.
[[Page H5236]]
Every step of the way we were opposed by lobbyists and special
interest groups who said it could not be done. But we heard the
concerns of the American people about all of these megamergers. We
heard the concerns of the local businessmen who want to compete, but
have one hand tied behind their backs by the archaic Glass-Steagall
restrictions. We heard from the Federal and State financial regulators
who emphasized the need to protect consumers and preserve the safety
and soundness of our financial system.
It is a testament to the will of the American people that we have
heard their concerns and are here today to pass legislation to protect
the future.
The legislation protects American investors by ensuring that the
rules for securities sales will be the same for everybody, no matter
where the securities activities take place. That means that investors
will be assured of the protections of the Federal securities laws, even
when they purchase securities in a bank, a protection investors do not
enjoy today.
The bill also treats the thrift industry fairly, by preventing future
expansion of the unitary thrift system, while protecting the ability of
existing thrifts to raise capital from the commercial markets. This is
an important win for American homebuyers who have relied on the thrift
industry to realize their American dream of homeownership.
This bill provides a better structure for regulating the financial
marketplace in the 21st Century. I look forward to further
strengthening that structure as we go to conference, by eliminating the
operating subsidiary and improving insurance consumer protections.
Our financial system has not been modernized since the Great
Depression. Federal regulators have been forced to invent highly
questionable and unauthorized make-shift regulations to try and
shoehorn an archaic legal system into the modern world. It must be
fixed. It must be fixed by Congress, not some unelected special
interest regulators.
H.R. 10 is the solution, and I am proud we are at the bridge of
achieving another historic accomplishment for the American people.
Beginning with the seminal efforts from the gentleman from Virginia
in 1935 to repeal the Glass-Steagall barriers to competition, Congress
has had neither the will nor the vision to open our financial markets
to full competition.
Mr. DINGELL. Madam Chairman, I yield 2 minutes to the distinguished
gentleman from New York (Mr. Towns).
Mr. TOWNS. Madam Chairman, I would like to begin by applauding the
leadership on both sides of the aisle in terms of the gentleman from
Virginia (Mr. Bliley), the chairman of the committee, and, of course,
the gentleman from Ohio (Mr. Oxley), the chairman of the Subcommittee
on Finance and Hazardous Materials, and, of course, the gentleman from
Michigan (Mr. Dingell), the ranking member on the Democratic side for
all their hard work. A lot of work and time and effort has gone into
this, a lot of hearings and all of that.
But I come today to say that I am concerned. First, I am concerned
about the privacy issue. I am very concerned about that. I am also
concerned about the behavior of the Committee on Rules. I think that we
want to be open and want to have the democratic process, but when the
Committee on Rules just makes decisions to drop out things just because
they have the ability to drop them out, without having a discussion on
them, I think that it does not serve this body well. It does not serve
the American people well. I am hoping that the Committee on Rules will
take another look at that and not continue to behave in that fashion.
This is not a perfect bill, but it is a step in the right direction.
I think that it will make us internationally competitive, which we need
to do. The time has come when we need to stop vacillating and to begin
to do the right thing, as my constituent Spike Lee says in Brooklyn.
I am very happy that at least the CRA provision, in terms of the fact
Community Reinvestment Act is very important, that they had the common
sense and good sense to leave that in there. They did not eliminate
that. I want to applaud the Committee on Rules for that because, I will
be honest with my colleagues, any bill that does not have the Community
Reinvestment Act in a strong way in it, I could not vote for it in any
way. So I am happy that at least that part is there.
But to conclude, let me say that I am hoping that some of the
problems that still exists with this legislation that we will correct
it in conference.
Mr. LEACH. Madam Chairman, I yield 2\1/2\ minutes to the gentleman
from Texas (Mr. Barton), a distinguished member of the Committee on
Commerce.
(Mr. BARTON of Texas asked and was given permission to revise and
extend his remarks.)
Mr. BARTON of Texas. Madam Chairman, I thank the distinguished
gentleman from Iowa (Mr. Leach), chairman of the Committee on Banking
and Financial Services.
Madam Chairman, I am standing on the Republican side to express some
of the same concerns that have been expressed on the Democratic side
about the inadequacy about the privacy protections in the bill that is
pending before us.
I want to commend the gentlewoman from Ohio (Ms. Pryce) and the
gentleman from Ohio (Mr. Gillmor) and others on the Republican side for
beginning to address the issue.
Sadly, we have not gone as far as we should go. We are about to enter
a brave new world where financial institutions offer large ranges of
services, not just checking account balances and savings account
balances. That is good. That is going to provide additional choice and
additional products for the American consuming public.
In the bill before us, if the Oxley amendment is adopted, we are
going to protect privacy in most cases for third-party transfers
outside the affiliate structure with some exceptions. We are going to
allow, within the affiliate structure, transfers with disclosure.
My opinion is, if it is a necessity to provide privacy for third-
party transactions outside of the affiliate structure, it is just as
much a necessity to provide that same opt-out provision within the
affiliate structure, given the fact that the very reason the bill is
before us is because we want to have these financial service
conglomerates.
I had offered, with the gentleman from Massachusetts (Mr. Markey), a
modified version of his amendment that was adopted on a voice vote by
the full Subcommittee on Energy and Power and Committee on Commerce.
That was not made in order by the Committee on Rules. I think that is
unfortunate.
I voted for the rule even knowing that my amendment had not been made
in order. I have spoken with the Speaker and the majority leader, and I
have their assurances that these privacy issues will continue to be
addressed.
I am sure that the gentleman from Iowa (Chairman Leach) and the
gentleman from Virginia (Chairman Bliley) share these same assurances.
But I want to let the body know that this concern about privacy is
not specifically a Democrat concern or Republican concern, it is
concern for all Americans. It is not going to go away, and we will have
to address it as this bill moves forward in the conference if it passes
the House.
Madam Chairman, I yield to the gentleman from Iowa (Mr. Leach) if he
wants to make a comment.
Mr. LEACH. Madam Chairman, I would just like to stress there is no
intent in this bill to jeopardize any confidences associated with
doctor-patient relationships nor the privacy protections currently
afforded any medical records. Indeed, the intent is to strengthen those
protections. To the degree that more precision in this area is
required, this gentleman is prepared to work in conference to ensure
that that occurs.
Mr. BARTON of Texas. Madam Chairman, I appreciate that pledge, and I
will work with the gentleman.
Mr. LaFALCE. Madam Chairman, I yield 30 seconds to the gentleman from
Texas (Mr. Barton).
Mr. BARTON of Texas. Madam Speaker, I am just flattered to continue
to be yielded time.
I yield to the gentleman from New York (Mr. LaFalce).
Mr. LaFALCE. Madam Chairman, it is my expectation that the bipartisan
[[Page H5237]]
amendment that was drafted with the gentlewoman from Ohio (Ms. Pryce),
the gentleman from Texas (Mr. Frost), myself, the gentleman from Iowa
(Mr. Leach) and others, and that a motion to recommit that will be
offered that will take whatever this body works its will on and then
simply takes the Markey-Barton amendment and a provision striking the
medical privacy provisions that my colleague is concerned about, and
that will be in the motion to recommit. So the gentleman will have an
opportunity to vote on exactly what he expressed concern about.
Mr. BARTON of Texas. Madam Chairman, I look forward to that
opportunity.
Mr. LaFALCE. Madam Chairman, I yield 1\1/2\ minutes to the gentleman
from Pennsylvania (Mr. Kanjorski), the distinguished ranking member of
the Subcommittee on Capital Markets, Securities, and Government
Sponsored Enterprises.
(Mr. KANJORSKI asked and was given permission to revise and extend
his remarks.)
Mr. KANJORSKI. Madam Chairman, I thank the ranking member for
yielding me this time.
Madam Chairman, I will take just one second to congratulate the
gentleman from Iowa (Chairman Leach) and the gentleman from New York
(Mr. LaFalce), the ranking member, on a job well done, a number of
years that everybody slaved over this. It is not a perfect bill, but I
think we should support the bill and move it on to conference.
Now, I would like to engage in a colloquy with the gentleman from
Louisiana (Mr. Baker). Madam Chairman, I rise to engage in a colloquy
with him about the Federal Home Loan Bank provisions contained in H.R.
10. As he will note, and as we have worked over the years, will there
be an understanding that he and I will work in conference together to
address issues to appropriately revise the REFCorp payments, put a cap
on the class B stock that can be counted toward meeting the risk-based
capital requirement, and that we should determine who should issue debt
for the system, and finally to work on the issue advanced base stock
purchase requirements for non-QTL members?
Madam Chairman, I yield to the gentleman from Louisiana (Mr. Baker).
Mr. BAKER. Madam Chairman, I certainly appreciate the gentleman's
interest and wish to express my full cooperation on these matters and
others that will be before us on the Federal Home Loan Bank. I
congratulate the gentleman from Pennsylvania and thank him for all his
courtesies and cooperation over the year in making this a reality.
Mr. KANJORKSI. Madam chairman, I want to thank the gentleman from
Louisiana (Mr. Baker) for his commitment to address these issues in
conference.
{time} 1815
Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from
Nebraska (Mr. Bereuter).
Mr. BEREUTER. Madam Chairman, I thank the gentleman for yielding me
this time, and in this colloquy with the chairman I would just say that
it is this Member's understanding that H.R. 10 would not alter the
definition of a diversified savings and loan holding company. Is this
correct?
Mr. LEACH. Madam Chairman, will the gentleman yield?
Mr. BEREUTER. I yield to the gentleman from Iowa.
Mr. LEACH. The answer to the gentleman's question is, yes, that is
correct.
Mr. BEREUTER. I thank the chairman. In particular, it is this
Member's understanding that under H.R. 10 insurance revenues will still
not be deemed to be banking related for the purposes of determining
whether a savings and loan holding company qualifies as diversified. Is
this correct?
Mr. LEACH. If the gentleman will continue to yield, the answer to
that question is also yes, that is correct, sir.
Mr. BEREUTER. Madam Chairman, I thank the gentleman for his comments.
Mr. LaFALCE. Madam Chairman, I yield 1 minute to the gentleman from
New York (Mr. Crowley).
(Mr. CROWLEY asked and was given permission to revise and extend his
remarks.)
Mr. CROWLEY. Madam Chairman, as a freshman congressman representing
the financial capital of the U.S., I rise today in support of H.R. 10.
Madam Chairman, currently our financial services industry is governed
by outdated laws and regulations which are costly and inconvenient to
consumers and which have put the industry at a competitive disadvantage
in the global marketplace.
Modernizing these outdated laws is needed to bring about the real
benefits available to the millions of Americans who use financial
services and to allow U.S. financial firms to remain the predominant
force in global markets.
Madam Chairman, this legislation strikes a critical, unprecedented
balance by providing a new financial services infrastructure aimed at
keeping the United States competitive in the global marketplace while
ensuring quality services and protections for consumers and
communities.
Madam Chairman, I know many of my colleagues are disappointed that
stronger privacy language was not included to protect the confidential
medical and financial information of consumers. I understand and agree
with their disappointment that the Committee on Rules did not rule in
order many Democratic-sponsored amendments to protect consumers.
The underlying Banking Committee version is a good bill. Let us not
lose sight of what we are trying to do.
Madam Chairman, we simply cannot afford to wait any longer to create
a modern framework for U.S. financial corporations and our Nation's
capital markets.
Failure to act now on financial services reform would send a terrible
message to global financial markets, and constitute a clear danger to
U.S. economic leadership in the world and so I strongly urge my
colleagues to support passage of H.R. 10.
Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from
Delaware (Mr. Castle), the former chairman of the Subcommittee on
Domestic and International Monetary Policy.
Mr. CASTLE. Madam Chairman, let me just congratulate the gentleman
from Iowa and the gentleman from New York for the wonderful and
extraordinary work they have done on this. I rise in strong support of
H.R. 10, the Financial Services Modernization Act of 1999, and I urge
my colleagues to seize the opportunity to pass this historic
legislation.
This legislation is not just years overdue, it is decades overdue.
H.R. 10 will allow the marketplace to give American consumers more
products and better choices to build a better financial future for them
and their families. H.R. 10 will give American banks, insurance
companies and insurance firms the opportunity to compete fairly in the
international marketplace.
We are finally close to achieving the overdue goal of financial
modernization. The President is ready to work with us to enact a law.
We cannot falter now. This legislation will benefit American families
and American business and maintain sound regulation. Seize this great
opportunity. Pass H.R. 10. Let us move our financial laws out of the
1930s and into the next century. Vote ``yes'' on H.R. 10. It means a
better future for our Nation.
To say that this legislation is long-overdue is a tremendous
understatement. It is not just years overdue. It is decades overdue.
Past attempts to pass financial services reform often failed because
one industry group or another felt that past bills put them at a
disadvantage.
While this legislative struggle has been going on, our constituents
have been looking for new, efficient and affordable products to give
their families financial security. We are long past the days when
people were satisfied with a simple savings account or life insurance
policy. Most Americans want to maximize their earnings and to find
products that will give them the best return.
The financial services marketplace has been struggling to meet
consumers needs within a regulatory structure that was created in the
1930s and 1950s.
Our Nation's banking, securities and insurance laws must be updated
to face the challenges of the next century.
Over the past three years, Congress has moved ever closer to the goal
of legislation that will benefit consumers and fairly balance the
divergent interests of banks, insurance companies, insurance agents,
and securities firms, as well as the federal and state regulators that
oversee these industries.
As a member of the House Banking Committee, I have been directly
involved in the work to modernize our financial services laws
[[Page H5238]]
since I came to Congress in 1993. I have to tell you it has been a
difficult struggle to balance the competing interests of the banking,
securities and insurance industries.
The legislation before us today, while not perfect, has finally won
the endorsement of all major industry groups.
Now is the time to act. We must do this to benefit consumers who need
a variety of financial products to help them plan for their economic
futures. In addition, we must update these laws to allow our financial
services providers to compete effectively in the next century.
The most important reason for supporting this legislation is that it
will benefit every American seeking to improve their family's financial
security by saving and investing more. This legislation will help them
achieve that goal by making more savings and investment products
available in one-stop shopping at competitive prices. In addition, the
bill contains important disclosure and sales standards to protect
consumers as they shop for these products.
This legislation will help consumers, but it will also benefit the
businesses seeking to provide these financial products. It will enable
banks, insurance companies and securities firms to affiliate and
operate more competitively on a level playing field. It will expand the
products that these financial services firms can offer to their
customers, while maintaining adequate regulation to preserve the safety
and soundness of the system.
Madam Chairman, as part of the long deliberations seeking to treat
all financial services providers fairly, I have been particularly
interested in assuring that national banks are permitted to compete
fairly in selling and underwriting insurance products. Bank sales and
underwriting of insurance will be good for competition and good for
American consumers.
To be candid, the provisions in this legislation regarding banking
and insurance are not perfect. I am sure representatives of the banking
and insurance industries can tell you how they believe the provisions
can be improved, but the fact of the matter is we have a workable
compromise that will protect consumers and allow for improved and fair
competition in how insurance is sold and underwritten by banks and
their new affiliates.
Madam Chairman, on this floor last year, I said to my colleagues that
this is historic legislation that has been a longtime in coming. That
statement is more true than ever.
Overall, H.R. 10 is a well-crafted effort to make our financial
services system ready for the 21st century and to meet the needs of
American consumers and business.
This is our best opportunity in years to bring our financial laws out
of the past and into the next century. The Senate has finally passed
its own legislation and the President is ready to join us in enacting
this legislation.
Every American who has a bank account, a mutual fund, or an insurance
policy will have new opportunities and choices to help build financial
security for their families. I urge my colleagues to take this historic
step and pass H.R. 10 today.
Mr. LaFALCE. Madam Chairman, how much time do I have remaining?
The CHAIRMAN. The gentleman from New York (Mr. LaFalce) has 1\1/4\
minutes remaining.
Mr. LEACH. Madam Chairman, I yield 2 minutes to the gentlewoman from
Illinois (Mrs. Biggert).
(Mrs. BIGGERT asked and was given permission to revise and extend her
remarks.)
Mrs. BIGGERT. Madam Chairman, I rise in support of H.R. 10 and thank
the gentleman from Iowa for the opportunity to speak.
As a freshman member of the Committee on Banking and Financial
Services, I was privileged to help produce in committee a bipartisan
bill that will modernize our Nation's banking, insurance and securities
industries. Over the past months I have heard from hundreds of my
constituents in support of this monumental legislation.
H.R. 10 allows broad new affiliations among banks, securities and
insurance companies. As our Nation and the world have progressed
technologically, the distinctions between financial fields have eased.
H.R. 10 reforms the outdated laws and regulations that add cost and
inconvenience to consumers and restrict their choices for financial
services.
Madam Chairman, H.R. 10 will allow our Nation's financial
institutions, security companies and insurance industries to compete in
the global marketplace. I am pleased that the Committee on Banking and
Financial Services and the Committee on Commerce overwhelmingly
approved this legislation. I hope that any snafus can be worked out in
the near future, and I urge the support of the whole House.
Mr. LEACH. Madam Chairman, I yield 2 minutes to the gentleman from
Louisiana (Mr. Baker).
Mr. BAKER. Madam Chairman, I thank the gentleman for yielding me this
time; and I wish to extend my appreciation and congratulations on the
job the chairman has done over the decade. He has committed himself to
the goal of financial modernization. I do not think without his
persistence this evening would have been possible.
I wish to speak tonight directly to the issue of what is in this bill
for the small town bank. With all the discussions about op-subs, opting
out, and privacy issues, there are a great deal of concerns that affect
many people, but when it comes to the 9,000 small institutions across
this Nation, I think it is important to point out that they are
struggling like any other small business to survive. Often their
product, money, is hard to come by. As banks merge and acquire one
another, small town banks do not often have the partner down the street
that can take part of that loan and help them extend credit in the
local community.
The Federal Home Loan Bank provisions in this legislation provide an
extraordinary new opportunity for small town banks. For banks in asset
size under $500 million, which is about 85 percent of the banks in
America, they can now go to the Federal Home Loan Bank and get credit.
And get this: Fixed interest rates for up to 15 years; and now for
small business and agricultural lending purposes.
With the passage of H.R. 10, we are opening up small town America
banks to the Federal Home Loan Bank credit window and giving them the
opportunity to meet the needs of working people, small businesses and
farmers across this country.
I think it is high time we do something in this Congress for those
small banks which have been too long ignored and neglected. And in this
process tonight, due to the leadership of the gentleman from Iowa (Mr.
Leach), we are going to meet this important community need. I
congratulate him and the ranking member on what I think will be an
important, successful night when we pass H.R. 10.
Mr. DINGELL. Madam Chairman, I yield 1 minute to the gentleman from
Washington (Mr. Inslee).
Mr. INSLEE. Madam Chairman, I regretfully say that I must oppose this
bill. This bill is an abject total failure to deal with the issue of
telemarketing by affiliated telemarketing firms.
Imagine this: Aunt Emma inherits $10,000. She puts her $10,000 into
her trusted bank. Should that banker be able to call their affiliated
telemarketing company, tell them that Aunt Emma is a ripe target to
sell some hot stock or annuity, and allow them to call her at 6 o'clock
at night and interrupt her watching Jeopardy to sell her that? And the
answer is, ``no,'' they should not be allowed to do that if Aunt Emma
does not want it.
Now, why is this important now? Some people have said we have moved
ahead a little on third parties, but we are creating an entirely new
species of telemarketer here. We are creating an entirely new species
with H.R. 10 of affiliated firms. And if we are going to create the
Tyrannosaurus rex of telemarketing, we ought to tame that before we
create the species.
Today is the time to tame that. Today is the time to reject this, go
back, and protect the rights of privacy of our constituents.
Mr. DINGELL. Madam Chairman, I yield 1 minute to the gentleman from
Minnesota (Mr. Luther).
Mr. LUTHER. Madam Chairman, I thank the gentleman from Michigan for
yielding me this time, and I rise in opposition to this bill.
Let me tell my colleagues a little bit about my home State of
Minnesota's unique experience with financial privacy rights. Less than
a month ago, Minnesota Attorney General Mike Hatch filed a civil suit
against a large financial institution for allegedly selling its
customers confidential information to a telemarketer. Of course, the
bank's customers had no idea their financial data was being handled
like this, and they never would have dreamed of it. The public reacted
very strongly upon learning the information.
This week that case was settled, only after a few weeks, on terms
very favorable to Minnesota consumers and very
[[Page H5239]]
similar to the Markey-Dingell-Stupak amendment.
I would simply ask my colleagues this: Should the consumers of
America be entitled to anything less than what the Minnesota Attorney
General obtained for Minnesota consumers after only a few weeks?
I urge my colleagues to oppose this bill. All Americans deserve real
privacy protections, and they deserve them now.
The CHAIRMAN. The Chair would propose to recognize Members for final
speeches in reverse order of their original allocations of time under
the rule, to wit: The gentleman from Michigan (Mr. Dingell), the
gentleman from New York (Mr. LaFalce), and the gentleman from Iowa (Mr.
Leach).
Mr. DINGELL. Madam Chairman, I yield myself the balance of my time.
Let us talk about medical privacy. The Secretary's recommendations on
this matter would explicitly preserve existing State laws that provide
for essential privacy protection. H.R. 10 implicitly overrides them.
With few exceptions, the Secretary's recommendations would require
consent before medical records could be disclosed. H.R. 10 permits
extensive disclosure without consent. Indeed, there are two pages of
exceptions in the rule and in the bill.
The recommendations of the Secretary would prohibit unauthorized
disclosure of medical records to insurance companies for underwriting
purposes, to credit agencies and to banks. H.R. 10 expressly allows
such disclosure. The Secretary's recommendations would require that any
authorization to disclose medical records be truly voluntary. H.R. 10
permits the insurers to coerce consent by saying they will refuse the
right to insurance unless that disclosure takes place.
H.R. 10 provides no safeguards ensuring only genuine medical research
projects attain access to medical records. The Secretary's
recommendations would include express protection in that regard.
The Secretary's recommendations would hold third parties responsible
for medical information that they receive. H.R. 10 allows third parties
to disclose medical information to anybody.
{time} 1830
Mr. LaFALCE. Madam Chairman, I yield myself the balance of my time.
First of all, I would like to thank the staff of the Committee on
Banking and Financial Services, the majority and minority staff. The
majority acted in a very bipartisan way. Our minority staff, Jeanne
Roslanovick, Rick Maurano, Dean Sagar, Tricia Haisten, Kirsten Johnson,
Patty Lord, and so many others were just terrific. We would not be here
without them.
Secondly, I would like to point out that there is a Statement of
Administration Policy. The administration supports the bill that is on
the floor today, but it has some very serious reservations,
reservations that are very similar to those I expressed.
They strongly favor the bipartisan privacy amendment that the
gentleman from Texas (Mr. Frost), the gentlewoman from Ohio (Ms.
Pryce), myself, the gentleman from Minnesota (Mr. Vento), the gentleman
from Iowa (Mr. Leach) and others have worked out so strongly. They are
terrific privacy.
They strongly oppose the medical privacy language of Ganske and want
that deleted. They strongly oppose the Paul-Barr-Campbell amendment, et
cetera. They strongly object to the fact that the Committee on Rules
did not permit the Lee anti-redlining amendment.
So, in sum, the position of the administration and the position that
I have expressed have been virtually identical. They would like us to
go forward but only if certain amendments are defeated and only if
certain provisions within the bill are cured in conference.
Mr. LEACH. Madam Chairman, I yield myself such time as I may consume.
Madam Chairman, let me just first thank all associated with this
process. My colleagues have had varied perspectives, and this is a very
controversial bill. The staff has been extraordinarily professional. I
personally believe that the committee staff that the gentleman from New
York (Mr. LaFalce) and I have is as good a staff as any in the history
of the Congress.
We have also enjoyed working with the committee staff of the
Committee on Commerce, which does not quite meet that standard, because
we have the highest standard, but we appreciate working with the
committee staff of the Committee on Commerce.
Let me also say that there are some perspectives that have been
presented in a contrasting way that on many of the underlying
philosophical aspects there is total consensus in this body. The intent
of this legislation is dramatic in the area of privacy. It will be
inconceivable to bring forth a law that will do anything except bolster
privacy. There is no intent in this law of any nature to undercut
executive discretion, which may arise later this summer if certain
follow-on legislation does not arise in a timely fashion from another
committee of jurisdiction.
In any regard, I am personally convinced that, in any historical
landscape of consideration, this is the right bill at the right time.
There will be nuances that we will all disagree about. But the
framework is to present a financial community that will be second to
none in the world, a financial community that will serve the American
consumer and be so competitive and broad that it will help bring
American financial practices and models to the rest of the world. So
this bill is designed to look to the next century in such a way that
finance will serve rather than be the servant of the people of the
world.
I urge support of this bill. I personally believe that we can go
forth. To the degree there are nuances that need to be corrected, I
assure my colleagues they will be.
Ms. STABENOW. Madam Chairman, I rise today to explain my vote on the
Bliley amendment to H.R. 10, the Financial Services Act of 1999. While
I support the efforts of my colleague, Mr. Bliley, to add new
protections for victims of domestic violence, I object to the second
provision in his amendment regarding mutual insurance companies.
One of my top priorities as a legislator here in the House and when I
served in both the Michigan House and Senate, has been to help the
victims of domestic violence. Last year I introduced two bills to help
victims of domestic abuse, H.R. 3901, Arrest Policies for Domestic
Violence and H.R. 3902, Court Appointed Special Advocates for Victims
of Child Abuse.
I strongly support the first provision in the Bliley amendment that
would prohibit banks from discriminating against victims of domestic
violence in providing insurance. This provision expressed the Sense of
Congress that all states should enact laws prohibiting such
discrimination. This kind of discrimination must be stopped so that
victims of domestic violence take the necessary steps toward financial
and personal freedom. Had I been given the opportunity to vote on this
provision of the amendment separately, I would have voted in favor.
Unfortunately, I was compelled to vote against the Bliley amendment
due to the language in the second provision regarding mutual insurance
companies. This language would permit mutual insurance companies to
relocate from one state to another and to reorganize into a mutual
holding company or stock company. This would permit some companies to
operate outside the important safety net of state regulation.
Therefore, in an effort to protect consumers, I voted against the
Bliley amendment.
Mr. POMEROY. Madam Chairman, I am reluctantly voting yes on H.R. 10.
It needs work--a lot of work--in conference committee to fully
establish functional regulation of insurance in state insurance
departments.
In light of assurances I have received from the Banking Committee
Chairman and Ranking Member to revisit the concerns I have advanced in
this regard I will vote for the bill to keep the process moving
forward.
We desperately need financial services modernization, but it is
vitally important the legislation establishing these reforms get it
done right.
Mrs. CAPPS. Madam Chairman, tonight I will vote against H.R. 10.
I do this with great disappointment because I truly believe that we
must modernize our woefully out-of-date financial service laws.
Modernizing these laws would create a more efficient financial
service industry and bring greater choice and lower prices for
consumers.
But I cannot in good conscience support this legislation. The so-
called medical privacy provision endangers consumer privacy protection
by allowing their sensitive health information to be sold.
I hope to work with my colleagues to tighten these provisions during
conference so I can support a financial services bill that does not
endanger patient privacy.
[[Page H5240]]
Mr. GONZALEZ. Madam Chairman, I am disappointed that the Rules
Committee did not allow me the opportunity to offer on the floor the
amendment on title insurance. I hoped to be able to explain the
treatment of title insurance in the bill and ensure the protection of
Texas state law.
The title insurance section of H.R. 10--Section 305--generally
prohibits national banks from underwriting or selling title insurance,
either directly or through a subsidiary. There is a grandfather clause
(Section 305(c)) that enables any national bank or national bank
subsidiary currently engaged in title insurance sales activities to
continue to engage in those activities. National banks would remain
free, however, to underwrite and sell title insurance products through
affiliates. The core prohibition on national bank and national bank
subsidiary title insurance sales activities is based on the idea that
there are problems associated with bank sales of title insurance. These
are real problems, and I thought that the best way to address them was
to limit bank-related title insurance activities to their affiliates.
This was why I originally offered the amendment that was adopted by the
House Banking Committee to require that title insurance sales be done
only through affiliates.
Section 305(b) of this bill has a ``parity'' exception that grants
national banks parity with state-chartered banks in the sale of title
insurance. The intent is to grant national banks in a State the power
to sell title insurance products in the same manner and to the same
extent as state-chartered banks that we actually and lawfully engaged
in title insurance sales activities in that State. My amendment would
simply have made it clear that Section 305(b) was a true parity
provision. It would have made clear that national banks could sell
title insurance products in a State only if state-chartered banks are
actively and lawfully engaged in title insurance activity on the date
of enactment. Alternatively, national banks could sell title insurance
if a state expressly authorizes bank title insurance sales for national
banks. Therefore, if the State legislature has not expressly authorized
title insurance sales as a lawful power for its State banks, but has
some other general statutory provision that might be interpreted as an
authorization (but does not explicitly do so), that other general
provision would not trigger parity rights for national banks. I thought
this clarification was necessary because it is only in states where
state legislatures had actually considered these problems that the
unique problems associated with bank title insurance sales activities
have been addressed.
Texas State insurance law is very important to me, and I hope this
clarification can still be made at some point during the consideration
of the bill.
Mr. PAYNE. Madam Chairman, I rise to express my strong support for
the Community Reinvestment Act which has helped ensure fair and equal
access to capital and credit. We all strive for the American dream of
home ownership and many of us aspire to start our own businesses. But
that dream is out of reach for some in our society because there are
financial institutions which discriminate against minorities living in
working class neighborhoods.
Fortunately, blatant discrimination in lending is declining, and
homeownership and small business opportunities are on the rise. Much of
this progress against so-called ``relining'' can be attributed to the
Community Reinvestment Act. Under CRA, federal banking agencies grade
lending institutions on how well they meet the credit and capital needs
of all the communities in which they are chartered and from which they
take deposits.
In my own state of New Jersey, CRA has helped provide more than $8
billion in discounted mortgages, discounted home improvement loans,
loans to small businesses owned by women and minorities and loans and
investments for community and economic development. Many people who
never thought it would be possible to own their own home have succeeded
through programs made possible by the Community Reinvestment Act.
Madam Chairman, let's help make the American Dream a reality for
millions of Americans by continuing to support a strong CRA.
Ms. ROYBAL-ALLARD. Madam Chairman, I rise in opposition to H.R. 1.
Rather than updating our antiquated banking laws and bringing the
United States financial system into the 21st century, H.R. 10 will
leave consumers and our communities more vulnerable than ever before.
Why should we allow for the unprecedented conglomeration of banks,
securities firms, and insurance companies while at the same time we
ignore the most modest provisions to protect our consumers?
I am opposed to H.R. 10 for a number of reasons:
H.R. 10 is missing important community reinvestment provisions.
Specifically, the bill fails to extend the Community Reinvestment Act--
the CRA--to the banking activities of non-bank financial institutions
that seek to affiliate with banks. In other words, if credit card
companies, securities firms or insurers would like to offer traditional
banking products such as checking accounts or loans, they should be
subject to the CRA. Why should we make it easier for banks, brokers and
insurance companies to merge without simultaneously modernizing and
expanding the CRA?
The CRA has averaged billions of dollars of investment into
communities such as mine, where unemployment and poverty levels are
still well above the national average. Low-income families, small
businesses and small farmers have all benefited from the CRA through
increased opportunities to purchase a home, and obtain start-up and
business expansion loans. Let's strengthen it, not weaken it.
H.R. 10 fails to crack down on insurance redlining. Missing from this
bill is a modest, consumer-friendly provision, authored by my colleague
Barbara Lee, which would combat redlining of neighborhoods by insurance
companies. Excluding this provision will once again leave vast segments
of our urban and rural communities vulnerable to discriminatory lending
practices by some unscrupulous insurance companies.
H.R. 10 isn't friendly to our thrifts and severely limits their
viability. The bill grants the Federal Reserve significant and perhaps
unwarranted new regulatory authority over unitary thrift holding
companies. Thrifts have been critically important in serving the
financial needs of low income and minority communities, particularly in
the area of mortgage financing. Threats to the thrift charter would,
therefore, disproportionately impact low income and minority
communities.
H.R. 10 permits the unprecedented pre-emption of stronger consumer-
friendly state laws thereby undermining state authority and harming
consumers. Under H.R. 10, progressive State banking laws such as those
requiring low-cost checking accounts or prohibiting ATM surcharges
would be weakened.
H.R. 10 fails to provide strong financial and medical privacy
protections. If we're going to allow H.R. 10 to accelerate mergers,
create mega one-stop centers with access to information about millions
of customers, we need to stop information from being disclosed to third
parties and affiliates. Anything less is unacceptable.
Certainly, we need to preserve America's financial leadership as we
approach the 21st century.
Certainly, we need to update our archaic laws so that U.S. companies
are not at a competitive disadvantage in the global marketplace.
Certainly, we should promote convenient and affordable one-stop
shopping for consumers in order to meet all of their financial needs.
But not at the expense of consumer privacy. Nor at the expense of the
Community Reinvestment Act.
I am not willing to trade the so-called perks of financial
modernization--efficiency, choice, convenience, one-stop-shopping--for
the decimation of privacy rights and community reinvestment. It's that
simple.
Our nations consumers should be our number one priority as we
contemplate the merits of H.R. 10. Unfortunately, H.R. 10 doesn't meet
this threshold. I urge my colleagues to oppose this bill.
Ms. McCARTHY of Missouri. Madam Chairman, I rise today in opposition
to this measure, H.R. 10, as put forth by the Rules Committee. I
support financial modernization, but the current bill fails to achieve
the goals set out by both the Banking and Commerce Committees. We can
do better than the measure that we are considering this evening. The
committee efforts were solid and established a procedure for consensus.
The Rules Committee refused to allow the consideration of key
amendments vital to financial modernization so that opportunities for
investment and savings continue fairly, and fair pricing practices and
misuse of private information essential to consumers are assured.
In the Commerce Committee on which I serve, agreement was achieved on
issues such as consumer privacy, state regulatory authority, and the
Community Reinvestment Act (CRA). The bipartisan resolution was altered
by the Rules Committee to preempt important language to protect
consumers against unfair lending, ATM surcharges, and check cashing
charges. Further, the measure now preempts essential state insurance
laws across the country, including requirements that insurance
companies pay legitimate claims in a timely manner, invest premiums
paid by insurance consumers in a prudent and safe manner, and
contribute to state funds established to guarantee the solvency of
insurers.
The measure before us no longer includes full disclosure requirements
allowing consumers to control how their financial information will be
used, transferred, and shared. Consumers should have confidence that
personal information shared with their insurer will be kept
confidential. To achieve this goal, the
[[Page H5241]]
need to safeguard consumers' personal and medical information must be
balanced with the need to allow financial institutions, including
insurance companies, to efficiently provide services to consumers.
The measure under consideration does not proactively address the
issue of insurance redlining. Allowing banks and insurance companies to
discriminate against consumers for any reason is unacceptable.
Violating fair housing practices should be addressed--this is a glaring
omission in the bill.
Finally, as written, this measure will sanctify the ability of the
Comptroller of the Currency (OCC) to override state consumer laws and
allow national banks to ignore essential consumer protections, such as
unnecessarily high prices on checking accounts and prepayment penalties
when consumers sell their homes and pay off their mortgages. Further,
we must address the issue of operating subsidiaries. Consumers are
easily confused and unfairly targeted when subsidiaries are allowed to
coexist with traditional banking services. Further, the Securities
Exchange Commission (SEC) and not the Comptroller should regulate these
entitles, to ensure that consumers are properly protected. The OCC's
focus is on the safety and soundness of investments, while the SEC
focuses on consumer protection.
Each of our lives are impacted daily by financial transactions--when
we write a check, have our paychecks directly deposited, pay our bills,
buy something over the Internet, purchase a house, or invest for our
retirement. We must successfully address and modernize the procedures
to safeguard consumer rights and prevent the inappropriate use of
personal information.
I will continue my advocacy for the proper balance between consumer
privacy and economic growth and hope the measure improves so that I can
support passage following Conference Committee efforts.
Mr. WEYGAND. Madam Chairman, I rise in support of H.R. 10, the
Financial Services Act of 1999.
I believe the House Banking Committee, of which I am a member, has
done an admirable job at balancing the many differing views and
opinions on how to structure financial services reform. I commend
Chairman Leach, Ranking Member LaFalce, and their staffs for all their
hard work in bringing what I believe is a balanced approach to
financial services reform to the floor.
Mr. Speaker, I have previously stated that there are two fundamental
questions to ask when considering the type of financial services
overhaul we are debating. First, what effect will this legislation have
on consumers? Second, what effect will the same legislation have on
U.S. financial institutions' ability to compete in an ever increasing
global market place?
In my view, this bill that makes significant progress on a number of
consumer issues. First, the bill we have before us preserves the
integrity of the Community Reinvestment Act (CRA). In fact, as a
requirement of affiliation, a financial holding company must have and
maintain at least a satisfactory CRA rating. Additionally, this bill
extends CRA requirements to any newly created Wholesale Financial
Institution. This language will ensure that financial institutions
continue to invest in those communities from which they take deposits.
This investment is crucial in order to meet the credit and lending
needs of traditionally under served communities. The fact is, CRA has
provided thousands of families and entrepreneurs with the credit they
needed to buy a home or start a business. CRA works. I urge my
colleagues to support the CRA provisions in this bill and oppose any
potentially weakening amendments.
Second, the bill addresses the important matter of financial privacy.
During the Banking Committee's consideration of H.R. 10, I co-sponsored
an amendment with Mr. Inslee, of Washington, addressing financial
privacy. That amendment would have provided consumers with the ability
to `opt out' of information sharing by their financial institution.
Ultimately, our amendment was defeated. However, due to the hard work
of Mr. Inslee, his staff, and the Banking Committee we are taking
positive steps toward protecting consumers personal financial
information.
This bill also requires greater disclosure of policies, procedures,
risks, and costs of certain transactions, including ATM fees. It
requires disclosure of existing privacy policies, contains strong anti-
tying and anti-coercion provisions, and includes the requirement to
disclose what products are federally insured and which ones are not.
All of these are pro-consumer and make good business sense.
However, I am concerned about one glaring omission from this bill.
The House Banking Committee approved an amendment that would have
prevented the practice of insurance redlining in low-income
communities. Redlining is a practice that strikes at the very heart of
what we should be opposing--discrimination based on your neighborhood
or income level.
The second concern I have with this bill, as it is before us today,
is with the potential disclosure of medical or health information. I
believe that there should be strong firewalls established between
affiliates or operating subsidiaries as it pertains to the exchange of
medical or health information. When a person shares private medical
information with an insurance company they should have every assurance
that whatever information is shared is not then given to the bank or
securities company that happens to own or is affiliated with that
insurance company.
It is my sincere hope that as this bill moves to conference with the
Senate we will continue to make progress on protecting individuals'
private medical information. I also hope that we can reinstate the
Banking Committee provision that would prohibit insurance redlining.
H.R. 10 will indeed make U.S. financial institutions more competitive
and assist them in remaining leaders in the world financial
marketplace. It will remove antiquated barriers to expansion and
competition. It will also allow financial institutions to take
advantage of new technologies, economies of scale and scope that will
result in efficiencies providing consumers with greater choice at lower
costs.
Developing this financial services modernization bill has been a long
and difficult process. What we have before us today is a carefully
constructed, balanced bill that will make our financial services
industry more competitive, provide consumers with more choice, and
takes several positive steps regarding consumer protections. This bill
deserves our support.
Mr. BLUMENAUER. Madam Chairman, I support the modernization
principles in this long overdue financial legislation. It has been
years in the making and this legislation is about as good as it is
going to get. On balance, it will improve the competitiveness of our
financial system and provide more choices for consumers.
There has emerged a growing concern about protecting the privacy
rights of Americans. These concerns are independent, but related to
financial services. Privacy is a major issue in business practices
generally and in the health care system in particular. I am
disappointed that the Republican Leadership did not allow several
provisions to be discussed that would have strengthened the protections
and I believe they would have made H.R. 10 a better bill. Nonetheless,
these concerns are not going to go away. They will be a part of the
Patients' Bill of Rights legislation and may be the subject of a
comprehensive stand alone bill that will spell out what protections
Americans can expect from their government regarding sensitive and
personal data.
Even though we were denied an opportunity to deal with these issues
in connection with H.R. 10, I hope the attention and the controversy
will spur this Congress to action and that we will not adjourn until we
provide a vehicle for understanding the rights and responsibility
surrounding individual privacy.
Mr. EWING. Madam Chairman, I rise today in support of H.R. 10. While
many of us have reservations about some sections of H.R. 10, I believe
that the House needs to pass this legislation to begin the process of
modernizing outdated, Depression-era laws that separate the financial
services industry. These changes are long overdue.
However, I would hope that the conference takes a hard look at the
so-called parity provision that was added to Section 305 by the
Commerce Committee. This parity provision would grant title insurance
sales authority to any national bank or its subsidiary located in a
state in which state-chartered banks have such authority. I believe
that the adoption of any such parity provision is unwarranted.
For instance, individual consumers purchasing homes and refinancing
their mortgages will have to pay for title insurance, and under the
current language in this bill, will pay a bank-owned agency to insure
the bank and basically your home. A national bank should be prohibited
from engaging in title insurance sales activities in a State unless the
state-chartered banks in that State are explicitly authorized to engage
in title insurance sales activities. H.R. 10 should require that
subsequent to enactment of the bill, states must explicitly authorize
state banks to sell title insurance.
Congress has always set the parameters for the exercise of national
bank powers and there is no reason to depart from that traditional
approach in this context. Moreover, adopting such an approach would
ignore the unique issues related to bank sales of title insurance that
mandate the confinement of such activities to bank affiliates. Simply
stated, I think we should leave it up to the individual States to
decide what best suits their banking and title insurance agents and not
Washington, D.C. There is a very unique relationship that currently
exists and this provision would significantly endanger the title
insurance agents across the nation.
I am also concerned that the unique needs of independent bankers are
not fully accounted for by H.R. 10. This issue should be
[[Page H5242]]
resolved in conference, so that independent bankers will be able to
continue to provide their crucial services to their communities.
In conclusion, I would like to express my support of H.R. 10 and urge
my colleagues on both sides of the aisle to support the passage of this
legislation.
Mr. DAVIS of Illinois. Madam Chairman, I take this opportunity to
express my support for H.R. 10, although reluctantly. In spite of and
notwithstanding the good premises of this bill, I am concerned that it
does not go far enough in its protection and/or expansion of Community
Reinvestment. I represent one of the most diverse districts in the
nation, the 7th District of Illinois. It contains many of the very
wealthy and many of the very poor. Moderately stable, upscale and low-
income communities, sixty-eight percent of all public housing in
Chicago. Community Reinvestment requirements have been a pipeline and a
lifesaver for the inner-city south and westside of my District. It has
saved communities and revitalized neighborhoods. It is amazing to me
that, as we debate such a revolutionizing, and modernizing bill, that
this House has failed to use this opportunity to elevate the Community
Reinvestment Act to its appropriate level.
Since its enactment in 1977, the CRA has made sure that our banks
would reach our country's poor communities. At the time of CRA's
enactment, banks and thrifts held \2/3\ of all financial industry
assets, today that number has fallen to \1/4\ of financial assets. This
steady erosion of CRA's financial base has the possibility to threaten
the future of the Act's effectiveness. Today, the specter of reduced
CRA effectiveness looms over H.R. 10. This bill could allow banks to
move their money into their securities and insurance affiliates where
the CRA cannot reach.
In my district, where nearly 175,000 individuals live at or below the
poverty level, CRA has been the most effective means by which they have
been able to purchase their home, or start their own business. But now,
as a result of H.R. 10's failure on the CRA, banks' ties to the local
community will be diminished, and the needs of the poor may not be met.
For those living in places like the West Side of Chicago, maintaining a
strong CRA will make all the difference in world.
Though I agree that the time has arrived to tear down the walls that
divide the banking, securities, and insurance industries, there is no
reason that the new conglomerates that this bill will spawn should not
also be subject to CRA. Though H.R. 10 does not include any changes
that will specifically alter CRA, without being amended, H.R. 10 can
deteriorate the financial base of CRA coverage. That a basic banking
service, whether offered through a parent bank or through a subsidiary
bank or a bank holding company, should affect its coverage under the
CRA does not make sense. Even if we pass H.R. 10 in its current form,
we must recognize a need to expand the current CRA laws to include all
institutions that are engaged in banking practices so that CRA's
effectiveness in revitalizing low income communities will never be
diminished. As long as I am a member in Congress, I will stand guard
over the CRA and make sure financial service companies respect the
intent and purpose of the CRA.
Mr. COYNE. Madam Chairman, as we consider the legislation before us
today, I want to express my strong support for the Community
Reinvestment Act.
Thanks to the CRA, many families and small businesses across the
country have gained meaningful access to credit for the first time.
Nationwide, more than one trillion dollars has been invested in
traditionally underserved neighborhoods as a result of the CRA.
I strongly support efforts to apply the CRA's requirements to the
banking activities of non-bank financial institutions which seek to
affiliate with banks. I deeply regret that the Rules Committee has not
made such an amendment in order.
I urge my colleagues to work with me as Congressional action on
financial services legislation proceeds to ensure that the CRA will
continue to promote equal access to credit.
Mr. BOEHNER. Madam Chairman, I rise in support of this landmark
legislation. In one great cascade, it washes over decades of obsolete
law, Congressional inattention, and regulatory creep to give us a
modern and prudent legislative framework for one of our most important
and dynamic industries. I believe it's the most important bill we'll
debate this year, and I strongly urge its passage.
In a bill this complex, it's easy to miss the forest for the trees.
But the broad direction is what's most important. Our nation's
financial services sector is the irrigation system for our economy. By
allowing for the quick and efficient flow of cash and of capital, it
provides the fuel that the rest of our economy needs to grow. By
calculating and allocating risk effectively, it minimizes the harm that
sudden distortions can do. And by providing a variety of savings,
investment, and insurance vehicles for our citizens, it allows us all
to plan and work for a secure retirement. Much is made of the dynamism
of the so-called high-tech sector, and its growth has been truly
phenomenal. But without a vibrant, stable, and innovative financial
services marketplace, many of these high-tech firms would still be
languishing on someone's chalkboard.
We have the most dynamic and competitive financial service sector in
the world. And that's why we have to pass this bill. Because the
industry has so outgrown our Depression-era regulatory framework that
soon, the framework will be irrelevant. And because our competitors are
catching up by passing modernized financial service laws of their own.
Unless we act here today, we may find ourselves ceding our dominance in
this critical market to our foreign competitors.
How does the bill accomplish this? Again, the broad strokes are the
important ones. First, functional regulation. Conduct should be
overseen by regulators who understand it. That means that securities
activities should be supervised by securities regulators, even if
they're performed by a bank. It means banking activities should be
regulated by banking authorities, and insurance activities by insurance
authorities. Functional regulations means that proper regulators can
see the warning signs of instability early enough to head it off.
Writing a functional regulatory structure is far more difficult,
however, than simply describing one, and the chairmen of the Banking
and Commerce committees have done a superb job.
Second, the bill reflects the marketplace fact that banking,
securities, and insurance underwriting all have far more in common than
not. All essentially reflect the same functions--calculating and
allocating risk, accumulating and investing capital. Keeping them apart
makes little sense economically, and so for the first time in 66 years,
the bill lets them affiliate. In good times, this means more
innovation, greater efficiency, and better products. In bad times, it
means that their risks will be diversified, protecting our economy and
our taxpayers from the failure of financial firms.
Third, it mixes this new flexibility with prudence. We've learned
from Japan that we need to go slow on mixing banking and commerce.
Let's see how we do with affiliation first, then return to the question
of commerce and banking.
And fourth, it's politically viable. We all know the controversy that
has always surrounded this bill. With industry groups historically
fighting each other for every advantage, it's no surprise that over the
last 22 years this bill has failed 11 times. But this bill, building on
the work of last year's, has the support of the broadest financial
services coalition yet.
Madam Chairman, in closing I want to congratulate my friends the
gentlemen from Iowa and Virginia, the chairmen of the Banking and
Commerce Committees. This is a huge accomplishment for this Congress
and for them personally. It's a testament to their leadership and,
given the history of this issue, it's a testament to their character
that we're here today to debate and pass this bill. I admire them both.
Madam Chairman, I strongly support H.R. 10, the Financial Services
Act of 1999. It is the right bill at the right time for our financial
services industry, for its consumers, and for our entire economy.
Mr. STARK. Madam Chairman, lawmakers casting a ``yea'' vote today on
the Financial Services Act, H.R. 10, are making a fundamental error.
They are effectively voting to strip millions of Americans of a basic
right: the ability to exercise meaningful control over who sees their
most sensitive information. Title III, Subtitle D, Section 351 of the
bill gives insurers extensive ability to disclose medical information
without a consumer's consent.
If this provision is enacted into law, it will create legal chaos. As
written, it appears to overlay myriad state medical privacy laws that
regulate disclosure and access.
Does it make you feel ill to know that under H.R. 10, a travel
insurance agent could peruse your medical records? Does it make your
blood pressure rise to know that under H.R. 10, auto insurance
companies could use medical data to raise your family's rate? And that
any insurer, as well as its affiliates and subsidiaries, would be
legally authorized to share sensitive, personal information with credit
reporting companies?
Unless lawmakers appointed as conferees for H.R. 10 take action to
strike the bill's medical privacy provisions, American consumers will
wake up to find that the insurance industry--which makes most of its
money through underwriting to reduce financial risk--can disclose their
medical data without authorization in many, many circumstances. And
that's plainly wrong.
It's also disturbing that the majority leadership has done next to
nothing to advance comprehensive medical privacy legislation in the
House of Representatives. Title V of the 1998 GOP managed care bill,
H.R. 4250, featured sorry medical privacy provisions that were roundly
condemned by consumer groups and privacy advocates through the country.
[[Page H5243]]
Now the August deadline for action set three years ago by the Health
Insurance Portability and Accountability Act is fast approaching. It is
my hope that a coalition of members to work together to produce medical
confidentiality legislation that is at least as strong as the 1997
recommendations developed by the HHS Secretary--with one notable
exception. The Secretary's recommendations proposed no additional
restraints on access to medical data by law enforcement officials in
the form of a subpoena or court order requirement. That is a position
with which I strongly disagree.
It is not too late to enact sound medical privacy legislation that
puts federal protections in place for consumers across the country,
while leaving stronger state laws in place and allowing states the
flexibility to add additional protections for those customers of the
future who find themselves afflicted with as-yet-unknown disorders, and
who, as a result, also suffer discrimination.
Enactment of H.R. 10's medical privacy provisions would not only
eradicate many existing medical privacy protections, but also hinder
the HHS Secretary's ability to promulgate regulations under HIPAA if
Congress does not act by next month.
Madam Chairman, we must not do this. The consequences for consumers
are far too grave.
Mr. FALEOMAVAEGA. Madam Chairman, H.R. 10 is about as complex a bill
as we address in this house. The bill has been in the making for years,
and at times it seemed impossible to get a majority of the Banking
Committee, let alone the full House, to agree on its contents.
Mr. Speaker, I know H.R. 10 remains a controversial bill, with
supporters on both sides of many issues. Without getting into the more
controversial issues, I do wish to comment on Section 162 contained in
the subtitle entitled ``Federal Home Loan Bank System Modernization''.
Among other technical amendments, this section adds American Samoa and
the Commonwealth of the Northern Mariana Islands to the provisions of
the Federal Home Loan Bank Act.
The condition of much of the private housing in American Samoa is
deplorable. Too many people are forced to live without electricity and
running water, and many structures could not withstand gale-force
winds, let alone the hurricane-force winds which blow through Samoa on
a regular basis. With an annual per capita income barely over $3,000,
and interest rates on commercial home loans in the 13%-14% range, there
is very little new construction or refurbishment of housing in American
Samoa.
To partially address this problem, Public Law 102-547 created a pilot
program through which Native American Samoan veterans, and other Native
American veterans, could obtain home loans at moderate rates, and the
response in American Samoa has been overwhelming. Unfortunately, this
pilot program is available only to a small segment of the population
residing in American Samoa.
During the first five-year authorization of the VA pilot program, to
the best of my knowledge, no loan went into default and needed to be
assumed by the Department of Veterans Affairs. I believe there is now a
sufficient track record for private lenders to feel comfortable in
making residential loans in American Samoa.
There is interest within the banking industry in American Samoa to be
included in the Federal Home Loan Bank program, The Amerika Samoa Bank,
a local bank, is on record in support of including American Samoa in
this federal housing program and is looking forward to obtaining access
to a source of long-term, low-interest funding to make home loans.
The number of complaints I receive from constituents in American
Samoa concerning the cost of home loans will further attest to the need
for loans at affordable interest rates in this remote, rural area.
Last year, the Federal Housing Finance Board issued a final rule
including American Samoa within its regulations. I am appreciative of
the willingness and efforts of the Federal Housing Finance Board to
include American Samoa and the Commonwealth of the Northern Mariana
Islands within its regulations, and that administrative action has been
working well; however, this statutory amendment will ensure a more
permanent solution.
In the 105th Congress I introduced H.R. 904, a bill which would
clarify that American Samoa is included in the Federal Home Loan Bank
Act. That provision is a part of Section 162 of H.R. 10, and I strongly
support that provision.
Mr. SANDLIN. Madam Chairman, I rise today in support of this bill.
Financial modernization is already occurring. Innovation and
technological advances are allowing financial services firms to offer
customers a wide range of new products and thus increasing competition
and benefitting consumers. These changes are occurring globally and
dramatically changing how financial services providers operate and
deliver their products. In the United States, however, burdensome
regulatory barriers are hindering the efforts of our financial
institutions to compete globally through the development and delivery
of new financial products.
The buttom line is simple, financial modernization is necessary and
will continue as a result of market forces, even in the absence of
legislation. However, the success of American firms, and ultimately,
the strength of the American economy, depend on a good bill--one that
will ensure that financial modernization occurs in an efficient manner
and protects the interests of customers as well as the safety and
soundness of our financial system.
But as we debate these important issues and work to modernize the way
our financial services firms do business, we must remember our
community banks. In East Texas, people trust their community banks and
know their local bankers. We have recognized that these institutions
are an integral part of rural America and that we must not overlook
them or jeopardize their future in any way as we undertake this
monumental legislation. I believe that this bill addresses these
needs--the needs of Main Street as much as Wall Street--and I urge you
to cast your vote in support.
Mr. NEY. Madam Chairman, I rise today in support of H.R. 10, The
Financial Services Modernization Bill of 1999. As a supporter of this
bill, I want to send a message to the Office of the Comptroller of the
Currency, on behalf of the Members who worked so hard to obtain passage
of this much-needed legislation.
This bill for the first time allows the true marriage of insurance,
banking and securities. The principle behind the bill is functional
regulation, the activities of any entity should be regulated by
function. So when a bank engages in insurance activities, those
activities should be regulated by insurance regulators, not banking
regulators. The same holds true for securities activities.
The bill seeks to craft a balance between Congress' authority to
grant banks certain powers and the States' authority to regulate
certain activities. This balance is particularly delicate in the
context of state regulation of the insurance sales activities of banks
and their affiliates. Section 104 of the bill sets up a fairly complex
scheme, designed to allow states to regulate insurance activities
without substantially interfering with banks' ability to sell
insurance. While the bill affords states a certain amount of certainty
regarding what is permissible regulation, through a creation of safe
harbor, it leaves much to potential challenge. As the bill makes clear,
our creation of a safe harbor is not intended to establish any kind of
inference regarding the permissibility of state insurance laws that
fall outside the safe harbor.
As a result of this legislation, federal banking regulators and state
insurance regulators will work together cooperatively in the best
interests of the public. This positive relationship should be given an
opportunity to develop. What we do not want to see is aggressive moves
on the part of the OCC, or other federal banking regulators, to
displace state insurance laws and regulations applied to banks. This
legislation is designed to foreclose the OCC's opportunity to do that.
Mr. PACKARD. Madam Chairman, I would like to issue my support for
H.R. 10, the Financial Services Act of 1999. This legislation will
allow citizens more control of their own money, not Washington
bureaucrats.
H.R. 10 enhances competition in the banking and financial service
markets. As the law stands today, the financial sector has to comply
with regulations set up after the Great Depression. This has to change.
The Financial Services Act will allow American companies to enter the
new millennium on an equal standing with financial businesses around
the world.
The Financial Services Act will benefit each individual who uses a
financial institute. Increasing free trade inside the financial sector
ensures higher quality services and lower prices. The government is
already far too involved in the lives of private citizens. This
legislation will increase choices and services for the American people.
Mr. Speaker, the Financial Services Act will ensure that American
companies continue to lead the world in the financial sector. I urge my
colleagues to support its passage.
Mr. BONILLA. Madam Chairman, I rise today in support of our community
leaders, America's bankers. Everyday, America's bankers serve their
communities whether it's through lending to home buyers, supporting
small businesses or even softball sponsorships. Still, if their actions
don't fit into the arbitrary mandates of the Community Reinvestment
Act, banks are strapped with large fines and their good deeds go
unnoticed.
Banks are the primary engines for small business lending everywhere.
Banks, especially small banks, invest in their communities and reflect
their communities. If they don't, they simply do not survive.
The rising tide of CRA threatens to put these community leaders out
of business. The
[[Page H5244]]
CRA has gone far, far beyond its original intent of ensuring fair
lending. Banks are now forced to have employees whose entire job is
devoted to CRA compliance.
Instead of working for their communities, these folks are working for
CRA federal bureaucrats. Instead of helping families buy their first
home, bankers are living in fear of their next CRA review.
Our colleagues in the Senate have already approved much-needed
changes in CRA. Let's end the bureaucratic nightmare of CRA and give
bankers a chance to truly serve their communities.
Mr. HYDE. Madam Chairman, I rise in support of H.R. 10, the
``Financial Services Act of 1999.'' For many years, we have been trying
to repeal the outdated restrictions that keep banks, securities firms,
and insurance companies from getting into one another's businesses.
After all the debate, I think we have finally come up with something in
this bill that will open up a whole new world of competition.
Financial services are becoming increasingly globalized, increasingly
computerized, and increasingly seamless. Banking laws passed during the
Depression simply will not do in the 21st century. I wish that we could
maintain a world where everyone knew their banker on a first name basis
and loans were made on a handshake, and I think in the new world some
banks will provide that kind of service to those who demand it. But we
need not have laws that limit us to that kind of service, as desirable
as it may seem. Everyone is better off if the market decides what kinds
of services financial firms will offer.
Just think about the progress we have made in the past ten years.
When I was a child, only the wealthy owned stocks. Now, with the growth
of the mutual fund industry and self-directed retirement funds,
millions and millions of average Americans not only own stocks, but
make their own investment decisions. These developments create wealth,
increase people's incentive to produce, and relieve some of the
entitlement burden of government. I believe that this bill will bring
more such positive developments.
I want to say a word about my friends Jim Leach, chairman of the
Banking Committee, and Tom Bliley, chairman of the Commerce Committee.
They have done an excellent job of putting this package together. I
commend them for their work in bringing this bill to the floor in a
very difficult and contentious environment.
I especially want to commend them for working with me on the bank
merger provisions of the bill and the bankruptcy provisions relating to
wholesale financial institutions. Under current law, bank mergers are
reviewed under special bank merger statutes, and they do not go through
the Hart-Scott-Rodino merger review process that covers most other
mergers. Now banks will be able to get into other businesses which they
have not been able to do before.
The principle that we have tried to follow is that when mergers
occur, the bank part of that merger will be judged under the current
bank merger statutes, and we do not intend any change in that process
or in any of the agencies' respective jurisdictions. The non-bank part
of that merger, which will fall under the new Section 6 of the Bank
Holding Company Act, will be subject to the normal Hart-Scott-Rodino
merger review by either the Justice Department or the Federal Trade
Commission. The amendment in the nature of a substitute has language
that embodies that principle. This language is essentially the same as
that in last year's bill, but certain technical and clarifying changes
have been made.
In short, no bank is treated differently than it otherwise would be
because it has some other business within its corporate family.
Likewise, no other business is treated differently than it otherwise
would be because it has a bank within its corporate family.
We have embodied that same principle with respect to the Federal
Trade Commission's authority to enforce the Federal Trade Commission
Act and other laws. Section 5 of the Federal Trade Commission Act
specifically prohibits the FTC from enforcing the Act against banks
because they are heavily regulated. The language in the amendment in
the nature of a substitute does not change that, but it does clarify
that the bank prohibition does not extend to any other non-bank parts
of a bank's corporate family. I would also note that similar language
was not necessary for the Justice Department because there are no
specific statutory prohibitions on its ability to enforce laws against
banks, other than the Hart-Scott-Rodino exemption that I have already
discussed.
With respect to the bankruptcy language on wholesale financial
institutions, I think that we all agree on the substance involved, but
the specific language may require some further refinement in
conference.
I will be requesting Judiciary Committee conferees on a few narrow
parts of the bill, and I look forward to continuing to work with my
Banking Committee and Commerce Committee colleagues.
I will insert four jurisdictional letters relating to the Judiciary
Committee's participation in this matter for printing in the Record.
Let me again commend my friends Jim Leach and Tom Bliley and everyone
else who has worked on this legislation, and I ask my colleagues to
support it.
House of Representatives,
Committee on the Judiciary,
Washington, DC, June 15, 1999.
Hon. Dennis Hastert,
Speaker, U.S. House of Representatives,
Washington, DC.
Dear Mr. Speaker: I am writing to let you know of the
Committee on the Judiciary's jurisdictional interest in H.R.
10, the ``Financial Services Act of 1999.'' As you know, the
Committee on Banking and Financial Services has filed its
report on H.R. 10, and the Committee on Commerce will do so
shortly.
The Committee on the Judiciary has jurisdiction over
several provisions of the bill as introduced: Sec. 104(a)(3)
(dealing with the preservation of state antitrust laws);
Sec. 104(b)(3)(A) & (b)(4)(B) (dealing with the non-
preemption of the McCarran-Ferguson Act); Sec. 122 (amending
Title 18 to create a crime for misrepresentations regarding
financial institution liability for obligations of
affiliates); Sec. 136(b) (to the extent that it deals with
the treatment of wholesale financial institutions under the
Bank Merger Act and the Bankruptcy Code in the new
Sec. 9B(b)(5) & (e)(3) of the Federal Reserve Act);
Sec. 13(d) (dealing with amendments to the Bankruptcy Code
for wholesale financial institutions); Sec. 136(e) (to the
extent that it deals with the treatment under the Bankruptcy
Code of corporations organized under Sec. 25A of the Federal
Reserve Act); Sec. Sec. 141-44 (dealing with the antitrust
review of mergers in the financial services industry);
Sec. 206(b) & (d) (dealing with administrative procedures for
the Securities and Exchange Commission outside the
Administrative Procedure Act); Sec. 214 (to the extent that
it creates a new crime under the Investment Company Act);
Sec. 301 (dealing with the continued viability of the
McCarran-Ferguson Act); Sec. 306 (dealing with expedited
dispute resolution for disputes between state and federal
regulators); Sec. 314(a) (dealing with court jurisdiction
over litigation concerning redomesticated insurer);
Sec. 321(d) (dealing with court jurisdiction over litigation
concerning reciprocity or uniformity determinations);
Sec. 335 (dealing with court jurisdiction over litigation
concerning the National Association of Registered Agents and
Brokers). In addition, there are at least two provisions of
the bill as reported by the Banking Committee over which this
committee has jurisdiction: Sec. 179 (creating new criminal
and civil liability for violations of new privacy
requirements) and Sec. 193 (to the extent that it limits the
claims of bankruptcy trustees).
The foregoing list is intended to be as comprehensive as
possible, but any inadvertent omission of a provision in
either the introduced or reported versions of the bill that
the Committee would otherwise have jurisdiction over does not
waive that jurisdiction. The Committee has not yet been able
to obtain a copy of the bill as ordered reported by the
Commerce Committee, and it reserves its rights with respect
to any additional provisions that may be included therein.
I have several relatively minor concerns with the language
of these provisions, and my staff has been working with the
staffs of the Banking and Commerce Committees to resolve
those concerns. I am confident that we will resolve them in
the near future. For that reason, I have written to Chairman
Leach and Chairman Bliley to inform them that I am willing to
waive the Committee's right to a sequential referral of H.R.
10 subject to the good faith commitment of all concerned that
these minor concerns will be addressed to our satisfaction
either in the base text made in order under the rule or a
manager's amendment when H.R. 10 goes to the floor.
My doing so does not constitute any waiver of the
Committee's jurisdiction over these provisions and does not
prejudice its rights in any future legislation relating to
these provisions or other similar provisions that may be
included in the Act. I request that you appoint Members of
this Committee as conferees on these provisions or any other
similar provisions in the bill should it go to conference.
I appreciate your consideration of my views on this issue.
Please let me know if you need any further information.
Sincerely,
Henry J. Hyde,
Chairman.
Hon. Jim Leach,
Chairman, Committee on Banking and Financial Services,
Washington, DC.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
Washington, DC.
Dear Jim and Tom. I am writing to let you know of the
Committee on the Judiciary's jurisdictional interest in H.R.
10, the ``Financial Services Act of 1999.'' As you know, the
Committee on Banking and Financial Services has filed its
report on H.R. 10, and the Committee on Commerce will do so
shortly.
The Committee on the Judiciary has jurisdiction over
several provisions of the bill as introduced: Sec. 104(a)(3)
(dealing with the preservation of state antitrust laws);
Sec. 104(b)(3)(A) & (b)(4)(B) (dealing with the
[[Page H5245]]
non-preemption of the McCarran-Ferguson Act); Sec. 122
(amending Title 18 to create crime for mispresentations
regarding financial institution liability for obligations of
affiliates); Sec. 136(b) (to the extent that it deals with
the treatment of wholesale financial institutions under the
Bank Merger Act and the Bankruptcy Code in the new
Sec. 9B(b)(5) & (e)(3) of the Federal Reserve Act);
Sec. 136(d) (dealing with amendments to the Bankruptcy Code
for wholesale financial institutions); Sec. 136(e) (to the
extent that it deals with the treatment under the Bankruptcy
Code of corporations organized under Sec. 25A of the Federal
Reserve Act); Sec. Sec. 141-44 (dealing with the antitrust
review mergers in the financial services industry);
Sec. 206(b) & (d) (dealing with administrative procedures for
the Securities and Exchange Commission outside the
Administrative Procedure Act); Sec. 214 (to the extent that
it creates a new crime under the Investment Company Act);
Sec. 301 (dealing with the continued viability of the
McCarran-Ferguson Act); Sec. 306 (dealing with expedited
dispute resolution for disputes between state and federal
regulators); Sec. 314(a) (dealing with court jurisdiction
over litigation concerning redomesticated insurer);
Sec. 321(d) (dealing with court jurisdiction over litigation
concerning reciprocity or uniformity determinations);
Sec. 335 (dealing with court jurisdiction over litigation
concerning the National Association of Registered Agents and
Brokers). In addition, there are at least two provisions of
the bill as reported by the Banking Committee over which this
committee has jurisdiction: Sec. 179 (creating new criminal
and civil liability for violations of new privacy
requirements) and Sec. 193 (to the extent that it limits the
claims of bankruptcy trustees).
The foregoing list is intended to be as comprehensive as
possible, but any inadvertent omission of a provision in
either the introduced or reported versions of the bill that
the Committee would otherwise have jurisdiction over does not
waive that jurisdiction. The Committee has not yet been able
to obtain a copy of the bill as ordered reported by the
Commerce Committee, and it reserves its rights with respect
to any additional provisions that may be included therein.
As you know, I have several relatively minor concerns with
the language of these provisions, and my staff has been
working with yours to resolve them. I am confident that we
will resolve them in the near future. For that reason, I am
willing to waive the Committee's right to a sequential
referral of H.R. 10 subject to the good faith commitment of
all concerned that these minor concerns will be addressed to
our satisfaction either in the base text made in order under
the rule or a manager's amendment which H.R. 10 goes to the
floor.
However, my doing so does not constitute any waiver of the
Committee's jurisdiction over these provisions and does not
prejudice its rights in any future legislation relating to
these provisions or any other similar provisions that may be
included in the Act. I will, of course, insist that Members
of this Committee be named as conferees on these provisions
or any other similar provisions in the bill should it go to
conference. By separate letter, a copy of which is attached,
I am making that request Speaker Hastert today.
I appreciate your consideration of my views on this issue.
Please let me know if you need any further information.
Sincerely,
Henry J. Hyde,
Chaiman.
U.S. House of Representatives,
Committee on Commerce,
Washington, DC, June 18, 1999.
Hon. Henry Hyde,
Chairman, Committee on the Judiciary,
Washington, DC.
Dear Henry: Thank you for your letter regarding the
Committee on the Judiciary's jurisdictional interest in H.R.
10, the ``Financial Services Act of 1999.''
I acknowledge the Judiciary Committee jurisdictional
interest in a number of provisions in H.R. 10. The Committee
on Commerce has included your proposed revision to the
antitrust subtitle in its consideration of the legislation. I
will work with you to address any other concerns you have
either in base text or as part of a manager's amendment on
the House floor.
I would not oppose Members of the Judiciary Committee being
named as conferees for provisions within your Committee's
jurisdiction.
Thank you for foregoing a request for a sequential referral
of this important legislation. I appreciate your willingness
to work with me.
Sincerely,
Tom Bliley,
Chairman.
____
U.S. House of Representatives, Committee on Banking and
Financial Services,
Washington, DC, June 15, 1999.
Hon. Henry Hyde,
Chairman, Committee on the Judiciary,
Washington, DC.
Dear Henry: Thank you for your letter regarding the
Judiciary Committee's jurisdictional interest in H.R. 10, the
``Financial Services Act of 1999.''
I recognize that the Committee on the Judiciary has
jurisdictional claims to those provisions in H.R. 10 which
affect the Bankruptcy Code, criminal sanctions, antitrust
laws, the McCarran-Ferguson Act, administrative procedures
and the court system. Your willingness to waive the
Committee's right to a sequential referral of this
legislation so that we may move it to the floor expeditiously
is appreciated. As outlined in your letter, I will continue
to work with you in good faith to see that the thrust of the
Judiciary Committee's concerns will be addressed as H.R. 10
goes to the floor. In addition, I agree with you that on the
provisions within the Judiciary Committee's jurisdiction the
Judiciary Committee should be represented when the bill goes
to conference.
Thanks again for your cooperation. I appreciate your
willingness to work with the Committee on Banking and
Financial Services.
Sincerely,
James A. Leach,
Chairman.
The CHAIRMAN. All time for general debate has expired.
Pursuant to the rule, the amendment in the nature of a substitute
consisting of the text of the Committee on Rules print dated June 24,
1999, is considered as an original bill for the purpose of amendment
under the 5-minute rule and is considered read.
The text of the amendment in the nature of a substitute is as
follows:
Strike out all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; PURPOSES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Financial
Services Act of 1999''.
(b) Purposes.--The purposes of this Act are as follows:
(1) To enhance competition in the financial services
industry, in order to foster innovation and efficiency.
(2) To ensure the continued safety and soundness of
depository institutions.
(3) To provide necessary and appropriate protections for
investors and ensure fair and honest markets in the delivery
of financial services.
(4) To avoid duplicative, potentially conflicting, and
overly burdensome regulatory requirements through the
creation of a regulatory framework for financial holding
companies that respects the divergent requirements of each of
the component businesses of the holding company, and that is
based upon principles of strong functional regulation and
enhanced regulatory coordination.
(5) To reduce and, to the maximum extent practicable, to
eliminate the legal barriers preventing affiliation among
depository institutions, securities firms, insurance
companies, and other financial service providers and to
provide a prudential framework for achieving that result.
(6) To enhance the availability of financial services to
citizens of all economic circumstances and in all geographic
areas.
(7) To enhance the competitiveness of United States
financial service providers internationally.
(8) To ensure compliance by depository institutions with
the provisions of the Community Reinvestment Act of 1977 and
enhance the ability of depository institutions to meet the
capital and credit needs of all citizens and communities,
including underserved communities and populations.
(c) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; purposes; table of contents.
TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE
COMPANIES, AND DEPOSITORY INSTITUTIONS
Subtitle A--Affiliations
Sec. 101. Glass-Steagall Act reformed.
Sec. 102. Activity restrictions applicable to bank holding companies
which are not financial holding companies.
Sec. 103. Financial holding companies.
Sec. 104. Operation of State law.
Sec. 105. Mutual bank holding companies authorized.
Sec. 105A. Public meetings for large bank acquisitions and mergers.
Sec. 106. Prohibition on deposit production offices.
Sec. 107. Clarification of branch closure requirements.
Sec. 108. Amendments relating to limited purpose banks.
Sec. 109. GAO study of economic impact on community banks, other small
financial institutions, insurance agents, and consumers.
Sec. 110. Responsiveness to community needs for financial services.
Subtitle B--Streamlining Supervision of Financial Holding Companies
Sec. 111. Streamlining financial holding company supervision.
Sec. 112. Elimination of application requirement for financial holding
companies.
Sec. 113. Authority of State insurance regulator and Securities and
Exchange Commission.
Sec. 114. Prudential safeguards.
Sec. 115. Examination of investment companies.
Sec. 116. Limitation on rulemaking, prudential, supervisory, and
enforcement authority of the Board.
[[Page H5246]]
Sec. 117. Equivalent regulation and supervision.
Sec. 118. Prohibition on FDIC assistance to affiliates and
subsidiaries.
Sec. 119. Repeal of savings bank provisions in the Bank Holding Company
Act of 1956.
Sec. 120. Technical amendment.
Subtitle C--Subsidiaries of National Banks
Sec. 121. Permissible activities for subsidiaries of national banks.
Sec. 122. Safety and soundness firewalls between banks and their
financial subsidiaries.
Sec. 123. Misrepresentations regarding depository institution liability
for obligations of affiliates.
Sec. 124. Repeal of stock loan limit in Federal Reserve Act.
Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial
Institutions
Chapter 1--Wholesale Financial Holding Companies
Sec. 131. Wholesale financial holding companies established.
Sec. 132. Authorization to release reports.
Sec. 133. Conforming amendments.
Chapter 2--Wholesale Financial Institutions
Sec. 136. Wholesale financial institutions.
Subtitle E--Preservation of FTC Authority
Sec. 141. Amendment to the Bank Holding Company Act of 1956 to modify
notification and post-approval waiting period for section
3 transactions.
Sec. 142. Interagency data sharing.
Sec. 143. Clarification of status of subsidiaries and affiliates.
Sec. 144. Annual GAO report.
Subtitle F--National Treatment
Sec. 151. Foreign banks that are financial holding companies.
Sec. 152. Foreign banks and foreign financial institutions that are
wholesale financial institutions.
Sec. 153. Representative offices.
Sec. 154. Reciprocity.
Subtitle G--Federal Home Loan Bank System Modernization
Sec. 161. Short title.
Sec. 162. Definitions.
Sec. 163. Savings association membership.
Sec. 164. Advances to members; collateral.
Sec. 165. Eligibility criteria.
Sec. 166. Management of banks.
Sec. 167. Resolution Funding Corporation.
Sec. 168. Capital structure of Federal home loan banks.
Subtitle H--ATM Fee Reform
Sec. 171. Short title.
Sec. 172. Electronic fund transfer fee disclosures at any host ATM.
Sec. 173. Disclosure of possible fees to consumers when ATM card is
issued.
Sec. 174. Feasibility study.
Sec. 175. No liability if posted notices are damaged.
Subtitle I--Direct Activities of Banks
Sec. 181. Authority of national banks to underwrite certain municipal
bonds.
Subtitle J--Deposit Insurance Funds
Sec. 186. Study of safety and soundness of funds.
Sec. 187. Elimination of SAIF and DIF special reserves.
Subtitle K--Miscellaneous Provisions
Sec. 191. Termination of ``know your customer'' regulations.
Sec. 192. Study and report on Federal electronic fund transfers.
Sec. 193. General Accounting Office study of conflicts of interest.
Sec. 194. Study of cost of all Federal banking regulations.
Sec. 195. Study and report on adapting existing legislative
requirements to online banking and lending.
Sec. 196. Regulation of uninsured State member banks.
Sec. 197. Clarification of source of strength doctrine.
Sec. 198. Interest rates and other charges at interstate branches.
Subtitle L-Effective Date of Title
Sec. 199. Effective date.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Registration for sales of private securities offerings.
Sec. 204. Information sharing.
Sec. 205. Treatment of new hybrid products.
Sec. 206. Definition of excepted banking product.
Sec. 207. Additional definitions.
Sec. 208. Government securities defined.
Sec. 209. Effective date.
Sec. 210. Rule of construction.
Subtitle B--Bank Investment Company Activities
Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Lending to an affiliated investment company.
Sec. 213. Independent directors.
Sec. 214. Additional SEC disclosure authority.
Sec. 215. Definition of broker under the Investment Company Act of
1940.
Sec. 216. Definition of dealer under the Investment Company Act of
1940.
Sec. 217. Removal of the exclusion from the definition of investment
adviser for banks that advise investment companies.
Sec. 218. Definition of broker under the Investment Advisers Act of
1940.
Sec. 219. Definition of dealer under the Investment Advisers Act of
1940.
Sec. 220. Interagency consultation.
Sec. 221. Treatment of bank common trust funds.
Sec. 222. Investment advisers prohibited from having controlling
interest in registered investment company.
Sec. 223. Statutory disqualification for bank wrongdoing.
Sec. 224. Conforming change in definition.
Sec. 225. Conforming amendment.
Sec. 226. Church plan exclusion.
Sec. 227. Effective date.
Subtitle C--Securities and Exchange Commission Supervision of
Investment Bank Holding Companies
Sec. 231. Supervision of investment bank holding companies by the
Securities and Exchange Commission.
Subtitle D--Disclosure of Customer Costs of Acquiring Financial
Products
Sec. 241. Improved and consistent disclosure.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
Sec. 301. State regulation of the business of insurance.
Sec. 302. Mandatory insurance licensing requirements.
Sec. 303. Functional regulation of insurance.
Sec. 304. Insurance underwriting in national banks.
Sec. 305. Title insurance activities of national banks and their
affiliates.
Sec. 306. Expedited and equalized dispute resolution for Federal
regulators.
Sec. 307. Consumer protection regulations.
Sec. 308. Certain State affiliation laws preempted for insurance
companies and affiliates.
Sec. 309. Interagency consultation.
Sec. 310. Definition of State.
Subtitle B--National Association of Registered Agents and Brokers
Sec. 321. State flexibility in multistate licensing reforms.
Sec. 322. National Association of Registered Agents and Brokers.
Sec. 323. Purpose.
Sec. 324. Relationship to the Federal Government.
Sec. 325. Membership.
Sec. 326. Board of directors.
Sec. 327. Officers.
Sec. 328. Bylaws, rules, and disciplinary action.
Sec. 329. Assessments.
Sec. 330. Functions of the NAIC.
Sec. 331. Liability of the Association and the directors, officers, and
employees of the Association.
Sec. 332. Elimination of NAIC oversight.
Sec. 333. Relationship to State law.
Sec. 334. Coordination with other regulators.
Sec. 335. Judicial review.
Sec. 336. Definitions.
Subtitle C--Rental Car Agency Insurance Activities
Sec. 341. Standard of regulation for motor vehicle rentals.
Subtitle D--Confidentiality
Sec. 351. Confidentiality of health and medical information.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
Sec. 401. Prohibition on new unitary savings and loan holding
companies.
Sec. 402. Retention of ``Federal'' in name of converted Federal savings
association.
TITLE V--PRIVACY
Subtitle A--Privacy Policy
Sec. 501. Depository institution privacy policies.
Sec. 502. Study of current financial privacy laws.
Subtitle B--Fraudulent Access to Financial Information
Sec. 521. Privacy protection for customer information of financial
institutions.
Sec. 522. Administrative enforcement.
Sec. 523. Criminal penalty.
Sec. 524. Relation to State laws.
Sec. 525. Agency guidance.
Sec. 526. Reports.
Sec. 527. Definitions.
TITLE I--FACILITATING AFFILIATION AMONG SECURITIES FIRMS, INSURANCE
COMPANIES, AND DEPOSITORY INSTITUTIONS
Subtitle A--Affiliations
SEC. 101. GLASS-STEAGALL ACT REFORMED.
(a) Section 20 Repealed.--Section 20 of the Banking Act of
1933 (12 U.S.C. 377) (commonly referred to as the ``Glass-
Steagall Act'') is repealed.
(b) Section 32 Repealed.--Section 32 of the Banking Act of
1933 (12 U.S.C. 78) is repealed.
SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE TO BANK HOLDING
COMPANIES WHICH ARE NOT FINANCIAL HOLDING
COMPANIES.
(a) In General.--Section 4(c)(8) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended to read
as follows:
[[Page H5247]]
``(8) shares of any company the activities of which had
been determined by the Board by regulation or order under
this paragraph as of the day before the date of the enactment
of the Financial Services Act of 1999, to be so closely
related to banking as to be a proper incident thereto
(subject to such terms and conditions contained in such
regulation or order, unless modified by the Board);''.
(b) Conforming Changes to Other Statutes.--
(1) Amendment to the bank holding company act amendments of
1970.--Section 105 of the Bank Holding Company Act Amendments
of 1970 (12 U.S.C. 1850) is amended by striking ``, to engage
directly or indirectly in a nonbanking activity pursuant to
section 4 of such Act,''.
(2) Amendment to the bank service company act.--Section
4(f) of the Bank Service Company Act (12 U.S.C. 1864(f)) is
amended by striking the period and adding at the end the
following: ``as of the day before the date of enactment of
the Financial Services Act of 1999.''.
SEC. 103. FINANCIAL HOLDING COMPANIES.
(a) In General.--The Bank Holding Company Act of 1956 is
amended by inserting after section 5 (12 U.S.C. 1844) the
following new section:
``SEC. 6. FINANCIAL HOLDING COMPANIES.
``(a) Financial Holding Company Defined.--For purposes of
this section, the term `financial holding company' means a
bank holding company which meets the requirements of
subsection (b).
``(b) Eligibility Requirements for Financial Holding
Companies.--
``(1) In general.--No bank holding company may engage in
any activity or directly or indirectly acquire or retain
shares of any company under this section unless the bank
holding company meets the following requirements:
``(A) All of the subsidiary depository institutions of the
bank holding company are well capitalized.
``(B) All of the subsidiary depository institutions of the
bank holding company are well managed.
``(C) All of the subsidiary depository institutions 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;
``(D) The company has filed with the Board a declaration
that the company elects to be a financial holding company and
certifying that the company meets the requirements of
subparagraphs (A), (B), and (C).
``(2) Foreign banks and companies.--For purposes of
paragraph (1), the Board shall establish and apply comparable
capital and other operating standards to a foreign bank that
operates a branch or agency or owns or controls a bank or
commercial lending company in the United States, and any
company that owns or controls such foreign bank, giving due
regard to the principle of national treatment and equality of
competitive opportunity.
``(3) Limited exclusions from community needs requirements
for newly acquired depository institutions.--Any depository
institution acquired by a bank holding company during the 12-
month period preceding the submission of a notice under
paragraph (1)(D) and any depository institution acquired
after the submission of such notice may be excluded for
purposes of paragraph (1)(C) during the 12-month period
beginning on the date of such acquisition if--
``(A) the bank holding company has submitted an affirmative
plan to the appropriate Federal banking agency to take such
action as may be necessary in order for such institution to
achieve a rating of `satisfactory record of meeting community
credit needs', or better, at the next examination of the
institution; and
``(B) the plan has been accepted by such agency.
``(c) Engaging in Activities That Are Financial in
Nature.--
``(1) Financial activities.--
``(A) In general.--Notwithstanding section 4(a), a
financial holding company may engage in any activity, and
acquire and retain the shares of any company engaged in any
activity, that the Board has determined (by regulation or
order and in accordance with subparagraph (B)) to be--
``(i) financial in nature or incidental to such financial
activities; or
``(ii) complementary to activities authorized under this
subsection to the extent that the amount of such
complementary activities remains small.
``(B) Coordination between the board and the secretary of
the treasury.--
``(i) Proposals raised before the board.--
``(I) Consultation.--The Board shall notify the Secretary
of the Treasury of, and consult with the Secretary of the
Treasury concerning, any request, proposal, or application
under this subsection, including a regulation or order
proposed under paragraph (4), for a determination of whether
an activity is financial in nature or incidental to such a
financial activity.
``(II) Treasury view.--The Board shall not determine that
any activity is financial in nature or incidental to a
financial activity under this subsection if the Secretary of
the Treasury notifies the Board in writing, not later than 30
days after the date of receipt of the notice described in
subclause (I) (or such longer period as the Board determines
to be appropriate in light of the circumstances) that the
Secretary of the Treasury believes that the activity is not
financial in nature or incidental to a financial activity.
``(ii) Proposals raised by the treasury.--
``(I) Treasury recommendation.--The Secretary of the
Treasury may, at any time, recommend in writing that the
Board find an activity to be financial in nature or
incidental to a financial activity.
``(II) Time period for board action.--Not later than 30
days after the date of receipt of a written recommendation
from the Secretary of the Treasury under subclause (I) (or
such longer period as the Secretary of the Treasury and the
Board determine to be appropriate in light of the
circumstances), the Board shall determine whether to initiate
a public rulemaking proposing that the subject recommended
activity be found to be financial in nature or incidental to
a financial activity under this subsection, and shall notify
the Secretary of the Treasury in writing of the determination
of the Board and, in the event that the Board determines not
to seek public comment on the proposal, the reasons for that
determination.
``(2) Factors to be considered.--In determining whether an
activity is financial in nature or incidental to financial
activities, the Board shall take into account--
``(A) the purposes of this Act and the Financial Services
Act of 1999;
``(B) changes or reasonably expected changes in the
marketplace in which bank holding companies compete;
``(C) changes or reasonably expected changes in the
technology for delivering financial services; and
``(D) whether such activity is necessary or appropriate to
allow a bank holding company and the affiliates of a bank
holding company to--
``(i) compete effectively with any company seeking to
provide financial services in the United States;
``(ii) use any available or emerging technological means,
including any application necessary to protect the security
or efficacy of systems for the transmission of data or
financial transactions, in providing financial services; and
``(iii) offer customers any available or emerging
technological means for using financial services.
``(3) Activities that are financial in nature.--The
following activities shall be considered to be financial in
nature:
``(A) Lending, exchanging, transferring, investing for
others, or safeguarding money or securities.
``(B) Insuring, guaranteeing, or indemnifying against loss,
harm, damage, illness, disability, or death, or providing and
issuing annuities, and acting as principal, agent, or broker
for purposes of the foregoing.
``(C) Providing financial, investment, or economic advisory
services, including advising an investment company (as
defined in section 3 of the Investment Company Act of 1940).
``(D) Issuing or selling instruments representing interests
in pools of assets permissible for a bank to hold directly.
``(E) Underwriting, dealing in, or making a market in
securities.
``(F) Engaging in any activity that the Board has
determined, by order or regulation that is in effect on the
date of enactment of the Financial Services Act of 1999, to
be so closely related to banking or managing or controlling
banks as to be a proper incident thereto (subject to the same
terms and conditions contained in such order or regulation,
unless modified by the Board).
``(G) Engaging, in the United States, in any activity
that--
``(i) a bank holding company may engage in outside the
United States; and
``(ii) the Board has determined, under regulations issued
pursuant to section 4(c)(13) of this Act (as in effect on the
day before the date of enactment of the Financial Services
Act of 1999) to be usual in connection with the transaction
of banking or other financial operations abroad.
``(H) Directly or indirectly acquiring or controlling,
whether as principal, on behalf of 1 or more entities
(including entities, other than a depository institution,
that the bank holding company controls) or otherwise, shares,
assets, or ownership interests (including without limitation
debt or equity securities, partnership interests, trust
certificates or other instruments representing ownership) of
a company or other entity, whether or not constituting
control of such company or entity, engaged in any activity
not authorized pursuant to this section if--
``(i) the shares, assets, or ownership interests are not
acquired or held by a depository institution;
``(ii) such shares, assets, or ownership interests are
acquired and held by an affiliate of the bank holding company
that is a registered broker or dealer that is engaged in
securities underwriting activities, or an affiliate of such
broker or dealer, as part of a bona fide underwriting or
investment banking activity, including investment activities
engaged in for the purpose of appreciation and ultimate
resale or disposition of the investment;
``(iii) such shares, assets, or ownership interests are
held only for such a period of time as will permit the sale
or disposition thereof on a reasonable basis consistent with
the nature of the activities described in clause (ii); and
``(iv) during the period such shares, assets, or ownership
interests are held, the bank
[[Page H5248]]
holding company does not actively participate in the day to
day management or operation of such company or entity, except
insofar as necessary to achieve the objectives of clause
(ii).
``(I) Directly or indirectly acquiring or controlling,
whether as principal, on behalf of 1 or more entities
(including entities, other than a depository institution or
subsidiary of a depository institution, that the bank holding
company controls) or otherwise, shares, assets, or ownership
interests (including without limitation debt or equity
securities, partnership interests, trust certificates or
other instruments representing ownership) of a company or
other entity, whether or not constituting control of such
company or entity, engaged in any activity not authorized
pursuant to this section if--
``(i) the shares, assets, or ownership interests are not
acquired or held by a depository institution or a subsidiary
of a depository institution;
``(ii) such shares, assets, or ownership interests are
acquired and held by an insurance company that is
predominantly engaged in underwriting life, accident and
health, or property and casualty insurance (other than
credit-related insurance) or providing and issuing annuities;
``(iii) such shares, assets, or ownership interests
represent an investment made in the ordinary course of
business of such insurance company in accordance with
relevant State law governing such investments; and
``(iv) during the period such shares, assets, or ownership
interests are held, the bank holding company does not
directly or indirectly participate in the day-to-day
management or operation of the company or entity except
insofar as necessary to achieve the objectives of clauses
(ii) and (iii).
``(4) Authorization of new financial activities.--The Board
shall, by regulation or order and in accordance with
paragraph (1)(B), define, consistent with the purposes of
this Act, the following activities as, and the extent to
which such activities are, financial in nature or incidental
to activities which are financial in nature:
``(A) Lending, exchanging, transferring, investing for
others, or safeguarding financial assets other than money or
securities.
``(B) Providing any device or other instrumentality for
transferring money or other financial assets.
``(C) Arranging, effecting, or facilitating financial
transactions for the account of third parties.
``(5) Post-consummation notification.--
``(A) In general.--A financial holding company that
acquires any company, or commences any activity, pursuant to
this subsection shall provide written notice to the Board
describing the activity commenced or conducted by the company
acquired no later than 30 calendar days after commencing the
activity or consummating the acquisition.
``(B) Approval not required for certain financial
activities.--Except as provided in section 4(j) with regard
to the acquisition of a savings association or in paragraph
(6) of this subsection, a financial holding company may
commence any activity, or acquire any company, pursuant to
paragraph (3) or any regulation prescribed or order issued
under paragraph (4), without prior approval of the Board.
``(6) Notice required for large combinations.--
``(A) In general.--No financial holding company shall
directly or indirectly acquire, and no company that becomes a
financial holding company shall directly or indirectly
acquire control of, any company in the United States,
including through merger, consolidation, or other type of
business combination, that--
``(i) is engaged in activities permitted under this
subsection or subsection (g); and
``(ii) has consolidated total assets in excess of
$40,000,000,000,
unless such holding company has provided notice to the Board,
not later than 60 days prior to such proposed acquisition or
prior to becoming a financial holding company, and during
that time period, or such longer time period not exceeding an
additional 60 days, as established by the Board, the Board
has not issued a notice disapproving the proposed acquisition
or retention.
``(B) Factors for consideration.--In reviewing any prior
notice filed under this paragraph, the Board shall take into
consideration--
``(i) whether the company is in compliance with all
applicable criteria set forth in subsection (b) and the
provisions of subsection (d);
``(ii) whether the proposed combination represents an undue
aggregation of resources;
``(iii) whether the proposed combination poses a risk to
the deposit insurance system;
``(iv) whether the proposed combination poses a risk to
State insurance guaranty funds;
``(v) whether the proposed combination can reasonably be
expected to be in the best interests of depositors or
policyholders of the respective entities;
``(vi) whether the proposed transaction can reasonably be
expected to further the purposes of this Act and produce
benefits to the public; and
``(vii) whether, and the extent to which, the proposed
combination poses an undue risk to the stability of the
financial system in the United States.
``(C) Required information.--The Board may disapprove any
prior notice filed under this paragraph if the company
submitting such notice neglects, fails, or refuses to furnish
to the Board all relevant information required by the Board.
``(D) Solicitation of views of other supervisory
agencies.--
``(i) In general.--Upon receiving a prior notice under this
paragraph, in order to provide for the submission of their
views and recommendations, the Board shall give notice of the
proposal to--
``(I) the appropriate Federal banking agency of any bank
involved;
``(II) the appropriate functional regulator of any
functionally regulated nondepository institution (as defined
in section 5(c)(1)(C)) involved; and
``(III) the Secretary of the Treasury, the Attorney
General, and the Federal Trade Commission.
``(ii) Timing.--The views and recommendations of any agency
provided notice under this paragraph shall be submitted to
the Board not later than 30 calendar days after the date on
which notice to the agency was given, unless the Board
determines that another shorter time period is appropriate.
``(d) Provisions Applicable to Financial Holding Companies
That Fail To Meet Requirements.--
``(1) In general.--If the Board finds, after notice from or
consultation with the appropriate Federal banking agency,
that a financial holding company is not in compliance with
the requirements of subparagraph (A), (B), or (C) of
subsection (b)(1), the Board shall give notice of such
finding to the company.
``(2) Agreement to correct conditions required.--Within 45
days of receipt by a financial holding company of a notice
given under paragraph (1) (or such additional period as the
Board may permit), the company shall execute an agreement
acceptable to the Board to comply with the requirements
applicable to a financial holding company.
``(3) Authority to impose limitations.--Until the
conditions described in a notice to a financial holding
company under paragraph (1) are corrected--
``(A) the Board may impose such limitations on the conduct
or activities of the company or any affiliate of the company
as the Board determines to be appropriate under the
circumstances; and
``(B) the appropriate Federal banking agency may impose
such limitations on the conduct or activities of an
affiliated depository institution or subsidiary of a
depository institution as the appropriate Federal banking
agency determines to be appropriate under the circumstances.
``(4) Failure to correct.--If, after receiving a notice
under paragraph (1), a financial holding company does not--
``(A) execute and implement an agreement in accordance with
paragraph (2);
``(B) comply with any limitations imposed under paragraph
(3);
``(C) in the case of a notice of failure to comply with
subsection (b)(1)(A), restore each depository institution
subsidiary to well capitalized status before the end of the
180-day period beginning on the date such notice is received
by the company (or such other period permitted by the Board);
or
``(D) in the case of a notice of failure to comply with
subparagraph (B) or (C) of subsection (b)(1), restore
compliance with any such subparagraph by the date the next
examination of the depository institution subsidiary is
completed or by the end of such other period as the Board
determines to be appropriate,
the Board may require such company, under such terms and
conditions as may be imposed by the Board and subject to such
extension of time as may be granted in the Board's
discretion, to divest control of any depository institution
subsidiary or, at the election of the financial holding
company, instead to cease to engage in any activity conducted
by such company or its subsidiaries pursuant to this section.
``(5) Consultation.--In taking any action under this
subsection, the Board shall consult with all relevant Federal
and State regulatory agencies.
``(e) Safeguards for Bank Subsidiaries.--A financial
holding company shall assure that--
``(1) the procedures of the holding company for identifying
and managing financial and operational risks within the
company, and the subsidiaries of such company, adequately
protect the subsidiaries of such company which are insured
depository institutions or wholesale financial institution
from such risks;
``(2) the holding company has reasonable policies and
procedures to preserve the separate corporate identity and
limited liability of such company and the subsidiaries of
such company, for the protection of the company's subsidiary
insured depository institutions and wholesale financial
institutions; and
``(3) the holding company complies with this section.
``(f) Authority To Retain Limited Nonfinancial Activities
and Affiliations.--
``(1) In general.--Notwithstanding section 4(a), a company
that is not a bank holding company or a foreign bank (as
defined in section 1(b)(7) of the International Banking Act
of 1978) and becomes a financial holding company after the
date of the enactment of the Financial Services Act of 1999
may continue to engage in any activity and retain direct
[[Page H5249]]
or indirect ownership or control of shares of a company
engaged in any activity if--
``(A) the holding company lawfully was engaged in the
activity or held the shares of such company on September 30,
1997;
``(B) the holding company is predominantly engaged in
financial activities as defined in paragraph (2); and
``(C) the company engaged in such activity continues to
engage only in the same activities that such company
conducted on September 30, 1997, and other activities
permissible under this Act.
``(2) Predominantly financial.--For purposes of this
subsection, a company is predominantly engaged in financial
activities if the annual gross revenues derived by the
holding company and all subsidiaries of the holding company
(excluding revenues derived from subsidiary depository
institutions), on a consolidated basis, from engaging in
activities that are financial in nature or are incidental to
activities that are financial in nature under subsection (c)
represent at least 85 percent of the consolidated annual
gross revenues of the company.
``(3) No expansion of grandfathered commercial activities
through merger or consolidation.--A financial holding company
that engages in activities or holds shares pursuant to this
subsection, or a subsidiary of such financial holding
company, may not acquire, in any merger, consolidation, or
other type of business combination, assets of any other
company which is engaged in any activity which the Board has
not determined to be financial in nature or incidental to
activities that are financial in nature under subsection (c).
``(4) Continuing revenue limitation on grandfathered
commercial activities.--Notwithstanding any other provision
of this subsection, a financial holding company may continue
to engage in activities or hold shares in companies pursuant
to this subsection only to the extent that the aggregate
annual gross revenues derived from all such activities and
all such companies does not exceed 15 percent of the
consolidated annual gross revenues of the financial holding
company (excluding revenues derived from subsidiary
depository institutions).
``(5) Cross marketing restrictions applicable to commercial
activities.--A depository institution controlled by a
financial holding company shall not--
``(A) offer or market, directly or through any arrangement,
any product or service of a company whose activities are
conducted or whose shares are owned or controlled by the
financial holding company pursuant to this subsection or
subparagraph (H) or (I) of subsection (c)(3); or
``(B) permit any of its products or services to be offered
or marketed, directly or through any arrangement, by or
through any company described in subparagraph (A).
``(6) Transactions with nonfinancial affiliates.--A
depository institution controlled by a financial holding
company may not engage in a covered transaction (as defined
by section 23A(b)(7) of the Federal Reserve Act) with any
affiliate controlled by the company pursuant to section
10(c), this subsection, or subparagraph (H) or (I) of
subsection (c)(3).
``(7) Sunset of grandfather.--A financial holding company
engaged in any activity, or retaining direct or indirect
ownership or control of shares of a company, pursuant to this
subsection, shall terminate such activity and divest
ownership or control of the shares of such company before the
end of the 10-year period beginning on the date of the
enactment of the Financial Services Act of 1999. The Board
may, upon application by a financial holding company, extend
such 10-year period by a period not to exceed an additional 5
years if such extension would not be detrimental to the
public interest.
``(g) Developing Activities.--A financial holding company
may engage directly or indirectly, or acquire shares of any
company engaged, in any activity that the Board has not
determined to be financial in nature or incidental to
financial activities under subsection (c) if--
``(1) the holding company reasonably concludes that the
activity is financial in nature or incidental to financial
activities;
``(2) the gross revenues from all activities conducted
under this subsection represent less than 5 percent of the
consolidated gross revenues of the holding company;
``(3) the aggregate total assets of all companies the
shares of which are held under this subsection do not exceed
5 percent of the holding company's consolidated total assets;
``(4) the total capital invested in activities conducted
under this subsection represents less than 5 percent of the
consolidated total capital of the holding company;
``(5) neither the Board nor the Secretary of the Treasury
has determined that the activity is not financial in nature
or incidental to financial activities under subsection (c);
``(6) the holding company is not required to provide prior
written notice of the transaction to the Board under
subsection (c)(6); and
``(7) the holding company provides written notification to
the Board describing the activity commenced or conducted by
the company acquired no later than 10 business days after
commencing the activity or consummating the acquisition.''.
(b) Factors For Consideration in Reviewing Application by
Financial Holding Company to Acquire Bank.--Section 3(c) of
the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)) is
amended by adding at the end the following new paragraph:
``(6) `Too big to fail' factor.--In considering an
acquisition, merger, or consolidation under this section
involving a financial holding company or a company that would
be any such holding company upon the consummation of the
transaction, the Board shall consider whether, and the extent
to which, the proposed acquisition, merger, or consolidation
poses an undue risk to the stability of the financial system
of the United States.''.
(c) Technical and Conforming Amendments.--
(1) Section 2 of the Bank Holding Company Act of 1956 (12
U.S.C. 1841) is amended by adding at the end the following
new subsection:
``(p) Insurance Company.--For purposes of sections 5, 6,
and 10, the term `insurance company' includes any person
engaged in the business of insurance to the extent of such
activities.''.
(2) Section 4(j) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(j)) is amended--
(1) in paragraph (1)(A), by inserting ``or in any
complementary activity under section 6(c)(1)(B)'' after
``subsection (c)(8) or (a)(2)''; and
(2) in paragraph (3)--
(A) by inserting ``, other than any complementary activity
under section 6(c)(1)(B),'' after ``to engage in any
activity''; and
(B) by inserting ``or a company engaged in any
complementary activity under section 6(c)(1)(B)'' after
``insured depository institution''.
(d) Report.--
(1) In general.--By the end of the 4-year period beginning
on the date of the enactment of this Act and every 4 years
thereafter, the Board of Governors of the Federal Reserve
System and the Secretary of the Treasury shall submit a joint
report to the Congress containing a summary of new activities
which are financial in nature, including grandfathered
commercial activities, in which any financial holding company
is engaged pursuant to subsection (c)(1) or (f) of section 6
of the Bank Holding Company Act of 1956 (as added by
subsection (a)).
(2) Other contents.--Each report submitted to the Congress
pursuant to paragraph (1) shall also contain the following:
(A) A discussion of actions by the Board of Governors of
the Federal Reserve System and the Secretary of the Treasury,
whether by regulation, order, interpretation, or guideline or
by approval or disapproval of an application, with regard to
activities of financial holding companies which are
incidental to activities financial in nature or complementary
to such financial activities.
(B) An analysis and discussion of the risks posed by
commercial activities of financial holding companies to the
safety and soundness of affiliate depository institutions.
(C) An analysis and discussion of the effect of mergers and
acquisitions under section 6 of the Bank Holding Company Act
of 1956 on market concentration in the financial services
industry.
(D) An analysis and discussion, by the Board and the
Secretary in consultation with the other Federal banking
agencies (as defined in section 3(z) of the Federal Deposit
Insurance Act), of the impact of the implementation of this
Act, and the amendments made by this Act, on the extent of
meeting community credit needs and capital availability under
the Community Reinvestment Act of 1977.
SEC. 104. OPERATION OF STATE LAW.
(a) Affiliations.--
(1) In general.--Except as provided in paragraph (2), no
State may, by statute, regulation, order, interpretation, or
other action, prevent or restrict an insured depository
institution or wholesale financial institution, or a
subsidiary or affiliate thereof, from being affiliated
directly or indirectly or associated with any person or
entity, as authorized or permitted by this Act or any other
provision of Federal law.
(2) Insurance.--With respect to affiliations between
insured depository institutions or wholesale financial
institutions, or any subsidiary or affiliate thereof, and
persons or entities engaged in the business of insurance,
paragraph (1) does not prohibit--
(A) any State from requiring any person or entity that
proposes to acquire control of an entity that is engaged in
the business of insurance and domiciled in that State
(hereafter in this subparagraph referred to as the
``insurer'') to furnish to the insurance regulatory authority
of that State, not later than 60 days before the effective
date of the proposed acquisition--
(i) the name and address of each person by whom, or on
whose behalf, the affiliation referred to in this
subparagraph is to be effected (hereafter in this
subparagraph referred to as the ``acquiring party'');
(ii) if the acquiring party is an individual, his or her
principal occupation and all offices and positions held
during the 5 years preceding the date of notification, and
any conviction of crimes other than minor traffic violations
during the 10 years preceding the date of notification;
(iii) if the acquiring party is not an individual--
(I) a report of the nature of its business operations
during the 5 years preceding the date of notification, or for
such shorter period as such person and any predecessors
thereof shall have been in existence;
(II) an informative description of the business intended to
be done by the acquiring party and any subsidiary thereof;
and
[[Page H5250]]
(III) a list of all individuals who are, or who have been
selected to become, directors or executive officers of the
acquiring party or who perform, or will perform, functions
appropriate to such positions, including, for each such
individual, the information required by clause (ii);
(iv) the source, nature, and amount of the consideration
used, or to be used, in effecting the merger or other
acquisition of control, a description of any transaction
wherein funds were, or are to be, obtained for any such
purpose, and the identity of persons furnishing such
consideration, except that, if a source of such consideration
is a loan made in the lender's ordinary course of business,
the identity of the lender shall remain confidential if the
person filing such statement so requests;
(v) fully audited financial information as to the earnings
and financial condition of each acquiring party for the 5
fiscal years preceding the date of notification of each such
acquiring party, or for such lesser period as such acquiring
party and any predecessors thereof shall have been in
existence, and similar unaudited information as of a date not
earlier than 90 days before the date of notification, except
that, in the case of an acquiring party that is an insurer
actively engaged in the business of insurance, the financial
statements of such insurer need not be audited, but such
audit may be required if the need therefor is determined by
the insurance regulatory authority of the State;
(vi) any plans or proposals that each acquiring party may
have to liquidate such insurer, to sell its assets, or to
merge or consolidate it with any person or to make any other
material change in its business or corporate structure or
management;
(vii) the number of shares of any security of the insurer
that each acquiring party proposes to acquire, the terms of
any offer, request, invitation, agreement, or acquisition,
and a statement as to the method by which the fairness of the
proposal was arrived at;
(viii) the amount of each class of any security of the
insurer that is beneficially owned or concerning which there
is a right to acquire beneficial ownership by each acquiring
party;
(ix) a full description of any contracts, arrangements, or
understandings with respect to any security of the insurer in
which any acquiring party is involved, including transfer of
any of the securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees
against loss or guarantees of profits, division of losses or
profits, or the giving or withholding of proxies, and
identification of the persons with whom such contracts,
arrangements, or understandings have been entered into;
(x) a description of the purchase of any security of the
insurer during the 12-month period preceding the date of
notification by any acquiring party, including the dates of
purchase, names of the purchasers, and consideration paid, or
agreed to be paid, therefor;
(xi) a description of any recommendations to purchase any
security of the insurer made during the 12-month period
preceding the date of notification by any acquiring party or
by any person based upon interviews or at the suggestion of
such acquiring party;
(xii) copies of all tender offers for, requests or
invitations for tenders of, exchange offers for and
agreements to acquire or exchange any securities of the
insurer and, if distributed, of additional soliciting
material relating thereto; and
(xiii) the terms of any agreement, contract, or
understanding made with any broker-dealer as to solicitation
of securities of the insurer for tender and the amount of any
fees, commissions, or other compensation to be paid to
broker-dealers with regard thereto;
(B) in the case of a person engaged in the business of
insurance which is the subject of an acquisition or change or
continuation in control, the State of domicile of such person
from reviewing or taking action (including approval or
disapproval) with regard to the acquisition or change or
continuation in control, as long as the State reviews and
actions--
(i) are completed by the end of the 60-day period beginning
on the later of the date the State received notice of the
proposed action or the date the State received the
information required under State law regarding such
acquisition or change or continuation in control;
(ii) do not have the effect of discriminating,
intentionally or unintentionally, against an insured
depository institution or affiliate thereof or against any
other person based upon affiliation with an insured
depository institution; and
(iii) are based on standards or requirements relating to
solvency or managerial fitness;
(C) any State from requiring an entity that is acquiring
control of an entity that is engaged in the business of
insurance and domiciled in that State to maintain or restore
the capital requirements of that insurance entity to the
level required under the capital regulations of general
applicability in that State to avoid the requirement of
preparing and filing with the insurance regulatory authority
of that State a plan to increase the capital of the entity,
except that any determination by the State insurance
regulatory authority with respect to such requirement shall
be made not later than 60 days after the date of notification
under subparagraph (A);
(D) any State from taking actions with respect to the
receivership or conservatorship of any insurance company;
(E) any State from restricting a change in the ownership of
stock in an insurance company, or a company formed for the
purpose of controlling such insurance company, for a period
of not more than 3 years beginning on the date of the
conversion of such company from mutual to stock form; or
(F) any State from requiring an organization which has been
eligible at any time since January 1, 1987, to claim the
special deduction provided by section 833 of the Internal
Revenue Code of 1986 to meet certain conditions in order to
undergo, as determined by the State, a reorganization,
recapitalization, conversion, merger, consolidation, sale or
other disposition of substantial operating assets,
demutualization, dissolution, or to undertake other similar
actions and which is governed under a State statute enacted
on May 22, 1998, relating to hospital, medical, and dental
service corporation conversions.
(3) Preservation of state antitrust and general corporate
laws.--
(A) In general.--Subject to subsection (c) and the
nondiscrimination provisions contained in such subsection, no
provision in paragraph (1) shall be construed as affecting
State laws, regulations, orders, interpretations, or other
actions of general applicability relating to the governance
of corporations, partnerships, limited liability companies or
other business associations incorporated or formed under the
laws of that State or domiciled in that State, or the
applicability of the antitrust laws of any State or any State
law that is similar to the antitrust laws.
(B) Definition.--The term ``antitrust laws'' has the same
meaning as in subsection (a) of the first section of the
Clayton Act, and includes section 5 of the Federal Trade
Commission Act to the extent that such section 5 relates to
unfair methods of competition.
(b) Activities.--
(1) In general.--Except as provided in paragraph (3), and
except with respect to insurance sales, solicitation, and
cross marketing activities, which shall be governed by
paragraph (2), no State may, by statute, regulation, order,
interpretation, or other action, prevent or restrict an
insured depository institution, wholesale financial
institution, or subsidiary or affiliate thereof from engaging
directly or indirectly, either by itself or in conjunction
with a subsidiary, affiliate, or any other entity or person,
in any activity authorized or permitted under this Act.
(2) Insurance sales.--
(A) In general.--In accordance with the legal standards for
preemption set forth in the decision of the Supreme Court of
the United States in Barnett Bank of Marion County N.A. v.
Nelson, 517 U.S. 25 (1996), no State may, by statute,
regulation, order, interpretation, or other action, prevent
or significantly interfere with the ability of an insured
depository institution or wholesale financial institution, or
a subsidiary or affiliate thereof, to engage, directly or
indirectly, either by itself or in conjunction with a
subsidiary, affiliate, or any other party, in any insurance
sales, solicitation, or cross-marketing activity.
(B) Certain state laws preserved.--Notwithstanding
subparagraph (A), a State may impose any of the following
restrictions, or restrictions which are substantially the
same as but no more burdensome or restrictive than those in
each of the following clauses:
(i) Restrictions prohibiting the rejection of an insurance
policy by an insured depository institution, wholesale
financial institution, or any subsidiary or affiliate
thereof, solely because the policy has been issued or
underwritten by any person who is not associated with such
insured depository institution or wholesale financial
institution, or any subsidiary or affiliate thereof, when
such insurance is required in connection with a loan or
extension of credit.
(ii) Restrictions prohibiting a requirement for any debtor,
insurer, or insurance agent or broker to pay a separate
charge in connection with the handling of insurance that is
required in connection with a loan or other extension of
credit or the provision of another traditional banking
product by an insured depository institution, wholesale
financial institution, or any subsidiary or affiliate
thereof, unless such charge would be required when the
insured depository institution or wholesale financial
institution, or any subsidiary or affiliate thereof, is the
licensed insurance agent or broker providing the insurance.
(iii) Restrictions prohibiting the use of any advertisement
or other insurance promotional material by an insured
depository institution or wholesale financial institution, or
any subsidiary or affiliate thereof, that would cause a
reasonable person to believe mistakenly that--
(I) a State or the Federal Government is responsible for
the insurance sales activities of, or stands behind the
credit of, the institution, affiliate, or subsidiary; or
(II) a State, or the Federal Government guarantees any
returns on insurance products, or is a source of payment on
any insurance obligation of or sold by the institution,
affiliate, or subsidiary;
(iv) Restrictions prohibiting the payment or receipt of any
commission or brokerage fee or other valuable consideration
for services as an insurance agent or broker to or by any
person, unless such person holds a valid State license
regarding the applicable class
[[Page H5251]]
of insurance at the time at which the services are performed,
except that, in this clause, the term ``services as an
insurance agent or broker'' does not include a referral by an
unlicensed person of a customer or potential customer to a
licensed insurance agent or broker that does not include a
discussion of specific insurance policy terms and conditions.
(v) Restrictions prohibiting any compensation paid to or
received by any individual who is not licensed to sell
insurance, for the referral of a customer that seeks to
purchase, or seeks an opinion or advice on, any insurance
product to a person that sells or provides opinions or advice
on such product, based on the purchase of insurance by the
customer.
(vi) Restrictions prohibiting the release of the insurance
information of a customer (defined as information concerning
the premiums, terms, and conditions of insurance coverage,
including expiration dates and rates, and insurance claims of
a customer contained in the records of the insured depository
institution or wholesale financial institution, or a
subsidiary or affiliate thereof) to any person or entity
other than an officer, director, employee, agent, subsidiary,
or affiliate of an insured depository institution or a
wholesale financial institution, for the purpose of
soliciting or selling insurance, without the express consent
of the customer, other than a provision that prohibits--
(I) a transfer of insurance information to an unaffiliated
insurance company, agent, or broker in connection with
transferring insurance in force on existing insureds of the
insured depository institution or wholesale financial
institution, or subsidiary or affiliate thereof, or in
connection with a merger with or acquisition of an
unaffiliated insurance company, agent, or broker; or
(II) the release of information as otherwise authorized by
State or Federal law.
(vii) Restrictions prohibiting the use of health
information obtained from the insurance records of a customer
for any purpose, other than for its activities as a licensed
agent or broker, without the express consent of the customer.
(viii) Restrictions prohibiting the extension of credit or
any product or service that is equivalent to an extension of
credit, lease or sale of property of any kind, or furnishing
of any services or fixing or varying the consideration for
any of the foregoing, on the condition or requirement that
the customer obtain insurance from an insured depository
institution, wholesale financial institution, a subsidiary or
affiliate thereof, or a particular insurer, agent, or broker,
other than a prohibition that would prevent any insured
depository institution or wholesale financial institution, or
any subsidiary or affiliate thereof--
(I) from engaging in any activity described in this clause
that would not violate section 106 of the Bank Holding
Company Act Amendments of 1970, as interpreted by the Board
of Governors of the Federal Reserve System; or
(II) from informing a customer or prospective customer that
insurance is required in order to obtain a loan or credit,
that loan or credit approval is contingent upon the
procurement by the customer of acceptable insurance, or that
insurance is available from the insured depository
institution or wholesale financial institution, or any
subsidiary or affiliate thereof.
(ix) Restrictions requiring, when an application by a
consumer for a loan or other extension of credit from an
insured depository institution or wholesale financial
institution is pending, and insurance is offered or sold to
the consumer or is required in connection with the loan or
extension of credit by the insured depository institution or
wholesale financial institution or any affiliate or
subsidiary thereof, that a written disclosure be provided to
the consumer or prospective customer indicating that his or
her choice of an insurance provider will not affect the
credit decision or credit terms in any way, except that the
insured depository institution or wholesale financial
institution may impose reasonable requirements concerning the
creditworthiness of the insurance provider and scope of
coverage chosen.
(x) Restrictions requiring clear and conspicuous
disclosure, in writing, where practicable, to the customer
prior to the sale of any insurance policy that such policy--
(I) is not a deposit;
(II) is not insured by the Federal Deposit Insurance
Corporation;
(III) is not guaranteed by the insured depository
institution or wholesale financial institution or, if
appropriate, its subsidiaries or affiliates or any person
soliciting the purchase of or selling insurance on the
premises thereof; and
(IV) where appropriate, involves investment risk, including
potential loss of principal.
(xi) Restrictions requiring that, when a customer obtains
insurance (other than credit insurance or flood insurance)
and credit from an insured depository institution or
wholesale financial institution, or its subsidiaries or
affiliates, or any person soliciting the purchase of or
selling insurance on the premises thereof, the credit and
insurance transactions be completed through separate
documents.
(xii) Restrictions prohibiting, when a customer obtains
insurance (other than credit insurance or flood insurance)
and credit from an insured depository institution or
wholesale financial institution or its subsidiaries or
affiliates, or any person soliciting the purchase of or
selling insurance on the premises thereof, inclusion of the
expense of insurance premiums in the primary credit
transaction without the express written consent of the
customer.
(xiii) Restrictions requiring maintenance of separate and
distinct books and records relating to insurance
transactions, including all files relating to and reflecting
consumer complaints, and requiring that such insurance books
and records be made available to the appropriate State
insurance regulator for inspection upon reasonable notice.
(C) Limitations.--
(i) OCC deference.--Section 306(e) does not apply with
respect to any State statute, regulation, order,
interpretation, or other action regarding insurance sales,
solicitation, or cross marketing activities described in
subparagraph (A) that was issued, adopted, or enacted before
September 3, 1998, and that is not described in subparagraph
(B).
(ii) Nondiscrimination.--Subsection (c) does not apply with
respect to any State statute, regulation, order,
interpretation, or other action regarding insurance sales,
solicitation, or cross marketing activities described in
subparagraph (A) that was issued, adopted, or enacted before
September 3, 1998, and that is not described in subparagraph
(B).
(iii) Construction.--Nothing in this paragraph shall be
construed to limit the applicability of the decision of the
Supreme Court in Barnett Bank of Marion County N.A. v.
Nelson, 116 S. Ct. 1103 (1996) with respect to a State
statute, regulation, order, interpretation, or other action
that is not described in subparagraph (B).
(iv) Limitation on inferences.--Nothing in this paragraph
shall be construed to create any inference with respect to
any State statute, regulation, order, interpretation, or
other action that is not referred to or described in this
paragraph.
(3) Insurance activities other than sales.--State statutes,
regulations, interpretations, orders, and other actions shall
not be preempted under subsection (b)(1) to the extent that
they--
(A) relate to, or are issued, adopted, or enacted for the
purpose of regulating the business of insurance in accordance
with the Act of March 9, 1945 (commonly known as the
``McCarran-Ferguson Act'');
(B) apply only to persons or entities that are not insured
depository institutions or wholesale financial institutions,
but that are directly engaged in the business of insurance
(except that they may apply to depository institutions
engaged in providing savings bank life insurance as principal
to the extent of regulating such insurance);
(C) do not relate to or directly or indirectly regulate
insurance sales, solicitations, or cross-marketing
activities; and
(D) are not prohibited under subsection (c).
(4) Financial activities other than insurance.--No State
statute, regulation, interpretation, order, or other action
shall be preempted under subsection (b)(1) to the extent
that--
(A) it does not relate to, and is not issued and adopted,
or enacted for the purpose of regulating, directly or
indirectly, insurance sales, solicitations, or cross
marketing activities covered under paragraph (2);
(B) it does not relate to, and is not issued and adopted,
or enacted for the purpose of regulating, directly or
indirectly, the business of insurance activities other than
sales, solicitations, or cross marketing activities, covered
under paragraph (3);
(C) it does not relate to securities investigations or
enforcement actions referred to in subsection (d); and
(D) it--
(i) does not distinguish by its terms between insured
depository institutions, wholesale financial institutions,
and subsidiaries and affiliates thereof engaged in the
activity at issue and other persons or entities engaged in
the same activity in a manner that is in any way adverse with
respect to the conduct of the activity by any such insured
depository institution, wholesale financial institution, or
subsidiary or affiliate thereof engaged in the activity at
issue;
(ii) as interpreted or applied, does not have, and will not
have, an impact on depository institutions, wholesale
financial institutions, or subsidiaries or affiliates thereof
engaged in the activity at issue, or any person or entity
affiliated therewith, that is substantially more adverse than
its impact on other persons or entities engaged in the same
activity that are not insured depository institutions,
wholesale financial institutions, or subsidiaries or
affiliates thereof, or persons or entities affiliated
therewith;
(iii) does not effectively prevent a depository
institution, wholesale financial institution, or subsidiary
or affiliate thereof from engaging in activities authorized
or permitted by this Act or any other provision of Federal
law; and
(iv) does not conflict with the intent of this Act
generally to permit affiliations that are authorized or
permitted by Federal law.
(c) Nondiscrimination.--Except as provided in any
restrictions described in subsection (b)(2)(B), no State may,
by statute, regulation, order, interpretation, or other
action, regulate the insurance activities authorized or
permitted under this Act or any other provision of Federal
law of an insured depository institution or wholesale
financial institution, or subsidiary or affiliate thereof, to
the extent that such statute, regulation, order,
interpretation, or other action--
[[Page H5252]]
(1) distinguishes by its terms between insured depository
institutions or wholesale financial institutions, or
subsidiaries or affiliates thereof, and other persons or
entities engaged in such activities, in a manner that is in
any way adverse to any such insured depository institution or
wholesale financial institution, or subsidiary or affiliate
thereof;
(2) as interpreted or applied, has or will have an impact
on depository institutions or wholesale financial
institutions, or subsidiaries or affiliates thereof, that is
substantially more adverse than its impact on other persons
or entities providing the same products or services or
engaged in the same activities that are not insured
depository institutions, wholesale financial institutions, or
subsidiaries or affiliates thereof, or persons or entities
affiliated therewith;
(3) effectively prevents a depository institution or
wholesale financial institution, or subsidiary or affiliate
thereof, from engaging in insurance activities authorized or
permitted by this Act or any other provision of Federal law;
or
(4) conflicts with the intent of this Act generally to
permit affiliations that are authorized or permitted by
Federal law between insured depository institutions or
wholesale financial institutions, or subsidiaries or
affiliates thereof, and persons and entities engaged in the
business of insurance.
(d) Limitation.--Subsections (a) and (b) shall not be
construed to affect the jurisdiction of the securities
commission (or any agency or office performing like
functions) of any State, under the laws of such State--
(1) to investigate and bring enforcement actions,
consistent with section 18(c) of the Securities Act of 1933,
with respect to fraud or deceit or unlawful conduct by any
person, in connection with securities or securities
transactions; or
(2) to require the registration of securities or the
licensure or registration of brokers, dealers, or investment
advisers (consistent with section 203A of the Investment
Advisers Act of 1940), or the associated persons of a broker,
dealer, or investment adviser (consistent with such section
203A).
(e) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Insured depository institution.--The term ``insured
depository institution'' includes any foreign bank that
maintains a branch, agency, or commercial lending company in
the United States.
(2) State.--The term ``State'' means any State of the
United States, the District of Columbia, any territory of the
United States, Puerto Rico, Guam, American Samoa, the Trust
Territory of the Pacific Islands, the Virgin Islands, and the
Northern Mariana Islands.
SEC. 105. MUTUAL BANK HOLDING COMPANIES AUTHORIZED.
Section 3(g)(2) of the Bank Holding Company Act of 1956 (12
U.S.C. 1842(g)(2)) is amended to read as follows:
``(2) Regulations.--A bank holding company organized as a
mutual holding company shall be regulated on terms, and shall
be subject to limitations, comparable to those applicable to
any other bank holding company.''.
SEC. 105A. PUBLIC MEETINGS FOR LARGE BANK ACQUISITIONS AND
MERGERS.
(a) Bank Holding Company Act of 1956.--Section 3(c)(2) of
the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)(2))
is amended--
(1) by striking ``factors.--In every case'' and inserting
``factors.--
``(A) In general.--In every case''; and
(2) by adding at the end the following new subparagraph:
``(B) Public meetings.--In each case involving 1 or more
insured depository institutions each of which has total
assets of $1,000,000,000 or more, the Board shall, as
necessary and on a timely basis, conduct public meetings in 1
or more areas where the Board believes, in the sole
discretion of the Board, there will be a substantial public
impact.''.
(b) Federal Deposit Insurance Act.--Section 18(c) of the
Federal Deposit Insurance Act (12 U.S.C. 1828(c)) is amended
by adding at the end the following new paragraph:
``(12) Public Meetings.--In each merger transaction
involving 1 or more insured depository institutions each of
which has total assets of $1,000,000,000 or more, the
responsible agency shall, as necessary and on a timely basis,
conduct public meetings in 1 or more areas where the agency
believes, in the sole discretion of the agency, there will be
a substantial public impact.''.
(c) National Bank Consolidation and Merger Act.--The
National Bank Consolidation and Merger Act (12 U.S.C. 215 et
seq.) is amended by adding at the end the following new
section:
``SEC. 6. PUBLIC MEETINGS FOR LARGE BANK CONSOLIDATIONS AND
MERGERS.
``In each case of a consolidation or merger under this Act
involving 1 or more banks each of which has total assets of
$1,000,000,000 or more, the Comptroller shall, as necessary
and on a timely basis, conduct public meetings in 1 or more
areas where the Comptroller believes, in the sole discretion
of the Comptroller, there will be a substantial public
impact.''.
(d) Home Owners' Loan Act.--Section 10(e) of the Home
Owners' Loan Act (12 U.S.C. 1463) is amended by adding at the
end the following new paragraph:
``(7) Public meetings for large depository institution
acquisitions and mergers.--In each case involving 1 or more
insured depository institutions each of which has total
assets of $1,000,000,000 or more, the Director shall, as
necessary and on a timely basis, conduct public meetings in 1
or more areas where the Director believes, in the sole
discretion of the Director, there will be a substantial
public impact.''.
SEC. 106. PROHIBITION ON DEPOSIT PRODUCTION OFFICES.
(a) In General.--Section 109(d) of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (12
U.S.C. 1835a(d)) is amended--
(1) by inserting ``, the Financial Services Act of 1999,''
after ``pursuant to this title''; and
(2) by inserting ``or such Act'' after ``made by this
title''.
(b) Technical and Conforming Amendment.--Section 109(e)(4)
of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended by
inserting ``and any branch of a bank controlled by an out-of-
State bank holding company (as defined in section 2(o)(7) of
the Bank Holding Company Act of 1956)'' before the period.
SEC. 107. CLARIFICATION OF BRANCH CLOSURE REQUIREMENTS.
Section 42(d)(4)(A) of the Federal Deposit Insurance Act
(12 U.S.C. 1831r-1(d)(4)(A)) is amended by inserting ``and
any bank controlled by an out-of-State bank holding company
(as defined in section 2(o)(7) of the Bank Holding Company
Act of 1956)'' before the period.
SEC. 108. AMENDMENTS RELATING TO LIMITED PURPOSE BANKS.
(a) In General.--Section 4(f) of the Bank Holding Company
Act of 1956 (12 U.S.C. 1843(f)) is amended--
(1) in paragraph (2)(A)(ii)--
(A) by striking ``and'' at the end of subclause (IX);
(B) by inserting ``and'' after the semicolon at the end of
subclause (X); and
(C) by inserting after subclause (X) the following new
subclause:
``(XI) assets that are derived from, or are incidental to,
consumer lending activities in which institutions described
in subparagraph (F) or (H) of section 2(c)(2) are permitted
to engage,'';
(2) in paragraph (2), by striking subparagraph (B) and
inserting the following new subparagraphs:
``(B) any bank subsidiary of such company engages in any
activity in which the bank was not lawfully engaged as of
March 5, 1987, unless the bank is well managed and well
capitalized;
``(C) any bank subsidiary of such company both--
``(i) accepts demand deposits or deposits that the
depositor may withdraw by check or similar means for payment
to third parties; and
``(ii) engages in the business of making commercial loans
(and, for purposes of this clause, loans made in the ordinary
course of a credit card operation shall not be treated as
commercial loans); or
``(D) after the date of the enactment of the Competitive
Equality Amendments of 1987, any bank subsidiary of such
company permits any overdraft (including any intraday
overdraft), or incurs any such overdraft in such bank's
account at a Federal reserve bank, on behalf of an affiliate,
other than an overdraft described in paragraph (3).''; and
(3) by striking paragraphs (3) and (4) and inserting the
following new paragraphs:
``(3) Permissible overdrafts described.--For purposes of
paragraph (2)(D), an overdraft is described in this paragraph
if--
``(A) such overdraft results from an inadvertent computer
or accounting error that is beyond the control of both the
bank and the affiliate;
``(B) such overdraft--
``(i) is permitted or incurred on behalf of an affiliate
which is monitored by, reports to, and is recognized as a
primary dealer by the Federal Reserve Bank of New York; and
``(ii) is fully secured, as required by the Board, by
bonds, notes, or other obligations which are direct
obligations of the United States or on which the principal
and interest are fully guaranteed by the United States or by
securities and obligations eligible for settlement on the
Federal Reserve book entry system; or
``(C) such overdraft--
``(i) is incurred on behalf of an affiliate solely in
connection with an activity that is so closely related to
banking, or managing or controlling banks, as to be a proper
incident thereto, to the extent the bank incurring the
overdraft and the affiliate on whose behalf the overdraft is
incurred each document that the overdraft is incurred for
such purpose; and
``(ii) does not cause the bank to violate any provision of
section 23A or 23B of the Federal Reserve Act, either
directly, in the case of a member bank, or by virtue of
section 18(j) of the Federal Deposit Insurance Act, in the
case of a nonmember bank.
``(4) Divestiture in case of loss of exemption.--If any
company described in paragraph (1) fails to qualify for the
exemption provided under such paragraph by operation of
paragraph (2), such exemption shall cease to apply to such
company and such company shall divest control of each bank it
controls before the end of the 180-day period beginning on
the date that the company receives notice from the Board that
the company has failed to continue to qualify for such
exemption, unless before the end of such 180-day period, the
company has--
``(A) corrected the condition or ceased the activity that
caused the company to fail to continue to qualify for the
exemption; and
[[Page H5253]]
``(B) implemented procedures that are reasonably adapted to
avoid the reoccurrence of such condition or activity.
The issuance of any notice under this paragraph that relates
to the activities of a bank shall not be construed as
affecting the authority of the bank to continue to engage in
such activities until the expiration of such 180-day
period.''.
(b) Industrial Loan Companies Affiliate Overdrafts.--
Section 2(c)(2)(H) of the Bank Holding Company Act of 1956
(12 U.S.C. 1841(c)(2)(H)) is amended by inserting before the
period at the end ``, or that is otherwise permissible for a
bank controlled by a company described in section 4(f)(1)''.
SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON COMMUNITY BANKS,
OTHER SMALL FINANCIAL INSTITUTIONS, INSURANCE
AGENTS, AND CONSUMERS.
(a) Study Required.--The Comptroller General of the United
States shall conduct a study of the projected economic impact
and the actual economic impact that the enactment of this Act
will have on financial institutions, including community
banks, registered brokers and dealers and insurance
companies, which have total assets of $100,000,000 or less,
insurance agents, and consumers.
(b) Reports to the Congress.--
(1) In general.--The Comptroller General of the United
States shall submit reports to the Congress, at the times
required under paragraph (2), containing the findings and
conclusions of the Comptroller General with regard to the
study required under subsection (a) and such recommendations
for legislative or administrative action as the Comptroller
General may determine to be appropriate.
(2) Timing of reports.--The Comptroller General shall
submit--
(A) an interim report before the end of the 6-month period
beginning after the date of the enactment of this Act;
(B) another interim report before the end of the next 6-
month period; and
(C) a final report before the end of the 1-year period
after such second 6-month period,''
SEC. 110. RESPONSIVENESS TO COMMUNITY NEEDS FOR FINANCIAL
SERVICES.
(a) Study.--The Secretary of the Treasury, in consultation
with the Federal banking agencies (as defined in section 3(z)
of the Federal Deposit Insurance Act), shall conduct a study
of the extent to which adequate services are being provided
as intended by the Community Reinvestment Act of 1977,
including services in low- and moderate-income neighborhoods
and for persons of modest means, as a result of the enactment
of this Act.
(b) Report.--Before the end of the 2-year period beginning
on the date of the enactment of this Act, the Secretary of
the Treasury, in consultation with the Federal banking
agencies, shall submit a report to the Congress on the study
conducted pursuant to subsection (a) and shall include such
recommendations as the Secretary determines to be appropriate
for administrative and legislative action with respect to
institutions covered under the Community Reinvestment Act of
1977.
Subtitle B--Streamlining Supervision of Financial Holding Companies
SEC. 111. STREAMLINING FINANCIAL HOLDING COMPANY SUPERVISION.
Section 5(c) of the Bank Holding Company Act of 1956 (12
U.S.C. 1844(c)) is amended to read as follows:
``(c) Reports and Examinations.--
``(1) Reports.--
``(A) In general.--The Board from time to time may require
any bank holding company and any subsidiary of such company
to submit reports under oath to keep the Board informed as
to--
``(i) its financial condition, systems for monitoring and
controlling financial and operating risks, and transactions
with depository institution subsidiaries of the holding
company; and
``(ii) compliance by the company or subsidiary with
applicable provisions of this Act.
``(B) Use of existing reports.--
``(i) In general.--The Board shall, to the fullest extent
possible, accept reports in fulfillment of the Board's
reporting requirements under this paragraph that a bank
holding company or any subsidiary of such company has
provided or been required to provide to other Federal and
State supervisors or to appropriate self-regulatory
organizations.
``(ii) Availability.--A bank holding company or a
subsidiary of such company shall provide to the Board, at the
request of the Board, a report referred to in clause (i).
``(iii) Required use of publicly reported information.--The
Board shall, to the fullest extent possible, accept in
fulfillment of any reporting or recordkeeping requirements
under this Act information that is otherwise required to be
reported publicly and externally audited financial
statements.
``(iv) Reports filed with other agencies.--In the event the
Board requires a report from a functionally regulated
nondepository institution subsidiary of a bank holding
company of a kind that is not required by another Federal or
State regulator or appropriate self-regulatory organization,
the Board shall request that the appropriate regulator or
self-regulatory organization obtain such report. If the
report is not made available to the Board, and the report is
necessary to assess a material risk to the bank holding
company or any of its subsidiary depository institutions or
compliance with this Act, the Board may require such
subsidiary to provide such a report to the Board.
``(C) Definition.--For purposes of this subsection, the
term `functionally regulated nondepository institution'
means--
``(i) a broker or dealer registered under the Securities
Exchange Act of 1934;
``(ii) an investment adviser registered under the
Investment Advisers Act of 1940, or with any State, with
respect to the investment advisory activities of such
investment adviser and activities incidental to such
investment advisory activities;
``(iii) an insurance company subject to supervision by a
State insurance commission, agency, or similar authority; and
``(iv) an entity subject to regulation by the Commodity
Futures Trading Commission, with respect to the commodities
activities of such entity and activities incidental to such
commodities activities.
``(2) Examinations.--
``(A) Examination authority.--
``(i) In general.--The Board may make examinations of each
bank holding company and each subsidiary of a bank holding
company.
``(ii) Functionally regulated nondepository institution
subsidiaries.--Notwithstanding clause (i), the Board may make
examinations of a functionally regulated nondepository
institution subsidiary of a bank holding company only if--
``(I) the Board has reasonable cause to believe that such
subsidiary is engaged in activities that pose a material risk
to an affiliated depository institution, or
``(II) based on reports and other available information,
the Board has reasonable cause to believe that a subsidiary
is not in compliance with this Act or with provisions
relating to transactions with an affiliated depository
institution and the Board cannot make such determination
through examination of the affiliated depository institution
or bank holding company.
``(B) Limitations on examination authority for bank holding
companies and subsidiaries.--Subject to subparagraph (A)(ii),
the Board may make examinations under subparagraph (A)(i) of
each bank holding company and each subsidiary of such holding
company in order to--
``(i) inform the Board of the nature of the operations and
financial condition of the holding company and such
subsidiaries;
``(ii) inform the Board of--
``(I) the financial and operational risks within the
holding company system that may pose a threat to the safety
and soundness of any subsidiary depository institution of
such holding company; and
``(II) the systems for monitoring and controlling such
risks; and
``(iii) monitor compliance with the provisions of this Act
and those governing transactions and relationships between
any subsidiary depository institution and its affiliates.
``(C) Restricted focus of examinations.--The Board shall,
to the fullest extent possible, limit the focus and scope of
any examination of a bank holding company to--
``(i) the bank holding company; and
``(ii) any subsidiary of the holding company that, because
of--
``(I) the size, condition, or activities of the subsidiary;
or
``(II) the nature or size of transactions between such
subsidiary and any depository institution which is also a
subsidiary of such holding company,
could have a materially adverse effect on the safety and
soundness of any depository institution affiliate of the
holding company.
``(D) Deference to bank examinations.--The Board shall, to
the fullest extent possible, use, for the purposes of this
paragraph, the reports of examinations of depository
institutions made by the appropriate Federal and State
depository institution supervisory authority.
``(E) Deference to other examinations.--The Board shall, to
the fullest extent possible, address the circumstances which
might otherwise permit or require an examination by the Board
by forgoing an examination and instead reviewing the reports
of examination made of--
``(i) any registered broker or dealer by or on behalf of
the Securities and Exchange Commission;
``(ii) any investment adviser registered by or on behalf of
either the Securities and Exchange Commission or any State,
whichever is required by law;
``(iii) any licensed insurance company by or on behalf of
any state regulatory authority responsible for the
supervision of insurance companies; and
``(iv) any other subsidiary that the Board finds to be
comprehensively supervised by a Federal or State authority.
``(3) Capital.--
``(A) In general.--The Board shall not, by regulation,
guideline, order or otherwise, prescribe or impose any
capital or capital adequacy rules, guidelines, standards, or
requirements on any subsidiary of a financial holding company
that is not a depository institution and--
``(i) is in compliance with applicable capital requirements
of another Federal regulatory authority (including the
Securities and Exchange Commission) or State insurance
authority;
``(ii) is registered as an investment adviser under the
Investment Advisers Act of 1940, or with any State, whichever
is required by law; or
[[Page H5254]]
``(iii) is licensed as an insurance agent with the
appropriate State insurance authority.
``(B) Rule of construction.--Subparagraph (A) shall not be
construed as preventing the Board from imposing capital or
capital adequacy rules, guidelines, standards, or
requirements with respect to--
``(i) activities of a registered investment adviser other
than investment advisory activities or activities incidental
to investment advisory activities; or
``(ii) activities of a licensed insurance agent other than
insurance agency activities or activities incidental to
insurance agency activities.
``(C) Limitations on indirect action.--In developing,
establishing, or assessing holding company capital or capital
adequacy rules, guidelines, standards, or requirements for
purposes of this paragraph, the Board shall not take into
account the activities, operations, or investments of an
affiliated investment company registered under the Investment
Company Act of 1940, unless the investment company is--
``(i) a bank holding company; or
``(ii) controlled by a bank holding company by reason of
ownership by the bank holding company (including through all
of its affiliates) of 25 percent or more of the shares of the
investment company, and the shares owned by the bank holding
company have a market value equal to more than $1,000,000.
``(4) Transfer of board authority to appropriate federal
banking agency.--
``(A) In general.--In the case of any bank holding company
which is not significantly engaged in nonbanking activities,
the Board, in consultation with the appropriate Federal
banking agency, may designate the appropriate Federal banking
agency of the lead insured depository institution subsidiary
of such holding company as the appropriate Federal banking
agency for the bank holding company.
``(B) Authority transferred.--An agency designated by the
Board under subparagraph (A) shall have the same authority as
the Board under this Act to--
``(i) examine and require reports from the bank holding
company and any affiliate of such company (other than a
depository institution) under section 5;
``(ii) approve or disapprove applications or transactions
under section 3;
``(iii) take actions and impose penalties under subsections
(e) and (f) of section 5 and section 8; and
``(iv) take actions regarding the holding company, any
affiliate of the holding company (other than a depository
institution), or any institution-affiliated party of such
company or affiliate under the Federal Deposit Insurance Act
and any other statute which the Board may designate.
``(C) Agency orders.--Section 9 of this Act and section 105
of the Bank Holding Company Act Amendments of 1970 shall
apply to orders issued by an agency designated under
subparagraph (A) in the same manner such sections apply to
orders issued by the Board.
``(5) Functional regulation of securities and insurance
activities.--The Board shall defer to--
``(A) the Securities and Exchange Commission with regard to
all interpretations of, and the enforcement of, applicable
Federal securities laws (and rules, regulations, orders, and
other directives issued thereunder) relating to the
activities, conduct, and operations of registered brokers,
dealers, investment advisers, and investment companies;
``(B) the relevant State securities authorities with regard
to all interpretations of, and the enforcement of, applicable
State securities laws (and rules, regulations, orders, and
other directives issued thereunder) relating to the
activities, conduct, and operations of brokers, dealers, and
investment advisers required to be registered under State
law; and
``(C) the relevant State insurance authorities with regard
to all interpretations of, and the enforcement of, applicable
State insurance laws (and rules, regulations, orders, and
other directives issued thereunder) relating to the
activities, conduct, and operations of insurance companies
and insurance agents.''.
SEC. 112. ELIMINATION OF APPLICATION REQUIREMENT FOR
FINANCIAL HOLDING COMPANIES.
(a) Prevention of Duplicative Filings.--Section 5(a) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1844(a)) is
amended by adding the following new sentence at the end: ``A
declaration filed in accordance with section 6(b)(1)(D) shall
satisfy the requirements of this subsection with regard to
the registration of a bank holding company but not any
requirement to file an application to acquire a bank pursuant
to section 3.''.
(b) Divestiture Procedures.--Section 5(e)(1) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1844(e)(1)) is
amended--
(1) by striking ``Financial Institutions Supervisory Act of
1966, order'' and inserting ``Financial Institutions
Supervisory Act of 1966, at the election of the bank holding
company--
``(A) order''; and
(2) by striking ``shareholders of the bank holding company.
Such distribution'' and inserting ``shareholders of the bank
holding company; or
``(B) order the bank holding company, after due notice and
opportunity for hearing, and after consultation with the
primary supervisor for the bank, which shall be the
Comptroller of the Currency in the case of a national bank,
and the Federal Deposit Insurance Corporation and the
appropriate State supervisor in the case of an insured
nonmember bank, to terminate (within 120 days or such longer
period as the Board may direct) the ownership or control of
any such bank by such company.
The distribution referred to in subparagraph (A)''.
SEC. 113. AUTHORITY OF STATE INSURANCE REGULATOR AND
SECURITIES AND EXCHANGE COMMISSION.
(a) Bank Holding Companies.--Section 5 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1844) is amended by adding at
the end the following new subsection:
``(g) Authority of State Insurance Regulator and the
Securities and Exchange Commission.--
``(1) In general.--Notwithstanding any other provision of
law, any regulation, order, or other action of the Board
which requires a bank holding company to provide funds or
other assets to a subsidiary insured depository institution
shall not be effective nor enforceable with respect to an
entity described in subparagraph (A) if--
``(A) such funds or assets are to be provided by--
``(i) a bank holding company that is an insurance company,
a broker or dealer registered under the Securities Exchange
Act of 1934, an investment company registered under the
Investment Company Act of 1940, or an investment adviser
registered by or on behalf of either the Securities and
Exchange Commission or any State; or
``(ii) an affiliate of the depository institution which is
an insurance company or a broker or dealer registered under
the Securities Exchange Act of 1934, an investment company
registered under the Investment Company Act of 1940, or an
investment adviser registered by or on behalf of either the
Securities and Exchange Commission or any State ; and
``(B) the State insurance authority for the insurance
company or the Securities and Exchange Commission for the
registered broker, dealer, investment adviser (solely with
respect to investment advisory activities or activities
incidental thereto), or investment company, as the case may
be, determines in writing sent to the holding company and the
Board that the holding company shall not provide such funds
or assets because such action would have a material adverse
effect on the financial condition of the insurance company or
the broker, dealer, investment company, or investment
adviser, as the case may be.
``(2) Notice to state insurance authority or sec
required.--If the Board requires a bank holding company, or
an affiliate of a bank holding company, which is an insurance
company or a broker, dealer, investment company, or
investment adviser described in paragraph (1)(A) to provide
funds or assets to an insured depository institution
subsidiary of the holding company pursuant to any regulation,
order, or other action of the Board referred to in paragraph
(1), the Board shall promptly notify the State insurance
authority for the insurance company, the Securities and
Exchange Commission, or State securities regulator, as the
case may be, of such requirement.
``(3) Divestiture in lieu of other action.--If the Board
receives a notice described in paragraph (1)(B) from a State
insurance authority or the Securities and Exchange Commission
with regard to a bank holding company or affiliate referred
to in that paragraph, the Board may order the bank holding
company to divest the insured depository institution not
later than 180 days after receiving the notice, or such
longer period as the Board determines consistent with the
safe and sound operation of the insured depository
institution.
``(4) Conditions before divestiture.--During the period
beginning on the date an order to divest is issued by the
Board under paragraph (3) to a bank holding company and
ending on the date the divestiture is completed, the Board
may impose any conditions or restrictions on the holding
company's ownership or operation of the insured depository
institution, including restricting or prohibiting
transactions between the insured depository institution and
any affiliate of the institution, as are appropriate under
the circumstances.''.
(b) Subsidiaries of Depository Institutions.--The Federal
Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by
adding at the end the following new section:
``SEC. 45. AUTHORITY OF STATE INSURANCE REGULATOR AND
SECURITIES AND EXCHANGE COMMISSION.
``(a) In General.--Notwithstanding any other provision of
law, any regulation, order, or other action of the
appropriate Federal banking agency which requires a
subsidiary to provide funds or other assets to an insured
depository institution shall not be effective nor enforceable
with respect to an entity described in paragraph (1) if--
``(1) such funds or assets are to be provided by a
subsidiary which is an insurance company, a broker or dealer
registered under the Securities Exchange Act of 1934, an
investment company registered under the Investment Company
Act of 1940, or an investment adviser registered by or on
behalf of either the Securities and Exchange Commission or
any State; and
``(2) the State insurance authority for the insurance
company or the Securities and Exchange Commission for the
registered broker or dealer, the investment company, or the
investment adviser, as the case may be, determines in writing
sent to the insured depository institution and the
appropriate Federal banking agency that the subsidiary
[[Page H5255]]
shall not provide such funds or assets because such action
would have a material adverse effect on the financial
condition of the insurance company or the broker, dealer,
investment company, or investment adviser, as the case may
be.
``(b) Notice to State Insurance Authority or SEC
Required.--If the appropriate Federal banking agency requires
a subsidiary, which is an insurance company, a broker or
dealer, an investment company, or an investment adviser
(solely with respect to investment advisory activities or
activities incidental thereto) described in subsection (a)(1)
to provide funds or assets to an insured depository
institution pursuant to any regulation, order, or other
action of the appropriate Federal banking agency referred to
in subsection (a), the appropriate Federal banking agency
shall promptly notify the State insurance authority for the
insurance company, the Securities and Exchange Commission, or
State securities regulator, as the case may be, of such
requirement.
``(c) Divestiture in Lieu of Other Action.--If the
appropriate Federal banking agency receives a notice
described in subsection (a)(2) from a State insurance
authority or the Securities and Exchange Commission with
regard to a subsidiary referred to in that subsection, the
appropriate Federal banking agency may order the insured
depository institution to divest the subsidiary not later
than 180 days after receiving the notice, or such longer
period as the appropriate Federal banking agency determines
consistent with the safe and sound operation of the insured
depository institution.
``(d) Conditions Before Divestiture.--During the period
beginning on the date an order to divest is issued by the
appropriate Federal banking agency under subsection (c) to an
insured depository institution and ending on the date the
divestiture is complete, the appropriate Federal banking
agency may impose any conditions or restrictions on the
insured depository institution's ownership of the subsidiary
including restricting or prohibiting transactions between the
insured depository institution and the subsidiary, as are
appropriate under the circumstances.''.
SEC. 114. PRUDENTIAL SAFEGUARDS.
(a) Comptroller of the Currency.--
(1) In general.--The Comptroller of the Currency may, by
regulation or order, impose restrictions or requirements on
relationships or transactions between a national bank and a
subsidiary of the national bank which the Comptroller finds
are consistent with the public interest, the purposes of this
Act, title LXII of the Revised Statutes of the United States,
and other Federal law applicable to national banks, and the
standards in paragraph (2).
(2) Standards.--The Comptroller of the Currency may
exercise authority under paragraph (1) if the Comptroller
finds that such action will have any of the following
effects:
(A) Avoid any significant risk to the safety and soundness
of depository institutions or any Federal deposit insurance
fund.
(B) Enhance the financial stability of banks.
(C) Avoid conflicts of interest or other abuses.
(D) Enhance the privacy of customers of the national bank
or any subsidiary of the bank.
(E) Promote the application of national treatment and
equality of competitive opportunity between subsidiaries
owned or controlled by domestic banks and subsidiaries owned
or controlled by foreign banks operating in the United
States.
(3) Review.--The Comptroller of the Currency shall
regularly--
(A) review all restrictions or requirements established
pursuant to paragraph (1) to determine whether there is a
continuing need for any such restriction or requirement to
carry out the purposes of the Act, including any purpose
described in paragraph (2); and
(B) modify or eliminate any restriction or requirement the
Comptroller finds is no longer required for such purposes.
(b) Board of Governors of the Federal Reserve System.--
(1) In general.--The Board of Governors of the Federal
Reserve System may, by regulation or order, impose
restrictions or requirements on relationships or
transactions--
(A) between a depository institution subsidiary of a bank
holding company and any affiliate of such depository
institution (other than a subsidiary of such institution); or
(B) between a State member bank and a subsidiary of such
bank,
which the Board finds are consistent with the public
interest, the purposes of this Act, the Bank Holding Company
Act of 1956, the Federal Reserve Act, and other Federal law
applicable to depository institution subsidiaries of bank
holding companies or State banks (as the case may be), and
the standards in paragraph (2).
(2) Standards.--The Board of Governors of the Federal
Reserve System may exercise authority under paragraph (1) if
the Board finds that such action will have any of the
following effects:
(A) Avoid any significant risk to the safety and soundness
of depository institutions or any Federal deposit insurance
fund.
(B) Enhance the financial stability of bank holding
companies.
(C) Avoid conflicts of interest or other abuses.
(D) Enhance the privacy of customers of the State member
bank or any subsidiary of the bank.
(E) Promote the application of national treatment and
equality of competitive opportunity between nonbank
affiliates owned or controlled by domestic bank holding
companies and nonbank affiliates owned or controlled by
foreign banks operating in the United States.
(3) Review.--The Board of Governors of the Federal Reserve
System shall regularly--
(A) review all restrictions or requirements established
pursuant to paragraph (1) to determine whether there is a
continuing need for any such restriction or requirement to
carry out the purposes of the Act, including any purpose
described in paragraph (2); and
(B) modify or eliminate any restriction or requirement the
Board finds is no longer required for such purposes.
(4) Foreign banks.--
(A) In general.--The Board may, by regulation or order,
impose restrictions or requirements on relationships or
transactions between a branch, agency, or commercial lending
company of a foreign bank in the United States and any
affiliate in the United States of such foreign bank that the
Board finds are consistent with the public interest, the
purposes of this Act, the Bank Holding Company Act of 1956,
the Federal Reserve Act, and other Federal law applicable to
foreign banks and their affiliates in the United States, and
the standards in paragraphs (2) and (3).
(B) Evasion.--In the event that the Board determines that
there may be circumstances that would result in an evasion of
this paragraph, the Board may also impose restrictions or
requirements on relationships or transactions between
operations of a foreign bank outside the United States and
any affiliate in the United States of such foreign bank that
are consistent with national treatment and equality of
competitive opportunity.
(c) Federal Deposit Insurance Corporation.--
(1) In general.--The Federal Deposit Insurance Corporation
may, by regulation or order, impose restrictions or
requirements on relationships or transactions between a State
nonmember bank (as defined in section 3 of the Federal
Deposit Insurance Act) and a subsidiary of the State
nonmember bank which the Corporation finds are consistent
with the public interest, the purposes of this Act, the
Federal Deposit Insurance Act, or other Federal law
applicable to State nonmember banks and the standards in
paragraph (2).
(2) Standards.--The Federal Deposit Insurance Corporation
may exercise authority under paragraph (1) if the Corporation
finds that such action will have any of the following
effects:
(A) Avoid any significant risk to the safety and soundness
of depository institutions or any Federal deposit insurance
fund.
(B) Enhance the financial stability of banks.
(C) Avoid conflicts of interest or other abuses.
(D) Enhance the privacy of customers of the State nonmember
bank or any subsidiary of the bank.
(E) Promote the application of national treatment and
equality of competitive opportunity between subsidiaries
owned or controlled by domestic banks and subsidiaries owned
or controlled by foreign banks operating in the United
States.
(3) Review.--The Federal Deposit Insurance Corporation
shall regularly--
(A) review all restrictions or requirements established
pursuant to paragraph (1) to determine whether there is a
continuing need for any such restriction or requirement to
carry out the purposes of the Act, including any purpose
described in paragraph (2); and
(B) modify or eliminate any restriction or requirement the
Corporation finds is no longer required for such purposes.
SEC. 115. EXAMINATION OF INVESTMENT COMPANIES.
(a) Exclusive Commission Authority.--
(1) In general.--Except as provided in paragraph (3), the
Commission shall be the sole Federal agency with authority to
inspect and examine any registered investment company that is
not a bank holding company or a savings and loan holding
company.
(2) Prohibition on banking agencies.--Except as provided in
paragraph (3), a Federal banking agency may not inspect or
examine any registered investment company that is not a bank
holding company or a savings and loan holding company.
(3) Certain examinations authorized.-- Nothing in this
subsection prevents the Federal Deposit Insurance
Corporation, if the Corporation finds it necessary to
determine the condition of an insured depository institution
for insurance purposes, from examining an affiliate of any
insured depository institution, pursuant to its authority
under section 10(b)(4) of the Federal Deposit Insurance Act,
as may be necessary to disclose fully the relationship
between the depository institution and the affiliate, and the
effect of such relationship on the depository institution.
(b) Examination Results and Other Information.--The
Commission shall provide to any Federal banking agency, upon
request, the results of any examination, reports, records, or
other information with respect to any registered investment
company to the extent necessary for the agency to carry out
its statutory responsibilities.
(c) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Bank holding company.--The term ``bank holding
company'' has the same meaning as in section 2 of the Bank
Holding Company Act of 1956.
[[Page H5256]]
(2) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(3) Federal banking agency.--The term ``Federal banking
agency'' has the same meaning as in section 3(z) of the
Federal Deposit Insurance Act.
(4) Registered investment company.--The term ``registered
investment company'' means an investment company which is
registered with the Commission under the Investment Company
Act of 1940.
(5) Savings and loan holding company.--The term ``savings
and loan holding company'' has the same meaning as in section
10(a)(1)(D) of the Home Owners' Loan Act.
SEC. 116. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY,
AND ENFORCEMENT AUTHORITY OF THE BOARD.
The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et
seq.) is amended by inserting after section 10 the following
new section:
``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL,
SUPERVISORY, AND ENFORCEMENT AUTHORITY OF THE
BOARD.
``(a) Limitation on Direct Action.--
``(1) In general.--The Board may not prescribe regulations,
issue or seek entry of orders, impose restraints,
restrictions, guidelines, requirements, safeguards, or
standards, or otherwise take any action under or pursuant to
any provision of this Act or section 8 of the Federal Deposit
Insurance Act against or with respect to a regulated
subsidiary of a bank holding company unless the action is
necessary to prevent or redress an unsafe or unsound practice
or breach of fiduciary duty by such subsidiary that poses a
material risk to--
``(A) the financial safety, soundness, or stability of an
affiliated depository institution; or
``(B) the domestic or international payment system.
``(2) Criteria for board action.--The Board shall not take
action otherwise permitted under paragraph (1) unless the
Board finds that it is not reasonably possible to effectively
protect against the material risk at issue through action
directed at or against the affiliated depository institution
or against depository institutions generally.
``(b) Limitation on Indirect Action.--The Board may not
prescribe regulations, issue or seek entry of orders, impose
restraints, restrictions, guidelines, requirements,
safeguards, or standards, or otherwise take any action under
or pursuant to any provision of this Act or section 8 of the
Federal Deposit Insurance Act against or with respect to a
financial holding company or a wholesale financial holding
company where the purpose or effect of doing so would be to
take action indirectly against or with respect to a regulated
subsidiary that may not be taken directly against or with
respect to such subsidiary in accordance with subsection (a).
``(c) Actions Specifically Authorized.--Notwithstanding
subsection (a), the Board may take action under this Act or
section 8 of the Federal Deposit Insurance Act to enforce
compliance by a regulated subsidiary with Federal law that
the Board has specific jurisdiction to enforce against such
subsidiary.
``(d) Regulated Subsidiary Defined.--For purposes of this
section, the term `regulated subsidiary' means any company
that is not a bank holding company and is--
``(1) a broker or dealer registered under the Securities
Exchange Act of 1934;
``(2) an investment adviser registered by or on behalf of
either the Securities and Exchange Commission or any State,
whichever is required by law, with respect to the investment
advisory activities of such investment adviser and activities
incidental to such investment advisory activities;
``(3) an investment company registered under the Investment
Company Act of 1940;
``(4) an insurance company or an insurance agency, with
respect to the insurance activities and activities incidental
to such insurance activities, subject to supervision by a
State insurance commission, agency, or similar authority; or
``(5) an entity subject to regulation by the Commodity
Futures Trading Commission, with respect to the commodities
activities of such entity and activities incidental to such
commodities activities.''.
SEC. 117. EQUIVALENT REGULATION AND SUPERVISION.
(a) In General.--Notwithstanding any other provision of
law, the provisions of--
(1) section 5(c) of the Bank Holding Company Act of 1956
(as amended by this Act) that limit the authority of the
Board of Governors of the Federal Reserve System to require
reports from, to make examinations of, or to impose capital
requirements on bank holding companies and their nonbank
subsidiaries or that require deference to other regulators;
and
(2) section 10A of the Bank Holding Company Act of 1956 (as
added by this Act) that limit whatever authority the Board
might otherwise have to take direct or indirect action with
respect to bank holding companies and their nonbank
subsidiaries,
shall also limit whatever authority that a Federal banking
agency (as defined in section 3(z) of the Federal Deposit
Insurance Act) might otherwise have under any statute to
require reports, make examinations, impose capital
requirements or take any other direct or indirect action with
respect to bank holding companies and their nonbank
subsidiaries (including nonbank subsidiaries of depository
institutions), subject to the same standards and requirements
as are applicable to the Board under such provisions.
(b) Certain Examinations Authorized.--No provision of this
section shall be construed as preventing the Federal Deposit
Insurance Corporation, if the Corporation finds it necessary
to determine the condition of an insured depository
institution for insurance purposes, from examining an
affiliate of any insured depository institution, pursuant to
its authority under section 10(b)(4) of the Federal Deposit
Insurance Act, as may be necessary to disclose fully the
relationship between the depository institution and the
affiliate, and the effect of such relationship on the
depository institution.
SEC. 118. PROHIBITION ON FDIC ASSISTANCE TO AFFILIATES AND
SUBSIDIARIES.
Section 11(a)(4)(B) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(a)(4)(B)) is amended by striking ``to benefit
any shareholder of'' and inserting ``to benefit any
shareholder, affiliate (other than an insured depository
institution that receives assistance in accordance with the
provisions of this Act), or subsidiary of''.
SEC. 119. REPEAL OF SAVINGS BANK PROVISIONS IN THE BANK
HOLDING COMPANY ACT OF 1956.
Section 3(f) of the Bank Holding Company Act of 1956 (12
U.S.C. 1842(f)) is amended to read as follows:
``(f) [Repealed].''.
SEC. 120. TECHNICAL AMENDMENT.
Section 2(o)(1)(A) of the Bank Holding Company Act of 1956
(12 U.S.C. 1841(o)(1)(A)) is amended by striking ``section
38(b)'' and inserting ``section 38''.
Subtitle C--Subsidiaries of National Banks
SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDIARIES OF NATIONAL
BANKS.
(a) Financial Subsidiaries of National Banks.--Chapter one
of title LXII of the Revised Statutes of United States (12
U.S.C. 21 et seq.) is amended--
(1) by redesignating section 5136A as section 5136C; and
(2) by inserting after section 5136 (12 U.S.C. 24) the
following new section:
``SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS.
``(a) Subsidiaries of National Banks Authorized To Engage
in Financial Activities.--
``(1) Exclusive authority.--No provision of section 5136 or
any other provision of this title LXII of the Revised
Statutes of the United States shall be construed as
authorizing a subsidiary of a national bank to engage in, or
own any share of or any other interest in any company engaged
in, any activity that--
``(A) is not permissible for a national bank to engage in
directly; or
``(B) is conducted under terms or conditions other than
those that would govern the conduct of such activity by a
national bank,
unless a national bank is specifically authorized by the
express terms of a Federal statute and not by implication or
interpretation to acquire shares of or an interest in, or to
control, such subsidiary, such as by paragraph (2) of this
subsection and section 25A of the Federal Reserve Act.
``(2) Specific authorization to conduct activities which
are financial in nature.--Subject to paragraphs (3) and (4),
a national bank may control a financial subsidiary, or hold
an interest in a financial subsidiary, that is controlled by
insured depository institutions or subsidiaries thereof.
``(3) Eligibility requirements.--A national bank may
control or hold an interest in a company pursuant to
paragraph (2) only if--
``(A) the national bank and all depository institution
affiliates of the national bank are well capitalized;
``(B) the national bank and all depository institution
affiliates of the national bank are well managed;
``(C) the national bank and all depository institution
affiliates of such national bank have achieved a rating of
`satisfactory record of meeting community credit needs', or
better, at the most recent examination of each such bank or
institution; and
``(D) the bank has received the approval of the Comptroller
of the Currency.
``(4) Activity limitations.--In addition to any other
limitation imposed on the activity of subsidiaries of
national banks, a subsidiary of a national bank may not,
pursuant to paragraph (2)--
``(A) engage as principal in insuring, guaranteeing, or
indemnifying against loss, harm, damage, illness, disability,
or death (other than in connection with credit-related
insurance) or in providing or issuing annuities;
``(B) engage in real estate investment or development
activities; or
``(C) engage in any activity permissible for a financial
holding company under paragraph (3)(I) of section 6(c) of the
Bank Holding Company Act of 1956 (relating to insurance
company investments).
``(5) Size factor with regard to free-standing national
banks.--Notwithstanding paragraph (2), a national bank which
has total assets of $10,000,000,000 or more may not control a
subsidiary engaged in financial activities pursuant to such
paragraph unless such national bank is a subsidiary of a bank
holding company.
``(6) Limited exclusions from community needs requirements
for newly affiliated depository institutions.--Any depository
institution which becomes an affiliate of a national bank
during the 12-month period preceding the date of an approval
by the Comptroller of the Currency under paragraph (3)(D) for
such bank, and any depository institution which becomes an
affiliate
[[Page H5257]]
of the national bank after such date, may be excluded for
purposes of paragraph (3)(C) during the 12-month period
beginning on the date of such affiliation if--
``(A) the national bank or such depository institution has
submitted an affirmative plan to the appropriate Federal
banking agency to take such action as may be necessary in
order for such institution to achieve a rating of
`satisfactory record of meeting community credit needs', or
better, at the next examination of the institution; and
``(B) the plan has been accepted by such agency.
``(7) Definitions.--For purposes of this section, the
following definitions shall apply:
``(A) Company; control; affiliate; subsidiary.--The terms
`company', `control', `affiliate', and `subsidiary' have the
same meanings as in section 2 of the Bank Holding Company Act
of 1956.
``(B) Financial subsidiary.--The term `financial
subsidiary' means a company which is a subsidiary of an
insured bank and is engaged in financial activities that have
been determined to be financial in nature or incidental to
such financial activities in accordance with subsection (b)
or permitted in accordance with subsection (b)(4), other than
activities that are permissible for a national bank to engage
in directly or that are authorized under the Bank Service
Company Act, section 25 or 25A of the Federal Reserve Act, or
any other Federal statute (other than this section) that
specifically authorizes the conduct of such activities by its
express terms and not by implication or interpretation.
``(C) Well capitalized.--The term `well capitalized' has
the same meaning as in section 38 of the Federal Deposit
Insurance Act and, for purposes of this section, the
Comptroller shall have exclusive jurisdiction to determine
whether a national bank is well capitalized.
``(D) Well managed.--The term `well managed' means--
``(i) in the case of a depository institution that has been
examined, unless otherwise determined in writing by the
appropriate Federal banking agency--
``(I) the achievement of a composite rating of 1 or 2 under
the Uniform Financial Institutions Rating System (or an
equivalent rating under an equivalent rating system) in
connection with the most recent examination or subsequent
review of the depository institution; and
``(II) at least a rating of 2 for management, if that
rating is given; or
``(ii) in the case of any depository institution that has
not been examined, the existence and use of managerial
resources that the appropriate Federal banking agency
determines are satisfactory.
``(E) Incorporated definitions.--The terms `appropriate
Federal banking agency' and `depository institution' have the
same meanings as in section 3 of the Federal Deposit
Insurance Act.
``(b) Activities That Are Financial in Nature.--
``(1) Financial activities.--
``(A) In general.--For purposes of subsection (a)(7)(B), an
activity shall be considered to have been determined to be
financial in nature or incidental to such financial
activities only if--
``(i) such activity is permitted for a financial holding
company pursuant to section 6(c)(3) of the Bank Holding
Company Act of 1956 (to the extent such activity is not
otherwise prohibited under this section or any other
provision of law for a subsidiary of a national bank engaged
in activities pursuant to subsection (a)(2)); or
``(ii) the Secretary of the Treasury determines the
activity to be financial in nature or incidental to such
financial activities in accordance with subparagraph (B) or
paragraph (3).
``(B) Coordination between the board and the secretary of
the treasury.--
``(i) Proposals raised before the secretary of the
treasury.--
``(I) Consultation.--The Secretary of the Treasury shall
notify the Board of, and consult with the Board concerning,
any request, proposal, or application under this subsection,
including any regulation or order proposed under paragraph
(3), for a determination of whether an activity is financial
in nature or incidental to such a financial activity.
``(II) Board view.--The Secretary of the Treasury shall not
determine that any activity is financial in nature or
incidental to a financial activity under this subsection if
the Board notifies the Secretary in writing, not later than
30 days after the date of receipt of the notice described in
subclause (I) (or such longer period as the Secretary
determines to be appropriate in light of the circumstances)
that the Board believes that the activity is not financial in
nature or incidental to a financial activity.
``(ii) Proposals raised by the board.--
``(I) Board recommendation.--The Board may, at any time,
recommend in writing that the Secretary of the Treasury find
an activity to be financial in nature or incidental to a
financial activity (other than an activity which the Board
has sole authority to regulate under subparagraph (C)).
``(II) Time period for secretarial action.--Not later than
30 days after the date of receipt of a written recommendation
from the Board under subclause (I) (or such longer period as
the Secretary of the Treasury and the Board determine to be
appropriate in light of the circumstances), the Secretary
shall determine whether to initiate a public rulemaking
proposing that the subject recommended activity be found to
be financial in nature or incidental to a financial activity
under this subsection, and shall notify the Board in writing
of the determination of the Secretary and, in the event that
the Secretary determines not to seek public comment on the
proposal, the reasons for that determination.
``(C) Authority over merchant banking.--The Board shall
have sole authority to prescribe regulations and issue
interpretations to implement this paragraph with respect to
activities described in section 6(c)(3)(H) of the Bank
Holding Company Act of 1956.
``(2) Factors to be considered.--In determining whether an
activity is financial in nature or incidental to financial
activities, the Secretary shall take into account--
``(A) the purposes of this Act and the Financial Services
Act of 1999;
``(B) changes or reasonably expected changes in the
marketplace in which banks compete;
``(C) changes or reasonably expected changes in the
technology for delivering financial services; and
``(D) whether such activity is necessary or appropriate to
allow a bank and the subsidiaries of a bank to--
``(i) compete effectively with any company seeking to
provide financial services in the United States;
``(ii) use any available or emerging technological means,
including any application necessary to protect the security
or efficacy of systems for the transmission of data or
financial transactions, in providing financial services; and
``(iii) offer customers any available or emerging
technological means for using financial services.
``(3) Authorization of new financial activities.--The
Secretary of the Treasury shall, by regulation or order and
in accordance with paragraph (1)(B), define, consistent with
the purposes of this Act, the following activities as, and
the extent to which such activities are, financial in nature
or incidental to activities which are financial in nature:
``(A) Lending, exchanging, transferring, investing for
others, or safeguarding financial assets other than money or
securities.
``(B) Providing any device or other instrumentality for
transferring money or other financial assets.
``(C) Arranging, effecting, or facilitating financial
transactions for the account of third parties.
``(4) Developing activities.--Subject to subsection (a)(2),
a financial subsidiary of a national bank may engage directly
or indirectly, or acquire shares of any company engaged, in
any activity that the Secretary has not determined to be
financial in nature or incidental to financial activities
under this subsection if--
``(A) the subsidiary reasonably concludes that the activity
is financial in nature or incidental to financial activities;
``(B) the gross revenues from all activities conducted
under this paragraph represent less than 5 percent of the
consolidated gross revenues of the national bank;
``(C) the aggregate total assets of all companies the
shares of which are held under this paragraph do not exceed 5
percent of the national bank's consolidated total assets;
``(D) the total capital invested in activities conducted
under this paragraph represents less than 5 percent of the
consolidated total capital of the national bank;
``(E) neither the Secretary of the Treasury nor the Board
has determined that the activity is not financial in nature
or incidental to financial activities under this subsection;
and
``(F) the national bank provides written notice to the
Secretary of the Treasury describing the activity commenced
by the subsidiary or conducted by the company acquired no
later than 10 business days after commencing the activity or
consummating the acquisition.
``(c) Provisions Applicable to National Banks That Fail To
Meet Requirements.--
``(1) In general.--If a national bank or depository
institution affiliate is not in compliance with the
requirements of subparagraph (A), (B), or (C) of subsection
(a)(3), the appropriate Federal banking agency shall notify
the Comptroller of the Currency, who shall give notice of
such finding to the national bank.
``(2) Agreement to correct conditions required.--Not later
than 45 days after receipt by a national bank of a notice
given under paragraph (1) (or such additional period as the
Comptroller of the Currency may permit), the national bank
and any relevant affiliated depository institution shall
execute an agreement acceptable to the Comptroller of the
Currency and the other appropriate Federal banking agencies,
if any, to comply with the requirements applicable under
subsection (a)(3).
``(3) Comptroller of the currency may impose limitations.--
Until the conditions described in a notice to a national bank
under paragraph (1) are corrected--
``(A) the Comptroller of the Currency may impose such
limitations on the conduct or activities of the national bank
or any subsidiary of the bank as the Comptroller of the
Currency determines to be appropriate under the
circumstances; and
``(B) the appropriate Federal banking agency may impose
such limitations on the conduct or activities of an
affiliated depository
[[Page H5258]]
institution or any subsidiary of the depository institution
as such agency determines to be appropriate under the
circumstances.
``(4) Failure to correct.--If, after receiving a notice
under paragraph (1), a national bank and other affiliated
depository institutions do not--
``(A) execute and implement an agreement in accordance with
paragraph (2);
``(B) comply with any limitations imposed under paragraph
(3);
``(C) in the case of a notice of failure to comply with
subsection (a)(3)(A), restore the national bank or any
depository institution affiliate of the bank to well
capitalized status before the end of the 180-day period
beginning on the date such notice is received by the national
bank (or such other period permitted by the Comptroller of
the Currency); or
``(D) in the case of a notice of failure to comply with
subparagraph (B) or (C) of subsection (a)(3), restore
compliance with any such subparagraph on or before the date
on which the next examination of the depository institution
subsidiary is completed or by the end of such other period as
the Comptroller of the Currency determines to be appropriate,
the Comptroller of the Currency may require such national
bank, under such terms and conditions as may be imposed by
the Comptroller of the Currency and subject to such extension
of time as may be granted in the Comptroller of the
Currency's discretion, to divest control of any subsidiary
engaged in activities pursuant to subsection (a)(2) or, at
the election of the national bank, instead to cease to engage
in any activity conducted by a subsidiary of the national
bank pursuant to subsection (a)(2).
``(5) Consultation.--In taking any action under this
subsection, the Comptroller of the Currency shall consult
with all relevant Federal and State regulatory agencies.''.
(b) Clerical Amendment.--The table of sections for chapter
one of title LXII of the Revised Statutes of the United
States is amended--
(1) by redesignating the item relating to section 5136A as
section 5136C; and
(2) by inserting after the item relating to section 5136
the following new item:
``5136A. Subsidiaries of national banks.''.
SEC. 122. SAFETY AND SOUNDNESS FIREWALLS BETWEEN BANKS AND
THEIR FINANCIAL SUBSIDIARIES.
(a) Purposes.--The purposes of this section are--
(1) to protect the safety and soundness of any insured bank
that has a financial subsidiary;
(2) to apply to any transaction between the bank and the
financial subsidiary (including a loan, extension of credit,
guarantee, or purchase of assets), other than an equity
investment, the same restrictions and requirements as would
apply if the financial subsidiary were a subsidiary of a bank
holding company having control of the bank; and
(3) to apply to any equity investment of the bank in the
financial subsidiary restrictions and requirements equivalent
to those that would apply if--
(A) the bank paid a dividend in the same dollar amount to a
bank holding company having control of the bank; and
(B) the bank holding company used the proceeds of the
dividend to make an equity investment in a subsidiary that
was engaged in the same activities as the financial
subsidiary of the bank.
(b) Safety and Soundness Firewalls Applicable to
Subsidiaries of Banks.--The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by inserting after section 45
(as added by section 113(b) of this title) the following new
section:
``SEC. 46. SAFETY AND SOUNDNESS FIREWALLS APPLICABLE TO
SUBSIDIARIES OF BANKS.
``(a) Limiting the Equity Investment of a Bank in a
Subsidiary.--
``(1) Capital deduction.--In determining whether an insured
bank complies with applicable regulatory capital standards--
``(A) the appropriate Federal banking agency shall deduct
from the assets and tangible equity of the bank the aggregate
amount of the outstanding equity investments of the bank in
financial subsidiaries of the bank; and
``(B) the assets and liabilities of such financial
subsidiaries shall not be consolidated with those of the
bank.
``(2) Investment limitation.--An insured bank shall not,
without the prior approval of the appropriate Federal banking
agency, make any equity investment in a financial subsidiary
of the bank if that investment would, when made, exceed the
amount that the bank could pay as a dividend without
obtaining prior regulatory approval.
``(3) Treatment of retained earnings.--The amount of any
net earnings retained by a financial subsidiary of an insured
depository institution shall be treated as an outstanding
equity investment of the bank in the subsidiary for purposes
of paragraph (1).
``(b) Operational and Financial Safeguards for the Bank.--
An insured bank that has a financial subsidiary shall
maintain procedures for identifying and managing any
financial and operational risks posed by the financial
subsidiary.
``(c) Maintenance of Separate Corporate Identity and
Separate Legal Status.--
``(1) In general.--Each insured bank shall ensure that the
bank maintains and complies with reasonable policies and
procedures to preserve the separate corporate identity and
legal status of the bank and any financial subsidiary or
affiliate of the bank.
``(2) Examinations.--The appropriate Federal banking
agency, as part of each examination, shall review whether an
insured bank is observing the separate corporate identity and
separate legal status of any subsidiaries and affiliates of
the bank.
``(d) Financial Subsidiary Defined.--For purposes of this
section, the term `financial subsidiary' has the meaning
given to such term in section 5136A(a)(7)(B) of the Revised
Statutes of the United States.
``(e) Regulations.--The appropriate Federal banking
agencies shall jointly prescribe regulations implementing
this section.''.
(c) Transactions Between Financial Subsidiaries and Other
Affiliates.--Section 23A of the Federal Reserve Act (12
U.S.C. 371c) is amended--
(1) by redesignating subsection (e) as subsection (f); and
(2) by inserting after subsection (d), the following new
subsection:
``(e) Rules Relating to Banks With Financial
Subsidiaries.--
``(1) Financial subsidiary defined.--For purposes of this
section and section 23B, the term `financial subsidiary'
means a company which is a subsidiary of a bank and is
engaged in activities that are financial in nature or
incidental to such financial activities pursuant to
subsection (a)(2) or (b)(4) of section 5136A of the Revised
Statutes of the United States.
``(2) Application to transactions between a financial
subsidiary of a bank and the bank.--For purposes of applying
this section and section 23B to a transaction between a
financial subsidiary of a bank and the bank (or between such
financial subsidiary and any other subsidiary of the bank
which is not a financial subsidiary) and notwithstanding
subsection (b)(2) and section 23B(d)(1), the financial
subsidiary of the bank--
``(A) shall be an affiliate of the bank and any other
subsidiary of the bank which is not a financial subsidiary;
and
``(B) shall not be treated as a subsidiary of the bank.
``(3) Application to transactions between financial
subsidiary and nonbank affiliates.--
``(A) In general.--A transaction between a financial
subsidiary and an affiliate of the financial subsidiary shall
not be deemed to be a transaction between a subsidiary of a
national bank and an affiliate of the bank for purposes of
section 23A or section 23B of the Federal Reserve Act.
``(B) Certain affiliates excluded.--For purposes of
subparagraph (A) and notwithstanding paragraph (4), the term
`affiliate' shall not include a bank, or a subsidiary of a
bank, which is engaged exclusively in activities permissible
for a national bank to engage in directly or which are
authorized by any Federal law other than section 5136A of the
Revised Statutes of the United States.
``(4) Equity investments excluded subject to the approval
of the banking agency.--Subsection (a)(1) shall not apply so
as to limit the equity investment of a bank in a financial
subsidiary of such bank, except that any investment that
exceeds the amount of a dividend that the bank could pay at
the time of the investment without obtaining prior approval
of the appropriate Federal banking agency and is in excess of
the limitation which would apply under subsection (a)(1), but
for this paragraph, may be made only with the approval of the
appropriate Federal banking agency (as defined in section
3(q) of the Federal Deposit Insurance Act) with respect to
such bank.''.
(d) Antitying.--Section 106(a) of the Bank Holding Company
Act Amendments of 1970 is amended by adding at the end the
following new sentence: ``For purposes of this section, a
subsidiary of a national bank which engages in activities
pursuant to subsection (a)(2) or (b)(4) of section 5136A of
the Revised Statutes of the United States shall be deemed to
be a subsidiary of a bank holding company, and not a
subsidiary of a bank.''.
SEC. 123. MISREPRESENTATIONS REGARDING DEPOSITORY INSTITUTION
LIABILITY FOR OBLIGATIONS OF AFFILIATES.
(a) In General.--Chapter 47 of title 18, United States
Code, is amended by inserting after section 1007 the
following new section:
``Sec. 1008. Misrepresentations regarding financial
institution liability for obligations of affiliates
``(a) In General.--No institution-affiliated party of an
insured depository institution or institution-affiliated
party of a subsidiary or affiliate of an insured depository
institution shall fraudulently represent that the institution
is or will be liable for any obligation of a subsidiary or
other affiliate of the institution.
``(b) Criminal Penalty.--Whoever violates subsection (a)
shall be fined under this title, imprisoned for not more than
5 years, or both.
``(c) Institution-Affiliated Party Defined.--For purposes
of this section, the term `institution-affiliated party' has
the same meaning as in section 3 of the Federal Deposit
Insurance Act and any reference in that section shall also be
deemed to refer to a subsidiary or affiliate of an insured
depository institution.
``(d) Other Definitions.--For purposes of this section, the
terms `affiliate', `insured depository institution', and
`subsidiary' have same meanings as in section 3 of the
Federal Deposit Insurance Act.''.
(b) Clerical Amendment.--The table of sections for chapter
47 of title 18, United States Code, is amended by inserting
after
[[Page H5259]]
the item relating to section 1007 the following new item:
``1008. Misrepresentations regarding financial institution liability
for obligations of affiliates.''.
SEC. 124. REPEAL OF STOCK LOAN LIMIT IN FEDERAL RESERVE ACT.
Section 11 of the Federal Reserve Act (12 U.S.C. 248) is
amended by striking the paragraph designated as ``(m)'' and
inserting ``(m) [Repealed]''.
Subtitle D--Wholesale Financial Holding Companies; Wholesale Financial
Institutions
CHAPTER 1--WHOLESALE FINANCIAL HOLDING COMPANIES
SEC. 131. WHOLESALE FINANCIAL HOLDING COMPANIES ESTABLISHED.
Section 10 of the Bank Holding Company Act of 1956 (12
U.S.C. 1841 et seq.) is amended to read as follows:
``SEC. 10. WHOLESALE FINANCIAL HOLDING COMPANIES.
``(a) Companies That Control Wholesale Financial
Institutions.--
``(1) Wholesale financial holding company defined.--The
term `wholesale financial holding company' means any company
that--
``(A) is registered as a bank holding company;
``(B) is predominantly engaged in financial activities as
defined in section 6(f)(2);
``(C) controls 1 or more wholesale financial institutions;
``(D) does not control--
``(i) a bank other than a wholesale financial institution;
``(ii) an insured bank other than an institution permitted
under subparagraph (D), (F), or (G) of section 2(c)(2); or
``(iii) a savings association; and
``(E) is not a foreign bank (as defined in section 1(b)(7)
of the International Banking Act of 1978).
``(2) Savings association transition period.--
Notwithstanding paragraph (1)(D)(iii), the Board may permit a
company that controls a savings association and that
otherwise meets the requirements of paragraph (1) to become
supervised under paragraph (1), if the company divests
control of any such savings association within such period
not to exceed 5 years after becoming supervised under
paragraph (1) as permitted by the Board.
``(b) Supervision by the Board.--
``(1) In general.--The provisions of this section shall
govern the reporting, examination, and capital requirements
of wholesale financial holding companies.
``(2) Reports.--
``(A) In general.--The Board from time to time may require
any wholesale financial holding company and any subsidiary of
such company to submit reports under oath to keep the Board
informed as to--
``(i) the company's or subsidiary's activities, financial
condition, policies, systems for monitoring and controlling
financial and operational risks, and transactions with
depository institution subsidiaries of the holding company;
and
``(ii) the extent to which the company or subsidiary has
complied with the provisions of this Act and regulations
prescribed and orders issued under this Act.
``(B) Use of existing reports.--
``(i) In general.--The Board shall, to the fullest extent
possible, accept reports in fulfillment of the Board's
reporting requirements under this paragraph that the
wholesale financial holding company or any subsidiary of such
company has provided or been required to provide to other
Federal and State supervisors or to appropriate self-
regulatory organizations.
``(ii) Availability.--A wholesale financial holding company
or a subsidiary of such company shall provide to the Board,
at the request of the Board, a report referred to in clause
(i).
``(C) Exemptions from reporting requirements.--
``(i) In general.--The Board may, by regulation or order,
exempt any company or class of companies, under such terms
and conditions and for such periods as the Board shall
provide in such regulation or order, from the provisions of
this paragraph and any regulation prescribed under this
paragraph.
``(ii) Criteria for consideration.--In making any
determination under clause (i) with regard to any exemption
under such clause, the Board shall consider, among such other
factors as the Board may determine to be appropriate, the
following factors:
``(I) Whether information of the type required under this
paragraph is available from a supervisory agency (as defined
in section 1101(7) of the Right to Financial Privacy Act of
1978) or a foreign regulatory authority of a similar type.
``(II) The primary business of the company.
``(III) The nature and extent of the domestic and foreign
regulation of the activities of the company.
``(3) Examinations.--
``(A) Limited use of examination authority.--The Board may
make examinations of each wholesale financial holding company
and each subsidiary of such company in order to--
``(i) inform the Board regarding the nature of the
operations and financial condition of the wholesale financial
holding company and its subsidiaries;
``(ii) inform the Board regarding--
``(I) the financial and operational risks within the
wholesale financial holding company system that may affect
any depository institution owned by such holding company; and
``(II) the systems of the holding company and its
subsidiaries for monitoring and controlling those risks; and
``(iii) monitor compliance with the provisions of this Act
and those governing transactions and relationships between
any depository institution controlled by the wholesale
financial holding company and any of the company's other
subsidiaries.
``(B) Restricted focus of examinations.--The Board shall,
to the fullest extent possible, limit the focus and scope of
any examination of a wholesale financial holding company
under this paragraph to--
``(i) the holding company; and
``(ii) any subsidiary (other than an insured depository
institution subsidiary) of the holding company that, because
of the size, condition, or activities of the subsidiary, the
nature or size of transactions between such subsidiary and
any affiliated depository institution, or the centralization
of functions within the holding company system, could have a
materially adverse effect on the safety and soundness of any
depository institution affiliate of the holding company.
``(C) Deference to bank examinations.--The Board shall, to
the fullest extent possible, use the reports of examination
of depository institutions made by the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the
Director of the Office of Thrift Supervision or the
appropriate State depository institution supervisory
authority for the purposes of this section.
``(D) Deference to other examinations.--The Board shall, to
the fullest extent possible, address the circumstances which
might otherwise permit or require an examination by the Board
by forgoing an examination and by instead reviewing the
reports of examination made of--
``(i) any registered broker or dealer or any registered
investment adviser by or on behalf of the Commission; and
``(ii) any licensed insurance company by or on behalf of
any State government insurance agency responsible for the
supervision of the insurance company.
``(E) Confidentiality of reported information.--
``(i) In general.--Notwithstanding any other provision of
law, the Board shall not be compelled to disclose any
nonpublic information required to be reported under this
paragraph, or any information supplied to the Board by any
domestic or foreign regulatory agency, that relates to the
financial or operational condition of any wholesale financial
holding company or any subsidiary of such company.
``(ii) Compliance with requests for information.--No
provision of this subparagraph shall be construed as
authorizing the Board to withhold information from the
Congress, or preventing the Board from complying with a
request for information from any other Federal department or
agency for purposes within the scope of such department's or
agency's jurisdiction, or from complying with any order of a
court of competent jurisdiction in an action brought by the
United States or the Board.
``(iii) Coordination with other law.--For purposes of
section 552 of title 5, United States Code, this subparagraph
shall be considered to be a statute described in subsection
(b)(3)(B) of such section.
``(iv) Designation of confidential information.--In
prescribing regulations to carry out the requirements of this
subsection, the Board shall designate information described
in or obtained pursuant to this paragraph as confidential
information.
``(F) Costs.--The cost of any examination conducted by the
Board under this section may be assessed against, and made
payable by, the wholesale financial holding company.
``(4) Capital adequacy guidelines.--
``(A) Capital adequacy provisions.--Subject to the
requirements of, and solely in accordance with, the terms of
this paragraph, the Board may adopt capital adequacy rules or
guidelines for wholesale financial holding companies.
``(B) Method of calculation.--In developing rules or
guidelines under this paragraph, the following provisions
shall apply:
``(i) Focus on double leverage.--The Board shall focus on
the use by wholesale financial holding companies of debt and
other liabilities to fund capital investments in
subsidiaries.
``(ii) No unweighted capital ratio.--The Board shall not,
by regulation, guideline, order, or otherwise, impose under
this section a capital ratio that is not based on appropriate
risk-weighting considerations.
``(iii) No capital requirement on regulated entities.--The
Board shall not, by regulation, guideline, order or
otherwise, prescribe or impose any capital or capital
adequacy rules, standards, guidelines, or requirements upon
any subsidiary that--
``(I) is not a depository institution; and
``(II) is in compliance with applicable capital
requirements of another Federal regulatory authority
(including the Securities and Exchange Commission) or State
insurance authority.
``(iv) Limitation.--The Board shall not, by regulation,
guideline, order or otherwise, prescribe or impose any
capital or capital adequacy rules, standards, guidelines, or
requirements upon any subsidiary that is not a depository
institution and that is registered as an investment adviser
under the Investment Advisers Act of 1940, except that this
[[Page H5260]]
clause shall not be construed as preventing the Board from
imposing capital or capital adequacy rules, guidelines,
standards, or requirements with respect to activities of a
registered investment adviser other than investment advisory
activities or activities incidental to investment advisory
activities.
``(v) Limitations on indirect action.--In developing,
establishing, or assessing holding company capital or capital
adequacy rules, guidelines, standards, or requirements for
purposes of this paragraph, the Board shall not take into
account the activities, operations, or investments of an
affiliated investment company registered under the Investment
Company Act of 1940, unless the investment company is--
``(I) a bank holding company; or
``(II) controlled by a bank holding company by reason of
ownership by the bank holding company (including through all
of its affiliates) of 25 percent or more of the shares of the
investment company, and the shares owned by the bank holding
company have a market value equal to more than $1,000,000.
``(vi) Appropriate exclusions.--The Board shall take full
account of--
``(I) the capital requirements made applicable to any
subsidiary that is not a depository institution by another
Federal regulatory authority or State insurance authority;
and
``(II) industry norms for capitalization of a company's
unregulated subsidiaries and activities.
``(vii) Internal risk management models.--The Board may
incorporate internal risk management models of wholesale
financial holding companies into its capital adequacy
guidelines or rules and may take account of the extent to
which resources of a subsidiary depository institution may be
used to service the debt or other liabilities of the
wholesale financial holding company.
``(c) Nonfinancial Activities and Investments.--
``(1) Grandfathered activities.--
``(A) In general.--Notwithstanding section 4(a), a company
that becomes a wholesale financial holding company may
continue to engage, directly or indirectly, in any activity
and may retain ownership and control of shares of a company
engaged in any activity if--
``(i) on the date of the enactment of the Financial
Services Act of 1999, such wholesale financial holding
company was lawfully engaged in that nonfinancial activity,
held the shares of such company, or had entered into a
contract to acquire shares of any company engaged in such
activity; and
``(ii) the company engaged in such activity continues to
engage only in the same activities that such company
conducted on the date of the enactment of the Financial
Services Act of 1999, and other activities permissible under
this Act.
``(B) No expansion of grandfathered commercial activities
through merger or consolidation.--A wholesale financial
holding company that engages in activities or holds shares
pursuant to this paragraph, or a subsidiary of such wholesale
financial holding company, may not acquire, in any merger,
consolidation, or other type of business combination, assets
of any other company which is engaged in any activity which
the Board has not determined to be financial in nature or
incidental to activities that are financial in nature under
section 6(c).
``(C) Limitation to single exemption.--No company that
engages in any activity or controls any shares under
subsection (f) of section 6 may engage in any activity or own
any shares pursuant to this paragraph.
``(2) Commodities.--
``(A) In general.--Notwithstanding section 4(a), a
wholesale financial holding company which was predominately
engaged as of January 1, 1997, in financial activities in the
United States (or any successor to any such company) may
engage in, or directly or indirectly own or control shares of
a company engaged in, activities related to the trading,
sale, or investment in commodities and underlying physical
properties that were not permissible for bank holding
companies to conduct in the United States as of January 1,
1997, if such wholesale financial holding company, or any
subsidiary of such holding company, was engaged directly,
indirectly, or through any such company in any of such
activities as of January 1, 1997, in the United States.
``(B) Limitation.--The attributed aggregate consolidated
assets of a wholesale financial holding company held under
the authority granted under this paragraph and not otherwise
permitted to be held by all wholesale financial holding
companies under this section may not exceed 5 percent of the
total consolidated assets of the wholesale financial holding
company, except that the Board may increase such percentage
of total consolidated assets by such amounts and under such
circumstances as the Board considers appropriate, consistent
with the purposes of this Act.
``(3) Cross marketing restrictions.--A wholesale financial
holding company shall not permit--
``(A) any company whose shares it owns or controls pursuant
to paragraph (1) or (2) to offer or market any product or
service of an affiliated wholesale financial institution; or
``(B) any affiliated wholesale financial institution to
offer or market any product or service of any company whose
shares are owned or controlled by such wholesale financial
holding company pursuant to such paragraphs.
``(d) Qualification of Foreign Bank as Wholesale Financial
Holding Company.--
``(1) In general.--Any foreign bank, or any company that
owns or controls a foreign bank, that operates a branch,
agency, or commercial lending company in the United States,
including a foreign bank or company that owns or controls a
wholesale financial institution, may request a determination
from the Board that such bank or company be treated as a
wholesale financial holding company other than for purposes
of subsection (c), subject to such conditions as the Board
considers appropriate, giving due regard to the principle of
national treatment and equality of competitive opportunity
and the requirements imposed on domestic banks and companies.
``(2) Conditions for treatment as a wholesale financial
holding company.--A foreign bank and a company that owns or
controls a foreign bank may not be treated as a wholesale
financial holding company unless the bank and company meet
and continue to meet the following criteria:
``(A) No insured deposits.--No deposits held directly by a
foreign bank or through an affiliate (other than an
institution described in subparagraph (D) or (F) of section
2(c)(2)) are insured under the Federal Deposit Insurance Act.
``(B) Capital standards.--The foreign bank meets risk-based
capital standards comparable to the capital standards
required for a wholesale financial institution, giving due
regard to the principle of national treatment and equality of
competitive opportunity.
``(C) Transaction with affiliates.--Transactions between a
branch, agency, or commercial lending company subsidiary of
the foreign bank in the United States, and any securities
affiliate or company in which the foreign bank (or any
company that owns or controls such foreign bank) has
invested, directly or indirectly, and which engages in any
activity pursuant to subsection (c) or (g) of section 6,
comply with the provisions of sections 23A and 23B of the
Federal Reserve Act in the same manner and to the same extent
as such transactions would be required to comply with such
sections if the bank were a member bank.
``(3) Treatment as a wholesale financial institution.--Any
foreign bank which is, or is affiliated with a company which
is, treated as a wholesale financial holding company under
this subsection shall be treated as a wholesale financial
institution for purposes of subsections (c)(1)(C) and (c)(3)
of section 9B of the Federal Reserve Act, and any such
foreign bank or company shall be subject to paragraphs (3),
(4), and (5) of section 9B(d) of the Federal Reserve Act,
except that the Board may adopt such modifications,
conditions, or exemptions as the Board deems appropriate,
giving due regard to the principle of national treatment and
equality of competitive opportunity.
``(4) Supervision of foreign bank which maintains no
banking presence other than control of a wholesale financial
institution.--A foreign bank that owns or controls a
wholesale financial institution but does not operate a
branch, agency, or commercial lending company in the United
States (and any company that owns or controls such foreign
bank) may request a determination from the Board that such
bank or company be treated as a wholesale financial holding
company, except that such bank or company shall be subject to
the restrictions of paragraphs (2)(A) and (3) of this
subsection.
``(5) No effect on other provisions.--This section shall
not be construed as limiting the authority of the Board under
the International Banking Act of 1978 with respect to the
regulation, supervision, or examination of foreign banks and
their offices and affiliates in the United States.
``(6) Applicability of community reinvestment act of
1977.--The branches in the United States of a foreign bank
that is, or is affiliated with a company that is, treated as
a wholesale financial holding company shall be subject to
section 9B(b)(11) of the Federal Reserve Act as if the
foreign bank were a wholesale financial institution under
such section. The Board and the Comptroller of the Currency
shall apply the provisions of sections 803(2), 804, and
807(1) of the Community Reinvestment Act of 1977 to branches
of foreign banks which receive only such deposits as are
permissible for receipt by a corporation organized under
section 25A of the Federal Reserve Act, in the same manner
and to the same extent such sections apply to such a
corporation.''.
SEC. 132. AUTHORIZATION TO RELEASE REPORTS.
(a) Federal Reserve Act.--The last sentence of the eighth
undesignated paragraph of section 9 of the Federal Reserve
Act (12 U.S.C. 326) is amended to read as follows: ``The
Board of Governors of the Federal Reserve System, at its
discretion, may furnish reports of examination or other
confidential supervisory information concerning State member
banks or any other entities examined under any other
authority of the Board to any Federal or State authorities
with supervisory or regulatory authority over the examined
entity, to officers, directors, or receivers of the examined
entity, and to any other person that the Board determines to
be proper.''.
(b) Commodity Futures Trading Commission.--The Right to
Financial Privacy Act of 1978 (12 U.S.C. 3401 et seq.) is
amended--
(1) in section 1101(7) of the (12 U.S.C. 3401(7))--
[[Page H5261]]
(A) by redesignating subparagraphs (G) and (H) as
subparagraphs (H) and (I), respectively; and
(B) by inserting after subparagraph (F) the following new
subparagraph:
``(G) the Commodity Futures Trading Commission; or''; and
(2) in section 1112(e), by striking ``and the Securities
and Exchange Commission'' and inserting ``, the Securities
and Exchange Commission, and the Commodity Futures Trading
Commission''.
SEC. 133. CONFORMING AMENDMENTS.
(a) Bank Holding Company Act of 1956.--
(1) Definitions.--Section 2 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841) is amended by inserting after
subsection (p) (as added by section 103(b)(1)) the following
new subsections:
``(q) Wholesale Financial Institution.--The term `wholesale
financial institution' means a wholesale financial
institution subject to section 9B of the Federal Reserve Act.
``(r) Commission.--The term `Commission' means the
Securities and Exchange Commission.
``(s) Depository Institution.--The term `depository
institution'--
``(1) has the meaning given to such term in section 3 of
the Federal Deposit Insurance Act; and
``(2) includes a wholesale financial institution.''.
(2) Definition of bank includes wholesale financial
institution.--Section 2(c)(1) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the
end the following new subparagraph:
``(C) A wholesale financial institution.''.
(3) Incorporated definitions.--Section 2(n) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841(n)) is amended by
inserting `` `insured bank','' after `` `in danger of
default',''.
(4) Exception to deposit insurance requirement.--Section
3(e) of the Bank Holding Company Act of 1956 (12 U.S.C.
1842(e)) is amended by adding at the end the following:
``This subsection shall not apply to a wholesale financial
institution.''.
(b) Federal Deposit Insurance Act.--Section 3(q)(2)(A) of
the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A))
is amended to read as follows:
``(A) any State member insured bank (except a District
bank) and any wholesale financial institution subject to
section 9B of the Federal Reserve Act;''.
CHAPTER 2--WHOLESALE FINANCIAL INSTITUTIONS
SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS.
(a) National Wholesale Financial Institutions.--
(1) In general.--Chapter one of title LXII of the Revised
Statutes of the United States (12 U.S.C. 21 et seq.) is
amended by inserting after section 5136A (as added by section
121(a) of this title) the following new section:
``SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITUTIONS.
``(a) Authorization of the Comptroller Required.--A
national bank may apply to the Comptroller on such forms and
in accordance with such regulations as the Comptroller may
prescribe, for permission to operate as a national wholesale
financial institution.
``(b) Regulation.--A national wholesale financial
institution may exercise, in accordance with such
institution's articles of incorporation and regulations
issued by the Comptroller, all the powers and privileges of a
national bank formed in accordance with section 5133 of the
Revised Statutes of the United States, subject to section 9B
of the Federal Reserve Act and the limitations and
restrictions contained therein.
``(c) Community Reinvestment Act of 1977.--A national
wholesale financial institution shall be subject to the
Community Reinvestment Act of 1977.
(2) Clerical amendment.--The table of sections for chapter
one of title LXII of the Revised Statutes of the United
States is amended by inserting after the item relating to
section 5136A (as added by section 121(d) of this title) the
following new item:
``5136B. National wholesale financial institutions.''.
(b) Wholesale Financial Institutions.--The Federal Reserve
Act (12 U.S.C. 221 et seq.) is amended by inserting after
section 9A the following new section:
``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
``(a) Application for Membership as Wholesale Financial
Institution.--
``(1) Application required.--
``(A) In general.--Any bank may apply to the Board of
Governors of the Federal Reserve System to become a State
wholesale financial institution, or to the Comptroller of the
Currency to become a national wholesale financial
institution, and, as a wholesale financial institution, to
subscribe to the stock of the Federal reserve bank organized
within the district where the applying bank is located.
``(B) Treatment as member bank.--Any application under
subparagraph (A) shall be treated as an application under,
and shall be subject to the provisions of, section 9.
``(2) Insurance termination.--No bank the deposits of which
are insured under the Federal Deposit Insurance Act may
become a wholesale financial institution unless it has met
all requirements under that Act for voluntary termination of
deposit insurance.
``(b) General Requirements Applicable to Wholesale
Financial Institutions.--
``(1) Federal reserve act.--Except as otherwise provided in
this section, wholesale financial institutions shall be
member banks and shall be subject to the provisions of this
Act that apply to member banks to the same extent and in the
same manner as State member insured banks or national banks,
except that a wholesale financial institution may terminate
membership under this Act only with the prior written
approval of the Board and on terms and conditions that the
Board determines are appropriate to carry out the purposes of
this Act.
``(2) Prompt corrective action.--A wholesale financial
institution shall be deemed to be an insured depository
institution for purposes of section 38 of the Federal Deposit
Insurance Act except that--
``(A) the relevant capital levels and capital measures for
each capital category shall be the levels specified by the
Board for wholesale financial institutions;
``(B) subject to subparagraph (A), all references to the
appropriate Federal banking agency or to the Corporation in
that section shall be deemed to be references to the
Comptroller of the Currency, in the case of a national
wholesale financial institution, and to the Board, in the
case of all other wholesale financial institutions; and
``(C) in the case of wholesale financial institutions, the
purpose of prompt corrective action shall be to protect
taxpayers and the financial system from the risks associated
with the operation and activities of wholesale financial
institutions.
``(3) Enforcement authority.--Section 3(u), subsections (j)
and (k) of section 7, subsections (b) through (n), (s), (u),
and (v) of section 8, and section 19 of the Federal Deposit
Insurance Act shall apply to a wholesale financial
institution in the same manner and to the same extent as such
provisions apply to State member insured banks or national
banks, as the case may be, and any reference in such sections
to an insured depository institution shall be deemed to
include a reference to a wholesale financial institution.
``(4) Certain other statutes applicable.--A wholesale
financial institution shall be deemed to be a banking
institution, and the Board shall be the appropriate Federal
banking agency for such bank and all such bank's affiliates,
for purposes of the International Lending Supervision Act.
``(5) Bank merger act.--A wholesale financial institution
shall be subject to sections 18(c) and 44 of the Federal
Deposit Insurance Act in the same manner and to the same
extent the wholesale financial institution would be subject
to such sections if the institution were a State member
insured bank or a national bank.
``(6) Branching.--Notwithstanding any other provision of
law, a wholesale financial institution may establish and
operate a branch at any location on such terms and conditions
as established by, and with the approval of--
``(A) the Board, in the case of a State-chartered wholesale
financial institution; and
``(B) the Comptroller of the Currency, in the case of a
national bank wholesale financial institution.
``(7) Activities of out-of-state branches of wholesale
financial institutions.--A State-chartered wholesale
financial institution shall be deemed to be a State bank and
an insured State bank for purposes of paragraphs (1), (2),
and (3) of section 24(j) of the Federal Deposit Insurance
Act.
``(8) Discrimination regarding interest rates.--Section 27
of the Federal Deposit Insurance Act shall apply to State-
chartered wholesale financial institutions in the same manner
and to the same extent as such provisions apply to State
member insured banks and any reference in such section to a
State-chartered insured depository institution shall be
deemed to include a reference to a State-chartered wholesale
financial institution.
``(9) Preemption of state laws requiring deposit insurance
for wholesale financial institutions.--The appropriate State
banking authority may grant a charter to a wholesale
financial institution notwithstanding any State constitution
or statute requiring that the institution obtain insurance of
its deposits and any such State constitution or statute is
hereby preempted solely for purposes of this paragraph.
``(10) Parity for wholesale financial institutions.--A
State bank that is a wholesale financial institution under
this section shall have all of the rights, powers,
privileges, and immunities (including those derived from
status as a federally chartered institution) of and as if it
were a national bank, subject to such terms and conditions as
established by the Board.
``(11) Community reinvestment act of 1977.--A State
wholesale financial institution shall be subject to the
Community Reinvestment Act of 1977.
``(c) Specific Requirements Applicable to Wholesale
Financial Institutions.--
``(1) Limitations on deposits.--
``(A) Minimum amount.--
``(i) In general.--No wholesale financial institution may
receive initial deposits of $100,000 or less, other than on
an incidental and occasional basis.
``(ii) Limitation on deposits of less than $100,000.--No
wholesale financial institution may receive initial deposits
of $100,000 or less if such deposits constitute more than 5
percent of the institution's total deposits.
``(B) No deposit insurance.--Except as otherwise provided
in section 8A(f) of the Federal Deposit Insurance Act, no
deposits held by a wholesale financial institution
[[Page H5262]]
shall be insured deposits under the Federal Deposit Insurance
Act.
``(C) Advertising and disclosure.--The Board and the
Comptroller of the Currency shall prescribe jointly
regulations pertaining to advertising and disclosure by
wholesale financial institutions to ensure that each
depositor is notified that deposits at the wholesale
financial institution are not federally insured or otherwise
guaranteed by the United States Government.
``(2) Minimum capital levels applicable to wholesale
financial institutions.--The Board shall, by regulation,
adopt capital requirements for wholesale financial
institutions--
``(A) to account for the status of wholesale financial
institutions as institutions that accept deposits that are
not insured under the Federal Deposit Insurance Act; and
``(B) to provide for the safe and sound operation of the
wholesale financial institution without undue risk to
creditors or other persons, including Federal reserve banks,
engaged in transactions with the bank.
``(3) Additional requirements applicable to wholesale
financial institutions.--In addition to any requirement
otherwise applicable to State member insured banks or
applicable, under this section, to wholesale financial
institutions, the Board may impose, by regulation or order,
upon wholesale financial institutions--
``(A) limitations on transactions, direct or indirect, with
affiliates to prevent--
``(i) the transfer of risk to the deposit insurance funds;
or
``(ii) an affiliate from gaining access to, or the benefits
of, credit from a Federal reserve bank, including overdrafts
at a Federal reserve bank;
``(B) special clearing balance requirements; and
``(C) any additional requirements that the Board determines
to be appropriate or necessary to--
``(i) promote the safety and soundness of the wholesale
financial institution or any insured depository institution
affiliate of the wholesale financial institution;
``(ii) prevent the transfer of risk to the deposit
insurance funds; or
``(iii) protect creditors and other persons, including
Federal reserve banks, engaged in transactions with the
wholesale financial institution.
``(4) Exemptions for wholesale financial institutions.--The
Board may, by regulation or order, exempt any wholesale
financial institution from any provision applicable to a
member bank that is not a wholesale financial institution, if
the Board finds that such exemption is consistent with--
``(A) the promotion of the safety and soundness of the
wholesale financial institution or any insured depository
institution affiliate of the wholesale financial institution;
``(B) the protection of the deposit insurance funds; and
``(C) the protection of creditors and other persons,
including Federal reserve banks, engaged in transactions with
the wholesale financial institution.
``(5) Limitation on transactions between a wholesale
financial institution and an insured bank.--For purposes of
section 23A(d)(1) of the Federal Reserve Act, a wholesale
financial institution that is affiliated with an insured bank
shall not be a bank.
``(6) No effect on other provisions.--This section shall
not be construed as limiting the Board's authority over
member banks or the authority of the Comptroller of the
Currency over national banks under any other provision of
law, or to create any obligation for any Federal Reserve bank
to make, increase, renew, or extend any advance or discount
under this Act to any member bank or other depository
institution.
``(d) Capital and Managerial Requirements.--
``(1) In general.--A wholesale financial institution shall
be well capitalized and well managed.
``(2) Notice to company.--The Board shall promptly provide
notice to a company that controls a wholesale financial
institution whenever such wholesale financial institution is
not well capitalized or well managed.
``(3) Agreement to restore institution.--Not later than 45
days after the date of receipt of a notice under paragraph
(2) (or such additional period not to exceed 90 days as the
Board may permit), the company shall execute an agreement
acceptable to the Board to restore the wholesale financial
institution to compliance with all of the requirements of
paragraph (1).
``(4) Limitations until institution restored.--Until the
wholesale financial institution is restored to compliance
with all of the requirements of paragraph (1), the Board may
impose such limitations on the conduct or activities of the
company or any affiliate of the company as the Board
determines to be appropriate under the circumstances.
``(5) Failure to restore.--If the company does not execute
and implement an agreement in accordance with paragraph (3),
comply with any limitation imposed under paragraph (4),
restore the wholesale financial institution to well
capitalized status not later than 180 days after the date of
receipt by the company of the notice described in paragraph
(2), or restore the wholesale financial institution to well
managed status within such period as the Board may permit,
the company shall, under such terms and conditions as may be
imposed by the Board subject to such extension of time as may
be granted in the discretion of the Board, divest control of
its subsidiary depository institutions.
``(6) Well managed defined.--For purposes of this
subsection, the term `well managed' has the same meaning as
in section 2 of the Bank Holding Company Act of 1956.
``(e) Resolution of Wholesale Financial Institutions.--
``(1) Conservatorship or receivership.--
``(A) Appointment.--The Board may appoint a conservator or
receiver to take possession and control of a wholesale
financial institution to the same extent and in the same
manner as the Comptroller of the Currency may appoint a
conservator or receiver for a national bank.
``(B) Powers.--The conservator or receiver for a wholesale
financial institution shall exercise the same powers,
functions, and duties, subject to the same limitations, as a
conservator or receiver for a national bank.
``(2) Board authority.--The Board shall have the same
authority with respect to any conservator or receiver
appointed under paragraph (1), and the wholesale financial
institution for which it has been appointed, as the
Comptroller of the Currency has with respect to a conservator
or receiver for a national bank and the national bank for
which the conservator or receiver has been appointed.
``(3) Bankruptcy proceedings.--The Comptroller of the
Currency (in the case of a national wholesale financial
institution) or the Board may direct the conservator or
receiver of a wholesale financial institution to file a
petition pursuant to title 11, United States Code, in which
case, title 11, United States Code, shall apply to the
wholesale financial institution in lieu of otherwise
applicable Federal or State insolvency law.
``(f) Board Backup Authority.--
``(1) Notice to the comptroller.--Before taking any action
under section 8 of the Federal Deposit Insurance Act
involving a wholesale financial institution that is chartered
as a national bank, the Board shall notify the Comptroller
and recommend that the Comptroller take appropriate action.
If the Comptroller fails to take the recommended action or to
provide an acceptable plan for addressing the concerns of the
Board before the close of the 30-day period beginning on the
date of receipt of the formal recommendation from the Board,
the Board may take such action.
``(2) Exigent circumstances.--Notwithstanding paragraph
(1), the Board may exercise its authority without regard to
the time period set forth in paragraph (1) where the Board
finds that exigent circumstances exist and the Board notifies
the Comptroller of the Board's action and of the exigent
circumstances.
``(g) Exclusive Jurisdiction.--Subsections (c) and (e) of
section 43 of the Federal Deposit Insurance Act shall not
apply to any wholesale financial institution.''.
(c) Voluntary Termination of Insured Status by Certain
Institutions.--
(1) Section 8 designations.--Section 8(a) of the Federal
Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
(A) by striking paragraph (1); and
(B) by redesignating paragraphs (2) through (10) as
paragraphs (1) through (9), respectively.
(2) Voluntary termination of insured status.--The Federal
Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by
inserting after section 8 the following new section:
``SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS INSURED
DEPOSITORY INSTITUTION.
``(a) In General.--Except as provided in subsection (b), an
insured State bank or a national bank may voluntarily
terminate such bank's status as an insured depository
institution in accordance with regulations of the Corporation
if--
``(1) the bank provides written notice of the bank's intent
to terminate such insured status--
``(A) to the Corporation and the Board of Governors of the
Federal Reserve System, in the case of an insured State bank,
or to the Corporation and the Comptroller of the Currency, in
the case of an insured national bank authorized to operate as
a wholesale financial institution, not less than 6 months
before the effective date of such termination; and
``(B) to all depositors at such bank, not less than 6
months before the effective date of the termination of such
status; and
``(2) either--
``(A) the deposit insurance fund of which such bank is a
member equals or exceeds the fund's designated reserve ratio
as of the date the bank provides a written notice under
paragraph (1) and the Corporation determines that the fund
will equal or exceed the applicable designated reserve ratio
for the 2 semiannual assessment periods immediately following
such date; or
``(B) the Corporation and the Board of Governors of the
Federal Reserve System, in the case of an insured State bank,
or the Corporation and the Comptroller of the Currency, in
the case of an insured national bank authorized to operate as
a wholesale financial institution, has approved the
termination of the bank's insured status and the bank pays an
exit fee in accordance with subsection (e).
``(b) Exception.--Subsection (a) shall not apply with
respect to--
``(1) an insured savings association; or
``(2) an insured branch that is required to be insured
under subsection (a) or (b) of section 6 of the International
Banking Act of 1978.
[[Page H5263]]
``(c) Eligibility for Insurance Terminated.--Any bank that
voluntarily elects to terminate the bank's insured status
under subsection (a) shall not be eligible for insurance on
any deposits or any assistance authorized under this Act
after the period specified in subsection (f)(1).
``(d) Institution Must Become Wholesale Financial
Institution or Terminate Deposit-Taking Activities.--Any
depository institution which voluntarily terminates such
institution's status as an insured depository institution
under this section may not, upon termination of insurance,
accept any deposits unless the institution is a wholesale
financial institution subject to section 9B of the Federal
Reserve Act.
``(e) Exit Fees.--
``(1) In general.--Any bank that voluntarily terminates
such bank's status as an insured depository institution under
this section shall pay an exit fee in an amount that the
Corporation determines is sufficient to account for the
institution's pro rata share of the amount (if any) which
would be required to restore the relevant deposit insurance
fund to the fund's designated reserve ratio as of the date
the bank provides a written notice under subsection (a)(1).
``(2) Procedures.--The Corporation shall prescribe, by
regulation, procedures for assessing any exit fee under this
subsection.
``(f) Temporary Insurance of Deposits Insured as of
Termination.--
``(1) Transition period.--The insured deposits of each
depositor in a State bank or a national bank on the effective
date of the voluntary termination of the bank's insured
status, less all subsequent withdrawals from any deposits of
such depositor, shall continue to be insured for a period of
not less than 6 months and not more than 2 years, as
determined by the Corporation. During such period, no
additions to any such deposits, and no new deposits in the
depository institution made after the effective date of such
termination shall be insured by the Corporation.
``(2) Temporary assessments; obligations and duties.--
During the period specified in paragraph (1) with respect to
any bank, the bank shall continue to pay assessments under
section 7 as if the bank were an insured depository
institution. The bank shall, in all other respects, be
subject to the authority of the Corporation and the duties
and obligations of an insured depository institution under
this Act during such period, and in the event that the bank
is closed due to an inability to meet the demands of the
bank's depositors during such period, the Corporation shall
have the same powers and rights with respect to such bank as
in the case of an insured depository institution.
``(g) Advertisements.--
``(1) In general.--A bank that voluntarily terminates the
bank's insured status under this section shall not advertise
or hold itself out as having insured deposits, except that
the bank may advertise the temporary insurance of deposits
under subsection (f) if, in connection with any such
advertisement, the advertisement also states with equal
prominence that additions to deposits and new deposits made
after the effective date of the termination are not insured.
``(2) Certificates of deposit, obligations, and
securities.--Any certificate of deposit or other obligation
or security issued by a State bank or a national bank after
the effective date of the voluntary termination of the bank's
insured status under this section shall be accompanied by a
conspicuous, prominently displayed notice that such
certificate of deposit or other obligation or security is not
insured under this Act.
``(h) Notice Requirements.--
``(1) Notice to the corporation.--The notice required under
subsection (a)(1)(A) shall be in such form as the Corporation
may require.
``(2) Notice to depositors.--The notice required under
subsection (a)(1)(B) shall be--
``(A) sent to each depositor's last address of record with
the bank; and
``(B) in such manner and form as the Corporation finds to
be necessary and appropriate for the protection of
depositors.''.
(3) Definition.--Section 19(b)(1)(A)(i) of the Federal
Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended by
inserting ``, or any wholesale financial institution subject
to section 9B of this Act'' after ``such Act''.
(d) Technical and Conforming Amendments to the Bankruptcy
Code.--
(1) Bankruptcy code debtors.--Section 109(b)(2) of title
11, United States Code, is amended by striking ``; or'' and
inserting the following: ``, except that--
``(A) a wholesale financial institution established under
section 5136B of the Revised Statutes of the United States or
section 9B of the Federal Reserve Act may be a debtor if a
petition is filed at the direction of the Comptroller of the
Currency (in the case of a wholesale financial institution
established under section 5136B of the Revised Statutes of
the United States) or the Board of Governors of the Federal
Reserve System (in the case of any wholesale financial
institution); and
``(B) a corporation organized under section 25A of the
Federal Reserve Act may be a debtor if a petition is filed at
the direction of the Board of Governors of the Federal
Reserve System; or''.
(2) Chapter 7 debtors.--Section 109(d) of title 11, United
States Code, is amended to read as follows:
``(d) Only a railroad and a person that may be a debtor
under chapter 7 of this title, except that a stockbroker, a
wholesale financial institution established under section
5136B of the Revised Statutes of the United States or section
9B of the Federal Reserve Act, a corporation organized under
section 25A of the Federal Reserve Act, or a commodity
broker, may be a debtor under chapter 11 of this title.''.
(3) Definition of financial institution.--Section 101(22)
of title 11, United States Code, is amended to read as
follows:
``(22) `financial institution' means a person that is a
commercial or savings bank, industrial savings bank, savings
and loan association, trust company, wholesale financial
institution established under section 5136B of the Revised
Statutes of the United States or section 9B of the Federal
Reserve Act, or corporation organized under section 25A of
the Federal Reserve Act and, when any such person is acting
as agent or custodian for a customer in connection with a
securities contract, as defined in section 741 of this title,
such customer,''.
(4) Subchapter v of chapter 7.--
(A) In general.--Section 103 of title 11, United States
Code, is amended--
(i) by redesignating subsections (e) through (i) as
subsections (f) through (j), respectively; and
(ii) by inserting after subsection (d) the following:
``(e) Subchapter V of chapter 7 of this title applies only
in a case under such chapter concerning the liquidation of a
wholesale financial institution established under section
5136B of the Revised Statutes of the United States or section
9B of the Federal Reserve Act, or a corporation organized
under section 25A of the Federal Reserve Act.''.
(B) Wholesale bank liquidation.--Chapter 7 of title 11,
United States Code, is amended by adding at the end the
following:
``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION
``Sec. 781. Definitions for subchapter
``In this subchapter--
``(1) the term `Board' means the Board of Governors of the
Federal Reserve System;
``(2) the term `depository institution' has the same
meaning as in section 3 of the Federal Deposit Insurance Act,
and includes any wholesale bank;
``(3) the term `national wholesale financial institution'
means a wholesale financial institution established under
section 5136B of the Revised Statutes of the United States;
and
``(4) the term `wholesale bank' means a national wholesale
financial institution, a wholesale financial institution
established under section 9B of the Federal Reserve Act, or a
corporation organized under section 25A of the Federal
Reserve Act.
``Sec. 782. Selection of trustee
``(a) Notwithstanding any other provision of this title,
the conservator or receiver who files the petition shall be
the trustee under this chapter, unless the Comptroller of the
Currency (in the case of a national wholesale financial
institution for which it appointed the conservator or
receiver) or the Board (in the case of any wholesale bank for
which it appointed the conservator or receiver) designates an
alternative trustee. The Comptroller of the Currency or the
Board (as applicable) may designate a successor trustee, if
required.
``(b) Whenever the Comptroller of the Currency or the Board
appoints or designates a trustee, chapter 3 and sections 704
and 705 of this title shall apply to the Comptroller or the
Board, as applicable, in the same way and to the same extent
that they apply to a United States trustee.
``Sec. 783. Additional powers of trustee
``(a) The trustee under this subchapter has power to
distribute property not of the estate, including
distributions to customers that are mandated by subchapters
III and Iv of this chapter.
``(b) The trustee under this subchapter may, after notice
and a hearing--
``(1) sell the wholesale bank to a depository institution
or consortium of depository institutions (which consortium
may agree on the allocation of the wholesale bank among the
consortium);
``(2) merge the wholesale bank with a depository
institution;
``(3) transfer contracts to the same extent as could a
receiver for a depository institution under paragraphs (9)
and (10) of section 11(e) of the Federal Deposit Insurance
Act;
``(4) transfer assets or liabilities to a depository
institution;
``(5) transfer assets and liabilities to a bridge bank as
provided in paragraphs (1), (3)(A), (5), (6), and (9) through
(13), and subparagraphs (A) through (H) and (K) of paragraph
(4) of section 11(n) of the Federal Deposit Insurance Act,
except that--
``(A) the bridge bank shall be treated as a wholesale bank
for the purpose of this subsection; and
``(B) any references in any such provision of law to the
Federal Deposit Insurance Corporation shall be construed to
be references to the appointing agency and that references to
deposit insurance shall be omitted.
``(c) Any reference in this section to transfers of
liabilities includes a ratable transfer of liabilities within
a priority class.
``Sec. 784. Right to be heard
``The Comptroller of the Currency (in the case of a
national wholesale financial institution), the Board (in the
case of any wholesale bank), or a Federal Reserve bank (in
the case of a wholesale bank that is a member of
[[Page H5264]]
that bank) may raise and may appear and be heard on any issue
in a case under this subchapter.
(C) Conforming amendment.--The table of sections for
chapter 7 of title 11, United States Code, is amended by
adding at the end the following:
``SUBCHAPTER V--WHOLESALE BANK LIQUIDATION
``781. Definitions for subchapter.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
(e) Resolution of Edge Corporations.--The 16th undesignated
paragraph of section 25A of the Federal Reserve Act (12
U.S.C. 624) is amended to read as follows:
``(16) Appointment of receiver or conservator.--
``(A) In general.--The Board may appoint a conservator or
receiver for a corporation organized under the provisions of
this section to the same extent and in the same manner as the
Comptroller of the Currency may appoint a conservator or
receiver for a national bank, and the conservator or receiver
for such corporation shall exercise the same powers,
functions, and duties, subject to the same limitations, as a
conservator or receiver for a national bank.
``(B) Equivalent authority.--The Board shall have the same
authority with respect to any conservator or receiver
appointed for a corporation organized under the provisions of
this section under this paragraph and any such corporation as
the Comptroller of the Currency has with respect to a
conservator or receiver of a national bank and the national
bank for which a conservator or receiver has been appointed.
``(C) Title 11 petitions.--The Board may direct the
conservator or receiver of a corporation organized under the
provisions of this section to file a petition pursuant to
title 11, United States Code, in which case, title 11, United
States Code, shall apply to the corporation in lieu of
otherwise applicable Federal or State insolvency law.''.
Subtitle E--Preservation of FTC Authority
SEC. 141. AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956
TO MODIFY NOTIFICATION AND POST-APPROVAL
WAITING PERIOD FOR SECTION 3 TRANSACTIONS.
Section 11(b)(1) of the Bank Holding Company Act of 1956
(12 U.S.C. 1849(b)(1)) is amended by inserting ``and, if the
transaction also involves an acquisition under section 4 or
section 6, the Board shall also notify the Federal Trade
Commission of such approval'' before the period at the end of
the first sentence.
SEC. 142. INTERAGENCY DATA SHARING.
To the extent not prohibited by other law, the Comptroller
of the Currency, the Director of the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, and
the Board of Governors of the Federal Reserve System shall
make available to the Attorney General and the Federal Trade
Commission any data in the possession of any such banking
agency that the antitrust agency deems necessary for
antitrust review of any transaction requiring notice to any
such antitrust agency or the approval of such agency under
section 3, 4, or 6 of the Bank Holding Company Act of 1956,
section 18(c) of the Federal Deposit Insurance Act, the
National Bank Consolidation and Merger Act, section 10 of the
Home Owners' Loan Act, or the antitrust laws.
SEC. 143. CLARIFICATION OF STATUS OF SUBSIDIARIES AND
AFFILIATES.
(a) Clarification of Federal Trade Commission
Jurisdiction.--Any person which directly or indirectly
controls, is controlled directly or indirectly by, or is
directly or indirectly under common control with, any bank or
savings association (as such terms are defined in section 3
of the Federal Deposit Insurance Act) and is not itself a
bank or savings association shall not be deemed to be a bank
or savings association for purposes of the Federal Trade
Commission Act or any other law enforced by the Federal Trade
Commission.
(b) Savings Provision.--No provision of this section shall
be construed as restricting the authority of any Federal
banking agency (as defined in section 3 of the Federal
Deposit Insurance Act) under any Federal banking law,
including section 8 of the Federal Deposit Insurance Act.
(c) Hart-Scott-Rodino Amendments.--
(1) Banks.--Section 7A(c)(7) of the Clayton Act (15 U.S.C.
18a(c)(7)) is amended by inserting before the semicolon at
the end the following: ``, except that a portion of a
transaction is not exempt under this paragraph if such
portion of the transaction (A) is subject to section 6 of the
Bank Holding Company Act of 1956; and (B) does not require
agency approval under section 3 of the Bank Holding Company
Act of 1956''.
(2) Bank holding companies.--Section 7A(c)(8) of the
Clayton Act (15 U.S.C. 18a(c)(8)) is amended by inserting
before the semicolon at the end the following: ``, except
that a portion of a transaction is not exempt under this
paragraph if such portion of the transaction (A) is subject
to section 6 of the Bank Holding Company Act of 1956; and (B)
does not require agency approval under section 4 of the Bank
Holding Company Act of 1956''.
SEC. 144. ANNUAL GAO REPORT.
(a) In General.--By the end of the 1-year period beginning
on the date of the enactment of this Act and annually
thereafter, the Comptroller General of the United States
shall submit a report to the Congress on market concentration
in the financial services industry and its impact on
consumers.
(b) Analysis.--Each report submitted under subsection (a)
shall contain an analysis of--
(1) the positive and negative effects of affiliations
between various types of financial companies, and of
acquisitions pursuant to this Act and the amendments made by
this Act to other provisions of law, including any positive
or negative effects on consumers, area markets, and
submarkets thereof or on registered securities brokers and
dealers which have been purchased by depository institutions
or depository institution holding companies;
(2) the changes in business practices and the effects of
any such changes on the availability of venture capital,
consumer credit, and other financial services or products and
the availability of capital and credit for small businesses;
and
(3) the acquisition patterns among depository institutions,
depository institution holding companies, securities firms,
and insurance companies including acquisitions among the
largest 20 percent of firms and acquisitions within regions
or other limited geographical areas.
(c) Sunset.--This section shall not apply after the end of
the 5-year period beginning on the date of the enactment of
this Act.
Subtitle F--National Treatment
SEC. 151. FOREIGN BANKS THAT ARE FINANCIAL HOLDING COMPANIES.
Section 8(c) of the International Banking Act of 1978 (12
U.S.C. 3106(c)) is amended by adding at the end the following
new paragraph:
``(3) Termination of grandfathered rights.--
``(A) In general.--If any foreign bank or foreign company
files a declaration under section 6(b)(1)(D) or receives a
determination under section 10(d)(1) of the Bank Holding
Company Act of 1956, any authority conferred by this
subsection on any foreign bank or company to engage in any
activity which the Board has determined to be permissible for
financial holding companies under section 6 of such Act shall
terminate immediately.
``(B) Restrictions and requirements authorized.--If a
foreign bank or company that engages, directly or through an
affiliate pursuant to paragraph (1), in an activity which the
Board has determined to be permissible for financial holding
companies under section 6 of the Bank Holding Company Act of
1956 has not filed a declaration with the Board of its status
as a financial holding company under such section or received
a determination under section 10(d)(1) by the end of the 2-
year period beginning on the date of enactment of the
Financial Services Act of 1999, the Board, giving due regard
to the principle of national treatment and equality of
competitive opportunity, may impose such restrictions and
requirements on the conduct of such activities by such
foreign bank or company as are comparable to those imposed on
a financial holding company organized under the laws of the
United States, including a requirement to conduct such
activities in compliance with any prudential safeguards
established under section 114 of the Financial Services
Act.''.
SEC. 152. FOREIGN BANKS AND FOREIGN FINANCIAL INSTITUTIONS
THAT ARE WHOLESALE FINANCIAL INSTITUTIONS.
Section 8A of the Federal Deposit Insurance Act (as added
by section 136(c)(2) of this Act) is amended by adding at the
end the following new subsection:
``(i) Voluntary Termination of Deposit Insurance.--The
provisions on voluntary termination of insurance in this
section shall apply to an insured branch of a foreign bank
(including a Federal branch) in the same manner and to the
same extent as they apply to an insured State bank or a
national bank.''.
SEC. 153. REPRESENTATIVE OFFICES.
(a) Definition of ``Representative Office''.--Section
1(b)(15) of the International Banking Act of 1978 (12 U.S.C.
3101(15)) is amended by striking ``State agency, or
subsidiary of a foreign bank'' and inserting ``or State
agency''.
(b) Examinations.--Section 10(c) of the International
Banking Act of 1978 (12 U.S.C. 3107(c)) is amended by adding
at the end the following: ``The Board may also make
examinations of any affiliate of a foreign bank conducting
business in any State if the Board deems it necessary to
determine and enforce compliance with this Act, the Bank
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), or
other applicable Federal banking law.''.
SEC. 154. RECIPROCITY.
(a) National Treatment Reports.--
(1) Report required in the event of certain acquisitions.--
(A) In general.--Whenever a person from a foreign country
announces its intention to acquire or acquires a bank, a
securities underwriter, broker, or dealer, an investment
adviser, or insurance company that ranks within the top 50
firms in that line of business in the United States, the
Secretary of Commerce, in the case of an insurance company,
or the Secretary of the Treasury, in the case of a bank, a
securities underwriter, broker, or dealer, or an investment
adviser, shall, within the earlier of 6 months of such
announcement or such acquisition and in consultation with
other appropriate Federal and State agencies, prepare and
submit to
[[Page H5265]]
the Congress a report on whether a United States person would
be able, de facto or de jure, to acquire an equivalent sized
firm in the country in which such person from a foreign
country is located.
(B) Analysis and recommendations.--If a report submitted
under subparagraph (A) states that the equivalent treatment
referred to in such subparagraph, de facto and de jure, is
not provided in the country which is the subject of the
report, the Secretary of Commerce or the Secretary of the
Treasury, as the case may be and in consultation with other
appropriate Federal and State agencies, shall include in the
report analysis and recommendations as to how that country's
laws and regulations would need to be changed so that
reciprocal treatment would exist.
(2) Report required before financial services negotiations
commence.--The Secretary of Commerce, with respect to
insurance companies, and the Secretary of the Treasury, with
respect to banks, securities underwriters, brokers, dealers,
and investment advisers, shall, not less than 6 months before
the commencement of the financial services negotiations of
the World Trade Organization and in consultation with other
appropriate Federal and State agencies, prepare and submit to
the Congress a report containing--
(A) an assessment of the 30 largest financial services
markets with regard to whether reciprocal access is available
in such markets to United States financial services
providers; and
(B) with respect to any such financial services markets in
which reciprocal access is not available to United States
financial services providers, an analysis and recommendations
as to what legislative, regulatory, or enforcement changes
would be required to ensure full reciprocity for such
providers.
(3) Person of a foreign country defined.--For purposes of
this subsection, the term ``person of a foreign country''
means a person, or a person which directly or indirectly owns
or controls that person, that is a resident of that country,
is organized under the laws of that country, or has its
principal place of business in that country.
(b) Provisions Applicable to Submissions.--
(1) Notice.--Before preparing any report required under
subsection (a), the Secretary of Commerce or the Secretary of
the Treasury, as the case may be, shall publish notice that a
report is in preparation and seek comment from United States
persons.
(2) Privileged submissions.--Upon the request of the
submitting person, any comments or related communications
received by the Secretary of Commerce or the Secretary of the
Treasury, as the case may be, with regard to the report
shall, for the purposes of section 552 of title 5, of the
United States Code, be treated as commercial information
obtained from a person that is privileged or confidential,
regardless of the medium in which the information is
obtained. This confidential information shall be the property
of the Secretary and shall be privileged from disclosure to
any other person. However, this privilege shall not be
construed as preventing access to that confidential
information by the Congress.
(3) Prohibition of unauthorized disclosures.--No person in
possession of confidential information, provided under this
section may disclose that information, in whole or in part,
except for disclosure made in published statistical material
that does not disclose, either directly or when used in
conjunction with publicly available information, the
confidential information of any person.
Subtitle G--Federal Home Loan Bank System Modernization
SEC. 161. SHORT TITLE.
This subtitle may be cited as the ``Federal Home Loan Bank
System Modernization Act of 1999''.
SEC. 162. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422) is amended--
(1) in paragraph (1), by striking ``term `Board' means''
and inserting ``terms `Finance Board' and `Board' mean'';
(2) by striking paragraph (3) and inserting the following:
``(3) State.--The term `State', in addition to the States
of the United States, includes the District of Columbia,
Guam, Puerto Rico, the United States Virgin Islands, American
Samoa, and the Commonwealth of the Northern Mariana
Islands.''; and
(3) by adding at the end the following new paragraph:
``(13) Community financial institution.--
``(A) In general.--The term `community financial
institution' means a member--
``(i) the deposits of which are insured under the Federal
Deposit Insurance Act; and
``(ii) that has, as of the date of the transaction at
issue, less than $500,000,000 in average total assets, based
on an average of total assets over the 3 years preceding that
date.
``(B) Adjustments.--The $500,000,000 limit referred to in
subparagraph (A)(ii) shall be adjusted annually by the
Finance Board, based on the annual percentage increase, if
any, in the Consumer Price Index for all urban consumers, as
published by the Department of Labor.''.
SEC. 163. SAVINGS ASSOCIATION MEMBERSHIP.
Section 5(f) of the Home Owners' Loan Act (12 U.S.C.
1464(f)) is amended to read as follows:
``(f) Federal Home Loan Bank Membership.--On and after
January 1, 1999, a Federal savings association may become a
member of the Federal Home Loan Bank System, and shall
qualify for such membership in the manner provided by the
Federal Home Loan Bank Act.''.
SEC. 164. ADVANCES TO MEMBERS; COLLATERAL.
(a) In General.--Section 10(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1430(a)) is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and indenting
appropriately;
(2) by striking ``(a) Each'' and inserting the following:
``(a) In General.--
``(1) All advances.--Each'';
(3) by striking the 2d sentence and inserting the
following:
``(2) Purposes of advances.--A long-term advance may only
be made for the purposes of--
``(A) providing funds to any member for residential housing
finance; and
``(B) providing funds to any community financial
institution for small business, agricultural, rural
development, or low-income community development lending.'';
(4) by striking ``A Bank'' and inserting the following:
``(3) Collateral.--A Bank'';
(5) in paragraph (3) (as so designated by paragraph (4) of
this subsection)--
(A) in subparagraph (C) (as so redesignated by paragraph
(1) of this subsection) by striking ``Deposits'' and
inserting ``Cash or deposits'';
(B) in subparagraph (D) (as so redesignated by paragraph
(1) of this subsection), by striking the 2d sentence; and
(C) by inserting after subparagraph (D) (as so redesignated
by paragraph (1) of this subsection) the following new
subparagraph:
``(E) Secured loans for small business, agriculture, rural
development, or low-income community development, or
securities representing a whole interest in such secured
loans, in the case of any community financial institution.'';
(6) in paragraph (5)--
(A) in the 2d sentence, by striking ``and the Board'';
(B) in the 3d sentence, by striking ``Board'' and inserting
``Federal home loan bank''; and
(C) by striking ``(5) Paragraphs (1) through (4)'' and
inserting the following:
``(4) Additional bank authority.--Subparagraphs (A) through
(E) of paragraph (3)''; and
(7) by adding at the end the following:
``(5) Review of certain collateral standards.--The Board
may review the collateral standards applicable to each
Federal home loan bank for the classes of collateral
described in subparagraphs (D) and (E) of paragraph (3), and
may, if necessary for safety and soundness purposes, require
an increase in the collateral standards for any or all of
those classes of collateral.
``(6) Definitions.--For purposes of this subsection, the
terms `small business', `agriculture', `rural development',
and `low-income community development' shall have the
meanings given those terms by rule or regulation of the
Finance Board.''.
(b) Clerical Amendment.--The section heading for section 10
of the Federal Home Loan Bank Act (12 U.S.C. 1430) is amended
to read as follows:
``SEC. 10. ADVANCES TO MEMBERS.''.
(c) Conforming Amendments Relating to Members Which Are Not
Qualified Thrift Lenders--The 1st of the 2 subsections
designated as subsection (e) of section 10 of the Federal
Home Loan Bank Act (12 U.S.C. 1430(e)(1)) is amended--
(1) in the last sentence of paragraph (1), by inserting
``or, in the case of any community financial institution, for
the purposes described in subsection (a)(2)'' before the
period; and
(2) in paragraph (5)(C), by inserting ``except that, in
determining the actual thrift investment percentage of any
community financial institution for purposes of this
subsection, the total investment of such member in loans for
small business, agriculture, rural development, or low-income
community development, or securities representing a whole
interest in such loans, shall be treated as a qualified
thrift investment (as defined in such section 10(m))'' before
the period.
SEC. 165. ELIGIBILITY CRITERIA.
Section 4(a) of the Federal Home Loan Bank Act (12 U.S.C.
1424(a)) is amended--
(1) in paragraph (2)(A), by inserting, ``(other than a
community financial institution)'' after ``institution''; and
(2) by adding at the end the following new paragraph:
``(3) Limited exemption for community financial
institutions.--A community financial institution that
otherwise meets the requirements of paragraph (2) may become
a member without regard to the percentage of its total assets
that is represented by residential mortgage loans, as
described in subparagraph (A) of paragraph (2).''.
SEC. 166. MANAGEMENT OF BANKS.
(a) Board of Directors.--Section 7(d) of the Federal Home
Loan Bank Act (12 U.S.C. 1427(d)) is amended--
(1) by striking ``(d) The term'' and inserting the
following:
``(d) Terms of Office.--The term''; and
(2) by striking ``shall be two years''.
(b) Compensation.--Section 7(i) of the Federal Home Loan
Bank Act (12 U.S.C. 1427(i)) is amended by striking ``,
subject to the approval of the board''.
(c) Repeal of Sections 22A and 27.--The Federal Home Loan
Bank Act (12 U.S.C. 1421
[[Page H5266]]
et seq.) is amended by striking sections 22A (12 U.S.C.
1442a) and 27 (12 U.S.C. 1447).
(d) Section 12.--Section 12 of the Federal Home Loan Bank
Act (12 U.S.C. 1432) is amended--
(1) in subsection (a)--
(A) by striking ``, but, except'' and all that follows
through ``ten years'';
(B) by striking ``subject to the approval of the Board''
the first place that term appears;
(C) by striking ``and, by its Board of directors,'' and all
that follows through ``agent of such bank,'' and inserting
``and, by the board of directors of the bank, to prescribe,
amend, and repeal by-laws governing the manner in which its
affairs may be administered, consistent with applicable laws
and regulations, as administered by the Finance Board. No
officer, employee, attorney, or agent of a Federal home loan
bank''; and
(D) by striking ``Board of directors'' where such term
appears in the penultimate sentence and inserting ``board of
directors''; and
(2) in subsection (b), by striking ``loans banks'' and
inserting ``loan banks''.
(e) Powers and Duties of Federal Housing Finance Board.--
(1) Issuance of notices of violations.--Section 2B(a) of
the Federal Home Loan Bank Act (12 U.S.C. 1422b(a)) is
amended by adding at the end the following new paragraphs:
``(5) To issue and serve a notice of charges upon a Federal
home loan bank or upon any executive officer or director of a
Federal home loan bank if, in the determination of the
Finance Board, the bank, executive officer, or director is
engaging or has engaged in, or the Finance Board has
reasonable cause to believe that the bank, executive officer,
or director is about to engage in, any conduct that violates
any provision of this Act or any law, order, rule, or
regulation or any condition imposed in writing by the Finance
Board in connection with the granting of any application or
other request by the bank, or any written agreement entered
into by the bank with the agency, in accordance with the
procedures provided in section 1371(c) of the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992. Such
authority includes the same authority to take affirmative
action to correct conditions resulting from violations or
practices or to limit activities of a bank or any executive
officer or director of a bank as appropriate Federal banking
agencies have to take with respect to insured depository
institutions under paragraphs (6) and (7) of section 8(b) of
the Federal Deposit Insurance Act, and to have all other
powers, rights, and duties to enforce this Act with respect
to the Federal home loan banks and their executive officers
and directors as the Office of Federal Housing Enterprise
Oversight has to enforce the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, the Federal
National Mortgage Association Charter Act, or the Federal
Home Loan Mortgage Corporation Act with respect to the
Federal housing enterprises under the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992.
``(6) To address any insufficiencies in capital levels
resulting from the application of section 5(f) of the Home
Owners' Loan Act.
``(7) To sue and be sued, by and through its own
attorneys.''.
(2) Technical amendment.--Section 111 of Public Law 93-495
(12 U.S.C. 250) is amended by striking ``Federal Home Loan
Bank Board,'' and inserting ``Director of the Office of
Thrift Supervision, ``the Federal Housing Finance Board,''.
(f) Eligibility To Secure Advances.--
(1) Section 9.--Section 9 of the Federal Home Loan Bank Act
(12 U.S.C. 1429) is amended--
(A) in the 2d sentence, by striking ``with the approval of
the Board''; and
(B) in the 3d sentence, by striking ``, subject to the
approval of the Board,''.
(2) Section 10.--Section 10 of the Federal Home Loan Bank
Act (12 U.S.C. 1430) is amended--
(A) in subsection (c)--
(i) in the 1st sentence, by striking ``Board'' and
inserting ``Federal home loan bank''; and
(ii) by striking the 2d sentence;
(B) in subsection (d)--
(i) in the 1st sentence, by striking ``and the approval of
the Board''; and
(ii) by striking ``Subject to the approval of the Board,
any'' and inserting ``Any''; and
(C) in subsection (j)(1)--
(i) by striking ``to subsidize the interest rate on
advances'' and inserting ``to provide subsidies, including
subsidized interest rates on advances'';
(ii) by striking ``Pursuant'' and inserting the following:
``(A) Establishment.--Pursuant''; and
(iii) by adding at the end the following new subparagraph:
``(B) Nondelegation of approval authority.--Subject to such
regulations as the Finance Board may prescribe, the board of
directors of each Federal home loan bank may approve or
disapprove requests from members for Affordable Housing
Program subsidies, and may not delegate such authority.''.
(g) Section 16.--Section 16(a) of the Federal Home Loan
Bank Act (12 U.S.C. 1436(a)) is amended--
(1) in the 3d sentence--
(A) by striking ``net earnings'' and inserting ``previously
retained earnings or current net earnings''; and
(B) by striking ``, and then only with the approval of the
Federal Housing Finance Board''; and
(2) by striking the 4th sentence.
(h) Section 18.--Section 18(b) of the Federal Home Loan
Bank Act (12 U.S.C. 1438(b)) is amended by striking paragraph
(4).
SEC. 167. RESOLUTION FUNDING CORPORATION.
(a) In General.--Section 21B(f)(2)(C) of the Federal Home
Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)) is amended to read
as follows:
``(C) Payments by federal home loan banks.--
``(i) In general.--To the extent that the amounts available
pursuant to subparagraphs (A) and (B) are insufficient to
cover the amount of interest payments, each Federal home loan
bank shall pay to the Funding Corporation in each calendar
year, 20.75 percent of the net earnings of that bank (after
deducting expenses relating to section 10(j) and operating
expenses).
``(ii) Annual determination.--The Board annually shall
determine the extent to which the value of the aggregate
amounts paid by the Federal home loan banks exceeds or falls
short of the value of an annuity of $300,000,000 per year
that commences on the issuance date and ends on the final
scheduled maturity date of the obligations, and shall select
appropriate present value factors for making such
determinations.
``(iii) Payment term alterations.--The Board shall extend
or shorten the term of the payment obligations of a Federal
home loan bank under this subparagraph as necessary to ensure
that the value of all payments made by the banks is
equivalent to the value of an annuity referred to in clause
(ii).
``(iv) Term beyond maturity.--If the Board extends the term
of payments beyond the final scheduled maturity date for the
obligations, each Federal home loan bank shall continue to
pay 20.75 percent of its net earnings (after deducting
expenses relating to section 10(j) and operating expenses) to
the Treasury of the United States until the value of all such
payments by the Federal home loan banks is equivalent to the
value of an annuity referred to in clause (ii). In the final
year in which the Federal home loan banks are required to
make any payment to the Treasury under this subparagraph, if
the dollar amount represented by 20.75 percent of the net
earnings of the Federal home loan banks exceeds the remaining
obligation of the banks to the Treasury, the Finance Board
shall reduce the percentage pro rata to a level sufficient to
pay the remaining obligation.''.
(b) Effective Date.--The amendment made by subsection (a)
shall become effective on January 1, 1999. Payments made by a
Federal home loan bank before that effective date shall be
counted toward the total obligation of that bank under
section 21B(f)(2)(C) of the Federal Home Loan Bank Act, as
amended by this section.
SEC. 168. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
Section 6 of the Federal Home Loan Bank Act (12 U.S.C.
1426) is amended to read as follows:
``SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS.
``(a) Regulations.--
``(1) Capital standards.--Not later than 1 year after the
date of enactment of the Financial Services Act of 1999, the
Finance Board shall issue regulations prescribing uniform
capital standards applicable to each Federal home loan bank,
which shall require each such bank to meet--
``(A) the leverage requirement specified in paragraph (2);
and
``(B) the risk-based capital requirements, in accordance
with paragraph (3).
``(2) Leverage requirement.--
``(A) In general.--The leverage requirement shall require
each Federal home loan bank to maintain a minimum amount of
total capital based on the aggregate on-balance sheet assets
of the bank and shall be 5 percent.
``(B) Treatment of stock and retained earnings.--In
determining compliance with the minimum leverage ratio
established under subparagraph (A), the paid-in value of the
outstanding Class B stock shall be multiplied by 1.5, the
paid-in value of the outstanding Class C stock and the amount
of retained earnings shall be multiplied by 2.0, and such
higher amounts shall be deemed to be capital for purposes of
meeting the 5 percent minimum leverage ratio.
``(3) Risk-based capital standards.--
``(A) In general.--Each Federal home loan bank shall
maintain permanent capital in an amount that is sufficient,
as determined in accordance with the regulations of the
Finance Board, to meet--
``(i) the credit risk to which the Federal home loan bank
is subject; and
``(ii) the market risk, including interest rate risk, to
which the Federal home loan bank is subject, based on a
stress test established by the Finance Board that rigorously
tests for changes in market variables, including changes in
interest rates, rate volatility, and changes in the shape of
the yield curve.
``(B) Consideration of other risk-based standards.--In
establishing the risk-based standard under subparagraph
(A)(ii), the Finance Board shall take due consideration of
any risk-based capital test established pursuant to section
1361 of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4611) for the enterprises
(as defined in that Act), with such modifications as the
Finance Board determines to be
[[Page H5267]]
appropriate to reflect differences in operations between the
Federal home loan banks and those enterprises.
``(4) Other regulatory requirements.--The regulations
issued by the Finance Board under paragraph (1) shall--
``(A) permit each Federal home loan bank to issue, with
such rights, terms, and preferences, not inconsistent with
this Act and the regulations issued hereunder, as the board
of directors of that bank may approve, any 1 or more of--
``(i) Class A stock, which shall be redeemable in cash and
at par 6 months following submission by a member of a written
notice of its intent to redeem such shares;
``(ii) Class B stock, which shall be redeemable in cash and
at par 5 years following submission by a member of a written
notice of its intent to redeem such shares; and
``(iii) Class C stock, which shall be nonredeemable;
``(B) provide that the stock of a Federal home loan bank
may be issued to and held by only members of the bank, and
that a bank may not issue any stock other than as provided in
this section;
``(C) prescribe the manner in which stock of a Federal home
loan bank may be sold, transferred, redeemed, or repurchased;
and
``(D) provide the manner of disposition of outstanding
stock held by, and the liquidation of any claims of the
Federal home loan bank against, an institution that ceases to
be a member of the bank, through merger or otherwise, or that
provides notice of intention to withdraw from membership in
the bank.
``(5) Definitions of capital.--For purposes of determining
compliance with the capital standards established under this
subsection--
``(A) permanent capital of a Federal home loan bank shall
include (as determined in accordance with generally accepted
accounting principles)--
``(i) the amounts paid for the Class C stock and any other
nonredeemable stock approved by the Finance Board;
``(ii) the amounts paid for the Class B stock, in an amount
not to exceed 1 percent of the total assets of the bank; and
``(iii) the retained earnings of the bank; and
``(B) total capital of a Federal home loan bank shall
include--
``(i) permanent capital;
``(ii) the amounts paid for the Class A stock, Class B
stock (excluding any amount treated as permanent capital
under subparagraph (5)(A)(ii)), or any other class of
redeemable stock approved by the Finance Board;
``(iii) consistent with generally accepted accounting
principles, and subject to the regulation of the Finance
Board, a general allowance for losses, which may not include
any reserves or allowances made or held against specific
assets; and
``(iv) any other amounts from sources available to absorb
losses incurred by the bank that the Finance Board determines
by regulation to be appropriate to include in determining
total capital.
``(6) Transition period.--Notwithstanding any other
provisions of this Act, the requirements relating to purchase
and retention of capital stock of a Federal home loan bank by
any member thereof in effect on the day before the date of
enactment of the Federal Home Loan Bank System Modernization
Act of 1999, shall continue in effect with respect to each
Federal home loan bank until the regulations required by this
subsection have taken effect and the capital structure plan
required by subsection (b) has been approved by the Finance
Board and implemented by such bank.
``(b) Capital Structure Plan.--
``(1) Approval of plans.--Not later than 270 days after the
date of publication by the Finance Board of final regulations
in accordance with subsection (a), the board of directors of
each Federal home loan bank shall submit for Finance Board
approval a plan establishing and implementing a capital
structure for such bank that--
``(A) the board of directors determines is best suited for
the condition and operation of the bank and the interests of
the members of the bank;
``(B) meets the requirements of subsection (c); and
``(C) meets the minimum capital standards and requirements
established under subsection (a) and other regulations
prescribed by the Finance Board.
``(2) Approval of modifications.--The board of directors of
a Federal home loan bank shall submit to the Finance Board
for approval any modifications that the bank proposes to make
to an approved capital structure plan.
``(c) Contents of Plan.--The capital structure plan of each
Federal home loan bank shall contain provisions addressing
each of the following:
``(1) Minimum investment.--
``(A) In general.--Each capital structure plan of a Federal
home loan bank shall require each member of the bank to
maintain a minimum investment in the stock of the bank, the
amount of which shall be determined in a manner to be
prescribed by the board of directors of each bank and to be
included as part of the plan.
``(B) Investment alternatives.--
``(i) In general.--In establishing the minimum investment
required for each member under subparagraph (A), a Federal
home loan bank may, in its discretion, include any 1 or more
of the requirements referred to in clause (ii), or any other
provisions approved by the Finance Board.
``(ii) Authorized requirements.--A requirement is referred
to in this clause if it is a requirement for--
``(I) a stock purchase based on a percentage of the total
assets of a member; or
``(II) a stock purchase based on a percentage of the
outstanding advances from the bank to the member.
``(C) Minimum amount.--Each capital structure plan of a
Federal home loan bank shall require that the minimum stock
investment established for members shall be set at a level
that is sufficient for the bank to meet the minimum capital
requirements established by the Finance Board under
subsection (a).
``(D) Adjustments to minimum required investment.--The
capital structure plan of each Federal home loan bank shall
impose a continuing obligation on the board of directors of
the bank to review and adjust the minimum investment required
of each member of that bank, as necessary to ensure that the
bank remains in compliance with applicable minimum capital
levels established by the Finance Board, and shall require
each member to comply promptly with any adjustments to the
required minimum investment.
``(2) Transition rule.--
``(A) In general.--The capital structure plan of each
Federal home loan bank shall specify the date on which it
shall take effect, and may provide for a transition period of
not longer than 3 years to allow the bank to come into
compliance with the capital requirements prescribed under
subsection (a), and to allow any institution that was a
member of the bank on the date of enactment of the Financial
Services Act of 1999, to come into compliance with the
minimum investment required pursuant to the plan.
``(B) Interim purchase requirements.--The capital structure
plan of a Federal home loan bank may allow any member
referred to in subparagraph (A) that would be required by the
terms of the capital structure plan to increase its
investment in the stock of the bank to do so in periodic
installments during the transition period.
``(3) Disposition of shares.--The capital structure plan of
a Federal home loan bank shall provide for the manner of
disposition of any stock held by a member of that bank that
terminates its membership or that provides notice of its
intention to withdraw from membership in that bank.
``(4) Classes of stock.--
``(A) In general.--The capital structure plan of a Federal
home loan bank shall afford each member of that bank the
option of maintaining its required investment in the bank
through the purchase of any combination of classes of stock
authorized by the board of directors of the bank and approved
by the Finance Board in accordance with its regulations.
``(B) Rights requirement.--A Federal home loan bank shall
include in its capital structure plan provisions establishing
terms, rights, and preferences, including minimum investment,
dividends, voting, and liquidation preferences of each class
of stock issued by the bank, consistent with Finance Board
regulations and market requirements.
``(C) Reduced minimum investment.--The capital structure
plan of a Federal home loan bank may provide for a reduced
minimum stock investment for any member of that bank that
elects to purchase Class B, Class C, or any other class of
nonredeemable stock, in a manner that is consistent with
meeting the minimum capital requirements of the bank, as
established by the Finance Board.
``(D) Liquidation of claims.--The capital structure plan of
a Federal home loan bank shall provide for the liquidation in
an orderly manner, as determined by the bank, of any claim of
that bank against a member, including claims for any
applicable prepayment fees or penalties resulting from
prepayment of advances prior to stated maturity.
``(5) Limited transferability of stock.--The capital
structure plan of a Federal home loan bank shall--
``(A) provide that--
``(i) any stock issued by that bank shall be available only
to, held only by, and tradable only among members of that
bank and between that bank and its members; and
``(ii) a bank has no obligation to repurchase its
outstanding Class C stock but may do so, provided it is
consistent with Finance Board regulations and is at a price
that is mutually agreeable to the bank and the member; and
``(B) establish standards, criteria, and requirements for
the issuance, purchase, transfer, retirement, and redemption
of stock issued by that bank.
``(6) Bank review of plan.--Before filing a capital
structure plan with the Finance Board, each Federal home loan
bank shall conduct a review of the plan by--
``(A) an independent certified public accountant, to
ensure, to the extent possible, that implementation of the
plan would not result in any write-down of the redeemable
bank stock investment of its members; and
``(B) at least 1 major credit rating agency, to determine,
to the extent possible, whether implementation of the plan
would have any material effect on the credit ratings of the
bank.
``(d) Termination of Membership.--
``(1) Voluntary withdrawal.--Any member may withdraw from a
Federal home loan bank by providing written notice to the
bank of its intent to do so. The applicable stock
[[Page H5268]]
redemption notice periods shall commence upon receipt of the
notice by the bank. Upon the expiration of the applicable
notice period for each class of redeemable stock, the member
may surrender such stock to the bank, and shall be entitled
to receive in cash the par value of the stock. During the
applicable notice periods, the member shall be entitled to
dividends and other membership rights commensurate with
continuing stock ownership.
``(2) Involuntary withdrawal.--
``(A) In general.--The board of directors of a Federal home
loan bank may terminate the membership of any institution if,
subject to Finance Board regulations, it determines that--
``(i) the member has failed to comply with a provision of
this Act or any regulation prescribed under this Act; or
``(ii) the member has been determined to be insolvent, or
otherwise subject to the appointment of a conservator,
receiver, or other legal custodian, by a State or Federal
authority with regulatory and supervisory responsibility for
the member.
``(B) Stock disposition.--An institution, the membership of
which is terminated in accordance with subparagraph (A)--
``(i) shall surrender redeemable stock to the Federal home
loan bank, and shall receive in cash the par value of the
stock, upon the expiration of the applicable notice period
under subsection (a)(4)(A);
``(ii) shall receive any dividends declared on its
redeemable stock, during the applicable notice period under
subsection (a)(4)(A); and
``(iii) shall not be entitled to any other rights or
privileges accorded to members after the date of the
termination.
``(C) Commencement of notice period.--With respect to an
institution, the membership of which is terminated in
accordance with subparagraph (A), the applicable notice
period under subsection (a)(4) for each class of redeemable
stock shall commence on the earlier of--
``(i) the date of such termination; or
``(ii) the date on which the member has provided notice of
its intent to redeem such stock.
``(3) Liquidation of indebtedness.--Upon the termination of
the membership of an institution for any reason, the
outstanding indebtedness of the member to the bank shall be
liquidated in an orderly manner, as determined by the bank
and, upon the extinguishment of all such indebtedness, the
bank shall return to the member all collateral pledged to
secure the indebtedness.
``(e) Redemption of Excess Stock.--
``(1) In general.--A Federal home loan bank, in its sole
discretion, may redeem or repurchase, as appropriate, any
shares of Class A or Class B stock issued by the bank and
held by a member that are in excess of the minimum stock
investment required of that member.
``(2) Excess stock.--Shares of stock held by a member shall
not be deemed to be `excess stock' for purposes of this
subsection by virtue of a member's submission of a notice of
intent to withdraw from membership or termination of its
membership in any other manner.
``(3) Priority.--A Federal home loan bank may not redeem
any excess Class B stock prior to the end of the 5-year
notice period, unless the member has no Class A stock
outstanding that could be redeemed as excess.
``(f) Impairment of Capital.--If the Finance Board or the
board of directors of a Federal home loan bank determines
that the bank has incurred or is likely to incur losses that
result in or are expected to result in charges against the
capital of the bank, the bank shall not redeem or repurchase
any stock of the bank without the prior approval of the
Finance Board while such charges are continuing or are
expected to continue. In no case may a bank redeem or
repurchase any applicable capital stock if, following the
redemption, the bank would fail to satisfy any minimum
capital requirement.
``(g) Rejoining After Divestiture of All Shares.--
``(1) In general.--Except as provided in paragraph (2), and
notwithstanding any other provision of this Act, an
institution that divests all shares of stock in a Federal
home loan bank may not, after such divestiture, acquire
shares of any Federal home loan bank before the end of the 5-
year period beginning on the date of the completion of such
divestiture, unless the divestiture is a consequence of a
transfer of membership on an uninterrupted basis between
banks.
``(2) Exception for withdrawals from membership before
1998.--Any institution that withdrew from membership in any
Federal home loan bank before December 31, 1997, may acquire
shares of a Federal home loan bank at any time after that
date, subject to the approval of the Finance Board and the
requirements of this Act.
``(h) Treatment of Retained Earnings.--
``(1) In general.--The holders of the Class C stock of a
Federal home loan bank, and any other classes of
nonredeemable stock approved by the Finance Board (to the
extent provided in the terms thereof), shall own the retained
earnings, surplus, undivided profits, and equity reserves, if
any, of the bank.
``(2) No nonredeemable classes of stock.--If a Federal home
loan bank has no outstanding Class C or other such
nonredeemable stock, then the holders of any other classes of
stock of the bank then outstanding shall have ownership in,
and a private property right in, the retained earnings,
surplus, undivided profits, and equity reserves, if any, of
the bank.
``(3) Exception.--Except as specifically provided in this
section or through the declaration of a dividend or a capital
distribution by a Federal home loan bank, or in the event of
liquidation of the bank, a member shall have no right to
withdraw or otherwise receive distribution of any portion of
the retained earnings of the bank.
``(4) Limitation.--A Federal home loan bank may not make
any distribution of its retained earnings unless, following
such distribution, the bank would continue to meet all
applicable capital requirements.''.
Subtitle H--ATM Fee Reform
SEC. 171. SHORT TITLE.
This subtitle may be cited as the ``ATM Fee Reform Act of
1999''.
SEC. 172. ELECTRONIC FUND TRANSFER FEE DISCLOSURES AT ANY
HOST ATM.
Section 904(d) of the Electronic Fund Transfer Act (15
U.S.C. 1693b(d)) is amended by adding at the end the
following new paragraph:
``(3) Fee disclosures at automated teller machines.--
``(A) In general.--The regulations prescribed under
paragraph (1) shall require any automated teller machine
operator who imposes a fee on any consumer for providing host
transfer services to such consumer to provide notice in
accordance with subparagraph (B) to the consumer (at the time
the service is provided) of--
``(i) the fact that a fee is imposed by such operator for
providing the service; and
``(ii) the amount of any such fee.
``(B) Notice requirements.--
``(i) On the machine.--The notice required under clause (i)
of subparagraph (A) with respect to any fee described in such
subparagraph shall be posted in a prominent and conspicuous
location on or at the automated teller machine at which the
electronic fund transfer is initiated by the consumer; and
``(ii) On the screen.--The notice required under clauses
(i) and (ii) of subparagraph (A) with respect to any fee
described in such subparagraph shall appear on the screen of
the automated teller machine, or on a paper notice issued
from such machine, after the transaction is initiated and
before the consumer is irrevocably committed to completing
the transaction.
``(C) Prohibition on fees not properly disclosed and
explicitly assumed by consumer.--No fee may be imposed by any
automated teller machine operator in connection with any
electronic fund transfer initiated by a consumer for which a
notice is required under subparagraph (A), unless--
``(i) the consumer receives such notice in accordance with
subparagraph (B); and
``(ii) the consumer elects to continue in the manner
necessary to effect the transaction after receiving such
notice.
``(D) Definitions.--For purposes of this paragraph, the
following definitions shall apply:
``(i) Electronic fund transfer.--The term `electronic fund
transfer' includes a transaction which involves a balance
inquiry initiated by a consumer in the same manner as an
electronic fund transfer, whether or not the consumer
initiates a transfer of funds in the course of the
transaction.
``(ii) Automated teller machine operator.--The term
`automated teller machine operator' means any person who--
``(I) operates an automated teller machine at which
consumers initiate electronic fund transfers; and
``(II) is not the financial institution which holds the
account of such consumer from which the transfer is made.
``(iii) Host transfer services.--The term `host transfer
services' means any electronic fund transfer made by an
automated teller machine operator in connection with a
transaction initiated by a consumer at an automated teller
machine operated by such operator.''.
SEC. 173. DISCLOSURE OF POSSIBLE FEES TO CONSUMERS WHEN ATM
CARD IS ISSUED.
Section 905(a) of the Electronic Fund Transfer Act (15
U.S.C. 1693c(a)) is amended--
(1) by striking ``and'' at the end of paragraph (8);
(2) by striking the period at the end of paragraph (9) and
inserting ``; and''; and
(3) by inserting after paragraph (9) the following new
paragraph:
``(10) a notice to the consumer that a fee may be imposed
by--
``(A) an automated teller machine operator (as defined in
section 904(d)(3)(D)(ii)) if the consumer initiates a
transfer from an automated teller machine which is not
operated by the person issuing the card or other means of
access; and
``(B) any national, regional, or local network utilized to
effect the transaction.''.
SEC. 174. FEASIBILITY STUDY.
(a) In General.--The Comptroller General of the United
States shall conduct a study of the feasibility of requiring,
in connection with any electronic fund transfer initiated by
a consumer through the use of an automated teller machine--
(1) a notice to be provided to the consumer before the
consumer is irrevocably committed to completing the
transaction, which clearly states the amount of any fee which
will be imposed upon the consummation of the transaction by--
(A) any automated teller machine operator (as defined in
section 904(d)(3)(D)(ii) of the Electronic Fund Transfer Act)
involved in the transaction;
[[Page H5269]]
(B) the financial institution holding the account of the
consumer;
(C) any national, regional, or local network utilized to
effect the transaction; and
(D) any other party involved in the transfer; and
(2) the consumer to elect to consummate the transaction
after receiving the notice described in paragraph (1).
(b) Factors To Be Considered.--In conducting the study
required under subsection (a) with regard to the notice
requirement described in such subsection, the Comptroller
General shall consider the following factors:
(1) The availability of appropriate technology.
(2) Implementation and operating costs.
(3) The competitive impact any such notice requirement
would have on various sizes and types of institutions, if
implemented.
(4) The period of time which would be reasonable for
implementing any such notice requirement.
(5) The extent to which consumers would benefit from any
such notice requirement.
(6) Any other factor the Comptroller General determines to
be appropriate in analyzing the feasibility of imposing any
such notice requirement.
(c) Report to the Congress.--Before the end of the 6-month
period beginning on the date of the enactment of this Act,
the Comptroller General shall submit a report to the Congress
containing--
(1) the findings and conclusions of the Comptroller General
in connection with the study required under subsection (a);
and
(2) the recommendation of the Comptroller General with
regard to the question of whether a notice requirement
described in subsection (a) should be implemented and, if so,
how such requirement should be implemented.
SEC. 175. NO LIABILITY IF POSTED NOTICES ARE DAMAGED.
Section 910 of the Electronic Fund Transfer Act (15 U.S.C
1693h) is amended by adding at the end the following new
subsection:
``(d) Exception for Damaged Notices.--If the notice
required to be posted pursuant to section 904(d)(3)(B)(i) by
an automated teller machine operator has been posted by such
operator in compliance with such section and the notice is
subsequently removed, damaged, or altered by any person other
than the operator of the automated teller machine, the
operator shall have no liability under this section for
failure to comply with section 904(d)(3)(B)(i).''.
Subtitle I--Direct Activities of Banks
SEC. 181. AUTHORITY OF NATIONAL BANKS TO UNDERWRITE CERTAIN
MUNICIPAL BONDS.
The paragraph designated the Seventh of section 5136 of the
Revised Statutes of the United States (12 U.S.C. 24(7)) is
amended by adding at the end the following new sentence: ``In
addition to the provisions in this paragraph for dealing in,
underwriting or purchasing securities, the limitations and
restrictions contained in this paragraph as to dealing in,
underwriting, and purchasing investment securities for the
national bank's own account shall not apply to obligations
(including limited obligation bonds, revenue bonds, and
obligations that satisfy the requirements of section
142(b)(1) of the Internal Revenue Code of 1986) issued by or
on behalf of any State or political subdivision of a State,
including any municipal corporate instrumentality of 1 or
more States, or any public agency or authority of any State
or political subdivision of a State, if the national bank is
well capitalized (as defined in section 38 of the Federal
Deposit Insurance Act).''.
Subtitle J--Deposit Insurance Funds
SEC. 186. STUDY OF SAFETY AND SOUNDNESS OF FUNDS.
(a) Study Required.--The Board of Directors of the Federal
Deposit Insurance Corporation shall conduct a study of the
following issues with regard to the Bank Insurance Fund and
the Savings Association Insurance Fund:
(1) Safety and soundness.--The safety and soundness of the
funds and the adequacy of the reserve requirements applicable
to the funds in light of--
(A) the size of the insured depository institutions which
are resulting from mergers and consolidations since the
effective date of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994; and
(B) the affiliation of insured depository institutions with
other financial institutions pursuant to this Act and the
amendments made by this Act.
(2) Concentration levels.--The concentration levels of the
funds, taking into account the number of members of each fund
and the geographic distribution of such members, and the
extent to which either fund is exposed to higher risks due to
a regional concentration of members or an insufficient
membership base relative to the size of member institutions.
(3) Merger issues.--Issues relating to the planned merger
of the funds, including the cost of merging the funds and the
manner in which such costs will be distributed among the
members of the respective funds.
(b) Report Required.--
(1) In general.--Before the end of the 9-month period
beginning on the date of the enactment of this Act, the Board
of Directors of the Federal Deposit Insurance Corporation
shall submit a report to the Congress on the study conducted
pursuant to subsection (a).
(2) Contents of report.--The report shall include--
(A) detailed findings of the Board of Directors with regard
to the issues described in subsection (a);
(B) a description of the plans developed by the Board of
Directors for merging the Bank Insurance Fund and the Savings
Association Insurance Fund, including an estimate of the
amount of the cost of such merger which would be borne by
Savings Association Insurance Fund members; and
(C) such recommendations for legislative and administrative
action as the Board of Directors determines to be necessary
or appropriate to preserve the safety and soundness of the
deposit insurance funds, reduce the risks to such funds,
provide for an efficient merger of such funds, and for other
purposes.
(c) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Insured depository institution.--The term ``insured
depository institution'' has the same meaning as in section
3(c) of the Federal Deposit Insurance Act.
(2) BIF and SAIF members.--The terms ``Bank Insurance Fund
member'' and ``Savings Association Insurance Fund member''
have the same meanings as in section 7(l) of the Federal
Deposit Insurance Act.
SEC. 187. ELIMINATION OF SAIF AND DIF SPECIAL RESERVES.
(a) SAIF Special Reserves.--Section 11(a)(6) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(a)(6)) is amended by
striking subparagraph (L).
(b) DIF Special Reserves.--Section 2704 of the Deposit
Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is
amended--
(1) by striking subsection (b); and
(2) in subsection (d)--
(A) by striking paragraph (4);
(B) in paragraph (6)(C)(i), by striking ``(6) and (7)'' and
inserting ``(5), (6), and (7)''; and
(C) in paragraph (6)(C), by striking clause (ii) and
inserting the following:
``(ii) by redesignating paragraph (8) as paragraph (5).''.
Subtitle K--Miscellaneous Provisions
SEC. 191. TERMINATION OF ``KNOW YOUR CUSTOMER'' REGULATIONS.
(a) In General.--None of the proposed regulations described
in subsection (b) may be published in final form and, to the
extent any such regulation has become effective before the
date of the enactment of this Act, such regulation shall
cease to be effective as of such date.
(b) Proposed Regulations Described.--The proposed
regulations referred to in subsection (a) are as follows:
(1) The regulation proposed by the Comptroller of the
Currency to amend part 21 of title 12 of the Code of Federal
Regulations, as published in the Federal Register on December
7, 1998.
(2) The regulation proposed by the Director of the Office
of Thrift Supervision to amend part 563 of title 12 of the
Code of Federal Regulations, as published in the Federal
Register on December 7, 1998.
(3) The regulation proposed by the Board of Governors of
the Federal Reserve System to amend parts 208, 211, and 225
of title 12 of the Code of Federal Regulations, as published
in the Federal Register on December 7, 1998.
(4) The regulation proposed by the Federal Deposit
Insurance Corporation to amend part 326 of title 12 of the
Code of Federal Regulations, as published in the Federal
Register on December 7, 1998.
SEC. 192. STUDY AND REPORT ON FEDERAL ELECTRONIC FUND
TRANSFERS.
(a) Study.--The Secretary of the Treasury shall conduct a
feasibility study to determine--
(1) whether all electronic payments issued by Federal
agencies could be routed through the Regional Finance Centers
of the Department of the Treasury for verification and
reconciliation;
(2) whether all electronic payments made by the Federal
Government could be subjected to the same level of
reconciliation as United States Treasury checks, including
matching each payment issued with each corresponding deposit
at financial institutions;
(3) whether the appropriate computer security controls are
in place in order to ensure the integrity of electronic
payments;
(4) the estimated costs of implementing, if so recommended,
the processes and controls described in paragraphs (1), (2),
and (3); and
(5) a possible timetable for implementing those processes
if so recommended.
(b) Report to Congress.--Not later than October 1, 2000,
the Secretary of the Treasury shall submit a report to
Congress containing the results of the study required by
subsection (a).
(c) Definition.--For purposes of this section, the term
``electronic payment'' means any transfer of funds, other
than a transaction originated by check, draft, or similar
paper instrument, which is initiated through an electronic
terminal, telephonic instrument, or computer or magnetic
tapes so as to order, instruct, or authorize a debit or
credit to a financial account.
SEC. 193. GENERAL ACCOUNTING OFFICE STUDY OF CONFLICTS OF
INTEREST
(a) Study Required.--The Comptroller General of the United
States shall conduct a study analyzing the conflict of
interest faced by the Board of Governors of the Federal
Reserve System between its role as a primary regulator of the
banking industry and its role as a vendor of services to the
banking and financial services industry.
[[Page H5270]]
(b) Specific Conflict Required to Be Addressed.--In the
course of the study required under subsection (a), the
Comptroller General shall address the conflict of interest
faced by the Board of Governors of the Federal Reserve System
between the role of the Board as a regulator of the payment
system, generally, and its participation in the payment
system as a competitor with private entities who are
providing payment services.
(c) Report to Congress.--Before the end of the 1-year
period beginning on the date of the enactment of this Act,
the Comptroller General shall submit a report to the Congress
containing the findings and conclusions of the Comptroller
General in connection with the study required under this
section, together with such recommendations for such
legislative or administrative actions as the Comptroller
General may determine to be appropriate, including
recommendations for resolving any such conflict of interest.
SEC. 194. STUDY OF COST OF ALL FEDERAL BANKING REGULATIONS.
(a) In General.--In accordance with the finding in the
Board of Governors of the Federal Reserve System Staff Study
Numbered 171 (April, 1998) that ``Further research covering
more and different types of regulations and regulatory
requirements is clearly needed to make informed decisions
about regulations'', the Board of Governors of the Federal
Reserve System, in consultation with the other Federal
banking agencies (as defined in section 3 of the Federal
Deposit Insurance Act) shall conduct a comprehensive study of
the total annual costs and benefits of all Federal financial
regulations and regulatory requirements applicable to banks.
(b) Report Required.--Before the end of the 2-year period
beginning on the date of the enactment of this Act, the Board
of Governors of the Federal Reserve System shall submit a
comprehensive report to the Congress containing the findings
and conclusions of the Board in connection with the study
required under subsection (a) and such recommendations for
legislative and administrative action as the Board may
determine to be appropriate.
SEC. 195. STUDY AND REPORT ON ADAPTING EXISTING LEGISLATIVE
REQUIREMENTS TO ONLINE BANKING AND LENDING.
(a) Study Required.--The Federal banking agencies shall
conduct a study of banking regulations regarding the delivery
of financial services, including those regulations that may
assume that there will be person-to-person contact during the
course of a financial services transaction, and report their
recommendations on adapting those existing requirements to
online banking and lending.
(b) Report Required.--Within 1 year of the date of the
enactment of this Act, the Federal banking agencies shall
submit a report to the Congress on the findings and
conclusions of the agencies with respect to the study
required under subsection (a), together with such
recommendations for legislative or regulatory action as the
agencies may determine to be appropriate.
(c) Definition.--For purposes of this section, the term
``Federal banking agencies'' means each Federal banking
agency (as defined in section 3(z) of the Federal Deposit
Insurance Act).
SEC. 196. REGULATION OF UNINSURED STATE MEMBER BANKS.
Section 9 of the Federal Reserve Act (12 U.S.C. 321 et
seq.) is amended by adding at the end the following new
paragraph:
``(24) Enforcement authority over uninsured state member
banks.--Section 3(u) of the Federal Deposit Insurance Act,
subsections (j) and (k) of section 7 of such Act, and
subsections (b) through (n), (s), (u), and (v) of section 8
of such Act shall apply to an uninsured State member bank in
the same manner and to the same extent such provisions apply
to an insured State member bank and any reference in any such
provision to `insured depository institution' shall be deemed
to be a reference to `uninsured State member bank' for
purposes of this paragraph.''.
SEC. 197. CLARIFICATION OF SOURCE OF STRENGTH DOCTRINE.
Section 18 of the Federal Deposit Insurance Act (21 U.S.C.
1828) is amended by adding at the end the following new
subsection:
``(t) Limitation on Claims.--
``(1) In general.--Notwithstanding any other provision of
law other than paragraph (2), no person shall have any claim
for monetary damages or return of assets or other property
against any Federal banking agency (including in its capacity
as conservator or receiver) relating to the transfer of
money, assets, or other property to increase the capital of
an insured depository institution by any depository
institution holding company or controlling shareholder for
such depository institution, or any affiliate or subsidiary
of such depository institution, if at the time of the
transfer--
``(A) the insured depository institution is subject to any
direction issued in writing by a Federal banking agency to
increase its capital;
``(B) the depository institution is undercapitalized,
significantly undercapitalized, or critically
undercapitalized (as defined in section 38 of this Act); and
``(C) for that portion of the transfer that is made by an
entity covered by section 5(g) of the Bank Holding Company
Act of 1956 or section 45 of this Act, the Federal banking
agency has followed the procedure set forth in such section.
``(2) Exception.--No provision of this subsection shall be
construed as limiting--
``(A) the right of an insured depository institution, a
depository institution holding company, or any other agency
or person to seek direct review of an order or directive
issued by a Federal banking agency under this Act, the Bank
Holding Company Act of 1956, the National Bank Receivership
Act, the Bank Conservation Act, or the Home Owners' Loan Act;
``(B) the rights of any party to a contract pursuant to
section 11(e) of this Act; or
``(C) the rights of any party to a contract with a
depository institution holding company or a subsidiary of a
depository institution holding company (other than an insured
depository institution).''
SEC. 198. INTEREST RATES AND OTHER CHARGES AT INTERSTATE
BRANCHES.
Section 44 of the Federal Deposit Insurance Act (12 U.S.C.
1831u) is amended--
(1) by redesignating subsection (f) as subsection (g); and
(2) by inserting after subsection (e) the following:
``(f) Applicable Rate and Other Charge Limitations.--
``(1) In general.--Except as provided for in paragraph (3),
upon the establishment of a branch of any insured depository
institution in a host State under this section, the maximum
interest rate or amount of interest, discount points, finance
charges, or other similar charges that may be charged, taken,
received, or reserved from time to time in any loan or
discount made or upon any note, bill of exchange, financing
transaction, or other evidence of debt by any insured
depository institution in such State shall be equal to not
more than the greater of--
``(A) the maximum interest rate or amount of interest,
discount points, finance charges, or other similar charges
that may be charged, taken, received, or reserved in a
similar transaction under the constitution, statutory, or
other lows of the home State of the insured depository
institution establishing any such branch, without reference
to this section, as such maximum interest rate or amount of
interest may change from time to time; or
``(B) the maximum rate or amount of interest, discount
points, finance charges, or other similar charges that may be
charged, taken, received, or reserved in a similar
transaction by an insured depository institution under the
constitution, statutory, or other laws of the host State,
without reference to this section.
``(2) Preemption.--The limitations established under
paragraph (1) shall apply only in any State that has a
constitutional provision that sets a maximum lawful rate of
interest on any contract at not more than 5 percent per annum
above the Federal Reserve Discount Rate or 90-day commercial
paper in effect in the Federal Reserve Bank in the Federal
Reserve District in which the State is located.
``(3) Rule of construction.--No provision of this
subsection shall be construed as superseding section 501 of
the Depository Institutions Deregulation and Monetary Control
Act of 1980.
Subtitle L-Effective Date of Title
SEC. 199. EFFECTIVE DATE.
Except with regard to any subtitle or other provision of
this title for which a specific effective date is provided,
this title and the amendments made by this title shall take
effect at the end of the 180-day period beginning on the date
of the enactment of this Act.
TITLE II--FUNCTIONAL REGULATION
Subtitle A--Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(4)) is amended to read as follows:
``(4) Broker.--
``(A) In general.--The term `broker' means any person
engaged in the business of effecting transactions in
securities for the account of others.
``(B) Exception for certain bank activities.--A bank shall
not be considered to be a broker because the bank engages in
any one or more of the following activities under the
conditions described:
``(i) Third party brokerage arrangements.--The bank enters
into a contractual or other written arrangement with a broker
or dealer registered under this title under which the broker
or dealer offers brokerage services on or off the premises of
the bank if--
``(I) such broker or dealer is clearly identified as the
person performing the brokerage services;
``(II) the broker or dealer performs brokerage services in
an area that is clearly marked and, to the extent
practicable, physically separate from the routine deposit-
taking activities of the bank;
``(III) any materials used by the bank to advertise or
promote generally the availability of brokerage services
under the arrangement clearly indicate that the brokerage
services are being provided by the broker or dealer and not
by the bank;
``(IV) any materials used by the bank to advertise or
promote generally the availability of brokerage services
under the arrangement are in compliance with the Federal
securities laws before distribution;
``(V) bank employees (other than associated persons of a
broker or dealer who are qualified pursuant to the rules of a
self-regulatory organization) perform only clerical or
[[Page H5271]]
ministerial functions in connection with brokerage
transactions including scheduling appointments with the
associated persons of a broker or dealer, except that bank
employees may forward customer funds or securities and may
describe in general terms the types of investment vehicles
available from the bank and the broker or dealer under the
arrangement;
``(VI) bank employees do not receive incentive compensation
for any brokerage transaction unless such employees are
associated persons of a broker or dealer and are qualified
pursuant to the rules of a self-regulatory organization,
except that the bank employees may receive compensation for
the referral of any customer if the compensation is a nominal
one-time cash fee of a fixed dollar amount and the payment of
the fee is not contingent on whether the referral results in
a transaction;
``(VII) such services are provided by the broker or dealer
on a basis in which all customers which receive any services
are fully disclosed to the broker or dealer;
``(VIII) the bank does not carry a securities account of
the customer except as permitted under clause (ii) or (viii)
of this subparagraph; and
``(IX) the bank, broker, or dealer informs each customer
that the brokerage services are provided by the broker or
dealer and not by the bank and that the securities are not
deposits or other obligations of the bank, are not guaranteed
by the bank, and are not insured by the Federal Deposit
Insurance Corporation.
``(ii) Trust activities.--The bank effects transactions in
a trustee or fiduciary capacity in its trust department, or
another department where the trust or fiduciary activity is
regularly examined by bank examiners under the same standards
and in the same way as such activities are examined in the
trust department, and--
``(I) is chiefly compensated for such transactions,
consistent with fiduciary principles and standards, on the
basis of an administration or annual fee (payable on a
monthly, quarterly, or other basis), a percentage of assets
under management, or a flat or capped per order processing
fee equal to not more than the cost incurred by the bank in
connection with executing securities transactions for trustee
and fiduciary customers, or any combination of such fees; and
``(II) does not solicit brokerage business, other than by
advertising that it effects transactions in securities in
conjunction with advertising its other trust activities.
``(iii) Permissible securities transactions.--The bank
effects transactions in--
``(I) commercial paper, bankers acceptances, or commercial
bills;
``(II) exempted securities;
``(III) qualified Canadian government obligations as
defined in section 5136 of the Revised Statutes, in
conformity with section 15C of this title and the rules and
regulations thereunder, or obligations of the North American
Development Bank; or
``(IV) any standardized, credit enhanced debt security
issued by a foreign government pursuant to the March 1989
plan of then Secretary of the Treasury Brady, used by such
foreign government to retire outstanding commercial bank
loans.
``(iv) Certain stock purchase plans.--
``(I) Employee benefit plans.--The bank effects
transactions, as a registered transfer agent (including as a
registrar of stocks), in the securities of an issuer as part
of any pension, retirement, profit-sharing, bonus, thrift,
savings, incentive, or other similar benefit plan for the
employees of that issuer or its affiliates (as defined in
section 2 of the Bank Holding Company Act of 1956), if--
``(aa) the bank does not solicit transactions or provide
investment advice with respect to the purchase or sale of
securities in connection with the plan; and
``(bb) the bank's compensation for such plan or program
consists chiefly of administration fees, or flat or capped
per order processing fees, or both.
``(II) Dividend reinvestment plans.--The bank effects
transactions, as a registered transfer agent (including as a
registrar of stocks), in the securities of an issuer as part
of that issuer's dividend reinvestment plan, if--
``(aa) the bank does not solicit transactions or provide
investment advice with respect to the purchase or sale of
securities in connection with the plan;
``(bb) the bank does not net shareholders' buy and sell
orders, other than for programs for odd-lot holders or plans
registered with the Commission; and
``(cc) the bank's compensation for such plan or program
consists chiefly of administration fees, or flat or capped
per order processing fees, or both.
``(III) Issuer plans.--The bank effects transactions, as a
registered transfer agent (including as a registrar of
stocks), in the securities of an issuer as part of that
issuer's plan for the purchase or sale of that issuer's
shares, if--
``(aa) the bank does not solicit transactions or provide
investment advice with respect to the purchase or sale of
securities in connection with the plan or program;
``(bb) the bank does not net shareholders' buy and sell
orders, other than for programs for odd-lot holders or plans
registered with the Commission; and
``(cc) the bank's compensation for such plan or program
consists chiefly of administration fees, or flat or capped
per order processing fees, or both.
``(IV) Permissible delivery of materials.--The exception to
being considered a broker for a bank engaged in activities
described in subclauses (I), (II), and (III) will not be
affected by a bank's delivery of written or electronic plan
materials to employees of the issuer, shareholders of the
issuer, or members of affinity groups of the issuer, so long
as such materials are--
``(aa) comparable in scope or nature to that permitted by
the Commission as of the date of the enactment of the
Financial Services Act of 1999; or
``(bb) otherwise permitted by the Commission.
``(v) Sweep accounts.--The bank effects transactions as
part of a program for the investment or reinvestment of
deposit funds into any no-load, open-end management
investment company registered under the Investment Company
Act of 1940 that holds itself out as a money market fund.
``(vi) Affiliate transactions.--The bank effects
transactions for the account of any affiliate (as defined in
section 2 of the Bank Holding Company Act of 1956) of the
bank other than--
``(I) a registered broker or dealer; or
``(II) an affiliate that is engaged in merchant banking, as
described in section 6(c)(3)(H) of the Bank Holding Company
Act of 1956.
``(vii) Private securities offerings.--The bank--
``(I) effects sales as part of a primary offering of
securities not involving a public offering, pursuant to
section 3(b), 4(2), or 4(6) of the Securities Act of 1933 or
the rules and regulations issued thereunder;
``(II) at any time after the date that is 1 year after the
date of enactment of the Financial Services Act of 1999, is
not affiliated with a broker or dealer that has been
registered for more than 1 year in accordance with this Act,
and engages in dealing, market making, or underwriting
activities, other than with respect to exempted securities;
and
``(III) effects transactions exclusively with qualified
investors.
``(viii) Safekeeping and custody activities.--
``(I) In general.--The bank, as part of customary banking
activities--
``(aa) provides safekeeping or custody services with
respect to securities, including the exercise of warrants and
other rights on behalf of customers;
``(bb) facilitates the transfer of funds or securities, as
a custodian or a clearing agency, in connection with the
clearance and settlement of its customers' transactions in
securities;
``(cc) effects securities lending or borrowing transactions
with or on behalf of customers as part of services provided
to customers pursuant to division (aa) or (bb) or invests
cash collateral pledged in connection with such transactions;
or
``(dd) holds securities pledged by a customer to another
person or securities subject to purchase or resale agreements
involving a customer, or facilitates the pledging or transfer
of such securities by book entry or as otherwise provided
under applicable law, if the bank maintains records
separately identifying the securities and the customer.
``(II) Exception for carrying broker activities.--The
exception to being considered a broker for a bank engaged in
activities described in subclause (I) shall not apply if the
bank, in connection with such activities, acts in the United
States as a carrying broker (as such term, and different
formulations thereof, are used in section 15(c)(3) of this
title and the rules and regulations thereunder) for any
broker or dealer, unless such carrying broker activities are
engaged in with respect to government securities (as defined
in paragraph (42) of this subsection).
``(ix) Excepted banking products.--The bank effects
transactions in excepted banking products, as defined in
section 206 of the Financial Services Act of 1999.
``(x) Municipal securities.--The bank effects transactions
in municipal securities.
``(xi) De minimis exception.--The bank effects, other than
in transactions referred to in clauses (i) through (x), not
more than 500 transactions in securities in any calendar
year, and such transactions are not effected by an employee
of the bank who is also an employee of a broker or dealer.
``(C) Broker dealer execution.--The exception to being
considered a broker for a bank engaged in activities
described in clauses (ii), (iv), and (viii) of subparagraph
(B) shall not apply if the activities described in such
provisions result in the trade in the United States of any
security that is a publicly traded security in the United
States, unless--
``(i) the bank directs such trade to a registered broker or
dealer for execution;
``(ii) the trade is a cross trade or other substantially
similar trade of a security that--
``(I) is made by the bank or between the bank and an
affiliated fiduciary; and
``(II) is not in contravention of fiduciary principles
established under applicable Federal or State law; or
``(iii) the trade is conducted in some other manner
permitted under rules, regulations, or orders as the
Commission may prescribe or issue.
``(D) Fiduciary capacity.--For purposes of subparagraph
(B)(ii), the term `fiduciary capacity' means--
``(i) in the capacity as trustee, executor, administrator,
registrar of stocks and bonds, transfer agent, guardian,
assignee, receiver, or custodian under a uniform gift to
minor
[[Page H5272]]
act, or as an investment adviser if the bank receives a fee
for its investment advice;
``(ii) in any capacity in which the bank possesses
investment discretion on behalf of another; or
``(iii) in any other similar capacity.
``(F) Exception for entities subject to section 15(e).--The
term `broker' does not include a bank that--
``(i) was, immediately prior to the enactment of the
Financial Services Act of 1999, subject to section 15(e) of
this title; and
``(ii) is subject to such restrictions and requirements as
the Commission considers appropriate.''.
SEC. 202. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(5)) is amended to read as follows:
``(5) Dealer.--
``(A) In general.--The term `dealer' means any person
engaged in the business of buying and selling securities for
such person's own account through a broker or otherwise.
``(B) Exception for person not engaged in the business of
dealing.--The term `dealer' does not include a person that
buys or sells securities for such person's own account,
either individually or in a fiduciary capacity, but not as a
part of a regular business.
``(C) Exception for certain bank activities.--A bank shall
not be considered to be a dealer because the bank engages in
any of the following activities under the conditions
described:
``(i) Permissible securities transactions.--The bank buys
or sells--
``(I) commercial paper, bankers acceptances, or commercial
bills;
``(II) exempted securities;
``(III) qualified Canadian government obligations as
defined in section 5136 of the Revised Statutes of the United
States, in conformity with section 15C of this title and the
rules and regulations thereunder, or obligations of the North
American Development Bank; or
``(IV) any standardized, credit enhanced debt security
issued by a foreign government pursuant to the March 1989
plan of then Secretary of the Treasury Brady, used by such
foreign government to retire outstanding commercial bank
loans.
``(ii) Investment, trustee, and fiduciary transactions.--
The bank buys or sells securities for investment purposes--
``(I) for the bank; or
``(II) for accounts for which the bank acts as a trustee or
fiduciary.
``(iii) Asset-backed transactions.--The bank engages in the
issuance or sale to qualified investors, through a grantor
trust or other separate entity, of securities backed by or
representing an interest in notes, drafts, acceptances,
loans, leases, receivables, other obligations (other than
securities of which the bank is not the issuer), or pools of
any such obligations predominantly originated by--
``(I) the bank;
``(II) an affiliate of any such bank other than a broker or
dealer; or
``(III) a syndicate of banks of which the bank is a member,
if the obligations or pool of obligations consists of
mortgage obligations or consumer-related receivables.
``(iv) Excepted banking products.--The bank buys or sells
excepted banking products, as defined in section 206 of the
Financial Services Act of 1999.
``(v) Derivative instruments.--The bank issues, buys, or
sells any derivative instrument to which the bank is a
party--
``(I) to or from a qualified investor, except that if the
instrument provides for the delivery of one or more
securities (other than a derivative instrument or government
security), the transaction shall be effected with or through
a registered broker or dealer; or
``(II) to or from other persons, except that if the
derivative instrument provides for the delivery of one or
more securities (other than a derivative instrument or
government security), or is a security (other than a
government security), the transaction shall be effected with
or through a registered broker or dealer; or
``(III) to or from any person if the instrument is neither
a security nor provides for the delivery of one or more
securities (other than a derivative instrument).''.
SEC. 203. REGISTRATION FOR SALES OF PRIVATE SECURITIES
OFFERINGS.
Section 15A of the Securities Exchange Act of 1934 (15
U.S.C. 78o-3) is amended by inserting after subsection (i)
the following new subsection:
``(j) Registration for Sales of Private Securities
Offerings.--A registered securities association shall create
a limited qualification category for any associated person of
a member who effects sales as part of a primary offering of
securities not involving a public offering, pursuant to
section 3(b), 4(2), or 4(6) of the Securities Act of 1933 and
the rules and regulations thereunder, and shall deem
qualified in such limited qualification category, without
testing, any bank employee who, in the six month period
preceding the date of enactment of this Act, engaged in
effecting such sales.''.
SEC. 204. INFORMATION SHARING.
Section 18 of the Federal Deposit Insurance Act is amended
by adding at the end the following new subsection:
``(t) Recordkeeping Requirements.--
``(1) Requirements.--Each appropriate Federal banking
agency, after consultation with and consideration of the
views of the Commission, shall establish recordkeeping
requirements for banks relying on exceptions contained in
paragraphs (4) and (5) of section 3(a) of the Securities
Exchange Act of 1934. Such recordkeeping requirements shall
be sufficient to demonstrate compliance with the terms of
such exceptions and be designed to facilitate compliance with
such exceptions. Each appropriate Federal banking agency
shall make any such information available to the Commission
upon request.
``(2) Definitions.--As used in this subsection the term
`Commission' means the Securities and Exchange Commission.''.
SEC. 205. TREATMENT OF NEW HYBRID PRODUCTS.
Section 15 of the Securities Exchange Act of 1934 (15
U.S.C. 78o) is amended by adding at the end the following new
subsection:
``(i) Rulemaking to Extend Requirements to New Hybrid
Products.--
``(1) Limitation.--The Commission shall not--
``(A) require a bank to register as a broker or dealer
under this section because the bank engages in any
transaction in, or buys or sells, a new hybrid product; or
``(B) bring an action against a bank for a failure to
comply with a requirement described in subparagraph (A);
unless the Commission has imposed such requirement by rule or
regulation issued in accordance with this section.
``(2) Criteria for rulemaking.--The Commission shall not
impose a requirement under paragraph (1) of this subsection
with respect to any new hybrid product unless the Commission
determines that--
``(A) the new hybrid product is a security; and
``(B) imposing such requirement is necessary or appropriate
in the public interest and for the protection of investors,
consistent with the requirements of section 3(f).
``(3) Considerations.--In making a determination under
paragraph (2), the Commission shall consider--
``(A) the nature of the new hybrid product; and
``(B) the history, purpose, extent, and appropriateness of
the regulation of the new hybrid product under the Federal
securities laws and under the Federal banking laws.
``(4) Consultation.--In promulgating rules under this
subsection, the Commission shall consult with and consider
the views of the Board of Governors of the Federal Reserve
System regarding the nature of the new hybrid product, the
history, purpose, extent, and appropriateness of the
regulation of the new product under the Federal banking laws,
and the impact of the proposed rule on the banking industry.
``(5) New hybrid product.--For purposes of this subsection,
the term `new hybrid product' means a product that--
``(A) was not subjected to regulation by the Commission as
a security prior to the date of enactment of this subsection;
and
``(B) is not an excepted banking product, as such term is
defined in section 206 of the Financial Services Act of
1999.''.
SEC. 206. DEFINITION OF EXCEPTED BANKING PRODUCT.
(a) Definition of Excepted Banking Product.--For purposes
of paragraphs (4) and (5) of section 3(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a) (4), (5)), the term
``excepted banking product'' means--
(1) a deposit account, savings account, certificate of
deposit, or other deposit instrument issued by a bank;
(2) a banker's acceptance;
(3) a letter of credit issued or loan made by a bank;
(4) a debit account at a bank arising from a credit card or
similar arrangement;
(5) a participation in a loan which the bank or an
affiliate of the bank (other than a broker or dealer) funds,
participates in, or owns that is sold--
(A) to qualified investors; or
(B) to other persons that--
(i) have the opportunity to review and assess any material
information, including information regarding the borrower's
creditworthiness; and
(ii) based on such factors as financial sophistication, net
worth, and knowledge and experience in financial matters,
have the capability to evaluate the information available, as
determined under generally applicable banking standards or
guidelines; or
(6) a derivative instrument that involves or relates to--
(A) currencies, except options on currencies that trade on
a national securities exchange;
(B) interest rates, except interest rate derivative
instruments that--
(i) are based on a security or a group or index of
securities (other than government securities or a group or
index of government securities);
(ii) provide for the delivery of one or more securities
(other than government securities); or
(iii) trade on a national securities exchange; or
(C) commodities, other rates, indices, or other assets,
except derivative instruments that--
(i) are securities or that are based on a group or index of
securities (other than government securities or a group or
index of government securities);
(ii) provide for the delivery of one or more securities
(other than government securities); or
(iii) trade on a national securities exchange.
[[Page H5273]]
(b) Classification Limited.--Classification of a particular
product as an excepted banking product pursuant to this
section shall not be construed as finding or implying that
such product is or is not a security for any purpose under
the securities laws, or is or is not an account, agreement,
contract, or transaction for any purpose under the Commodity
Exchange Act.
(c) Incorporated Definitions.--For purposes of this
section--
(1) the terms ``bank'', ``qualified investor'', and
``securities laws'' have the same meanings given in section
3(a) of the Securities Exchange Act of 1934, as amended by
this Act; and
(2) the term ``government securities'' has the meaning
given in section 3(a)(42) of such Act (as amended by this
Act), and, for purposes of this section, commercial paper,
bankers acceptances, and commercial bills shall be treated in
the same manner as government securities.
SEC. 207. ADDITIONAL DEFINITIONS.
Section 3(a) of the Securities Exchange Act of 1934 is
amended by adding at the end the following new paragraphs:
``(54) Derivative instrument.--
``(A) Definition.--The term `derivative instrument' means
any individually negotiated contract, agreement, warrant,
note, or option that is based, in whole or in part, on the
value of, any interest in, or any quantitative measure or the
occurrence of any event relating to, one or more commodities,
securities, currencies, interest or other rates, indices, or
other assets, but does not include an excepted banking
product, as defined in paragraphs (1) through (5) of section
206(a) of the Financial Services Act of 1999.
``(B) Classification limited.--Classification of a
particular contract as a derivative instrument pursuant to
this paragraph shall not be construed as finding or implying
that such instrument is or is not a security for any purpose
under the securities laws, or is or is not an account,
agreement, contract, or transaction for any purpose under the
Commodity Exchange Act.
``(55) Qualified investor.--
``(A) Definition.--For purposes of this title, the term
`qualified investor' means--
``(i) any investment company registered with the Commission
under section 8 of the Investment Company Act of 1940;
``(ii) any issuer eligible for an exclusion from the
definition of investment company pursuant to section 3(c)(7)
of the Investment Company Act of 1940;
``(iii) any bank (as defined in paragraph (6) of this
subsection), savings association (as defined in section 3(b)
of the Federal Deposit Insurance Act), broker, dealer,
insurance company (as defined in section 2(a)(13) of the
Securities Act of 1933), or business development company (as
defined in section 2(a)(48) of the Investment Company Act of
1940);
``(iv) any small business investment company licensed by
the United States Small Business Administration under section
301 (c) or (d) of the Small Business Investment Act of 1958;
``(v) any State sponsored employee benefit plan, or any
other employee benefit plan, within the meaning of the
Employee Retirement Income Security Act of 1974, other than
an individual retirement account, if the investment decisions
are made by a plan fiduciary, as defined in section 3(21) of
that Act, which is either a bank, savings and loan
association, insurance company, or registered investment
adviser;
``(vi) any trust whose purchases of securities are directed
by a person described in clauses (i) through (v) of this
subparagraph;
``(vii) any market intermediary exempt under section
3(c)(2) of the Investment Company Act of 1940;
``(viii) any associated person of a broker or dealer other
than a natural person;
``(ix) any foreign bank (as defined in section 1(b)(7) of
the International Banking Act of 1978);
``(x) the government of any foreign country;
``(xi) any corporation, company, or partnership that owns
and invests on a discretionary basis, not less than
$10,000,000 in investments;
``(xii) any natural person who owns and invests on a
discretionary basis, not less than $10,000,000 in
investments;
``(xiii) any government or political subdivision, agency,
or instrumentality of a government who owns and invests on a
discretionary basis not less than $50,000,000 in investments;
or
``(xiv) any multinational or supranational entity or any
agency or instrumentality thereof.
``(B) Additional authority.--The Commission may, by rule or
order, define a `qualified investor' as any other person,
taking into consideration such factors as the financial
sophistication of the person, net worth, and knowledge and
experience in financial matters.''.
SEC. 208. GOVERNMENT SECURITIES DEFINED.
Section 3(a)(42) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(42)) is amended--
(1) by striking ``or'' at the end of subparagraph (C);
(2) by striking the period at the end of subparagraph (D)
and inserting ``; or''; and
(3) by adding at the end the following new subparagraph:
``(E) for purposes of sections 15, 15C, and 17A as applied
to a bank, a qualified Canadian government obligation as
defined in section 5136 of the Revised Statutes of the United
States.''.
SEC. 209. EFFECTIVE DATE.
This subtitle shall take effect at the end of the 270-day
period beginning on the date of the enactment of this Act.
SEC. 210. RULE OF CONSTRUCTION.
Nothing in this Act shall supersede, affect, or otherwise
limit the scope and applicability of the Commodity Exchange
Act (7 U.S.C. 1 et seq.).
Subtitle B--Bank Investment Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED
BANK.
(a) Management Companies.--Section 17(f) of the Investment
Company Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
(1) by redesignating paragraphs (1), (2), and (3) as
subparagraphs (A), (B), and (C), respectively;
(2) by striking ``(f) Every registered'' and inserting the
following:
``(f) Custody of Securities.--
``(1) Every registered'';
(3) by redesignating the second, third, fourth, and fifth
sentences of such subsection as paragraphs (2) through (5),
respectively, and indenting the left margin of such
paragraphs appropriately; and
(4) by adding at the end the following new paragraph:
``(6) The Commission may adopt rules and regulations, and
issue orders, consistent with the protection of investors,
prescribing the conditions under which a bank, or an
affiliated person of a bank, either of which is an affiliated
person, promoter, organizer, or sponsor of, or principal
underwriter for, a registered management company may serve as
custodian of that registered management company.''.
(b) Unit Investment Trusts.--Section 26 of the Investment
Company Act of 1940 (15 U.S.C. 80a-26) is amended--
(1) by redesignating subsections (b) through (e) as
subsections (c) through (f), respectively; and
(2) by inserting after subsection (a) the following new
subsection:
``(b) The Commission may adopt rules and regulations, and
issue orders, consistent with the protection of investors,
prescribing the conditions under which a bank, or an
affiliated person of a bank, either of which is an affiliated
person of a principal underwriter for, or depositor of, a
registered unit investment trust, may serve as trustee or
custodian under subsection (a)(1).''.
(c) Fiduciary Duty of Custodian.--Section 36(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-35(a)) is
amended--
(1) in paragraph (1), by striking ``or'' at the end;
(2) in paragraph (2), by striking the period at the end and
inserting ``; or''; and
(3) by inserting after paragraph (2) the following:
``(3) as custodian.''.
SEC. 212. LENDING TO AN AFFILIATED INVESTMENT COMPANY.
Section 17(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-17(a)) is amended--
(1) by striking ``or'' at the end of paragraph (2);
(2) by striking the period at the end of paragraph (3) and
inserting ``; or''; and
(3) by adding at the end the following new paragraph:
``(4) to loan money or other property to such registered
company, or to any company controlled by such registered
company, in contravention of such rules, regulations, or
orders as the Commission may prescribe or issue consistent
with the protection of investors.''.
SEC. 213. INDEPENDENT DIRECTORS.
(a) In General.--Section 2(a)(19)(A) of the Investment
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
(1) by striking clause (v) and inserting the following new
clause:
``(v) any person or any affiliated person of a person
(other than a registered investment company) that, at any
time during the 6-month period preceding the date of the
determination of whether that person or affiliated person is
an interested person, has executed any portfolio transactions
for, engaged in any principal transactions with, or
distributed shares for--
``(I) the investment company;
``(II) any other investment company having the same
investment adviser as such investment company or holding
itself out to investors as a related company for purposes of
investment or investor services; or
``(III) any account over which the investment company's
investment adviser has brokerage placement discretion,'';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new clause:
``(vi) any person or any affiliated person of a person
(other than a registered investment company) that, at any
time during the 6-month period preceding the date of the
determination of whether that person or affiliated person is
an interested person, has loaned money or other property to--
``(I) the investment company;
``(II) any other investment company having the same
investment adviser as such investment company or holding
itself out to investors as a related company for purposes of
investment or investor services; or
``(III) any account for which the investment company's
investment adviser has borrowing authority,''.
(b) Conforming Amendment.--Section 2(a)(19)(B) of the
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)(B)) is
amended--
[[Page H5274]]
(1) by striking clause (v) and inserting the following new
clause:
``(v) any person or any affiliated person of a person
(other than a registered investment company) that, at any
time during the 6-month period preceding the date of the
determination of whether that person or affiliated person is
an interested person, has executed any portfolio transactions
for, engaged in any principal transactions with, or
distributed shares for--
``(I) any investment company for which the investment
adviser or principal underwriter serves as such;
``(II) any investment company holding itself out to
investors, for purposes of investment or investor services,
as a company related to any investment company for which the
investment adviser or principal underwriter serves as such;
or
``(III) any account over which the investment adviser has
brokerage placement discretion,'';
(2) by redesignating clause (vi) as clause (vii); and
(3) by inserting after clause (v) the following new clause:
``(vi) any person or any affiliated person of a person
(other than a registered investment company) that, at any
time during the 6-month period preceding the date of the
determination of whether that person or affiliated person is
an interested person, has loaned money or other property to--
``(I) any investment company for which the investment
adviser or principal underwriter serves as such;
``(II) any investment company holding itself out to
investors, for purposes of investment or investor services,
as a company related to any investment company for which the
investment adviser or principal underwriter serves as such;
or
``(III) any account for which the investment adviser has
borrowing authority,''.
(c) Affiliation of Directors.--Section 10(c) of the
Investment Company Act of 1940 (15 U.S.C. 80a-10(c)) is
amended by striking ``bank, except'' and inserting ``bank
(together with its affiliates and subsidiaries) or any one
bank holding company (together with its affiliates and
subsidiaries) (as such terms are defined in section 2 of the
Bank Holding Company Act of 1956), except''.
(d) Effective Date.--The amendments made by this section
shall take effect at the end of the 1-year period beginning
on the date of enactment of this subtitle.
SEC. 214. ADDITIONAL SEC DISCLOSURE AUTHORITY.
Section 35(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-34(a)) is amended to read as follows:
``(a) Misrepresentation of Guarantees.--
``(1) In general.--It shall be unlawful for any person,
issuing or selling any security of which a registered
investment company is the issuer, to represent or imply in
any manner whatsoever that such security or company--
``(A) has been guaranteed, sponsored, recommended, or
approved by the United States, or any agency, instrumentality
or officer of the United States;
``(B) has been insured by the Federal Deposit Insurance
Corporation; or
``(C) is guaranteed by or is otherwise an obligation of any
bank or insured depository institution.
``(2) Disclosures.--Any person issuing or selling the
securities of a registered investment company that is advised
by, or sold through, a bank shall prominently disclose that
an investment in the company is not insured by the Federal
Deposit Insurance Corporation or any other government agency.
The Commission may adopt rules and regulations, and issue
orders, consistent with the protection of investors,
prescribing the manner in which the disclosure under this
paragraph shall be provided.
``(3) Definitions.--The terms `insured depository
institution' and `appropriate Federal banking agency' have
the same meanings given in section 3 of the Federal Deposit
Insurance Act.''.
SEC. 215. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY
ACT OF 1940.
Section 2(a)(6) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(6)) is amended to read as follows:
``(6) The term `broker' has the same meaning given in
section 3 of the Securities Exchange Act of 1934, except that
such term does not include any person solely by reason of the
fact that such person is an underwriter for one or more
investment companies.''.
SEC. 216. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY
ACT OF 1940.
Section 2(a)(11) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(11)) is amended to read as follows:
``(11) The term `dealer' has the same meaning given in the
Securities Exchange Act of 1934, but does not include an
insurance company or investment company.''.
SEC. 217. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF
INVESTMENT ADVISER FOR BANKS THAT ADVISE
INVESTMENT COMPANIES.
(a) Investment Adviser.--Section 202(a)(11)(A) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)(A))
is amended by striking ``investment company'' and inserting
``investment company, except that the term `investment
adviser' includes any bank or bank holding company to the
extent that such bank or bank holding company serves or acts
as an investment adviser to a registered investment company,
but if, in the case of a bank, such services or actions are
performed through a separately identifiable department or
division, the department or division, and not the bank
itself, shall be deemed to be the investment adviser''.
(b) Separately Identifiable Department or Division.--
Section 202(a) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a)) is amended by adding at the end the
following:
``(26) The term `separately identifiable department or
division' of a bank means a unit--
``(A) that is under the direct supervision of an officer or
officers designated by the board of directors of the bank as
responsible for the day-to-day conduct of the bank's
investment adviser activities for one or more investment
companies, including the supervision of all bank employees
engaged in the performance of such activities; and
``(B) for which all of the records relating to its
investment adviser activities are separately maintained in or
extractable from such unit's own facilities or the facilities
of the bank, and such records are so maintained or otherwise
accessible as to permit independent examination and
enforcement by the Commission of this Act or the Investment
Company Act of 1940 and rules and regulations promulgated
under this Act or the Investment Company Act of 1940.''.
SEC. 218. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS
ACT OF 1940.
Section 202(a)(3) of the Investment Advisers Act of 1940
(15 U.S.C. 80b-2(a)(3)) is amended to read as follows:
``(3) The term `broker' has the same meaning given in
section 3 of the Securities Exchange Act of 1934.''.
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS
ACT OF 1940.
Section 202(a)(7) of the Investment Advisers Act of 1940
(15 U.S.C. 80b-2(a)(7)) is amended to read as follows:
``(7) The term `dealer' has the same meaning given in
section 3 of the Securities Exchange Act of 1934, but does
not include an insurance company or investment company.''.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et
seq.) is amended by inserting after section 210 the following
new section:
``SEC. 210A. CONSULTATION.
``(a) Examination Results and Other Information.--
``(1) The appropriate Federal banking agency shall provide
the Commission upon request the results of any examination,
reports, records, or other information to which such agency
may have access with respect to the investment advisory
activities--
``(A) of any--
``(i) bank holding company;
``(ii) bank; or
``(iii) separately identifiable department or division of a
bank,
that is registered under section 203 of this title; and
``(B) in the case of a bank holding company or bank that
has a subsidiary or a separately identifiable department or
division registered under that section, of such bank or bank
holding company.
``(2) The Commission shall provide to the appropriate
Federal banking agency upon request the results of any
examination, reports, records, or other information with
respect to the investment advisory activities of any bank
holding company, bank, or separately identifiable department
or division of a bank, which is registered under section 203
of this title.
``(b) Effect on Other Authority.--Nothing in this section
shall limit in any respect the authority of the appropriate
Federal banking agency with respect to such bank holding
company, bank, or department or division under any other
provision of law.
``(c) Definition.--For purposes of this section, the term
`appropriate Federal banking agency' shall have the same
meaning given in section 3 of the Federal Deposit Insurance
Act.''.
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) Securities Act of 1933.--Section 3(a)(2) of the
Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended by
striking ``or any interest or participation in any common
trust fund or similar fund maintained by a bank exclusively
for the collective investment and reinvestment of assets
contributed thereto by such bank in its capacity as trustee,
executor, administrator, or guardian'' and inserting ``or any
interest or participation in any common trust fund or similar
fund that is excluded from the definition of the term
`investment company' under section 3(c)(3) of the Investment
Company Act of 1940''.
(b) Securities Exchange Act of 1934.--Section
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(12)(A)(iii)) is amended to read as follows:
``(iii) any interest or participation in any common trust
fund or similar fund that is excluded from the definition of
the term `investment company' under section 3(c)(3) of the
Investment Company Act of 1940;''.
(c) Investment Company Act of 1940.--Section 3(c)(3) of the
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is
amended by inserting before the period the following: ``,
if--
``(A) such fund is employed by the bank solely as an aid to
the administration of trusts, estates, or other accounts
created and maintained for a fiduciary purpose;
``(B) except in connection with the ordinary advertising of
the bank's fiduciary services, interests in such fund are
not--
[[Page H5275]]
``(i) advertised; or
``(ii) offered for sale to the general public; and
``(C) fees and expenses charged by such fund are not in
contravention of fiduciary principles established under
applicable Federal or State law''.
SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAVING
CONTROLLING INTEREST IN REGISTERED INVESTMENT
COMPANY.
Section 15 of the Investment Company Act of 1940 (15 U.S.C.
80a-15) is amended by adding at the end the following new
subsection:
``(g) Controlling Interest in Investment Company
Prohibited.--
``(1) In general.--If an investment adviser to a registered
investment company, or an affiliated person of that
investment adviser, holds a controlling interest in that
registered investment company in a trustee or fiduciary
capacity, such person shall--
``(A) if it holds the shares in a trustee or fiduciary
capacity with respect to any employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, transfer
the power to vote the shares of the investment company
through to another person acting in a fiduciary capacity with
respect to the plan who is not an affiliated person of that
investment adviser or any affiliated person thereof; or
``(B) if it holds the shares in a trustee or fiduciary
capacity with respect to any person or entity other than an
employee benefit plan subject to the Employee Retirement
Income Security Act of 1974--
``(i) transfer the power to vote the shares of the
investment company through to--
``(I) the beneficial owners of the shares;
``(II) another person acting in a fiduciary capacity who is
not an affiliated person of that investment adviser or any
affiliated person thereof; or
``(III) any person authorized to receive statements and
information with respect to the trust who is not an
affiliated person of that investment adviser or any
affiliated person thereof;
``(ii) vote the shares of the investment company held by it
in the same proportion as shares held by all other
shareholders of the investment company; or
``(iii) vote the shares of the investment company as
otherwise permitted under such rules, regulations, or orders
as the Commission may prescribe or issue consistent with the
protection of investors.
``(2) Exemption.--Paragraph (1) shall not apply to any
investment adviser to a registered investment company, or any
affiliated person of that investment adviser, that holds
shares of the investment company in a trustee or fiduciary
capacity if that registered investment company consists
solely of assets held in such capacities.
``(3) Safe harbor.--No investment adviser to a registered
investment company or any affiliated person of such
investment adviser shall be deemed to have acted unlawfully
or to have breached a fiduciary duty under State or Federal
law solely by reason of acting in accordance with clause (i),
(ii), or (iii) of paragraph (1)(B).''.
SEC. 223. STATUTORY DISQUALIFICATION FOR BANK WRONGDOING.
Section 9(a) of the Investment Company Act of 1940 (15
U.S.C. 80a-9(a)) is amended in paragraphs (1) and (2) by
striking ``securities dealer, transfer agent,'' and inserting
``securities dealer, bank, transfer agent,''.
SEC. 224. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of 1940 (15
U.S.C. 80a-2(a)(5)) is amended by striking ``(A) a banking
institution organized under the laws of the United States''
and inserting ``(A) a depository institution (as defined in
section 3 of the Federal Deposit Insurance Act) or a branch
or agency of a foreign bank (as such terms are defined in
section 1(b) of the International Banking Act of 1978)''.
SEC. 225. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2) is amended by adding at the end the following
new subsection:
``(c) Consideration of Promotion of Efficiency,
Competition, and Capital Formation.--Whenever pursuant to
this title the Commission is engaged in rulemaking and is
required to consider or determine whether an action is
necessary or appropriate in the public interest, the
Commission shall also consider, in addition to the protection
of investors, whether the action will promote efficiency,
competition, and capital formation.''.
SEC. 226. CHURCH PLAN EXCLUSION.
Section 3(c)(14) of the Investment Company Act of 1940 (15
U.S.C. 80a-3(c)(14)) is amended--
(1) by redesignating clauses (i) and (ii) of subparagraph
(B) as subclauses (I) and (II), respectively;
(2) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively;
(3) by inserting ``(A)'' after ``(14)''; and
(4) by adding at the end the following new subparagraph:
``(B) If a registered investment company would be excluded
from the definition of investment company under this
subsection but for the fact that some of the company's assets
do not satisfy the condition of subparagraph (A)(ii) of this
paragraph, then any investment adviser to the company or
affiliated person of such investment adviser shall not be
subject to the requirements of section 15(g)(1)(B) with
respect to shares of the investment company.''.
SEC. 227. EFFECTIVE DATE.
This subtitle shall take effect 90 days after the date of
the enactment of this Act.
Subtitle C--Securities and Exchange Commission Supervision of
Investment Bank Holding Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING COMPANIES BY
THE SECURITIES AND EXCHANGE COMMISSION.
(a) Amendment.--Section 17 of the Securities Exchange Act
of 1934 (15 U.S.C. 78q) is amended--
(1) by redesignating subsection (i) as subsection (k); and
(2) by inserting after subsection (h) the following new
subsection:
``(i) Investment Bank Holding Companies.--
``(1) Elective supervision of an investment bank holding
company not having a bank or savings association affiliate.--
``(A) In general.--An investment bank holding company that
is not--
``(i) an affiliate of a wholesale financial institution, an
insured bank (other than an institution described in
subparagraph (D), (F), or (G) of section 2(c)(2), or held
under section 4(f), of the Bank Holding Company Act of 1956),
or a savings association;
``(ii) a foreign bank, foreign company, or company that is
described in section 8(a) of the International Banking Act of
1978; or
``(iii) a foreign bank that controls, directly or
indirectly, a corporation chartered under section 25A of the
Federal Reserve Act,
may elect to become supervised by filing with the Commission
a notice of intention to become supervised, pursuant to
subparagraph (B) of this paragraph. Any investment bank
holding company filing such a notice shall be supervised in
accordance with this section and comply with the rules
promulgated by the Commission applicable to supervised
investment bank holding companies.
``(B) Notification of status as a supervised investment
bank holding company.--An investment bank holding company
that elects under subparagraph (A) to become supervised by
the Commission shall file with the Commission a written
notice of intention to become supervised by the Commission in
such form and containing such information and documents
concerning such investment bank holding company as the
Commission, by rule, may prescribe as necessary or
appropriate in furtherance of the purposes of this section.
Unless the Commission finds that such supervision is not
necessary or appropriate in furtherance of the purposes of
this section, such supervision shall become effective 45 days
after the date of receipt of such written notice by the
Commission or within such shorter time period as the
Commission, by rule or order, may determine.
``(2) Election not to be supervised by the commission as an
investment bank holding company.--
``(A) Voluntary withdrawal.--A supervised investment bank
holding company that is supervised pursuant to paragraph (1)
may, upon such terms and conditions as the Commission deems
necessary or appropriate, elect not to be supervised by the
Commission by filing a written notice of withdrawal from
Commission supervision. Such notice shall not become
effective until one year after receipt by the Commission, or
such shorter or longer period as the Commission deems
necessary or appropriate to ensure effective supervision of
the material risks to the supervised investment bank holding
company and to the affiliated broker or dealer, or to prevent
evasion of the purposes of this section.
``(B) Discontinuation of commission supervision.--If the
Commission finds that any supervised investment bank holding
company that is supervised pursuant to paragraph (1) is no
longer in existence or has ceased to be an investment bank
holding company, or if the Commission finds that continued
supervision of such a supervised investment bank holding
company is not consistent with the purposes of this section,
the Commission may discontinue the supervision pursuant to a
rule or order, if any, promulgated by the Commission under
this section.
``(3) Supervision of investment bank holding companies.--
``(A) Recordkeeping and reporting.--
``(i) In general.--Every supervised investment bank holding
company and each affiliate thereof shall make and keep for
prescribed periods such records, furnish copies thereof, and
make such reports, as the Commission may require by rule, in
order to keep the Commission informed as to--
``(I) the company's or affiliate's activities, financial
condition, policies, systems for monitoring and controlling
financial and operational risks, and transactions and
relationships between any broker or dealer affiliate of the
supervised investment bank holding company; and
``(II) the extent to which the company or affiliate has
complied with the provisions of this Act and regulations
prescribed and orders issued under this Act.
``(ii) Form and contents.--Such records and reports shall
be prepared in such form and according to such specifications
(including certification by an independent public
accountant), as the Commission may require and shall be
provided promptly at any time upon request by the Commission.
Such records and reports may include--
``(I) a balance sheet and income statement;
[[Page H5276]]
``(II) an assessment of the consolidated capital of the
supervised investment bank holding company;
``(III) an independent auditor's report attesting to the
supervised investment bank holding company's compliance with
its internal risk management and internal control objectives;
and
``(IV) reports concerning the extent to which the company
or affiliate has complied with the provisions of this title
and any regulations prescribed and orders issued under this
title.
``(B) Use of existing reports.--
``(i) In general.--The Commission shall, to the fullest
extent possible, accept reports in fulfillment of the
requirements under this paragraph that the supervised
investment bank holding company or its affiliates have been
required to provide to another appropriate regulatory agency
or self-regulatory organization.
``(ii) Availability.--A supervised investment bank holding
company or an affiliate of such company shall provide to the
Commission, at the request of the Commission, any report
referred to in clause (i).
``(C) Examination authority.--
``(i) Focus of examination authority.--The Commission may
make examinations of any supervised investment bank holding
company and any affiliate of such company in order to--
``(I) inform the Commission regarding--
``(aa) the nature of the operations and financial condition
of the supervised investment bank holding company and its
affiliates;
``(bb) the financial and operational risks within the
supervised investment bank holding company that may affect
any broker or dealer controlled by such supervised investment
bank holding company; and
``(cc) the systems of the supervised investment bank
holding company and its affiliates for monitoring and
controlling those risks; and
``(II) monitor compliance with the provisions of this
subsection, provisions governing transactions and
relationships between any broker or dealer affiliated with
the supervised investment bank holding company and any of the
company's other affiliates, and applicable provisions of
subchapter II of chapter 53, title 31, United States Code
(commonly referred to as the `Bank Secrecy Act') and
regulations thereunder.
``(ii) Restricted focus of examinations.--The Commission
shall limit the focus and scope of any examination of a
supervised investment bank holding company to--
``(I) the company; and
``(II) any affiliate of the company that, because of its
size, condition, or activities, the nature or size of the
transactions between such affiliate and any affiliated broker
or dealer, or the centralization of functions within the
holding company system, could, in the discretion of the
Commission, have a materially adverse effect on the
operational or financial condition of the broker or dealer.
``(iii) Deference to other examinations.--For purposes of
this subparagraph, the Commission shall, to the fullest
extent possible, use the reports of examination of an
institution described in subparagraph (D), (F), or (G) of
section 2(c)(2), or held under section 4(f), of the Bank
Holding Company Act of 1956 made by the appropriate
regulatory agency, or of a licensed insurance company made by
the appropriate State insurance regulator.
``(4) Holding company capital.--
``(A) Authority.--If the Commission finds that it is
necessary to adequately supervise investment bank holding
companies and their broker or dealer affiliates consistent
with the purposes of this subsection, the Commission may
adopt capital adequacy rules for supervised investment bank
holding companies.
``(B) Method of calculation.--In developing rules under
this paragraph:
``(i) Double leverage.--The Commission shall consider the
use by the supervised investment bank holding company of debt
and other liabilities to fund capital investments in
affiliates.
``(ii) No unweighted capital ratio.--The Commission shall
not impose under this section a capital ratio that is not
based on appropriate risk-weighting considerations.
``(iii) No capital requirement on regulated entities.--The
Commission shall not, by rule, regulation, guideline, order
or otherwise, impose any capital adequacy provision on a
nonbanking affiliate (other than a broker or dealer) that is
in compliance with applicable capital requirements of another
Federal regulatory authority or State insurance authority.
``(iv) Appropriate exclusions.--The Commission shall take
full account of the applicable capital requirements of
another Federal regulatory authority or State insurance
regulator.
``(C) Internal risk management models.--The Commission may
incorporate internal risk management models into its capital
adequacy rules for supervised investment bank holding
companies.
``(5) Functional regulation of banking and insurance
activities of supervised investment bank holding companies.--
The Commission shall defer to--
``(A) the appropriate regulatory agency with regard to all
interpretations of, and the enforcement of, applicable
banking laws relating to the activities, conduct, ownership,
and operations of banks, and institutions described in
subparagraph (D), (F), and (G) of section 2(c)(2), or held
under section 4(f), of the Bank Holding Company Act of 1956;
and
``(B) the appropriate State insurance regulators with
regard to all interpretations of, and the enforcement of,
applicable State insurance laws relating to the activities,
conduct, and operations of insurance companies and insurance
agents.
``(6) Definitions.--For purposes of this subsection:
``(A) The term `investment bank holding company' means--
``(i) any person other than a natural person that owns or
controls one or more brokers or dealers; and
``(ii) the associated persons of the investment bank
holding company.
``(B) The term `supervised investment bank holding company'
means any investment bank holding company that is supervised
by the Commission pursuant to this subsection.
``(C) The terms `affiliate', `bank', `bank holding
company', `company', `control', `savings association', and
`wholesale financial institution' have the same meanings
given in section 2 of the Bank Holding Company Act of 1956
(12 U.S.C. 1841).
``(D) The term `insured bank' has the same meaning given in
section 3 of the Federal Deposit Insurance Act.
``(E) The term `foreign bank' has the same meaning given in
section 1(b)(7) of the International Banking Act of 1978.
``(F) The terms `person associated with an investment bank
holding company' and `associated person of an investment bank
holding company' mean any person directly or indirectly
controlling, controlled by, or under common control with, an
investment bank holding company.''.
``(j) Authority To Limit Disclosure of Information.--
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any information required
to be reported under subsection (h) or (i) or any information
supplied to the Commission by any domestic or foreign
regulatory agency that relates to the financial or
operational condition of any associated person of a broker or
dealer, investment bank holding company, or any affiliate of
an investment bank holding company. Nothing in this
subsection shall authorize the Commission to withhold
information from Congress, or prevent the Commission from
complying with a request for information from any other
Federal department or agency or any self-regulatory
organization requesting the information for purposes within
the scope of its jurisdiction, or complying with an order of
a court of the United States in an action brought by the
United States or the Commission. For purposes of section 552
of title 5, United States Code, this subsection shall be
considered a statute described in subsection (b)(3)(B) of
such section 552. In prescribing regulations to carry out the
requirements of this subsection, the Commission shall
designate information described in or obtained pursuant to
subparagraphs (A), (B), and (C) of subsection (i)(5) as
confidential information for purposes of section 24(b)(2) of
this title.''.
(b) Conforming Amendments.--
(1) Section 3(a)(34) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(34)) is amended by adding at the end the
following new subparagraph:
``(H) When used with respect to an institution described in
subparagraph (D), (F), or (G) of section 2(c)(2), or held
under section 4(f), of the Bank Holding Company Act of 1956--
``(i) the Comptroller of the Currency, in the case of a
national bank or a bank in the District of Columbia examined
by the Comptroller of the Currency;
``(ii) the Board of Governors of the Federal Reserve
System, in the case of a State member bank of the Federal
Reserve System or any corporation chartered under section 25A
of the Federal Reserve Act;
``(iii) the Federal Deposit Insurance Corporation, in the
case of any other bank the deposits of which are insured in
accordance with the Federal Deposit Insurance Act; or
``(iv) the Commission in the case of all other such
institutions.''.
(2) Section 1112(e) of the Right to Financial Privacy Act
of 1978 (12 U.S.C. 3412(e)) is amended--
(A) by striking ``this title'' and inserting ``law''; and
(B) by inserting ``, examination reports'' after
``financial records''.
Subtitle D--Disclosure of Customer Costs of Acquiring Financial
Products
SEC. 241. IMPROVED AND CONSISTENT DISCLOSURE.
(a) Revised Regulations Required.--Within one year after
the date of enactment of this Act, each Federal financial
regulatory authority shall prescribe rules, or revisions to
its rules, to improve the accuracy, simplicity, and
completeness, and to make more consistent, the disclosure of
information by persons subject to the jurisdiction of such
regulatory authority concerning any commissions, fees, or
other costs incurred by customers in the acquisition of
financial products.
(b) Consultation.--In prescribing rules and revisions under
subsection (a), the Federal financial regulatory authorities
shall consult with each other and with appropriate State
financial regulatory authorities.
(c) Consideration of Existing Disclosures.--In prescribing
rules and revisions under subsection (a), the Federal
financial regulatory authorities shall consider the
sufficiency and appropriateness of then existing
[[Page H5277]]
laws and rules applicable to persons subject to their
jurisdiction, and may prescribe exemptions from the rules and
revisions required by subsection (a) to the extent
appropriate in light of the objective of this section to
increase the consistency of disclosure practices.
(d) Enforcement.--Any rule prescribed by a Federal
financial regulatory authority pursuant to this section
shall, for purposes of enforcement, be treated as a rule
prescribed by such regulatory authority pursuant to the
statute establishing such regulatory authority's jurisdiction
over the persons to whom such rule applies.
(e) Definition.--As used in this section, the term
``Federal financial regulatory authority'' means the Board of
Governors of the Federal Reserve System, the Securities and
Exchange Commission, the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Commodity Futures
Trading Commission, and any self-regulatory organization
under the supervision of any of the foregoing.
TITLE III--INSURANCE
Subtitle A--State Regulation of Insurance
SEC. 301. STATE REGULATION OF THE BUSINESS OF INSURANCE.
The Act entitled ``An Act to express the intent of the
Congress with reference to the regulation of the business of
insurance'' and approved March 9, 1945 (15 U.S.C. 1011 et
seq.), commonly referred to as the ``McCarran-Ferguson Act''
remains the law of the United States.
SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS.
No person shall engage in the business of insurance in a
State as principal or agent unless such person is licensed as
required by the appropriate insurance regulator of such State
in accordance with the relevant State insurance law, subject
to section 104.
SEC. 303. FUNCTIONAL REGULATION OF INSURANCE.
The insurance activities of any person (including a
national bank exercising its power to act as agent under the
11th undesignated paragraph of section 13 of the Federal
Reserve Act) shall be functionally regulated by the States,
subject to section 104.
SEC. 304. INSURANCE UNDERWRITING IN NATIONAL BANKS.
(a) In General.--Except as provided in section 305, a
national bank and the subsidiaries of a national bank may not
provide insurance in a State as principal except that this
prohibition shall not apply to authorized products.
(b) Authorized Products.--For the purposes of this section,
a product is authorized if--
(1) as of January 1, 1999, the Comptroller of the Currency
had determined in writing that national banks may provide
such product as principal, or national banks were in fact
lawfully providing such product as principal;
(2) no court of relevant jurisdiction had, by final
judgment, overturned a determination of the Comptroller of
the Currency that national banks may provide such product as
principal; and
(3) the product is not title insurance, or an annuity
contract the income of which is subject to tax treatment
under section 72 of the Internal Revenue Code of 1986.
(c) Definition.--For purposes of this section, the term
``insurance'' means--
(1) any product regulated as insurance as of January 1,
1999, in accordance with the relevant State insurance law, in
the State in which the product is provided;
(2) any product first offered after January 1, 1999,
which--
(A) a State insurance regulator determines shall be
regulated as insurance in the State in which the product is
provided because the product insures, guarantees, or
indemnifies against liability, loss of life, loss of health,
or loss through damage to or destruction of property,
including, but not limited to, surety bonds, life insurance,
health insurance, title insurance, and property and casualty
insurance (such as private passenger or commercial
automobile, homeowners, mortgage, commercial multiperil,
general liability, professional liability, workers'
compensation, fire and allied lines, farm owners multiperil,
aircraft, fidelity, surety, medical malpractice, ocean
marine, inland marine, and boiler and machinery insurance);
and
(B) is not a product or service of a bank that is--
(i) a deposit product;
(ii) a loan, discount, letter of credit, or other extension
of credit;
(iii) a trust or other fiduciary service;
(iv) a qualified financial contract (as defined in or
determined pursuant to section 11(e)(8)(D)(i) of the Federal
Deposit Insurance Act); or
(v) a financial guaranty, except that this subparagraph (B)
shall not apply to a product that includes an insurance
component such that if the product is offered or proposed to
be offered by the bank as principal--
(I) it would be treated as a life insurance contract under
section 7702 of the Internal Revenue Code of 1986; or
(II) in the event that the product is not a letter of
credit or other similar extension of credit, a qualified
financial contract, or a financial guaranty, it would qualify
for treatment for losses incurred with respect to such
product under section 832(b)(5) of the Internal Revenue Code
of 1986, if the bank were subject to tax as an insurance
company under section 831 of that Code; or
(3) any annuity contract, the income on which is subject to
tax treatment under section 72 of the Internal Revenue Code
of 1986.
SEC. 305. TITLE INSURANCE ACTIVITIES OF NATIONAL BANKS AND
THEIR AFFILIATES.
(a) General Prohibition.--No national bank, and no
subsidiary of a national bank, may engage in any activity
involving the underwriting or sale of title insurance.
(b) Nondiscrimination Parity Exception.--
(1) In general.--Notwithstanding any other provision of law
(including section 104 of this Act), in the case of any State
in which banks organized under the laws of such State are
authorized to sell title insurance as agency, a national bank
and a subsidiary of a national bank may sell title insurance
as agent in such State, but only in the same manner, to the
same extent, and under the same restrictions as such State
banks are authorized to sell title insurance as agent in such
State.
(2) Coordination with ``wildcard'' provision.--A State law
which authorizes State banks to engage in any activities in
such State in which a national bank may engage shall not be
treated as a statute which authorizes State banks to sell
title insurance as agent, for purposes of paragraph (1).
(c) Grandfathering With Consistent Regulation.--
(1) In general.--Except as provided in paragraphs (2) and
(3) and notwithstanding subsections (a) and (b), a national
bank, and a subsidiary of a national bank, may conduct title
insurance activities which such national bank or subsidiary
was actively and lawfully conducting before the date of the
enactment of this Act.
(2) Insurance affiliate.--In the case of a national bank
which has an affiliate which provides insurance as principal
and is not a subsidiary of the bank, the national bank and
any subsidiary of the national bank may not engage in the
underwriting of title insurance pursuant to paragraph (1).
(3) Insurance subsidiary.--In the case of a national bank
which has a subsidiary which provides insurance as principal
and has no affiliate other than a subsidiary which provides
insurance as principal, the national bank may not directly
engage in any activity involving the underwriting of title
insurance.
(d) ``Affiliate'' and ``Subsidiary'' Defined.--For purposes
of this section, the terms ``affiliate'' and ``subsidiary''
have the same meanings as in section 2 of the Bank Holding
Company Act of 1956.
(e) Rule of Construction.--No provision of this Act or any
other Federal law shall be construed as superseding or
affecting a State law which was in effect before the date of
the enactment of this Act and which prohibits title insurance
from being offered, provided, or sold in such State, or from
being underwritten with respect to real property in such
State, by any person whatsoever.
SEC. 306. EXPEDITED AND EQUALIZED DISPUTE RESOLUTION FOR
FEDERAL REGULATORS.
(a) Filing in Court of Appeals.--In the case of a
regulatory conflict between a State insurance regulator and a
Federal regulator as to whether any product is or is not
insurance, as defined in section 304(c) of this Act, or
whether a State statute, regulation, order, or interpretation
regarding any insurance sales or solicitation activity is
properly treated as preempted under Federal law, either
regulator may seek expedited judicial review of such
determination by the United States Court of Appeals for the
circuit in which the State is located or in the United States
Court of Appeals for the District of Columbia Circuit by
filing a petition for review in such court.
(b) Expedited Review.--The United States Court of Appeals
in which a petition for review is filed in accordance with
subsection (a) shall complete all action on such petition,
including rendering a judgment, before the end of the 60-day
period beginning on the date on which such petition is filed,
unless all parties to such proceeding agree to any extension
of such period.
(c) Supreme Court Review.--Any request for certiorari to
the Supreme Court of the United States of any judgment of a
United States Court of Appeals with respect to a petition for
review under this section shall be filed with the Supreme
Court of the United States as soon as practicable after such
judgment is issued.
(d) Statute of Limitation.--No petition may be filed under
this section challenging an order, ruling, determination, or
other action of a Federal regulator or State insurance
regulator after the later of--
(1) the end of the 12-month period beginning on the date on
which the first public notice is made of such order, ruling,
determination or other action in its final form; or
(2) the end of the 6-month period beginning on the date on
which such order, ruling, determination, or other action
takes effect.
(e) Standard of Review.--The court shall decide a petition
filed under this section based on its review on the merits of
all questions presented under State and Federal law,
including the nature of the product or activity and the
history and purpose of its regulation under State and Federal
law, without unequal deference.
SEC. 307. CONSUMER PROTECTION REGULATIONS.
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
is amended by inserting after section 46 (as added by section
122(b) of this Act) the following new section:
``SEC. 47. CONSUMER PROTECTION REGULATIONS.
``(a) Regulations Required.--
[[Page H5278]]
``(1) In general.--The Federal banking agencies shall
prescribe and publish in final form, before the end of the 1-
year period beginning on the date of the enactment of the
Financial Services Act of 1999, consumer protection
regulations (which the agencies jointly determine to be
appropriate) that--
``(A) apply to retail sales practices, solicitations,
advertising, or offers of any insurance product by any
insured depository institution or wholesale financial
institution or any person who is engaged in such activities
at an office of the institution or on behalf of the
institution; and
``(B) are consistent with the requirements of this Act and
provide such additional protections for consumers to whom
such sales, solicitations, advertising, or offers are
directed as the agency determines to be appropriate.
``(2) Applicability to subsidiaries.--The regulations
prescribed pursuant to paragraph (1) shall extend such
protections to any subsidiaries of an insured depository
institution, as deemed appropriate by the regulators referred
to in paragraph (3), where such extension is determined to be
necessary to ensure the consumer protections provided by this
section.
``(3) Consultation and joint regulations.--The Federal
banking agencies shall consult with each other and prescribe
joint regulations pursuant to paragraph (1), after
consultation with the State insurance regulators, as
appropriate.
``(b) Sales Practices.--The regulations prescribed pursuant
to subsection (a) shall include anticoercion rules applicable
to the sale of insurance products which prohibit an insured
depository institution from engaging in any practice that
would lead a consumer to believe an extension of credit, in
violation of section 106(b) of the Bank Holding Company Act
Amendments of 1970, is conditional upon--
``(1) the purchase of an insurance product from the
institution or any of its affiliates; or
``(2) an agreement by the consumer not to obtain, or a
prohibition on the consumer from obtaining, an insurance
product from an unaffiliated entity.
``(c) Disclosures and Advertising.--The regulations
prescribed pursuant to subsection (a) shall include the
following provisions relating to disclosures and advertising
in connection with the initial purchase of an insurance
product:
``(1) Disclosures.--
``(A) In general.--Requirements that the following
disclosures be made orally and in writing before the
completion of the initial sale and, in the case of clause
(iv), at the time of application for an extension of credit:
``(i) Uninsured status.--As appropriate, the product is not
insured by the Federal Deposit Insurance Corporation, the
United States Government, or the insured depository
institution.
``(ii) Investment risk.--In the case of a variable annuity
or other insurance product which involves an investment risk,
that there is an investment risk associated with the product,
including possible loss of value.
``(iv) Coercion.--The approval of an extension of credit
may not be conditioned on--
``(I) the purchase of an insurance product from the
institution in which the application for credit is pending or
any of its affiliates or subsidiaries; or
``(II) an agreement by the consumer not to obtain, or a
prohibition on the consumer from obtaining, an insurance
product from an unaffiliated entity.
``(B) Making disclosure readily understandable.--
Regulations prescribed under subparagraph (A) shall encourage
the use of disclosure that is conspicuous, simple, direct,
and readily understandable, such as the following:
``(i) `NOT FDIC-INSURED'.
``(ii) `NOT GUARANTEED BY THE BANK'.
``(iii) `MAY GO DOWN IN VALUE'.
``(iv) `NOT INSURED BY ANY GOVERNMENT AGENCY'.
``(C) Adjustments for alternative methods of purchase.--In
prescribing the requirements under subparagraphs (A) and (D),
necessary adjustments shall be made for purchase in person,
by telephone, or by electronic media to provide for the most
appropriate and complete form of disclosure and
acknowledgments.
``(D) Consumer acknowledgment.--A requirement that an
insured depository institution shall require any person
selling an insurance product at any office of, or on behalf
of, the institution to obtain, at the time a consumer
receives the disclosures required under this paragraph or at
the time of the initial purchase by the consumer of such
product, an acknowledgment by such consumer of the receipt of
the disclosure required under this subsection with respect to
such product.
``(2) Prohibition on misrepresentations.--A prohibition on
any practice, or any advertising, at any office of, or on
behalf of, the insured depository institution, or any
subsidiary as appropriate, which could mislead any person or
otherwise cause a reasonable person to reach an erroneous
belief with respect to--
``(A) the uninsured nature of any insurance product sold,
or offered for sale, by the institution or any subsidiary of
the institution; or
``(B) in the case of a variable annuity or other insurance
product that involves an investment risk, the investment risk
associated with any such product.
``(d) Separation of Banking and Nonbanking Activities.--
``(1) Regulations required.--The regulations prescribed
pursuant to subsection (a) shall include such provisions as
the Federal banking agencies consider appropriate to ensure
that the routine acceptance of deposits is kept, to the
extent practicable, physically segregated from insurance
product activity.
``(2) Requirements.--Regulations prescribed pursuant to
paragraph (1) shall include the following:
``(A) Separate setting.--A clear delineation of the setting
in which, and the circumstances under which, transactions
involving insurance products should be conducted in a
location physically segregated from an area where retail
deposits are routinely accepted.
``(B) Referrals.--Standards which permit any person
accepting deposits from the public in an area where such
transactions are routinely conducted in an insured depository
institution to refer a customer who seeks to purchase any
insurance product to a qualified person who sells such
product, only if the person making the referral receives no
more than a one-time nominal fee of a fixed dollar amount for
each referral that does not depend on whether the referral
results in a transaction.
``(C) Qualification and licensing requirements.--Standards
prohibiting any insured depository institution from
permitting any person to sell or offer for sale any insurance
product in any part of any office of the institution, or on
behalf of the institution, unless such person is
appropriately qualified and licensed.
``(e) Consumer Grievance Process.--The Federal banking
agencies shall jointly establish a consumer complaint
mechanism, for receiving and expeditiously addressing
consumer complaints alleging a violation of regulations
issued under the section, which shall--
``(1) establish a group within each regulatory agency to
receive such 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.
``(f) Effect on Other Authority.--
``(1) In general.--No provision of this section shall be
construed as granting, limiting, or otherwise affecting--
``(A) any authority of the Securities and Exchange
Commission, any self-regulatory organization, the Municipal
Securities Rulemaking Board, or the Secretary of the Treasury
under any Federal securities law; or
``(B) except as provided in paragraph (2), any authority of
any State insurance commissioner or other State authority
under any State law.
``(2) Coordination with state law.--
``(A) In general.--Except as provided in subparagraph (B),
regulations prescribed by a Federal banking agency under this
section shall not apply to retail sales, solicitations,
advertising, or offers of any insurance product by any
insured depository institution or wholesale financial
institution or to any person who is engaged in such
activities at an office of such institution or on behalf of
the institution, in a State where the State has in effect
statutes, regulations, orders, or interpretations, that are
inconsistent with or contrary to the regulations prescribed
by the Federal banking agencies.
``(B) Preemption.--If, with respect to any provision of the
regulations prescribed under this section, the Board of
Governors of the Federal Reserve System, the Comptroller of
the Currency, and the Board of Directors of the Federal
Deposit Insurance Corporation determine jointly that the
protection afforded by such provision for consumers is
greater than the protection provided by a comparable
provision of the statutes, regulations, orders, or
interpretations referred to in subparagraph (A) of any State,
such provision of the regulations prescribed under this
section shall supersede the comparable provision of such
State statute, regulation, order, or interpretation.
``(h) Insurance Product Defined.--For purposes of this
section, the term `insurance product' includes an annuity
contract the income of which is subject to tax treatment
under section 72 of the Internal Revenue Code of 1986.''.
SEC. 308. CERTAIN STATE AFFILIATION LAWS PREEMPTED FOR
INSURANCE COMPANIES AND AFFILIATES.
Except as provided in section 104(a)(2), no State may, by
law, regulation, order, interpretation, or otherwise--
(1) prevent or significantly interfere with the ability of
any insurer, or any affiliate of an insurer (whether such
affiliate is organized as a stock company, mutual holding
company, or otherwise), to become a financial holding company
or to acquire control of an insured depository institution;
(2) limit the amount of an insurer's assets that may be
invested in the voting securities of an insured depository
institution (or any company which controls such institution),
except that the laws of an insurer's State of domicile may
limit the amount of such investment to an amount that is not
less than 5 percent of the insurer's admitted assets; or
(3) prevent, significantly interfere with, or have the
authority to review, approve, or disapprove a plan of
reorganization by which
[[Page H5279]]
an insurer proposes to reorganize from mutual form to become
a stock insurer (whether as a direct or indirect subsidiary
of a mutual holding company or otherwise) unless such State
is the State of domicile of the insurer.
SEC. 309. INTERAGENCY CONSULTATION.
(a) Purpose.--It is the intention of Congress that the
Board of Governors of the Federal Reserve System, as the
umbrella supervisor for financial holding companies, and the
State insurance regulators, as the functional regulators of
companies engaged in insurance activities, coordinate efforts
to supervise companies that control both a depository
institution and a company engaged in insurance activities
regulated under State law. In particular, Congress believes
that the Board and the State insurance regulators should
share, on a confidential basis, information relevant to the
supervision of companies that control both a depository
institution and a company engaged in insurance activities,
including information regarding the financial health of the
consolidated organization and information regarding
transactions and relationships between insurance companies
and affiliated depository institutions. The appropriate
Federal banking agencies for depository institutions should
also share, on a confidential basis, information with the
relevant State insurance regulators regarding transactions
and relationships between depository institutions and
affiliated companies engaged in insurance activities. The
purpose of this section is to encourage this coordination and
confidential sharing of information, and to thereby improve
both the efficiency and the quality of the supervision of
financial holding companies and their affiliated depository
institutions and companies engaged in insurance activities.
(b) Examination Results and Other Information.--
(1) Information of the board.--Upon the request of the
appropriate insurance regulator of any State, the Board may
provide any information of the Board regarding the financial
condition, risk management policies, and operations of any
financial holding company that controls a company that is
engaged in insurance activities and is regulated by such
State insurance regulator, and regarding any transaction or
relationship between such an insurance company and any
affiliated depository institution. The Board may provide any
other information to the appropriate State insurance
regulator that the Board believes is necessary or appropriate
to permit the State insurance regulator to administer and
enforce applicable State insurance laws.
(2) Banking agency information.--Upon the request of the
appropriate insurance regulator of any State, the appropriate
Federal banking agency may provide any information of the
agency regarding any transaction or relationship between a
depository institution supervised by such Federal banking
agency and any affiliated company that is engaged in
insurance activities regulated by such State insurance
regulator. The appropriate Federal banking agency may provide
any other information to the appropriate State insurance
regulator that the agency believes is necessary or
appropriate to permit the State insurance regulator to
administer and enforce applicable State insurance laws.
(3) State insurance regulator information.--Upon the
request of the Board or the appropriate Federal banking
agency, a State insurance regulator may provide any
examination or other reports, records, or other information
to which such insurance regulator may have access with
respect to a company which--
(A) is engaged in insurance activities and regulated by
such insurance regulator; and
(B) is an affiliate of an insured depository institution,
wholesale financial institution, or financial holding
company.
(c) Consultation.--Before making any determination relating
to the initial affiliation of, or the continuing affiliation
of, an insured depository institution, wholesale financial
institution, or financial holding company with a company
engaged in insurance activities, the appropriate Federal
banking agency shall consult with the appropriate State
insurance regulator of such company and take the views of
such insurance regulator into account in making such
determination.
(d) Effect on Other Authority.--Nothing in this section
shall limit in any respect the authority of the appropriate
Federal banking agency with respect to an insured depository
institution, wholesale financial institution, or bank holding
company or any affiliate thereof under any provision of law.
(e) Confidentiality and Privilege.--
(1) Confidentiality.--The appropriate Federal banking
agency shall not provide any information or material that is
entitled to confidential treatment under applicable Federal
banking agency regulations, or other applicable law, to a
State insurance regulator unless such regulator agrees to
maintain the information or material in confidence and to
take all reasonable steps to oppose any effort to secure
disclosure of the information or material by the regulator.
The appropriate Federal banking agency shall treat as
confidential any information or material obtained from a
State insurance regulator that is entitled to confidential
treatment under applicable State regulations, or other
applicable law, and take all reasonable steps to oppose any
effort to secure disclosure of the information or material by
the Federal banking agency.
(2) Privilege.--The provision pursuant to this section of
information or material by a Federal banking agency or State
insurance regulator shall not constitute a waiver of, or
otherwise affect, any privilege to which the information or
material is otherwise subject.
(f) Definitions.--For purposes of this section, the
following definitions shall apply:
(1) Appropriate federal banking agency; insured depository
institution.--The terms ``appropriate Federal banking
agency'' and ``insured depository institution'' have the same
meanings as in section 3 of the Federal Deposit Insurance
Act.
(2) Board; financial holding company; and wholesale
financial institution.--The terms ``Board'', ``financial
holding company'', and ``wholesale financial institution''
have the same meanings as in section 2 of the Bank Holding
Company Act of 1956.
SEC. 310. DEFINITION OF STATE.
For purposes of this subtitle, the term ``State'' means any
State of the United States, the District of Columbia, any
territory of the United States, Puerto Rico, Guam, American
Samoa, the Trust Territory of the Pacific Islands, the Virgin
Islands, and the Northern Mariana Islands.
Subtitle B--National Association of Registered Agents and Brokers
SEC. 321. STATE FLEXIBILITY IN MULTISTATE LICENSING REFORMS.
(a) In General.--The provisions of this subtitle shall
take effect unless, not later than 3 years after the date of
enactment of this Act, at least a majority of the States--
(1) have enacted uniform laws and regulations governing the
licensure of individuals and entities authorized to sell and
solicit the purchase of insurance within the State; or
(2) have enacted reciprocity laws and regulations governing
the licensure of nonresident individuals and entities
authorized to sell and solicit insurance within those States.
(b) Uniformity Required.--States shall be deemed to have
established the uniformity necessary to satisfy subsection
(a)(1) if the States--
(1) establish uniform criteria regarding the integrity,
personal qualifications, education, training, and experience
of licensed insurance producers, including the qualification
and training of sales personnel in ascertaining the
appropriateness of a particular insurance product for a
prospective customer;
(2) establish uniform continuing education requirements for
licensed insurance producers;
(3) establish uniform ethics course requirements for
licensed insurance producers in conjunction with the
continuing education requirements under paragraph (2);
(4) establish uniform criteria to ensure that an insurance
product, including any annuity contract, sold to a consumer
is suitable and appropriate for the consumer based on
financial information disclosed by the consumer; and
(5) do not impose any requirement upon any insurance
producer to be licensed or otherwise qualified to do business
as a nonresident that has the effect of limiting or
conditioning that producer's activities because of its
residence or place of operations, except that counter-
signature requirements imposed on nonresident producers shall
not be deemed to have the effect of limiting or conditioning
a producer's activities because of its residence or place of
operations under this section.
(c) Reciprocity Required.--States shall be deemed to have
established the reciprocity required to satisfy subsection
(a)(2) if the following conditions are met:
(1) Administrative licensing procedures.--At least a
majority of the States permit a producer that has a resident
license for selling or soliciting the purchase of insurance
in its home State to receive a license to sell or solicit the
purchase of insurance in such majority of States as a
nonresident to the same extent that such producer is
permitted to sell or solicit the purchase of insurance in its
State, if the producer's home State also awards such licenses
on such a reciprocal basis, without satisfying any additional
requirements other than submitting--
(A) a request for licensure;
(B) the application for licensure that the producer
submitted to its home State;
(C) proof that the producer is licensed and in good
standing in its home State; and
(D) the payment of any requisite fee to the appropriate
authority.
(2) Continuing education requirements.--A majority of the
States accept an insurance producer's satisfaction of its
home State's continuing education requirements for licensed
insurance producers to satisfy the States' own continuing
education requirements if the producer's home State also
recognizes the satisfaction of continuing education
requirements on such a reciprocal basis.
(3) No limiting nonresident requirements.--A majority of
the States do not impose any requirement upon any insurance
producer to be licensed or otherwise qualified to do business
as a nonresident that has the effect of limiting or
conditioning that producer's activities because of its
residence or place of operations, except that
countersignature requirements imposed on nonresident
producers shall not be deemed to have the effect of limiting
or conditioning a producer's activities because of its
residence or place of operations under this section.
[[Page H5280]]
(4) Reciprocal reciprocity.--Each of the States that
satisfies paragraphs (1), (2), and (3) grants reciprocity to
residents of all of the other States that satisfy such
paragraphs.
(d) Determination.--
(1) NAIC determination.--At the end of the 3-year period
beginning on the date of the enactment of this Act, the
National Association of Insurance Commissioners shall
determine, in consultation with the insurance commissioners
or chief insurance regulatory officials of the States,
whether the uniformity or reciprocity required by subsections
(b) and (c) has been achieved.
(2) Judicial review.--The appropriate United States
district court shall have exclusive jurisdiction over any
challenge to the National Association of Insurance
Commissioners' determination under this section and such
court shall apply the standards set forth in section 706 of
title 5, United States Code, when reviewing any such
challenge.
(e) Continued Application.--If, at any time, the uniformity
or reciprocity required by subsections (b) and (c) no longer
exists, the provisions of this subtitle shall take effect 2
years after the date on which such uniformity or reciprocity
ceases to exist, unless the uniformity or reciprocity
required by those provisions is satisfied before the
expiration of that 2-year period.
(f) Savings Provision.--No provision of this section shall
be construed as requiring that any law, regulation,
provision, or action of any State which purports to regulate
insurance producers, including any such law, regulation,
provision, or action which purports to regulate unfair trade
practices or establish consumer protections, including
countersignature laws, be altered or amended in order to
satisfy the uniformity or reciprocity required by subsections
(b) and (c), unless any such law, regulation, provision, or
action is inconsistent with a specific requirement of any
such subsection and then only to the extent of such
inconsistency.
(g) Uniform Licensing.--Nothing in this section shall be
construed to require any State to adopt new or additional
licensing requirements to achieve the uniformity necessary to
satisfy subsection (a)(1).
SEC. 322. NATIONAL ASSOCIATION OF REGISTERED AGENTS AND
BROKERS.
(a) Establishment.--There is established the National
Association of Registered Agents and Brokers (hereafter in
this subtitle referred to as the ``Association'').
(b) Status.--The Association shall--
(1) be a nonprofit corporation;
(2) have succession until dissolved by an Act of Congress;
(3) not be an agent or instrumentality of the United States
Government; and
(4) except as otherwise provided in this Act, be subject
to, and have all the powers conferred upon a nonprofit
corporation by the District of Columbia Nonprofit Corporation
Act (D.C. Code, sec. 29y-1001 et seq.).
SEC. 323. PURPOSE.
The purpose of the Association shall be to provide a
mechanism through which uniform licensing, appointment,
continuing education, and other insurance producer sales
qualification requirements and conditions can be adopted and
applied on a multistate basis, while preserving the right of
States to license, supervise, and discipline insurance
producers and to prescribe and enforce laws and regulations
with regard to insurance-related consumer protection and
unfair trade practices.
SEC. 324. RELATIONSHIP TO THE FEDERAL GOVERNMENT.
The Association shall be subject to the supervision and
oversight of the National Association of Insurance
Commissioners (hereafter in this subtitle referred to as the
``NAIC'').
SEC. 325. MEMBERSHIP.
(a) Eligibility.--
(1) In general.--Any State-licensed insurance producer
shall be eligible to become a member in the Association.
(2) Ineligibility for suspension or revocation of
license.--Notwithstanding paragraph (1), a State-licensed
insurance producer shall not be eligible to become a member
if a State insurance regulator has suspended or revoked such
producer's license in that State during the 3-year period
preceding the date on which such producer applies for
membership.
(3) Resumption of eligibility.--Paragraph (2) shall cease
to apply to any insurance producer if--
(A) the State insurance regulator renews the license of
such producer in the State in which the license was suspended
or revoked; or
(B) the suspension or revocation is subsequently
overturned.
(b) Authority To Establish Membership Criteria.--The
Association shall have the authority to establish membership
criteria that--
(1) bear a reasonable relationship to the purposes for
which the Association was established; and
(2) do not unfairly limit the access of smaller agencies to
the Association membership.
(c) Establishment of Classes and Categories.--
(1) Classes of membership.--The Association may establish
separate classes of membership, with separate criteria, if
the Association reasonably determines that performance of
different duties requires different levels of education,
training, or experience.
(2) Categories.--The Association may establish separate
categories of membership for individuals and for other
persons. The establishment of any such categories of
membership shall be based either on the types of licensing
categories that exist under State laws or on the aggregate
amount of business handled by an insurance producer. No
special categories of membership, and no distinct membership
criteria, shall be established for members which are insured
depository institutions or wholesale financial institutions
or for their employees, agents, or affiliates.
(d) Membership Criteria.--
(1) In general.--The Association may establish criteria for
membership which shall include standards for integrity,
personal qualifications, education, training, and experience.
(2) Minimum standard.--In establishing criteria under
paragraph (1), the Association shall consider the highest
levels of insurance producer qualifications established under
the licensing laws of the States.
(e) Effect of Membership.--Membership in the Association
shall entitle the member to licensure in each State for which
the member pays the requisite fees, including licensing fees
and, where applicable, bonding requirements, set by such
State.
(f) Annual Renewal.--Membership in the Association shall be
renewed on an annual basis.
(g) Continuing Education.--The Association shall establish,
as a condition of membership, continuing education
requirements which shall be comparable to or greater than the
continuing education requirements under the licensing laws of
a majority of the States.
(h) Suspension and Revocation.--The Association may--
(1) inspect and examine the records and offices of the
members of the Association to determine compliance with the
criteria for membership established by the Association; and
(2) suspend or revoke the membership of an insurance
producer if--
(A) the producer fails to meet the applicable membership
criteria of the Association; or
(B) the producer has been subject to disciplinary action
pursuant to a final adjudicatory proceeding under the
jurisdiction of a State insurance regulator, and the
Association concludes that retention of membership in the
Association would not be in the public interest.
(i) Office of Consumer Complaints.--
(1) In general.--The Association shall establish an office
of consumer complaints that shall--
(A) receive and investigate complaints from both consumers
and State insurance regulators related to members of the
Association; and
(B) recommend to the Association any disciplinary actions
that the office considers appropriate, to the extent that any
such recommendation is not inconsistent with State law.
(2) Records and referrals.--The office of consumer
complaints of the Association shall--
(A) maintain records of all complaints received in
accordance with paragraph (1) and make such records available
to the NAIC and to each State insurance regulator for the
State of residence of the consumer who filed the complaint;
and
(B) refer, when appropriate, any such complaint to any
appropriate State insurance regulator.
(3) Telephone and other access.--The office of consumer
complaints shall maintain a toll-free telephone number for
the purpose of this subsection and, as practicable, other
alternative means of communication with consumers, such as an
Internet home page.
SEC. 326. BOARD OF DIRECTORS.
(a) Establishment.--There is established the board of
directors of the Association (hereafter in this subtitle
referred to as the ``Board'') for the purpose of governing
and supervising the activities of the Association and the
members of the Association.
(b) Powers.--The Board shall have such powers and authority
as may be specified in the bylaws of the Association.
(c) Composition.--
(1) Members.--The Board shall be composed of 7 members
appointed by the NAIC.
(2) Requirement.--At least 4 of the members of the Board
shall have significant experience with the regulation of
commercial lines of insurance in at least 1 of the 20 States
in which the greatest total dollar amount of commercial-lines
insurance is placed in the United States.
(3) Initial board membership.--
(A) In general.--If, by the end of the 2-year period
beginning on the date of enactment of this Act, the NAIC has
not appointed the initial 7 members of the Board of the
Association, the initial Board shall consist of the 7 State
insurance regulators of the 7 States with the greatest total
dollar amount of commercial-lines insurance in place as of
the end of such period.
(B) Alternate composition.--If any of the State insurance
regulators described in subparagraph (A) declines to serve on
the Board, the State insurance regulator with the next
greatest total dollar amount of commercial-lines insurance in
place, as determined by the NAIC as of the end of such
period, shall serve as a member of the Board.
(C) Inoperability.--If fewer than 7 State insurance
regulators accept appointment to
[[Page H5281]]
the Board, the Association shall be established without NAIC
oversight pursuant to section 332.
(d) Terms.--The term of each director shall, after the
initial appointment of the members of the Board, be for 3
years, with \1/3\ of the directors to be appointed each year.
(e) Board Vacancies.--A vacancy on the Board shall be
filled in the same manner as the original appointment of the
initial Board for the remainder of the term of the vacating
member.
(f) Meetings.--The Board shall meet at the call of the
chairperson, or as otherwise provided by the bylaws of the
Association.
SEC. 327. OFFICERS.
(a) In General.--
(1) Positions.--The officers of the Association shall
consist of a chairperson and a vice chairperson of the Board,
a president, secretary, and treasurer of the Association, and
such other officers and assistant officers as may be deemed
necessary.
(2) Manner of selection.--Each officer of the Board and the
Association shall be elected or appointed at such time and in
such manner and for such terms not exceeding 3 years as may
be prescribed in the bylaws of the Association.
(b) Criteria for Chairperson.--Only individuals who are
members of the NAIC shall be eligible to serve as the
chairperson of the board of directors.
SEC. 328. BYLAWS, RULES, AND DISCIPLINARY ACTION.
(a) Adoption and Amendment of Bylaws.--
(1) Copy required to be filed with the naic.--The board of
directors of the Association shall file with the NAIC a copy
of the proposed bylaws or any proposed amendment to the
bylaws, accompanied by a concise general statement of the
basis and purpose of such proposal.
(2) Effective date.--Except as provided in paragraph (3),
any proposed bylaw or proposed amendment shall take effect--
(A) 30 days after the date of the filing of a copy with the
NAIC;
(B) upon such later date as the Association may designate;
or
(C) upon such earlier date as the NAIC may determine.
(3) Disapproval by the naic.--Notwithstanding paragraph
(2), a proposed bylaw or amendment shall not take effect if,
after public notice and opportunity to participate in a
public hearing--
(A) the NAIC disapproves such proposal as being contrary to
the public interest or contrary to the purposes of this
subtitle and provides notice to the Association setting forth
the reasons for such disapproval; or
(B) the NAIC finds that such proposal involves a matter of
such significant public interest that public comment should
be obtained, in which case it may, after notifying the
Association in writing of such finding, require that the
procedures set forth in subsection (b) be followed with
respect to such proposal, in the same manner as if such
proposed bylaw change were a proposed rule change within the
meaning of such subsection.
(b) Adoption and Amendment of Rules.--
(1) Filing proposed regulations with the naic.--
(A) In general.--The board of directors of the Association
shall file with the NAIC a copy of any proposed rule or any
proposed amendment to a rule of the Association which shall
be accompanied by a concise general statement of the basis
and purpose of such proposal.
(B) Other rules and amendments ineffective.--No proposed
rule or amendment shall take effect unless approved by the
NAIC or otherwise permitted in accordance with this
paragraph.
(2) Initial consideration by the naic.--Not later than 35
days after the date of publication of notice of filing of a
proposal, or before the end of such longer period not to
exceed 90 days as the NAIC may designate after such date, if
the NAIC finds such longer period to be appropriate and sets
forth its reasons for so finding, or as to which the
Association consents, the NAIC shall--
(A) by order approve such proposed rule or amendment; or
(B) institute proceedings to determine whether such
proposed rule or amendment should be modified or disapproved.
(3) NAIC proceedings.--
(A) In general.--Proceedings instituted by the NAIC with
respect to a proposed rule or amendment pursuant to paragraph
(2) shall--
(i) include notice of the grounds for disapproval under
consideration;
(ii) provide opportunity for hearing; and
(iii) be concluded not later than 180 days after the date
of the Association's filing of such proposed rule or
amendment.
(B) Disposition of proposal.--At the conclusion of any
proceeding under subparagraph (A), the NAIC shall, by order,
approve or disapprove the proposed rule or amendment.
(C) Extension of time for consideration.--The NAIC may
extend the time for concluding any proceeding under
subparagraph (A) for--
(i) not more than 60 days if the NAIC finds good cause for
such extension and sets forth its reasons for so finding; or
(ii) for such longer period as to which the Association
consents.
(4) Standards for review.--
(A) Grounds for approval.--The NAIC shall approve a
proposed rule or amendment if the NAIC finds that the rule or
amendment is in the public interest and is consistent with
the purposes of this Act.
(B) Approval before end of notice period.--The NAIC shall
not approve any proposed rule before the end of the 30-day
period beginning on the date on which the Association files
proposed rules or amendments in accordance with paragraph
(1), unless the NAIC finds good cause for so doing and sets
forth the reasons for so finding.
(5) Alternate procedure.--
(A) In general.--Notwithstanding any provision of this
subsection other than subparagraph (B), a proposed rule or
amendment relating to the administration or organization of
the Association shall take effect--
(i) upon the date of filing with the NAIC, if such proposed
rule or amendment is designated by the Association as
relating solely to matters which the NAIC, consistent with
the public interest and the purposes of this subsection,
determines by rule do not require the procedures set forth in
this paragraph; or
(ii) upon such date as the NAIC shall for good cause
determine.
(B) Abrogation by the naic.--
(i) In general.--At any time within 60 days after the date
of filing of any proposed rule or amendment under
subparagraph (A)(i) or clause (ii) of this subparagraph, the
NAIC may repeal such rule or amendment and require that the
rule or amendment be refiled and reviewed in accordance with
this paragraph, if the NAIC finds that such action is
necessary or appropriate in the public interest, for the
protection of insurance producers or policyholders, or
otherwise in furtherance of the purposes of this subtitle.
(ii) Effect of reconsideration by the naic.--Any action of
the NAIC pursuant to clause (i) shall--
(I) not affect the validity or force of a rule change
during the period such rule or amendment was in effect; and
(II) not be considered to be a final action.
(c) Action Required by the NAIC.--The NAIC may, in
accordance with such rules as the NAIC determines to be
necessary or appropriate to the public interest or to carry
out the purposes of this subtitle, require the Association to
adopt, amend, or repeal any bylaw, rule or amendment of the
Association, whenever adopted.
(d) Disciplinary Action by the Association.--
(1) Specification of charges.--In any proceeding to
determine whether membership shall be denied, suspended,
revoked, or not renewed (hereafter in this section referred
to as a ``disciplinary action''), the Association shall bring
specific charges, notify such member of such charges, give
the member an opportunity to defend against the charges, and
keep a record.
(2) Supporting statement.--A determination to take
disciplinary action shall be supported by a statement setting
forth--
(A) any act or practice in which such member has been found
to have been engaged;
(B) the specific provision of this subtitle, the rules or
regulations under this subtitle, or the rules of the
Association which any such act or practice is deemed to
violate; and
(C) the sanction imposed and the reason for such sanction.
(e) NAIC Review of Disciplinary Action.--
(1) Notice to the naic.--If the Association orders any
disciplinary action, the Association shall promptly notify
the NAIC of such action.
(2) Review by the naic.--Any disciplinary action taken by
the Association shall be subject to review by the NAIC--
(A) on the NAIC's own motion; or
(B) upon application by any person aggrieved by such action
if such application is filed with the NAIC not more than 30
days after the later of--
(i) the date the notice was filed with the NAIC pursuant to
paragraph (1); or
(ii) the date the notice of the disciplinary action was
received by such aggrieved person.
(f) Effect of Review.--The filing of an application to the
NAIC for review of a disciplinary action, or the institution
of review by the NAIC on the NAIC's own motion, shall not
operate as a stay of disciplinary action unless the NAIC
otherwise orders.
(g) Scope of Review.--
(1) In general.--In any proceeding to review such action,
after notice and the opportunity for hearing, the NAIC
shall--
(A) determine whether the action should be taken;
(B) affirm, modify, or rescind the disciplinary sanction;
or
(C) remand to the Association for further proceedings.
(2) Dismissal of review.--The NAIC may dismiss a proceeding
to review disciplinary action if the NAIC finds that--
(A) the specific grounds on which the action is based exist
in fact;
(B) the action is in accordance with applicable rules and
regulations; and
(C) such rules and regulations are, and were, applied in a
manner consistent with the purposes of this subtitle.
SEC. 329. ASSESSMENTS.
(a) Insurance Producers Subject to Assessment.--The
Association may establish such application and membership
fees as the Association finds necessary to cover the costs of
its operations, including fees made reimbursable to the NAIC
under subsection (b), except that, in setting such fees, the
Association may not discriminate against smaller insurance
producers.
(b) NAIC Assessments.--The NAIC may assess the Association
for any costs that the NAIC incurs under this subtitle.
[[Page H5282]]
SEC. 330. FUNCTIONS OF THE NAIC.
(a) Administrative Procedure.--Determinations of the NAIC,
for purposes of making rules pursuant to section 328, shall
be made after appropriate notice and opportunity for a
hearing and for submission of views of interested persons.
(b) Examinations and Reports.--
(1) Examinations.--The NAIC may make such examinations and
inspections of the Association and require the Association to
furnish to the NAIC such reports and records or copies
thereof as the NAIC may consider necessary or appropriate in
the public interest or to effectuate the purposes of this
subtitle.
(2) Report by association.--As soon as practicable after
the close of each fiscal year, the Association shall submit
to the NAIC a written report regarding the conduct of its
business, and the exercise of the other rights and powers
granted by this subtitle, during such fiscal year. Such
report shall include financial statements setting forth the
financial position of the Association at the end of such
fiscal year and the results of its operations (including the
source and application of its funds) for such fiscal year.
The NAIC shall transmit such report to the President and the
Congress with such comment thereon as the NAIC determines to
be appropriate.
SEC. 331. LIABILITY OF THE ASSOCIATION AND THE DIRECTORS,
OFFICERS, AND EMPLOYEES OF THE ASSOCIATION.
(a) In General.--The Association shall not be deemed to be
an insurer or insurance producer within the meaning of any
State law, rule, regulation, or order regulating or taxing
insurers, insurance producers, or other entities engaged in
the business of insurance, including provisions imposing
premium taxes, regulating insurer solvency or financial
condition, establishing guaranty funds and levying
assessments, or requiring claims settlement practices.
(b) Liability of the Association, Its Directors, Officers,
and Employees.--Neither the Association nor any of its
directors, officers, or employees shall have any liability to
any person for any action taken or omitted in good faith
under or in connection with any matter subject to this
subtitle.
SEC. 332. ELIMINATION OF NAIC OVERSIGHT.
(a) In General.--The Association shall be established
without NAIC oversight and the provisions set forth in
section 324, subsections (a), (b), (c), and (e) of section
328, and sections 329(b) and 330 of this subtitle shall cease
to be effective if, at the end of the 2-year period beginning
on the date on which the provisions of this subtitle take
effect pursuant to section 321--
(1) at least a majority of the States representing at least
50 percent of the total United States commercial-lines
insurance premiums have not satisfied the uniformity or
reciprocity requirements of subsections (a), (b), and (c) of
section 321; and
(2) the NAIC has not approved the Association's bylaws as
required by section 328 or is unable to operate or supervise
the Association, or the Association is not conducting its
activities as required under this Act.
(b) Board Appointments.--If the repeals required by
subsection (a) are implemented, the following shall apply:
(1) General appointment power.--The President, with the
advice and consent of the Senate, shall appoint the members
of the Association's Board established under section 326 from
lists of candidates recommended to the President by the
National Association of Insurance Commissioners.
(2) Procedures for obtaining national association of
insurance commissioners appointment recommendations.--
(A) Initial determination and recommendations.--After the
date on which the provisions of subsection (a) take effect,
the NAIC shall, not later than 60 days thereafter, provide a
list of recommended candidates to the President. If the NAIC
fails to provide a list by that date, or if any list that is
provided does not include at least 14 recommended candidates
or comply with the requirements of section 326(c), the
President shall, with the advice and consent of the Senate,
make the requisite appointments without considering the views
of the NAIC.
(B) Subsequent appointments.--After the initial
appointments, the NAIC shall provide a list of at least 6
recommended candidates for the Board to the President by
January 15 of each subsequent year. If the NAIC fails to
provide a list by that date, or if any list that is provided
does not include at least 6 recommended candidates or comply
with the requirements of section 326(c), the President, with
the advice and consent of the Senate, shall make the
requisite appointments without considering the views of the
NAIC.
(C) Presidential oversight.--
(i) Removal.--If the President determines that the
Association is not acting in the interests of the public, the
President may remove the entire existing Board for the
remainder of the term to which the members of the Board were
appointed and appoint, with the advice and consent of the
Senate, new members to fill the vacancies on the Board for
the remainder of such terms.
(ii) Suspension of rules or actions.--The President, or a
person designated by the President for such purpose, may
suspend the effectiveness of any rule, or prohibit any
action, of the Association which the President or the
designee determines is contrary to the public interest.
(c) Annual Report.--As soon as practicable after the close
of each fiscal year, the Association shall submit to the
President and to the Congress a written report relative to
the conduct of its business, and the exercise of the other
rights and powers granted by this subtitle, during such
fiscal year. Such report shall include financial statements
setting forth the financial position of the Association at
the end of such fiscal year and the results of its operations
(including the source and application of its funds) for such
fiscal year.
SEC. 333. RELATIONSHIP TO STATE LAW.
(a) Preemption of State Laws.--State laws, regulations,
provisions, or other actions purporting to regulate insurance
producers shall be preempted as provided in subsection (b).
(b) Prohibited Actions.--No State shall--
(1) impede the activities of, take any action against, or
apply any provision of law or regulation to, any insurance
producer because that insurance producer or any affiliate
plans to become, has applied to become, or is a member of the
Association;
(2) impose any requirement upon a member of the Association
that it pay different fees to be licensed or otherwise
qualified to do business in that State, including bonding
requirements, based on its residency;
(3) impose any licensing, appointment, integrity, personal
or corporate qualifications, education, training, experience,
residency, or continuing education requirement upon a member
of the Association that is different from the criteria for
membership in the Association or renewal of such membership,
except that counter-signature requirements imposed on
nonresident producers shall not be deemed to have the effect
of limiting or conditioning a producer's activities because
of its residence or place of operations under this section;
or
(4) implement the procedures of such State's system of
licensing or renewing the licenses of insurance producers in
a manner different from the authority of the Association
under section 325.
(c) Savings Provision.--Except as provided in subsections
(a) and (b), no provision of this section shall be construed
as altering or affecting the continuing effectiveness of any
law, regulation, provision, or other action of any State
which purports to regulate insurance producers, including any
such law, regulation, provision, or action which purports to
regulate unfair trade practices or establish consumer
protections, including countersignature laws.
SEC. 334. COORDINATION WITH OTHER REGULATORS.
(a) Coordination With State Insurance Regulators.--The
Association shall have the authority to--
(1) issue uniform insurance producer applications and
renewal applications that may be used to apply for the
issuance or removal of State licenses, while preserving the
ability of each State to impose such conditions on the
issuance or renewal of a license as are consistent with
section 333;
(2) establish a central clearinghouse through which members
of the Association may apply for the issuance or renewal of
licenses in multiple States; and
(3) establish or utilize a national database for the
collection of regulatory information concerning the
activities of insurance producers.
(b) Coordination With the National Association of
Securities Dealers.--The Association shall coordinate with
the National Association of Securities Dealers in order to
ease any administrative burdens that fall on persons that are
members of both associations, consistent with the purposes of
this subtitle and the Federal securities laws.
SEC. 335. JUDICIAL REVIEW.
(a) Jurisdiction.--The appropriate United States district
court shall have exclusive jurisdiction over litigation
involving the Association, including disputes between the
Association and its members that arise under this subtitle.
Suits brought in State court involving the Association shall
be deemed to have arisen under Federal law and therefore be
subject to jurisdiction in the appropriate United States
district court.
(b) Exhaustion of Remedies.--An aggrieved person shall be
required to exhaust all available administrative remedies
before the Association and the NAIC before it may seek
judicial review of an Association decision.
(c) Standards of Review.--The standards set forth in
section 553 of title 5, United States Code, shall be applied
whenever a rule or bylaw of the Association is under judicial
review, and the standards set forth in section 554 of title
5, United States Code, shall be applied whenever a
disciplinary action of the Association is judicially
reviewed.
SEC. 336. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) Home state.--The term ``home State'' means the State in
which the insurance producer maintains its principal place of
residence and is licensed to act as an insurance producer.
(2) Insurance.--The term ``insurance'' means any product,
other than title insurance, defined or regulated as insurance
by the appropriate State insurance regulatory authority.
(3) Insurance producer.--The term ``insurance producer''
means any insurance agent or broker, surplus lines broker,
insurance consultant, limited insurance representative, and
any other person that solicits, negotiates, effects,
procures, delivers, renews, continues or binds policies of
insurance or offers advice, counsel, opinions or services
related to insurance.
[[Page H5283]]
(4) State.--The term ``State'' includes any State, the
District of Columbia, American Samoa, Guam, Puerto Rico, and
the United States Virgin Islands.
(5) State law.--The term ``State law'' includes all laws,
decisions, rules, regulations, or other State action having
the effect of law, of any State. A law of the United States
applicable only to the District of Columbia shall be treated
as a State law rather than a law of the United States.
Subtitle C--Rental Car Agency Insurance Activities
SEC. 341. STANDARD OF REGULATION FOR MOTOR VEHICLE RENTALS.
(a) Protection Against Retroactive Application of
Regulatory and Legal Action.--Except as provided in
subsection (b), during the 3-year period beginning on the
date of the enactment of this Act, it shall be a presumption
that no State law imposes any licensing, appointment, or
education requirements on any person who solicits the
purchase of or sells insurance connected with, and incidental
to, the lease or rental of a motor vehicle.
(b) Preeminence of State Insurance Law.--No provision of
this section shall be construed as altering the validity,
interpretation, construction, or effect of--
(1) any State statute;
(2) the prospective application of any court judgment
interpreting or applying any State statute; or
(3) the prospective application of any final State
regulation, order, bulletin, or other statutorily authorized
interpretation or action,
which, by its specific terms, expressly regulates or exempts
from regulation any person who solicits the purchase of or
sells insurance connected with, and incidental to, the short-
term lease or rental of a motor vehicle.
(c) Scope of Application.--This section shall apply with
respect to--
(1) the lease or rental of a motor vehicle for a total
period of 90 consecutive days or less; and
(2) insurance which is provided in connection with, and
incidentally to, such lease or rental for a period of
consecutive days not exceeding the lease or rental period.
(d) Motor Vehicle Defined.--For purposes of this section,
the term ``motor vehicle'' has the meaning given to such term
in section 13102 of title 49, United States Code.
Subtitle D--Confidentiality
SEC. 351. CONFIDENTIALITY OF HEALTH AND MEDICAL INFORMATION.
(a) In General.--A company which underwrites or sells
annuities contracts or contracts insuring, guaranteeing, or
indemnifying against loss, harm, damage, illness, disability,
or death (other than credit-related insurance) and any
subsidiary or affiliate thereof shall maintain a practice of
protecting the confidentiality of individually identifiable
customer health and medical and genetic information and may
disclose such information only--
(1) with the consent, or at the direction, of the customer;
(2) for insurance underwriting and reinsuring policies,
account administration, reporting, investigating, or
preventing fraud or material misrepresentation, processing
premium payments, processing insurance claims, administering
insurance benefits (including utilization review activities),
providing information to the customer's physician or other
health care provider, participating in research projects,
enabling the purchase, transfer, merger, or sale of any
insurance-related business, or as otherwise required or
specifically permitted by Federal or State law; or
(3) in connection with--
(A) the authorization, settlement, billing, processing,
clearing, transferring, reconciling, or collection of amounts
charged, debited, or otherwise paid using a debit, credit, or
other payment card or account number, or by other payment
means;
(B) the transfer of receivables, accounts, or interest
therein;
(C) the audit of the debit, credit, or other payment
information;
(D) compliance with Federal, State, or local law;
(E) compliance with a properly authorized civil, criminal,
or regulatory investigation by Federal, State, or local
authorities as governed by the requirements of this section;
or
(F) fraud protection, risk control, resolving customer
disputes or inquiries, communicating with the person to whom
the information relates, or reporting to consumer reporting
agencies.
(b) State Actions for Violations.--In addition to such
other remedies as are provided under State law, if the chief
law enforcement officer of a State, State insurance
regulator, or an official or agency designated by a State,
has reason to believe that any person has violated or is
violating this title, the State may bring an action to enjoin
such violation in any appropriate United States district
court or in any other court of competent jurisdiction.
(c) Effective Date; Sunset.--
(1) Effective date.--Except as provided in paragraph (2),
subsection (a) shall take effect on February 1, 2000.
(2) Sunset.--Subsection (a) shall not take effect if, or
shall cease to be effective on and after the date on which,
legislation is enacted that satisfies the requirements in
section 264(c)(1) of the Health Insurance Portability and
Accountability Act of 1996 (Public Law 104-191; 110 Stat.
2033).
(d) Consultation.--While subsection (a) is in effect, State
insurance regulatory authorities, through the National
Association of Insurance Commissioners, shall consult with
the Secretary of Health and Human Services in connection with
the administration of such subsection.
TITLE IV--UNITARY SAVINGS AND LOAN HOLDING COMPANIES
SEC. 401. PROHIBITION ON NEW UNITARY SAVINGS AND LOAN HOLDING
COMPANIES.
(a) In General.--Section 10(c) of the Home Owners' Loan Act
(12 U.S.C. 1467a(c)) is amended by adding at the end the
following new paragraph:
``(9) Termination of expanded powers for new unitary
holding company.--
``(A) In general.--Subject to subparagraph (B) and
notwithstanding paragraph (3), no company may directly or
indirectly, including through any merger, consolidation, or
other type of business combination, acquire control of a
savings association after March 4, 1999, unless the company
is engaged, directly or indirectly (including through a
subsidiary other than a savings association), only in
activities that are permitted--
``(i) under paragraph (1)(C) or (2); or
``(ii) for financial holding companies under section 6(c)
of the Bank Holding Company Act of 1956.
``(B) Existing unitary holding companies and the successors
to such companies.--Subparagraph (A) shall not apply, and
paragraph (3) shall continue to apply, to a company (or any
subsidiary of such company) that--
``(i) either--
``(I) acquired 1 or more savings associations described in
paragraph (3) pursuant to applications at least 1 of which
was filed on or before March 4, 1999; or
``(II) subject to subparagraph (C), became a savings and
loan holding company by acquiring control of the company
described in subclause (I); and
``(ii) continues to control the savings association
referred to in clause (i)(II) or the successor to any such
savings association.
``(C) Notice process for nonfinancial activities by a
successor unitary holding company.--
``(i) Notice required.--Subparagraph (B) shall not apply to
any company described in subparagraph (B)(i)(II) which
engages, directly or indirectly, in any activity other than
activities described in clauses (i) and (ii) of subparagraph
(A), unless--
``(I) in addition to an application to the Director under
this section to become a savings and loan holding company,
the company submits a notice to the Board of Governors of the
Federal Reserve System of such nonfinancial activities in the
same manner as a notice of nonbanking activities is filed
with the Board under section 4(j) of the Bank Holding Company
Act of 1956; and
``(II) before the end of the applicable period under such
section 4(j), the Board either approves or does not
disapprove of the continuation of such activities by such
company, directly or indirectly, after becoming a savings and
loan holding company.
``(ii) Procedure.--Section 4(j) of the Bank Holding Company
Act of 1956, including the standards for review, shall apply
to any notice filed with the Board under this subparagraph in
the same manner as it applies to notices filed under such
section.''.
(b) Technical and Conforming Amendment.--Section 10(c)(3)
of the Home Owners' Loan Act (12 U.S.C. 1467a(c)(3)) is
amended by striking ``Notwithstanding'' and inserting
``Except as provided in paragraph (9) and notwithstanding''.
(c) Conforming Amendment.--Section 10(o)(5) of the Home
Owners' Loan Act (12 U.S.C. 1467a(o)(5)) is amended--
(1) in subparagraph (E), by striking ``, except
subparagraph (B)''; and
(2) by adding at the end the following new subparagraph:
``(F) In the case of a mutual holding company which is a
savings and loan holding company described in subsection
(c)(3), engaging in the activities permitted for financial
holding companies under section 6(c) of the Bank Holding
Company Act of 1956.''.
SEC. 402. RETENTION OF ``FEDERAL'' IN NAME OF CONVERTED
FEDERAL SAVINGS ASSOCIATION.
Section 2 of the Act entitled ``An Act to enable national
banking associations to increase their capital stock and to
change their names or locations'', approved May 1, 1886 (12
U.S.C. 30), is amended by adding at the end the following new
subsection:
``(d) Retention of `Federal' in Name of Converted Federal
Savings Association.--
``(1) In general.--Notwithstanding subsection (a) or any
other provision of law, any depository institution the
charter of which is converted from that of a Federal savings
association to a national bank or a State bank after the date
of the enactment of the Financial Services Act of 1999 may
retain the term `Federal' in the name of such institution if
such depository institution remains an insured depository
institution.
``(2) Definitions.--For purposes of this subsection, the
terms `depository institution', `insured depository
institution', `national bank', and `State bank' have the same
meanings as in section 3 of the Federal Deposit Insurance
Act.''.
[[Page H5284]]
TITLE V--PRIVACY
Subtitle A--Privacy Policy
SEC. 501. DEPOSITORY INSTITUTION PRIVACY POLICIES.
Section 6 of the Bank Holding Company Act of 1956 (as added
by section 103 of this title) is amended by adding at the end
the following new subsection:
``(h) Depository Institution Privacy Policies.--
``(1) Disclosure required.--In the case of any insured
depository institution which becomes affiliated under this
section with a financial holding company, the privacy policy
of such depository institution shall be clearly and
conspicuously disclosed--
``(A) with respect to any person who becomes a customer of
the depository institution any time after the depository
institution becomes affiliated with such company, to such
person at the time at which the business relationship between
the customer and the institution is initiated; and
``(B) with respect to any person who already is a customer
of the depository institution at the time the depository
institution becomes affiliated with such company, to such
person within a reasonable time after the affiliation is
consummated.
``(2) Information to be included.--The privacy policy of an
insured depository institution which is disclosed pursuant to
paragraph (1) shall include--
``(A) the policy of the institution with respect to
disclosing customer information to third parties, other than
agents of the depository institution, for marketing purposes;
and
``(B) the disclosures required under section
603(d)(2)(A)(iii) of the Fair Credit Reporting Act with
regard to the right of the customer, at any time, to direct
that information referred to in such section not be shared
with affiliates of the depository institution.
``(3) Applicability.--For purposes of section 10 of the
Home Owners' Loan Act, this subsection and subsection (i)
shall apply with regard to a savings and loan holding company
and any affiliate or insured depository institution
subsidiary of such holding company to the same extent and in
the same manner this subsection and subsection (i) apply with
respect to a financial holding company, affiliate of a
financial holding company, or insured depository institution
subsidiary of a financial holding company.''.
SEC. 502. STUDY OF CURRENT FINANCIAL PRIVACY LAWS.
(a) In General.--The Federal banking agencies shall conduct
a study of whether existing laws which regulate the sharing
of customer information by insured depository institutions
with affiliates of such institutions adequately protect the
privacy rights of customers of such institutions.
(b) Report.--Before the end of the 6-month period beginning
on the date of the enactment of this Act, the Federal banking
agencies shall submit a report to the Congress containing the
findings and conclusions of the agency with respect to the
study required under subsection (a), together with such
recommendations for legislative or administrative action as
the agencies may determine to be appropriate.
(c) Definitions.--For purposes of this section, the terms
``affiliate'', ``Federal banking agency'', and ``insured
depository institution'' have the meanings given to such
terms in section 3 of the Federal Deposit Insurance Act.
Subtitle B--Fraudulent Access to Financial Information
SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMATION OF
FINANCIAL INSTITUTIONS.
(a) Prohibition on Obtaining Customer Information by False
Pretenses.--It shall be a violation of this subtitle for any
person to obtain or attempt to obtain, or cause to be
disclosed or attempt to cause to be disclosed to any person,
customer information of a financial institution relating to
another person--
(1) by making a false, fictitious, or fraudulent statement
or representation to an officer, employee, or agent of a
financial institution;
(2) by making a false, fictitious, or fraudulent statement
or representation to a customer of a financial institution;
or
(3) by providing any document to an officer, employee, or
agent of a financial institution, knowing that the document
is forged, counterfeit, lost, or stolen, was fraudulently
obtained, or contains a false, fictitious, or fraudulent
statement or representation.
(b) Prohibition on Solicitation of a Person To Obtain
Customer Information From Financial Institution Under False
Pretenses.--It shall be a violation of this subtitle to
request a person to obtain customer information of a
financial institution, knowing that the person will obtain,
or attempt to obtain, the information from the institution in
any manner described in subsection (a).
(c) Nonapplicability to Law Enforcement Agencies.--No
provision of this section shall be construed so as to prevent
any action by a law enforcement agency, or any officer,
employee, or agent of such agency, to obtain customer
information of a financial institution in connection with the
performance of the official duties of the agency.
(d) Nonapplicability to Financial Institutions in Certain
Cases.--No provision of this section shall be construed so as
to prevent any financial institution, or any officer,
employee, or agent of a financial institution, from obtaining
customer information of such financial institution in the
course of--
(1) testing the security procedures or systems of such
institution for maintaining the confidentiality of customer
information;
(2) investigating allegations of misconduct or negligence
on the part of any officer, employee, or agent of the
financial institution; or
(3) recovering customer information of the financial
institution which was obtained or received by another person
in any manner described in subsection (a) or (b).
(e) Nonapplicability to Insurance Institutions for
Investigation of Insurance Fraud.--No provision of this
section shall be construed so as to prevent any insurance
institution, or any officer, employee, or agency of an
insurance institution, from obtaining information as part of
an insurance investigation into criminal activity, fraud,
material misrepresentation, or material nondisclosure that is
authorized for such institution under State law, regulation,
interpretation, or order.
(f) Nonapplicability to Certain Types of Customer
Information of Financial Institutions.--No provision of this
section shall be construed so as to prevent any person from
obtaining customer information of a financial institution
that otherwise is available as a public record filed pursuant
to the securities laws (as defined in section 3(a)(47) of the
Securities Exchange Act of 1934).
(g) Nonapplicability to Collection of Child Support
Judgments.--No provision of this section shall be construed
to prevent any State-licensed private investigator, or any
officer, employee, or agent of such private investigator,
from obtaining customer information of a financial
institution, to the extent reasonably necessary to collect
child support from a person adjudged to have been delinquent
in his or her obligations by a Federal or State court, and to
the extent that such action by a State-licensed private
investigator is not unlawful under any other Federal or State
law or regulation, and has been authorized by an order or
judgment of a court of competent jurisdiction.
SEC. 522. ADMINISTRATIVE ENFORCEMENT.
(a) Enforcement by Federal Trade Commission.--Compliance
with this subtitle shall be enforced by the Federal Trade
Commission in the same manner and with the same power and
authority as the Commission has under the title VIII, the
Fair Debt Collection Practices Act, to enforce compliance
with such title.
(b) Notice of Actions.--The Federal Trade Commission
shall--
(1) notify the Securities and Exchange Commission whenever
the Federal Trade Commission initiates an investigation with
respect to a financial institution subject to regulation by
the Securities and Exchange Commission;
(2) notify the Federal banking agency (as defined in
section 3(z) of the Federal Deposit Insurance Act) whenever
the Commission initiates an investigation with respect to a
financial institution subject to regulation by such Federal
banking agency; and
(3) notify the appropriate State insurance regulator
whenever the Commission initiates an investigation with
respect to a financial institution subject to regulation by
such regulator.
SEC. 523. CRIMINAL PENALTY.
(a) In General.--Whoever knowingly and intentionally
violates, or knowingly and intentionally attempts to violate,
section 521 shall be fined in accordance with title 18,
United States Code, or imprisoned for not more than 5 years,
or both.
(b) Enhanced Penalty for Aggravated Cases.--Whoever
violates, or attempts to violate, section 521 while violating
another law of the United States or as part of a pattern of
any illegal activity involving more than $100,000 in a 12-
month period shall be fined twice the amount provided in
subsection (b)(3) or (c)(3) (as the case may be) of section
3571 of title 18, United States Code, imprisoned for not more
than 10 years, or both.
SEC. 524. RELATION TO STATE LAWS.
(a) In General.--This subtitle shall not be construed as
superseding, altering, or affecting the statutes,
regulations, orders, or interpretations in effect in any
State, except to the extent that such statutes, regulations,
orders, or interpretations are inconsistent with the
provisions of this subtitle, and then only to the extent of
the inconsistency.
(b) Greater Protection Under State Law.--For purposes of
this section, a State statute, regulation, order, or
interpretation is not inconsistent with the provisions of
this subtitle if the protection such statute, regulation,
order, or interpretation affords any person is greater than
the protection provided under this subtitle as determined by
the Commission, on its own motion or upon the petition of any
interested party.
SEC. 525. AGENCY GUIDANCE.
In furtherance of the objectives of this subtitle, each
Federal banking agency (as defined in section 3(z) of the
Federal Deposit Insurance Act) and the Securities and
Exchange Commission or self-regulatory organizations, as
appropriate, shall review regulations and guidelines
applicable to financial institutions under their respective
jurisdictions and shall prescribe such revisions to such
regulations and guidelines as may be necessary to ensure that
such financial institutions have policies, procedures, and
controls in place to prevent the unauthorized disclosure of
customer financial information and to deter and detect
activities proscribed under section 521.
[[Page H5285]]
SEC. 526. REPORTS.
(a) Report to the Congress.--Before the end of the 18-month
period beginning on the date of the enactment of this Act,
the Comptroller General, in consultation with the Federal
Trade Commission, Federal banking agencies, the Securities
and Exchange Commission, appropriate Federal law enforcement
agencies, and appropriate State insurance regulators, shall
submit to the Congress a report on the following:
(1) The efficacy and adequacy of the remedies provided in
this subtitle in addressing attempts to obtain financial
information by fraudulent means or by false pretenses.
(2) Any recommendations for additional legislative or
regulatory action to address threats to the privacy of
financial information created by attempts to obtain
information by fraudulent means or false pretenses.
(b) Annual Report by Administering Agencies.--The Federal
Trade Commission and the Attorney General shall submit to
Congress an annual report on number and disposition of all
enforcement actions taken pursuant to this subtitle.
SEC. 527. DEFINITIONS.
For purposes of this subtitle, the following definitions
shall apply:
(1) Customer.--The term ``customer'' means, with respect to
a financial institution, any person (or authorized
representative of a person) to whom the financial institution
provides a product or service, including that of acting as a
fiduciary.
(2) Customer information of a financial institution.--The
term ``customer information of a financial institution''
means any information maintained by or for a financial
institution which is derived from the relationship between
the financial institution and a customer of the financial
institution and is identified with the customer.
(3) Document.--The term ``document'' means any information
in any form.
(4) Financial institution.--
(A) In general.--The term ``financial institution'' means
any institution engaged in the business of providing
financial services to customers who maintain a credit,
deposit, trust, or other financial account or relationship
with the institution.
(B) Certain financial institutions specifically included.--
The term ``financial institution'' includes any depository
institution (as defined in section 19(b)(1)(A) of the Federal
Reserve Act), any broker or dealer, any investment adviser or
investment company, any insurance company, any loan or
finance company, any credit card issuer or operator of a
credit card system, and any consumer reporting agency that
compiles and maintains files on consumers on a nationwide
basis (as defined in section 603(p)).
(C) Securities institutions.--For purposes of subparagraph
(B)--
(i) the terms ``broker'' and ``dealer'' have the meanings
provided in section 3 of the Securities Exchange Act of 1934
(15 U.S.C. 78c);
(ii) the term ``investment adviser'' has the meaning
provided in section 202(a)(11) of the Investment Advisers Act
of 1940 (15 U.S.C. 80b-2(a)); and
(iii) the term ``investment company'' has the meaning
provided in section 3 of the Investment Company Act of 1940
(15 U.S.C. 80a-3).
(D) Further definition by regulation.--The Federal Trade
Commission, after consultation with Federal banking agencies
and the Securities and Exchange Commission, may prescribe
regulations clarifying or describing the types of
institutions which shall be treated as financial institutions
for purposes of this subtitle.
The CHAIRMAN. No amendment to that amendment shall be in order except
those printed in House Report 106-214. Each amendment may be offered
only in the order printed in the report, may be offered only by a
Member designated in the report, shall be considered read, debatable
for the time specified in the report, equally divided and controlled by
the proponent and an opponent, shall not be subject to amendment, and
shall not be subject to a demand for division of the question.
The Chairman of the Committee of the Whole may postpone a request for
a recorded vote on any amendment and may reduce to a minimum of 5
minutes the time for voting on any postponed question that immediately
follows another vote, provided that the time for voting on the first
question shall be a minimum of 15 minutes.
It is now in order to consider Amendment No. 1 printed in House
Report 106-214.
Amendment No. 1 Offered by Mr. Burr of North Carolina
Mr. BURR of North Carolina. Madam Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 1 offered by Mr. Burr of North Carolina:
Page 29, line 24, before the period insert ``, except this
paragraph shall not apply with respect to a company that owns
a broadcasting station licensed under title III of the
Communications Act of 1934 and the shares of which have been
controlled by an insurance company since January 1, 1998''.
The CHAIRMAN. Pursuant to House Resolution 235, the gentleman from
North Carolina (Mr. Burr) and the gentleman from Michigan (Mr. Dingell)
each will control 5 minutes.
The Chair recognizes the gentleman from North Carolina (Mr. Burr).
Mr. BURR of North Carolina. Madam Chairman, I yield myself such time
as I may consume.
Madam Chairman, let me say that this is a very narrow amendment for a
unique situation. As a matter of fact, this amendment only applies to
the Jefferson Pilot Insurance Corporation of Greensboro, North
Carolina.
Their principal business is life insurance. But in the past 40 years
they have been in the broadcast business as well under Raycom Sports,
that great ACC delivery system. According to the Federal Reserve,
Jefferson Pilot is the only insurance company in the United States in
the broadcast business.
This amendment simply gives Jefferson Pilot the option of increasing
their broadcast interest in order to maximize the value of their asset
divestiture. They would still be required to stay under the 15-percent
gross revenue limitation and to divest any non-bank and financial
institution assets in the 10-year period if they were purchased by a
bank.
The Federal Reserve and the Treasury have no objection to this
amendment. I urge my colleagues on both sides of the aisle to support
this very common sense amendment.
Madam Chairman, I reserve the balance of my time.
Mr. DINGELL. Madam Chairman, I ask unanimous consent to yield the
entirety of my time to the gentleman from New York (Mr. LaFalce) to
dispense as he pleases.
The CHAIRMAN. Is there objection to the request of the gentleman from
Michigan?
There was no objection.
Mr. LaFALCE. Madam Chairman, I yield myself such time as I may
consume.
Madam Chairman, I oppose this amendment on two basic grounds. Number
one, it is special-interest legislation. It should not be on the floor
today.
Secondly, how can we give 10 minutes' time for special-interest
legislation when we could not give 10 minutes' time for an insurance
redlining amendment, when we could not give 10 minutes' time so that we
could satisfy the desires of those would want a basic life-line
banking, we could not give 10 minutes' time to those who wanted to add
to the privacy protections that we have come to consensually in the
Pryce-Oxley-Frost-Menendez-LaFalce amendment?
For those reasons, I oppose the bill.
Madam Chairman, I ask unanimous consent to yield the balance of my
time for the purpose of control to the gentleman from Texas (Mr.
Bentsen).
The CHAIRMAN. Is there objection to the request of the gentleman from
New York?
There was no objection.
Mr. BENTSEN. Madam Chairman, I yield to the gentleman from North
Carolina (Mr. Watt).
Mr. WATT of North Carolina. Madam Chairman, I thank the gentleman for
yielding.
Madam Chairman, I rise in support of the Burr-Myrick amendment.
It is true that this amendment will impact on the one company in the
Nation, because this is a unique company. The company happens to be in
the insurance business and it currently happens to be in the
communications business.
The underlying bill restricts income from nonfinancial activities to
15 percent and limits ownership before divestiture to 10 years. All
this company is asking to do is to go up to those limits by
acquisition. They are not at those limits now.
There may be other companies that are grandfathered under this
provision that are already at those limits. They are not asking to go
beyond those limits. They are simply asking to be able to conduct their
business within the confines of the limits of divestiture and time that
are applicable to other companies.
I certainly think this is reasonable. We should not restrict
companies from growing as long as they are not restricting commerce and
unduly exposing financial activities to risks that are not foreseen.
Obviously, the risks
[[Page H5286]]
are foreseen by this bill because the 15-percent, 10-year limit
continues to apply.
Mr. BURR of North Carolina. Madam Chairman, I yield to the
gentlewoman from Charlotte, North Carolina (Mrs. Myrick) a member of
the Committee on Rules.
Mrs. MYRICK. Madam Chairman, I rise in support of the amendment of
the gentleman from North Carolina (Mr. Burr).
I would just like to reiterate what the gentleman from North Carolina
(Mr. Burr) has already said. This amendment does not harm the delicate
compromises of this bill. Jefferson Pilot has been in the insurance
business and the communications business for 40 years. The amendment is
narrowly crafted, and it maintains the 15-percent gross revenue
limitation on nonfinancial activities. They also are subjected to the
10-year divestiture requirement.
Madam Chairman, a vote for this amendment is a vote for ACC
basketball.
Mr. BENTSEN. Madam Chairman, I reserve the balance of my time.
Mr. BURR of North Carolina. Madam Chairman, I yield myself such time
as I may consume.
Madam Chairman, in most cases we would criticize on this House floor
for a very specific tailored amendment for a specific company. But, as
has been pointed out, this is a unique company because they are the
only ones that will get caught in the catch-22 of what we created,
which was an atmosphere in the Telecommunications Act of 1996 where we
go through a different calculation as to how we value assets in the
communications business today.
In fact, it has been official to have a pool of companies in a
particular market to achieve the true asset value of a communications
business. As this company agrees to divest themselves of the
nonfinancial assets, I think that it is only fair to look at that 1996
Act, to look at what we are getting ready to do, and to say we will
allow this company who is caught in the middle to, under their
divestiture of this broadcast business, to at least achieve the asset
value that it is worth.
Unfortunately, that means that we have to create this one amendment
that says, during this 10-year period, we will allow them possibly to
add a radio station in a market because it raises the value of the sale
in that market to where it should be.
I do not think that it is out of line to allow companies, and
specifically this one, who are affected by changes that we make to in
fact be excluded from the specific language that we are here to do
today.
I appreciate the concerns expressed by my dear friends on the other
side. I hope that in the end they will support this, because I believe
it is the right thing to do.
Mr. BENTSEN. Madam Chairman, I yield myself the remaining time.
(Mr. BENTSEN asked and was given permission to revise and extend his
remarks.)
Mr. BENTSEN. Madam Chairman, first of all, I do not have any problem
with this particular company, and I do not have any problem with the
ACC, and I do not have any problem with North Carolina. I think it is a
great State. Not as great as the State of Texas, but I think it is a
pretty good State. But the problem I have is that this is a specific
carve-out that apparently affects one company in the United States.
Now, the bill that is before us sets some pretty strict rules for
companies. And we had long debates in the Committee on Banking and
Financial Services, and I am assuming the Committee on Commerce as
well, on the issues of banking and commerce.
{time} 1845
This bill also sets limits on a number of companies called unitary
thrifts. There are about 75 of those who because of the way they are
valued, their value is going to change because of this bill. We could
not debate that on the floor because apparently we are not capable of
doing that, but nonetheless, we made those decisions, and we made
strict rules.
I am sorry that this company is affected by it, but they are just
going to have to make a choice under the rules that are provided for in
this bill of either being a broadcast company and insurance company or
an insurance company and a banking company, but they want to have it
all three ways, and they would be the only one in the United States
that could do that. I do not think that is appropriate. That is not
given to anybody else.
For that reason, I have to oppose the amendment. I would hope that
our colleagues would oppose the amendment as well.
Madam Chairman, I yield back the balance of my time.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from North Carolina (Mr. Burr).
The question was taken; and the Chairman announced that the ayes
appeared to have it.
Mr. BENTSEN. Madam Chairman, I demand a recorded vote.
The CHAIRMAN. Pursuant to House Resolution 235, further proceedings
on the amendment offered by the gentleman from North Carolina (Mr.
Burr) will be postponed.
It is now in order to consider amendment No. 2 printed in House
Report 106-214.
Amendment No. 2 Offered by Ms. Schakowsky
Ms. SCHAKOWSKY. Madam Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 2 offered by Ms. Schakowsky:
Page 72, after line 13, insert the following new section
(and amend the table of contents accordingly):
SEC. 110A. STUDY OF FINANCIAL MODERNIZATION'S AFFECT ON THE
ACCESSIBILITY OF SMALL BUSINESS AND FARM LOANS.
(a) Study.--The Secretary of the Treasury, in consultation
with the Federal banking agencies (as defined in Section 3(z)
of the Federal Deposit Insurance Act), shall conduct a study
of the extent to which credit is being provided to and for
small business and farms, as a result of this Act.
(b) Report.--Before the end of the 5-year period beginning
on the date of the enactment of this Act, the Secretary, in
consultation with the Federal banking agencies, shall submit
a report to the Congress on the study conducted pursuant to
subsection (a) and shall include such recommendations as the
Secretary determines to be appropriate for administrative and
legislative action.
The CHAIRMAN. Pursuant to House Resolution 235, the gentlewoman from
Illinois (Ms. Schakowsky) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from Illinois (Ms. Schakowsky).
Ms. SCHAKOWSKY. Madam Chairman, I yield myself 2 minutes.
First of all, I would like to thank my cosponsors, the gentlewoman
from California (Ms. Lee), the gentleman from Illinois (Mr. Gutierrez)
and the gentleman from North Carolina (Mr. Watt) for their help on this
amendment.
This amendment would call for a 5-year study of financial
modernization's effect on small business and farm lending. What it does
is direct the U.S. Treasury Department with Federal bank regulators to
study the effect of this bill, and the consolidation of the financial
services industry into large conglomerates that it will undoubtedly
encourage, on small business and farm lending and suggest legislative
and regulatory changes as necessary to aid small business and farm
lending.
I think our first rule in this House ought to be, first we do no
harm. I am not suggesting that this bill will do any harm to small
businesses or farms, but we want to make sure that that is the case,
because small business certainly does deserve our support. There are 23
million small businesses that employ 53 percent of the workforce and
account for 47 percent of all sales. Sixty-seven percent of all small
businesses get their credit from banks, and many of these are small
banks. We know that smaller businesses often have more difficulty in
obtaining loans from banks.
What we want to make sure is that the result of H.R. 10 is not that
we see fewer loans going to small banks and to farmers. The data shows,
as I said, that small businesses and farmers do rely on small banks for
their financing and a world without small banks could negatively affect
the businesses and our national economy.
Chairman Greenspan of the Federal Reserve acknowledged before the
Committee on Banking and Financial Services during hearings on H.R. 10
that
[[Page H5287]]
``small bank lending is inherent in the way small business is
effectively financed. If it turns out that a lot of community banks
would sort of fade or be absorbed into large institutions, I would be
concerned.''
What my amendment does is ensure that regulators and the public will
have the necessary information to combat negative effects on small
business from this legislation.
Madam Chairman, I yield 1 minute to the gentleman from New York (Mr.
LaFalce), the ranking member of the Committee on Banking and Financial
Services.
Mr. LaFALCE. Madam Chairman, I rise in support of the amendment of
the gentlewoman from Illinois. It is a very good amendment. We must
always be concerned about the effect of any legislation we pass on
small business and on farm lending.
But I rise primarily to thank the gentlewoman for being such an
outstanding freshman member of the House Committee on Banking and
Financial Services. I know of no member who is a greater champion of
the consumer and consumer interest, whether it has to do with
redlining, whether it has to do with privacy, whether it has to do with
housing. She has been a true champion and she is going to be a great
leader in the future.
Ms. SCHAKOWSKY. Madam Chairman, I yield 30 seconds to the gentleman
from Iowa (Mr. Leach).
Mr. LEACH. Madam Chairman, I would like to echo the gentleman from
New York's comments about the gentlewoman. She has brought a great
contribution to the Committee on Banking and Financial Services. We are
all very appreciative.
This particular amendment is common sense, it is reasonable, and the
majority has no objection whatsoever.
Ms. SCHAKOWSKY. Madam Chairman, I yield 30 seconds to the gentleman
from Minnesota (Mr. Vento).
Mr. VENTO. Madam Chairman, I echo my colleagues' statements about the
gentlewoman's efforts as a new Member of Congress. I especially think
this is important to those of us that represent States that have a
significant rural constituency.
Minnesota, incidentally, is sort of a small bank State. We have 555
banks. Many of them serve the rural constituents in that State. I would
like to report to the House the dire problems that we are facing in the
western, north and east portions of Minnesota with regards to the farm
economy. It is a very stressful time and a time of great concern.
Clearly, the financial engine of these communities are these small
town banks that continue to extend credit and to provide the lifeblood
that they need. A study of these as the gentlewoman has envisioned as
well as for other small businesses which are having a very difficult
time in our economy and that we really want to get behind and support
with such bills as the PRIME bill and the community financial services
programs that we support will be helpful.
I know the gentlewoman supports those efforts. I support this study.
It would be good to have the information available so we can plot what
the impact is and the profile of the market.
Ms. SCHAKOWSKY. Madam Chairman, I yield 1 minute to the gentleman
from North Carolina (Mr. Watt).
Mr. WATT of North Carolina. Madam Chairman, I thank the gentlewoman
for yielding me this time. As a cosponsor of this amendment, I rise in
support of the amendment.
One of the concerns that a number of people have had about all of
this consolidation and the ability to merge and cross financial lines
is the impact that it will have on lending, particularly for minority
communities, for small businesses, for farms. That is why we have been
so insistent on maintaining the CRA provisions, and that is why I think
it is important for us to support this amendment, to make sure that if
there is an adverse impact that results from this bill, we know about
it immediately and can take whatever steps are appropriate and
necessary to respond to it.
I want to applaud the gentlewoman for coming forward with this
amendment and strongly encourage my colleagues to support it.
The CHAIRMAN pro tempore (Mrs. Myrick). Is there any Member who is
opposed to this amendment?
If there is no opposition, the question is on the amendment offered
by the gentlewoman from Illinois (Ms. Schakowsky).
The amendment was agreed to.
The CHAIRMAN pro tempore. It is now in order to consider amendment
No. 3 printed in House Report 106-214.
Amendment No. 3 Offered by Ms. Velazquez
Ms. VELAZQUEZ. Madam Chairman, I offer an amendment.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 3 offered by Ms. Velazquez:
Page 96, line 12, strike ``operations of''.
The CHAIRMAN pro tempore. Pursuant to House Resolution 235, the
gentlewoman from New York (Ms. Velazquez) and a Member opposed each
will control 5 minutes.
The Chair recognizes the gentlewoman from New York (Ms. Velazquez).
Ms. VELAZQUEZ. Madam Chairman, I yield myself such time as I may
consume. I rise in support of this bipartisan amendment and urge its
immediate adoption. This amendment would slightly modify section 114 to
ensure that the banking policies established by Congress are
implemented in a fair and consistent manner with respect to all
entities, domestic and foreign, conducting a banking business in the
United States. The passage of this amendment will enable all banks
doing business in the United States to serve the needs of their
customers.
The language in H.R. 10 grants the Federal Reserve Board authority
regarding the overseas operations of a foreign bank. However, it is not
clear what exactly the scope of this particular language means and the
Federal Reserve has agreed to delete the words ``operations of'' to
clarify that the provision expressly applies to the foreign bank itself
and not the bank's parent or sister affiliates. This clarification
ensures parity with U.S. law.
Foreign banks have a large and long-standing presence in New York and
they are an important part of our economy in New York and throughout
the country. For example, many foreign banks have broker-dealers
subsidiaries that provide capital and liquidity to the U.S. securities
markets, serving to enhance the ability of U.S. businesses to raise
capital.
This bipartisan amendment has been cleared by the Federal Reserve
Board, is supported by the Conference of State Bank Supervisors, and
similar language is included in the version of financial modernization
passed by the other body.
I urge my colleagues to adopt this amendment.
Mr. LEACH. Madam Chairman, will the gentlewoman yield?
Ms. VELAZQUEZ. I yield to the gentleman from Iowa.
Mr. LEACH. We have carefully reviewed this amendment with the Federal
Reserve Board of the United States. It is my understanding that they
have no objection to the amendment, that it is a very thoughtful and
reasonable approach to dealing with a particular problem. Therefore, we
have great respect for the gentlewoman's effort and support her
amendment.
Ms. VELAZQUEZ. Madam Chairman, I yield back the balance of my time.
The CHAIRMAN pro tempore. Is there any Member who is opposed to this
amendment?
If not, the question is on the amendment offered by the gentlewoman
from New York (Ms. Velazquez).
The amendment was agreed to.
The CHAIRMAN pro tempore. It is now in order to consider amendment
No. 4 printed in House Report 106-214.
Amendment No. 4 Offered by Mr. Barr of Georgia
Mr. BARR of Georgia. Madam Chairman, I offer an amendment.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 4 offered by Mr. Barr of Georgia:
Page 235, after line 23, insert the following new
subsections:
(c) Prevention of Future Privacy Invasions.--
(1) In general.--Section 5318(g) of title 31, United States
Code, is amended--
(A) by striking paragraph (1) and inserting the following
new paragraph:
``(1) In general.--Any financial institution, and any
director, officer, employee, or
[[Page H5288]]
agent of any financial institution, may report to the
Secretary any transaction relevant to a possible violation of
a law or regulation.'';
(B) in paragraph (2), by striking ``suspicious'';
(C) in paragraph (4)(A)--
(i) by striking ``requiring'' and inserting ``receiving'';
and
(ii) by striking ``suspicious transaction'' and inserting
``transaction relevant to a possible violation of a law or
regulation'';
(D) in paragraph (4)(B), by striking ``suspicious
transaction'' and inserting ``transaction relevant to a
possible violation of a law or regulation''; and
(E) by adding at the end of paragraph (4) the following new
subparagraph:
``(D) Recordkeeping.--The Secretary shall ensure that no
report filed under this paragraph is maintained by the
Secretary or any Federal or State law enforcement or
supervisory agency to whom access to the report (or
information therein) has been granted after the earlier of--
``(i) the end of the 4-year period beginning on the date
the report was received; or
``(ii) 60 days after the expiration of the longest statute
of limitations relating to any possible violation of a law or
regulation identified in such report,
unless the report or information contained in the report is
being used in an on-going investigation of a possible
violation of a law or regulation identified in such
report.''.
(2) Clarification of purposes of anti-money laundering
program.--Section 5318(h) of title 31, United States Code, is
amended by adding at the end the following new paragraph:
``(3) Limitation.--Notwithstanding paragraphs (1) and (2),
the Secretary may not require or encourage an insured
depository institution or any affiliate of an insured
depository institution to--
``(A) determine the sources of funds used by any customer
of the institution or affiliate in any transaction;
``(B) assess the purpose of any transaction or seek from
the customer an explanation for the transaction;
``(C) determine what transactions are normal or expected
for a customer;
``(D) monitor customer body language or behavior;
``(E) monitor customer transactions and compare them to
historical patterns; or
``(F) report to the Secretary transactions that do not
conform to a customer's historical transaction patterns.
(3) Clerical amendments.--
(A) The subsection heading for section 5318(g) is amended
to read as follows:
``(g) Reporting Possible Violations of Laws and
Regulations.--''.
(B) The paragraph heading for section 5318(g)(4) of title
31, United States Code, is amended to read as follows:
``(4) Single designee for reporting transactions relevant
to a possible violation of law or regulation.--''.
(d) Increase in Trigger Amount for Cash Transaction
Reports.--
(1) Domestic.--Section 5313(a) of title 31, United States
Code, is amended by adding at the end the following new
sentence: ``In no event may the Secretary require reports
under this section for transactions involving less than
$25,000.''.
(2) Importing and exporting.--Section 5316(a) is amended by
striking ``$10,000'' each place such term appears and
inserting ``$25,000''.
(e) Agency Reports on Reconciling Penalty Amounts.--Before
the end of the 1-year period beginning on the date of the
enactment of this Act, the Federal banking agencies (as
defined in section 3 of the Federal Deposit Insurance Act)
shall submit reports to the Congress containing proposed
legislation to conform the penalties imposed on depository
institutions (as defined in section 3 of the Federal Deposit
Insurance Act) for violations of subchapter II of chapter 53
of title 31, United States Code, to the penalties imposed on
such institutions under section 8 of the Federal Deposit
Insurance Act.
The CHAIRMAN pro tempore. Pursuant to House Resolution 235, the
gentleman from Georgia (Mr. Barr) and a Member opposed each will
control 5 minutes.
The Chair recognizes the gentleman from Georgia (Mr. Barr).
Mr. BARR of Georgia. Madam Chairman, I yield myself 1\1/2\ minutes.
Earlier this year, as a matter of fact late last year, the American
people were treated to one of the most gross examples of overreaching
by the Federal Government, by Federal regulators, that they had ever
witnessed, the so-called ``know your customer'' regulations that were
proposed by the FDIC. These proposed regulations would have required
every financial institution in the country to develop a profile on
every one of their customers all over the country and to determine what
the financial transaction habits of each individual customer were so
that if there was something that occurred out of the ordinary, outside
of that profile, the law enforcement authorities would be notified.
Thankfully, the American people, through the work of this Congress,
stopped the ``know your customer'' regulations dead in their tracks.
Well, they are back. Under the guise of the Bank Secrecy Act, which
has some very laudable, important provisions in it, the suspicious
activity reports require, in essence, ``know your customer''
regulations mandated on the banks.
The amendment proposed by the gentleman from California, the
gentleman from Texas and myself today simply removes the mandatory
nature of the suspicious activity reports which in essence are ``know
your customer'' regulations. We do not remove the important tool that
law enforcement has in working with financial institutions to disclose
to the government suspicious activity. We simply tell the government
that the millions upon millions of reports that they have accumulated
by requirement over the years and have never used and which are rarely
used shall no longer be required.
{time} 1900
Madam Chairman, I reserve the balance of my time.
Mr. LaFALCE. Madam Chairman, I rise in opposition to the amendment
offered by the gentleman from Georgia (Mr. Barr).
Mr. HUTCHINSON. Madam Chairman, I rise in opposition as well. Is
there any provision to split the time?
The CHAIRMAN. By unanimous consent each gentleman could split the
time if so desired.
Mr. LaFALCE. Madam Chairman, I yield 2\1/2\ of my 5 minutes to either
the gentleman from Iowa (Mr. Leach) or his designee.
Mr. LEACH. Madam Chairman, I would be happy to yield that time to my
distinguished colleague from Arkansas (Mr. Hutchinson).
The CHAIRMAN. Without objection, the gentleman from Arkansas (Mr.
Hutchinson) will control 2\1/2\ minutes.
There was no objection.
Mr. LaFALCE. Madam Chairman, I yield myself such time as I may
consume.
Let me say that a number of Republicans are going to be recognized by
me:
The gentleman from Iowa (Mr. Leach), the gentleman from Florida (Mr.
McCollum), the gentlewoman from New Jersey (Mrs. Roukema), the
gentleman from Alabama (Mr. Bachus).
I will only have 30 seconds for myself and no more than 30 seconds
for anyone else.
I oppose this amendment strongly. It goes way beyond the repeal of
Know Your Customer. It basically would repeal provisions of the Bank
Secrecy Act that have been in existence for decades. The FBI strongly
opposes this, says it cannot enforce the law, Treasury and Justice
strongly oppose it. Based upon my conversation with the administration
I think they would be constrained to veto a bill that did not repeal
these strong law enforcement provisions.
I strongly urge the defeat of this amendment.
Madam Chairman, I reserve the balance of my time.
Mr. HUTCHINSON. Madam Chairman, I yield 1\1/2\ minutes to the
gentleman from Florida (Mr. McCollum) who has been such a leader on
this issue.
(Mr. McCOLLUM asked and was given permission to revise and extend his
remarks.)
Mr. McCOLLUM. Madam Chairman, I thank the gentleman for yielding this
time to me. I just want to say with all due respect to my colleagues
who are promoting this amendment this is far beyond a Know Your
Customer amendment. I am opposed to that too, just like everybody, I
suspect, here is. That was a horrible idea the Treasury had, and I am
very glad to see that it has disappeared.
But what we are doing in this amendment, if it is passed, it actually
guts existing money laundering laws. It would set the drug war back by
some estimates that I suspect is true, maybe 20 years. What it really
would do would be to allow drug kingpins to launder money undetected.
The current laws say that one has to have a currency transaction report
if they go to the bank and take cash of $10,000 or more and deposit it
in order for us to have the notice that we need to have of that
transaction so that law enforcement can get ahold of these drug
kingpins
[[Page H5289]]
and can have a chain and prove the evidence.
What the gentleman from Georgia (Mr. Barr) and the gentleman from
Texas (Mr. Paul) are offering here would increase that amount to
$25,000. There are lots of what we call smurfing transactions for far
less than $25,000, and, in addition, the most visceral thing in here,
this amendment would actually eliminate the requirement that banks
report suspected illegal activity, eliminate the requirement. It is all
volunteer in the parts of the bank. The Treasury Department could no
longer in their law enforcement hat or in their regulatory hat require
banks to report suspected illegal activity of any sort, not just money
laundering, but any sort.
I think that the gentleman from Georgia (Mr. Barr) and the gentleman
from Texas (Mr. Paul) and the gentleman from California (Mr. Campbell)
have gone further than they may have intended. This is no time to
retreat on the effort on the war against drugs or the financial fraud
and the money laundering, and that is what this amendment does.
So in the strongest terms I urge this amendment to be defeated.
Mr. BARR of Georgia. Madam Chairman, I yield 1 minute to the
distinguished gentleman from Texas (Mr. Paul).
(Mr. PAUL asked and was given permission to revise and extend his
remarks.)
Mr. PAUL. Madam Chairman, I thank the gentleman from Georgia (Mr.
Barr) for yielding this time to me.
Madam Chairman, if my colleagues are opposed to Know Your Customer
regulations they must support this amendment because this does away
with Know Your Customer regulations, the profiling of every single
customer in this country. This notion that it is going to ruin law
enforcement is just not valid. There is estimated $100 million cost for
one conviction by the reports that are sent in, and this does not
prohibit the banks from sending in reports. If there is a suspicious
character, they can still do this.
So it will not hinder law enforcement.
What it does, Madam Chairman: It protects the consumer, it protects
the citizen, it protects the right of all Americans. We cannot
rationalize and justify the abuse of liberty for the pretense that on
occasion we might catch a criminal. But the fact that it could cost
$100 million per conviction is sort of what I would call overkill.
What we must do is protect the American citizen. Law enforcement will
not be hindered. If my colleagues are opposed to Know Your Customer
regulation, they must vote for this amendment.
Mr. LaFALCE. Madam Chairman, I yield 30 seconds to the gentleman from
Michigan (Mr. Dingell), the distinguished past and future chairman of
the Committee on Commerce.
(Mr. DINGELL asked and was given permission to revise and extend his
remarks.)
Mr. DINGELL. Madam Chairman, I thank my good friend and colleague for
yielding me this time.
Madam Chairman, I know the authors of this amendment are Members of
great decency and goodness, and I think they are accomplishing
something that they really do not want. This is opposed by the
Department of Justice, the FBI, the Department of Treasury.
Banks have been involved in money laundering, too, I would remind my
colleagues, and when we make the action of the bank voluntary with
regard to reporting, we subject ourselves to a real probability that
the banks are simply not going to report. The money launderers, the
Cali Cartel, the drug merchants and the Mafia will love this amendment.
If my colleagues like that, if they want crime, this is a good
amendment to support; if my colleagues want to clean up the situation,
I would urge them to oppose the amendment.
Mr. HUTCHINSON. Madam Chairman, I yield such time as she may consume
to the gentlewoman from New Jersey (Mrs. Roukema).
(Mrs. ROUKEMA asked and was given permission to revise and extend her
remarks.)
Mrs. ROUKEMA. Madam Chairman, I rise in strong opposition to this
position, and it is an open invitation to drug dealers, and that is
why, as has been stated, every law enforcement and every banking group
is opposed to it.
I rise in strong opposition.
This amendment guts our money laundering laws and helps drug dealers.
I oppose strongly. What we have learned through hearings is that we
need to tighten up, not loosen.
1. Making suspicious activity reports voluntary plays into the hands
of the drug dealers. This will only make money laundering easier.
2. Raising the cash transaction reporting level to $25,000 from
$10,000 is not justified. How many legitimate cash transactions are
there over $10,000?
3. Purging Suspicious Activities Report (SAR) records after 4 years
would undermine crime fighting efforts.
Money laundering involves complex financial transactions. Law
enforcement sometimes needs several years to put together cases. This
will hurt.
The Banking agencies oppose Barr/Campbell.
Law enforcement uniformly opposes Barr/Campbell.
N.J. Governor Whitman opposes Barr/Campbell.
The ABA Fraud Prevention Oversight Council opposes Barr/Campbell.
Mr. HUTCHINSON. Madam Chairman, I yield 30 seconds to the gentleman
from Alabama (Mr. Bachus).
Mr. BACHUS. Madam Chairman, I like to quote from the President of the
Organization of Police Chiefs of the United States. He says this
amendment will have a significant detrimental impact on the ability of
law enforcement agencies nationwide to effectively investigate and
prosecute cases involving money laundering, fraud, and other financial
crimes. If this amendment had been in effect in 1997, it would have
stopped 2,536 Federal investigations resulting in convictions for
financial institution fraud matters.
And finally, what does the FBI say about this? A vote for this
amendment will send a signal to criminal organizations worldwide that
the U.S. is a money laundering haven.
Clearly this is a no vote.
Madam Chairman, I include for the Record the following letter:
International Association
of Chiefs of Police,
Alexandria, VA, July 1, 1999.
Hon. Dennis Hastert,
Speaker, House of Representatives,
Washington, DC.
Dear Mr. Speaker: On behalf of the International
Association of Chiefs of Police (IACP), I am writing to
express our profound concern over the Barr/Paul/Campbell
Amendment to H.R. 10, the Financial Services Act. This
amendment will have a significant detrimental impact on the
ability of law enforcement agencies to effectively
investigate and prosecute cases involving money laundering,
fraud and other financial crimes. I urge you to oppose this
amendment.
The Barr/Paul/Campbell amendment, by eliminating the
requirement that financial institutions file Suspicious
Activity Reports (SARs), will deprive law enforcement of an
invaluable investigative tool which, according to the FBI,
was used in 98% of the cases filed by its Fraud Investigation
Squad in 1998. These 1998 investigations resulted in the
convictions of more than 2600 individuals and the restoration
of more than $490 million to the victims of fraud.
In addition, by elevating the threshold limit of the
Currency Transaction Report (CTR) from $10,000 to $25,000,
the Barr/Paul/Campbell amendment would severely undermine the
anti-drug efforts of law enforcement agencies. Since there
are few legitimate cash transactions exceeding the $10,000
limit, the CTR often provides law enforcement with valuable
information on the money laundering operations of drug
dealers. Raising the CTR threshold to $25,000 will only
assist criminals in their efforts to hide their illegal
profits.
Once again, I urge you to protect the ability of law
enforcement to combat fraud, money laundering and financial
crimes by opposing the Barr/Paul/Campbell amendment to H.R.
10.
Thank you for your attention in this matter.
Sincerely,
Ronald S. Neubauer,
President.
Mr. BARR of Georgia. Madam Chairman, I yield 1 minute to the
distinguished gentleman from California (Mr. Campbell).
(Mr. CAMPBELL asked and was given permission to revise and extend his
remarks.)
Mr. CAMPBELL. Madam Chairman, the cost to every bank that has to
comply is huge, but the cost of individual liberty is much more
important. What business does the Federal Government have ordering a
bank to tell them about my bank account?
What we are dealing with today is a function of invasion of
individual liberty in the guise of law enforcement.
[[Page H5290]]
This argument that we will lose so many prosecutions is absurd. The
number of $25,000 does not even adjust for inflation from the original
$10,000 established in 1970. So when we hear these arguments that we
will suddenly be a haven for money laundering, recognize that we are
not even adjusting for inflation from the $10,000 requirement
established in 1970 to a $25,000 requirement today. It ought to be
$40,000 if we adjusted for inflation.
But let us say that just for a moment there may be one prosecution
that does not happen, but in return, in return, we do not have the
Federal Government ordering banks to profile me, to find out what my
activities are when I depart from normal activity, to define what is
normal activity, to condemn me if I do not behave in a normal manner.
For that price of freedom I think we are sacrificing very, very little,
if anything, on law enforcement.
I conclude by saying if we were to repeal the Fourth Amendment, if we
were to repeal the Fifth Amendment, we could improve law enforcement,
but it would not be worth it.
Mr. LaFALCE. Madam Chairman, I yield 30 seconds to the distinguished
gentleman from Minnesota (Mr. Vento).
Mr. VENTO. Madam Chairman, I rise in strong opposition to this
amendment. This is really a privacy gone crazy. It would gut the Bank
Secrecy Act and the provisions dealing with the suspicious activities
reports as well as the cash transaction reports. It is under the guise
of privacy, a 30-year law that has been effective in terms of
protecting and help us deal with the emerging types of networks of
crime that exist in our society. Just raising the cash transaction
itself, we should subject this to deliberate hearings and
considerations, and I do not think that we should shove it out under
the basis of the unpopularity of Know Your Customer, which, in fact,
this bill has stopped in its tracks.
Mr. HUTCHINSON. Madam Chairman, I yield 30 seconds to the
distinguished chairman from Iowa (Mr. Leach).
(Mr. LEACH asked and was given permission to revise and extend his
remarks.)
Mr. LEACH. Madam Chairman, first let me just stress section 191 of
this bill repeals the Know Your Customer regulation. Secondly, the
committee would be happy to deal with further modifications in this
area. But thirdly, it has to be understood by everybody here that money
laundering is the Achilles heel of drug traffickers, and many are able
to separate themselves from their illegal activities, but they cannot
from their money, and just like Al Capone was convicted for tax
evasion, drug traffickers today are convicted more than anything else
of money laundering. To throw this out would be an absolute assault on
law enforcement. We must not allow it to happen.
Madam Chairman, I yield to the gentleman from Ohio (Mr. Oxley).
(Mr. OXLEY asked and was given permission to revise and extend his
remarks.)
Mr. OXLEY. Madam Chairman, I rise in opposition to the amendment. It
is antilaw enforcement, and I plan to vote no on the amendment.
Mr. BARR of Georgia. Madam Chairman, I yield myself such time as I
may consume.
Madam Chairman, just a little over a week ago we heard that the sky
was going to fall if asset forfeiture laws of this country were brought
in line with normal standards of fairness, due process and other
constitutional safeguards. Today we hear that the sky will fall if we
simply require law enforcement to do its job and not mandate that banks
do its job for them.
The fact that there have been tens of millions of suspicious activity
reports filed and virtually no prosecutions initiated based on those
suspicious activity reports clearly illustrates that what we are
hearing today is hyperbole based on the unwillingness of law
enforcement to make any changes whatsoever in the way they are
accustomed to operating.
If my colleagues are opposed to Know Your Customer, then they must be
opposed to these provisions of the suspicious activity report
requirement which does not gut the Bank Secrecy Act. This amendment
addresses just one small portion of the Bank Secrecy Act. It is simply
one of a number of tools that are provided for law enforcement under
the Bank Secrecy Act. It is not an essential tool. It takes nothing
away from law enforcement that it might otherwise get through
legitimate law enforcement means. All, virtually all, money laundering
cases of any significance are prosecuted, investigated and convictions
obtained thereon not based on mandated secrecy reports, but on other
provisions of the Bank Secrecy Act and other provisions of the money
laundering statutes.
To say that law enforcement will be gutted by this amendment is a red
herring. If colleagues oppose Know Your Customer, then they must
support the Barr-Paul-Campbell amendment.
Mr. LaFALCE. Madam Chairman, I yield 30 seconds to the gentlewoman
from California (Ms. Waters).
Ms. WATERS. Madam Chairman, what a contradiction for so-called law
and order Members of this House to be advocating this amendment. The
Paul-Barr-Campbell amendment should be entitled: The Drug Dealers'
Improvement Act of 1999 because the amendment will increase the ability
of drug dealers to launder drug profits.
There are few legitimate cash transactions in excess of $10,000. It
is unusual to have someone walking around with $25,000 of cash in their
wallet or their purse. Therefore, it is inappropriate to raise the
reporting requirement to $25,000. It indeed guts the Bank Secrecy Act.
I would ask every Member of this House to say no to the dope dealers
and those that would support their ability to launder money.
Mr. LaFALCE. Madam Chairman, I yield myself such time as I may
consume.
Again I strongly oppose this, but I want to point out to those who
have not spoken that we have had individuals from the Republican party
and the Democratic party strongly oppose this from the right, from the
left, the gentleman from Arkansas (Mr. Hutchinson), the gentleman from
Florida (Mr. McCollum), the gentleman from Alabama (Mr. Bachus), the
gentleman from Iowa (Mr. Leach), the gentlewoman from New Jersey (Mrs.
Roukema). On the Democratic side, my colleagues heard from the
gentlewoman from California (Ms. Waters), the gentleman from Minnesota
(Mr. Vento), the gentleman from Michigan (Mr. Dingell). The
administration believes that this would shred their ability to enforce
antimoney laundering and bank secrecy provisions.
{time} 1915
I strongly urge everyone to defeat this amendment. I am sorry that it
was permitted. We could have used this 10 minutes to discuss something
like redlining, something that would have brought about bipartisan
support.
Mrs. MALONEY of New York. Madam Chairman, I am certainly sympathetic
to the privacy concerns being raised during this debate. And I voted
for the amendment during the Banking Committee mark-up of H.R. 10 which
eliminated the newly proposed ``Know Your Customer'' rules.
This amendment, however, will seriously curtail the efforts of law
enforcement in curbing fraud and stopping drug traffickers.
The Bank Secrecy Act requires certain forms . . . the Suspicious
Activities Report and the Currency Transactions Report to be filed when
certain triggers are met. This amendment would make this system
voluntary . . . not basing these reports on any of the triggers which
may be hit, and probably resulting in banks becoming the favored
launderers of fraudulent funds and drug money.
Yet these reports have been crucial to uncovering all sorts of fraud
and drug rings. In New York City last year, the FBI's office received a
Suspicious Activity Report which indicated that a former vice president
of a large bank had embezzled funds. The investigation discovered that
the embezzlement reached $20 million.
Another New York City case in July 1997 used these reports to uncover
a fraudulent loan scheme worth $20 million in losses to area banks.
These cases most likely would not have been discovered without the
triggers in the Bank Secrecy Act.
Join with the Justice Department, the Treasury Department and the
Customs Service in helping law enforcement fight fraud and the drug
trade.
This amendment is anti-law enforcement.
Oppose this amendment.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Georgia (Mr. Barr).
The question was taken; and the Chairman announced that the noes
appeared to have it.
[[Page H5291]]
Mr. BARR of Georgia. Madam Chairman, I demand a recorded vote.
The CHAIRMAN. Pursuant to House Resolution 235, further proceedings
on the amendment offered by the gentleman from Georgia (Mr. Barr) will
be postponed.
The CHAIRMAN. The Committee will rise informally.
The Speaker pro tempore (Mr. Lewis of Kentucky) assumed the chair.
____________________