[Congressional Record Volume 145, Number 149 (Thursday, October 28, 1999)]
[House]
[Pages H11127-H11128]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL MODERNIZATION CONFERENCE REPORT
The SPEAKER pro tempore. Under a previous order of the House, the
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
Ms. KAPTUR. Mr. Speaker, soon the House will have an opportunity to
consider S. 900, what is entitled the Financial Modernization
Conference Report.
This complicated and controversial legislation seeks to overhaul
banking laws that have been in existence in our country since the Great
Depression. These laws were dedicated to safety and soundness in the
banking system of the United States.
The laws that have been on the books for this entire century since
the Great Depression have separated the activities of bankers, of the
insurance industry, and of the securities and stock brokerage
industries. Essentially, what this legislation attempts to do is to
allow them to intermarry and to do business together.
Now, I recently did a survey in my district, and I asked our
constituents the following question: How would you describe your
personal views of bank practices? Two-thirds stated that they disliked
the changes that have been occurring in the banking system. They say
the fees are not consistent with the services provided, services are
declining, and most of our banks are no longer locally owned.
If we think to the system that has been in place in this country that
has permitted us to grow and to increase equity for America's families,
the epitome of this system was the community bank. And in fact, the
community banker became an active member of the local chamber of
commerce in every neighborhood, in every city; and banking became
equated with stability.
What we have seen happen in the banking system of our country, and it
has been happening slowly, slowly, slowly, we have watched communities
like my own, Toledo, OH, become a branch economy of an institution
located someplace else. And when that happened, community contributions
to Boy Scouts by those institutions went down, to children's softball
teams and so forth. The community contributions, the philanthropy of
that institution and the personal identification of the president of
the institution with the community as a whole diminished.
In addition to that, we have seen the idea of safety and soundness
changed fundamentally to where now most of these institutions have
turned into high-flying debt pushers trying to get consumers to take on
more credit than they can afford.
In fact, last week when I got home from Congress and I opened my
mail, I got so mad I ripped this letter up. Because this came from an
institution that does business in Ohio, and what did it have? It had
one of these $5 checks attached that says that, if you cash this and
sign up for our program, we will send you $5.
But what was I to sign up for? Here is a banking institution pushing
more credit on the commercial side to me, a depositor in that
institution. They want me to sign up for Shopper's Advantage, over
250,000 brand items; Traveler's Advantage, again credit to travel;
concierge's service; Saver's Club discount book. In other words, they
are pushing debt, pushing debt through the banking system at our
consumers.
Now, this is a fundamental change in the way that our country used to
operate in the field of banking and credit. In some ways, these lending
institutions, if we can call them that, are not so much interested in
building communities as in milking communities and in taking money that
should be placed in those depositors' accounts so that they can end up
owning a piece of the rock rather than assuming these greater and
greater debt burdens that are characterizing family accounts across
this country.
Here is a recent chart on the rising level of consumer debt in our
country. The average family cannot survive more than 3 months without
getting their paycheck in the mail because of the debts that they owe.
Yet these institutions that are supposed to be dedicated to safety and
soundness are into pushing more credit, not in the interest of
community building, but in the interest only of profits of those
institutions.
We have seen megafinancial conglomerates and mergers across our
country, and this bill will only add new hurdles to the already
difficult task for consumers obtaining basic financial services without
incurring outlandish and arbitrary fees.
Further, consumers will be forced to speak with more 1-800
recordings. How many of us have got lost in those when we try to get an
answer out of a banking institution in this country and very pricey
automatic teller machines rather than dealing with human beings? This
is happening across our country.
Mr. Speaker, the fundamental precept of any banking laws in this
country should be safety and soundness, not high-flying credit pushers.
I rise today to outline my concerns with this conference report. I
believe America's Fiscal Fitness is in jeopardy as we enter the next
millennium. Are we really prepared for the challenges that lie ahead?
I am concerned about the growing trend toward mergers and
acquisitions throughout America's banking industry. These massive
consolidations, most recently seen with the merger of Nations Bank and
Bank of America, will likely result in fewer financial service options
and fewer alternatives for consumers when it comes to shopping for life
insurance, checking accounts, and investments transactions.
The mega-financial conglomerates created by this bill will only add
new hurdles to the already difficult task of obtaining basic financial
services without incurring outlandish and arbitrary fees. Further,
consumers will be forced to speak with 1-800 number recordings and sent
to pricey automatic teller machines rather than dealing with human
beings.
Consumer spending makes up two-thirds of our economy, but increases
accounted for an astounding 85 percent of the growth in the gross
domestic product last year. And it's fueled by unsustainable efforts by
most families.
Consumer debt, from credit cards to home mortgages, now total about
85 percent of personal income--with installment loans accounting for
$1.4 trillion. The 55 to 60 million households that carry a credit card
balance from month-to-month have an average balance of $7,000 and pay
more than $1,000 per year in interest and fees.
As consumer debt has increased net family worth has declined. Federal
Reserve reports that the median net worth of all U.S. families, in
constant 1995 dollars has dropped from $57,000 in 1989 to $55,600 in
1995.
A report released by the Consumer Federation of America found that
half of U.S. households do not have $1,000 in assets available for an
emergency. Should the economy take a dramatic downturn, these families
are not prepared.
As a percentage of the gross domestic product, consumer debt has
increased from 13.74 percent in 1990 to 15.41 percent this year. One
family in six below $25,000 in annual income spends more than 40
percent of its income on debt service.
American families have kept their heads above water by working more
hours--middle-income couples with children are putting in an average of
6 full-time weeks more each year than a decade ago.
The burden of today's consumer debt coupled with an increase in
interest rates, a new
[[Page H11128]]
wave of downsizing, or a cutback in overtime hours would force families
to curtail spending and push many into bankruptcy.
Today, over 12 million American families can't afford bank accounts.
And for those who do have accounts, the average annual cost of
maintaining a regular checking account has risen to more than $217 in
1999--according to U.S. Public Interest Research Group. Meanwhile, in
1998 banks recorded nearly $62 million in profits, an eighth straight
record year.
The Financial Modernization Conference bill does little to discourage
the growth of bigger, higher fee banks, leading to less consumer choice
and higher fees for all Americans. There are also privacy concerns that
are not addressed in this bill.
The bill allows for sharing between mega-bank affiliates. Which can
only lead to more of the solicitations like this one that I received
over the weekend from Key Bank.
The bill does not allow a customer to ``opt-out'' if a financial
institution wishes to distribute the customer's information to
affiliates within the financial holding company. Is it too much to ask
for a customer to have the right to ``opt-out'' and inform his or her
financial institution that it may not distribute his or her personal,
private financial information to financial institutions?
Mr. Speaker, I am aware of the tremendous work on the part of the
Banking Committee Members and staff and appreciate their work on this
important issue. I remain, however, concerned that the bill falls short
from meeting consumer protection needs and reducing bank fees.
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