[Congressional Record Volume 145, Number 156 (Monday, November 8, 1999)]
[Extensions of Remarks]
[Page E2302]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          CONFERENCE REPORT ON S. 900, GRAMM-LEACH-BLILEY ACT

                                 ______
                                 

                               speech of

                          HON. JOHN D. DINGELL

                              of michigan

                    in the house of representatives

                       Thursday, November 4, 1999

  Mr. DINGELL. Madam Speaker, to paraphrase the words Charles Dickens 
penned in 1859, this is the best of bills; this is the worst of bills. 
It is an act of wisdom; it is an act of foolishness. It wisely 
recognizes the technological and regulatory changes that have blurred 
the lines between industries and products, and builds a new regulatory 
structure to house and foster competition and innovation. However, it 
unwisely fails to recognize that, for all that has changed 
dramatically, human nature has not. Prodigious failures and frauds are 
no less possible, indeed, perhaps are even more likely today. Yet S. 
900 provides inadequate protections for taxpayers, depositors, 
investors, and consumers.
  Now, I can tell that some of my colleagues are bracing themselves for 
a speech about the Crash of 1929 and the Great Depression that followed 
it. I am not giving that speech today. I am not opposing S. 900 because 
I am stuck in the past. I am opposing S. 900 because it's a bad bill 
today and for the future. About the past, I will only observe that he 
who does not learn from it, is doomed to repeat it. This bill bears 
dangerous seeds.
  First, S. 900 facilitates affiliations between banks, brokerages, and 
insurance companies, creating institutions that are ``too big to 
fail.'' However, it does not reform deposit insurance or antitrust 
implementation and enforcement. The bill's supporters tout all the 
benefits to consumers, but woe to the American people when they have to 
pick up the tab for one of these failures or when competition 
disappears and prices shoot up.
  It also authorizes banks' direct operating subsidiaries to engage in 
risky new principal activities like securities underwriting and, in 
five years, merchant banking with Treasury and Federal Reserve 
approval. The flimsy limitations and firewalls will not hold back 
contagion and underscore the foolishness in not reforming deposit 
insurance, and thus the threat to taxpayers and depositors.
  Second, the privacy provisions in S. 900 are a sham. The bill gives 
financial institutions new access to our personal financial and other 
information for purposes of cross-marketing and profiteering. Under S. 
900, a customer cannot opt out of information sharing if his financial 
institution enters a ``joint marketing agreement'' with unaffiliated 
third parties. This loophole makes the privacy protections about as 
effective as a lace doily would be in holding back a flood.
  Third, this bill undermines the Community Reinvestment Act. Many of 
my colleagues will speak to this point more eloquently than I, and I 
associate myself with their remarks. At the appropriate point, I will 
include National Community Reinvestment Coalition's letter in the 
Record.
  Fourth, it undermines the separation of banking and commerce. Title 
IV closes the unitary thrift loophole by barring future ownership of 
thrifts by commercial concerns. But about 800 firms that are 
grandfathered can engage in any commercial activity, even if they were 
not so engaged on the grandfather date. Moreover, title I allows the 
new financial holding companies (which incorporate commercial banks) to 
engage in any ``complementary'' activities to financial activities 
determined by the Federal Reserve. And in a piece of circular mischief, 
any S&L holding company, whether or not grandfathered, can engage in 
any activities determined to be ``complementary'' for financial holding 
companies. Title I of S. 900 also waters down the prudential 
limitations that the House had imposed on merchant banking. S. 900 
clearly ignores the warning of then Treasury Secretary Rubin to 
Congress in May of this year: ``We have serious concerns about mixing 
banking and commercial activities under any circumstances, and these 
concerns are heightened as we reflect on the financial crisis that has 
affected so many countries around the world over the past two years.''
  Fifth, the conference agreement would let banks evaluate and process 
health and other insurance claims without having to comply with state 
consumer protections. This means that banks, of all people, will make 
important medical benefit decisions that patients and doctors should 
make. According to the National Association of Insurance Commissioners, 
S. 900 could prevent up to 1,781 state insurance consumer protection 
laws and regulations from being applied to banks that conduct insurance 
activities. State laws could be preempted that require consumers to be 
paid claims they are due and that protect consumers against predatory 
practices of banks that sell credit insurance. S. 900 also preempts 
state consumer privacy laws restricting the dissemination of medical 
and other personal information by a bank engaged in insurance 
activities. The conference committee rejected an amendment that I 
offered to address these serious shortcomings.
  Sixth, S. 900 contains provisions (subtitle B of title III) on the 
redomestication of mutual insurers that are opposed by the National 
Conference of State Legislatures and the National Conference of State 
Legislatures and the National Conference of Insurance Legislators. They 
contend that this legislation is anti-consumer and not in the public 
interest in that it would preempt the anti-mutualization laws in 30 
states and places as many as 35 million policyholders, many of our 
constituents, at risk of losing $94.7 billion in equity. Their letter 
also follows my statement.
  Finally, our capital markets are the envy of the world and their 
success rests on the high level of public confidence in their 
integrity, fairness, transparency, and liquidity. While S. 900 pays lip 
service to the functional regulation of securities by the SEC, it, in 
fact, creates too many loopholes in securities regulation--too many 
products are carved out, and too many activities are exempted--thus 
preventing the SEC from effectively monitoring and protecting U.S. 
markets and investors. In a final indignity, the effective date of the 
securities title was extended mysteriously to 18 months from the one 
year approved by the conference committee. So, the title I Glass-
Steagall repeal is effective 120 days after date of enactment, the 
insurance provisions are effective on date of enactment, the pitiful 
privacy provisions are effective six months after the date of 
enactment, but the banks do not have to comply with the federal 
securities laws until 18 months or a year and a half after the date of 
enactment. This makes absolutely no sense whatsoever, but, considering 
all the other problems with this bill, is par for the course.
  I support modernization of our financial laws. I support competition 
and innovation. I do not believe either should be accomplished at the 
expense of taxpayers, depositors, investors, consumers, and our 
communities.
  S. 900 is a bad bill for the reasons I have outlined. I therefore 
refused to sign the conference report and I will vote ``no'' on 
passage.

                          ____________________