[Congressional Record Volume 145, Number 158 (Wednesday, November 10, 1999)]
[Extensions of Remarks]
[Pages E2343-E2344]
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. EDWARD R. ROYCE

                             of california

                    in the house of representatives

                       Thursday, November 4, 1999

  Mr. ROYCE. Madam Speaker, the historic legislation that we are 
considering today, is a win for the consumer, a win for the U.S. 
economy and a win for America's international competitive position 
abroad.
  American consumers will benefit from increased access, better 
services, greater convenience and lower costs. They will be offered

[[Page E2344]]

the convenience of handling their banking, insurance and securities 
activities at one location. More importantly, with the efficiencies 
that could be realized from increased competition among banks, 
insurance, and securities providers under this proposal, consumers 
could ultimately save an estimated $18 billion annually.
  Federal Reserve Chairman Alan Greenspan has stated that ``Consumers 
of financial services are denied the lower prices, increased access and 
higher quality services that would accompany the increased competition 
associated with permitting banking companies to expand their 
activities.''
  This reduction in the cost of financial services, is in turn, a big 
win for the U.S. economy. Finally, this legislation is a win for 
America's international competitive position, as it will allow U.S. 
companies to compete more effectively with foreign firms for business 
around the world.
  As the Federal Reserve Chairman stated, ``We cannot afford to be 
complacent regarding the future of the U.S. banking industry. The 
issues are too important for the future growth of our economy and the 
welfare of our citizens.''
  This legislation is thirty years overdue Mr. Speaker, and I urge my 
colleagues not to delay its passage a day longer.
  At this time, I would like to make a few clarifying remarks.
  Included in Title VI of the bill before us are complex changes in the 
structure of the Federal Home Loan Bank (FHLBank) System. I believe 
these changes will enhance the ability of the System to help member 
institutions serve their communities, though there is enormous work yet 
to be done to implement these initiatives. Consequently, at the risk of 
redundancy, it is important to reiterate the view expressed in the 
Conference regarding related regulatory actions.
  As noted in the Committee Report, the Conferees acknowledged and 
supported withdrawal of the Financial Management and Mission 
Achievement (FMMA) rule proposed earlier this year by the Federal 
Housing Finance Board (FHFB), the FHLBank System regulator. The FMMA 
would have made dramatic changes in such areas as mission, investments, 
liquidity, capital, access to advances and director/senior officer 
responsibilities. Because of serious concerns over the FMMA's impact on 
FHLBank earnings, its effect on safety and soundness and its legal 
basis, the proposal has been intensely controversial among the 
FHLBanks' membership, with over 20 national and state bank and thrift 
trade associations calling for a legislated delay on FMMA.
  Many Conferees not only shared these concerns but also felt strongly 
that the FMMA should not be pursued while the FHLBank System is 
responding to the statutory changes in this bill. There was great 
sympathy for a moratorium blocking the FMMA, but prior to the matter 
coming to a vote, Chairman Morrison of the FHFB sent a letter to 
Chairmen Gramm and Leach agreeing to withdraw the proposal, which I 
want to make sure is part of the Record. He also promised to consult 
with the Banking Committees regarding the content of the capital rules 
and any rules dealing with investments or advances. The FHFB's 
commitment not to act precipitously in promulgating regulations in 
these areas creates the proper framework for effective and timely 
implementation of the reforms that Congress is seeking to put in place.
  The regulatory standstill to which the FHFB has committed should 
apply to any final rules or policies applicable to investments, and the 
FHFB should maintain the current $9 billion ceiling on member mortgage 
asset pilot programs or similar activities. In the context of dramatic 
impending changes in the capital structure of the FHLBanks, I believe 
it is necessary for the FHFB to refrain from any effort otherwise to 
rearrange the FHLBanks' investment framework, liquidity structure and 
balance sheets.
  Finally, Mr. Speaker I would like to note that it is my understanding 
that credit enhancement done through the underwriting and reinsurance 
of mortgage guaranty insurance after a loan has been closed are 
secondary market transactions included in the exemption for secondary 
market transactions in section 502(e)(1)(C) of the S. 900 Conference 
Report.

                                Federal Housing Finance Board,

                                 Washington, DC, October 18, 1999.
     Hon. Phil Gramm,
     Chairman, Committee on Banking, Housing, and Urban Affairs, 
         Washington, DC.
     Hon. Jim Leach,
     Chairman, Committee on Banking and Financial Services, 
         Washington, DC.
       Dear Senator Gramm and Congressman Leach: As you proceed to 
     consider legislation to modernize the Federal Home Loan Bank 
     System as part of the S. 900/H.R. 10 conference, I am aware 
     that there is substantial concern regarding our proposed 
     Financial Management and Mission Achievement regulation 
     (FMMA). Unfortunately, this legitimate concern regarding a 
     far-reaching regulatory initiative has resulted in a proposal 
     for a statutory moratorium on our regulatory authority. 
     Despite the best efforts of well-meaning advocates, such 
     statutory language can only lead to serious ambiguity and 
     potential litigation over the independent regulatory 
     authority of the Finance Board.
       Therefore, this letter is intended to give you and your 
     colleagues on the Committee of Conference solid assurances 
     about our intentions upon final enactment of the statute 
     being drafted in conference. Upon such enactment, the Finance 
     Board will: 1. Withdraw, forthwith, its proposed FMMA. 2. 
     Proceed in accordance with the statutory instructions 
     regarding regulations governing a risk-based capital system 
     and a minimum leverage requirement for the Federal Home Loan 
     Banks. 3. Take no action to promulgate proposed or final 
     regulations limiting assets or advances beyond those 
     currently in effect (except to the extent necessary to 
     protect the safety and soundness of the Federal Home Loan 
     Banks) until such time as the regulations described in number 
     2 have become final and the statutory period for submission 
     of capital plans by the Banks has expired. 4. Consult with 
     each of you and your colleagues on the Banking Committees of 
     the House and the Senate, regarding the content of both the 
     capital regulations and any regulations on the subjects 
     described in number 3, prior to issuing them in proposed 
     form.
       I believe that these commitments cover the areas of concern 
     which have lead to a proposal for moratorium legislation. You 
     can rely on this commitment to achieve those legitimate ends 
     sought by moratorium proponents without clouding the 
     necessary regulatory authority of the Finance Board which 
     could result from statutory language.
       Thank you for your consideration.
           Sincerely,
                                                Bruce A. Morrison.

     

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