[Congressional Record Volume 145, Number 159 (Thursday, November 11, 1999)]
[Extensions of Remarks]
[Page E2371]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




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

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                               speech of

                          HON. JAMES A. LEACH

                                of iowa

                    in the house of representatives

                       Thursday, November 4, 1999

  Mr. LEACH. Mr. Speaker, I insert the following for printing in the 
Record:

       Unitary thrift holding companies--Section 401 closes the 
     unitary thrift holding company loophole that permits 
     commercial firms to acquire thrifts. This section contains a 
     grandfather provision that permits a company that was a 
     savings and loan holding company on May 4, 1999, or had an 
     application on file as of that date, to acquire and continue 
     to control a thrift and engage in commercial activities. It 
     should be recognized that this exception to the general 
     prohibitions in section 401 on commercial firms owning 
     thrifts applies only to companies that owned or controlled 
     thrifts as of that date (or pursuant to an application 
     pending as of that date) and not to any subsequent acquirer 
     of a grandfathered unitary thrift holding company.
       The intention of the conferees on this matter is very clear 
     from the plain language of section 401. First, section 401 
     provides that no company may acquire a thrift after May 4, 
     1999, unless the company is engaged only in financial 
     activities. Second, a company that does acquire a thrift 
     after May 4, 1999 may not engage in commercial activities. As 
     such, a grandfathered unitary thrift holding company could 
     not be acquired by another commercial firm or financial firm 
     and retain its commercial activities. A financial firm could 
     not acquire a grandfathered unitary thrift holding company 
     engaged in commercial activities unless such activities are 
     divested because the acquiring financial firm would then be 
     engaged in commercial activities directly and indirectly in 
     violation of section 401.
       Insurance company portfolio investments--New section 
     4(k)(4)(I) of the Bank Holding Company Act permits insurance 
     company subsidiaries of financial holding companies to 
     acquire equity interests in nonfinancial companies 
     (``portfolio companies''). Such acquisitions, however, must 
     represent an investment made in the ordinary course of the 
     insurance company's business and must be made in accordance 
     with relevant state insurance law. The Act also prohibits a 
     financial holding company from routinely managing or 
     operating a portfolio company held pursuant to this section, 
     except as necessary to obtain a reasonable return of the 
     investment. It has been suggested that this would permit 
     officer overlaps between the financial holding company and 
     the portfolio company held under the authority granted by 
     this section. This is not the case. The restriction in fact 
     was intended to prohibit financial holding companies from 
     becoming involved in the day-to-day operations or management 
     of a portfolio company, except in unusual circumstances, and 
     thereby maintain the Act's general prohibition on the mixing 
     of banking and commerce. Since the officers of a company are 
     involved in the day-to-day management of the company's 
     affairs, officer interlock between a financial holding 
     company and a portfolio company would, in most circumstances, 
     involve the holding company in the routine management and 
     operation of the portfolio company. Director interlocks, on 
     the other hand, would properly allow a financial holding 
     company to monitor its investment as long as the director was 
     not involved in the day-to-day management of the portfolio 
     company.

     

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