[Congressional Record (Bound Edition), Volume 145 (1999), Part 11]
[House]
[Pages 14995-15072]
[From the U.S. 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.

                              {time}  1638


                     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.
  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.

[[Page 14996]]

  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 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, Richard Baker, 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 text of the insurance language contained in the bill generally 
reflects the versions reported out of both the House Banking Committee 
and the full Senate, with certain limited modifications suggested by 
the House Commerce Committee. One such modification inserts additional 
parenthetical language in Section 303 dealing with the functional 
regulation of insurance activities. The addition of this parenthetical 
language is not intended to have any effect on the broad protections 
against state discrimination set forth in section 104 of this bill, the 
application of the preemption standards set forth in the 1996 Barnett 
Supreme Court case, or the rule-writing and implementation authority of 
federal regulators under Federal law.
  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

[[Page 14997]]

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 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.
  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. 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

[[Page 14998]]

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 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.
  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.

[[Page 14999]]

  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 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,

[[Page 15000]]

     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 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

[[Page 15001]]

     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 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

[[Page 15002]]

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 third 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 
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

[[Page 15003]]

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. 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

[[Page 15004]]

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. 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

[[Page 15005]]

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.
  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

[[Page 15006]]

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 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?

[[Page 15007]]

  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. 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 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.

[[Page 15008]]

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 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

[[Page 15009]]

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.
  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

[[Page 15010]]

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. 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 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

[[Page 15011]]

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. 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 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

[[Page 15012]]

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. 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.
  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. 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

[[Page 15013]]

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. 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 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

[[Page 15014]]

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. 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. Madam Chairman, I would like to engage 
the managers from both sides, if I might, in a colloquy.
  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.

[[Page 15015]]


  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. 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 trusted 
clerks, Robert Simison and Mike Flood.
  They were joined by diligent efforts of the minority staff, Consuela 
Washington and Bruce Gwinn. 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.
  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

[[Page 15016]]

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. 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 
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. 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

[[Page 15017]]

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. 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 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.

[[Page 15018]]

  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. 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 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

[[Page 15019]]

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.
  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.

[[Page 15020]]

  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 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.

[[Page 15021]]

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 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

[[Page 15022]]

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.
  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

[[Page 15023]]

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.
  Madam Chairman, 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.

[[Page 15024]]

  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 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.

[[Page 15025]]

     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 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.

[[Page 15026]]

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.
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.

[[Page 15027]]

         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:
       ``(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

[[Page 15028]]

     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 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

[[Page 15029]]

     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 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

[[Page 15030]]

     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
       (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.

[[Page 15031]]

       (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 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--

[[Page 15032]]

       (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--
       (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);

[[Page 15033]]

       (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
       ``(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.

[[Page 15034]]

       ``(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
       ``(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,

[[Page 15035]]

     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 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--

[[Page 15036]]

       (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.
       (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

[[Page 15037]]

     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 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.

[[Page 15038]]

       ``(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 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

[[Page 15039]]

     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 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

[[Page 15040]]

     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 
     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

[[Page 15041]]

     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))--
       (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.

[[Page 15042]]

       ``(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 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;

[[Page 15043]]

       ``(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.
       ``(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,

[[Page 15044]]

     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 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,

[[Page 15045]]

     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 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

[[Page 15046]]

       (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 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.--

[[Page 15047]]

       (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 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;

[[Page 15048]]

       ``(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 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

[[Page 15049]]

     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--

[[Page 15050]]

       (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;
       (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

[[Page 15051]]

     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.
       (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--

[[Page 15052]]

       ``(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 
     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

[[Page 15053]]

     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 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--

[[Page 15054]]

       (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.
       (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

[[Page 15055]]

     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--
       (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

[[Page 15056]]

       ``(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--
       ``(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

[[Page 15057]]

     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;
       ``(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,

[[Page 15058]]

     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 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

[[Page 15059]]

     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.--
       ``(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.

[[Page 15060]]

       ``(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 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.

[[Page 15061]]



     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.
       (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.

[[Page 15062]]

       (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 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

[[Page 15063]]

     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.

     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

[[Page 15064]]

     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.
       (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

[[Page 15065]]

     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.''.

                            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.

[[Page 15066]]

       (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.

     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

[[Page 15067]]

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.
  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 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.

[[Page 15068]]


  Mr. BENTSEN. Madam Chairman, I yield myself the remaining time.
  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 EFFECT 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 ``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

[[Page 15069]]

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 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:

[[Page 15070]]

       ``(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. 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 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. 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.

[[Page 15071]]

  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. 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. 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. 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. 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).

[[Page 15072]]


  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. 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.
  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.

                          ____________________