[Congressional Record (Bound Edition), Volume 145 (1999), Part 19]
[Extensions of Remarks]
[Pages 27738-27739]
[From the U.S. Government Publishing Office, www.gpo.gov]



     THE COMMUNITY BANK TILT TO FINANCIAL MODERNIZATION LEGISLATION

                                 ______
                                 

                          HON. JAMES A. LEACH

                                of iowa

                    in the house of representatives

                        Monday, November 1, 1999

  Mr. LEACH. Mr. Speaker, during every stage in its development, 
financial modernization legislation has had controversial elements for 
all of the parties concerned. Differences will always remain between 
and within the banking, insurance, and securities industries. But it 
should be clear that in the final analysis the Gramm-Leach-Bliley Act 
which will be considered this week, relatively speaking, tilts in favor 
of the nation's community banks and the customers they serve.
  Seven areas deserve particular mention:
  1. Unitary Thrifts. While the financial modernization legislation 
provides for increased competition in the delivery of financial 
products, it repudiates the Japanese industrial model and forestalls 
trends toward mixing commerce and banking. The unitary thrift loophole 
which allows commercial firms to control smaller S&L charters has been 
closed. Not only will no new unitaries be chartered, but those in 
existence cannot be sold to commercial firms. This means that the 
signal breach of banking and commerce that exists in current law is 
plugged, which has the effect of both stopping the potential 
``keiretzuing'' of the American economy and protecting the viability, 
and therefore the value, of community bank charters. As close observers 
of the process understand, at many stages in consideration of bank 
modernization legislative, powerful interest groups attempted to 
introduce legislative language which would have allowed large banks to 
merge with large industrial concerns--i.e., to provide that Chase could 
merge with General Motors or Bank of America with Amoco. Instead, this 
bill precludes this prospect and, indeed, blocks America's largest 
retail company from owning a federally insured institution, for which 
an application is pending. Federal Home Loan Bank System reforms.
  2. The FHLB charter is broadened to allow community banks to borrow 
for small business and family farm lending. The implications of this 
FHLB mission expansion are extraordinary. In rural areas it allows, for 
the first time, community banks to have access to long-term capital 
comparable to the Farm Credit System, which like the Federal Home Loan 
Bank System is empowered as a Government Sponsored Enterprise to tap 
national credit markets at near Treasury rates. The bill thus creates 
greater competitive equity between community banks and the Farm Credit 
System and greater credit cost savings for farmers. With regard to the 
small business provision, the same principle applies. If larger 
financial institutions choose to emphasize relationships with larger 
corporate and individual customers, the ability of community banks to 
pledge small business loans as collateral for FHLB System advances will 
allow them to serve comprehensively a small business and middle class 
family market niche. Most importantly, if the present trend continues 
of American savers putting less money in banks and more in non-insured 
deposit accounts, such as money-market mutual funds, this FHLB reform 
assures community banks the liquidity--at competitive costs--they will 
need for generations to come.
  3. Additional Powers. In recent years, sophisticated money-center 
banks have developed powers, under Federal Reserve and OCC rulings, 
that have allowed them to offer products which community banks in many 
states are frequently precluded from offering. This bill allows 
community banks all the powers as a matter of right that larger 
institutions have accumulated on an ad hoc basis. In addition, 
community banks for the first time are authorized the right to 
underwrite municipal revenue bonds.
  4. Regulatory relief. The legislation provides modest regulatory 
relief for banks with assets

[[Page 27739]]

under $250 million. Those with an ``outstanding'' Community 
Reinvestment Act rating will be examined for compliance only every 5 
years, while those with a ``satisfactory rating will be reviewed every 
4 years.
  5. Special provisions. For a bill of the magnitude for this one, 
there are surprisingly few special interest provisions. The Congress 
held the line to assure that breaches of imprudent regulation were not 
provided to specific institutions, therefore protecting the deposit 
insurance fund, to which community banks disproportionately provide 
resources, and the public, which is the last contingency backup.
  6. Prohibition on deposit production offices. The legislation expands 
the prohibition on deposit production offices contained in the Reigle-
Neal Interstate bill to include all branches of an out-of-state bank 
holding company. This prohibition ensures that large multi-state bank 
holding companies do not take deposits from communities without making 
loans within them.
  7. Competition. The power under the act will provide community banks 
a credible basis to compete with financial institutions of any size or 
any speciality and in addition to offer, in similar ways, services that 
new entrants into financial markets, such as Internet or computer 
software companies, may originate.
  In a competitive world in which consolidation has been the hallmark 
of the past decade, the framework of this bill assures that community 
banks have the tools to remain competitive. If larger institutional 
arrangements ever become consumer-unfriendly or geographically-
concentrated in their product offerings, the powers reserved for 
community banks will ensure competitive viability and, where needed, 
incentivize the establishment of new community-based institutions.
  What the new flexibility provided community banks means in that small 
businesses in the most rural parts of America will be provided access 
to the most up-to-date, sophisticated financial products in the world, 
delivered by people they know and trust. Without financial 
modernization legislation, the trend towards commerce and banking, as 
well as more faceless interstate banking, will be unstoppable. 
Community based institutions need to be able to compete with larger 
institutions on equal terms or growth and economic stability in rural 
America will be jeopardized.

                       SENATE COMMITTEE MEETINGS

  Title IV of Senate Resolution 4, agreed to by the Senate on February 
4, 1977, calls for establishment of a system for a computerized 
schedule of all meetings and hearings of Senate committees, 
subcommittees, joint committees, and committees of conference. This 
title requires all such committees to notify the Office of the Senate 
Daily Digest--designated by the Rules committee--of the time, place, 
and purpose of the meetings, when scheduled, and any cancellations or 
changes in the meetings as they occur.
  As an additional procedure along with the computerization of this 
information, the Office of the Senate Daily Digest will prepare this 
information for printing in the Extensions of Remarks section of the 
Congressional Record on Monday and Wednesday of each week.
  Meetings scheduled for Tuesday, November 2, 1999 may be found in the 
Daily Digest of today's Record.

                           MEETINGS SCHEDULED

                               NOVEMBER 3
     9:30 a.m.
       Armed Services
         To hold hearings on lessons learned from the military 
           operations conducted as part of Operation Allied Force, 
           and associated relief operations, with respect to 
           Kosovo.
                                                            SH-216
       Health, Education, Labor, and Pensions
         Business meeting to consider pending calendar business.
                                                            SD-430
       Energy and Natural Resources
         Business meeting to consider pending calendar business.
                                                            SD-366
     10 a.m.
       Governmental Affairs
         Business meeting to consider pending calendar business.
                                                            SD-628
       Environment and Public Works
       Fisheries, Wildlife, and Drinking Water Subcommittee
         To hold hearings to examine solutions to the policy 
           concerns with respect to Habitat Conservation Plans.
                                                            SD-406
       Aging
         To hold hearings to examine the qulity of care in the 
           nation's nursing homes.
                                                            SD-562
       Commission on Security and Cooperation in Europe
         To hold hearings on the Chechen crisis and its 
           implications for Russian Democracy.
                                            2226, Rayburn Building
     10:30 a.m.
       Foreign Relations
         Business meeting to consider pending calendar business.
                                                    S-116, Capitol
     2:30 p.m.
       Foreign Relations
         To hold hearings to examine issues in promoting United 
           States interests.
                                                            SD-419

                               NOVEMBER 4
     9:30 a.m.
       Indian Affairs
         To hold joint hearings with the House Committee on 
           Resources on S. 1586, to reduce the fractionated 
           ownership of Indian Lands; and S. 1315, to permit the 
           leasing of oil and gas rights on certain lands held in 
           trust for the Navajo Nation or allotted to a member of 
           the Navajo Nation, in any case in which there is 
           consent from a specified percentage interest in the 
           parcel of land under consideration for lease.
                                              Room to be announced
       Armed Services
         To hold hearings on the nomination of Alphonso Maldon, 
           Jr., of Virginia, to be an Assistant Secretary of 
           Defense; and the nomination of John K. Veroneau, of 
           Virginia, to be an Assistant Secretary of Defense.
                                                            SR-222
       Commerce, Science, and Transportation
         To hold hearings on local phone competition, examining 
           how to increase consumer choice in local telephone 
           markets.
                                                            SR-253
     10 a.m.
       Aging
         To hold hearings on certain initiatives to improve 
           nursing home quality of care.
                                                            SD-562
       Judiciary
         Business meeting to consider pending calendar business.
                                                            SD-226
     10:15 a.m.
       Foreign Relations
         To hold hearings to examine issues relating to Chechnya.
                                                            SD-419
     11 a.m.
       Judiciary
         To hold hearings on issues relating to the MCI Worldcom/
           Sprint merger.
                                                            SD-266
     2:30 p.m.
       Foreign Relations
         To hold hearings to examine the future United States 
           policy with Nigeria.
                                                            SD-419

                               NOVEMBER 5
     11 a.m.
       Foreign Relations
       International Economic Policy, Export and Trade Promotion 
           Subcommittee
         To hold hearings to examine issues relating to the 
           International Monetary Fund, focusing on lessons 
           learned from the Asian financial crisis.
                                                            SD-419