[Congressional Record (Bound Edition), Volume 145 (1999), Part 20]
[Senate]
[Pages 28329-28365]
[From the U.S. Government Publishing Office, www.gpo.gov]



   FINANCIAL SERVICES MODERNIZATION ACT OF 1999--CONFERENCE REPORT--
                               Continued

  Mr. LOTT. Mr. President, let me just take a moment at this time, if 
the Senator would allow me.
  When the history is written of this session of Congress, it will 
probably identify this piece of legislation as the single biggest 
achievement. I have heard this financial services modernization issue 
discussed for my entire career in the Congress, which is now up to 27 
years. It has been tried by Republicans, by Democrats in the Congress, 
House and Senate, administrations of both parties. It never quite 
occurred.
  I think it is appropriate we commend all of those who have been 
involved in this process for bringing us to this moment. This 
legislation is going to pass overwhelmingly. It is going to bring us 
into the modern era of financial services. It is going to allow us to 
be more equally competitive around the world.
  I think we should properly note what has happened. If today's papers 
are any indication, we passed major trade legislation yesterday and it 
didn't even make the first section of one of the papers in this city; 
it wound up in the business section. It was hardly noted, the effort 
that was put into passing that major free trade legislation. I hope 
that will not be the case with this major legislation.
  So for all those involved--I won't begin at the top and go to the 
bottom--obviously Secretary Rubin was involved in earlier discussions; 
Alan Greenspan was involved; Secretary Summers has been involved. The 
administration did stay engaged when they could have said we are not 
going to talk anymore. Leaders in both the House and the Senate, the 
elected leadership, Democrats and Republicans on both sides of the 
aisle, on both sides of the Capitol worked to make this happen.
  Let me say for the record--I know, because I watched it very 
carefully and had some meetings which, I think, helped give it some 
momentum, some impetus--it would not be where it is today, it would not 
have been achieved, without the leadership of the senior Senator from 
Texas, Mr. Gramm. He has done a masterful job. Many people said: It 
won't happen. Many people said: He will kill it. I kept saying: No; you 
wait. He will make this happen through thick or thin. It will get done.
  It is being done. To take nothing away from all those involved--
including the ranking member of the committee, Senator Sarbanes of 
Maryland, who was actively involved--I have to note, with a lot of 
appreciation and gratitude, the tremendous leadership of the Senator 
from Texas. I don't think he can probably ever replicate this effort 
again. So I think that at this time we should express our appreciation 
because it is a monumental achievement.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Fitzgerald). The Senator from Texas.
  Mr. GRAMM. Mr. President, I appreciate that. I know it is going to 
cost me something big, but I am very grateful for it. As I said last 
night, one of the reasons we were successful, one of the reasons this 
bill is as good as it is, is that I have had the very strong support of 
Trent Lott and our leadership. Having their support is like having a 
stone wall to your back in a gun fight: You can still get killed, but 
nobody is going to shoot you in the back. That has been very 
beneficial. Trent Lott's willingness to say we are going to follow this 
path, whether it leads us to success or failure, is really what has led 
us to success.
  I appreciate those kind comments and yield the floor.
  Mr. SARBANES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. SARBANES. Mr. President, are we back on the bill?
  The PRESIDING OFFICER. We are back on the bill.
  Mr. SARBANES. I yield 10 minutes of my time to the distinguished 
Senator from North Carolina.
  The PRESIDING OFFICER. The Senator from North Carolina is recognized.
  Mr. EDWARDS. Mr. President, I rise today in support of the Gramm-
Leach-Bliley Act. This legislation is of critical importance to America 
and will benefit our nation's financial services companies and American 
consumers. Quite simply, I believe it helps pave the way to our 
continued economic prosperity.
  This legislation will ensure stronger consumer protections in the 
rapidly changing and consolidating world of financial services. The 
legislation is important to consumers, because the industry is already 
changing dramatically, but through regulatory backdoors and without 
much-needed consumer protections. Banks, securities firms, and 
insurance companies--

[[Page 28330]]

historically separated from one another--have already started engaging 
in each others' business, and there have been no affirmative 
protections in place for the nation's consumers. This law rectifies 
that situation.
  I do have some concerns with certain sections regarding federal 
preemption of state laws that I hope to clarify. Throughout 
consideration of this legislation--S. 900, H.R. 10, and the chairmen's 
mark--I have worked with my colleagues to make sure that the final 
language of the bill does not adversely affect recently passed consumer 
protection legislation in my home state of North Carolina.
  North Carolina is a leading state in the financial services world on 
several fronts. We are home to some of the largest banks in the 
country. We are home to some of the strongest and most innovative 
community development groups in the country. We see, every day, how 
well these players work with one another to provide convenient banking 
services to all North Carolinians.
  North Carolina is also a leader in consumer protections. Our state 
General Assembly recently passed two important pieces of consumer 
legislation that had broad support. First, the General Assembly passed 
legislation that will require Blue Cross/Blue Shield of North 
Carolina--a non-profit--to create a public trust to help fund public 
health expenses in the event it converts to for-profit status. Its 
rationale was simple. A company should not be able to use its not-for-
profit status--a government granted exemption from taxation--to build 
market dominance and then convert to for-profit status. In that 
situation, the not-for-profit status would have acted as a government 
subsidy, and conversion should not be allowed without some form of 
assessment for the subsidy. This legislation had bipartisan support and 
was agreed to by all parties.
  Throughout consideration of financial modernization legislation, I 
have steadfastly supported language that will protect this law from 
possible federal preemption. The conference report accompanying the 
legislation indicates that this type of law is not of the sort for 
which federal preemption would come into play. Specifically, the report 
noted that ``[t]he House receded on its provision specifically 
addressing a North Carolina Blue Cross-Blue Shield organization, as the 
State laws governing those types of entities would not be preempted so 
long as the State laws do not discriminate . . .''. Because the North 
Carolina law places a requirement on Blue Cross/Blue Shield of North 
Carolina regardless of any possible affiliation, it treats identically 
all interested parties seeking to affiliate or acquire. A bank that 
might want to acquire Blue Cross/Blue Shield must comply with the law 
in the same way as a car dealership, or any other potential acquirer, 
would. Therefore, it is impossible to argue that the law is in any way 
discriminatory.
  The other critical piece of legislation is a recently passed law that 
prohibits the financing of products like credit insurance in home 
mortgages. In recent years, including credit insurance costs in the 
mortgage was a favorite tactic of some predatory institutions--a tactic 
that ultimately cost consumers thousands of dollars. North Carolina is 
a leader in making sure its residents are protected from predatory 
lending and financing practice, predominant over what may be weaker 
federal standards or laws.
  The State of North Carolina enacted this law on July 22, 1999. The 
law, among other things, regulates mortgage financing and what non-
housing products may be included. For example, it bars the lump sum 
financing of credit insurance premiums in consumer home loans. The law 
was intended to regulate mortgages and to prevent a potentially 
misleading form of home lending. It does not prevent credit insurance 
from being provided for home loans on a monthly basis, but merely cuts 
off financing the premiums up-front since the state General Assembly 
determined that such financing is fundamentally unfair. Congress does 
not intend to preempt this law in the Gramm-Leach-Bliley Act.
  I believe that this North Carolina law regulates mortgage financing 
and does not target the ability of an insured depository to sell 
insurance products. The focus of my state's legislature was on 
mortgages and efforts to shoehorn other products into the cost of the 
mortgage. The legislature would have acted the same way if mortgage 
lenders had been attempting to include lump sum financing of moving 
expenses or a new TV. However, if it were determined that the law 
concerns insurance sales activities, this Act still would not preempt 
the North Carolina provision. At most, the North Carolina law regulates 
how credit insurance is sold--the prohibition on financing credit 
insurance premiums cuts off one avenue of sale while leaving all other 
avenues open. As Section 104(d)(2) of the Act states, such laws are not 
preempted unless they ``prevent or significantly interfere with the 
activities of depository institutions or their affiliates.'' The North 
Carolina law does neither. Banks may still sell credit insurance in 
connection with mortgages, only one sale technique is foreclosed.
  In addition to the two consumer protection matters I just mentioned, 
I wanted to say a few words about the privacy provisions in this 
legislation. A great deal of debate centered on personal financial 
information and the way banks, securities firms and insurance companies 
may use that information. Privacy in financial services is an extremely 
complex issue because what one person may view as an invasion of 
privacy, another might appreciate as a timely and appropriate offering 
of a much-needed service. I think it is important to realize that the 
issue of protecting personal privacy is not limited to the financial 
services world. In our meetings, we also spoke of privacy of medical 
information. The news is full of stories of other companies--grocery 
stores, toy makers, appliance stores, telephone companies and others--
that are creating massive databases of customer information to be used 
for marketing products and services.
  In this legislation, we have given customers the opportunity to 
decide whether or not they want to let their financial institution 
share their personal information with a third party. We require 
financial institutions to have a privacy policy--and we require that 
this policy is explained to all the institution's customers. We also 
included an important provision that makes it a Federal crime--
punishable by up to 5 years in prison--to obtain customer information 
through fraudulent or deceptive means. I myself would have supported 
even more privacy protection. I am confident that in the next few 
years, we will be forced to deal with this problem more 
comprehensively.
  Finally, I would like to say a few things about the Community 
Reinvestment Act. I struggled long and hard with the CRA provisions 
included in this law, because CRA is so important to North Carolina and 
to me personally. I wanted to be able to support this bill, but I would 
have refused to do so if I believed that CRA was undermined. I have 
seen first hand the amazing benefits--to banks and to consumers--that 
have resulted from CRA.
  North Carolina banks represent some of the biggest and best CRA 
success stories, and I know from talking to bankers that they work well 
with community groups to make sure all neighborhoods are served. I 
spoke with several North Carolina community group leaders about the 
compromise we worked out, and while I know it wasn't their ideal, I 
believe that they recognize how much effort went into protecting CRA. 
Most importantly, I want to make sure that everyone knows that before a 
bank can even benefit from the new powers under this legislation, it 
must have at least a ``satisfactory'' CRA record. And, if it doesn't 
maintain at least a ``satisfactory'' rating, that bank can't buy any 
other financial firm until it gets its rating back up. What this means 
for CRA, and for those who actively support its goals, is that the 
commitments banks make to serving their communities will continue to be 
of paramount importance to their daily business.
  However, I do worry about some of the reporting burdens being imposed 
on

[[Page 28331]]

CRA groups by this measure. In the last few days, these reporting 
requirements have been the subject of numerous talks between committee 
members and the Treasury Department. Because these requirements are a 
new idea--the provision was added to S. 900 during floor debate--we 
have been careful to make sure that the language is clear that the 
provision will not impose undue burdens on community groups. I fear 
that unless provisions of this bill are narrowly interpreted, they 
could provoke a kind of regulatory witch hunt. But I am confident that 
the spirit of this bill is to diminish regulatory burdens and that all 
provisions in this law must be interpreted in that light.
  And so we find ourselves at a truly historic moment. We are about to 
pass legislation that will modernize our nation's financial laws, 
increase competition, increase options for consumers, decrease costs, 
protect personal financial information and ensure the continued 
application of the Community Reinvestment Act. We have a good bill 
here, and I strongly support it.
  To elaborate, this is a bill that has been long overdue. There are 
those who have been toiling in the vineyards with respect to this bill 
for a very long time.
  Financial services modernization is well recognized throughout the 
Senate as something that is desperately needed. If done the right way, 
which I believe this bill accomplished, it is helpful to consumers. It 
will provide a more competitive market, greater competition, and one-
stop shopping for consumers of financial services. It will also help 
provide a coherent legal framework for the operation of the financial 
services industry in this country.
  A lot of the things we are doing officially and legally through this 
bill have been done through the back door for years because of the fact 
that the financial services industry has changed so much in this 
country over the last 20 to 30 years. The one position we, on my side, 
felt most strongly about was, while we believed in financial services 
modernization and supported it--and I wholeheartedly held that belief--
it was critical that we be able to maintain the provisions of the 
Community Reinvestment Act, or CRA, because CRA has done so much good 
in this country. It has done so much good in my home State of North 
Carolina to help revitalize chronically economically disadvantaged 
areas, turned neighborhoods around that were crime infested. It has 
been an extraordinarily positive thing, something the banks in my State 
of North Carolina strongly support, always have supported, and continue 
to support.
  The one other issue is that of privacy. We made some positive steps 
with respect to privacy. Since essentially there was very little 
regulation of people's personal privacy in existing law, we made a 
positive step in that direction. But there is probably still additional 
work to do in that area.
  Let me talk, again, about the Community Reinvestment Act, which is 
the foundation for us being able to get a bill. The Community 
Reinvestment Act has had such an extraordinarily positive impact on 
areas of our country that desperately needed financial support. The 
bedrock principle in our negotiations on this legislation was that no 
bank should be allowed to take advantage of the expanded services 
available under this bill unless they had a satisfactory CRA rating. As 
a result of much discussion and negotiation between the parties 
involved in this bill, we have been able to accomplish that. I believe 
we have done what needed to be done to maintain the fundamental 
principle of CRA.
  In addition, we have been able to provide that no bank can acquire or 
merge with another institution unless it has at least a satisfactory 
CRA rating. We worked very hard to make sure that principle remained in 
place. After much discussion and negotiation, after the bill passed the 
Senate over the objection of a number of us because we believed it 
weakened CRA, in the conference committee and in the discussions we 
were able to get this principle reinstated. We have done the most 
fundamental thing that had to be done in order to get a bill, which is 
to make sure CRA was in place, that it remained vibrant and strong, and 
that no bank could take advantage of the provisions of these expanded 
services available under this bill unless they had a satisfactory CRA 
rating.
  I believe in CRA. I think it is an extraordinarily positive thing for 
the country. The banks in my State believe in it. They have done a 
wonderful job complying with the provisions of CRA. We have been able, 
through hard work and negotiation, to maintain those critical 
provisions of CRA in this bill.
  This bill also contains some positive steps in the area of privacy. 
We had, as I indicated earlier, very little protection for people's 
personal financial records in banking and financial institutions prior 
to the enactment of this bill. Assuming we are able to pass this 
conference report today, there will be some positive steps in that 
direction. The reality is, though, there are a number of us, myself 
included, who believe we need to go further, that there is more that 
needs to be done to protect people's privacy.
  Folks have a fundamental right to know what is happening with their 
personal financial information and to know it is not being used in 
inappropriate ways.
  This bill takes a positive step in that direction. I think for that 
reason it makes sense to support the bill. However, I believe there is 
more work that needs to be done in this area. Many of us on our side, 
including the ranking member, Senator Sarbanes, believe there is more 
to be done in this area.
  Financial modernization, as contained in this bill, will also help 
ensure continued economic growth in this country. The reason for that 
is that now our banks, our financial institutions in this country, will 
be able to compete in the global marketplace because our financial 
institutions have operated for many years now under rules that were 
antiquated, which in this environment and marketplace made no sense, 
and with which foreign competitors, who also do business in the United 
States, didn't have to comply. With continued prosperity and growth so 
important in our country, it was important that we be able to have 
modernization in the financial services industry. This bill 
accomplishes that.
  It will be good, as I indicated, not only for domestic competition, 
to allow banks to compete with one another and, as a result, lower 
costs for consumers, but it also allows our banks to compete 
internationally, which is critically important.
  Finally, I thank those who worked so long and hard on this bill. 
There are many who worked long and tirelessly on this bill: First, 
Senator Sarbanes, our ranking member, who has been one of my mentors in 
my 10 months here in the Senate, who is a remarkable leader; he has 
shown remarkable leadership and guidance on this bill. Also, Senator 
Sarbanes' extraordinary staff, Steve Harris and Marty Gruenberg, who 
are both wonderful, have worked with us throughout this process. This 
could not have been done without their work and guidance. Also, my 
friends, Senator Dodd, Senator Schumer, and Senator Reid, who, along 
with Senator Sarbanes, were in that small room with me late into the 
evening negotiating the provisions of the CRA, which eventually were 
contained in this legislation and without which there would be no bill. 
They all worked tirelessly--Senators Dodd, Schumer, Reid, and 
Sarbanes--late into the evening, and we were able, finally, to reach a 
reasonable compromise. But it could not have been done without the 
leadership of all of those Senators.
  Senators Shelby and Bryan worked very hard on the issue of privacy. 
Philosophically, and in my heart, I am with them on that issue. I think 
we have made positive steps in the area of privacy. Senators Shelby and 
Bryan are fundamentally right that the American people deserve and 
believe they deserve the right to have their personal financial 
information protected. They showed great leadership in that area. 
Senators Johnson, Kerrey, and Bayh, throughout this process, have 
worked with us very long and hard, and without their support this 
legislation would not have been possible.

[[Page 28332]]

  Finally, I mention our chairman, Senator Gramm, beside whom I had 
occasion to sit for many hours on that Thursday night and Friday 
morning when we were able to finally reach agreement on this bill. 
Without his hard work and leadership and willingness to compromise and 
negotiate, ultimately, this bill would not exist. The majority leader 
is right in that respect. So I applaud him for his work on this bill, 
and I applaud him particularly for his willingness to compromise, to 
negotiate, and to have a back-and-forth discussion with those of us who 
had somewhat different views on issues such as CRA privacy.
  Finally, to Chairmen Leach and Bliley and ranking members LaFalce and 
Dingell, who did great work throughout this process, including that 
late-evening meeting that went to 2:30 or 3 o'clock in the morning; and 
Secretary Summers and members of the Treasury Department who were in 
that room working tirelessly with us, particularly to iron out some of 
the details associated with the compromises that were reached that 
night.
  I do believe this is a historic piece of legislation. I think it is a 
piece of legislation that benefits consumers; it will increase 
competition in this country; it will lower prices. I believe it will 
allow for one-stop shopping for folks who want to go to one place and 
have all their financial services provided, and it makes positive steps 
in the area of privacy, although there is still work left to be done.
  Also, most fundamentally, it protects the critical principles of the 
Community Reinvestment Act, which has been such a positive law in this 
country and has had such an extraordinarily positive impact on my home 
State. I have seen neighborhoods that have literally been turned around 
by CRA, the Community Reinvestment Act. Because of the work and 
negotiation that went into this legislation, I believe we have 
satisfied the fundamental principles of CRA.
  Mr. President, I urge colleagues to support and vote for this 
conference report. It is the result of a lot of hard work by a lot of 
people and a lot of compromises.
  With that, I yield the floor.
  The PRESIDING OFFICER. The Senator from Maryland is recognized.
  Mr. SARBANES. Mr. President, before yielding to the Senator from 
Connecticut, I acknowledge and express my deep appreciation to the 
Senator from North Carolina for his very positive and constructive 
contributions throughout the process of developing this legislation. He 
really made a very important difference in helping to get us through 
some satisfactory resolutions of some difficult questions. I am very 
appreciative to him.
  Mr. President, I yield 15 minutes to the Senator from Connecticut.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized.
  Mr. DODD. Mr. President, I thank the Chair and I thank my colleague 
and ranking member of the Banking Committee.
  I rise today, as well, in strong support of this very historic 
conference report accompanying S. 900, which I believe will receive 
strong bipartisan support by Members of this body as well as in the 
House and will be signed into law by President Clinton.
  Nearly 70 years ago, the Glass-Steagall Act, which provided the 
foundation for separating domestic banking, securities, and insurance 
activities, was enacted into law. Advances in technology, the change in 
our Nation's capital markets, and the very fast-growing globalization 
of financial services have demanded that we as a legislative body 
examine and make some changes to our financial laws to accommodate and 
to take into consideration these dramatic changes that have occurred. 
Making these changes has not been easy. The task of creating a new 
regulatory framework that strengthens consumer protections and, at the 
same time, fosters market efficiencies and industry innovations has 
been extremely difficult. Endless hours, days, weeks, and years of 
negotiations have been spent to craft legislation to allow our Nation's 
financial services industries to remain leaders in the global 
marketplace.
  I have been a member of the Senate Banking Committee since the first 
day I was sworn into the Senate, almost 19 years ago. I think this 
effort dates to about 1967 or 1968, more than 30 years ago. This has 
been an ongoing debate and issue on the part of the Banking Committees 
of the Senate and the House, the Commerce Committee, and numerous 
efforts at the executive branch level. But certainly over the last 20 
years, on numerous occasions, this body has enacted reforms to 
financial services only to watch the legislation die either in 
conference or be unable to reach a final consideration on the floor of 
the Senate.
  So I speak today on behalf of a lot of people who have come before 
us. I think of people such as Senator Don Riegle of Michigan, who 
worked very hard on this; Senator Jake Garn; William Proxmire, the 
first chairman I served under on the Banking Committee. They all 
labored hard to try to come up with a means by which we might modernize 
these services. Certainly, those who predated those Members I mentioned 
worked diligently over the years to try to see if they could modernize 
these financial services to accommodate the efficiencies and demands of 
the end of the 20th century. We begin, in about 60 days, a new 
millennium, where already the ability to transact financial business on 
a global basis can be done in nanoseconds around the globe--a far cry 
from where we were 3 years ago when this effort first began to try to 
address some of the realities that had overtaken the Glass-Steagall 
Act, as sound a piece of legislation as it was, which was adopted so 
many years ago.
  So today I speak not only on behalf of the conference report that I 
think accomplishes the task so many who came before us labored to 
achieve, but this landmark legislation dramatically modernizes our 
financial laws to allow banks, securities firms, and insurance 
companies to affiliate and provide a rational process for these 
affiliations to take place--not one done by court decision or simply by 
regulation, but, as the legislative body in this country, we have now 
authorized regulation through the deliberate process of hearings, 
markup of bills, consideration on the floor of the Senate, and a 
conference report. While it is laborious, rather, to go through that, 
and difficult, it is far better, in my view, to establish these laws on 
that basis than to be relying strictly on the courts and regulators to 
do so.
  I welcome this day as a day of success and triumph for the 
legislative body exercising its responsibilities to put its strong 
imprint on how this process ought to work.
  As we enter the 21st century, S. 900 will help, in my view, to 
continue our Nation's financial services leadership in the global 
marketplace--that is a critical issue--remaining competitive abroad but 
helping to continue to create new jobs and new opportunities for 
literally millions of people here at home.
  This legislation also provides significant benefits and protections 
to investors and financial services consumers who will not only benefit 
from the competition of these diversified firms, but who will also 
benefit from standardized and comprehensive protections for the sale of 
financial products.
  There are a number of aspects of this conference report that I would 
like to touch upon very briefly.
  Critical to my support--and I think many others--of any financial 
services modernization legislation was ensuring that banks continue to 
invest in the communities in which they serve.
  I have often stated that if the price of modernizing our financial 
services industry would be to deny fair access of credit to those who 
need it the most, I was not willing to pay that price, nor do I think 
many others would.
  This legislation before us not only preserves current investment in 
our communities, but it actually strengthens both the intent and the 
practical effect of the Community Reinvestment Act.
  Under this legislation, CRA will continue to apply to all banks 
regardless of size or location, without exception.
  Additionally, this legislation will guarantee that no bank with an 
unsatisfactory CRA rating can engage in any

[[Page 28333]]

new financial activities of insurance or securities.
  This is fundamentally an important change. For the first time, a 
bank's CRA rating will be a consideration if it attempts to engage in 
new financial activities. That is a major triumph.
  Some legitimate concerns have been raised over the potential burden 
on community groups and banks imposed by reporting requirements. I have 
worked hard, as have others, to make sure that no undue burden is 
placed on community groups and that the appropriate Federal banking 
regulations will have adequate discretion to ensure that result.
  We are going to need to watch this and see to it that it doesn't 
occur over the coming weeks and months. But I am confident that with 
the provisions in this bill any efforts to try to become punitive or 
overreaching when it comes to regulations will be met with responsible 
regulatory action. So we will be monitoring that action very carefully.
  S. 900 reaffirms that the State regulation of insurance codified by 
McCarran-Ferguson remains intact, a very important provision. It 
further provides an orderly process for resolving differences between 
States and Federal regulators on bank insurance activities.
  This legislation reinforces further the essential concept that 
investors need protection regardless of whether they purchase 
securities from a broker, bank, or other entity.
  S. 900 ensures that in creating this new financial structure the 
integrity of our markets is maintained and that investor protections 
are enhanced.
  With the rapid change in our financial markets, this legislation 
ensures that investors remain protected, which is fundamentally a 
critical area to all of us.
  Another area that needs improvement is the protection of consumer 
privacy. We did not go far enough, in my view, in this bill in doing 
that. There were some steps made that are certainly an improvement over 
the status quo. But I believe far more action is necessary in this area 
than incorporated in this bill.
  This legislation contains some important privacy protections. For the 
first time, financial institutions must disclose to consumers their 
intent to share or sell personal financial information to anyone. 
Although stronger provisions which I have supported along with many 
others were not approved by the conference, I believe that we have sent 
a strong signal to the industry about the use of sensitive consumer 
information. I happen to believe that consumers not only have the right 
to know, but also have a right to say no to the sharing of their 
personal financial information with anybody. This erosion of the 
privacy of our most personal, sensitive financial information can and 
must be stopped.
  I hope the privacy provisions contained in this bill will be an 
important first step to ensuring and addressing this critically 
important issue.
  I am a coauthor along with the ranking Democrat of this committee, 
Senator Sarbanes, and others of the Financial Information Privacy Act, 
S. 187, that was introduced in this Congress. We welcome further 
cosponsors of this bill. This is a matter that people care about 
regardless of place in the country, ideology, or financial status.
  It is unsettling to people to know that when a merger or acquisition 
occurs, while you shared certain financial information with those with 
whom you initially negotiated, all of a sudden there is a new entity 
involved, and somehow that information you shared with a company is 
going to become the product of another industry that you didn't 
anticipate when you shared the initial information.
  Certainly, people are finding it unsettling. They know it goes on. 
The unsolicited inquiries they receive by telephone and mail certainly 
indicate that financial services information that people thought was 
being held private is becoming far too public.
  This is an issue on which we have to spend more time. It needs to be 
addressed. I am aware of the concern of the industry. But consumer 
demands in this area are not going to go away.
  Further, let me say it isn't just a question of banks. Customers 
would be given, under this proposal, the important opportunity to 
prevent banks and securities firms from disclosing or selling this 
information to affiliates before banks and security firms could 
disclose or sell information to a third party. They would be required 
to give notice to the consumer and obtain the express written 
permission of the consumer before making any such disclosure.
  I will continue to press for even greater privacy protections than 
are presently included in this bill.
  This is a good bill, as I said at the outset. There are a lot of 
people who can rightfully claim credit for having been significant 
players in producing this product. No single individual was responsible 
for this result.
  As I mentioned, there are the people who are no longer in public 
life, some of whom have even passed away, who can literally be called 
inheritors of this product and responsible in some ways for the success 
we are announcing today.
  I mention the previous chairmen of the Banking Committee in the 
Senate, certainly previous banking chairs of the House side, former 
Secretaries of the Treasury, and different administrations must feel 
some sense of accomplishment today as we achieve this result. They were 
a part of that historic journey which began so many years ago.
  There were 66 conferees, an unwieldy number. Twelve percent of the 
U.S. Congress were members of this conference. Certainly, each and 
every one of them were involved to one degree or another. Though the 
number was unwieldy, I think all of the members played an important and 
constructive role from time to time.
  I commend Senator Al D'Amato, our former colleague from New York, who 
is no longer a member of this body but was chairman of this committee 
last year. He crafted a good bill, H.R. 10. It wasn't adopted into law. 
But a lot of what we have in front of us today was part of that bill 
last year. He did a good job. While we are of different parties and 
different political persuasions on many matters, Al D'Amato is a friend 
of mine. I have always thought of him to be such, and he deserves some 
recognition today as we talk about the accomplishments of this bill.
  Senator Phil Gramm of Texas, who I have served with on the Banking 
Committee now for many years--I have worked with him on numerous pieces 
of legislation but nothing quite of the import of this bill--is a tough 
negotiator. He is knowledgeable and he is smart. He worked hard on this 
bill and deserves credit as chairman of the committee for the final 
result and for pulling the pieces together.
  It has been mentioned by my good friend, Senator John Edwards of 
North Carolina. I see my colleague from Rhode Island, Jack Reed, who 
was there that evening. Rod Grams, who is on the floor at this moment, 
was in the room. That was quite an evening.
  I suppose history books will expand the size of the number of people 
who were in that room that night as oftentimes happens. It wasn't that 
big a room. There were not that many people in the room. But I have 
said to the chairman of the committee that I admired his stamina that 
night. He was there pretty much taking arrows and glances from the 
Federal Reserve Board, the Treasury, House Democrats, and Senate 
Democrats. While we fought hard, I admired his stamina, his stick-to-
itiveness, his willingness to stay in the room to get the job done.
  I begin by commending Senator Gramm for his fine work. Obviously, our 
ranking Democrat, Senator Sarbanes, with whom I have sat next to on 
this committee for almost 20 years, without his leadership I don't 
believe we would have achieved the result we have today. I commend him 
for his fine work not only in this bill but over the years for the job 
he has done paying detailed attention to critical pieces of 
legislation, a sense of patience when others wanted to rush to a quick 
result.
  More often than not, when Senator Sarbanes suggests we slow down, it 
is not for idle reasons. He is as knowledgeable as any individual I 
know, and

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he pays attention to the details. Too often we don't pay careful enough 
attention to the details and they can come back to haunt Members of 
Congress. I commend him for his terrific work.
  Also, I commend Congressman Leach, the chairman of the House Banking 
Committee, John LaFalce, Chairman Bliley, and Chairman Dingell, all 
with whom I have served over the years in the House. John LaFalce and I 
were elected to Congress on the same day: 25 years ago Tuesday night we 
were elected to Congress the first time. Today, he is the ranking 
Democrat on that committee. And Jim Leach, Chairman Bliley, and John 
Dingell all did a very fine job in working on this.
  I thank the Banking Committee staff, both the minority and the 
majority, for the work they have done on this legislation. I begin with 
Alex Sternhell, who is my staff person who has worked so hard on this 
legislation. Again, like Alex who has worked hard going back 19 years, 
it began with Ed Silverman of my office, who was on the Banking 
Committee, along with a series of terrific staff members who have 
traveled this road on financial services modernization. Ed Silverman, 
Marti Cochran, Peter Kinzler, Michael Stein, Paul Hannah, Courtney 
Ward, and Andrew Lowenthal should be commended for all of their help. 
Alex did a great job on this. I thank him. Steve Harris, Marty 
Gruenberg and the wonderful job of working so many years, Patience 
Singleton, Dean Shahinian, and others on the minority side have been 
integral to this process, including Wayne Abernathy, Linda Lord, Geoff 
Gray, Dina Ellis, and others have made tremendously valuable 
contributions. I want the record to reflect my appreciation and 
admiration for their work.
  The administration has remained firm in their commitment to passage 
of this legislation. John Podesta, Gene Sperling, and others have 
played critical roles during this process and were very involved on 
Thursday night and Friday morning working out the final version of the 
bill.
  We should not forget that former Treasury Secretary Robert Rubin, who 
pushed very hard for the legislation, did a terrific job on it and 
played a pivotal role in drafting the legislation. Larry Summers, his 
successor, deserves great credit for his contributions as well, and the 
whole team at the Treasury--Alan Greenspan and his capable staff; 
Arthur Levitt, Chairman of the SEC, for his contribution to the 
financial services modernization, particularly the critical pieces that 
affect the securities industry and investor protections. This would not 
have been adopted if not for his fine work.
  Lastly, of course, the members of our committee. Jack Reed was there 
that night and did a terrific job. I want the record to reflect that 
the Boy Scouts of America, particularly, owe Jack Reed a debt of 
gratitude. He discovered what could have been a very significant 
loophole in this bill and used the example that the Boy Scouts of 
America could be adversely affected. While it is not so named in the 
bill, that provision will be known by those in the room that night as 
the Jack Reed Boy Scout amendment. They got a good deal of support on 
behalf of the Senator from Rhode Island.
  John Edwards and Chuck Schumer, new members of the committee, were 
there, along with Jack Reed, and did a terrific job as new members of 
the committee, wading right in and making a significant contribution; 
also, John Kerry and Dick Bryan, who cared so much about privacy issues 
and fought hard. We did not get all we needed, but we had a tremendous 
voice in those efforts. Evan Bayh and Tim Johnson played critical 
roles, as well.
  I have often said over the years of trying to achieve financial 
modernization I am reminded of the mythical figure Sisyphus who rolled 
the rock up the hill only to have it roll back down the hill when he 
got near the top. I have a painting of Sisyphus that I cherish. Today, 
I can report that the rock is at the top of the hill and I think it 
will stay there.
  To all who have been involved in this, my sincere thanks for their 
tremendous efforts. The industry people and outside groups who make 
valuable contributions deserve recognition.
  I yield the floor.
  Mr. SARBANES. Mr. President, I thank the able Senator from 
Connecticut for his very fine remarks and also acknowledge the very 
positive and constructive role he played throughout this process that 
helped the Senate get a product that we can bring back and recommend to 
our colleagues in the Senate, after having it initially in the Senate 
on a very divided vote. There were a number of very difficult issues to 
work out and the Senator from Connecticut was intimately involved with 
all or most of those issues. We are very appreciative of him for the 
instructive contribution that was made.
  I yield 10 minutes to the Senator from Rhode Island.
  The PRESIDING OFFICER. The senior Senator from Rhode Island.
  Mr. REED. Mr. President, I thank Senator Dodd for his kind words and 
his great leadership, along with Senator Sarbanes.
  I rise to support the conference report on S. 900, the Financial 
Services Modernization Act of 1999. We are on the verge of a historic 
transformation of the financial services industry that will take it 
from the Depression-era laws of Glass-Steagall and position it to meet 
the challenges of the next century.
  Some may argue this legislation is a ratification of what the market 
has already done, but it is an important ratification because it will 
allow our financial institutions to be more efficient and more 
effective. I think it will accomplish two fundamental and very 
important goals. First, it will provide more efficient access to 
financial services which will directly benefit consumers in terms of 
better service and lower cost. Second, it will make our financial 
institutions much more competitive in a world of globalized financial 
transactions. These two goals have been achieved in this legislation. I 
am proud to support the legislation.
  It is also incumbent upon us to understand and underscore some of the 
concerns that still remain after this legislation is passed. Again, let 
me emphasize this legislation will increase the efficiency and 
effectiveness of our financial services industry and will benefit the 
American consumer. As we tear down the walls between banks and 
insurance companies and securities firms and open up many 
possibilities, we also open many potential pitfalls. I think we should 
be concerned about those, also.
  As we celebrate passage today, we should also underscore and point 
out areas that bear close watching. Fundamental changes as we are 
proposing today include consequences which may have adverse effects if 
they are not anticipated and watched carefully. Among those is the 
issue of the consolidation of our financial services industry. We are 
witnessing the megamergers that are transforming our financial services 
industry from small multiple providers to large providers that are very 
few in number. We run the risk of the doctrine ``too big to fail;'' 
that the financial institutions will become so large we will have to 
save them even if they are unwise and foolish in their policies. We 
have seen this before. We have to be very careful about this.
  The legislation does not require any market policing requirements 
with regard to this issue. It does mandate the Federal Reserve, within 
18 months of passage of this bill, will review the impact of potential 
mergers and consolidations in the financial services industry. I think 
that is appropriate, and I look forward to the report of the Federal 
Reserve. Again, this is another issue of which we have to be terribly 
conscious because with this legislation we are allowing a huge 
concentration across different functional areas of financial activities 
in the United States. Again, I believe it is justified and warranted by 
the changing conditions of our economy, but we should be careful as we 
go forward.
  Another issue that has been mentioned several times before is the 
issue of privacy. The legislation before us is taking a first step in 
protecting the financial information of the consumers of America, but 
it is just a first step.

[[Page 28335]]

There are many more steps we must and should take. They will be 
demanded of us by our constituents, the consumers of financial services 
throughout the United States. With the growth of computer technology 
and the ability to store and disseminate large volumes of information 
instantaneously, we will continue to wrestle with these issues of 
privacy, not just in financial services but in every area of endeavor 
throughout our economy.
  We took a first step. We have instructed companies, if they wish to 
share a customer's private information, they must give that customer 
the option to say no to that activity. We have also tried to curtail 
some of the more egregious predatory activities we have witnessed in 
the last few years with respect to the abuse of consumer information by 
financial institutions. As I said before, we are moving ahead with this 
first step. We must not only contemplate but also be prepared to take 
other steps in the future to protect the privacy of the American 
people. This legislation has laid a foundation, but that foundation 
alone will not protect the privacy of the American people.
  There is another issue I would like to comment upon, which has been 
commented upon by my colleagues also, and that is the issue of the 
Community Reinvestment Act. The Community Reinvestment Act is not just 
a device to allocate resources in poor neighborhoods; it is a 
commitment by this Government, through the banking industry, to ensure 
that all Americans have a fair opportunity to participate in the 
economy and do so in a way that they can benefit themselves and their 
families.
  Community Reinvestment has been a powerful success over the decade 
since its passage because it has, for the first time, given many 
communities which before were ignored, which before were denied access 
to credit and financial services, those very financial services and 
credit. As a result, not only did they get the money but they got 
something else: They got a feeling of participation and connection to 
this economy and to this country. That perception, that feeling, is 
just as important as any of the specific programs funded by CRA.
  What we have done in this legislation is protect the fundamental 
essence of what I think CRA should be about. We have said that if any 
financial institution wants to partake of these new, enhanced, expanded 
powers, they must by law have a satisfactory CRA rating. If they do not 
have a satisfactory CRA rating, they will not be able to take advantage 
of this legislation.
  I believe the dynamics of the financial industry are such that the 
opportunity to participate in these new powers will be a positive 
force, ensuring through competition in the marketplace that CRA is not 
neglected, that CRA is still a strong, vital part of any financial 
institution. If that is not the case, then we have to be prepared to 
act once again because we cannot abandon the Community Reinvestment 
Act. To do so would be to abandon scores and scores of our fellow 
citizens. We cannot do that. We should not do that.
  This legislation with respect to CRA has been improved immensely from 
the Senate version. As you recall, the original provisions sent forward 
by Chairman Gramm had potentially severe effects on CRA. There was a 
total exemption of small banks from any CRA requirements. That would 
represent 38 percent of the banks in this country. They would be exempt 
totally from any recognition of CRA responsibility. That has been 
eliminated from this conference report.
  What we have done is allowed small banks that have satisfactory or 
better CRA records to have a longer interval between their inspections. 
But we have also required and provided that the regulators at any time 
can conduct a CRA inspection if they have reasonable cause to believe 
the CRA program is not being followed by that financial institution. 
These are steps which have strengthened CRA, particularly in contrast 
to the legislation we considered on this floor several months ago.
  There is another aspect I believe deserves comment, and that is the 
issue of functional regulation. I am very pleased that functional 
regulation has become the order of the day, that the Securities and 
Exchange Commission will look at securities activities, banking 
regulators look at banking activities, and the Federal Reserve will 
have enhanced powers to look at financial holding companies and other 
major financial institutions. But I believe we have to recognize we are 
giving these regulatory authorities new powers, some of which are 
somewhat novel. They have to have the capacity, both institutionally 
and financially, with resources, to be much more perceptive and much 
more thorough in their regulatory process-- again hearkening back to 
the point of the huge potential concentration in these financial 
institutions.
  We also understand with respect to this legislation that, in this 
arena of functional regulation, there might be some potential 
stalemates.
  Mr. President, one of the potential roadblocks or stalemates is that 
State insurance commissioners still play an extremely important role. 
In some respects, unless they are fully integrated through this Federal 
financial regulatory structure, we might in fact have problems. That is 
another issue that bears close watching.
  There is, I believe, something else we should comment upon, and that 
is the success we have had in allowing the financial services industry 
to choose the mode of operation which best suits their unique situation 
for an individual company. What I am specifically referring to is the 
language with respect to operating subsidiaries. I know my colleague, 
Senator Shelby of Alabama, has worked long and hard on this. I, too, 
have worked long and hard on it. We now have a situation where national 
banks can choose to operate a certain limited spectrum of activities in 
a subsidiary or in the holding company. I believe this is sensible. It 
also gives the Treasury Department a significant role in the regulatory 
process since they, too, will be able to regulate some of these new 
activities. That is important also.
  One last point I believe bears repeating. We are entering in some 
respects, a brave new world. The old walls have come down. We have new 
opportunities; new financial vistas have to be explored. It behooves us 
to be very watchful, very careful, and to insist on and ensure that the 
regulators are careful and also that they have the resources to do this 
job. We will all rue the day, this day, if years from now or months 
from now we discover that, because of this new flexibility, there are 
more complicated problems facing us. I think we should go forward but 
go forward with the notion that we, in fact, are going to regulate well 
and wisely these new powers we are giving financial institutions.
  Let me conclude by saying this has been the work of many hands. I 
thank Chairman Gramm for his persistent efforts. Our ranking member, 
Senator Sarbanes, has done a remarkable job leading us carefully, 
thoroughly, and thoughtfully. Senator Dodd has been especially 
important in this process, bringing us together in moments when we did 
not think we could come together for final resolution. Senator Schumer, 
my colleague from New York, was very active throughout this process; 
Senator Edwards, and many others--all of the conferees played critical 
roles. In the other body, Chairman Leach and ranking member LaFalce, 
Chairman Dingell and Chairman Bliley, all were very effective.
  I reserve special words for two members of the administration with 
whom I have worked over the last several years: Bob Rubin, the former 
Secretary, and John Hawke, the former Comptroller of the Currency.
  Finally, on my staff, I thank Jonathan Berger and Kevin Davis for 
their great work.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Virginia.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. SARBANES. Will the Senator yield to me for a second?
  Mr. GRAMS. I yield.
  Mr. SARBANES. Mr. President, before the Senator leaves the floor, I

[[Page 28336]]

thank the Senator from Rhode Island for his extraordinary contributions 
throughout the process of developing this conference report. He has 
made an extremely valuable contribution to a successful result. I am 
deeply appreciative.
  Mr. GRAMS. Mr. President, I rise this afternoon in strong support of 
this very important legislation that balances the interests of 
individual consumers with the needs of America's financial services 
industries.
  I know names have been mentioned and accolades have gone out, and 
very well-deserved, to those who need to be thanked for their hard 
work. I start the list with Senator Phil Gramm who worked very hard 
over this last year. By the way, it was a year ago today following the 
elections that we began consideration of getting this bill back on the 
floor again. Also, of course, I thank the ranking member, Senator 
Sarbanes, who worked very hard as well over these years, and especially 
over the last 12 months, in crafting this bill and making sure of its 
success.
  I also thank former Treasury Secretary Rubin and the latter 
contributions by Treasury Secretary Larry Summers. Chairman Greenspan 
of the Federal Reserve and SEC Chairman Arthur Levitt, of course, were 
very instrumental in this. I thank our colleagues on the House side, 
Chairman Leach and Congressman Bliley, for their work and efforts.
  I could go on. When one does this, they always run the risk of not 
mentioning somebody. There were so many hands in this.
  Alan Brubaker appears on the list to be commended. Alan is on my 
staff, and I have to compliment him as well on all the hours he has put 
in on this bill, working very hard staff to staff. Alan has done a 
tremendous job, and I compliment him on his efforts.
  In testimony before the House Banking Committee, then-Secretary of 
the Treasury, Robert Rubin, testified that the administration estimated 
enactment of financial modernization legislation will result in annual 
savings of $15 billion. The important part of this is those savings 
will end up in the pockets of consumers because in a competitive world, 
people are going to find the cheapest way in an expanded array of 
financial services. The consumers, under this bill, are going to be the 
biggest benefactors--$15 billion in annual savings in financial 
modernization.
  This package of reforms has been under consideration, as we heard, in 
one form or another for over two decades. I am proud to be a member of 
the committee and the Senate that has taken the handoff from those who 
came before us and carried the ball across the goal line. As Senator 
Dodd mentioned, former Senator Alfonse D'Amato should also be 
recognized for the contributions he made over the years.
  This has been a top priority for myself. I served on the Banking 
Committee in the House for the one term I was there, and the No. 1 
priority when I reached the Senate was to be on the Banking Committee. 
I was never a banker, but I have sat across the table from many 
bankers. I thought it was very important to add the voice of a small 
businessman and an individual in banking legislation.
  This legislation provides the appropriate regulatory framework for an 
event already occurring throughout the regulatory fiat, and that is the 
affiliation between commercial banks, securities firms, and insurance 
companies.
  We protect consumers by establishing a system of functional 
regulation whereby institutions will be overseen by experts in their 
areas. In other words, the securities operations will continue to be 
supervised by security experts, banks by banking experts and, of 
course, insurance by State insurance commissioners.
  In addition to ensuring a level playing field for business through 
consistent regulation, again, consumers also benefit because the 
institutions with which they are dealing will be regulated by the 
experts in those products. Thus, by authorizing properly regulated 
affiliations between financial companies, we ensure that our financial 
services companies will be able to compete worldwide and with 
appropriate regulation at home, they will not be forced to move 
offshore to remain competitive.
  Although the estimated $15 billion in cost savings will certainly 
benefit our consumers, the provision which most immediately impacts the 
consumer, of course, is the establishment of a national floor of 
privacy protections.
  A lot of people do not realize that without this bill, we would go 
back to almost zero, except for the fair credit reporting bills. This 
brings a tremendous number of new protections in privacy to our 
consumers. It is a major step forward in that area.
  The consensus contained in this bill will now provide consumers with 
major areas of protection beyond current law. Specifically, the 
conference agreement, one, ensures consumers will have greater clarity 
of their financial institution's privacy policies by requiring the 
institution to disclose those policies on information sharing--to the 
affiliates and third parties of both current and former customers--at 
the time the institution establishes a relationship with that customer, 
as well as reviewing those regulations or those policies each and every 
year. The consumer will have major privacy protections.
  Two, it provides consumers with the ability to take their names off 
the list, in other words, to opt out if they do not want their personal 
information shared with a nonaffiliated third party.
  Three, it criminalizes the actions of bad actors who use false 
pretense or, in other words, lie to obtain a consumer's personal 
financial information.
  Four, it preserves all existing and all future State privacy 
protections above and beyond the national floor established in this 
bill. It allows the States to set their levels as well.
  Five, it authorizes a study to review whether further privacy 
measures are needed. That is very important because as we complete this 
bill--nobody has ever written a perfect bill, I do not think, out of 
Washington, and it is very important to review what we have done and 
look at what else needs to be done. But this review is going to be very 
important as well in the area of privacy.
  Although the central purpose of the bill is to remove decades-old 
barriers to the integration of the financial services industry, by 
recognizing that privacy is both a very important issue to the consumer 
and a responsibility of the financial institution, the bill puts in 
place the framework to ensure the consumer is protected and allows the 
financial industry to expand services and products.
  I recognize the debate over privacy has not been concluded with these 
changes. The enthusiasm these provisions have garnered, as well as the 
expressions of support Congress has received for recent actions to 
prevent implementation of the FDIC's ``Know Your Customer'' rule and to 
restrict the ability of States to sell driver's license information, 
demonstrates the public's concern over these privacy issues.
  I look forward to further debate on these issues following the 
comprehensive hearings Chairman Gramm has pledged to hold after we have 
received the findings of the report called for in this bill. After 
further study, we will all be better equipped to consider the issue of 
privacy. In the meantime, I firmly believe we have provided stronger 
protections for the consumer.
  Mr. President, I thank all my colleagues for all their hard work. I 
strongly urge them to support this conference report.
  I thank the Chair and yield the floor.
  Mr. BRYAN addressed the Chair.
  The PRESIDING OFFICER (Mr. Bunning). The Senator from Nevada.
  Mr. BRYAN. Mr. President, I believe the record will reflect that the 
Senator from Nevada, pursuant to a unanimous consent agreement, has 30 
minutes to speak. If I am so informed, I would like to yield myself a 
part of the time at this point.
  The PRESIDING OFFICER. That is correct.
  Mr. BRYAN. I thank the Presiding Officer.

[[Page 28337]]

  Mr. President, and my colleagues, when we are talking about the 
financial institutions and affiliates and nonaffiliates, and 
international banking transactions, those are concepts which most of my 
constituents, and I daresay most of the constituents of all of my 
colleagues, see as having very little relevance to their lives. There 
are not too many people in the country whose lives are intimately 
involved, on a day-to-day basis, with affiliate sharing of information 
or involved in major financial transactions.
  Most of us have an insurance policy or two, and increasingly--about 
50 percent--American families now have stock ownership in some form or 
another. Most of us have bank accounts, and that is probably the extent 
of the average American family in terms of financial information. So I 
think it may be instructive if I put some context into this debate we 
are having.
  We have experienced, in the decade of the 1990s, an extraordinary 
rapidity of change, if you will, in the way in which financial 
services--banking, insurance, and stock securities--are handled in this 
country.
  We have also seen an enormous number of mergers across the board in 
American business. To some extent, it is almost a sense of deja vu 
because at the end of the last century, in the 1890s, we saw a 
tremendous consolidation of industry in the country. Many will recall 
that was a period of time in which we had vast industrial cartels and 
trusts. So there was an enormous concentration of wealth and power in 
some of these large industrial concerns that were just taking shape in 
the latter part of the 19th century.
  In a sense, as the 20th century is coming to a close, that pace has 
quickened. The critics would say we are experiencing a sense of merger 
mania or merger frenzy. So many of the major financial institutions in 
the country are participating in that.
  Just a couple of examples: Citibank and Travelers have come together; 
NationsBank and Bank of America--and I could point out countless 
hundreds.
  What impact does that have on the average citizen in this country? I 
think it is fair to say, none of us really know.
  The advocates for these mergers and consolidations are saying: Look. 
We will provide new convenience to the American public, we will have 
one-stop shopping for insurance and banking and securities; that it 
will be less expensive; that more options will be provided. That may, 
in fact, be the case. I think none of us know for sure.
  The critics raise the specter that this concentration of power, this 
enormous business combine that is taking place across the whole range 
of financial services, may not be good for the country; that that kind 
of concentration of wealth, as we learned a century ago, may be bad for 
the public. I have not reached a judgment on that.
  I was fully prepared to support this legislation because I recognize 
another reality. Historically, from the 1930s, banking, insurance, and 
securities were separated in three discrete and separate categories: If 
you wanted to have a banking transaction, you went to the bank; if you 
wanted to get insurance coverage, you went to an insurance company; if 
you wanted to dabble in the stock market or wanted to buy stocks or 
bonds, you went to a stockbroker.
  That is the way most Americans have historically dealt with the 
financial services industry. That was as a result of legislation 
enacted after the great financial collapse of the Great Depression to 
protect against this consolidation of power that many thought was a 
contributing factor to the collapse of the financial industry in 
America in 1929. It is called Glass-Steagall. So if that name comes up, 
that is what that means.
  I think that reality and fairness would dictate that the model which 
regulates those industries as three separate and discrete industries 
has no longer relevance in America today. Whether it should, whether we 
wish that was still the case, in point of fact several things have 
occurred.
  Court decisions, decisions by administrative agencies, have, in 
effect, torn down those walls of separation. Increasingly, we are 
having a lot of those services, the banking and the insurance and the 
securities functions, kind of merged together. As a result of that, I 
think it is fair to say--and the advocates have made this point--the 
financial regulatory structure that emerged as a consequence of the 
Great Depression, the Glass-Steagall Act, no longer comports with the 
reality of the marketplace. That is fair and that is true.
  So we need a new regulatory model, a new framework. This legislation 
has much to commend it. And it provides that regulatory framework. 
Essentially, we are saying in this legislation: Look, if you are 
providing an insurance service, you ought to be regulated by the same 
regulator, whether you are a small independent insurance office in 
Winnemucca, NV, or whether you are operating in the ionosphere of some 
of the major Wall Street concerns in the financial center of our 
country in New York City. That is called functional regulation.
  So that is the background.
  As I said, I had hoped to be able to support this legislation. I 
recognize it has been worked on for many years. The reality of this 
also has to be tempered by another reality, and that is the right of 
privacy. For more than a century, we have recognized in America the 
right of privacy. That right of privacy, as we know it today, is 
threatened and endangered. It is threatened and endangered by some of 
the marvelous technologies of our time.
  Let's talk about financial services for a moment in terms of that 
technology. It was not too long ago that when you went to a bank, if 
you were going to make a bank deposit, you saw a teller, and he or she, 
by hand, posted, entered--there was kind of a carbon sheet--the deposit 
in the record. If you were applying for insurance, you manually filled 
out papers; your insurance agent compiled all of this, and he kind of 
kept a carbon copy. Twenty years ago, when we got into Xerox 
capability, he had duplication capability. The same thing was 
essentially true for securities.
  What has changed all of that? Some very positive and powerful forces: 
Computerization. As a result of some software programs, it is possible 
to gather data and profile it, whether you are a bank depositor, 
whether you are an individual who is an insurance customer, or whether 
you are a stock and bond owner and you have your account with a 
securities firm. Just a stroke of the key now can bring that data up. 
What does that mean?
  It means that if I am a marketer and I want to get a profile of 
somebody who, say, has an average bank account balance of $50,000, no 
longer would it be necessary for some poor devil in a green eye shade 
laboring in some dimly lit corner of some financial company to go 
through and pull the records manually. Today, a sophisticated software 
program can simply, with a key stroke, bring up that information. That 
information is very valuable. It is very comprehensive. Today, most 
Americans have an enormous amount of their personal financial data, the 
kind of thing that is very personal--their bank account, what checks 
they are writing and to whom, what kind of insurance coverages they 
have, their application indicating any health problems they might 
have--as part of a database. It is on a computer disk drive. What kind 
of stocks and bonds they have, what kind of certificates of deposit 
they may own and when they may come up--that database is there.
  I think most of us have this vague concept that when we are dealing 
with our bank, when we are dealing with our insurance company, when we 
are dealing with our stockbroker, that stuff is confidential. Isn't it? 
Isn't that similar to talking with your lawyer about a legal problem or 
your doctor about a medical problem or even sharing with your local 
pastor, your rabbi, your minister, your religious advisor? Isn't there 
a privilege there? It is kind of confidential. Certainly you, as an 
individual, think it is confidential. You certainly do not have the 
expectation that that information is going to be shared. If that was 
your expectation, I regret to tell you that you are wrong because today 
that information, even

[[Page 28338]]

without this legislation--and I will talk about that--is freely 
exchanged.
  It is big money. It is big money in the sense that individuals who 
share that information--financial companies--share that information 
because they make substantial amounts of money as a result of that.
  Let me give an indication in terms of what the U.S. Comptroller of 
the Currency has said: Most large national banks--this is without this 
legislation--sell customer account information to marketing companies. 
Those are the lovely people who call you at home during the dinner hour 
frequently or who inundate your mailbox with some type of solicitation.
  The U.S. Comptroller of the Currency says: Most large national banks 
sell customer account information to marketing companies, and the banks 
typically get 20 percent to 25 percent of the revenue generated by 
marketers. Some banks have generated millions of dollars in revenue by 
providing third parties with information on millions of customers, 
including name and address, Social Security number, credit card 
numbers--all of this according to a Ms. Julie Williams, chief counsel 
to the U.S. Comptroller of the Currency.
  This enormous amount of financial information that is collected, 
which you give your bank, your insurance company, your security broker, 
is now being freely shared. It is valuable, and it is worth millions of 
dollars. That is the current law.
  What about this piece of legislation makes the privacy concerns even 
more heightened? The advocates of this bill will say there are no 
privacy restrictions now, and that is largely true. Banks, insurance 
companies, security houses are free to share this information. So they 
say: Look, we have some privacy provisions in there. We are taking some 
important protections.
  I will comment on that in a moment. But this bill tears down those 
walls of separation between banking, between insurance, and between 
securities functions, and it kind of merges them altogether.
  The advocates will say that is going to make it convenient for 
everyone. What it means is that a bank will now be able to own an 
affiliate, a sister company, an insurance company, and so that 
information from the bank and its sister affiliate, an insurance 
company or a security company, can now be freely exchanged.
  We are talking about the large brokerage houses in America. We are 
talking about the largest insurance companies in America. We are 
talking about the largest banks in America. In effect, that information 
the banks were selling and making substantial amounts of money on, as 
was pointed out by the Comptroller of the Currency that they were 
selling to marketers, now, as a result of this legislation, which will 
encourage the formation of these affiliate or sister banking, sister 
insurance, sister securities relationships, will expand exponentially. 
No question about that--cross-marketing, that is part of the intent. 
That is what drives this.
  There are some realities of the marketplace we all acknowledge. So 
that information that is in your bank account now can move to an 
insurance company affiliate, can move to a securities affiliate, and 
the converse of that is true; it can move in the other direction. You 
have a stock account; that information can be shared with an affiliate 
that is an insurance company or a bank.
  So this information that you would think--and I thought, until I 
became a member of this committee and became more familiar with the 
laws dealing with financial companies--is confidential is now going to 
be widely shared. And there are big dollars in this. That is why the 
privacy concerns are heightened, that more of this information is going 
to be shared with more people, the most personal and private kind of 
stuff in your financial history, your health record, as reflected by 
any information on your bank account.
  Now, what is happening currently before this new law? Let us talk 
about a couple of examples I think will prove to be particularly 
egregious. This is the kind of abuse that occurs.
  In one case, a 90-year-old woman who had been a customer of a bank 
for more than 50 years--that would be a trusted relationship; I cannot 
imagine this woman would believe this information would be shared with 
others, but it was--was billed by a telemarketer for a computer 
product. She didn't even own a computer. Before she died, it took her 
11 months to get the telemarketer to remove the charges from her credit 
card account. Information which the bank had shared, her bank, a 
relationship of 50 years, one would have to think there was a trust 
relationship that the depositor had with that bank, but this 
information was shared.
  Let me point out, as has occurred during the course of our 
discussion, a situation with respect to the San Fernando Valley Bank. 
They sold a convicted felon 90 percent of the credit card numbers that 
the convicted felon used to run up $45.7 million in bogus charges 
against those customers. The bank sold that information to a 
telemarketer.
  That is what is occurring now, today, without this exponential 
expansion of the sharing of information. Let me talk about U.S. Bank. 
U.S. Bank was involved in sharing some information, as well. That, too, 
posed some major concerns because this information was being sold to a 
telemarketer that offered such things as travel and health care 
products. The bank received nearly $4 million in commissions for 
selling this information to nearly a million customers. These things 
are occurring.
  Here is a typical example of what this reflects. This is a deposit 
record. It appears that the last deposit was $109,451. What we know is 
that the lady who made this deposit, perhaps in an off-guarded moment 
of candor, shares with the teller--she is banking the old-fashioned 
way, sharing with the teller--that she is not really sure what to do 
with this money. One can assume that this money was recently acquired, 
through an inheritance or some change of circumstance in her life, and 
she had a good bit of money that came in, this $109,000. She shares 
this information with the teller. The teller writes on the bottom: 
``She came in today and wasn't sure what she could do with her money.'' 
Look up here. It says ``David.'' He is one of these affiliates who is 
involved with a securities company. It says: ``David, see what you can 
do. Thank you, teller 12''--whoever teller 12 is. That information is 
then being shared with a securities company, and, undoubtedly, this 
lady received a call. She has absolutely no idea that anybody other 
than perhaps the closest members of her family know she has just come 
into some money and deposited $109,000. That is the kind of stuff that 
is occurring now.
  The point I am trying to make is that if those abuses are occurring 
now--and that is only the tip of the iceberg--imagine what is going to 
be happening with all of these fire walls having been taken down and 
the affiliates sharing information.
  There is one thing I did not make clear. I did point out that banks 
will be able to assist their affiliate that is an insurance or 
securities company, but these affiliates also own other companies, 
commercial firms that may sell a whole range of products, such as 
sporting goods, travel packages, vacation homes, you name it. So that 
is part of their business currently. With the affiliation sharing, all 
of that information moves downstream within the sister affiliate, which 
is a major concern in terms of these marketing efforts.
  Now, let's talk about what the bill purports to do. I inquire, how 
much time I have remaining?
  The PRESIDING OFFICER. The Senator has 8 minutes remaining.
  Mr. BRYAN. OK. We will try to do this quickly.
  Let's talk about the expectation of what people think in terms of 
their privacy. I think this is an interesting number. The Wall Street 
Journal did a poll on what our expectations are and what we fear will 
happen most. Which one or two concerns are you most concerned about in 
the next century? Loss of personal privacy, 29 percent. This is not 
done by some do-gooder, ultraliberal social think tank; this is done by 
the Wall Street Journal, which is the voice of American business. And 
29 percent fear loss of personal privacy.
  When you ask people, ``Would you mind if a company you did business

[[Page 28339]]

with sold information about you to another company?'' 92 percent say 
yes. Yes, they mind. The American people care very much about that. 
They may not know the difference between an op-sub and an affiliate, or 
what a unitary thrift is, what a ``whoopie'' is. Those are all terms we 
have debated here. But they sure know what privacy is about.
  ``In the future, insurance companies and investment firms may be able 
to merge into a single company. If they do, would you support or oppose 
these newly merged companies internally sharing information?'' That is 
what this bill permits.
  Eighty-one percent say no.
  Here are some headlines across America: ``Banks Sell Your Secrets,'' 
USA Today. Los Angeles Times: ``Privacy? Don't bank on it.'' Los 
Angeles Times: ``Your Privacy Could Be a Thing of the Past.''
  Let's talk about the bill because the bill provides minimal 
protection. First of all, it tells you the banks are required to post a 
policy of what their privacy policy is. Here is an existing web page 
with an existing bank in the country today:

       Question 4: If I request to be excluded from affiliate 
     sharing of information, what information about me and my 
     products and services with you will and will not be shared 
     within your affiliated family of banks and companies?

  That is the question. Here is the answer:

       Answer 4: 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.

  This web page would be perfectly appropriate and legal under the new 
law. All that is required is a posting of the policy. Now, if anybody 
in America thinks that is an adequate protection for your privacy, I 
would like to talk about a little piece of property I have in New York 
called the Brooklyn Bridge, and we would like to talk about you buying 
it from me. Utterly absurd. That is what is happening.
  Now, there is absolutely no provision--none, zippo, nada, zero, 
nothing--that prevents the sharing of information from affiliate to 
affiliate. No privacy at all. That is freely exchanged; it is freely 
exchanged.
  With respect to the third party, the nonaffiliate, we are told, yes, 
there is an opt-out provision; that is, you can let people know you 
want that not to be done. OK, that sounds fine, except there are two 
major, glaring exceptions. Those are marketing agreements and joint 
marketing in which those provisions simply do not apply. So if the 
third party itself has a company that is involved in telemarketing, 
there is absolutely no prohibition against that information being 
shared. So in point of fact--and the USA Today, I think, has made a 
very telling commentary on that by pointing out that these provisions 
simply provide very little. I quote the October 28 edition:

       A consumer's right to opt out of data-swapping arrangements 
     is severely restricted. Consumers would not, for instance, be 
     able to stop banks from sharing information with third 
     parties that market a bank's own products; nor could we block 
     data-sharing deals that involve products sold under joint 
     agreements.

  Further, it goes on to point out there is no protection against banks 
sharing information with financial or insurance companies they own. In 
fact, since the law would encourage such cross-ownership, a consumer's 
chance of stopping widespread information sharing likely would be 
minimal.
  I simply say for colleagues interested in privacy, receive no 
comfort, my friends--none--that these very transparent and illusory 
privacy provisions really provide much at all. They provide virtually 
nothing, no protection at all with respect to affiliate sharing.
  I think the protection with respect to a transfer to a third party 
with those two gaping loopholes--gaping--any attorney who has taken a 
single course in any kind of securities would easily be able to craft a 
loophole for his client that would make that activity perfectly 
permissible.
  The bottom line of all of this is that those of us on the committee 
who offered an amendment which would have simply said, look, you have 
to provide every customer with the right to opt out; that is, to be 
notified that: Look, you have a right to opt out if you don't want this 
to occur, we are told, no, that would destroy the dynamics, the synergy 
of the marketplace; it could not happen.
  Let me tell you, these very American companies--and they are premier 
companies and wonderful companies and successful, and as Americans we 
are vicariously proud of them--do business in Europe. But in doing 
business in Europe, the European Union requires the opt-out provision. 
And the same companies that say American citizens should not have that 
privacy, that it would destroy their opportunities in the market and 
the synergies of the marketplace to provide those same protections that 
those of us in committee sought to add to the European counterparts--
you will recall the U.S. bank situation. The attorney general of 
Minnesota took them to task. Guess what. As part of a settlement 
agreement that they entered into, they agreed as part of that 
settlement agreement to do what? To inform customers of the bank's 
privacy policy and to provide notice of customers' rights to opt out of 
the sharing of information with bank affiliates.
  Think about that. U.S. banks as part of a settlement said they could 
do it and it would not compromise their ability to take advantage of 
the dynamics and the synergies of the marketplace. The largest and most 
successful financial companies in America that do business daily in 
Europe have agreed to be bound by those provisions, but they will not 
be bound by the provisions in this country.
  So Americans have a very much depreciated right of privacy compared 
to their counterparts in Europe. I would simply say, Why? Why? I don't 
know what the answer is.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. BRYAN. Will the Senator yield to me an additional 5 minutes?
  Mr. SHELBY. Mr. President, I yield to the Senator from Nevada an 
additional 5 minutes.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. BRYAN. Mr. President, I will wind this up because the Senator 
from Alabama has shared this fight with the Senator from Nevada in 
committee and in conference. I thank him for his leadership and his 
support.
  The point I was trying to make is this is not an unreasonable 
request. If one of the largest banks in America, as part of a 
settlement with the attorney general of Minnesota, can agree to the 
opt-out provisions which a number of us on the committee sought to add, 
every bank can live with those provisions.
  If the major banks in America that do business in Europe every day of 
the week can live with those provisions, I think we have to ask 
ourselves why would these companies not be prepared to provide the same 
kinds of privacy protections that either they have agreed to in a 
consent decree when they have been taken to court by the attorney 
general--in this case the attorney general of Minnesota--not be willing 
to provide the same kinds of protections provided to Europeans to 
people in America?
  There was some debate in the committee. ``We don't want to impose 
upon the American economy the European model.'' No; I don't either. 
None of us did. The question is not do we want to impose the European 
model. The question that has to be framed is, why should Americans be 
entitled to less protection as to their right to privacy from the same 
company that is doing business in Europe and providing those 
protections to their European customers?
  I must say that it was because of these overarching concerns--we have 
seen the examples; I believe they are simply the iceberg of examples 
today--the potential for abuse in terms of violating your fundamental 
right of privacy and the most sensitive information about your personal 
life will be widely shared and disseminated. I think if you look at it 
very carefully, there is no protection at all in the affiliate area--
none. A sister company

[[Page 28340]]

can freely exchange that information with banks, insurance, stock 
brokerages, and the companies which those affiliates own.
  With respect to third parties, the so-called nonaffiliate, if you 
look at those marketing and joint agreement exceptions, I have to tell 
you there is not much there. What you get, in fact, is the whole of the 
doughnut. That is not much protection.
  My able colleague from Alabama and I and others, the distinguished 
ranking member of the committee, fought the good fight for this in the 
committee. We just believe those protections are inadequate.
  I thank my colleague for yielding me the time.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SHELBY. Mr. President, how much time do I have?
  The PRESIDING OFFICER. Fifty-five minutes.
  Mr. SHELBY. I yield as much time as I shall consume.
  Mr. President, I rise to voice my stringent objection to the 
conference report of the financial services modernization bill. While I 
believe we need to modernize the laws that govern this country's 
financial system, I do not believe we should do so at any price.
  My colleagues in the Senate should know this legislation comes with a 
very high price to the American people. In my judgment, the price is 
simply too high. Let me explain.
  First of all, I want to say that there are some very good things in 
this bill, not the least of which is the repeal of two sections of the 
Depression-era Glass-Steagall Act which allow banks, securities firms, 
and insurance companies to affiliate. Congress has worked on this for 
many years.
  Under Senator Gramm's leadership as chairman of our Committee on 
Banking, this much-needed change will soon become reality. I think that 
is very positive in this bill.
  That being said, I think it should be perfectly clear that there 
remains Depression-era laws on the books, and I hope Chairman Gramm 
would be interested in working with others on the Banking Committee to 
repeal those laws as well.
  In particular, I am referring to the 1930s price control on business 
checking accounts. To the extent that we are modernizing this country's 
financial laws, one would think we would eliminate this price control 
and allow small businesses across this country to receive interest on 
their checking accounts and enjoy the full benefits of financial 
modernization.
  Let me talk just a few minutes on CRA expansion.
  I also feel compelled to set the record straight on the floor this 
afternoon on the Community Reinvestment Act provisions in this bill. 
Make no mistake about it. This bill expands--yes, Mr. President, 
expands--the Community Reinvestment Act. I know a great deal about this 
because I, along with Senator Gramm, killed this very bill last year 
because we were both opposed to the dramatic expansion of CRA in the 
bill at that time.
  I don't understand what is different this year. I don't understand 
why no one is willing to stand up and oppose the expansion of CRA when 
it is very clear that this bill does, indeed, expand CRA. Why else 
would the administration support the bill? Why else would Rev. Jesse 
Jackson support the bill? We all know why. The bill expands CRA.
  On page 15 of the bill, my colleagues will see a provision entitled 
``CRA Requirement.'' This provision says that ``the appropriate Federal 
banking agency shall prohibit a financial holding company, or any 
insured depository institution from'' commencing any new activity or 
directly or indirectly acquiring control of a company engaged in any 
new activity, if the institution has a less than satisfactory CRA 
record on its most recent exam.
  That is a very crucial ``maintenance'' requirement, as we call it in 
this bill.
  Last year, the legislation gave the regulators the discretion to 
impose restrictions for falling out of compliance with CRA. This year, 
we have inserted a statutory prohibition of conducting new activities.
  If the institution that was CRA-compliant when elected to become a 
financial holding company then chooses to engage in a new activity, the 
regulator could then use the enforcement authority in section 8 of the 
Federal Deposit Insurance Act to impose civil money penalties on bank 
directors and officers. I am opposed to the maintenance requirement 
today just as much as I was opposed to the maintenance requirement last 
year. My position has not changed.
  This expansion does not exist in current law today. If you have a 
certain bank charter, you can conduct all activities permissible to 
that charter whether you have a CRA-satisfactory record or not.
  I believe we are making a grave mistake by expanding CRA. I am 
extremely disappointed because I know we have reached the point of no 
return. As conservatives, we will have no legs to stand on if and when 
we try to revisit this issue. My friends, we are, indeed, paying a very 
high price for this legislation.
  Privacy is very important to all Americans. I pose a question to my 
colleagues: Does anyone know what issue brings together the American 
Civil Liberties Union, Consumers Union, and Ralph Nader of Public 
Citizen to Phyllis Schlafly of Eagle Forum and the Free Congress 
Foundation? It is the bill before the Senate, the financial privacy 
provisions. All of these groups have formed an unprecedented coalition 
to oppose this bill simply based on the lack of privacy protections. 
That is the price the American people are going to pay--their privacy--
if we pass this bill for only a few large financial conglomerates.
  In an article entitled ``Banks Sell Your Secrets,'' USA Today 
reported:

       Consumers across the USA have been shocked and upset to 
     learn banks have been selling their private financial data, 
     from account balances to Social Security numbers.

  Phyllis Schlafly of the Eagle Forum is quoted:

       The checks you write and receive, the invoices you pay and 
     the investments you make reveal as much about you as a 
     personal diary, but instead of banks keeping your information 
     under lock and key, it is being collected, repackaged and 
     sold.

  In September of this year, the Los Angeles Times reported that 
Charter Pacific Bank of San Fernando Valley, CA, sold 3.7 million 
credit card numbers to a felon who then allegedly ran up over $45 
million worth of charges to the cardholders. It appears the felon also 
billed customers for access to X-rated web sites the customers never 
knew about. How do these people explain that to their families, their 
neighbors, or their church members?
  The USA Today also ran an article on October 28, 1999, entitled 
``Congress Passes Up Chance to Protect Your Financial Privacy.'' 
Reporting on this specific bill before the Senate today, the article 
read:

       Technology already has made it far easier for disparate 
     firms to collect, share and sell warehouses of sensitive data 
     on individuals. And the banking bill would encourage banks, 
     insurance companies, and investment firms to link arms, 
     making data swapping from a wide range of sources much 
     easier.

  That, my friends, is the point. We are about to pass this afternoon a 
financial modernization bill that represents industry interests in a 
big way. However, we have forgotten the interests of the most crucial 
market participant of all in America--the consumer, the American 
citizen. Under this bill, the consumer has little, if any, ability to 
protect the transfer of his or her personal nonpublic financial 
information. Indeed, the so-called privacy protections in this bill are 
a far cry from the protection we give taxpayers on their tax returns. 
It is against the law for an unauthorized inspection or disclosure of 
an individual's tax return. Violation of this law is punishable by 
fines, imprisonment, or both. The Internal Revenue Code even prescribes 
civil damages for the unauthorized inspection or disclosure and the 
notification to the taxpayer if an unauthorized inspection or 
disclosure has occurred.
  I can assure Members these large financial conglomerates will have 
more information on citizens than the IRS, but we have done virtually 
nothing to

[[Page 28341]]

protect the sharing of such nonpublic personal financial information 
for the American people.
  Proponents of financial modernization will say the bill includes the 
strongest privacy provisions ever enacted by Congress. While that 
sounds great, the reality is the provisions are porous and do not 
provide the consumer with sufficient information to make an informed 
decision or the true ability to opt out of information sharing.
  First, the opt-out requirement does not apply to affiliate sharing. 
This is significant because the bill allows financial holding companies 
to affiliate with entities engaged in activities that are 
``complementary,'' to financial activities, as well as grandfather 
commercial companies and those acquired from merchant banking.
  As a result, the holding company can share a wealth of nonpublic 
personal financial information with affiliated telemarketers selling 
nonfinancial products such as travel services, dental plans, and so 
forth. Should an insurance company be allowed to affiliate with a 
grocery store chain in order to track an individual's diet? Nothing in 
this bill prohibits this relationship or sharing of that information.
  Second, the bill includes an exception to the porous opt-out 
provision that allows two or more financial institutions to share their 
customers' nonpublic personal information with telemarketers to market 
financial products or services offered under a so-called joint 
agreement.
  While the financial institution must notify its customers about the 
sharing of that information, it does not have to provide customers with 
the ability to opt out of such information sharing. Furthermore, under 
the joint agreement provision, the nonaffiliated third party could then 
share the nonpublic personal information with its own affiliate. As a 
result, the opt-out provision provides no privacy protection at all.
  For example, a financial institution could endorse a for-profit 
investment tip sheet service or stock day trading service targeting 
senior citizens. The financial institution could share confidential 
information with that tip sheet service or day trading service without 
affording the customer the right to opt out of it. To be more specific, 
the institution can give the tip sheet or day trading service a list of 
wealthy senior citizens or, in the case of an insurance company, a list 
of recent widows or widowers who recently received a large insurance 
payment. Is this really what the Senate wants to encourage and endorse? 
I hope not.
  The bill also allegedly includes an all-out prohibition against the 
sharing of customer account number information for marketing purposes. 
What about sharing account numbers for the purposes of verifying 
customers' credit card accounts? The bill allows that. It is a way to 
get around it. Charter Pacific Bank in California claims they sell 
customer data files to merchants for data verification purposes, not 
marketing purposes. Therefore, the privacy provisions in the bill allow 
Charter Pacific to sell the customer account information to anyone, 
much less a felon, all over again.
  As if that were not enough, all of a sudden new language has appeared 
in the conference report telling the regulators to allow for the 
transfer of personal account numbers to nonaffiliated third party 
telemarketers if the information is encrypted. Nothing in this bill 
says financial institutions are prohibited from giving the third party 
the key to unlock the encrypted information. In fact, that is common 
practice. This exception completely eviscerates the prohibition of 
third party telemarketers in the bill. This means U.S. Bancorp in 
Minnesota could sell the account numbers to MemberWorks all over again. 
This bill would not prevent it.
  I believe these privacy provisions are a sham. I have said it before. 
They are a joke on the American people, and I will not sit by and be a 
party to this. When the American people, and they will, become aware of 
what Congress has done, it will be too late. This bill lets the genie 
out of the bottle. I am sure, as soon as this bill passes, if not 
before, a lot of people will be running for cover and introducing 
privacy bills. I bet President Clinton will set up a Presidential 
commission or something such as that, or a study group, to study the 
issue. That sounds nice. Too bad the President is not willing to make 
financial privacy a priority when it really matters, right here and 
right now, when we are giving financial institutions the unprecedented 
ability to collect, profile, share, and sell personal nonpublic 
financial information.
  Critics claim that requiring a consumer to provide his affirmative 
consent before sharing information would be a hindrance to the free 
flow of information and basically unworkable. If this is the case, why 
did Citibank agree to an opt-in requirement for nonaffiliated third 
parties to do business in Germany? You heard me right. The biggest and 
most vocal proponent of this bill signed an agreement with its German 
affiliates in 1995 that basically required Citibank to obtain consent 
on the application form before they could share personal data to third 
parties. Citibank agreed to give Germans more privacy protections than 
we are giving our own citizens in the United States today.
  Does that bother anybody else in this Chamber besides me? It should. 
I think this is a tragedy. I think it is absurd. The banking industry 
has told us they would oppose this bill if we simply give the consumer 
the ability to object to the sharing of nonpublic personal information. 
First of all, I think it is hypocritical of them to threaten us with 
that position, seeing as how Citigroup voluntarily agreed to provide 
consumers the ability to opt out in Germany.
  Second, I believe Congress should not be dictated to by the financial 
industry or any other industry as to what provisions we put in on 
behalf of the American consumer. They should not write laws, ever. But 
Congress should.
  I have heard many Members talk about empowerment and how we must 
empower the individual. We spend a lot of time discussing empowerment 
zones. Why are we ignoring the empowerment principle on this piece of 
legislation? Why is Congress going to take a walk on this issue? Why is 
Congress not going to stand up for the American people and assure them 
the ability to stop a financial institution from profiling individuals 
based on their most personal behavioral patterns and then selling that 
information at will? The American people clearly believe this is too 
high a price to pay for this bill. If we are going to allow the huge 
financial conglomerates to affiliate to provide services--and we are--
why must we also give them the ability to sell, profit, and exploit an 
individual's personal nonpublic profile?
  This is not a partisan issue. It does not matter if you are a 
Democrat or Republican, conservative, liberal, rich or poor. An 
individual's financial matters are very private to that individual. 
Families will not discuss how much money other family members make at 
the dinner table. It is too private. It is too sensitive. They do not 
talk about it because they do not want to talk about it and they are in 
control of what information they share, even with their loved ones.
  The bitter irony is that while the individual is practicing 
discretion in America, Congress is belligerently aiding and abetting 
complete strangers in accessing an individual's most private financial 
matters, including account balances, where they shop, and what they 
buy. We are aiding and abetting the felon in California who bought a 
list of account numbers and charged up to $45 million. We are aiding 
and abetting third party marketers such as MemberWorks, who bought a 
list from a bank and then automatically billed individuals' accounts.
  I have said it before and I will say it again here, we are paying a 
very high price, a very dear price for this bill. The American people 
are paying a very dear price for this bill, and they will continue to 
pay it. It is very difficult for me this afternoon to celebrate this 
landmark achievement of financial modernization when I know we did so 
at the expense of every American.
  I know this bill will pass with a lot of votes, but I urge my 
colleagues to vote

[[Page 28342]]

against this bill mainly because of the lack of privacy provisions. Ask 
your mother, your father, your husband, or your wife about this. They 
will all tell you that one-stop shopping is not worth giving up their 
financial privacy. The price is too high--too high.
  I yield the floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEAHY. Mr. President, what is the parliamentary situation?
  The PRESIDING OFFICER. The Senate is considering S. 900 under 
controlled time.
  Mr. LEAHY. How much time is remaining for the proponents of the 
conference report?
  The PRESIDING OFFICER. Senator Gramm has 28 minutes; Senator 
Sarbanes, 23 minutes; Senator Shelby, 44 minutes; and Senator Dorgan, 
19 minutes.
  Mr. SARBANES. Mr. President, I yield the Senator 5 minutes off the 
time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEAHY. Mr. President, I rise today to speak in support of the 
Conference Report on S. 900, the Financial Modernization Act of 1999. 
As we prepare to enter the 21st century, it is critical that our laws 
governing financial services reflect the reality of the current 
marketplace and establish a sound legal framework that will carry us 
well into the new millennium.
  This legislation will repeal the Glass-Steagall Act, a Depression-era 
law that separates the banking, securities, and insurance industries. 
The Glass-Steagall Act was originally adopted in 1933 to stave off 
another Great Depression.
  While it clearly served its purpose back then, the law regulating our 
financial service industries is now sorely out of date.
  The face of financial services has changed dramatically in recent 
years. We are already witnessing a marketplace at work that is 
producing new services offered by financial institutions of all shapes 
and sizes. But under current law, the financial firms are often forced 
to work around existing prohibitions on the coupling of different 
services, often incurring unnecessary costs to the ultimate detriment 
of the consumer.
  Modernizing current law will make the financial services industry 
more competitive, both at home and abroad. This legislation will make 
it easier for banking, securities, and insurance firms to consolidate 
their services, allowing them to cut expenses and offer more products 
at a lower cost to businesses and consumers.
  The Treasury Department has estimated that increased competition in 
the securities, banking, and insurance industry could save consumers as 
much as $15 billion annually.
  I want to praise the Clinton Administration and the Senate and House 
conferees for reaching a fair and equitable compromise regarding the 
application the Community Reinvestment Act (CRA). Since the enactment 
of the CRA in 1977, financial institutions have committed more than one 
trillion dollars to low and moderate income communities.
  The continued strength of the CRA means that hundreds of billions of 
dollars worth of new home mortgage and small business loans will be 
made in low- and moderate-income urban and rural communities in the 
next century.
  The compromise contained in the conference report prevents a bank 
from moving into a new line of business if it does not have a 
satisfactory lending record under the CRA, while limiting the frequency 
of reviews under the CRA for small banks with a satisfactory or 
excellent record.
  I am pleased to report that in my home state of Vermont, no banks, 
large or small, have received less than a satisfactory CRA rating. It 
is my hope that this legislation will encourage banks in other states 
to improve their community lending records. Enforcement of the CRA is a 
win-win situation for banks and neighborhoods across the country.
  In addition, this legislation allows states to continue to regulate 
insurance sales by banks and other new financial entities, keeping this 
authority where it properly belongs. The Vermont Department of Banking, 
Insurance and Securities has strongly supported its continued oversight 
of insurance sales by banks and other financial firms in my home state 
because of the agency's experience and expertise, and I agree.
  I am also pleased that the conferees did not include the medical 
privacy language included in the House-passed bill in the conference 
report. Senators Kennedy and Jeffords joined me in sending a letter on 
July 20 to the Chairman of the Senate Banking Committee requesting that 
this section be struck in conference.
  This language had been inserted in the House bill under the guise of 
providing medical privacy protections, but it would do no such thing. 
The language actually would have created a laundry list of lawful uses 
of personally identifiable health information without any consent by 
the patient.
  Moreover, the House-passed language would have wiped out the August 
deadline for Congressional action included in the Health Insurance 
Portability and Accountability Act of 1996. I strongly opposed this 
wrongheaded approach.
  I still have significant concerns about how this bill may negatively 
impact the privacy of individuals medical records. However, I believe 
the recent steps by the Clinton Administration to establish federal 
regulations governing some medical records of Americans is an important 
step forward.
  And I will reaffirm something I have said over, and over again--this 
Congress must act on its own and pass a comprehensive federal law that 
will govern all medical records and all those who could have access to 
them.
  Mr. President, I must also express my deep disappointment with 
conference report's financial privacy provisions. Congress has missed 
an historic opportunity to provide fundamental privacy of every 
American's personal financial information.
  Our right of privacy has become one of the most vulnerable rights in 
the Information Age. We must master new threats to our individual 
privacy and security, and in particular, to our ability to control the 
terms under which our personal information is acquired, disclosed and 
used.
  But this conference report fails to give consumers the control over 
their personal financial information that every American deserves.
  After this conference report becomes law, new conglomerates in the 
financial services industry will begin offering a widening variety of 
services, each of which requires a customer to provide financial, 
medical or other personal information. But nothing in the new law will 
prevent these new subsidiaries or affiliates of financial conglomerates 
from sharing this information for uses beyond those the customer 
thought he or she was providing it for.
  For example, the conference report has no consumer consent 
requirements for these new financial subsidiaries or affiliates to 
sell, share, or publish savings account balances, certificates of 
deposit maturity dates and balances, stock and mutual fund purchases 
and sales, life insurance payouts or health insurance claims. That is 
wrong.
  I am an enthusiast when it comes to the Internet and our burgeoning 
information technologies. These are exciting times, and the 
digitalization of information and the explosion in the growth of 
computing and electronic networking offer tremendous potential benefits 
to the way Americans live, work, conduct commerce, and interact with 
their government. But we must make sure that information technology 
remains our servant, instead of becoming our master.
  Tuesday, I spoke with Treasury Secretary Summers about the need for 
additional legislation to provide real financial privacy safeguards. In 
the next

[[Page 28343]]

session of the 106th Congress, I look forward to working with him and 
Senator Shelby, Senator Bryan, Senator Sarbanes and others on the 
Senate Banking Committee to enact comprehensive legislation to update 
our laws to provide fundamental privacy protections of the personal 
financial information of all Americans.
  The need for financial privacy protection will not go away, and 
Congress should address it without further delay.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, Senator Dorgan is here to speak, and I will 
yield the floor to allow him to speak, but I want to make it clear to 
anyone who has time that we are fast reaching the magic moment where we 
are going to conclude the debate and vote. It is only fair that Senator 
Sarbanes and I as managers of the bill be allowed to speak last. I ask 
unanimous consent that we may hold our time until the end.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from North Dakota.
  Mr. DORGAN. Mr. President, I come to the floor in a circumstance 
where I will not support the legislation that is before the Senate 
today. Before I describe the reasons for that, let me say I certainly 
admire the craftsmanship and the legislative skills of the Senator from 
Texas and the Senator from Maryland, the Senator from Connecticut, and 
so many others who have played a role in bringing this legislation to 
the floor. Frankly, I did not think they were going to get it done, but 
they did.
  In the final hours of the Congress, they bring a piece of legislation 
to the floor--it is called financial services modernization. I know 
they feel passionately and strongly it is the right thing to do. For 
other reasons, I feel very strongly it is the wrong thing to do. I do 
not come to denigrate their work. We have a philosophical disagreement 
about this legislation, and I want to describe why.
  This legislation repeals some of the major provisions of the Glass-
Steagall Act named after Senator Carter Glass from Virginia, and Henry 
Steagall, a Congressman from Alabama, the primary authors. It will 
allow banks and security underwriters to affiliate with one another. It 
also repeals similar provisions in other banking laws to allow banks 
and insurance firms to marry up. It will permit many new kinds of 
financial services to be conducted within a financial holding company 
or a national bank subsidiary.
  I want to describe why I think in many ways this effort is some 
legislative version of back to the future. I believe when this 
legislation is enacted--and it is expected it will be--we will see 
immediately even a greater level of concentration and merger activity 
in the financial services industries.
  When there is this aggressive move toward even greater 
concentration--and the concentration we have seen recently ought to be 
alarming to all of us--but when this increased concentration occurs, we 
ought to ask the question: Will this be good for the consumer, or will 
it hurt the consumer? We know it will probably be good for those who 
are combining and merging. They do that because it is in their 
interest. But will it be in the public's interest? Will the consumer be 
better served by larger and larger companies? Bank mergers, in fact, 
last year held the top spot in the value of all mergers: More than $250 
billion in bank mergers deals last year. That is $250 billion out of 
$1.6 trillion in merger deals. Of the banks in this country, 10 
companies hold about 30 percent of all domestic deposits and are 
expected to hold more than 40 percent of all domestic assets should the 
pending bank mergers that now exist be approved.
  After news that there was a compromise on this financial services 
modernization bill in the late hours, a compromise that there was going 
to be a bill passed by Congress, I noted the stock values of likely 
takeover targets jumped in some cases by more than $7 a share. That 
ought to tell us what is on the horizon.
  Clearly this legislation is not concerned about the rapid rate of 
consolidation in our financial services industries. The conference 
report that is before us dropped even a minimal House bill provision 
that would have required an annual General Accounting Office report to 
Congress on market concentration in financial services over the next 5 
years. Even that minimal step that was in the House bill was dropped in 
this conference report.
  What does it mean if we have all this concentration and merger 
activity? The bigger they are, the less likely this Government can 
allow them to fail. That is why we have a doctrine in this country with 
some of our larger banks--and that ``some'' is a growing list--of 
something called ``too big to fail.'' A few years ago, we had only 11 
banks in America that were considered by our regulators so big they 
would not be allowed to fail. Their failure would be catastrophic to 
our economy and so, therefore, they cannot fail.
  The list of too big to fail banks has grown actually. Now it is 21 
banks. There are 21 banks that are now too big to fail in this country.
  We are also told by the Federal Reserve Board that the largest 
megabanks in this country, so-called LCBOs, the large complex banking 
organizations, need customized supervision because their complexity and 
size have reached a scale and diversity that would threaten the 
stability of financial markets around the world in the event of 
failure.
  Let me read something from the Federal Reserve Bank president from 
Richmond. This is a Fed regional bank president saying this:

       Here's the risk: when a bank's balance sheet has been 
     weakened by financial losses, the safety net creates adverse 
     incentives that economists usually refer to as a ``moral 
     hazard.'' Since the bank is insured, its depositors will not 
     necessarily rush to withdraw deposits even if knowledge of 
     the bank's problems begin to spread.

  Because the bank is too big to fail.

       In these circumstances, the bank has an incentive to pursue 
     relatively risky loans and investments in hope that higher 
     returns will strengthen its balance sheets and ease the 
     difficulty. If the gamble fails, the insurance fund and 
     ultimately taxpayers are left to absorb the losses. I am sure 
     you remember that not very long ago, the S&L bailout bilked 
     taxpayers for well over $100 billion.

  Again, quoting the president of the Richmond Federal Reserve Bank:

       The point I want to make in the context of bank mergers is 
     that the failure of a large, merged banking organization 
     could be very costly to resolve. Additionally, the existence 
     of such organizations could exacerbate the so-called too-big-
     to-fail problem and the risks it prevents. Consequently, I 
     believe the current merger wave has intensified the need for 
     a fresh review of the safety net--specifically the breadth of 
     the deposit insurance coverage--with an eye towards reform.

  This bill addresses a lot of issues. But it does nothing, for 
example, to deal with megabanks engaged in risky derivatives trading. I 
do not know if many know it, but we have something like $33 trillion in 
value of derivatives held by U.S. commercial banks in this country.
  Federally-insured banks in this country are trading in derivatives 
out of their own proprietary accounts. You could just as well put a 
roulette wheel in the bank lobby. That is what it is. I offered 
amendments on the floor of the Senate when this bill was originally 
here to stop bank speculation in derivatives in their own proprietary 
accounts and also to take a look at some sensible regulation of risky 
hedge funds, but those amendments were rejected. You think there is not 
risk here? There is dramatic risk, and it is increasing. This piece of 
legislation acts as if it does not exist. It ignores it.
  A philosopher and author once said: Those who cannot remember the 
past are condemned to repeat it. We have a piece of legislation on the 
floor today that I hope very much, for the sake of not only those who 
vote for it and believe in it but for the American people who will 
eventually have to pick up the pieces--I hope this works.
  Fusing together of the idea of banking, which requires not just 
safety and soundness to be successful but the perception of safety and 
soundness, with other inherently risky speculative activity is, in my 
judgment, unwise.
  I do not usually quote William Safire. I guess I have done it a 
couple times on the floor of the Senate. I suppose we all look for 
things that are

[[Page 28344]]

comforting to our point of view. But William Safire wrote a piece 3 
days ago in the New York Times:

       Americans are unaware that Congress and the President have 
     just agreed to put us all at extraordinary financial and 
     personal risk.

  Then he talks about the risk. The risk of allowing the coupling of 
inherently risky enterprises with our banking system, that requires the 
perception of safety and soundness, I personally think is unwise. I do 
not denigrate those who believe otherwise. There is room for 
disagreement. I may be dead wrong.
  It may be that I am hopelessly old-fashioned. But I just do not think 
we should ignore the lessons learned in the 1930s, when we had this 
galloping behavior by people who believed nothing was ever going to go 
wrong and you could do banking and securities and all this together--
just kind of put it in a tossed salad; it would be just fine--and then 
we saw, of course, massive failures across this country. And people 
understood that we did something wrong here: We allowed the financial 
institutions, and especially banks in this country, to be involved in 
circumstances that were inherently risky. It was a dumb thing to do.
  The result was, we created barriers saying: Let's not let that happen 
again. Let's never let that happen again. And those barriers are now 
being torn down with a bill called financial services modernization.
  I remember a couple of circumstances that existed more recently. I 
was not around during the bank failures of the 1930s. I was not around 
for the debate that persuaded a Congress to enact Glass-Steagall and a 
range of other protections. But I was here when, in the early 1980s, it 
was decided that we should expand the opportunities for savings and 
loans to do certain things. And they began to broker deposits and they 
took off. They would take a sleepy little savings and loan in some 
town, and they would take off like a Roman candle. Pretty soon they 
would have a multibillion-dollar organization, and they would decide 
they would use that organization to park junk bonds in. We had a 
savings and loan out in California that had over 50 percent of its 
assets in risky junk bonds.
  Let me describe the ultimate perversion, the hood ornament on 
stupidity. The U.S. Government owned nonperforming junk bonds in the 
Taj Mahal Casino. Let me say that again. The U.S. Government ended up 
owning nonperforming junk bonds in the Taj Mahal Casino in Atlantic 
City. How did that happen? The savings and loans were able to buy junk 
bonds. The savings and loans went belly up. The junk bonds were not 
performing. And the U.S. Government ended up with those junk bonds.
  Was that a perversion? Of course it was. But it is an example of what 
has happened when we decide, under a term called modernization, to 
forget the lessons of the past, to forget there are certain things that 
are inherently risky, and they ought not be fused or merged with the 
enterprise of banking that requires the perception and, of course, the 
reality--but especially the perception--of safety and soundness.
  Last year, we had a failure of a firm called LTCM, Long-Term Capital 
Management. It was an organization run by some of the smartest people 
in the world, I guess, in the area of finance. They had Nobel laureates 
helping run this place. They had some of the smartest people on Wall 
Street. They put together a lot of money. They had this hedge fund, 
unregulated hedge fund. They had invested more than $1 trillion in 
derivatives in this fund--more than $1 trillion in derivatives value.
  Then, with all of the smartest folks around, and all this money, and 
an enormous amount of leverage, when it looked as if this firm was 
going to go belly up, just flat out broke, guess what happened. On a 
Sunday, Mr. Greenspan and the Federal Reserve Board decided to convene 
a meeting of corresponding banks and others who had an interest in 
this, saying: You have to save Long-Term Capital Management. You have 
to save this hedge firm. If you don't, there will be catastrophic 
results in the economy. The hit will be too big.
  You have this unregulated risky activity out there in the economy, 
and you have one firm that has $1 trillion in derivative values and 
enormous risk, and, with all their brains, it doesn't work. They are 
going to go belly up. Who bears the burden of that? The Federal 
Government, the Federal Reserve Board.
  We have the GAO doing an investigation to find out the circumstances 
of all that. I am very interested in this no-fault capitalism that 
exists with respect to Long-Term Capital Management. Who decides what 
kind of capitalism is no-fault capitalism? And when and how and is 
there a conflict of interest here?
  The reason I raise this point is, this will be replicated again and 
again and again, as long as we bring bills to the floor that talk about 
financial services modernization and refuse to deal with the issue of 
thoughtful and sensible regulation of things such as hedge funds and 
derivatives and as long as we bring bills to the floor that say we can 
connect and couple, we can actually hitch up, inherently risky 
enterprises with the core banking issues in this country.
  I hear about fire walls and affiliates, all these issues. I probably 
know less about them than some others; I admit that. But I certainly 
know, having studied and read a great deal about the lessons of 
history, there are some things that are not old-fashioned; there are 
some notions that represent transcendental truths. One of those, in my 
judgment, is that we are, with this piece of legislation, moving 
towards greater risk. We are almost certainly moving towards 
substantial new concentration and mergers in the financial services 
industry that are almost certainly not in the interest of consumers. 
And we are deliberately and certainly, with this legislation, moving 
towards inheriting much greater risk in our financial services 
industries.
  I regret I cannot support the legislation. But let me end where I 
began because this is not one of those issues where I don't respect 
those who have a different view. I said when I started--I say as I 
close--there was a great deal of legislative skill exhibited on the 
part of those who put this together. I didn't think they were going to 
get this done, frankly. I wish they hadn't, but they did. That is a 
testament to their skill.
  I don't know whether I am right or wrong on this issue. I believe 
fervently that 2 years, 5 years, 10 years from now, we will look back 
at this moment and say: We modernized the financial services industry 
because the industry did it itself and we needed to move head and draw 
a ring around it and provide some guidance, some rules and regulations. 
I also think we will, in 10 years time, look back and say: We should 
not have done that because we forgot the lessons of the past; those 
lessons represent timeless truths that were as true in the year 2000 or 
2010 as they were in the year 1930 or 1935.
  Again, I cannot vote for this legislation. My hope is that history 
will prove me wrong and that this will not pose the kind of 
difficulties and risks I fear it will for the American people.
  One final point: With respect to the regulation of risky hedge funds, 
and especially the issue dealing with the value of derivatives in this 
country--$33 trillion, a substantial amount of it held by the 25 
largest banks in this country, a substantial amount being traded in 
proprietary accounts of those banks--we must do something to address 
those issues. That kind of risk overhanging the financial institutions 
of this country one day, with a thud, will wake everyone up and lead 
them to ask the question: Why didn't we understand that we had to do 
something about that? How on Earth could we have thought that would 
continue to exist without a massive problem for the American people and 
for its financial system?
  I yield the floor.
  Mr. FEINGOLD. Mr. President, after years of persistent lobbying and a 
flood of political donations, three industries may soon have a lot to 
celebrate--the insurance, banking and securities industries will have a 
huge victory if we pass this conference report today.

[[Page 28345]]

  I do want to note that some of those Senators who helped to craft 
this legislation are among the very best Members of the Senate.
  While I oppose this measure, I certainly commend them for their 
dedication and hard work on this bill.
  Nevertheless, with this legislation, this Congress is declaring the 
ultimate bank holiday--giving banks, insurance companies and securities 
firms a permanent vacation from the Glass-Steagall Act and other 
Depression-era banking law reforms.
  Advocates of this legislation will tell you that it is terrific for 
consumers, offering them one-stop shopping for all their financial and 
insurance needs.
  But the reality is far more complicated and far less appealing--it is 
likely to cause a merger-mania in the industry that could severely 
limit consumer choice and spur a rise in banking fees.
  This conference report also raises serious issues about consumer 
privacy. Privacy advocates worry that it will give bankers, insurers 
and securities firms virtually unlimited license to share account data 
and other sensitive information.
  To top it all off, this legislation undermines the Community 
Reinvestment Act.
  Higher bank fees, reduced consumer choice and fewer protections for 
low-income loan assistance--these don't sound very good to most 
consumers, Mr. President. But they sound good to the industries that 
will benefit from this legislation. This conference report is music to 
the ears of the industries that have been lobbying for these changes 
for decades.
  And this lobbying campaign has left a trail of political 
contributions that is nothing short of stunning. A recent study by 
Common Cause put the political contributions of these special interests 
at $187.2 million in the last ten years.
  That is why I am going to take this opportunity to Call the Bankroll. 
This lobbying effort for so-called financial services modernization is 
truly breathtaking, because it combines the clout of three industries 
that on their own are giants in the campaign finance system, 
particularly the soft money system.
  Together the power of their combined pocketbooks were a powerful 
force propelling this legislation through Congress.
  One of these industries, the securities and investment industry is a 
legendary soft money donor, and I will just highlight a few such firms 
that have lobbied on behalf of this legislation.
  Merrill Lynch has long called for banking deregulation. The company, 
its subsidiaries and executives gave more than $310,000 in soft money 
during the 1998 election cycle.
  Morgan Stanley Dean Witter, which gave more than $145,000 in soft 
money in 1997 and 1998, was also a key part of the lobbying team on 
this issue. In fact the Washington Post reported that the company's 
chairman, along with several other corporate heads, made calls to White 
House officials the very night the conference hammered out an agreement 
on this bill.
  Lobbyists lined the halls outside the room where the conference met 
to reconcile the House and Senate version of the bill, and as we know, 
that is standard procedure on Capitol Hill.
  As usual, corporate lobbyists lined the halls, while the consumers 
who will bear the impact--and consumer advocates agree it will be an 
adverse impact--of this bill, were left out in the cold.
  The banking industry was also there that night, of course, since this 
legislation is a bonanza for them too, revolutionizing the kinds of 
services that banks can offer.
  Citigroup was there, and so was the presence of the more than 
$720,000 that Citigroup and its executives and subsidiaries gave in 
soft money to the political parties in the 1998 election cycle.
  That is a huge sum, Mr. President, especially for an election cycle 
in which there was not even a presidential election.
  And in the current election cycle Citigroup is off to a running start 
with $293,000 in soft money from Citigroup, its executives and 
subsidiaries.
  That is more than $1 million from Citigroup, it's executives and 
subsidiaries in just two and a half years.
  The powerful banking interest BankAmerica, its executives and 
subsidiaries also weighed in with more than $347,000 in soft money in 
the 1998 election cycle, and more than $40,000 already in the current 
election cycle.
  And let's not forget the insurance industry. They have a massive 
stake in this legislation as well, an interest that is well-reflected 
by the size of the industry's soft money contributions.
  For instance, there is the Chubb Corp and its subsidiaries, which 
gave nearly $220,000 in soft money contributions in 1997 and 1998, and 
has given more than $60,000 already in 1999.
  Then there is the industry lobby group, the American Council of Life 
Insurance, which also gave heavily to the parties with more than 
$315,000 in soft money contributions in 1997 and 1998, and more than 
$63,000 so far this year.
  In the end, what do all these contributions add up to? They add up to 
tremendous access to legislators and broad influence over the process 
by which this legislation was crafted--access and influence that the 
average consumer can't even begin to imagine, let alone afford.
  This is a serious problem, and I think everyone in this Chamber knows 
it.
  The American people certainly know it.
  They think our votes are on the auction block, and who can blame 
them.
  Who can blame them, and more than that, who can show them why they 
should think otherwise?
  That is a question I ask my colleagues, and I think we all know the 
answer.
  Mr. MIKULSKI. Mr. President, I rise today to oppose the Financial 
Services Modernization Conference Report.
  While I oppose this legislation, I strongly commend the work of my 
senior colleague Senator Sarbanes. Because of his efforts, this bill is 
far better than previous versions. It does more to help low and 
moderate income and minority Americans to have access to capital, 
credit and financial services. Senator Sarbanes also improved the 
privacy provisions of this bill.
  Despite the significant improvements Senator Sarbanes fought so hard 
for, there are still a number of what I call ``yellow flashing lights'' 
or warning signals that force me to oppose this legislation.
  First, I am concerned that if we relax the laws about who can own and 
operate financial institutions, an unhealthy concentration of financial 
resources will be the inevitable result. The savings of the many will 
be controlled by the few. If we relax banking regulations in this 
country, Americans will know less about where their deposits are kept 
and about how they are being used.
  Marylanders used to have savings accounts with local banks where the 
teller knew their name and their family. We have already seen the trend 
toward mega-mergers, accompanied by higher fees, a decline in service, 
and the loss of neighborhood financial institutions. This bill 
accelerates that trend.
  With a globalization of financial resources, the local bank could be 
bought by a holding company based in Thailand. Instead of the friendly 
teller, consumers will be contacting a computer operator in a country 
half-way around the globe through an 800 number. Their account will be 
subject to financial risks that have nothing to do with their job, 
their community, or even the economy of the United States. I know 
impersonalized globalization is not what banking customers want when we 
talk about modernization of the financial services.
  Second, I am concerned that complex financial and insurance products 
will now be sold in a cluttered market by untrained individuals. 
Investment and insurance planning for families is a very important 
process. These are some of the most important decisions that families 
make. They should be made with the assistance of certified 
professionals--whom the family can trust. By breaking down these fire 
walls and allowing various companies to offer insurance and complex 
investment products, we run the risk that

[[Page 28346]]

consumers will be confused, defrauded, and treated like market segments 
and not individuals with unique needs and goals.
  Third, I am concerned about the privacy provisions in this 
legislation. While the bill offers some privacy protections for 
consumers, such as requiring financial institutions to provide 
customers with notice of its privacy policies, it does not go far 
enough. There are several loopholes in the bill that will allow for the 
sharing of private information among private institutions. Customers 
cannot object to having that information shared in those circumstances 
and there are no restrictions on the kind of detailed personal 
information that can be shared. Imagine the problems that could arise 
if insurance providers could scrutinize your credit card purchases. 
Protecting personal information is one of the issues that matter most 
to the American people--and this bill does not speak to their concerns.
  Finally, the bill does not have the safeguards we need against bank 
failures. Banks will now be venturing out to engage in new and risky 
industries. If a bank fails during one of those ventures, thousands of 
people and businesses who have worked hard and invested their money 
with that bank fail too. Let's not forget about the taxpayers who will 
be left to pick up the pieces. These failures could set off a chain 
reaction and threaten the stability of our entire economy.
  Mr. President, I am not opposed to a necessary reform of our 
financial services laws. But I believe the American people need greater 
protection before a global financial plan is enacted.
  Mr. HARKIN. Mr. President, I oppose this conference report. There are 
a number of important and positive elements in the measure that provide 
for improvements in the regulation of financial institutions that will 
better enable us to assure for the soundness of our financial 
institutions. More could have been done in that area. But, there are 
clear improvements. There are provisions which help small banks and 
small insurance companies acquire additional resources that are 
important to their ability to compete, to help their customers and 
useful to economy in their local areas. And, in a world marketplace, 
American institutions should have the resources needed to compete in 
that marketplace.
  Unfortunately, these positive steps are outweighed by the negative 
impact the bill will have on the privacy rights of Americans. Under 
this legislation, banks, insurance firms, and credit card agencies that 
are owned by the same mega-corporation can share a consumer's personal 
information. What kind of stock do you own? What information can be 
acquired from your credit card statements? When do your CD's mature? 
And, I fear, that information about a customer's health might also 
become available to those in a company who might decide if a customer 
is to get a loan or not get a loan. Do we want any possibility that a 
loan officer might have access to information about the medical 
condition and other private medical matters of a loan applicant without 
the customer's permission? I believe that this bill should have clearly 
provided solid protections in these areas. Unfortunately, these are the 
kinds of things that could happen if this measure becomes law.
  The measure does not even allow a customer to say No, I do not want 
any information picked up from my bank account or from records with the 
insurance company which is a part of a larger financial institution to 
be shared by any other part of a financial institution. If a customer 
wants information shared because that customer believes that he or she 
would be helped by one stop shopping for financial activities, fine. 
Let that customer waive rights to privacy by signing an appropriate 
form. But, the basic right to block information collected by a company 
from being shared by other parts of a company is not in this bill.
  There is an ability to say that you do not want the financial entity 
to simply sell the information. But, I understand that under this bill, 
your financial institution can share information they have acquired 
from your various accounts with other companies that they have entered 
into certain types of marketing agreements.
  Computers have great advantages. They increase the efficiency of our 
economy. But, they can store huge amounts of information about a 
person's private habits and circumstances. In this age where we have an 
explosion in the amount of information that is collected about people, 
I believe it is essential that we erect strong barriers that prevent 
the passage of personal information without a person's permission.
  I am also concerned about the weakness in the bill concerning the 
Community Reinvestment Act. We need to keep the burdens of paperwork 
down, particularly for small banks. But, we also need to provide for 
effective teeth in the requirement that banks provide proper financial 
assistance to all parts of their service area. And, this bill falls 
short in that area.
  Mrs. BOXER. Mr. President, although I am a longstanding supporter of 
financial services modernization, I will vote against S. 900--the 
Financial Services Modernization bill. I am concerned that this bill 
does far too little to ensure the privacy of individuals.
  Over the past three or four years we have seen an explosion of 
mergers in the financial services industry. Citibank and the Travelers 
Group merged. And in my home state, BankAmerica--California's biggest 
bank--merged with NationsBank. All of these mergers, in my home state 
and elsewhere, will undoubtedly have a major impact on consumers. And 
while we do not know what that impact will ultimately be, I believe we 
do know it will impact our privacy. Why?
  Although most Americans believe their financial data is private, they 
are wrong. In fact, current law allows banks to do basically whatever 
they want with the personal information they collect from their 
customers in the course of doing business. Banks can provide a 
consumer's name, address, account balance, payment history, even his 
account number and social security number to their affiliates. And they 
can sell that information to third parties without even notifying the 
customer whose information has been sold.
  Given that banks already share and sell the personal information of 
their customers, why then do I oppose this bill? I oppose it because I 
believe the bill will heighten the existing problem.
  Mr. President, S. 900 will heighten the problem because, as noted by 
Robert Scheer in a November 2 Los Angeles Times editorial, ``. . . [the 
bill] allows banks, insurance and brokerage firms to merge not only 
their equity but also the vast accumulation of computerized records on 
consumers' buying habits, health treatments, investments and credit 
history.''
  The tearing down of walls that now exist between banks, insurance 
firms, and securities firms, in this highly technological and 
computerized era, means the information now being shared will expand 
exponentially. There will be more information to share, more 
comprehensive information to share, and more people with whom to share 
it and to whom to sell it.
  Privacy rights are most vulnerable in the information age. And while 
I realize we cannot turn back the clock, I do believe we as policy 
makers can and should provide some parameters for the sharing and 
selling of personal information. Unfortunately, despite all of the talk 
of self regulation, financial institutions provide little if any 
privacy protections. The legislation before us does nothing to improve 
this situation.
  Finally, I understand that many financial institutions have 
complained that stronger privacy protections in the context of 
financial services modernization are unworkable, too costly to 
implement, and will, in part, defeat the purpose of allowing banks, 
insurance companies, and brokerage firms to affiliate. I reject these 
arguments for two specific reasons.
  First, at least one large U.S. financial institution offers its 
European customers the kinds of privacy protections it contends it 
cannot offer its U.S. customers. In 1995, that institution agreed to 
allow their German customers to

[[Page 28347]]

``opt-in'' to having their non-public financial information shared with 
other companies.
  Second, it is the current policy of some U.S. financial institutions 
not share their customers' personal information without first getting 
the permission of those customers or allowing those customers to ``opt-
out'' of such sharing. And those institutions, American Express and 
U.S. Bancorp among them, apparently have not found such policies overly 
burdensome or competitively disadvantageous.
  In closing, proponents of this legislation suggest the privacy 
provisions included in the bill are sufficient. Indeed, some have 
suggested the privacy provisions contained in this bill are historic. 
And although some small steps have been made, like the notice provision 
which requires financial institutions to tell customers about their 
policies for disclosing nonpublic personal data and the provision which 
prevents stronger state consumer privacy laws from being pre-empted, I 
believe the steps are far too small.
  I wish I could support this bill. As I said at the outset, I am a 
longstanding supporter of financial services modernization. I do not 
believe, however, the privacy of consumers should be, or need be, 
sacrificed for such modernization.
  Mr. BENNETT addressed the Chair.
  The PRESIDING OFFICER (Mr. Voinovich). The Senator from Utah.
  Mr. BENNETT. Are we in a quorum call?
  The PRESIDING OFFICER. No, we are not.
  Mr. BENNETT. I seek recognition then.
  Mr. GRAMM. Mr. President, I yield 5 minutes to the distinguished 
Senator from Utah.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. BENNETT. I thank the chairman of the committee.
  I rise with my fellow members of the committee to express my delight 
at this particular piece of legislation and the fact that we have come 
to where we are.
  I take note of the work of Geoff Gray, Linda Lord, Wayne Abernathy, 
and other members of the committee staff who have provided such 
tremendous support for this. They have been available not only to the 
chairman but to members of the committee as well in a way that has been 
tremendously helpful. I make that acknowledgment of their contribution.
  I will focus for just a moment on the issues of privacy. Most of the 
other issues relating to this bill have already been aired and 
discussed. I don't need to add to that. But I have paid a lot of 
attention to the whole privacy issue for the last 3\1/2\, 4 years, 
primarily because of my interest in medical confidentiality. I am the 
prime sponsor of the bill relating to confidentiality of medical 
records and, frankly, have had quite an education in the whole privacy 
area as a result of that.
  We are in a new world. That has become a cliche but, as with most 
cliches, it happens to be true. We are in a new world now where 
information is available at a level and a quantity that has never been 
the case before. Those who complain about this and want to go back to 
the anonymity of the pre-electronic age are wishing for something that 
is simply not going to happen. Those who call themselves ``privacy 
advocates,'' who have attacked certain portions of this bill, are 
wishing for a world that is long gone.
  The only question now with respect to the information that is 
available to us is not will it be available but, rather, how will it be 
responsibly used. One of the things that many of the privacy advocates 
ignore is the reality of the marketplace. Having been a businessman 
prior to coming to the Congress, I want to talk about that for a 
minute. The privacy advocates think Government must intervene on behalf 
of the consumers against rapacious businesses that would somehow use 
the information available to them in a way to do damage to those 
consumers. I suppose there are some businesses that might be so foolish 
as to do that, but the vast majority of businesses recognize that the 
only way they survive is on repeat business, and the only way they get 
repeat business is to keep their customers happy.
  I remember, during the hearings, Congressman Markey raised some 
specters and gave us examples of abuses that banks had made of credit 
card information of some of their customers. I made the comment there, 
and I will repeat it here: If a bank did to me what Congressman Markey 
accused a bank of doing to one of its customers, I would change banks. 
I can solve the problem on my own very quickly. I don't need the 
Government to step in in that situation to protect me.
  Furthermore, the bankers I deal with, such as the retailers and 
others that want to sell me something, are very anxious not to offend 
me. They are very anxious to keep me happy. So if they start using this 
information that they have, as a result of the information age, in a 
way to service my needs better, they are going to keep me happy. If 
Government interferes with their ability to do that, Government will 
get in the way. On the other hand, if they--that is, the banks--use 
this information in a way I don't like, they jeopardize our 
relationship, and they jeopardize my business.
  We must understand here in the Congress that customers are not the 
captives of the business and banking organizations that depend upon 
them for revenue. Customers are the reason for their existence, and 
customers, consequently, truly are king. That is another cliche that a 
lot of people who haven't been in business don't understand, but it is 
true. The customer is king. If you do anything that violates your trust 
with the customer, you are going to pay for it, and you are going to 
pay for it in real dollars.
  So I believe the balance that has been struck in this bill to provide 
the right amount of privacy protection is the correct balance, and I 
think we must take some time and see how it works out in the real world 
of real commerce before we panic and say we must pass further Federal 
regulations.
  With that, I record my approval of the work of the chairman and the 
ranking member with respect to the conference and all of the 
difficulties connected therewith, and say this is a historic day that 
we are finally reaching after many, many years of wrangling on this 
subject.
  I yield the floor.


                        securities transactions

  Mr. LEVIN. Mr. President, I thank Senator Sarbanes for entering into 
this colloquy with me during consideration of the conference report to 
the financial services modernization bill, S. 900. This is an important 
bill which will bring our nation's regulatory structure up to date with 
the many changes that have taken place over the past several decades 
regarding the activities of banks, securities firms, and insurance 
companies.
  Mr. SARBANES. I agree with my colleague. The regulatory structure for 
banks, securities firms, and insurance companies has not kept apace of 
the new activities in which these entities have been able to take part.
  Mr. LEVIN. As I understand it, S. 900 will, among other things, make 
changes to the Glass-Steagall Act which separates banking and 
securities business so that banks and their affiliates will be able to 
take part in securities transactions from which they were previously 
prohibited.
  Mr. SARBANES. The Senator is correct. This is one of the fundamental 
aspects of this legislation.
  Mr. LEVIN. During Senate consideration of S. 900, I was concerned 
with the ability of banks, securities firms, and insurance companies to 
enter into these new activities, and how these new activities would be 
regulated and by whom. In particular, I was concerned with how the 
securities activities of banks would be regulated. In the original 
version of S. 900 there were loopholes which allowed the securities 
activities of banks to go unregulated by the Securities and Exchange 
Commission. I felt that these loopholes should be closed. I believe 
that it makes the most sense for the regulators who have the most 
experience in securities transactions, namely the SEC, to oversee these 
activities.

[[Page 28348]]


  Mr. SARBANES. The Senator is correct. Under current law, banks are 
exempt from SEC regulation as brokers and dealers. The original version 
of S. 900 would have maintained this exemption and would have allowed 
banks to conduct a large range of securities transactions outside SEC 
regulation.
  Mr. LEVIN. It is for this reason that I sponsored, with the support 
of Senator Schumer, an amendment to S. 900 which stated the following: 
``It is the intention of this Act subject to carefully defined 
exceptions which do not undermine the dominant principle of functional 
regulation to ensure that securities transactions effected by a bank 
are regulated by securities regulators, notwithstanding any other 
provision of this Act.'' This amendment was agreed to during Senate 
consideration of S. 900. Senator Sarbanes, as ranking member of the 
Senate Banking Committee, is it your understanding that the conference 
report upholds the approach which I sought in my amendment?
  Mr. SARBANES. Yes, the conference report does uphold your approach.
  Mr. LEVIN. I thank the Senator. Meaningful oversight by the SEC of 
securities transactions by banks is critical to the financial health of 
our economy. Functional regulation will help to ensure that confidence 
in our financial system continues.
  Mr. President, I have a copy of a letter from the Chairman of the 
Securities and Exchange Commission Arthur Levitt to Senate Banking 
Chairman Phil Gramm in which Chairman Levitt ``enthusiastically 
support(s) the securities provisions contained in the (chairman's) 
Mark'' which eventually became part of the conference report. I ask 
unanimous consent that a copy of this letter be printed in the Record 
following this colloquy.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                           Securities and Exchange Commission,

                                 Washington, DC, October 14, 1999.
     Hon. Phil Gramm,
     Chairman, Committee on Banking, Housing and Urban Affairs, 
         U.S. Senate, Dirksen Senate Office Building, Washington, 
         DC.
       Dear Senator Gramm: As you know, the Securities and 
     Exchange Commission has long supported financial 
     modernization legislation that provides the protections of 
     the securities laws to all investors. I believe that the 
     changes to the securities laws contained in the proposed 
     amendments to the Chairmen's Mark that we agreed upon today 
     will significantly strengthen the investor protections of the 
     bill.
       With the approval of those amendments, which I understand 
     you are distributing now, I enthusiastically support the 
     securities provisions contained in the Mark.
       I appreciate your willingness to work with us on these 
     provisions to protect investors.
           Sincerely,
                                                    Arthur Levitt.


                              section 711

  Mr. DODD. Mr. President, I rise to engage in a colloquy with the 
chairman of the Banking Committee. As the Chairman is aware, some 
legitimate concerns have been raised over the potential burdens imposed 
by the reporting requirements contained in section 711.
  Am I correct in stating that section 711(h)(2)(A) provides that 
Federal banking regulators shall ``ensure that the regulations 
prescribed by the agency do not impose any undue burden on the parties 
and the proprietary and confidential information is protected.''
  Mr. GRAMM. Mr. President, the understanding of the Senator from 
Connecticut is correct.
  Mr. DODD. Mr. President, I also inquire of the chairman of the 
Banking Committee whether I am also correct in stating that the 
statement of managers provides that ``the Federal banking agencies are 
directed, in implementing regulations under this provision, to minimize 
the regulatory burden on reporting parties. One way in which to 
accomplish this goal would be wherever possible and appropriate with 
the purposes of this section, to make use of existing reporting and 
auditing requirements and practices of reporting parties, and thus 
avoid unnecessary duplication of effort. The managers intend that, in 
issuing regulations under this section, the appropriate Federal 
supervisory agency may provide that the nongovernmental entity or 
person that is not an insured depository institution may, where 
appropriate and in keeping with the provisions of this section, fulfill 
the requirements of subsection (c) by the submission of its annual 
audited financial statement or its Federal income tax return.''
  Mr. GRAMM. The understanding of the Senator from Connecticut is 
correct.
  Mr. DODD. I thank the chairman for his cooperation in this matter.


                       effective date of title i

  Mr. DODD. Mr. President, I rise to engage in a colloquy with the 
chairman of the Banking Committee. Mr. Chairman, the conference 
committee agreed to make the effective date of implementation of title 
I, except for section 104, 120 days from the date of enactment. We 
reached this decision to provide the regulators with an opportunity to 
implement this legislation effectively. Am I correct in stating that it 
is the intent of the conferees that title I become effective 120 days 
after enactment even if the agencies are not able to complete all of 
the rulemaking required under the act during that time.
  Mr. GRAMM. Mr. President, the understanding of the Senator from 
Connecticut is correct. In addition, it should be noted that in some 
instances, no rule-writing is required. For example, new section 
4(k)(4) of the Bank Holding Company Act, as added by section 103 of the 
bill, explicitly authorizes bank holding companies which file the 
necessary certifications to engage in a laundry list of financial 
activities. These activities are permissible upon the effective date of 
the act without further action by the regulators. The conferees 
recognize, however, that refinements in rulemaking may be necessary and 
desirable going forward, and for example, have specifically authorized 
the Federal Reserve and the Treasury Department to jointly issue rules 
on merchant banking activities. If regulators determine that any such 
rulemaking is necessary, the conferees encourage them to act 
expeditiously.


                              section 731

  Mr. GRAMS. Mr. President, I ask Senator Gramm, in his capacity as 
chairman of the Senate Banking Committee and one of the chief authors 
of the Gramm-Leach-Bliley Act that is before us today, to clarify a 
point about section 731 of the act. Is it correct that section 731 is 
not intended to affect banks whose home office and authorized branch 
offices are not located in the State described?
  Mr. GRAMM. Mr. President, that is correct.
  Mr. GRAMS. Mr. President, I also inquire whether it is also Chairman 
Gramm's understanding that, notwithstanding section 731, national banks 
with interstate offices are in all events authorized under section 85 
of the National Bank Act, as confirmed by the United States Supreme 
Court case, Marquette National Bank v. First of Omaha Service Corp., 
439 U.S. 299 (1978), to export the interest rates of the State where 
their home office is located?
  Mr. GRAMM. Mr. President, that is my understanding. I would add that 
national banks are also entitled to charge the rates of the host State 
of the interstate branch, as authorized by interpretations of the 
Comptroller of the Currency, where there is some nexus between the hose 
State and the loan.


                              section 507

  Mr. MACK. Mr. President, I rise to engage in a colloquy with my good 
friend Senator Gramm, chairman of the Committee on Banking, on section 
507 of the Financial Services Modernization Act of 1999. I want to 
confirm that section 507 is intended to apply only to the amendments 
made by subtitle A of title V of the bill, and that section 507 is not 
to be construed, under any circumstances, to apply to any provision of 
law other than the provisions of subtitle A. For instance, subtitle A 
of title V relates only to disclosure of nonpublic personal information 
to nonaffiliated third parties. This means that section 507 of the bill 
does not supersede, alter, or affect laws on the disclosure of 
information among affiliated entities. In particular, section 507 does 
not supersede, alter, or affect the provisions of the Federal Fair 
Credit Reporting Act (or FCRA) regarding the communication of 
information among

[[Page 28349]]

persons related by common ownership or affiliated by corporate control, 
nor does section 507 supersede, alter, or affect the existing FCRA 
preemption of state laws with respect to the exchange of information 
among affiliated entities. I yield to my friend.
  Mr. GRAMM. Mr. President, the understanding of the Senator from 
Florida is correct. Section 507 is intended to apply only to subtitle A 
of title V of the bill, and is not to be construed to apply to any 
provision of law other than the provisions of the subtitle. Thus, 
section 507 does not affect the existing FCRA provisions on that 
statute's relationship to state laws.


                             section 502(b)

  Mr. CRAPO. Mr. President, I respectfully request of the chairman that 
we engage in a colloquy regarding section 502(b), which describes the 
opt-out notice required by subtitle A.
  I would like to clarify that a financial institutions' obligation to 
send an opt-out notice under this subtitle is satisfied when it has 
complied with notification requirements regarding privacy policies and 
practices under section 503, and the consumer is further given the 
right to direct that their non-public personal information not be 
disclosed to non-affiliated third parties. A separate opt-out notice 
need not be provided for each third party disclosure, provided that the 
consumer receives a prior clear and conspicuous opt-out opportunity 
covering third party disclosures generally.
  Mr. GRAMM. Mr. President, the interpretation of the Senator from 
Idaho on this point is correct. The intent of section 502 is to assure 
that consumers receive clear and conspicuous notice of a financial 
institutions' privacy policies and practices, and to assure that 
consumers can direct that their non-public information not be disclosed 
to third parties. So long as consumers receive a notice that gives them 
a clear choice about whether or not that non-public personal 
information can be transferred to non-affiliated third parties, the 
opt-out choice need not be provided separately for each disclosure of 
such information.


                     insurance company investments

  Mr. BENNETT. Mr. President, I rise to engage the distinguished 
chairman of the Banking Committee in a colloquy on the ability of 
insurance companies to make investments that are treated as ``financial 
in nature'' under this legislation even though the investments are made 
in companies that are not engaged in financial activities.
  Am I correct that overlap between board members and officers of a 
financial holding company and a portfolio company in which an insurance 
company has an investment is not intended to result necessarily in a 
determination that the holding company routinely manages or operates 
the portfolio company? Or to state this intention another way, the 
existence of routine holding company management or operation is to be 
based upon an assessment of actual holding company involvement in day-
to-day management and operations of the portfolio company, rather than 
board member or officer overlaps.
  Mr. GRAMM. Mr. President, the understanding of the Senator from Utah 
is correct.
  Mr. BENNETT. Mr. President, I also inquire of the distinguished 
chairman of the Banking Committee whether I am also correct that the 
exception under which a holding company may routinely manage or operate 
a portfolio company when necessary or required to obtain a reasonable 
return on investment is intended to apply to an investment in a company 
that has been generating a below average rate of return on investment 
either at the time the holding company becomes a bank holding company 
or that generates a below average rate of return at a subsequent time?
  Mr. GRAMM. Mr. President, the understanding of the Senator from Utah 
is also correct.
  Mr. BENNETT. Mr. President, finally, I would inquire whether I am 
correct that, consistent with the principle of functional regulation 
applied throughout this legislation, the determination whether an 
investment made by an insurance company is made in the ordinary course 
of business in accordance with relevant state law should be made by the 
insurance authority of the state in which the insurance company is 
located.
  Mr. GRAMM. Mr. President, yes, the Senator's understanding is 
correct.
  Mr. BENNETT. Mr. President, I thank the Chairman.


                             section 502(d)

  Mr. HAGEL. Mr. President, will the chairman of the Banking committee 
yield for a few questions?
  Mr. GRAMM. Mr. President, I yield to the vice chairman of the 
Financial Institutions Subcommittee.
  Mr. HAGEL. Mr. President, I inquire of the chairman with respect to 
the provision in section 502(d) that prohibits the sharing of customer 
account numbers with non-affiliated third parties for marketing 
purposes, is it the intent that the third party be able to receive 
customer account number upon approval by the customer?
  Mr. GRAMM. Mr. President, yes, that is correct.
  Mr. HAGEL. Mr. President, I also inquire of the chairman whether, in 
fact, it is his expectation that the regulators will use their broad 
exemptive authority given in the legislation to allow for sharing 
encrypted account numbers if the customer has given his or her 
authorization?
  Mr. GRAMM. Mr. President, yes, that is true.
  Mr. BENNETT. Mr. President, would the chairman please yield to me for 
a question?
  Mr. GRAMM. Mr. President, I would be happy to yield to the chairman 
of the financial Institutions Subcommittee.
  Mr. BENNETT. Mr. President, I inquire of the distinguished chairman 
of the Banking Committee whether the managers felt so strongly that 
they chose to highlight this exemption for encrypted account numbers in 
report language. We would hope the regulators would use this exemptive 
authority. Isn't that true?
  Mr. GRAMM. Mr. President, Yes.
  Mr. HAGEL. This commonsense approach is consistent with consumer 
choice and with the customer privacy. We expect the regulators to use 
their exemptive authority to allow legitimate business practices that 
safeguard customer financial information to continue to operate and 
provide customers with greater choices of products and services.


                              section 401

  Mr. BENNETT. Mr. President, I rise to engage in a colloquy with the 
distinguished chairman of the Banking Committee. It is my understanding 
that section 401 of the Gramm-Leach-Bliley Act is intended to prohibit 
acquisitions of grandfathered unitary thrift holding companies by 
commercial companies. Section 401 is not intended to prohibit 
acquisitions of grandfathered unitary thrift holding companies by 
companies that, immediately prior to the acquisition, engage only in 
the activities permissible for financial holding companies. Is that 
correct?
  Mr. GRAMM. Mr. President, the understanding of the gentleman from 
Utah is correct.
  Mr. BENNETT. Mr. President, I also seek clarification of the chairman 
of the Banking Committee that section 401 of the Gramm-Leach-Bliley Act 
is not intended to limit or otherwise affect the powers and authorities 
of grandfathered unitary thrift holding companies after such companies 
are acquired by companies that, immediately prior to the acquisition, 
engage only in the activities permissible for financial holding 
companies. Is that correct?
  Mr. GRAMM. Mr. President, the understanding of the gentleman from 
Utah is correct.
  Mr. GORTON. Mr. President, will the chairman yield to me for a 
question?
  Mr. GRAMM. Mr. President, I would be happy to do so.
  Mr. GORTON. Mr. President, it is my understanding that, under section 
401 of the Gramm-Leach-Bliley Act, the Office of Thrift Supervision has 
the authority to prevent evasions of the unitary thrift holding company 
grandfather provisions of the act. Will the chairman tell me if that is 
correct?
  Mr. GRAMM. Mr. President, that is correct.
  Mr. GORTON. Mr. President, there is a long-standing body of law that 
addresses the issue of when an acquisition or change in control of a 
savings

[[Page 28350]]

association or thrift holding company occurs. Is it intended that the 
Office of Thrift Supervision would apply to existing body of law to 
determine if an evasion has occurred?
  Mr. GRAMM. Mr. President, in response to my colleague, let me state 
that section 401 is intended to authorize the Office of Thrift 
Supervision to prevent evasions through actions that are consistent 
with the statutory, regulatory and interpretive provisions governing 
acquisitions or changes in control of savings associations and thrift 
holding companies that were in effect on the grandfather cut-off date, 
May 4, 1999.


                                title v

  Mr. ALLARD. Mr. President, I wish to engage my esteemed colleague, 
Senator Gramm, in a brief colloquy to clarify two items pertaining to 
title V, subtitle A. First Mr. President, is it Chairman Gramm's 
understanding that the term ``nonpublic personal information'' as that 
term is defined in section 509(4) of title V, subtitle A, applies to 
information that describes an individual's financial condition obtained 
from one of the three sources as set forth in the definition, and by 
example would include experiences with the account established in the 
initial transaction or other private financial information?
  Mr. GRAMM. Mr. President, that is my understanding.
  Mr. ALLARD. The second item relates to an amendment to the Fair 
Credit Reporting Act, ``FCRA'' in 506(b) of title V, subtitle A. Mr. 
President, it is my understanding that striking the FCRA's outright 
prohibition on various agencies drafting trade regulation rules or 
other regulations is intended to allow for these agencies to fulfill 
their mandate under this title to issue regulations. The deletion 
leaves the law silent on the issue of agencies issuing regulations 
outside of this title, and it should not be construed to mean that an 
agency now has a mandate to issue any such regulations. Mr. President, 
does the distinguished chairman of the Banking Committee, Mr. Gramm, 
share this view of the provision?
  Mr. GRAMM. Mr. President, I agree with Senator Allard's assessments 
on these points.
  Mrs. FEINSTEIN. Mr. President, I rise to support the Financial 
Services Modernization Act. I would like to explain why I will vote in 
favor of this conference bill, but I also want to discuss one area 
where I feel this legislation falls significantly short--privacy. The 
financial modernization bill deserves the support of this body for 
several reasons:
  (1) First, it reforms our antiquated financial services laws. By 
allowing a single organization to offer any type of financial product, 
the bill will stimulate competition and innovation in the banking, 
securities and insurance industry. It will increase choice and reduce 
costs for consumers, communities and businesses. According to Secretary 
Summers, Americans spend over $350 billion per year for fees and 
commissions for brokerage, insurance and banking services. If increased 
competition yielded savings to consumers of even 5 percent, they would 
save over $18 billion per year.
  (2) By removing the barriers to competition, the act will also 
enhance the stability of our financial services system. Financial 
institutions will be able to diversify their product offerings--and 
therefore their sources of revenue. They will also be better able to 
compete in the global financial marketplace, which is rapidly changing. 
Though U.S. banks still maintain some of the highest numbers in assets, 
they no longer rank the highest among the world's top banks in 
profitability. The financial services modernization bill gives U.S. 
financial institutions the flexibility and expanded powers to stay 
competitive in the changing market.
  (3) The conference bill benefits Americans communities by preserving 
the Community Reinvestment Act. I am pleased to see that the act 
requires that banks maintain a good track record in community 
reinvestment as a condition for expanding into newly authorized 
businesses. This is the first time that a bank's rating under the CRA 
will be considered when it expands outside of traditional banking 
activities. I am also happy to see that the act applies CRA to all 
banks without exception.
  Despite these merits, there is one issue of great concern to many 
Californians and many Americans--the lack of privacy provisions in the 
legislation. As my colleagues know, financial institutions are 
currently permitted to document, profile, and sell our most personal 
financial information. Financial institutions share and sell social 
security numbers, addresses, information about what stocks we own, what 
checks we write, what we charge on our credit cards and how much money 
we have in the bank. All of this without the knowledge or permission of 
their clients. I believe Americans should have the opportunity to 
prohibit a financial institution from sharing or selling this personal 
financial information.
  The bottom line is simple: Bank customers should have the final say 
in whether their bank sells or even shares their personal financial 
information. Regardless of whether that information is being shared 
with a financial institution within a bank's shareholding company or 
with a third party. The consumer should decide who has access to this 
personal information. According to an October 21st USA Today article, 
U.S. Bancorp sold customer information to a telemarketer membership 
program. U.S. Bancorp customers began complaining that they were billed 
for marketing services they never agreed to. According to the lawsuit 
against U.S. Bancorp, the bank's customers say they were never even 
contacted by the marketing service before the charges appeared on their 
statements.
  In one case, the suit says, a 90-year-old woman who had been a 
customer of U.S. Bancorp for more than 50 years was billed for a 
program that offers discounts on computer products. The woman didn't 
own a computer. Before she died, she tried for 11 months to get the 
telemarketing firm to remove the charges from her credit card account. 
The legislation does not do enough to prevent this type of problem. In 
another example, the Los Angeles Times reports that a small San 
Fernando Valley bank unknowingly became the accessory to a huge credit 
card scam. The bank sold 3.7 million credit card numbers to a felon, 
who then allegedly bilked cardholders out of millions of dollars.
  Under the act, people applying for a mortgage will have no say over 
who has access to their personal financial data. If a person has been 
treated for an illness and paid for their medical tests with their 
credit care or personal checks, that individual's bank and mortgage 
company will share this information, without the knowledge or consent 
of the client. Tax information, insurance information, and records of 
medical tests they have purchased will be fair game for financial 
institutions. This sensitive information should be kept private--not 
shared between banks, insurance companies, and securities firms.
  For 66 years--since the Glass-Steagall Act was enacted after the 
Depression--a boundary has existed between banks, insurance companies, 
and securities firms. This bill breaks through that wall, by allowing 
financial entities to merge. This change, while beneficial to the 
industry, should not come at the expense of the consumer. Industry 
groups are opposed to privacy provisions--and go so far as to say that 
privacy provisions could make it tougher for them to fight fraud. It's 
no surprise they feel this way, considering banks typically get 20-to-
25 percent of the revenue generated by the marketer. But a handful of 
financial companies already allow customers to restrict the use of 
private information--and it doesn't seem to be hurting them. American 
Express sends customers a notice once a year, asking customers if they 
want to receive product offers from American Express or outside 
merchants. Even if customers want the offers, the company never gives 
detailed information about a transaction history. If American Express 
can protect its customer's privacy, why can't all financial 
institutions?

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  The conference bill includes only a weak privacy provision allowing 
customers to say no to their bank's disclosure of information to third 
parties--such as telemarketers. I think this is a serious flaw in an 
otherwise very good bill. In fact, the language adopted by the 
conference authorizes financial institutions and third parties to enter 
into joint marketing agreements that would allow them to skirt the opt-
out requirement. And the bill intentionally does not restrict the 
sharing of private financial information among a financial 
institution's affiliates. I hope my colleagues will work with me in the 
future to see that Americans' privacy is better protected.
  The Financial Services Modernization Act makes the most important 
legislative changes to the structure of the U.S. financial system since 
the 1930s. I believe the bill is good for the U.S. economy as well as 
our ability to compete in global financial markets. Despite my reserves 
about the privacy provisions in the bill, I support S. 900, and urge 
its adoption by my colleagues.
  Mr. KERRY. Mr. President, I express my genuine appreciation to all 
the members of the Senate Banking Committee for their hard work, 
commitment and dedication to resolving the tough and contentious issues 
surrounding the conference report that we are considering today. It is 
no exaggeration to suggest that this conference report represents more 
than 15 years of hard work and perseverance in tackling one of the most 
important issues in the new economy.
  I support the conference report. However, I do so with some 
reservations about the way the final product was developed and because 
it does not include a number of important consumer protection 
provisions. For example, the legislation will pre-empt important state 
legislation prohibiting certain predatory lending practices that result 
in poor, vulnerable, elderly homeowners being bilked out of thousands 
of dollars or, in some cases, losing their homes.
  However, I believe enactment of financial modernization is a critical 
first step toward breaking down barriers to allow financial services 
companies to provide better services at lower costs to consumers and to 
help insure American dominance of global finance in the 21st Century.
  As we all know, breaking down the walls that separate commercial 
banking from the insurance and securities industries is of enormous 
importance to the future of the financial services industry, which has 
undergone an immense transformation in recent years. Dramatic changes 
in technology along with historic mergers, consolidations, and 
acquisitions have reordered the structure of the financial services 
industry and made the statutory distinctions that have existed in the 
law until today less and less relevant in the real world.
  As a result of these changes, large corporations have begun bypassing 
traditional financial institutions and accessing capital markets 
directly. Many large corporations now meet their funding needs by 
issuing commercial paper, rather than by borrowing from banks. Banks 
and thrifts are also experiencing increased competition from non-
banking institutions that offer a range of financial products and 
services. During this time, commercial banks have been unable to 
provide consumers with a number of important financial products and 
services.
  The conference report that the Senate is considering today repeals 
the Glass-Steagall Act, which has separated banks from securities firms 
since the 1930s. It also repeals a similar provision that has separated 
banking and insurance. It will permit the creation of new financial 
holding companies that could offer banking, insurance, securities and 
other financial products.
  I am very pleased that the Treasury Secretary Summers and Federal 
Reserve Bank Chairman Alan Greenspan have come to an agreement on the 
operating subsidiary issue that was included in the conference report. 
Banks will now be able to choose the corporate structure under which to 
conduct new non-banking activities--either through an operating 
subsidiary or through an affiliate. The bill would allow operating 
subsidiaries to engage in merchant banking activities, but only if the 
Federal Reserve and the Treasury jointly agree that the activity is 
permissible. A bank would have to be well capitalized and well managed 
after deducting its equity investment in an operating subsidiary from 
its capital in order to take advantage of these new activities. I 
believe that this compromise will let banks choose their own operating 
structure and will help maintain safety and soundness in our financial 
system.
  The operating subsidiary provisions also include language that would 
retain state authority over state chartered bank subsidiaries. Section 
121(d)(1) of the final bill provides that nothing in Section 46(d) 
supersedes the current authority of the FDIC over bank subsidiary 
activities under Section 24 of the Act. The provision recognizes that, 
consistent with current and proposed rules of the FDIC, investment 
authorities of state-chartered bank subsidiaries are not to be 
restricted to any greater extent that those authorized for a state bank 
itself. More particularly, in several states, including Massachusetts, 
state banks have a long history of exercising limited authority to 
invest in common stocks either directly or through wholly-owned 
subsidiaries. The FDIC has acknowledged and approved such investment 
authority through so-called investment subsidiaries. It is my 
understanding that the newly added Section 46(d) acknowledges and 
preserves that authority and does not contemplate imposition of 
additional regulatory requirements or impediments.
  I am also glad that the conference report will permit financial 
institutions to engage in merchant banking activities. This will allow 
banks to invest in small companies for the purpose of appreciating and 
ultimately reselling the investment. The merchant banking provisions 
limit the day-to-day management of companies by financial institutions 
and the duration of the investment. I am hopeful that these new powers 
will allow banks to provide more capital for small businesses, which 
have been leading contributors to the economic growth of our country.
  The conference report includes an important limitation on banking and 
commerce which eliminates the ability of commercial firms to form new 
unitary thrifts unless they had owned or had applied to own a unitary 
thrift by May 4, 1999. Under the conference report, current unitary 
thrift holding companies and their savings association subsidiaries 
would be able to continue their normal activities. However, future 
sales of unitary thrift holding companies would not be allowed to 
commercial firms. Sales would be limited only to financial holding 
companies.
  Building this fence around financial firms to keep them largely 
isolated from joint ownership with commerce and industry is an 
extremely important safeguard in this legislation. My first priority as 
member of the Senate Banking Committee is to maintain the safety and 
soundness of our financial system to insure that American taxpayer 
funds are not necessary to bail out our financial institutions. 
However, we are now in an era in which banks and other firms are 
becoming ``too big to fail'' where the government will intervene if its 
collapse would cause a major harm to the economy. With the enactment of 
this legislation, banks, insurance and securities conglomerates will 
grow even larger and more intertwined. The failure of any one of these 
new conglomerates could disrupt our financial system and risk a 
taxpayer-funded bailout that would dwarf the savings and loan payout. 
For example, recently the Federal Reserve Bank felt compelled to rescue 
the Long Term Capital, a hedge fund, even though it was not a federally 
insured bank.
  That is why I strongly supported including a provision that would 
have required large banks to back some portion of their assets with 
subordinated debt. Holders of this type of debt would have a strong 
incentive to monitor each financial institution's level of risk to 
protect their investment. This

[[Page 28352]]

approach could also serve as an early warning signal for regulators of 
banks that are engaged in risky activities. Unfortunately, this 
requirement was reduced to only a study. I will be working with my 
colleagues and with federal regulators to address this problem in the 
future.
  I am also very disappointed that the conference report does not 
include acceptable language regarding mutual insurance companies. Many 
States currently have laws that restrict the hostile take over of a 
mutual insurance company that has recently converted to a stock 
insurer. However, the conference report allows these state laws to be 
preempted ``so long as such restriction does not have the effect of 
discriminating, intentionally or unintentionally, against an insured 
depository institution or an affiliate thereof * * *.'' I believe that 
this language, as currently written, would allow only banks whose 
takeover attempts were denied by a state insurance commissioner to 
litigate. The ability to litigate would not be extended to any other 
potential acquisitor.
  This law means that any state restriction of a banking organization's 
attempts to takeover a demutualizing insurance company could be 
construed by a court as discrimination against the bank. I believe that 
this could lead to costly and time consuming litigation for every 
insurance company that attempts demutualization. Further, if a court 
were to fail to interpret the word ``discrimination'' narrowly, this 
new language could essentially end the important state preemption 
provision only in cases where a bank is the proposed acquisitor. It 
would not allow other potential acquisitors to litigate.
  I am also very concerned about the provision included in the 
conference report that will allow mutual insurance companies to 
redomesticate to another state and reorganize into a mutual holding 
companies or stock companies. I believe that this provision will allow 
some mutual insurance companies to move to states without adequate 
consumer protections and could endanger policyholders during a 
conversion from mutual to stock form.
  I am pleased, however, that the conference report includes the PRIME 
Act, which will provide an opportunity to lend a helping hand to those 
in need of financial aid and technical assistance so that they can 
fulfill their personal, family, and community responsibilities. 
Microenterprise development has given many a chance to break the cycle 
of poverty and welfare and move toward individual responsibility and 
financial independence.
  Specifically, the PRIME Act authorizes funding for technical 
assistance to give microentrepreneurs access to information on 
developing a business plan, record-keeping, planning, financing and 
marketing, which are crucial to small business development.
  For example, PRIME would augment funds for valuable programs run by 
Working Capital, located in Massachusetts and a recipient of a 
Presidential Award for Excellence in Microenterprise Development in 
1997. Working Capital currently offers a number of valuable programs to 
its microenterprise customers which could be augmented by additional 
funding under PRIME such as providing business credit to 
microentrepreneurs and providing business education and training on how 
to draw up business plans and prepare financial projections. These 
programs instruct microentrepreneurs on how to use these tools in 
managing their businesses. This type of assistance is crucial to the 
development of our low-income communities and throughout the United 
States.
  I very much appreciate that the conference report includes a 
provision to repeal the Savings Bank Provisions in the Bank Holding 
Company Act. Section 3(f) was added to the Bank Holding Company Act in 
1987 to provide a special grant of authority to savings banks, but 
court decisions and Federal Reserve Board interpretations now make it 
restrictive for many Massachusetts banks. Repeal of this provision will 
bring the treatment of Massachusetts savings banks in line with that of 
other financial institutions.
  Mr. President, I also want to emphasize that although I strongly 
believe that we have to take this first step to toward modernizing our 
banking industry and although I will support this conference report, I 
remain committed to strengthening and improving consumer privacy 
protections and to encouraging greater community investment by 
financial institutions.
  I believe that we can and must do more to safeguard the financial 
privacy of every American. Every American deserves to control his or 
her personal financial information. I am concerned that the changes in 
technology and in the marketplace have diminished every American's 
ability to safeguard his or her personal financial privacy. The 
conference report gives customers of financial services companies only 
limited control over their personal financial information. Customers 
will now have the right to object to their institutions' sharing their 
financial data with third parties and will require these institutions 
to provide notice to customers when they disclose financial information 
within an affiliate. Fortunately, the conference report does not 
preempt stronger state privacy laws.
  I want to note for the Record that I supported stronger privacy 
protections that would have given every customer the right to see what 
financial information would be shared with affiliates or third parties. 
I also supported an opt-in standard for consumers whose financial 
institution provides their personal financial information to 
unaffiliated third parties. This provision was supported by 26 state 
Attorneys General and many others. I will be working with my 
distinguished colleagues including the Senator from Maryland Mr. 
Sarbanes, as well as Senators Bryan, Shelby and others to work on 
strengthening safeguards to protect the privacy of every American.
  All throughout the consideration of this legislation, from the very 
first meetings of the Banking Committee, through floor consideration 
and the conference negotiations, Congressional Democrats and the 
Administration have insisted that the Community Reinvestment Act must 
be allowed to grow and adapt to the new circumstances being created for 
the financial industry. Despite the most aggressive, uninformed, and 
sustained attack on that important law I have ever witnessed, I am 
happy to say that the new law will reflect this important goal.
  The new law established that, as a precondition for any bank to 
exercise any of the new powers authorized by this legislation, either 
de novo or through a merger or acquisition, a bank must have a 
satisfactory CRA rating. This test will be applied each time a bank 
seeks to take engage in a new activity, so that a bank will have to, as 
a practical matter, both have and maintain a satisfactory CRA rating to 
take advantage of the new law. Prior to this agreement, a bank could 
start up a securities affiliate without any regard to its CRA rating, 
so this new law is clearly a step forward. That is why Reverend Jesse 
Jackson and the Local Initiatives Support Corporation (LISC) support 
the CRA provisions in the bill.
  I understand and share the concerns of some of my colleagues who 
believe that the conference report does not go far enough. Certainly, 
the alternative that and my fellow Democrats supported would have been 
more acceptable. However, I believe that this legislation clearly meets 
the objective of ensuring that CRA remains a central part of every 
financial institution's operations into the next century.
  The conference report would also require certain agreements between a 
bank and community groups made in connection with CRA to be fully 
disclosed and would reduce the frequency of CRA compliance exams for 
certain banks with less than $250 million in assets.
  I am concerned that further attempts to weaken the Community 
Reinvestment Act will occur during the 106th Congress. Let me be 
absolutely clear: I will strongly oppose any attempts to weaken CRA in 
any manner whatsoever. CRA is a fundamental tool to insure that all 
creditworthy Americans, regardless of the neighborhood they live in, 
regardless of their race or circumstances, have access to the bank 
loans that are needed to buy a home or

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start a business. It is a law that breathes life into the rhetoric we 
all use extolling the virtues of equal opportunity. We cannot and must 
not return to the days of poverty and desperation borne of bank 
redlining in too many communities across the nation.
  This conference report is far from perfect, but few compromises ever 
are. A product that represents more than 15 years of hard work and the 
debates of literally hundreds of individuals and disparate 
constituencies could hardly represent a perfect product to every side. 
This report is no different. But I will tell you, and I think almost 
all of us would agree that in the American system of free enterprise 
the interests of consumers and industry are best served if we permit 
competition as long as that competition is fair and does not give any 
industry or player an advantage over another. I believe that this 
legislation is an important step in facilitating that competition and 
it meets that test by allowing every American access to a broader group 
of financial services at a lower cost. We have a historic chance to 
provide meaningful financial services reform. I will support the 
conference report and I urge my colleagues to support it as well. And, 
remembering as I think we all should, that this legislation represents 
not an endpoint but a starting point, I would respectfully suggest that 
we all focus in the months and years ahead on the potential role this 
Senate can play in helping to create the environment in which financial 
services work to the best advantage of every American. Our goal should 
be nothing less.
  Mr. GORTON. Mr. President, I expect the financial services 
modernization conference report will pass both the Senate and House 
with large majorities. I certainly understand the strong support for 
this sweeping legislation, though I must register my strong displeasure 
and firm opposition to the punitive unitary thrift charter provisions 
included in this measure. The language approved by the conference 
committee and favored by the Clinton-Gore administration unfairly, 
unnecessarily and without compelling reason eliminates and restricts 
existing authorities and powers of the unitary thrift charter.
  I am proud to represent a state where the thrift industry is 
thriving. Washington state thrifts manage over $200 billion in assets. 
It may surprise some to learn that the largest unitary thrift in the 
nation, Washington Mutual, is headquartered in Washington state. One 
does not expect a financial institution of this size to be based in 
Washington. Though, knowing this fact, one should not be surprised to 
learn of my significant interest in how this legislation affects my 
largest financial institution constituent and a major Washington state 
employer.
  I support virtually all of the conference report's modernization 
provisions: eliminating the 1933 barrier to the affiliation of banks, 
insurance companies and securities firms that will allow consumers 
greater choice at reduced costs; the compromise agreement reached 
between the Federal Reserve Board and Treasury Department on the 
regulation of operating subsidiaries; improving the Community 
Reinvestment Act; expending Federal Home Loan Bank provisions that will 
allow greater access for small business and farm loans; and the 
inclusion of privacy protections for consumers.
  These provisions do contribute to the modernization of our nation's 
financial services industry from the Great Depression era laws under 
which they have been operating. These changes represent positive 
advances for the future. Such is not the case with the unitary thrift 
charter provisions. The unitary thrift language is regressive and 
punitive--a step backwards for financial modernization and a black-mark 
on an otherwise favorable bill. I sincerely regret that delusional 
fears about the non-existent and impossible mixing of banking and 
commerce under a unitary thrift charter have prevailed over fact and 
reason. Neither the FDIC or the primary regulator have identified any 
safety and soundness concerns during the three decade existence of 
unitary thrifts. Not one.
  It is clear that this legislation unfairly treats Washington Mutual 
and other unitary thrifts, and for this specific reason I seriously 
considered voting against the conference report to protest the 
injustice of the unitary thrift provisions. After listening to and 
speaking with Chairman Gramm to clarify the impact of the unitary 
thrift charter provisions, however, I concluded that I will support 
passage of the conference report. The unitary thrift provisions are 
completely contradictory to this legislation's goal of modernization, 
yet I find the clarifying statements of Chairman Gramm to be of 
sufficient reassurance that I will not vote against this conference 
report.
  Mr. MACK. Mr. President, I rise today in strong support of the 
conference report accompanying S. 900, the Gramm-Leach-Bliley Act of 
1999. And I want to begin my remarks today by congratulating Senator 
Gramm, my friend and the chairman of the committee. We would not be 
here without his hard work, dedication, and skillful negotiation and he 
deserves the lion's share of credit for the fine bill we have before us 
today.
  We are making history here. It has been 66 years since Congress 
passed the Glass-Steagall banking act in the depths of the Great 
Depression. It has been at least twenty years since determined efforts 
began in the Congress to repeal this outdated law and modernize the 
country's banking code. Today--finally--we have come to the end of the 
road.
  As we stand on the verge of passing this bill, we have a great view 
both backward and forward. We can see a past in which the country's 
financial services industry led the world despite an archaic code 
recognized by everyone to be insufficient. And we can look ahead into a 
future that offers the American financial consumer: New and innovative 
products, better choices, information and service, and workable 
regulations that allow our financial firms to compete in the global 
marketplace to an even greater extent than today.
  This much-needed legislation modernizing our nation's banking laws is 
happening none too soon. I want to spend some time talking about the 
two reasons I believe we're here. The first is the transformation of 
our economy over the past 20 years, and by extension the remarkable 
changes in our financial services sector. And the second is the 
tremendous impact of the technological revolution on the banking 
industry.
  We are currently in the eighth year of the longest peacetime economic 
expansion in our history. When you look at the data, there is only one 
conclusion to draw: we are now reaping the economic benefits of the 
hard decisions on economic fundamentals we made back in the 1980s. 
Under the leadership of President Reagan, we dramatically lowered 
marginal tax rates, began the rollback of burdensome and overlapping 
regulations, promoted openness to trade and investment around the 
world, lowered interest rates, and defeated the inflation menace that 
crippled our economic competitiveness. In the 1990s, Congress finally 
completed the job by producing the first balanced federal budgets in a 
generation.
  You cannot overestimate the impact of these fundamental economic 
victories on the prosperity the nation is enjoying today. One of my 
biggest concerns, as I think about the history of this era, is people 
will be left with the impression that President Clinton's 1993 tax 
increases created this economic expansion. Nothing could be further 
from the truth. We must not forget the hard--and ultimately correct--
decisions made on fundamental questions like taxes, regulation, 
interest rates, and inflation in the 1980s that freed up the 
marketplace and allowed American businesses to capitalize on their 
inherent advantages.
  The country's financial sector has certainly shared in this 
prosperity. We have witnessed a revolution in the delivery of financial 
services during the 1990s as the traditional barriers between banking, 
insurance and securities began to come down. Freedom and our free 
enterprise system ensured that new financial products and alliance 
emanated from America to service the

[[Page 28354]]

demands of the global economy. These products and alliance provide 
American businesses, investors, and consumers with the ability to 
secure more easily the capital they need to finance their hopes and 
dreams. As this new economic and financial dynamic became more clear, 
it was also apparent our existing banking code was outdated and in need 
of change.
  As part of the new economy, it is hard to overstate the impact of the 
technological revolution on the financial marketplace. Earlier this 
year, during hearings on the bill before us, Chairman Greenspan noted 
the financial sector:

       . . . is undergoing major and fundamental change driven by 
     a revolution in technology, by dramatic innovations in the 
     capital markets, and by the globalization of the financial 
     markets and the financial services industry.

  Indeed, the financial marketplace is changing with lightning speed. 
In September, we held a high-technology summit at the Joint Economic 
Committee. One of those who testified before our committee was a 
twenty-nine-year-old entrepreneur who created an electronic stock 
trading network. Nine of these electronic trading networks make up 
about twenty percent of the NASDAQ market and are posing a serious 
challenge to more traditional stock exchanges and markets. Mortgages 
and traditional banking services are available over the internet. And 
anybody who watches television advertisements knows a new generation od 
web-based businesses are transforming the traditional image--and, 
incidentally, the fee structure--of stock brokers and stock trading. 
These businesses and the many others who have gone online to challenge 
the existing orthodoxy are prompting sweeping changes in the financial 
marketplace. And they are creating yet another imperative for this 
bill.
  As the American financial industry seized on technological advances 
to lead the world into new financial markets and new financial 
products, they awoke from their long slumber of lobbying wars and turf 
protection and realized it was in everybody's best interest to pass 
this bill. If our financial firms are to lead and compete in the world 
marketplace, they must be able to compete from a position of strength. 
And they must compete from the foundation of banking laws that reflect 
the new realities of the world marketplace.
  The end game on this legislation was by no means easy. During the 
eleven months we spent writing this bill, we had to continually strike 
careful balances between the broad, over-arching goals of the bill and 
the temptation to tinker with the marketplace and predetermine the 
shape of future financial products and services. The fast pace of 
change presents a difficult choice for policymakers. We are often too 
cumbersome in the Congress to lead, we can be irrelevant if we follow, 
and some among us believe it could be risky to get out of the way. In 
the face of this dilemma, some of our colleagues wanted us to 
anticipate every possible side-effect of this financial transformation 
and write the laws accordingly. This is just not possible, and the 
resultant regulatory burdens would have stopped this financial 
revolution in its tracks.
  In the bill before us today, we tried to embrace the following 
principles:
  First, banks, insurance companies and securities firms should be able 
to enter one another's business and create a financial dynamic for the 
next century;
  Second, new banking products should be regulated by the regulator 
that knows them best.
  Third, institutions should disclose to customers what they are doing 
with their sensitive personal information--both within and outside the 
financial firm. And customers should be able to stop these companies 
from sharing their information with third parties.
  Next, new financial activities conducted through subsidiaries of 
banks should be conducted so as to ensure taxpayer guaranteed deposits 
are not threatened.
  And finally, the burdensome regulations on banks with respect to 
community lending should not be increased as a result of what we're 
doing in this bill.
  There are sensible guidelines and I'm satisfied we've created the 
basis here for a safe, sound and flexible financial industry that will 
serve the interests of American consumers, investors and businesses 
well into the future.
  As I said at the beginning of my remarks, we are making history here. 
A hundred years from today, I believe the primary thing people will 
remember about this Congress is that we finally did the right thing and 
passed this bill.
  Mr. President, I would like to conclude my remarks on a personal 
note. As I begin to recognize the reality that my service in the United 
States Senate will end in slightly more than a year, I find I am 
engaging in the occasional reflection.
  During the last 12 years of my 18 years in the Congress, I served on 
the Senate Banking Committee--the committee responsible for writing and 
overseeing the laws of the land that regulate the banking and financial 
industry. This has been special to me because I spent the first sixteen 
years of my career in the banking business. It was work I enjoyed as 
the years went by. It was also work I found increasingly frustrating 
because of the stifling regulatory burden placed on banks by the 
federal government. It was for these and other reasons I left my 
position as President and LEO of my bank in Cape Coral, Florida and ran 
for the Congress.
  I will not stand here today and claim the credit for the far-reaching 
and far-sighted bill before us today. My friend and colleague Senator 
Gramm deserves the credit on the Senate side. I nonetheless feel a 
strong sense of pride and institutional accomplishment for the legacy 
we are leaving to the United States in passing this bill. It will 
benefit the people, the industry, and the economy as a whole and it is 
truly a document we can all be very proud of. I urge my colleagues to 
support the conference report
  Mr. WYDEN. Mr. President, I have always been supportive of 
modernizing the outdated laws and regulations governing the financial 
services industry. It doesn't make sense to me to slap a regulatory 
straight-jacket on American financial companies and drive up costs for 
consumers while companies around the globe are able to compete 
unhindered by unnecessary barriers. It seems to me that you can't 
compete in a 21st century global financial market using a playbook that 
was written during the Great Depression.
  But I have also believed that financial services modernization 
shouldn't come at the expense of consumer and community interests. In 
fact, back in May, I voted against the Senate version of this bill, as 
did 43 of my colleagues here in the Senate, because it would have 
devastated lending in rural and low income communities, and because it 
didn't adequately address the issue of consumer financial privacy.
  Fortunately, this conference report is leaps and bounds better than 
the bill that passed along party lines here in the Senate several 
months ago. It won't allow financial institutions to participate in the 
new and improved financial market unless they maintain a good community 
lending record. And, while far from perfect, it also begins to address 
the issue of consumer financial privacy, which was virtually non-
existent in the previous bill.
  This bill requires financial institutions to disclose their privacy 
and information sharing policies to their customers. And in some 
instances--but not enough--it allows consumers to block these companies 
from sharing their private customer information with other companies. 
This is an improvement over the original Senate bill, and even an 
improvement over current law.
  This is a good start on financial privacy, but it doesn't close the 
deal. The privacy provisions in the conference report do not provide 
the level of protection that the American people deserve.
  There is a long way to go with respect to protecting the financial 
privacy of all Americans. While I am disappointed that the privacy 
protections in the bill are not as strong as I would like, I share the 
beliefs of several of my distinguished colleagues, such as Senator 
Sarbanes and Senator Leahy, that these protections can be and must be 
further strengthened by legislation

[[Page 28355]]

next year, and I intend to work closely with my colleagues to make sure 
this happens.
  On balance, the conference report should be adopted, and I hope that 
the same forces that worked so hard to move legislative mountains and 
align political stars to make this legislation possible will work 
equally as hard with me and other Senators next year to give Americans 
the privacy protection they demand and deserve.
  Mr. LIEBERMAN. Mr. President, I rise today to express my support for 
the Financial Services Modernization Act of 1999. The Financial 
Services Modernization Act of 1999 is landmark legislation that 
provides for a historic modernization of our financial services system. 
This legislation is the culmination of years of effort on the part of 
several Congresses, several administrations, and federal financial 
regulators. Passing this legislation will eliminate inefficiencies and 
unnecessary barriers in our economy that were created by the Glass-
Steagall Act of 1933 and other laws passed generations ago.
  With this legislation, the Congress recognizes the significant 
transformations taking place in our economy and its financial services 
sector. Through this Act, Congress makes the necessary and critical 
leaps for our financial services sector to catch up with the realities 
of a marketplace and economy driven by an information technology 
revolution. The changes created through this legislation are 
inevitable. They overhaul laws implemented decades ago that have not 
withstood the test of time and that have increasingly been bypassed 
through more and more regulatory loopholes. Passing the Financial 
Services Modernization Act of 1999 will create a rational financial 
structure in the U.S., the world's largest economy, that will be 
competitive in the global economy. I strongly urge my colleagues to 
support this legislation.
  By updating laws separating banks, securities firms, and insurance 
companies, this Act will result in a broader array of financial 
services and products for consumers. It will spur innovation in the 
financial services industry and create a more competitive marketplace 
where powerful new products come to market more quickly and at a lower 
cost to consumers. It will lead to the creation of an array of new 
products for consumers and at the same time will help them to make 
their choices more intelligently and efficiently by allowing for one-
stop shopping for a multitude of financial services.
  Specifically, by overriding sections of the Glass-Steagall Act and 
other federal and state laws, this legislation will allow banks, 
insurance companies, and security firms to more easily merge or 
otherwise enter one another's businesses.
  While allowing the industry greater flexibility to provide services, 
this legislation also protects consumer privacy by requiring financial 
institutions to create privacy policies and spell them out to 
consumers. Financial institutions will have to provide notice of how 
they share the financial information of their customers and with 
certain exceptions they would be prohibited from disclosing personally 
identifiable financial information to non-affiliated third parties 
without first giving consumers the opportunity to ``opt out''. The 
legislation gives regulatory agencies the authority to enforce those 
privacy protections.
  Importantly, this legislation also retains key parts of the 1977 
Community Reinvestment Act. Any financial services company that is out 
of compliance with that Act would not be allowed to take advantage of 
mergers and other benefits outlined under this legislation. It is right 
that the Administration and others held fast to keeping a strong CRA 
component in this legislation. The CRA has been critically important to 
many communities and community-based organizations in Connecticut and 
across the country. The CRA, like the Individual Development Accounts 
(IDAs) that I strongly support, helps more Americans to actively 
participate in our economy by providing them the ability to build 
assets and to access financial services.
  This legislation is not perfect. Its implementation will need to be 
monitored over time. I will be paying particular attention to how this 
legislation affects both consumer privacy and CRA implementation. 
However, this legislation is good and long overdue. It provides 
balanced and strong protections for consumers and communities without 
diluting its intended financial services benefits.
  Finally, I would like to thank those who have worked so tirelessly to 
do what so many others have tried and failed to do for the last 20 
years. Through the hard work of the Senate Banking Committee members, 
including Senator Dodd of Connecticut and Chairman Gramm, their House 
counterparts, in conjunction with the Administration, particularly 
Secretary Summers and his staff, the financial services industry, and 
those representing the interests of consumers and communities, we now 
have legislation with compromise language that achieves a broad public 
purpose. We are now able to achieve the improvements to our financial 
services sector that have been needed for decades and that will 
effectively bring us into the next century.
  Mrs. LINCOLN. Mr. President, I rise today in support of the Financial 
Modernization Bill. After decades of unsuccessful tries, it appears 
that financial modernization legislation may finally become a reality. 
As we move into the next millennium, I believe it is important that the 
financial service structure in this country is up to par with the rest 
of the world so that American finance can continue to lead 
internationally.
  The thing that impresses me the most about this bill, Mr. President, 
is not the way it will strengthen American financial markets and allow 
this important sector of our economy to grow with the technology of the 
age. It's not even that we will close the Unitary Thrift Loophole, or 
that we will maintain the Community Reinvestment Act to ensure that low 
income and minority communities in my home state of Arkansas will 
continue to have access to the capital needed to create jobs and 
increase incomes. What impresses me most, Mr. President, is the way we 
are going about passing it. When I vote for this bill later today, I 
feel like I will have weighed all the issues and had the opportunity to 
actually work to make it better for the people of my state. We 
deliberated, discussed, and fought over the merits of the legislation--
not just parliamentary tactics. This bill was scrutinized by Senator 
Sarbanes and Senator Gramm and all of my colleagues on the Senate 
Banking Committee before it ever got to the floor. Before it was even 
put on the calendar, it was subject to the judgement and the intellect 
of these men, whose esteem I hold in the highest regard.
  After this bill came out of committee and to the floor, we were able 
to offer and vote on amendments to adjust and strengthen the bill. I 
supported some amendments that passed, and I supported some that 
failed, but what is important is that my votes and the votes of my 
colleagues were registered and the conferees were able to gauge the 
Senate's support for these provisions. This allowed for compromise, Mr. 
President, and at the end of the day it allowed for a bill that a 
majority of the Senate can and, I predict, will support.
  Mr. BURNS. Mr. President, I rise today to express my concern over the 
lack of adequate privacy protections in the financial modernization 
bill under consideration. While I feel that the current laws governing 
our financial services industry are out-of-date and in need of 
modernization, I do have strong concerns over the inadequate and weak 
privacy provisions included in this bill.
  Paramount to our freedom is the right to privacy; to be left alone 
and to be secure in the belief that our business is just that, ours and 
no one else's. When we do share our personal business information with 
others it is with the real and reasonable expectation that it remains 
our property. When dealing with our doctor or lawyer we know that the 
communication is privileged. Traditionally, when providing information 
to our banker or insurance agent or our stockbroker, we similarly

[[Page 28356]]

believed that the information provided was specific to that 
transaction.
  We choose to compromise our privacy to the extent necessary to 
conduct business and with the belief that the information is ours and 
does not become the property of the person with whom we are dealing. No 
one has the right and no one should have the right to market our 
personal information without our prior approval. To do so violates our 
privacy and compromises the trust relationship that is vital to 
commerce.
  Regrettably, we now know that those we trusted with one of our most 
prized possessions, our privacy, have violated that trust in the 
interests of profit. In the course of deliberations of this bill, we 
have heard that the sharing of information is essential to efficiency 
in the market place and to better provide customer benefits and 
services. However, the fact remains that these benefits come at the 
expense of personal privacy and that creates an atmosphere of distrust 
and invites abuse by the very people we must trust to conduct our 
business. Technology must be tempered with caution. Efficiency cannot 
be at the expense of personal privacy. Institutions should not have the 
license to exploit our information unless they allow us to opt out. 
Individuals should have the right to allow institutions to share their 
information by opting in. Customers should be given sufficient notice 
and choice to deny financial institutions from sharing or selling their 
nonpublic, personally identifiable, sensitive financial information. 
Americans must have the ability to say ``no.''
  This bill remembers the big financial institutions in this country, 
however, seems to forget the most important variable in the equation--
the individual. This bill protects banks' rights, but fails to consider 
an individual's rights to privacy. We need to establish rules to 
protect the privacy of a customer's confidential information. No longer 
should we rely upon or expect the financial institutions themselves to 
do this, as they are the very ones profiting from the sale of customer 
information. We must find a balanced system that protects consumers.
  I assure my colleagues that we will very soon be revisiting this 
issue and that these deliberations will be prompted by constituents 
abused as a result of the loopholes contained in this bill. Bottom 
line, financial institutions should not be allowed to share and sell 
confidential, personal customer information without consent. Americans 
need provisions which truly protect their privacy. Americans deserve 
this right, no less.
  Mr. LUGAR. Mr. President, I raise today in support of passage of the 
Conference Report to accompany S. 900, the Financial Services 
Modernization Act of 1999.
  During my first term in the Senate, I served as a member of the 
Senate Banking Committee. It was a busy time for the Committee: we 
passed the Foreign Corrupt Practices Act, permitted for the first time 
interest bearing checking accounts, and agreed to the Community 
Reinvestment Act. During those years, the Committee also undertook the 
difficult tasks of restructuring the finances for New York City and 
Chrysler Corporation. I am proud of the work we did on the Committee 
with these initiatives, and we made sure that the American taxpayers 
did not have to foot the bill for the restructuring of the debt.
  I am pleased that after all these years, we are on the verge of 
passing comprehensive reform that has bipartisan and Administration 
support. This bill will finally break down inefficient barriers between 
insurance, banking, and securities and allow United States financial 
services corporations to compete on an even basis with their European 
and Asian counterparts.
  Over the years, through regulation, court cases, and the development 
of new financial products, the line separating banking, insurance, and 
securities has been blurred. In recent years, banks have been selling 
insurance and mutual funds; brokerage firms have been offering 
customers money market accounts with check writing privileges. The 
market was dictating that the laws needed to be rewritten. I have 
always believed that the laws should be written by Congress, not 
bureaucrats. It has taken time to fine tune these changes and reach 
this bipartisan consensus; but Congress has finally met this challenge.
  Mr. President, over the course of the last five years, a lot of work 
and hundreds of hours have gone into perfecting this monumental 
legislation. I want to commend the Members of the Conference Committee, 
representatives from the Administration and the Federal Reserve, and 
the financial community for crafting a consensus piece of legislation. 
It will open competition, while establishing proper safeguards to 
protect consumer privacy and maintaining safety and soundness standards 
for federally insured financial institutions.
  In a free market society, competition lowers prices and raises the 
level of customer service. I believe consumers will benefit from this 
landmark bill by giving them the choice of products and services 
offered by more market participants. I am pleased to have this 
opportunity to speak in support of the passage of this long overdue 
legislation.
  I yield the floor.
  Mr. DOMENICI. Mr. President, I rise in strong support of the 
conference agreement before the Senate today. There are few bills 
Congress has completed in my time here which will have a more profound 
impact on our economy than this legislation to modernize and harmonize 
the various segments of our financial services industry.
  I think this historic legislation will result in lower costs of 
financial services for American consumers, and enhance the 
competitiveness of United States companies in the global financial 
marketplace.
  At the outset, I want to congratulate Chairman Gramm and the members 
of the Senate Banking Committee for all of their hard work on this 
issue. As Chairman Gramm knows, it has been no easy task to get the 
banking, securities and insurance industries, as well as the 
Administration, the regulators and community groups to agree on what 
shape this law should take. It is a testament to Senator Gramm's 
tenacity that he was able finally to hammer out this agreement.
  As we move into the 21st century, the United States continues to 
maintain capital markets which are the envy of the world. Bank 
consolidations and rapid expansion of new global markets have meant 
phenomenal growth in our financial services sector in recent years. The 
wave of bank mergers in the late 1990's has led to a situation where 
the assets held by the five largest banks in the United States now 
total $2.1 trillion. Five years ago, the top five only had $753 billion 
in assets.
  In 1998, for the first time in many years, a U.S. bank is one of the 
top 10 largest in the world based on assets. From 1997 to 1998, U.S. 
banks in the top 100 in the world saw their assets grow by 23 percent, 
their capital base grow by 48 percent and their revenues increase by 36 
percent. The United States has 8 of the top 10 securities firms in the 
world and 4 of the top 20 insurance companies.
  With all of this financial strength consolidated in the United 
States, some may wonder why we need this historic new law. With the 
advent of the European Monetary Union, the combined gross domestic 
product of the nations in the Union is already equal to that of the 
United States. When the U.K. joins the Union, the combined GDP will be 
10 percent greater than the GDP of the United States. United States 
firms need to be more flexible, more efficient, and able to offer more 
products if they are to compete successfully in these new markets.
  Currently, European laws are much more flexible, allowing financial 
services firms across the Atlantic to be better integrated than United 
States firms. Our laws need to keep pace. This conference report will 
allow our various banking, insurance and securities firms to combine 
through financial holding companies so that they may be even stronger 
competitors in the increasingly international financial services 
marketplace.

[[Page 28357]]

  This enhanced efficiency is not only good for the United States' 
competitiveness in the international market, it is good for consumers. 
The Treasury Department estimates that every 1 percentage point decline 
in the cost of financial intermediation could save U.S. consumers $3.5 
billion a year.
  This new law will allow consumers to enjoy cheaper access to capital 
and one-stop shopping at financial services superstores. Americans who 
want to borrow to buy a new car or a home, purchase insurance to 
protect that car or home, or invest in securities for the future, will 
for the first time under this new law be able to do all of that at one 
time, in one place and at a lower cost.
  I want to commend the chairman and conferees for the way in which 
they have resolved two major issues which concerned me when we debated 
this bill in the Senate. Those issues are whether the Federal Reserve 
or Treasury Department should be the primary regulator of the new 
financial holding companies, and what to do about abuses of the 
Community Reinvestment Act of CRA.
  First, I have great respect for Treasury Secretary Summers and his 
predecessor, Robert Rubin. They are two of the finest economic and 
financial minds in the world. But I simply believe that it is more 
appropriate for the Federal Reserve, a nonpolitical entity also headed 
by a pretty good economic and financial mind in Alan Greenspan, to 
serve as the primary regulator in this new age. Regulation of our 
financial system should not be subject to the ups and downs of the 
political process, as would be the case if a political appointee, in 
this case the Secretary of the Treasury, had control.
  I believe that this bill makes the proper policy decision by 
designating the Federal Reserve as the umbrella regulator of financial 
holding companies. The bill provides a mechanism for coordination 
between the Fed and the Treasury in approving new financial activities 
for financial holding company subsidiaries. The Treasury Department, 
through the Office of the Comptroller of the Currency will maintain its 
functional regulatory authority over the banking activities of 
affiliates and subsidiaries of national banks. This is a good 
compromise and I salute the chairman for his work.
  Second, I commend the chairman for his diligence in attempting to 
address the abusers related to the CRA. This bill does not go as far as 
I know the chairman would like, but it is a good start. And for those 
concerned community groups out there who have not abused the CRA, let 
there be no confusion: when this law is signed by the President, there 
will still be a CRA and there will still be robust community lending 
across the United States. In fact, the law itself states that nothing 
in the conference agreement repeals any existing provision of the CRA.
  What the bill does is provide regulatory relief to small banks which 
demonstrate that they have achieved at least a satisfactory CRA rating 
in their most recent audit. This will reduce the burdens related to CRA 
exams for 82 percent of all banks. And for the larger institutions in 
cities like Albuquerque, the CRA will continue to apply in the same 
manner as it does today. That is an eminently reasonable approach.
  Finally, the bill allows a little sunlight to be shed on all CRA 
agreements between banks and community groups. Over the next ten years, 
banks have promised $350 billion in loans and payments to community 
groups under the CRA. This law will require full public disclosure of 
those agreements, and an annual accounting of how the money and other 
resources promised in the agreement were utilized. The public has a 
right to examine the costs and benefits associated with CRA agreements, 
and this will provide that public accountability.
  Mr. President, I want to commend all of those who have worked so hard 
to finally get Congress to the point where this bill can become law. I 
am happy to support this bill, and look forward to the President 
signing it into law.
  Mr. MOYNIHAN. Mr. President, we have been debating the subject of 
banking in the Senate since the 18th century. We began to ask ourselves 
a question, could we have a national bank, which Mr. Hamilton, of New 
York, thought we could do and should do. We created one. It had a very 
brief tenure. It went out of existence just in time that the Federal 
Government had no financial resources for the War of 1812. So it was 
reinstituted, in 1816 for 20 years, and went out of existence just in 
time for the panic of 1837. We went through greenbacks. There must have 
been a wampum period. We went to gold coinage. Then a free coinage of 
silver dominated our politics for almost two decades, as farmers sought 
liquidity and availability of credit. Finally, at the end of the 
century of exhaustive debate, we more or less gave up and adopted what 
we now call the Federal Reserve System.
  To say we debated this matter for a century is certainly true. For 
the last quarter century, we have turned our focus to the nonbank bank. 
You are really reaching for obscurity when you define an issue as we 
have done, and yet that seems to be the term with which we have to 
deal.
  The issue of the nonbank banks, were banks will be allowed to expand 
into newly authorized businesses such as securities and insurance 
underwriting, could finally be resolved in the Senate today. As we 
consider the conference report on financial modernization and prepare 
to pass the most significant piece of banking legislation since the 
1933 Glass-Steagall Act, I would like to make two points, followed by a 
coda. The first being that we need financial modernization, that 
Depression-era banking laws need to be repealed. A May 4, 1999, 
Washington Post editorial reads:

       Since the Depression, Federal law has sought to keep 
     banking, insurance and securities industries separate. The 
     idea, in part, was to make sure that Federally insured bank 
     deposits didn't wind up somewhere risky and unregulated. But 
     in recent years, even without a change in the law, that 
     separation has eroded. Banks have found ways to offer mutual 
     funds to their customers; investment firms function like 
     deposit institutions; etc. It makes sense now to bring 
     legislation--and regulation--in line with reality.

  It strikes me as odd that most corporations are free to engage in any 
lawful business. Banks, by contrast, are limited to the business of 
banking. It is generally agreed that the Glass-Steagall Act of 1933 and 
the Bank Holding Company Act of 1956 need to be amended. Banks, 
security firms, and insurance companies should be allowed to offer each 
other's services. They already do by finding loopholes in the law. 
Congress must catch up, and pass a law that condones this activity. 
London does it. Tokyo too. Why not New York, which, if I may say, is 
one of the world's banking capitals?
  This is a real problem for existing banks, who find themselves under 
the serious constraints of Depression-era banking laws. Suddenly, they 
find that their activities are encroached upon and they are not able to 
do things that they ought to do--that they are going to need to do--in 
order to survive in a competitive world economy.
  With this bill, we have the opportunity to modernize our financial 
institutions and allow banks to do the things they ought to do, that 
they are going to need to do, to survive and grow. We must seize this 
opportunity, pass this bill, and give our banks the opportunity to 
compete in the world economy.
  Now to the second point. When this bill came up for a vote last May, 
I could not support it because the provisions concerning the Community 
Reinvestment Act were unacceptable. The CRA, enacted in 1977, has 
played a critical role in revitalizing low-and-medium-income 
communities. New York has benefitted from this. A March 17, 1999 New 
York Times editorial states:

       In New York City's South Bronx neighborhood, the money has 
     turned burned-out areas into havens for affordable homes and 
     a new middle class. The banks earn less on community-based 
     loans than on corporate business. But the most civic-minded 
     banks have accepted this reduced revenue as a cost of doing 
     business--and as a reasonable sacrifice for keeping the 
     surrounding communities strong.

  I am told that an acceptable--albeit not perfect--compromise has been 
worked out on this matter. With this agreement in hand, I can now 
support

[[Page 28358]]

the bill. However, I urge the regulators to keep a close eye on the CRA 
provision and make sure that banks make loans where they are required 
to and keep investing in those communities that need it most.
  I conclude on the question of privacy. No small matter. Consumers, 
rightly so, are concerned that their personal information will be 
shared among the newly affiliated companies. The bill places no 
restrictions on the kinds of detailed personal information--such as 
customer bank balances, credit card account numbers, income and 
investments, insurance records, purchases made by check or credit 
card--that can be swapped among them. A November 3, 1999, Times 
editorial addresses this matter:

       In an electronic world where businesses can effortlessly 
     collect, compile, and mine personal data for marketing and 
     other purposes, consumers should have the right to control 
     the spread of their financial information. Under current 
     Federal law, consumers have almost no rights in this area. 
     The bill adds some limited protections, but it does not go 
     far enough, particularly since conglomeration will greatly 
     accelerate the sharing of private information in the 
     financial sector.

  As we move ahead with this bill and make substantial changes to the 
banking laws, we must make sure that privacy laws keep pace. this is 
much too important of an issue to be overlooked.
  I ask unanimous consent that the Times March 17th and November 3rd 
editorials, and the Post March 4th editorial be printed in the Record.
  There being no objection, the editorials were ordered to be printed 
in the Record, as follows:

                [From the New York Times, Mar. 17, 1999]

                        Mischief From Mr. Gramm

       Cities that were in drastic decline 20 years ago are 
     experiencing rebirth, thanks to new homeowners who are 
     transforming neighborhoods of transients into places where 
     families have a stake in what happens. The renaissance is due 
     in part to the Federal Community Reinvestment Act, which 
     requires banks to reinvest actively in depressed and minority 
     areas that were historically written off. Senator Phil Gramm 
     of Texas now wants to weaken the reinvestment Act, 
     encouraging a return to the bad old days, when banks took 
     everyone's deposits but lent them only to the affluent. 
     Sensible members of Congress need to keep the measure intact.
       The act was passed in 1977. Until then, prospective home or 
     business owners in many communities had little chance of 
     landing loans even from banks where they keep money on 
     deposit. But according to the National Community reinvestment 
     coalition, banks have committed more than $1 trillion to once 
     neglected neighborhoods since the act was passed, the vast 
     majority of it in the last six years.
       In New York City's south Bronx neighborhood, the money has 
     turned burned-out areas into havens for affordable homes and 
     a new middle class. The banks earn less on community-based 
     loans than on corporate business. But the most civic-minded 
     banks have accepted this reduced revenue as a cost of doing 
     business--and as a reasonably sacrifice for keeping the 
     surrounding communities strong.
       Federal bank examiners can block mergers or expansions for 
     banks that fail to achieve a satisfactory Community 
     Reinvestment Act rating. The Senate proposal that Mr. Gramm 
     supports would exempt banks with assets of less than $100 
     million from their obligations under the act. That would 
     include 65 percent of all banks. The Senate bill would also 
     dramatically curtail the community's right to expose what it 
     considers unfair practices. Without Federal pressure, 
     however, the amount of money flowing to poorer neighborhoods 
     would drop substantially, undermining the urban recovery.
       Mr. Gramm argues that community groups are ``extorting'' 
     money from banks in return for approval, and describes the 
     required paperwork as odious. But community organizations 
     that build affordable housing in Mr. Gramm's home state 
     heartily disagree. Mayor Ron Kirk of Dallas disagrees as 
     well, and told the Dallas Morning News that he welcomed the 
     opportunity to explain to Mr. Gramm that ``there is no 
     downside to investing in all parts of our community.''
       In a perfect world, lending practices would be fair and the 
     reinvestment Act would be unnecessary. But without Federal 
     pressure the country would return to the era of redlining, 
     when communities cut off from capital withered and died.
                                  ____


                [From the New York Times, Nov. 3, 1999]

                     Privacy in Financial Dealings

       The financial services bill that will overhaul the nation's 
     banking laws is a good deal for financial institutions but a 
     bad deal for consumer privacy. The bill would allow banks, 
     brokerage houses and insurance companies to merge into 
     financial conglomerates, a long-overdue reform. The banking 
     industry stands to gain from the right to expand into other 
     businesses, and consumers could benefit from the case of one-
     stop shopping and the creation of new financial services. But 
     protecting consumers' financial privacy should also be 
     central to financial modernization. This bill is weak on that 
     score.
       In an electronic world where businesses can effortlessly 
     collect, compile and mine personal data for marketing and 
     other purposes, consumers should have the right to control 
     the spread of their financial information. Under current 
     federal law, consumers have almost no rights in this area. 
     The bill adds some limited protection, but it does not go far 
     enough, particularly since conglomeration will greatly 
     accelerate the sharing of private information to the 
     financial sector.
       The bill would require that a financial institution provide 
     customers with general notice about its privacy and 
     disclosure policy. But the institution would remain free to 
     share a customer's personal information with affiliates of 
     the company and with unaffiliated companies that sign 
     marketing agreements, without the customer's consent and 
     without giving the customer the right to object to having 
     that information transferred.
       The bill places no restrictions on the kind of detailed 
     personal information--such as customer bank balances, credit 
     card account numbers,income and investments, insurance 
     records, purchases made by check or credit card--that can be 
     swapped among affiliated companies. New regulations proposed 
     by the Clinton administration on medical privacy would 
     prohibit a health insurance company from disclosing medical 
     records to a bank. But nothing in this bill would stop a bank 
     or life insurance company, for example, from sharing equally 
     personal information about customers.
       The bill allows consumers to ``opt out'' of disclosure of 
     private information to unaffiliated companies. But that 
     provision contains a big loophole. It would not apply if a 
     financial institution enters into a joint agreement with an 
     unrelated financial institution to market products or 
     services. That means even corporate entities that have no 
     business relationship with a customer could get private 
     information without the customer's consent.
       Privacy advocates have argued that financial institutions 
     should be required to get a customer's consent before they 
     transfer or sell personal information. But the banking lobby 
     contends that getting affirmative authorization is too 
     costly. At the very least, consumers who want to keep their 
     records private should be allowed to opt out of having that 
     information disclosed to others.
       President Clinton has supported a strong opt-out provision, 
     but in final negotiations in Congress the administration 
     acceded to the loopholes that narrow the opportunities to opt 
     out. Most consumers do not want their banks to share or sell 
     personal information to other businesses, whether under one 
     corporate umbrella or not. Their concerns about privacy will 
     only grow as the new conglomerates begin to cross-market 
     their products. If President Clinton signs the bill, as 
     expected, he must push for separate privacy legislation that 
     actually gives consumers the right to personal data.
                                  ____


                [From the Washington Post, May 4, 1998]

                           Banking on Reform

       The Senate today is scheduled to begin considering a bill 
     that would remake the financial services industry, allowing 
     banks and insurance companies and investment banks and 
     insurance companies and investment firms to merge and 
     compete. Similar legislation is making its way through the 
     House. The thrust of both bills is sound. But while the 
     industries have lobbied hard to shape a law satisfactory to 
     them, the current legislation doesn't adequately protect low-
     income communities or consumers' privacy. Financial 
     modernization should apply to them, too.
       Since the Depression, federal law has sought to keep the 
     banking, insurance and securities industries separate. The 
     idea, in part, was to make sure that federally insured bank 
     deposits didn't wind up somewhere risky and unregulated. But 
     in recent years, even without a change in the law, that 
     separation has eroded. Banks have found ways to offer mutual 
     funds to their customers; investment firms function like 
     deposit institutions; etc. It makes sense now to bring 
     legislation--and regulation--in line with reality.
       Congress has been trying to do so, and failing, for more 
     than a decade, and may again. But on the major issues, the 
     administration, the Federal Reserve and Congress have pretty 
     well agreed. They would let the financial services industries 
     meld while for the most part keeping them out of other 
     businesses, a wise decision. They've come up with fire walls 
     and regulatory schemes that, while still not entirely agreed 
     upon, have satisfied most concerns about protecting federally 
     insured deposits.
       But there is no consensus yet on safeguarding the interests 
     of underserved communities. Since 1977 federally insured 
     banks have been subject to the Community Reinvestment Act, 
     requiring them to seek business opportunities in poor areas 
     as well as

[[Page 28359]]

     middle-class and wealthy neighborhoods. The law, a response 
     originally to clear evidence of bias in lending, has worked 
     well. It doesn't force banks to make unprofitable loans, but 
     it encourages them to look beyond traditional customers, and 
     it's had a beneficial effect on home ownership and small-
     business lending.
       Sen. Phil Gramm, chairman of the Banking Committee, now 
     wants to scale the law way back. He argues that community 
     groups use it to extort money from banks; there's scant 
     evidence for that. The real danger is that, with financial 
     modernization, banks will gradually escape their community 
     obligations by transferring capital to affiliates that aren't 
     covered by the law. The law should be extended and modernized 
     to keep pace with a changing industry.
       Consumer privacy also could be in danger as barriers among 
     industries break down. An example: Should your life insurance 
     medical records be shipped over, without your knowledge, to 
     the loan officer considering your mortgage application? Sen. 
     Paul Sarbanes of Maryland and Rep. Ed Markey of 
     Massachusetts, among others, would give consumers more 
     control over the sale and sharing of personal data. As the 
     financial industry moves into a new era, privacy laws should 
     also keep pace.

  Mr. SARBANES. Mr. President, I yield 10 minutes to the Senator from 
Indiana.
  The PRESIDING OFFICER. The Senator from Indiana is recognized.
  Mr. BAYH. Thank you, Mr. President. I thank Senator Sarbanes.
  Mr. President, I rise to express my strong support in favor of the 
Financial Services Modernization Act. I do so because of my heartfelt 
conviction that it will be good for the American economy, it will be 
good for the financial services sector of the economy, and it will also 
be good for consumers and the American people for many years to come.
  I will begin by expressing my gratitude and respect for the leaders 
who have brought us here today after so many years. Senator Gramm has 
performed admirably in getting this accomplished after so many years in 
the past it has failed. I salute him and commend him for his efforts.
  Quite frankly, there were some questions about the new chairman when 
he assumed this position: Would he be willing to make reasonable 
compromises necessary to get the bill passed? Would he take a broader 
view or be the captive of narrow parochial interests? Would he be 
flexible? All these questions, I am proud to say, have been answered in 
the affirmative.
  I wish to salute my colleague, Senator Gramm, for this historic 
accomplishment. Without his leadership, we would not be here today. It 
is a masterful bit of work. And I am proud of his accomplishment in 
this regard.
  I also wish to salute my colleague, Senator Sarbanes. Also, we would 
not be here today without his leadership. He has proven to be a 
tireless advocate and effective spokesperson for those who are less 
fortunate. He has proven to be a tireless worker in favor of the rights 
of privacy of America's consumers. We would not have a bill before the 
Senate today that could pass this body, that the President would sign, 
or, frankly, one that enjoyed wide support were it not for the tireless 
efforts of Senator Sarbanes. I compliment him as well. He has been a 
copartner in this historic accomplishment which we recognize today.
  This legislation is good for the American economy. The era of global 
competitiveness in the financial services sector is unquestionably an 
area in which our Nation is preeminent. The world looks to the United 
States to lead the way in areas such as banking, insurance, securities, 
and investment banking.
  Financial services contribute annually to a trade surplus for the 
United States of America at a time when our trade deficit is running 
into the hundreds of billions of dollars. But we cannot take our 
current preeminence for granted. I have had some experience in this 
regard.
  My colleagues may not know that Indiana was one of the very last 
States to adopt not interstate banking but across-State-line banking in 
the mid-1980s. As a result of the fact we didn't modernize our laws, 
once the walls came tumbling down, as they inevitably do, almost all of 
Indiana's financial institutions in the banking sector were gobbled up 
by institutions from other States.
  If we were similarly to hamstring America's financial institutions--
banking, insurance, and securities--with antiquated laws that kept them 
from having the flexibility needed to compete with our foreign 
competitors, the day might not be too far removed when those from 
Germany, Japan, Switzerland, and other nations would be gobbling up our 
financial institutions because they were too weak or incapable of 
competing. We shouldn't let that happen to our country.
  Hundreds of thousands of jobs across our country and tens of 
thousands of jobs in Indiana depend upon us getting this done. I am 
proud to say that we will. It is good for America's economy. It is also 
good for the broader economy.
  Manufacturing, agriculture, and other sectors depend upon access to a 
vital growing financial services sector. Access to capital is one of 
the key ingredients for financial success today. Because of this bill, 
greater efficiency in providing funds for expansion will exist, leading 
to greater investment, greater productivity, and a rising standard of 
living for America's working men and women. Access to capital is one of 
the key ingredients to success in the economy today. This legislation 
will ensure that the funds keep flowing from America's economy, making 
it more productive and more efficient for American workers and American 
shareholders alike.
  This legislation is good for consumers. Not only will it be 
convenient, providing one-stop shopping for working men and women 
across our country, where they go to a single place and meet their 
banking needs, insurance needs, security investment needs, and others, 
but it will also lead to greater efficiency, lower interest rates, and 
greater access to credit. It will also lead to greater innovation in 
the new marketplace with greater competition.
  I foresee a day not too far removed when services that we can barely 
imagine today will be provided more conveniently and efficiently to 
Americans across our country.
  Frankly, I approach this bill with some reservations as well. Some 
issues needed to be resolved or I would not be standing here today to 
express my strong support for this legislation. Foremost among these 
was the Community Reinvestment Act, an act that is necessary to 
guaranteeing access to capital for Americans of every walk of life, 
regardless of race, creed, or color.
  As I said when I previously took the floor to speak on this issue, 
access to capital today is as important as access to electricity was in 
the 1930s or access to a telephone was in the 1950s or 1960s. I 
recognize that issue has been positively resolved in the course of our 
negotiations.
  Second, the emerging issue of privacy is very important. I share the 
concerns of many Americans about what will happen to their most 
sensitive information in the new global marketplace.
  I am pleased to say that we have taken the first steps in this 
legislation to guarantee greater privacy for American consumers by 
requiring clear and plain disclosure about what information will be 
used within a company, and also allowing American consumers the right 
to opt out and prohibit companies that they do business with from 
sharing their financial information with third parties.
  This is an issue we have only begun to recognize. We must continue to 
follow it in the days to come. If it should be the case that greater 
protections are necessary, I will be one of those who will help to lead 
the way and look forward to leading the way to ensuring that. For the 
time being, I am pleased with the provisions currently in the bill and 
am proud to say we are taking a significant step forward.
  In conclusion, for 20 years, we have been laboring to modernize the 
law that governs financial services that was first enacted in the 
1930s. A long string of people who have preceded us in this body have 
attempted this and have not been successful. But thanks to the 
leadership of Senator Gramm and the leadership of Senator Sarbanes, the 
ability of all involved to come together and compromise for the

[[Page 28360]]

well being of the American economy, the American consumer, and the 
future of our country, today we celebrate the historic accomplishment.
  I intend to vote for this legislation. I urge my colleagues to do the 
same.
  Again, I congratulate all who have brought us to this important 
accomplishment.
  Thank you. I yield the floor.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, Senator Sarbanes and I have decided, giving 
people an opportunity to get here, that I will speak, and then Senator 
Sarbanes will speak. Then I will close out.
  Mr. SARBANES. Mr. President, will the Senator yield for a moment?
  Mr. GRAMM. I am very happy to yield.
  Mr. SARBANES. Both sides have tried very hard to canvas their members 
to see if anyone wishes to speak on this bill. At the moment, we have 
reached the point where we don't think there is anyone left to speak. 
The time for voting has been set for reasons of people having been 
drawn to other responsibilities. But if there is someone out there who 
wants a few minutes to speak on this legislation, now is the time. 
Otherwise, it is going to be closed out. We have tried very hard to 
offer all Members an opportunity to speak, if they wish to do so, on 
this conference report.
  Mr. GRAMM. Mr. President, let me agree with my ranking member to say 
that we have waited 40 years for this bill. We are not waiting any 
longer than 3:30. If someone wants to get over here and speak, they had 
better do it. It is always a little bit risky to try to sum up on a 
bill such as this that has been in the making for 40 years, a bill that 
overturns a piece of legislation that Franklin Roosevelt said was the 
most important bill ever passed by an American Congress.
  Having listened to the debate, I have a few points in conclusion. 
First, there is often such a difference between reality and perception. 
I listened to some of my colleagues, especially those who oppose the 
bill, talk about special interests and what this special interest or 
that special interest got in this bill. In my period of service in 
Congress, I have never participated in the writing of a bill with less 
special interests involved than this bill. When Republicans on the 
committee started in January a series of meetings to talk about why we 
wanted to modernize the financial laws of the country, why we wanted to 
repeal Glass-Steagall, why we wanted to restructure the economy in 
terms of benefit, we set out a theory of financial services 
modernization and we set out a plan to try to achieve it.
  As I listened to all the talk about special interests, I remember 
Texas bankers and Texas insurance agents both sending a letter which 
arrived on the same day telling my constituents I had betrayed their 
particular interests to the other. The insurance agents sent out a 
letter saying I had sold out to the bankers; the bankers sent out a 
letter saying I had sold out to the insurance agents.
  The bottom line is nobody was sold out in this bill. We started a 
negotiation to try to deal with a legitimate concern. The concern was 
this: If someone is going to a bank for a loan, should that bank, while 
they are in the process of making that loan, have the right to try to 
sell an individual insurance? We tried to sit down with everybody 
knowledgeable and come up with a real solution. In the end, I am happy 
to say, both of these interest groups concluded nobody had sold their 
interests out and we had put together a good bill.
  However, there is a simple test on this bill. If anybody wants to set 
a marker today to determine whether in 20, 40, or 60 years from now we 
are going to compare this bill to Glass-Steagall, whether this bill is 
a success, there is a simple test. That test is, Will this bill 
generate more diverse products for the American consumer? Will those 
products better meet the needs of the American consumer? And will they 
be cheaper? If those things don't happen, this bill fails.
  That is what this bill is about. There is nothing in this bill that 
sets out to benefit big banks in New York. I don't represent New York. 
I don't have any huge banks in my State. Long ago, other people bought 
out the big banks in my State. I have sought in this bill, and I 
believe the vast majority of all of our Members, have sought to promote 
the interests of the consumer.
  This bill is about people who go to work every day and who borrow 
money on their homes. If someone can improve on their mortgage rate and 
bring down the interest they pay by even one-quarter of 1 percent, that 
means thousands of dollars in their pockets over a 30-year period. That 
is what this bill is about. This bill is about people who want checking 
accounts and who want services, and they want those services provided 
on a competitive basis where they are as cheap as can be produced and 
sold. That is what this bill is about.
  This bill is about people who want the ability to do their banking, 
their insurance, their securities, their retirement on a competitive 
basis. It is about bringing together those forces.
  We have been living with a system that was established during the 
Great Depression. I don't think there is any reason now to go back and 
rehash why it happened. But one can make a strong case that the 
Depression was produced by a failure of the Federal Reserve. Milton 
Friedman made that case in the ``Monetary History of the United 
States'' and won the Nobel prize principally for that work.
  Congress was frightened. They didn't know what to do. It was an age 
of demagoguery. Probably the most demagogic statement that has ever 
been made in American history was made by the President of the United 
States, Franklin Roosevelt, when during the debate on Glass-Steagall he 
said:

       The money changers have fled from the high seats in the 
     temple of our civilization.

  That statement is reminiscent of statements being made in Central 
Europe at the same time.
  Congress didn't know what caused the Depression. They were 
frightened. They didn't know what to do so they passed a bill that I 
think one can argue historically was as punitive as it was 
prescriptive. It was aimed at one man, in some ways--J.P. Morgan--
probably the greatest American of the early 20th century. We don't know 
a lot about him because he never held public office, but he was 
probably the greatest American of the early part of this century.
  In this era, we had a bill passed that basically forced an artificial 
separation of the financial sector of our economy. That bill, despite 
the fact its author within a year had concluded it was a mistake, has 
been the law of the land. In fact, Time magazine calls it the defining 
financial legislation of the 20th century.
  We came here today to change the defining legislation of the 20th 
century. We came to bring logic back to the financial sector. We didn't 
come here today to bring it back to benefit banks or to benefit 
insurance companies or to benefit securities companies. We came to 
overturn the most significant financial legislation of the 20th century 
because it is in the interests of the American consumer that it be 
overturned.
  Let me touch on areas that will be much benefited by this that have 
had no discussion. The first point, one of the biggest problems we 
have, is the inability of small businesses to raise capital. Probably 
the most concentrated part of the American financial sector is 
securities underwriting.
  If a little business in Mexia or College Station, TX, or Cambridge or 
Easton, MD, or any other of thousands of small or medium-sized towns 
across America, has a good idea, they will have a hard time raising 
capital because it is hard to get Wall Street interested in a small 
business in a little town unless you have one of the great ideas of the 
century--and even then it takes a long time to prove it.
  By letting banks participate in underwriting securities now, every 
banker in every small town will have the ability to identify a good 
small business and give them access to capital that has never existed 
before in the history of this country. That is a benefit which will 
accrue to literally hundreds of thousands of small businesses over the 
decades to come as a result of

[[Page 28361]]

this bill because we will vastly expand the number of securities 
underwriters, we will make every bank in every city in America a 
potential underwriter for small business. That is a dramatic and 
positive change in law.
  We dominate the world's financial markets, and we have done it with 
one hand tied behind us, because we have the greatest economic system 
in the history of the world.
  But we can untie that hand that we have had tied behind us, and we do 
it in this bill by repealing Glass-Steagall. This bill is going to make 
America more competitive on the world market, and that is important 
because it means thousands of jobs, high-paying jobs--not just on Wall 
Street in New York City, but for every business and every consumer in 
America. I believe we are too quick to say something benefits Wall 
Street instead of Main Street. The reality is, Wall Street is the 
foundation on which Main Street is built. When America is more 
competitive, every American benefits.
  There has been a lot of talk that what we are trying to do is already 
happening to some degree. And it is because almost immediately after 
the passage of Glass-Steagall, we had an effort by regulators to begin 
to bore holes in these walls between insurance and banking, and between 
securities and banking. We have seen, through regulatory innovation, a 
successful effort in some areas to get around the law. This has allowed 
some competition to occur. The problem is, what regulators give, they 
can take back. So we have created a situation where we have given 
virtual police power to regulators because they have allowed these 
innovations to occur and they can take them back at any moment. That 
creates too much power to be focused in the hands of a very small 
number of people.
  We change that by tearing down the walls, and in the process taking 
that discretionary power away from the regulators so people are 
guaranteed in law the right to be engaged in these activities.
  My dear colleague from Maryland mentioned yesterday the issue of 
``too big to fail.'' That is a real issue. In this bill we start the 
process of dealing with the issue of too big to fail. We establish a 
principle, as part of the compromise that was worked out between 
Treasury and the Federal Reserve, which is not well understood. It is a 
complicated kind of issue. But what it does is profoundly important 
because for the first time in American financial law, we require big 
banks to have subordinated debt. That is debt that only gets paid once 
the depositors are paid, the creditors are paid, and everything else is 
paid off. That subordinated debt is a real live thermometer that is 
constantly telling us how well this financial institution is. It is 
constantly telling us how safe and how sound these institutions are. It 
represents, in my opinion, the beginning of our effort to deal with a 
very real problem that Senator Sarbanes talked about, and that problem 
is the problem of being too big to fail. We don't let banks do anything 
within the bank unless they have an incredibly high rating on that 
subordinated debt; that is, that it be rated AAA, AA, or A.
  There has been a lot of talk about CRA. The bottom line is we have 
done several very positive things. First, sunshine is the best 
disinfectant. How can people be held accountable if we don't know what 
they have been given money to do, how much money they have been given, 
and how they spend it. In this legislation, we have set out an ironclad 
process to guarantee us that information.
  Second, there is a regulatory burden problem. Small banks end up 
being heavily burdened by regulations that often have a relatively 
nominal effect on big banks. We have dealt with that by giving smaller 
banks some needed regulatory relief. In terms of privacy, we have heard 
a lot of discussion, but we need to remember two things: No. 1, we 
require in this bill, in a provision that was adopted in the 
conference, offered by Members of the Senate conference, a disclosure 
in detail of what a bank's privacy policies are. That gives consumers 
the most powerful tool that exists in a free society in protecting 
privacy, and that is if you do not like the bank's policy, you can take 
your business somewhere else.
  Second, we give consumers the power to opt out.
  So these are important provisions. I thought, as we waited to be sure 
everyone is here for this vote, that these points needed to be made.
  I reserve the remainder of my time.
  The PRESIDING OFFICER (Mr. Fitzgerald). The Senator from Maryland.
  Mr. SARBANES. Mr. President, as we come to the closing moments of 
this discussion of the conference report, I want to recapitulate a few 
points.
  First of all, I think it must be understood that changes are taking 
place in the financial landscape at the moment. They have been taking 
place over the last 20 years. In some respects, this legislation is an 
effort to create a statutory framework which will encompass the changes 
that have been happening and which it is reasonable to assume will 
continue to happen, even if we do not have legislation.
  So many of the connections and the relationships about which some 
have expressed concern in the course of the debate--because they see 
this legislation as permitting them--are happening right now and will 
continue to happen. But they are happening without a rational 
legislative framework, without the Congress, in effect, having made 
judgments as to what the structure of the system is going to be, 
without the actors within the system knowing exactly what the rules 
are, and having the security that comes from knowing they are operating 
within a defined environment.
  I stress that because some have raised it in the course of the 
debate. Let me say in that respect I think we have had a very good 
debate on this conference report, if I may say so. I thank those of our 
colleagues who have spoken because of the depth of the perceptions and 
understanding they have brought to this debate. I think what transpired 
last night and today has been in the better traditions of the Senate.
  The marketplace in many respects has influenced the need for this 
legislation. Securities firms have been offering bank-like products. 
Banks have been offering insurance-like products. Both have been 
engaged in significant securities activities. This has been taking 
place out in the marketplace but without a statutory framework within 
which it clearly functions. These developments have now been going on 
for more than two decades. We have been wrestling in the Congress for 
approximately that length of time to see how to revise our laws 
concerning financial services in order to update them. We are about to 
accomplish that today.
  This will enable the regulators--and of course this bill is very 
strong on functional regulation--to maintain appropriate oversight as 
we deal with this evolving marketplace. At the same time, it will 
enable financial service firms to respond to the needs of their 
customers. Many assert the customers will receive very significant 
savings. Others say, no, no, it is going to result in greater costs. In 
a sense, we will have to see how it plays out.
  The administration sent a letter to us from the Secretary of the 
Treasury. I ask unanimous consent that letter be printed in the Record 
at the conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. SARBANES. The administration says the following:

       By allowing a single organization to offer any type of 
     financial product, the bill will stimulate competition, 
     thereby increasing choice and reducing costs for consumers, 
     communities, and businesses. Americans spend over $350 
     billion per year on fees and commissions for brokerage, 
     insurance and banking services. If increased competition 
     yielded savings to consumers of even 5 percent, they would 
     save over $18 billion per year.

  They go on to say:

       Removal of barriers to competition will also enhance the 
     stability of our financial services system. Financial 
     services firms will be able to diversify their product 
     offerings and thus their sources of revenue.
       Financial firms will be able to diversify their product 
     offerings and thus their

[[Page 28362]]

     sources of revenue. They also will be better able to compete 
     in global financial markets.

  Which, of course, has become an increasingly relevant consideration 
as we consider our position vis-a-vis those of financial institutions 
headquartered in countries overseas.
  From the very beginning, many of us made it very clear there were 
important principles we thought had to be addressed with respect to 
this legislation if we were to support it. We had to face questions, of 
course, of the safety and soundness of our financial system. We had 
important questions of CRA, important questions of consumer protection, 
important questions of the line between banking and commerce, which has 
been an important principle in the American system.
  In the end, we have been able to work these issues in a way that we 
have addressed those concerns--not entirely in some instances.
  People have talked about privacy today. It is my expectation that 
issue will continue to remain on our agenda because we have not yet 
fully disposed of it, although I do note this bill put in some privacy 
protections where none now exists. People should bear that in mind. 
Those who look at these provisions and say: We want more--and I am 
essentially with them; I introduced a bill earlier in this session that 
had more such provisions, and I continue to support those concepts--for 
those who say they want more, they need to understand we have nothing 
at the moment. The privacy provisions that are in this bill represent 
an important step forward.
  I also have indicated that the too-big-to-fail issue--and the 
chairman has also commented on that--is an important matter that still 
remains before us. It is imperative this study the Federal Reserve and 
the Treasury are to do jointly come back with recommendations that 
enable us to address that issue.
  This is a risk that is present in the situation. We have confronted 
it in the past with respect to various financial institutions. We get 
the moral hazard question: Institutions which assume they have reached 
the size that they then become too big to fail have less of a 
constraint upon them in terms of their activities than smaller 
institutions because they begin to operate on the assumption that no 
one is going to require them to bear the consequences of their 
imprudence.
  There have been occasions, of course, in the past when regulators 
have said we simply cannot allow this institution to bear the full 
consequences of its bad judgments because if we do that, it will have 
an impact upon the financial system as an entirety; therefore, we need 
to work out ways in which we can address that question with respect to 
these large financial mergers and acquisitions which, of course, are 
going to happen under this legislation. Of course, they were already 
happening.
  What the legislation does is put a framework around this activity 
which will enable the regulators to exercise much more careful 
oversight. It is preferable to have a framework developed by the 
Congress, not on an ad hoc basis by one regulator or another regulator, 
not in situations where some perceive that regulators are being 
competitive with one another in terms of how they deal with the 
financial services sector. If we can have a responsible statutory 
framework established by the Congress which is contained in this 
legislation that is now before us, it will contribute to the safety and 
soundness of the financial system. This legislation better enables us 
to maintain the separation of banking and commerce.
  There are important consumer protections, including some protections 
about which the Securities and Exchange Commission was concerned, and 
the legislation that has been developed has the very clear support of 
the Securities and Exchange Commission.
  We have preserved the relevancy of the Community Reinvestment Act, 
and we have given banks the choice to conduct their expanded activities 
either through a holding company or, to a limited extent, through a 
subsidiary. That was the issue that had the Federal Reserve and the 
Treasury in deep discussions with one another, and in the end I believe 
they resolved that satisfactorily.
  Let me also observe that this rational legislative framework we are 
putting into place provides for the future evolution of the financial 
services industry. People will have the security of knowing what the 
playing field is, something they do not know today with assurance. 
Nowadays, they go to a regulator and get permission to engage in an 
activity. The next thing they know, they are in court, and then the 
case has to wind its way through the court system. They may either be 
upheld or turned down.
  No one is quite sure what they are permitted to do and what they are 
not permitted to do. People are constantly testing the edges of this. 
The regulators are in some confusion. In some instances we have 
overlap, and in other instances we seem to have no overlapping at all--
in fact, a vacuum--in terms of overseeing these activities.
  With this conference report and this legislation which represents a 
major change--there is no doubt about that--these are far-reaching and 
difficult public policy issues. They have not been solved for so long 
because they are far-reaching and difficult. We have had to address 
balancing the needs and concerns of the consumers--which, after all, 
ought to be one of our prime objectives--with a necessity of 
accommodating to new technology and new ways of doing business and the 
nature of the competition we are facing from abroad.
  In the course of working through this, it has been an extremely 
interesting process. I take considerable satisfaction from the fact 
that in working with the chairman and with many others, we have been 
able to go from a position where we had a bill that, when it left the 
Senate, was vehemently contested to where we now come back with a 
conference report that most of us, if not all, can join in supporting 
and commending to our colleagues.
  I recognize some of the points that were made here by some who were 
apprehensive about the future. I think those are reasonable arguments. 
They are arguments we considered. They were factors with which we had 
to wrestle. But I am hopeful that what we are doing here will represent 
a very important step forward in the workings of the financial services 
industry, in the protections for our consumers, in giving us a rational 
statutory framework, and in enabling the regulators to do their job.
  It sustains the relevancy of the Community Investment Act, which has 
been so important for some of the movement of capital into low- and 
moderate-income communities in this country. It has made such a 
difference. It is a very important first step, an important first step 
on the privacy issue. We have tried to safeguard the ability of State 
regulators to participate. On privacy, States can continue to enact 
legislation of a higher standard than the Federal standard. State 
insurance regulators will continue to play the role they have 
traditionally played with respect to State regulation of insurance.
  So I think, all in all, we have put together a good and balanced 
package. I commend it to my colleagues as we move to final passage. I 
thank the chairman of the committee.
  I yield the floor.

                               Exhibit 1


                                   Department of the Treasury,

                                 Washington, DC, November 3, 1999.
     Hon. Tom Daschle,
     U.S. Senate,
     Washington, DC.
       Dear Tom: The Administration strongly supports passage of 
     S. 900, the Gramm-Leach-Bliley Act of 1999. This legislation 
     will modernize our financial services laws to better enable 
     American companies to compete in the new economy.
       The bill makes the most important legislative changes to 
     the structure of the U.S. financial system since the 1930s. 
     By allowing a single organization to offer any type of 
     financial product, the bill will stimulate competition, 
     thereby increasing choice and reducing costs for consumers, 
     communities and businesses. Americans spent over $350 billion 
     per year on fees and commissions for brokerage, insurance, 
     and banking services. If increased competition yielded 
     savings to consumers of even 5 percent, they would have over 
     $18 billion per year.
       Removal of barriers to competition will also enhance the 
     stability of our financial

[[Page 28363]]

     services system. Financial services firms will be able to 
     diversify their product offerings and thus their sources of 
     revenue. They also will be better able to compete in global 
     financial markets.
       The President has strongly supported the elimination of 
     barriers to financial services competition. He has made 
     clear, however, that any financial modernization bill must 
     also preserve the vitality of the Community Reinvestment Act, 
     enhance consumer protection in the privacy and other areas, 
     allow financial services firms to choose the corporate 
     structure that best serves their customers, and continue the 
     traditional separation of banking and commerce. As approved 
     by the Conference Committee, S. 900 accomplishes each of 
     these goals.
       With respect to CRA, S. 900 establishes an important, 
     prospective principle: banking organizations seeking to take 
     advantage of new, non-banking authority must demonstrate a 
     satisfactory record of meeting the credit needs of all the 
     communities they serve, including low and moderate income 
     communities. Thus, S. 900 for the first time prohibits a bank 
     or holding company from expanding into newly authorized 
     businesses such as securities and insurance underwriting 
     unless all of its insured depository institutions have a 
     satisfactory or better CRA rating. Furthermore, CRA will 
     continue to apply to all banks, and existing procedures for 
     public comment on, and CRA review of, any application to 
     acquire or merge with a bank will be preserved. The bill 
     offers further support for community development in the form 
     of a new program to provide technical help to low- and 
     moderate-income micro-entrepreneurs.
       The bill includes other measures affecting CRA that have 
     been narrowed significantly from their earlier Senate form. 
     The bill includes a limited extension of the CRA examination 
     cycle for small banks with outstanding or satisfactory CRA 
     records, but expressly preserves the ability of regulators to 
     examine a bank any time for reasonable cause, and does not 
     affect regulators ability to inquire in connection with an 
     application. Finally, the bill includes a requirement for 
     disclosure and reporting of CRA agreements. We believe that 
     the legislation and its legislative history have been 
     constructed to prevent undue burdens from being imposed on 
     banks and those working to stimulate investment in 
     underserved communities.
       In May, the President stressed the importance of adopting 
     strong and enforceable privacy protections for consumers 
     financial information. S. 900 provides protections for 
     consumers that extend far beyond existing law. For the first 
     time, consumers will have an absolute right to know if their 
     financial institution intends to share or sell their personal 
     financial data, and will have the right to block sharing or 
     sale outside the financial institutions' corporate family. Of 
     equal importance, these restrictions have teeth. S. 900 gives 
     regulatory agencies full authority to enforce privacy 
     protections, as well as new rulemaking authority under the 
     existing Fair Credit Reporting Act. The bill also expressly 
     preserves the ability of states to provide stronger privacy 
     protections. In addition, it establishes new safeguards to 
     prevent pretext calling, by which unscrupulous operators seek 
     to discover the financial assets of consumers. In sum, we 
     believe that this reflects a real improvement over the status 
     quo; but, we will not rest. We will continue to press for 
     even greater protections--especially effective choice about 
     whether personal financial information can be shared with 
     affiliates.
       We are pleased that the bill promotes innovation and 
     competition in the financial sector, by allowing banks to 
     choose whether to conduct most new non-banking activities, 
     including securities underwriting and dealing, in either a 
     financial subsidiary or an affiliate of a bank.
       The bill also promotes the safety and soundness of the 
     financial system by enhancing the traditional separation of 
     banking and commerce. The bill strictly limits the ability of 
     thrift institutions to affiliate with commercial companies, 
     closing a gap in existing law. The bill also includes 
     restrictions on control of commercial companies through 
     merchant banking.
       Although the Administration strongly supports S. 900, there 
     are provisions of the bill that concern us. The bill's 
     redomestication provisions could allow mutual insurance 
     companies to avoid state law protecting policyholders, 
     enriching insiders at the expense of consumers. The 
     Administration intends to monitor any redomestications and 
     state law changes closely, and return to the Congress if 
     necessary. The bill's Federal Home Loan Bank provisions fail 
     to focus the System more on lending to community banks and 
     less on arbitrage activities short-term lending that do not 
     advance its public purpose.
       The Administration strongly supports S. 900, and urges its 
     adoption by the Congress.
           Sincerely,
                                              Lawrence H. Summers,
                                        Secretary of the Treasury.

  Mr. GRAMM. Mr. President, it would be my objective to speak and end 
by 3:30 and we would have the vote.
  The PRESIDING OFFICER. The Senator from Texas.
  Mr. GRAMM. Mr. President, success is claimed by a thousand parents. 
And today there are a lot of people who can claim parenthood. I am very 
happy to have played a part in delivering the bill before the Senate 
today.
  I think it represents the American legislative process at its best. 
It has resulted more from an effort to reach a logical conclusion than 
to satisfy various special interest groups. In that way, it is not 
unique but it is different.
  But the question is not how proud we are of this bill today. The 
question is, How will it look 50 years from now when it has gone from 
infancy to maturity?
  Obviously, after setting out a dramatic change in public policy, it 
is fair to set out a test for determining its success. How will people 
judge whether we were successful in passing this bill today? My test 
is, What are we trying to do in the bill? Are we trying to benefit 
banks or insurance companies or securities companies, or are we trying 
to benefit consumers and workers? The test that I believe we should 
use--the test I will use, the test I hope people looking at this bill 
years in the future will use--is, Did it produce a greater diversity of 
products and services for American consumers? Were those products 
better? And did they sell at a lower price? I think if the answer to 
those three questions is yes, then this bill will have succeeded.
  The world changes, and we have to change with it. Abraham Lincoln 
used to tell the story about how Government had to change all outmoded 
laws because they did not fit anymore, much as it would be unreasonable 
to expect a man to wear the same clothes he wore as a boy; that there 
is a nature to things and to society, and as they change, Government 
has to change to recognize the new reality.
  I believe today we are changing financial services in America to 
reflect that we do have a new century coming and we have an opportunity 
to dominate that century the way America dominated the last century.
  Ultimately, the final judge of the bill is history. Ultimately, as 
you look at the bill, you have to ask yourself, Will people in the 
future be trying to repeal it, as we are here today trying to repeal--
and hopefully repealing--Glass-Steagall? I think the answer will be no. 
I think it will be no because we are doing something very different 
from Glass-Steagall. Glass-Steagall, in the midst of the Great 
Depression, thought Government was the answer. In this period of 
economic growth and prosperity, we believe freedom is the answer.
  This is a deregulatory bill. I believe that is going to be the wave 
of the future. Although this bill will be changed many times, and 
changed dramatically as we expand freedom and opportunity, I do not 
believe it will be repealed. It sets the foundation for the future, and 
that will be the test.
  So I am proud to have been part of this. I am proud to have worked 
with everybody as part of the process. It has been interesting and 
Government at its best. I think one of the reasons we run for public 
office is to get a chance to do things such as this. I am glad to have 
had an opportunity to play a part and urge all of my colleagues to 
support this dramatic move into the future.
  Mr. KERREY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. SARBANES. Mr. President, is there time remaining? I yield the 
Senator 2 minutes if there is.
  The PRESIDING OFFICER. There is time until 3:30.
  Mr. KERREY. Mr. President, I will be done by 3:30.
  I intend to vote for this legislation. I congratulate the parents of 
the bill: Senator Gramm, Senator Sarbanes, and others, who worked very 
hard. This was not easy to do.
  I agree, it is Government at its best. I believe this is very much 
proconsumer. There is nothing more frustrating than trying to do a 
financial transaction and being told: I would like to be able to do it, 
but I can't. We have been limiting our individual capacity to develop 
our economy, to pursue the American dream, and do all other sorts of 
things that make America such a great country.
  I appreciate very much the effort made to make certain there is still

[[Page 28364]]

good regulatory oversight. I have no doubt that safety and soundness 
considerations will be taken into account. I think the concerns that we 
are going to have a meltdown such as we had in 1929 are concerns that 
are dramatically overblown, given the strength both of the Treasury and 
the Federal Reserve in this legislation.
  So I appreciate very much the hard work and diligence of the chairman 
and the ranking member because I believe our economy and our people 
will benefit from it.
  I am grateful as well--I do not know if the Senator from Texas is--
that the unitary thrift provision is limited in this legislation. The 
Johnson-Kerrey amendment that passed on the floor might have been a bit 
difficult, but I think it is an important provision. I like the 
provisions for community reinvestment. I think it is a terrific 
compromise. My small banks have been asking for regulatory relief that 
provides it. I think the sunshine provisions are quite exciting. I look 
forward to seeing where this money and how this money is being spent.
  On the issue of privacy, you have improved current privacy 
protections, better than what we have under existing law. I must say, I 
had my own interest in privacy, and my concern about privacy increased 
as a consequence of examining this bill. I hope to participate in a 
bipartisan effort to give the American people the kind of privacy 
protections that American citizens both expect and deserve.
  Again, I congratulate and thank very much the chairman and ranking 
member. It is a very important piece of legislation. People were 
predicting you were not going to be able to get the job done. I hope 
you enjoyed the pizza that night when you stayed up very late to finish 
your work. I am grateful you went the extra mile. There is no doubt in 
my mind there is going to be a positive cause and effect between this 
bill being law and the health of the U.S. economy.
  Mr. DASCHLE. Mr. President, this legislation has been a long time 
coming. Many, including this Senator, consider it long overdue. It is 
historic in magnitude.
  It has been described, appropriately, as a new ``Constitution'' for 
financial services for the 21st Century. Because of its importance, it 
has been hard fought. But we can be proud of the final product. It will 
foster a continuation of the extraordinary economic growth this nation 
has seen in the last several years.
  Most importantly, it offers new opportunities and benefits for 
American consumers. It allows for ``one-stop shopping'' for an array of 
financial services. Americans will be able to conduct their banking, 
insurance and investment activities under one roof, with all the 
convenience that entails.
  By allowing a single company to offer an array of financial products, 
this bill will stimulate competition, leading to greater choices and 
reduced fees for consumers and businesses alike. New companies will 
create innovative new products for consumers.
  It is important to remember how far we have come to reach this 
historic moment. Congress has been trying to pass a bill along these 
lines for 20 years. We came extremely close in the last Congress, but 
it fell apart in its waning moments over disagreements about the 
Community Reinvestment Act.
  Again in this Congress, the bill saw some tough moments. In the 
Senate, it passed by party-line votes both in committee and on the 
floor.
  Because of the deep commitment of Democrats to enactment of this 
legislation, we did not give up. We introduced an alternative bill that 
could garner bipartisan support. And I am proud to say that this 
conference agreement embodies all of the principles that we advocated 
in our alternative bill.
  We do not need to surrender our beliefs to support of this bill, 
because it adopts our positions on every major issue. Best of all, 
these victories mean that the President can sign this bill into a law, 
so it can improve the delivery of financial services for many years to 
come.
  Our positions prevailed right down the line.
  Our position prevailed on banking and commerce: this bill strictly 
limits the ability of thrifts to affiliate with commercial companies, 
closing a loophole in current law.
  Our position prevailed on operating subsidiaries: the bill allows 
banks to choose whether to conduct new activities in either a financial 
subsidiary or an affiliate. They can choose whatever form best suits 
their customers' needs.
  Our position prevailed on consumer protections: the SEC retains the 
ability to protect consumers when banks sell securities products, which 
was a major concern of SEC Chairman Levitt. The agreement also 
preserves important state consumer protection laws governing insurance 
sales, and prohibits coercive sales practices.
  Our position prevailed on the Community Reinvestment Act: CRA is 
preserved under this bill. The agreement addresses our greatest concern 
by requiring that banks have a good track record on lending within 
their own communities before they can expand into newly authorized 
businesses.
  We can be proud of these achievements, and proud to support this 
bill.
  At the same time, we can be disappointed the bill does not go further 
to protect consumers' financial privacy. The bill does contains some 
important provisions requiring financial institutions to give customers 
notice about their privacy policies. But these companies retain 
extraordinary latitude in sharing a customer's most sensitive, personal 
information without the customer's consent and without even giving the 
customer the right to object. We have to do better. This issue is far 
from over, and we will have to revisit it next year.
  Despite these shortcomings, which also exist in current law, this 
legislation will benefit consumers, businesses and the economy, and 
deserves our support. Through this bill, Congress is finally reforming 
our outdated financial services laws to recognize new realities in the 
marketplace.
  I would like to commend our many colleagues, administration 
officials, and outside institutions that have worked so long and so 
hard to bring us to this point. We must especially recognize the 
leadership of the ranking member of the Banking Committee, Senator 
Sarbanes, for his dogged determination to ensure that this final 
product upheld the public's best interests. The Secretary of the 
Treasury, Larry Summers, and his predecessor, former Secretary Rubin, 
also played key roles in ensuring that this legislation protected the 
interests of American consumers.
  I must also commend the Chairman of the Banking Committee, Senator 
Gramm, for his recognition of the need for compromise and 
bipartisanship in producing a bill that deserves the signature of the 
President of the United States.
  Mr. President, this legislation deserves the support of an 
overwhelming bipartisan majority of our colleagues, and I urge them to 
vote for it today.
  The PRESIDING OFFICER. The hour of 3:30 having arrived, the question 
is on agreeing to the conference report. The yeas and nays have been 
ordered. The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. FITZGERALD (When his name was called). Present.
  Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) is 
necessarily absent.
  The PRESIDING OFFICER (Mr. Gregg). Are there any other Senators in 
the Chamber desiring to vote?
  The result was announced--yeas 90, nays 8, as follows:

                      [Rollcall Vote No. 354 Leg.]

                                YEAS--90

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Chafee
     Cleland
     Cochran
     Collins
     Conrad
     Coverdell
     Craig
     Crapo
     Daschle
     DeWine
     Dodd
     Domenici
     Durbin
     Edwards
     Enzi
     Feinstein
     Frist
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Hatch
     Helms
     Hollings
     Hutchinson
     Hutchison

[[Page 28365]]


     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerrey
     Kerry
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     Mack
     McConnell
     Moynihan
     Murkowski
     Murray
     Nickles
     Reed
     Reid
     Robb
     Roberts
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Schumer
     Sessions
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Voinovich
     Warner
     Wyden

                                NAYS--8

     Boxer
     Bryan
     Dorgan
     Feingold
     Harkin
     Mikulski
     Shelby
     Wellstone

                        ANSWERED ``PRESENT''--1

       
     Fitzgerald
       

                             NOT VOTING--1

       
     McCain
       
  The conference report was agreed to.
  Mr. SARBANES. I move to reconsider the vote.
  Mr. BAUCUS. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. SANTORUM. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SANTORUM. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________