[Congressional Record (Bound Edition), Volume 145 (1999), Part 20]
[Extensions of Remarks]
[Page 28882]
[From the U.S. Government Publishing Office, www.gpo.gov]



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

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                               speech of

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Thursday, November 4, 1999

  Mr. STARK. Madam Speaker, I rise in opposition to the conference 
report on S. 900, the Financial Services Modernization Act. It is badly 
flawed on several counts.
  Rather than strengthening the Community Reinvestment Act, the 
conference report actually weakens this landmark regulation. For 
example, the bill limits CRA's oversight of 80% of the nation's banks 
by decreasing the frequency of exams from once every two years to once 
every five years for banks with at least a ``satisfactory'' rating. 
This ill-advised provision will undoubtedly induce small banks to game 
the CRA process.
  In fact, the National Community Reinvestment Coalition predicts that 
small banks ``will relax their CRA lending in underserved communities 
for four years, and then hustle to make loans in the last year before a 
`twice in a decade' CRA exam.''
  The overall impact of the CRA provisions, then, is to weaken 
protections against discrimination and redlining by constraining the 
Community Reinvestment Act in an era when financial conglomerates will 
become ever more powerful.
  The Gramm-Leach-Bliley bill also raises troubling questions about the 
basic relationship between federal and state law in key areas. 
Supporters claim that the bill leaves state insurance law undisturbed. 
But in an October 13 letter, the National Association of Insurance 
Commissioners warned that the bill's broad, loose language will 
effectively permit banks to ``engage in high-risk reinsurance, claims 
settlement, credit insurance, third-party management services and other 
insurance business activities without being subject to supervision by 
either the States or the Federal government.''
  NAIC's concerns focus on Section 104 of the conference report, which 
says that no state can ``prevent or restrict'' a bank's business 
activities. This language ``attacks the heart of State insurance 
regulation,'' NAIC writes, ``because every action taken by a State to 
protect consumers restricts the business activities of insurance 
providers--including banks--to some degree. The letter concludes with a 
grim prediction that ``virtually all State insurance regulatory actions 
affecting banks would thus be subject to legal challenge and possible 
preemption.''
  Among the categories of state laws that may be preempted by S. 900, 
according to NAIC, are fair claims settlement laws covering consumers 
who purchase health, auto, homeowners, life, annuities, and other types 
of insurance.''
  Concerns have also been raised about whether more protective state 
medical confidentiality laws are saved. Supporters say they are, but 
state insurance commissioners say that's not clear. Litigation is sure 
to follow, which will cost consumers plenty.
  In addition, the bill's privacy rules governing sharing of 
information within affiliated entities are astonishingly weak. The bill 
allows affiliates--banks, securities firms and insurers--to freely 
share financial information without the consumer's consent. Affiliates 
have only to disclose their basic rules once a year.
  The problems that this could create are severe. Financial 
institutions, looking at the bottom line, will use all of the 
information available to them before making lending decisions. Why, for 
example, would a bank that has a health insurance subsidiary not want 
to weigh medical information gleaned from financial data in considering 
mortgage applications? Will young families now have to worry that, 
having supplied medical information to apply for life or casualty 
insurance, that this data will affect their application for a home 
loan?
  It is wrong and inappropriate for Congress to, on the one hand, enact 
legislation that explicitly allows mergers between banks, insurers and 
securities firms--but which on the other hand denies consumers any say 
in how their personal financial information can be used and disclosed.
  I thought we learned this lesson 21 years ago, when Congress enacted 
the Right to Financial Privacy Act. That 1978 law, which I authored, 
put in place standards governing access and sharing of financial 
information for federal agencies. It stemmed from a Supreme Court 
decision that ruled the Fourth Amendment does not apply to banking 
records. As a former California banker, I had been a party in that 1974 
suit, Calfornia Bankers Association v. Schultz.
  And here we are today, throwing open the door for financial 
institutions to create huge new holding companies--without giving 
consumers any ability to say how their sensitive personal financial 
information can be shared. In effect, we are creating a financial 
privacy vacuum.
  Defenders of the conference agreement say that the bill limits 
sharing of personal financial data with non-affiliated, third party 
entities. Nonsense. All that companies that don't formally affiliate 
have to do to escape the bill's consumer ``opt-out'' provision is enter 
into a joint agreement. Then, presto, they are free to manipulate 
personal financial data in any way they like.
  Nobody likes getting annoying calls from pesky telemarketers at 
dinnertime. Well, once this bill passes, the telemarketing business 
will go through the roof. Mergers between banks, securities firms and 
insurers will produce data amalgamation like we've never seen before. 
Before long, your health insurer will be able to get information on how 
much money you make and what investment strategies you favor--making 
underwriting that much easier. Your bank will be able to easily look up 
how many checks you've written to your psychiatrist--and use that 
information to help decide whether you're an acceptable loan risk.
  This is the dawning of a new Orwellian Age of Information.
  I urge my colleagues to vote no on the Gramm-Leach-Bliley conference 
report.

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