    [Public Papers of the Presidents of the United States: WILLIAM J. CLINTON (1999, Book II)]
    [November 12, 1999]
    [Pages 2082-2084]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Statement on Signing the Gramm-Leach-Bliley Act
    November 12, 1999

        Today I am pleased to sign into law S. 900, the Gramm-Leach-Bliley
    Act. This historic legislation will modernize our financial services
    laws, stimulating greater innovation and competition in the financial
    services industry. America's consumers, our communities, and the economy
    will reap the benefits of this Act.
        Beginning with the introduction of an Administration-sponsored bill
    in 1997, my Administration has worked vigorously to produce financial
    services legislation that would not only spur greater competition, but
    also protect the rights of consumers and guarantee that expanded
    financial services firms would meet the needs of America's underserved
    communities. Passage of this legislation by an overwhelming, bipartisan
    majority of the Congress suggests that we have met that goal.
        The Gramm-Leach-Bliley Act makes the most important legislative
    changes to the structure of the U.S. financial system since the 1930s.
    Financial services firms will be authorized to conduct a wide range of
    financial activities, allowing them freedom to innovate in the new
    economy. The Act repeals provisions of the Glass-Steagall Act that,
    since the Great Depression, have restricted affiliations between banks
    and securities firms. It also amends the Bank Holding Company Act to
    remove restrictions on affiliations between banks and insurance
    companies. It grants banks significant new authority to conduct most
    newly authorized activities through financial subsidiaries.
        Removal of barriers to competition will 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.
    They will also be better equipped to compete in global financial
    markets.
        Although the Act grants financial services firms greater latitude to
    innovate, it also contains important safety and soundness protections.
    While the Act allows common ownership of banking, securities, and
    insurance firms, it still requires those activities to be conducted
    separately within an organization, subject to functional regulation and
    funding limitations.
        Both the Vice President and I have insisted that any financial
    services modernization legislation must benefit American communities by
    preserving and strengthening community reinvestment. I am very pleased
    that the Act accomplishes this goal. The Act establishes an important
    prospective principle: banking organizations seeking to conduct new
    nonbanking activities must first demonstrate a satisfactory record of
    meeting the credit needs of all the communities they serve, including
    low- and moderate-income communities. Thus, the law will for the first
    time prohibit expansion into activities such as securities and insurance
    underwriting unless all of the organization's banks and thrifts maintain
    a ``satisfactory'' or better rating under the Community Reinvestment Act
    (CRA). The CRA will continue to apply to all banks and thrifts, and any
    application to acquire or merge with a bank or thrift will continue to
    be reviewed under CRA, with full opportunity for public comment. The
    bill offers further support for community development in the form of a
    new Program for Investment in Microentrepreneurs (PRIME), to

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    provide technical help to low- and moderate-income microentrepreneurs.
        The Act includes a limited extension of the CRA examination cycle
    for small banks and thrifts with outstanding or satisfactory CRA
    records, but expressly preserves the ability of regulators to examine
    these institutions at any time for reasonable cause, and does not affect
    regulators' authority in connection with an application. The bill also
    includes a requirement for disclosure and reporting of CRA agreements.
    The Act and its legislative history have been crafted to alleviate
    burdens on banks and thrifts and those working to stimulate investment
    in underserved communities. It is critical that depository institutions
    and their community partners continue efforts that have led to the
    highest home ownership rate in our history, including a particularly
    dramatic increase in recent years in minority and low-income home
    ownership. My Administration remains committed to ensuring that
    implementation of these provisions does not in any way diminish
    community reinvestment, and stands ready to remedy any problems that may
    arise.
        Last May, I proposed strong and enforceable Federal privacy
    protections for consumers' financial information. I am very pleased that
    the Act provides a number of the new protections that I proposed.
        Under the Act, financial institutions must clearly disclose their
    privacy policies to customers up front and annually, allowing consumers
    to make truly informed choices about privacy protection. 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,
    either within the corporate family or with an unaffiliated third-party.
    Consumers will have the right to ``opt out'' of such information sharing
    with unaffiliated third parties. These protections constitute a
    significant change from existing law, under which information on
    everything from account balances to credit card transactions can be
    shared or sold by a financial institutions without a customer's
    knowledge or consent, including the sale of information to telemarketers
    and other nonfinancial firms.
        Of equal importance, these restrictions have teeth. For the first
    time, the Act allows privacy protection to be included in regular bank
    examinations. The Act grants regulators full authority to issue privacy
    rules and to use the full range of their enforcement powers in case of
    violations. The Act grants new, and needed, rulemaking authority under
    the existing Fair Credit Reporting Act. In addition, it establishes new
    penalties to prevent pretext calling, by which unscrupulous persons use
    deceptive practices to determine the financial assets of consumers. The
    Act will specifically allow the States to provide stronger privacy
    protections if they choose to do so.
        Although these are significant steps forward, we will continue to
    press for even greater privacy protections--especially choice about
    whether personal financial information can be shared within a corporate
    family. Privacy is fundamental to Americans, and to my Administration.
        The Act also streamlines supervision of bank holding companies and
    preserves financial regulation along functional lines. Activities
    generally will be overseen by those regulators who are most
    knowledgeable about a given financial activity, including the Securities
    and Exchange Commission for securities activities and State regulators
    for insurance activities. Given the broad new affiliations permissible
    under this legislation, I fully expect our regulators to work together
    to protect the integrity of our financial system. The bill also promotes
    the safety and soundness of our financial system by enhancing the
    traditional separation of banking and commerce. The bill limits the
    ability of thrift institutions to affiliate with commercial companies.
        There are provisions of the Act that concern me. The Act's
    redomestication provisions could allow mutual insurance companies to
    avoid State law protecting policyholders, enriching insiders at the
    expense of consumers. We intend to monitor any redomestications and
    State law changes closely, returning to the Congress if necessary. The
    Act's Federal Home Loan Bank (FHLB) provisions fail to focus the FHLB
    System more on lending to community banks and less on arbitrage
    activities and short-term lending that do not advance its public
    purpose.
        The Act raises certain constitutional issues with respect to the
    insurance privacy provisions in title V. The Act might be construed as
    contrary to Supreme Court decisions that hold that the Congress may not
    compel States to enact or administer a Federal regulatory program. I
    interpret section 505(c) of the Act, however, as providing States with a
    constitutionally permissible choice of whether to participate in such a
    program. States that choose to participate will

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    gain the powers listed in section 505(c); States that decline will not.
    I believe that the Congress, in giving States a choice (in section
    505(c)) whether to ``adopt regulations to carry out this subtitle,''
    intended to allow States to accept or decline all of the rulemaking and
    enforcement obligations assigned to State authorities under sections
    501-505 of the Act. This interpretation is consistent with the
    explanation in the conference report that both the rulemaking and
    enforcement roles of State insurance authorities are voluntary not
    mandatory.
        Section 332(b) of S. 900 provides for Presidential appointment of
    the board of directors of the National Association of Registered Agents
    and Brokers (NARAB), established by the bill in the event that certain
    stated conditions occur. Because members of the NARAB board would
    exercise significant Federal governmental authority under those
    conditions, they must be appointed as Officers pursuant to the
    Appointments Clause of the Constitution. Under section 332(b)(1) of the
    bill, the President would be required to make such appointments from
    lists of candidates recommended by the National Association of Insurance
    Commissioners. The Appointments Clause, however, does not permit such
    restrictions to be imposed upon the President's power of appointment. I
    therefore do not interpret the restrictions of section 332(b)(1) as
    binding and will regard any such lists of recommended candidates as
    advisory only.
        The Gramm-Leach-Bliley Act is a major achievement that will benefit
    American consumers, communities, and businesses of all sizes. I thank
    all of those individuals who played a role in the development and
    passage of this historic legislation.

                                                          William J. Clinton

    The White House,

    November 12, 1999.

    Note: S. 900, approved November 12, was assigned Public Law No. 106-102.