John Dingell

Mr. DINGELL

Mr. DINGELL. Mr. Speaker, as ranking member of the Committee on Commerce, which has jurisdiction over securities including the standards of financial accounting, and to whom was referred the bill H.R. 10, the Financial Services Act of 1999, I rise to clarify a matter involving the legislative history of this legislation. My remarks are an extension of remarks that I made during House consideration of H.R. 10 on amendment No. 8 offered by Mrs. Roukema (July 1, 1999, Congressional Record at H5295 and H5299). During House consideration of this amendment (July 1, 1999, Congressional Record at H5294-H5300), several Banking Committee Members were recognized for unanimous-consent requests to revise and extend their remarks on that amendment which related to the manner in which insured depository institutions or depository institution holding companies report loan loss reserves on their financial statements. Because the House adjourned following completion of H.R. 10 at midnight on July 1, 1999, until 12:30 p.m. on Monday, July 12, it was not possible to review the material inserted by these Members until after the Independence Day District Work Period. In conducting that review, I have discovered nongermane and inaccurate remarks about an accounting practice known as ``pooling.'' These remarks, which were not before the House when it voted on the Roukema amendment, assert that the Financial Accounting Standards Board (FASB or Board) ``has not always sought adequate input from the accounting or banking communities on proposed changes in regulations''--a patently false statement when compared with both the public record and FASB's own procedures regarding due process--and asks the conference committee on H.R. 10 to ``include language either in this bill or future legislation to ensure that this process is an open and fair one'' (July 1, 1999, Congressional Record at H5296, bold type- face material, 2d column). I have the following comments on that material which follows the statement that the gentleman from Alabama (Mr. Bachus) actually delivered to the House: Since 1996, FASB, the independent private sector organization that establishes and improves standards of financial accounting for the United States, has been publicly deliberating issues relating to the accounting treatment for business combinations. Currently in the United States, companies can account for a business combination in one of two very different ways: the ``purchase'' method--in which one company is the buyer and records the company being acquired at the price it actually paid--and the ``pooling-of- interests'' method--in which two companies merge and just add together the book values of their net assets. The availability of two different accounting methods for business combinations is problematic for several reasons. First, it is difficult for investors to compare the financial statements of companies that use the different methods. The purchase method of accounting provides investors with different and much more useful financial information than does the pooling method--because the financial statements of the acquiring company in a purchase business combination reflect the investment it has made and provide feedback about the subsequent performance of that investment. Second, it affects competition in the mergers and acquisitions market (both domestically and internationally). Because companies that can use the pooling method do not report the cost of goodwill and other similar costs of the acquisition, they may be more willing to pay more than companies that must use the purchase method. This obviously can have a dramatic effect on shareholders. Third, the United States is out of step internationally--most other countries either prohibit the pooling method entirely or permit its use only as an exception. Finally, since the current accounting standards for business combinations were issued in 1970, the FASB, the American Institute of Certified Public Accountants, the Emerging Issues Task Force, and the United States Securities and Exchange Commission (SEC) have all been inundated with issues resulting from companies' seeking to use the pooling methods. Numerous interpretations of the pooling method rules have been required to address those issues. The high degree of required maintenance of those rules has led many to conclude that the current accounting rules are broken. After over a dozen public Board meetings, public meetings with the Financial Accounting Standards Advisory Council and the Business Combinations task force (both of which include preparers, users, and auditors), the issuance of two documents for public comment, and after carefully considering the input from all of its constituents, including the accounting and banking communities, the Board has tentatively decided that only one method, the purchase method, should be used to account for all business combinations. The Board's tentative decision reflects the view that virtually every business combination represents the purchase of one company by another and that the purchase method is the most appropriate method of reporting the economics of those transactions to investors. By allowing only one method of accounting for all business combinations: The investment made in the purchase of the other company is always reflected; feedback about the performance of those investments is provided; and investors can more easily make comparisons between investment opportunities, both domestically and internationally. As part of the FASB's extensive and open due process, the tentative decision regarding the methods of accounting for business combinations will be exposed for public comment later this summer as part of an Exposure Draft of a proposed new business combination accounting standard. In addition, early next year, the Board will hold public hearings to provide constituents an additional opportunity to directly discuss any concerns with the Board. Comment letters received in response to the Exposure Draft and the public hearing testimony will be carefully and fully considered by the Board at public meetings prior to reaching any decisions on the content of a final standard on the accounting for business combinations. FASB has kept the Congress fully informed on these matters of substance and process through document submissions and staff briefings. This accounting issue is controversial and will require extensive and careful review, realities that FASB fully recognizes and has taken steps to fully address. Legislation is not warranted. But I would like to point out that for some time, U.S. stock exchanges and many U.S.- based multinational companies have been pushing for adaption of international accounting standards. I find it ironic that some segments of the industry are now opposing the adoption of international standards in area where those standards are arguably tougher and more honest and accurate than the current U.S. standard. The Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940 are the basic laws that govern securities market regulation in the United States. Those laws, and related rules and regulations subsequently adopted by the SEC, establish the initial and continuing disclosure that companies must make if their securities are sold to or traded by the U.S. investing public. The goals of this disclosure system are to promote informed decisions by the investing public through full and fair disclosure, which includes preventing misleading or incomplete financial reporting. The success of this system has produced the world's most honest, fair, liquid, and efficient capital market. Financial statements are a cornerstone of this approach, and the quality and usefulness of those financial statements are directly dependent on the accounting principle used to prepare them. While the federal securities laws grant the SEC the authority to establish U.S. generally accepted accounting principles of GAAP, the SEC historically has looked to the private sector, and has formerly endorsed FASB, for leadership in establishing and improving accounting principles to be used by public companies, while the SEC retains it statutory authority to supplement, override or otherwise amend private sector accounting standards in the rare occasions where such action may be necessary and appropriate. This partnership with the private sector facilities input into the accounting standard-setting process from all stakeholders in U.S. capitol markets, including financial statement preparers, auditors and issuers, as well as regulators. This systems isn't broken and does not need to be fixed.

Mr. DINGELL

Mr. DINGELL. Mr. Speaker, we began to write the law that would become the Telecommunications Act of 1996 in 1993. At that time, the vast majority of the American people were scarcely aware of the Internet's existence and potential. In fact, it's amusing to recall that some of the people we today revere as visionaries--including those in, say, Redmond, Washington--initially failed to understand the importance of the World Wide Web. Much has changed since then. The Internet is on the front page of every major daily newspaper, and every major daily newspaper is on the Internet. E-mail addresses are exchanged as freely as telephone numbers. And the effect on the nation's commerce has been staggering. But the most amazing thing about this technological revolution is that this is only the beginning. That is why Representative Billy Tauzin (R-LA) and I introduced H.R. 2420, the ``Internet Freedom and Broadband Deployment Act'' on July 1, 1999. We want the exponential growth of the Internet to continue unabated. We want to remove outdated remnants of regulation written when we needed to safeguard and promote a different world of telecommunications. Today, those rules do little more than slow down progress. Out legislation is designed to take the speed limits off the Information Superhighway once and for all. First, the bill makes sure that Internet service will not become a de facto monopoly for any one provider. As technological convergence allows the cable and telephone wires in every home to deliver virtually the same services to the American people, it makes no sense to treat these wires differently under the law. It grossly distorts the operation of the market by giving one wire an artificial advantage over the other. Our bill protects consumers from a new monopoly in the business of Internet access and guarantees all Americans the freedom to choose the very best service at the lowest possible price. Second, our bill protects consumers against the increasing concentration of market power in the Internet backbone business. The backbone of the Internet is virtually invisible to the average user, but it's arguably the most important communications link in the chain. It also has the potential of becoming the bottleneck of the 21st century. Virtually every bit and byte that travels over the Internet must cross one or more of these backbone networks to reach its destination. It is imperative that these networks remain competitive, and our bill will make sure that is so. We are embarking on a technological journey that has already transformed our lives. The public is clamoring for new, high tech services, but they will be slow in coming and more expensive under current rules. Chairman Tauzin and I have put together a blueprint for change that we believe will bring tremendous benefits to American consumers and the nation's economy. We propose to leave behind any personal biases and battle scars from past telecom wars, and we look forward to an exciting and stimulating debate characterized first and foremost, by open minds, fresh ideas, and a singular focus on what's best for the American people.

Mr. DINGELL

Mr. DINGELL. Madam Chairman, I yield 1 minute to the gentleman from Washington (Mr. Inslee).

Mr. DINGELL. Madam Chairman, I yield myself 4 minutes. (Mr. DINGELL asked and was given permission to revise and extend his remarks.)

Mr. DINGELL. Madam Chairman, this is a bad bill. We consider it under a bad rule. George Santayana said something which I thought was very interesting. He said, ``He who does not learn from history is doomed to repeat it.'' It looks like this Congress is setting out to create exactly the same situation which caused the 1929 crash. It looks like this Congress is setting out to create the situation that caused the collapse of the banks in Japan and Thailand by setting up op-subs and by setting up monstrous conglomerates which will expose the American taxpayers and American investors to all manner of mischief and to the most assured economic calamity. The bill is considered under a rule which does not afford either an opportunity to offer all the amendments or to have adequate debate thereof. But what does the bill do, among other things? First all, it allows megamergers to create monstrous institutions which could engage in almost any sort of financial action. It sets up essentially, devices like the banks in Japan, which are in a state of collapse at this time, banks in Korea and Thailand, which are in a state of collapse, or banks in the United States, which could do anything and which did anything and contributed in a massive way to the economic collapse of this country in 1929 which was only cleared and cured by World War II. Some of the special abuses of this particular legislation need to be noted. The Committee on Rules has stripped out an anti-redlining provision which had been in the law and which is valuable, and it is brazen and outrageous discrimination against women and minorities and it sanctifies such actions by insurance companies and others within the banks' financial holding companies which will be set up hereunder. It attacks the privacy of American citizens. It allows unauthorized dissemination of their personal financial information and records. It guts the current protections for medical information now under State law. And it hampers the ability of the Secretary of Health and Human Services to adopt meaningful protections. Every single health group in the United States and the AFL-CIO oppose this provision because it guts the rights of Americans to know that what they tell their doctor and what their doctor tells them is secure. If we want to protect the security of our own financial records, we should tremble at this bill. It contains laughable financial privacy protections that tell a bank that it only has to disclose its privacy policy if it happens to have one. In other words, if they are going to give them the shaft, they should tell them. But they can do anything they want in terms of the financial information which they give them and which can be used to hurt them in their personal affairs. The bill wipes out more than 1,700 essential State insurance laws across the country. It creates no Federal regulator to fill the void. So, as a result, their protections when they buy insurance are stripped away. Alan Greenspan, the chairman of the Federal Reserve, is properly worried, and that should count for a lot. Let me read to my colleagues what he said to the Committee on Commerce this year. ``I and my colleagues are firmly of the view that the long-term stability of U.S. financial markets and the interests of the American taxpayer would be better served by no financial modernization bill rather than one that allows the proposed new activities to be conducted by the bank.'' And he goes on to state that he and his colleagues ``believe strongly that the operating subsidiary approach would damage competition in and the vitality of our financial services industry and poses serious risks for the American taxpayer.'' He noted that it creates a situation where banks and other financial activities will be made too big to fail and that the taxpayers then will be compelled to come in and bail them out. So if my colleagues enjoyed the outrage of what the Committee on Banking and Financial Services did to us on the savings and loan reform, this, they should know, is a perfection of that. That cost us about $500 billion. This, my colleagues can be assured, will cost us a lot more. I urge my colleagues to vote against this abominable legislation. In case my colleagues have any questions about my views, I want to clearly state for the record that I rise to condemn this bill. It is a terrible piece of legislation and should cause Americans to quake at the prospect of its passing. If you value your civil rights, you should worry about this bill. The Rules Committee stripped out an anti-redlining provision, offered by our colleague Ms. Lee and agreed to by the Banking Committee. This brazen act allows discrimination against women and minorities by insurance companies within the bill's financial holding companies. If you have had cancer or diabetes or depression or any other medical condition that could affect your employment or lead to discrimination against you, you should fear this bill. It contains a medical privacy provision that actually sanctifies the unauthorized dissemination of your personal medical information records. It guts many current protections for medical information and hampers the ability of the Secretary of Health and Human Services to adopt meaningful protections. Legions of groups oppose this provision from the American Medical Association to the AFL-CIO. If you want to protect the privacy of your own personal financial records, you should tremble at the prospect of this bill. The bill contains laughable financial privacy protections that tell a bank to disclose its privacy policy--if it has one. This bill deprives you of the right to say no. If you own insurance, you should worry if you bought it from a bank. This bill wipes out more than 1,700 essential state insurance laws across the country, with no federal regulator to fill the void. If you are a taxpayer, you should recoil in horror at this bill. No less an august person than Alan Greenspan is worried, and usually that counts for a lot. Let me read to you what he said before the Commerce Committee in April of this year: I and my colleagues are firmly of the view that the long- term stability of U.S. financial markets and the interests of the American taxpayer would be better served by no financial modernization bill rather than one that allows the proposed new activities to be conducted by the bank. He reiterated these views to me on June 28 in a letter which I intend to put into the Record, but I want to read just one part: I and my colleagues on the Board believe strongly that the operating subsidiary approach would damage competition in and the vitality of our financial services industry and poses serious risks for the American taxpayer. We have no doubt that the holding company approach, adopted by the house last year, passed by the Senate this year, and supported by each previous Treasury and Administration for nearly 20 years, is the prudent and safest way to modernize our financial affiliation laws and does not sacrifice any of the benefits of financial reform. This bill greatly expands the authority of political appointees and bureaucrats over banking and monetary policy. That worries Alan Greenspan. It should worry all Americans. In the earlier debate on the rule, several of my Republican colleagues labeled our concerns as ``partisan.'' So be it! If the Republicans want to accuse Democrats of caring about equal rights and protection from discrimination under the Constitution, I'll proudly stand with my Democratic colleagues. If the Republicans want to accuse Democrats of standing for full and fair protection of Americans' privacy rights, I'll proudly stand under that banner as well. What I won't stand for is this abominable legislation. I support responsible financial modernization. I do not support this bill. It is a terrible piece of legislation and I urge the House to defeat it so we can go back to the drawing board and write a good bill. In closing, I would like to address an important technical matter and explain the purpose of the Section 303 ``Functional Regulation of Insurance'' reference to Section 13 of the Federal Reserve Act. That reference is included to ensure that everyone that engages in the business of insurance--including national banks selling insurance as agents under the small-town sales provision commonly known as ``Section 92''--are subject to state regulation of those activities. Some have argued that this reference is not meant to overrule the Supreme Court's ruling in the Barnett Bank case. I want to make clear that that statement is correct to the extent that the Commerce Committee intended that all state functional regulation of the insurance activities of financial institutions would be subject to the preemption rules set forth in Section 104. Indeed, that is why there is a specific reference to Section 104 at the end of Section 303. And Section 104 incorporates the preemption standard articulated by the Supreme Court in the Barnett Bank case and even specifically cites that case. The statement, however, is incorrect to the extent that it implies that the Comptroller of the Currency remains free to issue his own set of rules and regulations to govern small-town national bank insurance sales activities. Although--as the Barnett Bank opinion recognizes-- Section 92 specifically authorizes the Comptroller to issue such regulations, Section 303 makes clear that States are now the paramount authority in the regulation of small-town national bank insurance sales activities. Under Section 303, all state regulations of insurance sales activities apply to small-town national bank insurance sales activities under Section 92 unless those regulations are prohibited under the Section 104 preemption standard. Organizations Opposed to The Medical Records Provisions in H.R. 10 Physician Organizations American Medical Association American Psychiatric Association American College of Surgeons American College of Physicians/American Society of Internal Medicine American Academy of Family Physicians American Psychological Association Nurses Organizations American Nurses Association American Association of Occupational Health Nurses Patient Organizations National Breast Cancer Coalition Consortium for Citizens with Disabilities/Privacy Working Group National Association of People with AIDS AIDS Action National Organization for Rare Disorders National Mental Health Association Myositis Association Infectious Disease Society Privacy/Civil Rights Organizations Consumer Coalition for Health Privacy American Civil Liberties Union Center for Democracy and Technology Bazwlon Center for Mental Health Law Labor Organizations

Mr. DINGELL. Madam Chairman, I continue to reserve the balance of my time.

Mr. DINGELL. Madam Chairman, I thank my good friend and colleague for yielding me this time. Madam Chairman, I know the authors of this amendment are Members of great decency and goodness, and I think they are accomplishing something that they really do not want. This is opposed by the Department of Justice, the FBI, the Department of Treasury. Banks have been involved in money laundering, too, I would remind my colleagues, and when we make the action of the bank voluntary with regard to reporting, we subject ourselves to a real probability that the banks are simply not going to report. The money launderers, the Cali Cartel, the drug merchants and the Mafia will love this amendment. If my colleagues like that, if they want crime, this is a good amendment to support; if my colleagues want to clean up the situation, I would urge them to oppose the amendment.

Mr. DINGELL. Madam Chairman, I ask unanimous consent to yield the entirety of my time to the gentleman from New York (Mr. LaFalce) to dispense as he pleases.

Mr. DINGELL. Madam Chairman, I yield myself the balance of my time. Let us talk about medical privacy. The Secretary's recommendations on this matter would explicitly preserve existing State laws that provide for essential privacy protection. H.R. 10 implicitly overrides them. With few exceptions, the Secretary's recommendations would require consent before medical records could be disclosed. H.R. 10 permits extensive disclosure without consent. Indeed, there are two pages of exceptions in the rule and in the bill. The recommendations of the Secretary would prohibit unauthorized disclosure of medical records to insurance companies for underwriting purposes, to credit agencies and to banks. H.R. 10 expressly allows such disclosure. The Secretary's recommendations would require that any authorization to disclose medical records be truly voluntary. H.R. 10 permits the insurers to coerce consent by saying they will refuse the right to insurance unless that disclosure takes place. H.R. 10 provides no safeguards ensuring only genuine medical research projects attain access to medical records. The Secretary's recommendations would include express protection in that regard. The Secretary's recommendations would hold third parties responsible for medical information that they receive. H.R. 10 allows third parties to disclose medical information to anybody.

Mr. DINGELL. Madam Chairman, I yield 1 minute to the gentleman from Minnesota (Mr. Luther).

Mr. DINGELL. Madam Chairman, I yield 2 minutes to the distinguished gentleman from New York (Mr. Towns).

Mr. DINGELL. Madam Chairman, I yield 3 minutes to the distinguished gentlewoman from California (Ms. Eshoo).

Mr. DINGELL. Madam Chairman, I yield 4 minutes to the gentleman from Massachusetts (Mr. Markey).

Mr. DINGELL. Madam Chairman, I yield 1\1/2\ minutes to the distinguished gentlewoman from California (Mrs. Capps).

Mr. DINGELL

Mr. DINGELL. Madam Chairman, I rise in opposition to the amendment.

Mr. DINGELL. Madam Chairman, I yield myself 3 minutes. (Mr. DINGELL asked and was given permission to revise and extend his remarks.)

Mr. DINGELL. Madam Chairman, I reserve the balance of my time.

Mr. DINGELL. Madam Chairman, I begin by expressing great respect and affection to the gentlewoman from New Jersey (Mrs. Roukema). I would like to read the essential part of the language of the amendment. It says ``The Securities and Exchange Commission shall consult and coordinate comments with the appropriate Federal banking agency before taking any action or rendering any opinion''. Now, that is pretty broad authority. It makes essentially the SEC, by the requirement for coordinating, subservient with regard to all of the matters under its jurisdiction in dealing with the banking regulators. For example, they could be compelled to address questions of behaviors of bank on accounting and accounting principles. What the amendment really has in practical effect is the ability for the SEC to be prevented from imposing the same honest financial reporting it requires from other companies. I think we should ask the question why should the banks not play by the same rules that everybody else plays by? We have got a lot of troubles with accounting and with misapplication of sound accounting principles. I think we ought to take a look at the requirements now, which are generally accepted accounting principles, GAP, as opposed to RAP. Accounting trickery can afford enormous savings to wrongdoers. It can be sanctified by banking regulators as it has been in the past. It can cost taxpayers billions of dollars again, as it did in the 1980s when banking regulators permitted the use of regulatory accounting, which enabled the banks to then phony up their goodwill and to look solid and solvent where, in fact, they were not. Bank regulators have said in the hearings before the Committee on Banking and Financial Services, they do not need this authority. The amendment is unnecessary. The question then is, why would we treat banks differently than others in terms of the reporting which they must make to the regulatory agencies and to the shareholders and stockholders in their periodic reports? Who then but the banks would want to evade the responsibility of telling the truth? How would honest reporting and accounting under the jurisdiction of regulators who treat everybody the same way be bettered by permitting the banks to achieve separate different special and probably more favorable treatment? Madam Chairman, I reserve the balance of my time.

Mr. DINGELL. Madam Chairman, I yield myself 3 minutes. (Mr. DINGELL asked and was given permission to revise and extend his remarks.)

Mr. DINGELL. I rise in opposition to the amendment, Madam Chairman.

Mr. DINGELL. Madam Chairman, I yield myself such time as I may consume. Madam Chairman, what we are talking about here is a banking system and a financial system that is going to be fair and open. The gentleman, I am sure, will recall that this amendment was adopted unanimously, unanimously by the House last year. This is not something that has been snuck up into the proceedings in some curious fashion, it was in the bill last year. It was adopted overwhelmingly in the Committee on Commerce. It simply says, disclose. Tell the truth. There is nothing wrong with that. Madam Chairman, I yield back the balance of my time, with an expression of respect and affection for my colleague on the other side.

Mr. DINGELL. Madam Chairman, I yield 30 seconds to my good friend, the gentleman from New York (Mr. LaFalce)

Mr. DINGELL. Madam Chairman, with all respect to the author of this amendment, the amendment would keep consumers in the dark, and financial providers would enjoy it mightily. Section 241 of H.R. 10 includes a noncontroversial and commonsense provision that passed the House last year in similar legislation. It requires all financial services regulatory agencies to prescribe or revise rules to improve the disclosure of commissions, fees, and other costs incurred by consumers in the purchase of financial products. This section does not regulate or limit fees. That would be done by the market. Section 241 merely requires disclosure so consumers can comparison shop on the basis of understandable and accurate disclosure. This helps both competition and consumers. The amendment would delete this disclosure requirement and replace it with a GAO study, a red herring rate regulation that nobody wants or seeks. We do not seek to regulate rates. This bill is already a bust for consumers. We are functioning under a gag rule. But this amendment simply strips the consumers of banking and other financial services of one more right, and that is a right to know what the charges are being assessed against them by the banks and other financial institutions, and in a sense it significantly changes existing law. Madam Chairman, I reserve the balance of my time.

Mr. DINGELL. Madam Chairman, I yield myself such time as I may consume. Madam Chairman, let me read the language of the amendment again so everybody understands what we are talking about. It says, ``The Securities and Exchange Commission shall consult and coordinate comments with the appropriate Federal banking agency before taking any action or rendering any opinion.'' That makes the SEC subject to the bank regulators in matters in which it has traditionally acted under its powers given it by the Congress of the United States. Never before has it been subject to the jurisdiction of the bank regulators. Now, the bank regulators said they did not need this authority. As a matter of fact, the joint guidance issued in March of this year by the SEC and by the bank regulators reaffirmed the importance of credible financial statements and meaningful disclosure to investors to a safe and sound financial system. The joint interagency letter reaffirms the policy set by Congress that the banks should follow GAP when recording and reporting loan locations. I would simply advise my colleagues, there is no reason to do this. The bank regulators do not seek the authority to have this done. The only good-hearted folks who want to do it is the bankers. The bankers simply do not want to tell the people all the things they should. They want to be able to get things cooked around the way they might like to have them done. I would also inform my colleagues that there is something else. This is going to impose interminable amounts of delay on banks in getting decisions on matters important to them which are charged to the SEC because of the immense amount of coordination, the immense amount of time, the immense amount of effort, and the immense amount of action that will be required by both the SEC and by the bank regulators. If my colleagues want to waste time, hurt banking, hurt consumers, and see to it that the people do not receive an honest picture of events going on in the bank, this is the amendment for them. If, however, my colleagues want to continue a system which works generally well and which causes no problem and which the bank regulators seek no change, then vote with me. Vote against the amendment. Madam Chairman, I include for the Record the Joint Release that I referred to as follows: Securities and Exchange Commission, Federal Deposit Insurance Corporation, Federal Reserve Board, Office of Comptroller of the Currency, Office of Thrift Supervision, Washington, DC, March 10, 1999. joint press release The Securities and Exchange Commission, Federal Deposit Insurance Corporation, Federal Reserve Board, Office of Comptroller of the Currency, and Office of Thrift Supervision have jointly issued the attached letter to financial institutions on the allowance for loan losses. Attachment: joint interagency letter to financial institutions Last November, the Securities and Exchange Commission, Federal Deposit Insurance Corporation, Federal Reserve Board, Office of Comptroller of the Currency, and Office of Thrift Supervision (the Agencies) issued a Joint Interagency Statement in which they reaffirmed the importance of credible financial statements and meaningful disclosure to investors and to a safe and sound financial system. The Joint Interagency Statement underscored the requirement that depository institutions record and report their allowance for loan and lease losses in accordance with generally accepted accounting principles (GAAP). We stress and continue to emphasize the importance of depository institutions having prudent, conservative, but not excessive, loan loss allowances that fall within an acceptable range of estimated losses. We recognize that today instability in certain global markets, for example is likely to increase loss inherent in affected institutions' portfolios and consequently require higher allowances for credit losses than were appropriate in more stable times. Despite the issuance of the November Joint Interagency Statement, there is continued uncertainty among financial institutions as to the expectations of the banking and securities regulators on the appropriate amount, disclosure and documentation of the allowance for credit losses. The Agencies now announce additional measures designed to address this continued uncertainty. These measures are consistent with the Agencies' mutual objective of, and focus on, addressing prospectively, where feasible, issues related to improving the documentation, disclosure, and reporting of loan loss allowances of financial institutions. The Agencies are establishing a Joint Working Group, comprised of policy representatives from each of the Agencies, to gain a better understanding of the procedures and processes, including ``sound practices,'' used generally by banking organizations to determine the allowance for credit losses. An important aspect of the Joint Working Group's activities will be to receive input from representatives of the banking industry and the accounting profession on these matters, and will not involve joint examinations of institutions. The common base of knowledge that results will facilitate the joint and individual efforts of the Agencies to provide improved guidance on appropriate procedures, documentation, and disclosures to the banking industry. This will assist the banking community in complying with GAAP and will improve comparability among financial statements of depository and other lending institutions. The Joint Working Group will also share information and insights concerning issues of mutual concern that may arise. Using information gathered through the Joint Working Group and from representatives of the accounting profession and the banking industry, the Agencies will work together to issue parallel guidance, on a timely basis, and within a year on the first two items listed below, in the following key areas regarding credit loss allowances: Appropriate Methodologies and Supporting Documentation.-- The Agencies intend to issue guidance that will suggest procedures and processes necessary for a reasoned assessment of losses inherent in a portfolio and discuss ways to ensure that documentation supports the reported allowance. Enhanced Disclosures.--This guidance will address appropriate disclosures of allowances for credit losses and the credit quality of institutions' portfolios by identifying key areas for enhanced disclosures, including the need for institutions to disclose changes in risk factor and asset quality that affect allowances for credit losses. The enhanced disclosures would contribute to better understanding by investors and the public of the risk profile of banking institutions and improve market discipline. The Agencies will work together to encourage and support the Financial Accounting Standards Board's process of providing additional guidance regarding accounting for allowances for loan losses. The Agencies emphasize that GAAP requires that management's determination be based on a comprehensive, adequately documented, and consistently applied analysis of the particular institution's exposures, the effects of its lending and collection policies, and its own loss experience under comparable conditions. In addition, the Agencies will support and encourage the task force of the American Institute of Certified Public Accountants (AICPA) that is developing more specific guidance on the accounting for allowances for credit losses and the techniques of measuring the credit loss inherent in a portfolio at a particular date. In particular, the AICPA task force will focus on providing guidance on how best to distinguish probable-losses inherent in the portfolio as of the balance sheet date--the guidepost agreed to by the Agencies for reporting allowances in accordance with GAAP-- from possible or future losses not inherent in the balance sheet as of that date. Additionally, the Agencies will ask the AICPA task force to consider recently developed portfolio credit risk measurement and management techniques that are consistent with GAAP as part of this effort. The AICPA project already has been initiated and will include representatives from the accounting profession and the banking industry, as well as observers from the SEC and the banking agencies. Senior staff of the Agencies will continue to meet to discuss banking industry accounting and financial disclosure policy issues of interest that affect the transparency of financial reporting and bank safety and soundness. These discussions will address progress in the application of accounting and disclosure standards by banking institutions, including those impacting the allowance for credit losses, with particular focus on recently identified issues and trends. The meetings also will be used to coordinate projects of the Agencies in areas of mutual interest. The first of these meetings was held on January 27. The Agencies believe that the actions announced above will promote a better and clearer understanding among financial institutions of the appropriate procedures and processes for determining credit losses in accordance with GAAP. The Agencies intend that these steps will enhance the transparency of financial information and improve market discipline, consistent with safety and soundness objectives. In recognition of the specialized regulatory nature of the banking industry and in order to resolve ongoing uncertainties in the industry, with the announcement of these initiatives, the Agencies' focus, in so far as feasible, will be on enhancing allowance practices going forward.

Mr. DINGELL

Mr. DINGELL. Mr. Speaker, this is a bad rule. It is a bad bill, and the process is arrogantly crafted to deny the House the opportunity to consider important questions. It is the function of the Committee on Rules to make possible an orderly debate but also to see to it that important national questions are discussed. This is not a rule; it is a gag rule. The committee has chosen to deny the committees and the Members of this body opportunities to discuss very important matters. The rule is unfair to taxpayers. It greatly prevents us from addressing the question of how we will assure that banking insurance paid for by the taxpayer will not be used to cover risky, speculative activities. No amendment can be offered on this point. The rule is unfair to consumers. The rule does not permit amendments to restore consumer protections stripped out of the bill by the Committee on Rules. The bill preempts more than 1,700 State insurance laws across the country, and, if this bill passes in its current form, every State insurance law that is to protect consumers of insurance products will be essentially rendered null and void. We will be allowed to consider one consumer-related provision. That is an amendment to deny consumers meaningful information on the costs of products that they buy, and we will change that. This rule is unfair to investors. The bill still contains enormous loopholes in investor protections when securities are sold or underwritten by banks. An amendment to close just one of those loopholes was denied by the Committee on Rules. The worst thing that this bill does is it denies protection of privacy of American people. It does not allow the ordinary citizen to know that his personal financial information is not going to be thrown around wherever the holder of that particular information might choose to place it. We have an amendment which would have assured protection of that. That amendment is prohibited by this rule. In like fashion, the medical information of every citizen is, under this legislation, thrown open to the gaze of all. The result of that, of course, is going to be significant loss of personal privacy by ordinary citizens with regard to medical conditions and medical care. I think that is wrong. The Committee on Rules did not permit an amendment to address that question. My question to the Republican leadership, my question to the Committee on Rules is: What are they afraid of? Why is it they are gagging this body? Why is it that they refuse to allow these questions to be debated? Let us allow the House to work its will. Let us allow fair consideration of all of the important questions that need to be addressed. If my colleagues are right, I am sure they will prevail. If they have the votes, they might even prevail when they are not right, but the hard fact of the matter is at least allow the House to address these questions. They are important. I am sorry to see the day when the Committee on Rules would exert such outrageous power.