Phil Gramm

Mr. GRAMM

Mr. GRAMM. Mr. President, I have several unanimous consent requests. All of them are agreed to on both sides of the aisle. Let me just go through them.

Mr. GRAMM. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRAMM

Mr. GRAMM. Mr. President, I will make the following point. We go back and forth to try to keep some balance in the debate. I think when people have a real question that it is a logical thing to do. But when questions used really disrupt the flow of the debate so that you have long periods of time on one side of the aisle, I don't think it is quite fair. Obviously under the rules we can do it, but it can be done on both sides. I would like to just suggest--we are going to vote on this at about 7 o'clock. We have plenty of time. Everybody can be heard. I would just like to suggest that we go back and forth. Everybody will get a chance to speak. I urge our colleagues, if you have a real question on something you don't know--other than, ``Do you realize that our proposal is a great proposal and their proposal is a rotten proposal?''--yes, I realize that--if you have a real question, I think it makes sense. But in fairness to what we try to do in going back and forth, I urge people to wait for their time to speak so we have debate on both sides of the aisle. That is my point. Several Senators addressed the Chair.

Mr. GRAMM. Mr. President, you will hardly know where to begin when you have listened to these speeches for a couple hours, and most of them have nothing whatsoever to do with what we are talking about on the floor. It reminds me of the old Lincoln adage, where Lincoln was engaged in a debate, and the guy debating Lincoln got up and gave a wonderful speech that had nothing to do with the subject being debated; and Lincoln got up and said that his colleague had given a wonderful speech that would be appropriate for another day and another occasion. I want to go through, roughly, 10 points that have been raised in all these speeches, and then go back to what we are debating. No. 1, we have had a lot of speeches for CRA. And one would get the idea in listening to these speeches that someone is proposing to repeal CRA. In fact, as far as I am aware, no one has ever offered an amendment or bill since 1977 proposing repeal of CRA. Whether the record for CRA is as wonderful as our colleagues have claimed, have we built more houses because the economy is better or because of CRA? Who wants to get into that debate? Because it is not relevant to what we are talking about, nobody is talking about repealing CRA. No. 2, nobody is talking about ``turning back the clock.'' What we are talking about is dealing with abuses that exist in the current system, and that can and should be fixed. One of those abuses basically has to do with extraordinary power that protesters and protest groups have at critical moments when banks are trying to make decisions. The second has to do with the relevancy of CRA, and which banks under what circumstances have relevant requirements, and what are the regulatory burdens and costs involved. In terms of a point that was made way back so many speeches ago--I forget which one it was--that in 99 percent of the cases where banks apply to do something that requires CRA evaluation, nobody challenges that action, that is a very misleading number, really, for a number of reasons. First, most of these applications concern the opening or closing branches. They are not very relevant. It is basically the mergers and acquisitions that are relevant to CRS protests. Second, as I have pointed out on many occasions, most of the CRA action takes place not in the formal complaint, but basically when the protester goes to the bank threatening that unless the bank takes certain action, often giving that person money, that they are going to file a complaint. So it never shows up in the statistics. So that is all interesting but largely irrelevant. One of our colleagues said that I said, or someone had said, that CRA is just an extortion program. No one ever made that statement. What I have said is that CRA has become a vehicle where a tremendous number of actions occur that certainly look like extortion. When you look at contracts that are being signed, these individuals and groups are given large sums of money, and then they sign a commitment that they will withdraw their objection. That is a classic quid pro quo, that is the essence of extortion or bribery or kickbacks. There are a lot of names you can use. But no one has suggested any of them in this debate. Many, most, almost all of the people involved in CRA are conscientious and honest. We are talking about people here who are abusing the system. And even spokesmen for CRA, even spokesmen for community groups, say there are abuses, that the abuses undercut the system. As everybody who is on the Banking Committee knows, when the CRA advocates testified before the Banking Committee, a clear point was made that abuses do occur. They called the abuses ``greenmail.'' I think the standard term is ``blackmail,'' but nobody disputes that they occur. What we are trying to do is to deal with them. In terms of half the banks being out of compliance, half the banks being affected, there isn't any proposal that would let half the banks out of CRA. Basically, the proposal in the underlying bill is that banks with less than $100 million in assets and which are also in nonmetropolitan areas, in rural areas, that these banks be exempt from CRA. Now, why? First of all, since 1990, over a 9-year period, there have been 16,380 examinations of these small rural banks; 16,380 times Federal regulators have gone to these rural banks. They have sat down for days and weeks, looking through their records. They have done reports to determine whether these rural banks are lending in their community and meeting their community reinvestment requirements. After 16,380 examinations, only 3 banks have been found to be substantially out of compliance. The cost of complying with CRA for these examinations to the small banks has been roughly $80,000 a year, according to the 488 letters we have received from small banks on this subject. That is $1.3 billion of cost imposed on small banks. I have read at great length letters about how small banks can't serve their customers because they have to do all this paperwork and how it is interfering with community lending. I have read some passionate letters on this subject on the floor of the Senate in this debate. I am not going to reread them now. The point is, $1.3 billion later, 16,380 examinations later, crushing paperwork, cost burden on very small banks, many of them between 6 and 10 employees, $1.3 billion of costs banks have paid, and only 3 small rural banks have been found to be substantially out of compliance. What does our bill do? It exempts from CRA very small, very rural banks. In total, in terms of the number of banks, that is about 38 percent of the banks in America. In terms of available capital, as you can see from this chart, that is 2.7 percent of all the assets in all the banks and S&Ls in America. Now, the logical question is this: 44 percent of our auditing effort is going into banks that have only 2.7 percent of the assets, and they have been found to be substantially out of compliance only 3/100 of 1 percent of the time. Is this not massive regulatory overkill? What does this have to do with meeting community needs for loans? If there has ever been an overreach in regulatory terms, imposing $1.3 billion of cost on little banks and little communities to turn up three banks in 9 years that have been substantially out of compliance, this is regulatory overkill. We are trying to fix it. In terms of exemption based on a 3-year record, one of my frustrations in debating on the Senate floor--and I guess all of us can be accused of doing it; I try to, at least within my own mind, be careful about things I say. I try to put my argument in the best light I can. Everybody else does. I try not to say things I don't believe to be true. But we continue to hear these things like, if a bank has been in compliance three times, they are exempt from CRA. That is not what our bill does. Here is what our bill does. Let me explain the problem. In fact, let me have that quote from the law professor at Cornell. This quote is from Cornell law professor Jonathan Macey. Jonathan Macey is one of our Nation's premier experts in banking law and is very knowledgeable in this whole area of application of CRA. In evaluating what is happening, this is basically what he says: You see really weird things when you look at the code of Federal regulations . . . like Federal regulators are encouraged to leave the room and allowing community groups to negotiate ex parte with bankers in a community reinvestment context. . . . Giving jobs to the top five officials of these communities or shake-down groups is generally high up on the list (of demands). So, what we really have is a bit of old world Sicily brought into the U.S., but legitimized and given the patina of government support. Let me see those CRA agreements, if you will stack all those back up there one more time. I am going to zip through them real quickly. One of our problems in evaluating what happened to the $9 billion of cash payments that were made under CRA--something never contemplated; nobody on the Banking Committee in 1977, I don't believe, thought CRA would ultimately produce cash payments being made to individuals and to groups; they thought, as we have heard arguments all day, that CRA is about lending--we don't know where all this money goes. We don't know what percentage of rake-offs, for example, these groups get on loans banks make, because we don't have the records. These CRA agreements are confidential; they are not made public. That is something later that we hope to change. But let me just say, I have three pieces of CRA agreements. These are all private agreements where the parties have agreed not to make them public. We have redacted the names to protect the people who committed not to make them public. The point I am trying to make here is how far away from lending, as we conventionally know it, this is. This is from Bank A: Provide blank--this is the CRA group--with a grant of up to $20,000. Provide blank with a grant of up to $50,000. Provide blank with a grant of up to $25,000. And on this one they say why: to pay reasonable and necessary soft costs incurred. Provide blank with a grant of a reasonable amount. And then after they agree to pay that money, look at this provision: Blank agrees to withdraw on the date hereof the comment letter, dated blank 28, 19 blank, and any related materials filed by blank with the Office of the Comptroller of the Currency, the Federal Reserve Bank, and the board--and it goes on. The point is, on one page they give all these grants to groups, and then on the second page the groups agree to withdraw the complaints they filed against the action the banks want to make. Here is the point: Did the groups file the complaints to get the money? What about the legitimacy of the complaint? Did it go away when they got the money? It goes on. We are getting more and more of these every day. Then, in every one of these agreements we have seen, there is an agreement by the community group or the individual and the bank not to disseminate or otherwise make available to the public copies of this agreement. Here is a second bank agreement, Bank B: Blank will receive a fee of 2 and three quarters percent of the face amount of each program loan made by blank. Now, I wonder if people in that community realize that this undisclosed individual, or group, is getting a rake-off of 2.75 percent of the face value of every loan that is being made by this bank. Blank will receive a $200,000 fee as reimbursement, $100,000 payable fund, execution and delivery, $100,000 6 months from now. That is the quid. Here is the quo: The group commits to withdraw all pending protests of regulatory applications and related matters, but not to sponsor, either directly or indirectly, to protest or supply information in connection with any protest relating to the pending or future blank applications with bank regulators. In other words, it doesn't matter what abuses the bank might do in the future. They are never going to protest again because of this. At the request to send letters to the customers of the bank--well, let me go on. Not only do they agree never to protest again on any issue, but they agree to purge the files and data bases of all information relating to the bank's customers. Now, it goes on: to immediately cease all activities directed against the bank; to maintain the confidentiality of this agreement--they have confidentiality again here--and then: to cooperate with the community group, to help them use this agreement to leverage other financial institutions to get money from them. In other words, not only are they paying this money, they are going to help them get other banks to pay it. It is funny how little things grab you. Maybe it is just me, but this one hits me the hardest. I was wondering why we were getting these letters from banks in favor of CRA when the bank officers were telling me--and in some cases saying publicly--that CRA was blackmail. Yet, I was getting letters from these banks saying CRA is great. Well, here is the reason: Blank will work with the blank to establish a clear, written declaratory statement indicating support for the Community Reinvestment Act and the Home Mortgage Disclosure Act, and the party's opposition to any attempts to weaken the law. Blank will send the final copy of this statement to the blank. In other words, they will let them go over and rewrite the letter they are going to send. And they are going to send the letter to the American Bankers Association, Federal Reserve Board, Office of the Comptroller of the Currency, the whole congressional delegation of their State, and to all members of the House and Senate Banking Committees. So, Senator Bennett, when you got a letter from this bank telling you that CRA is the greatest thing that has ever been, you probably did not know that was the result of a CRA agreement so that a bank could do business in America. And we are not talking about Honduras; we are not talking about Thailand. We are talking about the United States of America, and we have banks--some of the richest and most powerful institutions in America--that are having dictated to them at this very moment that they have to write us letters telling us things they do not believe. How is that happening? How can that be happening in America? I ask you, how can it happen? Not only is it happening, it is being condoned because, as the law professor from Cornell said, we have given the patina of Government support to something that if it happened to an American bank in Thailand, we would file an unfair trade practice against them. So when you are getting all these letters telling you how wonderful CRA is from banks, remember this agreement. In fact, I received such a letter from a particular bank. Fortunately, to show you this is a very good and honorable bank, they say in their letter they have been forced to send this letter as a result of a CRA agreement. I discovered this letter because there was an editorial written attacking the bill quoting this bank, or this letter, interestingly enough. There was an editorial written quoting a letter from First Union Corporation, a wonderful, great bank. They were quoted in the editorial as saying how great CRA was and why we should not be making any changes to the bill. Well, I said I want to see this letter. So we got the letter. Let me read the first paragraph: As part of a CRA pledge we made during our merger with CoreStates, First Union National Bank committed to send a written statement to certain individuals or organizations clearly expressing our position on CRA and HMDA regulations. We, as an organization, are very committed to serving all of our communities, including underserved areas. We are happy to provide this statement. Then they go on to say that nothing in the letter is meant to be an endorsement or opposition to any particular bill. I know we have one of the most distinguished former prosecutors in America sitting in the Chair. I have to say--not to speak for him, because in his role as Presiding Officer, he can't speak until he comes down here--what is the difference between this and the old protection racket that existed when I was a child? I am proud to say that my uncles, as sheriffs and police officers, broke up some of those protection rackets. But the only difference is that this is Government; this is the Federal Government that is basically allowing this to happen. Now, we are not talking about repealing CRA. We are not talking about ending a program that obviously has had many successes. We are talking about trying to deal with abuse. So what are the two things we do? No. 1, we say that if a bank has a history of being in compliance with the law, if they have been evaluated 3 years in a row and been found to be in compliance with CRA, and if they are presently in compliance with CRA, then any individual or group can protest, file a complaint; and under the existing regulations of the Comptroller of the Currency, there has to be a hearing for any complaint that is lodged. But what our amendment adds is the requirement that if this bank has a long history of being in compliance, before the regulator can stop the action that they have earned the right to undertake, the protester must present some substantial evidence. In other words, if you are a good actor and you have been evaluated 3 years in a row and were found to be in compliance, you are innocent until proven guilty. Somebody can't just walk in and say a banker is a racist and a loan shark. Some protesters have done exactly that. There is a CRA protester who calls himself an ``urban terrorist,'' who used those charges against a bank, harassed them for 4 years, went to a speech of the president of the bank at Harvard University, disrupted the speech, made this man's life miserable for 4 long years, until the bank gave him $1.4 million and a $200,000 grant and set up an organization that now lends $3.5 billion, totally unregulated by the Federal Government. He gets a 2.75- percent rake-off of each one of those loans, and nobody knows what he does with the money. He is not accountable to anybody. Now, all we want to do is say if a bank has consistently been in compliance and you want to stop them from merging with another bank, or opening a branch, you have to present some evidence. Now, what is the standard we have used? The Presiding Officer, as a distinguished attorney and former prosecutor, knows that substantial evidence is the most defined term in American law. It is referred to over 900 times in the United States Code. There have been 400 court decisions that have defined ``substantial evidence.'' So what standard do we require a protester to meet if he tries to impose potentially hundreds of millions of dollars in costs on a bank, and to stop a bank from doing what it appears to be qualified to do? They have to present evidence. Here are four standards set by the Supreme Court as to what ``substantial evidence'' means: They have to present evidence that is understood to mean ``more than a mere scintilla.'' That is a standard we are setting. You can't come in and stop a bank with a consistent record of CRA compliance. You can't automatically stop, shut down, and delay the process unless you present evidence that is ``more than a mere scintilla.'' Unless you present such relevant evidence as a ``reasonable mind might''-- notice it didn't say ``would,'' but ``might''-- ``accept as adequate to support a claim.'' You have to present evidence that is real, material, not ``seeming or imaginary,'' and considerable in amount, value, and worth. Why in the world would we stand by and allow a bank that has complied with the law of the land and been evaluated three times in a row as being in compliance to be prevented from exercising a right they have earned unless somebody presents credible evidence, substantial evidence, to the contrary? I don't understand. Why would anybody be against this change? I continue to be stunned that our colleagues talk about CRA and how wonderful it is. That is not what we are talking about. Should you have to present some evidence if you are going to try to deny people the rights they earned under the law? How can that be unfair? How can that be reaching? How can that be burdensome? Who could be against that? The second provision of the bill provides relief to small banks in rural areas. I have gone through the figures: $1.3 billion later, in this decade of audits and costs imposed on the banks, three small rural banks--three one-hundredths of 1 percent--are bad actors. Is that not regulatory overkill? We have forced little banks, many with just 6 to 10 employees, to pay $1.3 billion in compliance costs, and in 16,380 examinations, only 3 of them have been deemed to be substantially out of compliance. Does that make sense? Is that crazy? Did I miss something? I could read to you letter after letter. We have had 488 letters from banks urging the committee to take this action. I have read them before; I will not do so again. Finally, let me remind my colleagues that the amendment that is pending doesn't just strike these two provisions--the ``integrity and relevance'' provisions--it does far more than that. It would create a situation where individual officers and directors of a bank could potentially be fined up to $1 million a day for noncompliance. Remember, in these little banks you have 16,380 examinations over the decade, and just 3 banks have been found to be substantially out of compliance. What is the justification for this $1-million-a-day fine? I have letters from the American Bankers Association, and from the Independent Bankers Association, pointing out the obvious. This provision that has been offered by our colleague from Nevada, and was offered in committee by Senator Sarbanes, will make it virtually impossible for small banks to get quality directors, because who can afford that potential liability? It will make it virtually impossible for small banks, who can't buy the insurance to protect people from liability, to hire quality bank officials. The bill goes on and on and on in the most massive overkill of expanding CRA to nonbanking activities. Currently, a bank can sell insurance without CRA approval. This substitute that is now pending would require CRA approval for that. Banks can sell securities without CRA approval. This takes CRA out of banking and into other areas. What is the justification for that? The justification for requiring CRA was that banks have a federal subsidy through deposit insurance. So that is public insurance, and making banks do things in the public interest could be justified. But how does expanding that requirement outside banking make any sense? Are we simply going to keep writing laws telling people what to do with this money? Basically we have a choice. The choice is the following: Both of these provisions concern CRA. The bill that was adopted by the Banking Committee has two reforms--one an integrity provision, and one a relevancy provision. The amendment that has been offered strikes both of those reforms and imposes all of these new regulations. So I think it is as clear a choice as you can make. Just a couple of other points, and I will stop, because I know that others want to speak. One of our colleagues quoted the Wall Street Journal. The Wall Street Journal has editorialized not once but twice in favor of the position the committee has taken here. I urge my colleagues again to look at the debate--not get carried away or be confused by people who say the committee has gutted CRA, is killing CRA, or is repealing CRA. We are not doing any of those things. But we are dealing with abuses of CRA. They need to be dealt with. They scream out to be dealt with. If I could make a plea to the other side, it would be a simple and short plea: If we don't fix the abuses of CRA, by the time we are through letting people know what is happening in terms of these $9 billion of cash payments, and by the time we finally do run down and know where all of this money is going, and we find that much of it--or some of it--is not being used to benefit people who are supposed to be benefiting from community loans, I think it is going to undercut CRA. If I were a strong proponent of CRA, I would be for these reforms, because they clean up a program that clearly has had an impact. But our colleagues--as they did on welfare--it was abused and abused and abused and abused and abused. But they would never ever, ever, ever say that it should be fixed. Finally, the American people rose up and elected a new Congress. We are probably in the majority because of their intransigence. So God does provide His services from time to time. And then it was fixed. They probably could have had it closer to what they wanted had they been willing to fix it. But the position we have heard today over and over is, never ever, ever, ever will we allow any change whatsoever, no matter how bad the abuse is in CRA. I don't understand it. I think it is an extreme view. I hope that even yet, by the time we get through conference, by the time we have had a chance to discuss this over many more times, perhaps there can be a compromise. I yield the floor. Mr. DODD addressed the Chair.

Mr. GRAMM. Mr. President, I thank the distinguished Democrat leader for the effort he has made to get the Senate to this point. Obviously, when we have votes on contentious issues, ultimately Members come to the floor and vote. Somebody wins and somebody loses. I think on many of the votes we are going to have, neither of us knows what the outcome will be. We are beginning a process that will go through conference. We have a bill in the House that is very different. I think we all want to write a bill that the White House can sign. Yesterday, the President came out with six conditions for signing the bill, two of which your substitute does not comply with. Obviously, we are going to have to work with the White House on a continuing basis. I want to assure you, Mr. Leader, I will also sit down, roll up my sleeves, and try to work. Maybe we can't solve these problems, but if it is possible to solve them, I want to do it. I thank the Senator for his help. Mr. President, how much time remains on both sides?

Mr. GRAMM. I yield 5 minutes to the distinguished Senator from Wyoming.

Mr. GRAMM

Mr. GRAMM. Mr. President, I ask unanimous consent that the resolution and preamble be agreed to en bloc, the motion to reconsider be laid upon the table, and that any statements relating thereto be placed in the Record at the appropriate place as if read.

Mr. GRAMM. Mr. President, I ask unanimous consent that the Senate proceed immediately to the consideration of Calendar No. 74, S. Res. 54.

Mr. GRAMM

Mr. GRAMM. I now ask unanimous consent that it be in order to ask for the yeas and nays on S. Res. 94.

Mr. GRAMM. I ask unanimous consent that immediately following the vote, there be a period of morning business until 11 a.m., with the time equally divided. I further ask that the first half of the time be allocated to Senator Coverdell and the second half of the time to be allocated to Senator Dorgan or his designee. I also ask consent that at 11 a.m. the Senate resume consideration of S. 900, the financial modernization bill, and the pending Sarbanes amendment. I finally ask that the time until 12 noon be equally divided between Senator Gramm and Senator Sarbanes, and that Senator Gramm be recognized at 12 noon to make a motion to table the pending Sarbanes amendment to S. 900.

Mr. GRAMM

Mr. GRAMM. For the information of all Senators, the Senate will convene on Wednesday at 9:30 a.m. and will immediately proceed to a rollcall vote on adoption of S. Res. 94. Following the vote, the Senate will be in a period of morning business until 11 a.m. At 11 a.m., the Senate will resume consideration of Senator Sarbanes' substitute amendment to S. 900, the Financial Services Modernization Act, with a vote on the Gramm motion to table occurring at approximately 12 noon. Additional amendments are expected, and therefore Senators can expect votes throughout Wednesday's session of the Senate.

Mr. GRAMM

Mr. GRAMM. Does the Senator from New Mexico wish to say something before we start? Mr. President, I ask unanimous consent to yield to Senator Domenici and to reclaim my time when he is finished.

Mr. GRAMM. Mr. President, let me try to outline the procedure that we have agreed to by unanimous consent as we begin the debate on financial services modernization. We have agreed to have opening statements. I guess we will assume that the rest of the morning will be used up in those opening statements. I will make an opening statement, the ranking member of the committee, Senator Sarbanes, will make an opening statement, and then all those who would like to make an opening statement are encouraged to come to the floor and do those statements this morning. Under the unanimous consent agreement, Senator Sarbanes would then offer a comprehensive substitute for the committee mark. That would be debated for the remainder of the morning--if there is any morning left when it is introduced--and this afternoon. When debate on that is completed, a vote would be set. It is my assumption, since we have colleagues from two States who have had a terrible natural disaster and have gone home this morning to assist in making the evaluations that will help us respond to that through our Federal emergency programs, my assumption is that we will set aside the vote until some time tomorrow when they can come back. Under the unanimous consent agreement, at the end of the Sarbanes amendment, I, or my designee, would be recognized to offer two amendments. Those amendments will be offered and debated. And then, depending on where we are in terms of our colleagues coming back from their States that have had the natural disasters, we would begin the voting process. The final part of the unanimous consent agreement would be a fourth amendment that Senator Sarbanes, or his designee, would offer, and that would be an amendment that would strike the CRA provisions of the committee bill and insert the provisions related to CRA, which are in the Sarbanes substitute. That would get us four amendments into the process, and we would then begin the normal debate process where the floor would be open to those who seek recognition. I know that it is the hope of our leadership that we would finish the bill this week. I don't see any reason that we can't do that. Let me say, as we begin this debate, I am willing to stay here late at night, through the night, if we need to in order to have a full debate on these issues. I think we all recognize that under the Senate rules everybody gets to have their say. Everybody gets an opportunity to offer amendments. I am hopeful that we can complete this process by Thursday. We have a long trail to follow to complete the bill. As many people in the Senate are aware, the House has a divided jurisdiction. The House committee has acted on the bill, the Banking Committee; but the Commerce Committee, which has joint jurisdiction, is now in the process, on a bipartisan basis, of writing a bill that is very different. So I am hopeful that by this Thursday we can complete this bill and start moving toward conference and toward all the work that still lies before us. I would be happy to yield to Senator Sarbanes.

Mr. GRAMM. Mr. President, I think that is right. Some time between noon and 4 o'clock is the word that I received.

Mr. GRAMM. I don't see any reason why we can't accommodate each other. We want to have a full debate. Much of the essence of the differences that exist are embodied in the first and fourth amendments. I think having a full debate is what we should do. I think it is important that people understand the issues, and I can certainly say, from my point of view, I think the better people understand these issues, the better off we are. We are here to debate the most important banking bill in 60 years today. This bill would dramatically change the American financial system. It would knock down existing barriers that separate insurance and banking and separate securities and banking. It would create a new financial institution in America, which would still be a bank or a bank holding company, would still have the same structure, but it would be a very different institution, and it would be basically a supermarket for financial services. Let me say, in going into the process, that my goal is to put together a bill that will provide greater diversity and financial services at a lower price to American consumers. If this bill does not meet the test of providing benefit in terms of a greater diversity and availability of product, if it doesn't meet the test of providing a lower cost for those products, for the people who do the work and pay the taxes and pull the wagon in America, then it would be my view that we have failed in this bill. That, I think, is the test that we need to use in order to judge our success or lack thereof on this bill. In terms of barriers erected between insurance and banking and between securities and banking, most of these barriers erected in the 1920s and 1930s, what has happened that has really brought us to this point in terms of legislating this dramatic change in the American financial system is that, over time, these barriers have stopped looking like barriers, and now they look like little slices of Swiss cheese. They have large and small holes in them, some created by innovative regulators, some created by the growth of practice and convention. But the net result is that after fighting each other for 50 years to try to keep other industries out of their individual portion of the financial services industry, these three great economic forces in the American economy--the insurance industry, the banking industry, and the securities industry--have basically concluded that they would be better off in terms of an open field of competition and greater able to meet the needs of their consumers if we simply took down these barriers. Also students of this problem--no matter what their persuasion within limits at the beginning of the debate--have concluded that the instability that exists in allowing these walls that divide these three major financial industries to continue to stand, knowing that these walls have, because of the holes in them, produced this instability and produced an unstable structure in many cases--the basic conclusion has been reached by virtually everyone engaged in the debate that we would be better off to take down these barriers than to leave them standing as they are. The debate today is not about the changes that we make in the name of financial services modernization. That is why I believe and hope that in the end we can reach a consensus where at least 51 Members of the Senate--hopefully more--will vote for the final product of this deliberation. What we are debating is not about what changes are to be made, but how to make those changes. That really involves basically two areas, and they will be the focal point of this debate. The first area is the question of where these new financial services should be provided. Should these new financial services be provided within the bank itself, within the legal structure of the bank, and what capital that is invested in these new parts of the financial services industry will count as the capital of the bank itself? Or should these new financial services be provided by affiliates of holding companies outside the bank? This is a fundamentally important question. It is a question where we have great differences of opinion. It is a question that the Chairman of the Federal Reserve Board, Alan Greenspan, believes is so important that he has said in testimony before the House Commerce Committee that if we had a bill that allowed banks to provide these expanded services within the bank itself, that bill would be so dangerous in terms of providing an unlevel playing surface--in terms of encouraging artificially the concentration of securities products being sold and serviced inside the bank--and the safety and soundness dangers with the Federal Deposit Insurance Corporation would be so great, that he and every member of the Board of Governors of the Federal Reserve Board have taken a position that it would be better to pass no financial services modernization than to undertake to allow banks to provide these new services within the bank itself. The White House and the Treasury have taken exactly the opposite position--they favor a bill where banks can provide these services within the legal structure of the bank. It is my understanding--I have not seen it, but it is my understanding--that we have another veto threat from the President. The number of items the President is threatening to veto has grown, and now we have gone from four items in his first letter to six items, some of which, it is my understanding, would also apply to the Sarbanes substitute and to the House bill, further raising some question about the administration's degree of seriousness about this bill. That is our first issue. Should banks provide the new expanded financial services within the structure of the bank itself, or should they be forced to take capital out of the bank and invest it through their holding company in these separate and independent entities that, while affiliated with the bank holding company, will be independent of the bank? That is probably the most important issue that we will vote on. I will say more about it later in my opening statement. You will hear a lot more about it as we get further into the debate. Inevitably in a big bill like this, subsidiary issues take on great importance. One issue that has taken on very great importance in this bill is community reinvestment. I will talk more about this later when we turn to these two areas of dispute. But let me say the real question here boils down to this simple question: Should we have a massive expansion in CRA and CRA enforcement and with it a massive expansion in regulatory burden, or should we reform the existing program to try to eliminate the growing abuse that is occurring in that program and the growing regulatory burden that exists in that program? That will be the second major issue that we will deal with as part of this bill. Before I turn to a discussion about what the underlying committee bill does, I just want to say a few words of thanks to people that have been important in putting this bill together. I first want to thank Senator Bryan and Senator Johnson for their help in committee in making many elements of this bill a bipartisan bill. I joined with Senator Bryan to adopt a provision related to how banks would sell insurance. I thank Senator Johnson from South Dakota, who joined with Senator Shelby in supporting an amendment to exempt very small rural banks from the regulatory burden of CRA. I think the action by these two Senators really set a standard that we ought to work to meet in the rest of this bill. I thank my Republican colleagues who sat through many long seminars on financial services modernization, for lack of a better term. I thank them for doing this with a minimum of complaint. I think the net result is that by and large the Republican members of the Banking Committee understand this issue better than we did when this issue was discussed last year. I think the net result is that we have a better bill. I would like to thank all of my staff on the majority side of the committee. But I especially want to thank our staff director, Wayne Abernathy, our chief counsel, Linda Lord, and our financial economist, Steve McMillin, for all the work they have done on this bill and the work that they have done to make the bill better. Finally, let me just express a regret. I regret that I have not done a better job in working with Senator Sarbanes. We have had a difficult time in working together to forge a bipartisan bill. Some of this is inevitable, I think. Some of it is not. I just want to say that my inability to work with Senator Sarbanes on this bill is something that I regret. I have the highest regard for his intellect and his sincerity on these issues. And while he and I do not agree on many of these issues, I don't doubt for a moment that he understands the issues and he is sincere about the position he has taken. I think that is one of the reasons it is very hard to work out some of these issues, because, as Thomas Jefferson observed long ago, good men with good intentions in a free society often reach different conclusions. When that happens, the best we can do is to simply plow ahead. And that is what we are doing here. Let me try to run through very quickly what I believe are the major elements in the Financial Services Modernization Act of 1999 as reported by the Senate Banking Committee. First, this bill repeals Glass-Steagall. It knocks down the barriers between insurance and banking and between securities and banking. It chooses to do this for the vast majority of the capital in the banking industry through affiliates of bank holding companies. This bill makes the decision that it is unwise and dangerous to allow large banks to provide these expanded services within the structure of the bank itself. The majority of the members of the committee concluded that Chairman Greenspan is right, that there are strong safety and soundness arguments against allowing banks to provide these expanded services within the structure of the bank itself and that this endangers the taxpayer through the Federal Deposit Insurance Corporation. Additionally, the majority of the members of the committee were convinced that to give banks the ability to sell these financial products within the structure of the bank, and therefore to give them the ability to internalize the inherent subsidies that are built into FDIC insurance, plus the ability of banks to borrow from the Fed window at the lowest interest rates in the country and use the Fed wire, that these implicit subsidies--which the Federal Reserve Board has estimated to be as high as 12 basis points--would be big enough to assure over time to virtually guarantee a massive degree of economic concentration, concentration whereby banks would end up dominating these markets--not because they are more inherently efficient but because they would have the advantage of the subsidies that come from undertaking these provisions within the bank. This view was very broadly held last year. Senator Sarbanes, in the bill he supported, supported this position last year. This was the position of the House bill last year. Now we have a debate as to whether or not the Congress, the Senate committee and the House itself, should reverse its position. This is not a partisan issue. I don't know how the votes are going to fall, and I know partisanship has really entered into this area. Historically, on issues like this there has been a great division on a bipartisan basis. Congressman John Dingell, who is the ranking Democrat on the House Commerce Committee that has joint jurisdiction on this issue, has taken a very strong position that he will oppose the bill if banks are allowed to provide these services within the structure of the bank itself. It is clear that the House Commerce Committee is going to take the position of the Senate bill. This is clearly a very important issue. An effort was made in the Senate Banking Committee to try to reach a compromise on this issue, to let very small banks that in general are not big enough to operate holding companies efficiently, yet might in a very small way want to get into other financial services such as securities and insurance--we set out a dividing line of $1 billion of assets and below for smaller banks that together when added up comprise about 18 percent of the capital of our banking system, that we would allow them to use operating subsidiaries, but with special accounting rules so they could expand services and not be precluded from the activity based on their size. However, we require any bank with assets over $1 billion or that has a holding company to use subsidiaries of holding companies so that these services are provided outside the bank. We allow banks to underwrite municipal revenue bonds. We follow functional regulations so that whatever industry you are in, no matter what name is on your marquee, and no matter what business it is associated with, you will be regulated by the regulators who regulate that particular type of activity. We make a strong effort to reduce regulatory burden and streamline the process by giving the Federal Reserve Board the umbrella supervisory ability but requiring them in most instances to use the audits of other agencies. The committee bill takes a very strong position in reaffirming the State regulation of the insurance business. We reaffirm that McCarran- Ferguson is the law of the land, and we require that any institution that is selling insurance in any State comply with the licensing requirements of that State. Our requirement on the State is simply that they have nondiscriminatory requirements. We expand the resolution process, knowing that in the future there will be debate about what products are insurance products or banking products or securities products. We have a resolution process. Then we give equal standing to the contesting regulators before the court. We go to extra lengths to protect small banks and their trust departments. Between 15 percent and 20 percent of the income of many small banks comes from trust departments. There is a very real concern that banks which are providing trust functions that might never get into financial services modernization, that might never open up a securities affiliate or op-sub could find themselves regulated by the Securities and Exchange Commission and have a dual regulatory burden, are being forced to set up an op-sub or set up a subsidiary simply to continue to do the same things in their trust department that they have always done. We have a very strong provision to protect these small banks, and basically have the preemptive provision that if a bank is providing the service in a trust department today that they cannot be required to set up a separate entity to conduct those same services. We have two CRA provisions in the bill. The first provision has to do with integrity. It is a very simple provision. Unfortunately, in this debate one of my great frustrations is that many people don't want to debate the issue before the Senate. As almost always happens in these cases, especially when you have an emotionally charged issue, people change the subject; they set up straw men and knock them down. Let me make it clear that nothing in this bill in any way repeals CRA. This bill, as reported by the Senate Banking Committee, does two things in CRA. First, it has an integrity provision which says if banks have historically been in compliance with CRA, if in their annual evaluations they have been found to be in compliance not once, not twice, but three times in a row, if they are currently in compliance, then if protest groups or objectors want to come in and object to a bank action, then objector or protester has to present some substantial evidence to suggest that the bank--which has been in compliance 3 years in a row and is currently deemed to be in compliance--is out of compliance. As I will discuss in just a moment, we have a long history of case law as it relates to what ``substantial evidence'' means. But that is the first requirement. It is simply an integrity requirement. It says that if you are in compliance with CRA and you have a long history of being in compliance, someone can't rush in at the last minute on a major bank merger, where hundreds of millions of dollars are at stake, and say they want to undertake a merger and file a protest saying that these two banks are racist or these two banks are loan sharks. These are words that have been used by people who filed these protests-- without presenting one scintilla of evidence. In fact, one of the definitions of substantial evidence is ``more than a single scintilla of evidence.'' So this amendment simply says, if you are going to try to prevent a bank from doing something that it has been certified historically on a continuing basis as being in compliance to do, you have to present some substantial evidence to suggest that all these evaluations have been wrong or that something has happened since the last evaluation. I do not understand, personally, why anyone would object to that amendment. We already require in case law that the decisions of administrators at the Federal level be based on substantial evidence. So we are really requiring by statute what is already required under case law, and I will talk about that a little more in just a moment. Our second amendment exempts very small, rural banks from CRA. These are banks that have less than $100 million of assets. These are banks that often have between 6 and 10 employees. And these are banks that are outside standard metropolitan areas. I will talk more in a minute about the regulatory burden that is imposed by CRA on these very small banks, but since many figures have been used by people who have been critical of this proposal, let me say that while 38 percent of the banks and S&Ls in America are very small, rural institutions, together they have only 2.7 percent of the capital that is contained in our banking system nationwide. The basic argument here, which has strong roots in existing banking law and which is supported, to some degree on a bipartisan basis, is that these very small, very rural banks that do not have a city to serve, in most cases, much less an inner city, should not have massive regulatory burden imposed on them through CRA. The next provision of the bill is that we eliminate the SAIF special reserve fund, allowing that money to go into the SAIF itself. We cut off the unitary thrift holding company provision. This is a controversial issue. It will be debated. Let me just give a brief summary of the thinking of the majority of the members of the Banking Committee on this issue. Current law permits commercial companies to own an S&L. This is called a unitary thrift, and a decision was made in our bill to end this provision. So, then the question is what are you going to do about commercial entities that already own S&Ls? The decision we made was to cut off, effective as of the date that we introduced the committee mark, any further applications for a commercial company to own an S&L, so that all of those applications which were filed prior to that date can be evaluated by the Federal regulator, but no new applications would be allowed. There is a second question as to whether we should go so far as to limit the ability of commercial entities that already have thrifts to sell their thrift to another commercial interest. The majority of the members of the Banking Committee concluded that we could go as far as not allowing any new entities to come into existence. But an ex post facto law that goes back and changes the rules that thrifts operate on, after people have already invested their money--many of these entities came in and made investments of hard money during the S&L crisis; many of these commercial entities were encouraged to invest this money and in doing so they saved the taxpayer literally billions of dollars--and to come in now and say not only are we not going to allow any more unitary thrifts to come into existence, something that this bill supports, but we are going to limit what you can do with the thrift you already have, we believe that runs afoul of the takings provision of the fifth amendment of the Constitution. We think it is very important to be aware of that conflict with the Constitution because recently savings and loans have filed suit against the Federal Government based on another bill, FIRREA, where Congress, on an ex post facto basis, went back and took back provisions when these companies entered into a contract with the Federal Government. And we are now told, based on a ruling by the Supreme Court, that we can expect billions of dollars of payments to these S&Ls because the Federal Government has breached its contract. We have set out a line that we are not willing to go over, and that line is we are not willing to violate the Constitution. We have provisions that allow community banks of less than $500 million to be members of and to use the Federal Home Loan Bank. We also allow them to use small business, small farm and small agriculture lending as collateral for loans, and we believe this will improve the liquidity of small banks and their ability to serve their communities. We have a 3-year freeze on existing FICO assessment. We are discussing this issue at great length, but basically when we made a decision to move the two insurance rates to the same level, there was also a discussion about merging the two insurance funds. But Congress never acted on that issue. The majority of the members of the committee in our underlying bill believed there ought to be a discussion about that issue and that we ought to make a decision on that issue. Finally, in terms of the bill itself, we mandate a major GAO study of subchapter S corporations that are engaged in the banking business as a first step toward changing the way we tax very small banks. Many of our colleagues will remember that last year we were able to allow small banks with fewer than 75 shareholders to be taxed as individuals under subchapter S. We are now trying to expand that out to 150 shareholders. This is a very important provision for small banks. Let me review briefly the two major issues of contention in the bill. Operating subs versus affiliates; Chairman Greenspan and all former living Chairmen of the Federal Reserve Board and most former Secretaries of the Treasury have argued that it is unwise and dangerous to let banks provide these broad financial services within the structure of the bank itself; that they should be required to separate securities, separate insurance, separate these other industries from the capital of the bank itself because the bank is insured by the American taxpayer. So the first argument is a safety and soundness argument. The second argument is that the implicit subsidies to banks will give them an unfair advantage in providing these services if they are allowed to do them within the bank. I just want to read a couple of quotes from Alan Greenspan. This is Alan Greenspan in his April 28 testimony before the House Commerce Committee. ``I and my colleagues''--and by ``colleagues'' he means every member of the Board of Governors of the Federal Reserve Board. I want to remind our colleagues, meaning Senators, that most of those members of the Federal Reserve Board were appointed by Bill Clinton, by this President. Chairman Greenspan said: I and my colleagues accordingly are firmly of the view that the long-term stability of U.S. financial markets and the interest of the American taxpayer would be better served by no financial services modernization bill, rather than one that allows the proposed new activities to be conducted by the bank as proposed in H.R. 10. And I would say in the Sarbanes-Daschle substitute. In other words, every member of the Board of Governors of the Federal Reserve Board says that for the safety of the taxpayer in FDIC insurance, and for the general competitiveness of the economy, if we had a choice between letting banks provide these broad services within the bank or having no bill at all, they unanimously would prefer having no bill rather than doing it the wrong way, as they concluded. Greenspan goes on to say that allowing these services to be provided within the bank ``leads to greater risks for the deposit insurance funds and for the taxpayer.'' Secondly, John Dingell, long-time chairman of the House Commerce Committee and, in the minds of many, the most influential Democrat in the House of Representatives, has said that, ``absent significant changes in H.R. 10''--that is, the House bill, and the same provisions are in the Sarbanes substitute--``that I will be compelled to oppose this bill with every bit of strength I have.'' So this is a very important issue and an issue which we will vote on as part of the general substitute that will be voted on first, and then perhaps we will vote on again. Let me turn to a discussion of CRA. Most people think of the Community Reinvestment Act as being a very small program. And it was a very small program until 1992. In 1977, Senator Proxmire put a little provision in a housing bill that nominally required banks to make loans in the communities where they collected deposits. A North Carolina Democrat objected to the provision. There was a vote to strip it out of the bill, and the vote failed on a 7-7 tie. This so-called CRA provision went on to become the law of the country and became far more important than the bill to which it was attached. Prior to 1992, if you added up all the CRA agreements and all the bank capital allocated by the CRA requirements, these provisions had allocated only about $42 billion worth of capital. Today, 6 years later, CRA is allocating $694 billion in 1 year. That is loans, that is commitments to lend, and that is hard cash payments. To put this in perspective, that is bigger than the gross domestic product of Canada. It is bigger than the combined assets of General Motors, Ford, and Chrysler. It is bigger than the total discretionary Federal budget of the U.S. Government. Especially troubling is the $9 billion of cash payments which have been made as part of CRA agreements. In 1977, nobody ever contemplated that under a requirement of law which required banks to meet credit needs of the communities where they collected deposits that someday banks would pay out and commit $9 billion of cash payments as part of this process. Let me explain these cash payments: As part of every CRA agreement we have been able to obtain, there is a requirement that the banks pay cash to individual protesters and protest groups, in return for which they generally sign an agreement that they will withdraw their objection to the banks taking the activity which they objected to. Our provisions relating to CRA are very simple. Let me begin with the integrity provision. Under current law--or under current practice, because the law is a very general law--it is possible for a protest group, say, in Boston to protest a bank merger in Illinois and, in essence, not go away until its ``expenses'' in a cash payment to it are made. It has now become fairly common for protest groups from one State or region to protest bank actions in another State or region, entering into the process to file a complaint or to threaten a complaint. But often official complaints are not filed. You are going to hear figures about there being complaints in only 1 percent of the bank applications. Remember, most applications are only to close or open a branch. The big applications are merger applications, and one of the reasons we have had an explosion in CRA and the cash payments in the last 6 years is from these mergers. None of these agreements is public--every agreement we have seen, and we now have three that I have read, and we are getting more every day-- every one of them requires the bank to keep the agreement private, so no one knows what percentage of the face value of the loan goes to the community group in a cash payment. No one knows how much in direct payments occurs. No one knows how much the community group collects in classes, say, that it makes the borrowers go to and then pay it cash money. But basically our first amendment tries to deal with the following problem: The last-minute protest, or where the protester does not file with the Comptroller of the Currency but simply goes to the bank in question and says, ``Look, I'm going to file this complaint. Here is a letter that I'm going to send to the Comptroller of the Currency calling you a racist and calling you a loan shark. And these are the protests that I'm going to hold in these various locations. And I wanted to see, before I did all this stuff, if you were willing to `comply' with the law.'' Basically what is happening in these cases is, there is immense pressure on the bank to make a cash payment or to enter into some kind of agreement in order to be able to move forward on their merger. Here is what our amendment says. If a bank has been in compliance with CRA--the bank has been evaluated by any of the Federal regulators who have jurisdiction to come to the bank, evaluate it, review its records, and determine that it is complying with CRA--if the bank has complied 3 years in a row, and if it is currently in compliance, then a protester is not precluded from protesting. You are going to hear some people say this is a safe harbor. It is not a safe harbor. Legally, it is a rebuttable presumption. The bank is assumed to be in compliance if it has been in compliance three times in a row and is deemed by its regulators in compliance now, unless the protester or protest group can present substantial evidence of noncompliance. Now, what does ``substantial evidence'' mean and where does the term come from? Substantial evidence is referenced 900 times in the United States Code. It is probably the best defined legal term in the American system of jurisprudence. There have been 400 major cases defining what substantial evidence means. Title 5 of the United States Code relating to administrative law-- that is, how agencies function--already requires that agency action be based upon substantial evidence, not on arbitrary or capricious action. So the reality is, it is already the law that bank regulators should be using this standard right now for evaluating CRA. In fact, all banking laws and procedures and the judicial review of all banking laws and all banking procedures use one standard--substantial evidence. Now, what does substantial evidence mean? I have a good counsel, and she has gone back and researched all these 900 laws and all of these court rulings. Here is what substantial evidence means. In order for a protester to stop a bank merger or have its protest become a formal part of the consideration for a bank application, the protester must present substantial evidence that the bank is either not in compliance or won't be in compliance after its action. Now, what does substantial evidence mean? It means ``more than a mere scintilla.'' In other words, you have a bank that is engaged in a transaction where it could literally lose $100 million a day by being unable to consummate its agreement, and the standard that we require for you as an individual to come in and throw a rock in the gear and potentially stop this whole process is that you have to present more than a mere scintilla of evidence that this bank, with a long history of compliance, where the regulators say it is in compliance right now, all you have to do is present more than a mere scintilla of evidence that in fact the bank is not in compliance. Now, what is onerous about that? In fact, should we have a procedure in a free society where professional protesters, without presenting a mere scintilla of evidence, can literally hold up institutions and potentially impose hundreds of millions of dollars of costs on them and their customers without presenting a scintilla of evidence? Who could be against that proposal? A second definition defined in case law and in statute is, such relevant evidence as a reasonable mind might--it doesn't say ``has to''--accept as adequate to support a claim; real, material, not seeming or imaginary; considerable in amount, value, and worth. So I ask my colleagues and anybody who might be interested in this debate, is it unreasonable for a bank which has historically been in compliance with the CRA law, has been meeting the requirements as judged by the regulators who have responsibility for judging, having been in compliance 3 years in a row, being in compliance now, if somebody wants to come in and prevent them from doing things which the regulator has already judged in their last evaluation that at least as of that point they were in compliance with the law to allow them to do that, is it unreasonable to ask that they present at least one scintilla of evidence, that they present evidence that a reasonable mind might accept as adequate to support a claim, that their evidence be real, material and not seeming or imaginary, or that it be considerable in amount, value, and worth? How could anyone think that standard is too high? The second issue related to CRA has to do with small banks. Small banks in rural areas have a very small percentage of the capital that is available in the American banking system--about 2.7 percent. But I think of greater importance is the following figure, and I think it proves one thing conclusively: Small banks in communities that are outside metropolitan areas--that is, generally don't even have a city much less an inner city--are doing an excellent job of serving their communities. Since 1990, there have been 16,380 CRA exams on small, rural banks. Many of the small bankers from all over America who have written the Banking Committee have estimated that CRA compliance costs them about $60- to $80,000 a year. They have to name a CRA compliance officer. Many of these banks have between 6 and 10 employees. By the time they do all the paperwork and comply with all of the regulations, by the time they name a CRA compliance officer--normally that is the president of the bank--they are having to pay between $60- and $80,000 a year to comply. Sixteen thousand, three hundred and eighty of them have been examined for CRA compliance since 1990, and only three small rural banks and S&Ls have been deemed to be out of compliance. That is, 3/100 of 1 percent of the evaluations have turned up just three small banks and small S&Ls in rural areas that are out of compliance. In return for having turned up 3 supposed bad actors, you have had 16,380 evaluations, 40 percent of the entire enforcement mechanism for CRA. What I do not understand is why CRA advocates don't want to take that enforcement and put it where the money is, in the urban areas and in the big banks. I have numerous letters--and I will read some of them--from small bankers, several of whom have been Federal regulators enforcing these very laws in the past, outlining how hard it is for them to comply with these regulations and that they are already lending to everybody in town just to stay in business. These are very small communities, and they have a very small lending base. Now, I have spent a lot of time going through these issues, but I think they are important issues. I look forward to debating this issue. I hope we can pass a good bill. I agree with Alan Greenspan and I agree with every one of the Board of Governors of the Federal Reserve Board, however, on one point: It is better to have no bill than to have a bad bill. I want a bill that is going to promote competition, not reduce it. I want a bill that is going to reduce regulation and redtape and cost, not increase it. I want a bill that is going to expand financial services, not reduce them. I want a bill that is going to lower the costs of financial services, not increase them. I believe we have such a bill before the Senate. I hope my colleagues will listen very carefully to the debate. I hope they will enter it with open, not necessarily empty, minds. I think if they listen to the two major issues we are going to debate--and those issues are: Should banks provide these expanded services within a bank, or should they have to provide it outside the bank structure?--and as they listen to the issue about whether or not we want integrity and relevance in CRA, which has become, now, the largest program undertaken by the Federal Government, if measured against direct government spending. It seems to me that the conclusions they will reach are obvious, and in reaching those conclusions we will have the additional benefit of passing a bill that will expand financial services and reduce costs. I thank my colleagues for their patience. I yield the floor. Mr. SARBANES addressed the Chair.

Mr. GRAMM. Will the Senator yield?

Mr. GRAMM. Mr. President, let me just ask our colleague how long he needs after lunch to speak?

Mr. GRAMM. Let me say I do not object. I think we should go back and forth. So if we have a Republican who would like to speak after Senator Sarbanes, we can do that. If the Senator wants, he can have 40 minutes or an hour and 40 minutes. We would like to hear it.

Mr. GRAMM. Sure.

Mr. GRAMM. Mr. President, I am going to yield to the Presiding Officer and come up and preside so he can give his opening statement, if he would like to do that. Before doing that, however, I will make a couple of points in response to Senator Sarbanes' statement. First of all, the substitute that Senator Sarbanes will offer is not last year's bill. In fact, it is fundamentally different from last year's bill on the most important issue in financial services modernization. That issue is, should the modernization occur within the structure of the bank, or should it occur through the holding company? Last year's bill followed the proposal which has been made and supported by all of the members of the Federal Reserve Board and its Chairman, Alan Greenspan, whereas this bill----

Mr. GRAMM. I am happy to yield.

Mr. GRAMM

Mr. GRAMM. Mr. President, let me thank our dear colleague from Utah for his very fine comments. Any colleagues who want an opportunity to speak on the bill should come to the floor to be afforded that opportunity. At some point, if we don't have people over to speak on the bill, Senator Sarbanes, under the unanimous consent request, will offer his substitute. Members can wait and speak on that substitute, if the Senator chooses to offer it, and obviously if you want to speak about the bill itself, you can do it on the substitute. Members desiring to speak on the bill before the substitute is pending, should come on over. Mr. President, I will respond very briefly to our dear colleague, Senator Wellstone. Senator Wellstone gave an impassioned plea not to repeal CRA. Let me say that one of my great frustrations with our efforts to reform CRA and curb abuses in CRA is that nobody wants to debate the reforms. Even the spokesman for the national association of the community groups that form the heart of CRA has said what they call ``green mail'' exists. They think it is harmful to CRA. Most Americans would call that process ``blackmail'' and not ``green mail.'' I think many people have had at least their eyebrows raised by the fact that $9 billion in cash payments have been made or committed under CRA. CRA is not about giving people money not to testify against your bank merger, or to testify for it; instead, CRA is about giving people an opportunity to have input and present evidence as to whether they are meeting the requirements of the law. I don't know what any judicial process--and this is a quasi-judicial process, I guess you could say--how anyone would not be revolted by the practice of paying witnesses. In essence, as Members will see when we begin the debate on CRA and we show some of the documents with the names redacted, that is exactly what is happening all over America today. The point I make about CRA is no one is talking about repealing CRA. This is not a debate about repealing or weakening CRA. This is a debate about integrity of banks that have longstanding records of compliance, and whether somebody just by calling them a name--by saying they are a loan shark, they are a racist, or some other inflammatory name--should be able to delay actions that they are guaranteed on an impartial basis under the law. All our provision in the bill says is that if a bank is going to be denied the ability to do something that they would have to be in CRA compliance for, and they have a long history of being in compliance on CRA, then those people who object--for their objection to be used to delay the process--have to present substantial evidence. Now, ``substantial evidence'' is defined in law more precisely than any other term of art in the American legal system: more than a scintilla of evidence; facts that would lead a reasonable person to think that something might be true. We are talking about the lowest standard of law, not the highest standard. The second provision in out bill would allow very small banks in rural areas that don't have a city to serve, much less an inner city, to be exempt from a regulatory burden that costs them between $60,000 and $80,000 a year, even though these banks generally have only between 6 and 10 employees. Since 1990, in 16,000 audits of these small, rural banks, only three banks have been found to be in substantial noncompliance. Every word that the Senator said about not repealing CRA I am sure resonated, but it doesn't have anything to do with the debate we are having. Nobody is proposing we repeal CRA in this bill. We are talking about two targeted reforms. I don't want anybody to get confused. Senator Dodd has come to the floor. I yield the floor. Mr. DODD addressed the Chair.

Mr. GRAMM. Mr. President, I ask the distinguished Senator from West Virginia to add me as a cosponsor to that resolution, if he would.

Mr. GRAMM. It was my hope tonight that we could finish debate on this amendment, and that we would have a vote tomorrow. Our problem, as you know, is that we have the two Senators from Oklahoma who have flown home to participate in the evaluation and assistance with the terrible tragedy that happened there with the tornadoes. We are hopeful that they are going to be back tonight or in the morning. Then we are going to have a vote on Senator Byrd's resolution commending the Rev. Jesse Jackson, and other clergy leaders who participated in his trip. That vote is going to occur in the morning; I am not sure exactly what time. But the idea would be to have that vote in the morning and then, at that point, either I or the majority leader would move to table the amendment and we would have a vote on it. We would then offer one of our amendments at that point.

Mr. GRAMM. I am happy to yield.