Phil Gramm

Mr. GRAMM

Mr. GRAMM. I would assume we will have a debate in the morning and that we will probably have at least a half an hour on each side. I see nothing unreasonable about having time in the morning. I would strongly suggest that we do it. Any Member can object to any unanimous consent request. Otherwise, if the Senator wishes to have time, we will divide the time equally tomorrow. I don't see any reason why he couldn't have a chance to speak tomorrow.

Mr. GRAMM. Why don't I do this. Just reclaiming my time, why don't I try to finish up here in 20 minutes and yield and let the Senator speak?

Mr. GRAMM. I don't know whether we have 30 minutes equally divided or 1 hour equally divided, but within that constraint, it seems to me, the Senator could speak.

Mr. GRAMM. Mr. President, let me just touch on four more issues in the Sarbanes substitute that I take strong issue with. I see Senator Gorton is here and he wanted to say something. The next concern that I have and that the majority has with the Sarbanes substitute is that it adopts security law revisions making it significantly more difficult for small banks to engage in trust and fiduciary activities. These activities currently make up about 15 to 20 percent of the revenues of small banks. Here is the problem. Our bill goes to great lengths to say to some small bank in some small town that doesn't intend to get into financial services, that nothing in this bill is going to force them to take their trust department activities that they are now engaged in and either set up an operating subsidiary or set up an affiliate. I believe the provisions of the Sarbanes substitute could adversely affect virtually every small bank in America and endanger the operations that they currently can do within a bank only under regulation by the bank in the name of trust department activities. I believe the provision offered by Senator Sarbanes could force many of these banks to set up operating subsidiaries, or set up affiliates, and in the process drive up their costs and threaten their revenues. Now we come to the so-called unitary thrift holding company. If you listen to Senator Sarbanes, you get the idea that somehow we are expanding commercial activities of banks. The reality is that the Sarbanes substitute, by allowing banks to hold a commercial basket for 15 years, expands commercial activities of banks substantially more than our bill does. Our bill restricts the ability of commercial companies--an ability they have under current law--our bill restricts their ability to apply for charters and to set up a unitary thrift. Unitary thrifts are legal under current law. So, for example, General Motors can get an S&L charter and can go into the S&L or banking business through that charter. That is the law of the land today. As a result, a substantial number of commercial companies have gotten those charters. Our bill ends that practice. And effective on the day that the underlying committee bill was released as a committee print, any application for a unitary thrift received after that date would not be acted upon. The difference between the Sarbanes substitute and what we do is that, in addition, the Sarbanes substitute goes back and says that those unitary thrifts that already exist would have an ex post facto change in law that would limit their ability to sell their thrift--which is a change in the regulations under which they set up or bought the charter. I believe that this is a takings of property, that it violates the fifth amendment of the Constitution. In fact, we have recently had a Supreme Court ruling striking down another ex post facto law that Congress passed that took away provisions that were in contracts that banks--and in this case S&Ls--had negotiated with Federal S&L regulators. So we create no new commercial powers. There is nothing in our bill that in any way expands the ability of banks to hold commercial assets, whereas the substitute will allow them to hold them for 15 years under a grandfather provision, a provision that is not in our bill. I was somewhat stunned to hear the presentation by Senator Sarbanes that we were expanding commercial powers when in reality his substitute has a 15-year grandfather for existing activities, a provision that our bill does not have. Our bill not only does not expand commercial activities but it cuts off the issue of new unitary thrift licenses. But we do not go back and change the rules of the game on S&Ls that invested good money, many of them during the S&L crisis, saving the taxpayer billions of dollars. We don't go back and change the rules of the game on them. I talked about No. 7. That is the commercial basket issue. The substitute offered by Senator Sarbanes allows commercial banks to hold these commercial assets for up to 15 years. There is no similar provision in our bill. Finally, the Sarbanes substitute strips away power from State insurance regulators. Under the Sarbanes substitute, States could only collect information but could not act on information, nullifying the authority of State insurance commissioners to review and approve or disapprove applications. The National Association of Insurance Commissioners opposes this provision. So basically those are the differences. I think the differences are very clear and very stark. I hope my colleagues will look at them and will reject this substitute. This substitute would create a bill that Alan Greenspan and every member of the Federal Reserve Board, speaking as a body through the Chairman, has said would be worse, in terms of danger to the taxpayers, danger to the insurance fund, danger to the economy, than passing no bill at all. This bill would repeal two very simple, very targeted, very minor reforms of CRA, and would institute the most massive expansion of CRA in America history. I think if people look at any one of these eight areas that I have outlined, they will conclude that the committee acted properly in rejecting the Sarbanes substitute. But the Sarbanes substitute wasn't rejected just because it was deficient in, say, five of these eight areas. It was rejected because in each and every one of these areas it was inferior--in terms of the well-being of the taxpayer, the well- being of the depository insurance system, the well-being of the economy--to the underlying bill that was adopted by the Banking Committee. I urge my colleagues to reject this substitute. There will be a tabling motion tomorrow on some basis yet to be agreed to. I yield the floor.

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

Mr. GRAMM. Mr. President, let me talk about simplicity and clarity in the two bills. I know that seldom in writing laws do we hear lawmakers talk about what makes sense and what is simple and what is readable. I begin by asking people to look at the bill adopted by the Senate Banking Committee modernizing financial services. That bill is 150 pages long. The substitute which has been offered by Senator Sarbanes is 349 pages long. Members might ask, What is the extra 200 pages for? The extra 200 pages is for a convoluted process that breaks the simplicity of the bill adopted by the Banking Committee. What is very good about our bill is, it is very easy to understand. If a securities firm wants to set up a bank holding company and engage in securities activities, banking activities, and insurance activities, it can set up a bank holding company, and outside the bank it can be involved in insurance and securities and it can be involved in banking under the bank holding company. It is a very simple organization. It is an organization that provides any one of the three financial industries to become bank holding companies and participate in providing a broad array of services, including banking services. And it is an organization that is very easy to understand. It is an organization that you can set out in 150 pages with all the whistles and bells and all the icing on the cake. The Sarbanes substitute is 200 pages more complicated, and it is more complicated because it goes about things in a very different way. You can have a bank holding company that can be in the banking business and in the securities business under the basic framework of the bank. You can have a financial services holding company, a totally new entity, and it can have an insurance company, a bank holding company, and a securities firm. And under the bank holding company, you can have a bank, and that bank can be in the securities business, and it creates another totally new entity, a wholesale financial holding company, and it can be in the insurance business, wholesale financial institution business, and securities firms. Finally, banks can be in the securities business. So the first argument I want to make is based on simplicity--not that anybody ever gauged a Federal law based on, ``Does it make sense, is it simple, could people actually employ it, what kind of roadmap is it for the development of new financial institutions in America?'' But the reason our bill can do what it sets out to do in 150 pages, and the reason the substitute takes 300 pages, is the underlying bill adopted by the Banking Committee has a simple structure that everybody can understand and that securities firms, banks, and insurance companies could all participate in. Under our bill, it is easy for any one of the three to set up a bank holding company. The substitute is a lot more complicated and brings in a lot of new institutions. It would be very hard, in terms of a user-friendly roadmap, as to how to do this. I do not know that sways anybody in the private sector or in any real world activity. But simplicity, and the sort of clear approach that people can follow--if they are buying a roadmap or if they are buying a computer program--is an important thing. Unfortunately, it is not something that is often mentioned in making the law of the land; but, quite frankly, it should be. I am going to try to take less time in responding than I did in my opening statement on this. I want to break the proposal into eight areas and discuss the proposal in that way. There are eight key ways that this substitute is fundamentally different from the bill which was adopted by the Banking Committee and which is before us. The first and most important difference is that the substitute before us--offered by Senator Sarbanes, which is different from the bill that Senator Sarbanes supported last year, different from the bill that was adopted by the Banking Committee last year, and far different from the bill that is before the Senate now--allows banks to engage in broad financial services within the legal framework of the bank. Alan Greenspan, the Chairman of the Board of Governors of the Federal Reserve, has said--and I want to read this quote because I think it is important. I think, No. 1, everybody in America takes Alan Greenspan seriously. Second, I want to remind people that the majority of the Governors of the Federal Reserve Board were appointed by this President, Bill Clinton. This is a statement that Chairman Greenspan made just last week before the House Commerce Committee in opposition to exactly the proposal which is the heart of the Sarbanes substitute. When Chairman Greenspan refers to ``colleagues,'' he means every member of the Federal Reserve Board, including those appointed by Bill Clinton: I and my colleagues are firmly convinced 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. . . . I want to be sure everybody understands this quote. It is as clear as you can be clear. The most respected economic mind in America, the man who more than any other person on this planet has been responsible for the financial stability that has created over 20 million jobs and enriched working Americans by driving up equity values and by creating unparalleled prosperity in America, said last week that he and every member of the Board of Governors of the Federal Reserve believe it would be better to have no financial services modernization bill than to adopt the Sarbanes substitute. That is pretty clear. I think it is a profound position to take. Let me make the point: Everybody who knows Alan Greenspan knows that Alan Greenspan goes out of his way not to be confrontational. Everybody who knows Chairman Greenspan knows that if there is a way of saying something around the barn, something which might be offensive to somebody, he sort of walks all the way around the barn and let's you understand--where you can hope nobody else understands--that he said your idea is a bad idea. That is the way Alan Greenspan works. But in front of God and everybody at the House Commerce Committee last week, Alan Greenspan said if the alternative is the Sarbanes substitute or no bill, he and every member of the Board of Governors of the Federal Reserve are convinced that ``no bill'' is better than the Sarbanes substitute. Why does he say this? In a dozen other quotes, he basically says two things: No. 1, since we have deposit insurance, where the taxpayer is on the hook for bank failures that threaten insured deposits, he is concerned that allowing banks to get into these other kinds of financial businesses within the framework of the bank itself endangers deposit insurance and threatens the taxpayer. So the first reason that Chairman Greenspan made this extraordinary statement--in fact, the strongest statement he has made as Chairman of the Board of Governors of the Federal Reserve--is concern about the insurance fund and the taxpayer being on the hook. The second concern is that if banks provide these expanded activities, such as securities and insurance or whatever activities are ultimately allowed within banks, the subsidy that banks have in deposit insurance--something no other institution has besides banks, S&Ls, and other institutions that have Federal guarantees, and when I am saying banks I mean broadly defined--plus the ability to borrow from the Federal Reserve at the lowest interest rates at which anybody in the world borrows, and the ability to use the Fed wire, where they can wire money that instantly becomes bank reserves and it is guaranteed by the Federal Reserve bank, Chairman Greenspan and the Federal Reserve have estimated that if banks were allowed to provide these services within the bank, they probably have an effective subsidy of around 14 basis points. And this subsidy is due to the access to these three items: Deposit insurance, the Fed window, the Fed wire. Chairman Greenspan has explained to anybody who would listen that if you let banks perform these services within the banking structure itself, banks will have an advantage over those who are providing securities services and selling securities outside of banks; that if you allowed banks to do insurance within the bank, they would have an advantage over insurance companies that are not banks. Chairman Greenspan has tried to alert us to the fact that if we adopted the Sarbanes substitute we could literally, within 10 or 20 years, have a financial system where virtually all of the securities activities and all of the insurance activities, if banks were allowed to do insurance within the bank itself, would be dominated by a handful of big banks. In other words, our economy would look very much like the Japanese economy, in terms of its financial structure. Chairman Greenspan says, if your choice is no bill or doing what the Sarbanes substitute wants to do, for safety and soundness reasons, for the protection of the taxpayer, for the protection of competition, for the protection of the competitiveness of the American economy, Chairman Greenspan says: Kill the bill before you do what the Sarbanes substitute would do, in terms of letting banks in these other lines of financial services within the structure of the bank. Chairman Greenspan said let banks do these things--let them sell insurance, let them provide securities services--but make banks do them outside the bank where they have to take capital out of the bank to capitalize these companies and where they compete with nonbanks on an equal footing. This is a critically important issue, and it is an incredible paradox, an absolutely astounding paradox that Senator Sarbanes, who supported Chairman Greenspan's position in the bill last year, is now taking exactly the opposite position. It is my understanding that perhaps all the Democrat Members of the Senate may be inclined to take this position, a position that many of them, perhaps two out of every three, would have opposed as any kind of freestanding measure. I hope that is not the case, but perhaps it is. If for no other reason, if you do not have 101 other reasons to vote against the Sarbanes substitute, listen to Alan Greenspan: Spare the taxpayer, spare deposit insurance, and spare the economy by rejecting this proposal. The pending substitute dramatically expands CRA. It dramatically expands CRA in several ways. For the first time in the history of CRA, the Sarbanes substitute provides that financial institutions that fall out of compliance with CRA will now be deemed to be in violation of banking law and, therefore, potentially subject to fines of up to $1 million a day. Let me remind those who do not follow these issues--and why would you unless you are in this line of work?--currently under the Community Reinvestment Act, while banks are evaluated every year and while banks take a legitimate pride in getting good scores on their evaluations, they are not required to be in compliance. The only time CRA imposes a ``penalty'' is if a bank wants to take an action that requires CRA evaluation--such as the opening or closing of a branch, or selling or buying a bank, or merging with another bank. The Sarbanes substitute would vastly expand CRA by making it a violation of Federal banking law simply to be out of compliance with CRA and, in the process, potentially subject not just the bank, but an individual bank officer and an individual board member, to a fine of $1 million a day. The Independent Community Bankers of America sent a letter today raising a very important issue. Little banks have trouble getting people of substance to serve on their bank boards. It is hard because there are liability issues involved, and one of the big struggles that little banks have is getting city leaders to be on the bank board. We want the best people to serve on bank boards because they are the people who ultimately make decisions that affect safety and soundness, that affect the well-being of the depositor, that affect lending policy, and that affect the taxpayer through Federal deposit insurance. I want you to listen to the president of the Independent Community Bankers of America. This is an organization that represents small, independent banks all over America. Listen to this paragraph: We also have grave concerns about expanding CRA enforcement authority to include the levying of heavy fines and penalties against banks or their officers and directors. An ongoing challenge for many community banks in small communities is finding willing and qualified bank directors. Legislation following the savings and loan crisis of the 1980s and early 1990s greatly increased the amount of civil monetary penalties to which bank officers and directors may be subject. Any increase in the potential for fines and penalties could provide further disincentive for serving on a bank board. All Members should realize that this does not apply just to small banks, it applies to big banks. If you had a bank with 200 branches and just one branch fell out of compliance, you could potentially be subjected to this fine. This is regulatory overkill. This is totally unjustified. Our colleague, Senator Sarbanes, says we have not presented enough data about abuses. Where is the abuse that could possibly call for such a provision? This is punitive legislation at its worst, and if you think we have a problem now with community groups intervening and demanding cash payments, you add to it a possibility that a bank officer or board member could be fined $1 million a day and you are going to multiply the abuse a thousandfold. This is a proposal which was clearly written, and I can tell you where and when, when there was a desperate effort in the House to get their bill passed last year. It passed by one vote, and they basically gave this provision to groups that wanted to massively expand CRA. That is how it got into this whole debate. I cannot believe anybody seriously would want to subject bank officers and bank directors to a potential $1-million-a-day fine for temporarily falling out of compliance with CRA. The Sarbanes substitute expands CRA by requiring CRA compliance to engage in new financial activities, including insurance and securities. No CRA test is now required for such banking activities. Here is the whole issue. Today, some banks do sell insurance. Today, some 20 banks engage in securities activities, and virtually every bank, through their holding company, engages in activities which, under the Sarbanes substitute, would be pushed out of the trust department and into an affiliate or an operating sub and, therefore, would subject that bank to this new regulation. The point is, current law does not require a bank to get CRA approval to sell insurance. Current law does not require a bank to get CRA approval to sell securities. This is, again, a massive expansion in CRA. And if the Senator is justified in questioning our justification for wanting to adopt two modest reforms of CRA, I think it is reasonable to ask what is the justification for this massive expansion in CRA. Finally, on CRA, for the first time in American history, the Sarbanes substitute would expand CRA to a noninsured institution. The justification for CRA was that banks and other banking-type institutions, S&Ls, have deposit insurance. And that is a subsidy to the bank. Therefore, asking the bank to provide these resources, on a broad basis, to the community or to allocate capital based on a Government dictate rather than the market had a justification. That was the justification for CRA. The Sarbanes substitute would expand CRA coverage to a new institution, the wholesale financial institution, or WFI, which does not have FDIC insurance. This is a clear expansion of CRA beyond anything that has ever been enacted into law. In addition, the Sarbanes substitute would repeal the two reform provisions that are in the bill. I am not going to get into a long dissertation on this subject, because we are going to have an opportunity to debate this subject at length tomorrow--and believe me, I am ready to debate it--but I just want to make a couple points about the provisions that would be stricken by the Sarbanes substitute. First of all, our first provision is an integrity provision. Put simply, consider a bank that is in compliance and has been in continuing compliance with CRA for 3 years in a row, so that in the mind of the regulator, based on the information they have been presented--and any group in America can have an input into those evaluations--this bank is a good actor, they have a good record of compliance. The Sarbanes substitute would strike our provision that says that while anybody can present any information they want to the regulator-- and the regulator can demand a new evaluation when the bank in question seeks, for example, to merge with another bank or sell or buy a bank-- but unless the protesting group presents some substantial evidence that this bank is out of compliance--something that their regulators had said three times in a row they were not--unless they can present some substantial evidence, then based on that objection alone, the regulator cannot turn down the proposal or delay it. I went through earlier today--and I hope people heard it and remember it--but I went through what ``substantial evidence'' means. The most important thing to remember about it is, the law already requires it. All banking law requires decisionmaking to be based on ``substantial evidence,'' and bars decisionmaking based on arbitrary and capricious action. All banking law currently requires it. All appeals of banking regulator decisions must be based on the absence of substantial evidence. So really what we are trying to do here is force the regulator to comply with the normal administrative convention, which is, if somebody wants to enter a process--at the last moment, in this case--and demand that someone not be allowed to do something that they have earned a right to do, then they must present substantial evidence to show that they are not complying. Senator Sarbanes suggested that the evidence can only be on items which have occurred since the last evaluation. Not so. In fact, what our bill says is that the regulator may not delay or deny an application unless ``substantial verifiable information arising since the time of [the bank's] most recent examination under that Act demonstrating noncompliance is filed with the appropriate Federal [regulator].'' Our provision provides that any new information may be presented. It is not something that has occurred since the last evaluation. It is something that the banking examiners did not have before when they said the bank was complying with the law. I went through at great length the 900--I did not go through all 900 of them--but 900 times in Federal statutes we refer to ``substantial evidence.'' We have 400 court cases that have defined it. What does it mean? ``More than a scintilla of information,'' a factual basis under which a reasonable person might reach a conclusion--not that they would reach a conclusion, but that they might reach a conclusion. So what Senator Sarbanes is determined to kill is a simple proposal that certainly does not repeal CRA or overturn CRA or do violence to CRA. All it says is, if a bank has a long record of being in compliance with CRA, if they are in compliance with CRA now, and they want to undertake an action that requires CRA evaluation, that if somebody wants to come in and object, they can say anything they want, they can present any information they want, but the regulator cannot overturn their established record unless the protester presents substantial information or data to back up their claim. You might ask, why could anybody be opposed to that? Can you imagine that you have a bank which is trying to buy another bank, and they have been in compliance with CRA for three evaluations in a row and are currently in compliance, they have hundreds of millions of dollars at stake in consummating this agreement, a decision that can affect thousands of people, and you let one protester, who often is from not just another State but another region of the country--a protester from Brooklyn, NY--and he comes in and protests a bank merger in Illinois and will not go away until he gets his ``expenses paid'' and until he gets a cash payment? Now, under our provision, anybody can come in and protest, but in order for them to be able to stop the process, they have to provide substantial information. I cannot understand how anybody can be opposed to that. The second provision of our bill that would be overturned by the Sarbanes substitute is the small bank exemption. Let me try to explain this, I think, in a way that everybody can understand. I have two colleagues here. Let me say that I am sorry, but Senator Sarbanes took an extended period of time to present this, and I have to go through and be sure it is responded to comprehensively. So I am probably going to talk for another half an hour or 45 minutes. If either one of my colleagues has just a few minutes, I will stop and let them speak. But I do not want them staying around here, standing up and thinking that I am about to finish. So with that, if either one of you just has an announcement you want to make or a unanimous consent request, I will yield. OK. Here is the problem. You have little banks in rural areas. They have, most of them, between 6 and 10 employees. They are serving communities that do not even have a city, much less an inner city, and they are being forced to comply with this law called CRA. It would be one thing if there were a record showing that these small, rural banks are not lending in their communities. But the plain truth is, as I pointed out earlier, since 1990 there have been 16,380 examinations conducted by bank regulators of small banks and S&Ls in rural areas, that is, outside standard metropolitan areas. And in those 16,380 examinations, only 3 rural banks have been found to be in substantial noncompliance. These examinations and the regulatory burden imposed in complying with this law costs the average rural bank between $60- and $80,000. Imagine, you have a bank with 6 to 10 employees and they have to pay $80,000 to comply with a law that has found, since 1990, 3/100 of 1 percent of them out of compliance. You might ask, is this overkill? It is interesting, because in other financial laws that relate to similar issues, we exempt banks outside standard metropolitan areas. In the HMDA statute related to similar areas, if you are very small, you are exempt if you are outside a standard metropolitan area. And that is what we are talking in our provision--exempting very small banks in very rural areas. Instead of my speaking for the problem, let me let the people who are affected speak. They are a lot more articulate on these issues than I am. Let me just run over some numbers with you. We have received hundreds of letters from small banks all over America urging us to adopt the provision in this bill; we have received 488 as of today. What these small banks tell us is that CRA compliance is costing them between $60- and $80,000 a year. The First National Bank of Seiling, OK, has estimated it takes the equivalent of one full-time employee to comply with CRA. The Chemical Bank of Big Rapids, MN--with assets of $94 million--agrees that it takes one full-time employee. Crosby State Bank of Crosby, TX, agrees with the one full-time employee. The First National Bank of Cortez, CO, thinks that they spend a minimum of 100 hours annually of CRA compliance officer time. Let me read from some of the letters that have been submitted to the committee. I am only going to read from five or six of them, but I think they tell the story. The first letter is from the Cattle National Bank. The Cattle National Bank, for those of you who don't know, and you should, is in Seward, NE. Here is what the vice president and cashier of the Cattle National Bank in Seward, NE, says: Let me add that since the origination of public disclosure of CRA examinations we have not had one person from our community ever request the information. The only requests that we have had have come from bank consultants wanting to glean some tidbit from our disclosure. This is a letter from Copiah Bank, which is a national bank in Crystal Springs, MS. This is written by the president and chief executive officer. Our Compliance Officer, Gary Broome, and his assistant have spent many research hours and reams of paper in their efforts to comply with the mandated requirement's paper work. We have even had to outsource some of its checkpoints to a compliance consultant from time to time. As an $83 million community bank . . . that means they probably have 6 or 7 employees . . . we feel an obligation to help in your efforts toward easing our paper work burden. Lakeside State Bank, ND. As a former bank examiner for the Federal Deposit Insurance Corporation, which included consumer compliance experience, and as a banker for over 15 years I believe I have a good understanding of the intent and the workings of CRA. Over 47 years of our existence we have provided financing to virtually every main street business in our town, our customer base includes approximately 80 percent of the area farms and for the last several years over 50 percent of our loans have been to American Indians. The law-- And he means CRA. . . .is a heavy burden because of the expansiveness of the regulations and the paper requirements of compliance. We spend hours documenting what we have already done rather than spending that time more efficiently by doing more for our community. This is from Farmers and Merchants Bank, and this is in Arnett, OK, written by the executive vice president and CEO. I am the CEO as well as the chief loan officer, compliance officer and CRA officer. I have to wear so many hats because we are small and have a staff of only 7 including myself. CRA compliance, done correctly, takes a lot of time, which takes me away from my primary responsibility of loaning money to my community. It has almost gotten to the point that lending is a secondary function. It seems like we have the choice of lending to our community or writing up CRA plans showing how we would lend to the community if we had time to make the loans. It is funny how wisdom just leaps off the page. Large banks can hire full time CRA officers and other compliance personnel to administer CRA programs, but small banks cannot . . . This is from the Redlands Centennial Bank, and it is in Redlands, CA. We spent approximately $80 thousand dollars of our shareholders' money last year supporting this ill-defined regulation. Even the regulators who examined us were hard pressed to give us specific definitions on how we might better implement this regulation. I am urging you to get rid of this nonsensical CRA yoke. Keep up the fight, because there are a lot of us out here who are too busy balancing making a living with government regulations in this crazy business . . . Chemical Bank North, which is a little bank in Grayling, MI. It is a $74 million bank, which means it probably has 6 to 10 employees. As it is, we must devote disproportionate resources to creating and maintaining the ``paper trail'' that the current CRA regulations require. Our board members must attend time consuming CRA Committee meetings and our officers and staff members spend significant valuable time preparing reports and keeping records that serve no purpose other than to keep us in compliance with a regulation that attempts to enforce from a regulatory standpoint what we do everyday in the normal course of our business . . . I would estimate that we devote the equivalent of a full time employee to all aspects of CRA compliance. I mean, does anybody care that, for this little bank, that one-tenth of their payroll is needed to comply with a government regulation that in 9 years, in 16,000 such audits, has found only 3 banks substantially out of compliance? In 9 years, in 16,000 audits of banks like the Chemical Bank in Grayling, MI, government regulators have found only 3 banks out of the 16,000 evaluations where there was substantial noncompliance. And yet, we are making these banks pay $80,000 a year. Does anybody care? You know, we talk about the little guy and why aren't we here debating this and that. Does anybody care that a little bank, trying to serve consumers in a small town, a little independent bank in an era when a lot of people are worried about all the banks being taken over by big banks, here is a little bitty bank trying to stay in business, and 1 out of every 10 people they employ--because they only employ 10--has to spend time complying with one regulation, which, over 9 years, in 16,000 audits, has found 3 violators? Yet, our colleague, Senator Sarbanes, is so outraged that we would lift this paperwork burden that he has offered a substitute. I don't understand it. I don't understand it. But I don't guess I have to understand it. First National Bank, founded in 1876, in Wamego, KS, spelled W-A-M-E- G-O. I ask the Chair, am I pronouncing it right?

Mr. GRAMM. The occupant of the Chair knows because he knows and loves everybody that lives in that State, and I appreciate that. Wamego, KS. This is a little bitty bank, the First National Bank of Wamego, KS, founded in 1876. In other words, it has been in business for 123 years. How big do you think it is after 123 years of service? They have $65 million in assets, and it is the lifeblood of Wamego, KS. It is struggling with paperwork. It is a small bank and has 6 to 10 employees. People in that town are proud they have a bank. In a lot of towns that size, the bank has already gone broke and moved off to the big city. This bank has not deserted its customer base. They are trying to make a living. Let me read to you from their letter: Our bank was listed 2 years in a row as the best bank in Kansas to obtain loans for small businesses by Entrepreneur Magazine. They have received an outstanding rating under CRA--the best rating you can get. Our outstanding grade did not make us a better bank. CRA did not make us make more loans than we would have made. CRA did take a lot of employee time to document that we were an outstanding bank. Here is the point. This is a little bank that has been doing the job for 123 years. It only has $65 million in assets. This is a very small bank. It probably does not have 10 employees. It has been evaluated as being outstanding. But in 16,000 evaluations over the last 9 years, bank regulators nationwide found only 3 banks that were in substantial noncompliance. Why are we tormenting this little bank in Wamego, KS, which is doing a great job, and imposing $60,000 to $80,000 in costs on them to discover that only 3 banks out of 16,000 evaluations aren't doing a good job? The next letter is from Nebraska National Bank, which is in Kearney, NE. They have $34 million in assets. This has to be one of the smallest banks in America. It has been in business for an extended period of time. I don't know how many employees they have, but I would guess five or six employees in the whole bank: We do not make foreign loans. We don't speculate in derivatives. We don't siphon deposits from this area to fund loans elsewhere. Instead, like virtually all banks under $250 million in assets [remember, they are only $34 million in assets], we provide home loans, business loans, farm loans, construction loans. We don't do this because of the Community Reinvestment Act, but because it makes good business sense. I bitterly resent every minute of my time and that of my staff spent to comply with this regulation because it takes time away from productive duties. I feel the regulation is now being used by consumer activist groups to shake down banks seeking regulatory approval for expansion of mergers. Now, that is a strong testament. Nothing I could say could give a stronger testament than that. Let me give you one final one. Like I said, we have 488 just like it. They don't understand why it is unreasonable to lift this heavy regulatory burden when only 3 substantial noncompliant banks have been discovered in 9 years after 16,000 audits. You take 16,000 audits at $80,000 apiece, for the banks, that is a lot of money for these little towns. The last letter is from American State Bank, an independent bank in Portland, OR. It is signed by the chairman and the CEO: As one of the oldest and most strongly capitalized African American owned banks west of the Mississippi River, Portland based American State Bank supports your position on CRA exemption for nonmetropolitan banks. We also urge you to explore exempting from CRA requirements minority-owned commercial banks. Today, minority-owned banks still maintain their focus on serving our Nation's minority communities and their citizens. It is redundant at best to impose CRA requirements on banks whose sole purpose is to serve minority citizens. At worst, it compels minority banks to sustain burdensome, expensive administrative costs and subjects banks to a bureaucracy largely unaware of the realities of the inner-city marketplace. Now, I could go on and on, Mr. President, in outlining the arguments related to small banks, but let me stop there on this issue and go back to the other provisions of the bill. Let me say to my colleague that to go through and respond to each of the points Senator Sarbanes made is probably going to take me another half hour. If the Senator has a unanimous consent request, or a short statement, I would be glad to yield. But if not, I want him and others to know that I should be finished maybe by 7 o'clock.

Mr. GRAMM. I am happy to yield.

Mr. GRAMM. Will the Senator yield for one moment?

Mr. GRAMM. I have to accommodate our dear colleague from Minnesota. Let me say, I wish he could go on forever, because I am always enlightened listening to him. But to accommodate him, I asked unanimous consent that he might have 40 minutes when we came back in at 2:15. It is now 3:15. The Senator has spoken an hour. I asked other people to come over to speak based on that agreement. I do not intend to try to enforce the 40 minutes, but if the Senator could take that into account, because I asked Senator Bennett, who, as are all of us, is busy, to come over based on that agreement. He has been sitting here now for 25 minutes or so. If the Senator could sort of begin to bring it to a close, it would be much appreciated.

Mr. GRAMM. Mr. President, I suggest the absence of a quorum.

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

Mr. GRAMM

Mr. GRAMM. Mr. President, I ask unanimous consent that the Subcommittee on Administrative Oversight and the Courts, of the Senate Judiciary Committee, be authorized to meet during the session of the Senate on Tuesday, May 4, 1999 at 2:00 p.m. to hold a hearing in room 226, Senate Dirksen Building, on ``S. 353, the Class Action Fairness Act of 1999.''

Mr. GRAMM. Mr. President, I ask unanimous consent that the Subcommittee on Antitrust, Business Rights, and Competition, of the Senate Judiciary Committee, be authorized to hold a hearing during the session of the Senate on Tuesday, May 4, 1999 at 10 a.m. in room 226 of the Senate Dirksen Office Building, on: ``S. 467, the Antitrust Merger Review Act: Accelerating FCC Review of Mergers.''

Mr. GRAMM. Mr. President, I ask unanimous consent that the Subcommittee on International Trade and Finance of the Committee on Banking, Housing, and Urban Affairs be authorized to meet during the session on the Senate on Tuesday, May 4, 1999, to conduct a hearing on ``Effects of International Institutions on U.S. Agricultural Exports.''

Mr. GRAMM. Mr. President, I ask unanimous consent that the Committee on Foreign Relations be authorized to meet during the session of the Senate on Tuesday, May 4, 1999 at 10 a.m. to hold a hearing.

Mr. GRAMM. Mr. President, I ask unanimous consent that the Senate Committee on Indian Affairs be authorized to meet during the session of the Senate on Tuesday, May 4, 1999 at 9:30 a.m. to conduct an Oversight Hearing on Census 2000, Implementation in Indian Country. The Hearing will be held in room 485 of the Russell Senate Office Building.

Mr. GRAMM. Mr. President, I ask unanimous consent that the Committee on Commerce, Science, and Transportation be allowed to meet on Tuesday, May 4, 1999, at 9:30 a.m. on TV violence.

Mr. GRAMM. Mr. President, I ask unanimous consent that the Committee on Energy and Natural Resources be granted permission to meet during the session of the Senate on Tuesday, May 4, for purposes of conducting a full committee hearing which is scheduled to begin at 9:30 a.m. The purposes of this hearing is to receive testimony on S. 25, the Conservation and Reinvestment Act of 1000; S. 446, the Resources 2000 Act; S. 532, the Public Land and Recreation Investment Act of 1999; S. 819, the National Park Preservation Act; and the Administration's Lands Legacy proposal.

Mr. GRAMM. Mr. President, the Finance Committee requests unanimous consent to conduct a hearing on Tuesday, May 4, 1999 beginning at 10:00 a.m. in room 215 Dirksen.

Mr. GRAMM

Mr. GRAMM. No. I am simply making sure that everybody understands-- because there were a lot of references made between last year's bill and this year's bill--that how someone voted last year is interesting and may, to some extent, be relevant, but on the fundamental issue that is before us, whether or not these new services should be provided within the bank or outside the bank in holding companies, the substitute which the Senator will offer later today is a very different bill from last year's bill. That is the only point I am making. The second thing I will make clear is, I didn't object to the growth in CRA and the commitments made to CRA. I did make the point, however, that when in a given year--in fact, last year--the loans, the commitments to lend, the cash payments, and the commitments to pay cash in the future are bigger than the Canadian economy, bigger than the discretionary budget of the Federal Government, perhaps it is time to look at potential abuses. Now, granted, the Senator made the point that not every loan was made this year, and not every cash payment was made this year. I was simply using the data the way community groups presented it. I was very careful to say that the $694 billion was loans, commitments to lend, cash payments, commitments to pay cash in the future. I stand by those numbers, and those are the numbers of the community service groups.

Mr. GRAMM. I am happy to yield.

Mr. GRAMM. It was a 1-year figure.

Mr. GRAMM. There will be more agreements next year and next year and next year. The point is, this has grown from a very small program into a very big program. I believe, and the majority of the members of the committee believe, it is time to look at this program and look at abuses, and we are going to have plenty of time to debate this later. Let me also note that, under current law, a bank is not required to get CRA approval to sell insurance. Under current law, there are a limited number of banks that do have some insurance powers. They are not required under current law to get CRA approval to engage in those security powers. Now, in terms of the CRA reforms in the bill reported by the Banking Committee, those reforms have been endorsed by the American Bankers Association, by the Bankers Roundtable, and by the Independent Bankers Association of America. When our colleague says everybody is happy with the provisions of his substitute, I want people to know that three major banking groups have endorsed the provisions of our bill. Let me say again--and I don't know what you do to get people to use the English language--there is not a safe harbor in this bill. A safe harbor is where something can't be challenged. There is a rebuttable presumption in the bill. There is a big difference between the two. The rebuttable presumption in the bill simply says that in order to stop or delay a regulatory action, you have to present substantial evidence. That substantial evidence is defined in law as more than a scintilla. It is defined as such relevant evidence as a reasonable person might accept as adequate to support a claim. That is not a safe harbor. That simply is giving the evaluation that has occurred some standing. Our colleague talks about comments. Nothing in the bill prevents anybody from commenting on any CRA evaluation. Comments can be made. People can submit any comments. All our provision says is, if a bank has been in compliance for 3 years in a row, if they are currently in compliance in their evaluation with CRA, if the regulator is going to stop the process or delay it, they have to have more than a scintilla of evidence. In order for the protest or objection to be used to stop the process for a bank with a long history of compliance, there has to be substantial evidence. People can comment all they want to comment. Nothing in this provision prevents comments. Finally--and we will have lots of time to debate these--in terms of unitary thrifts, unitary thrift holding companies are not a loophole. Congress legislated them. We end them in saying that you cannot do any more, but to suggest that they are a loophole, an accident, that nobody ever intended they come into existence, they have existed for over 30 years. We are not debating here whether or not we should stop the issue of new licenses to commercial interests to create ``new unitary thrifts.'' The question is, What do you do with people who already have the charters? Do you change the rules of the game on them? If our colleagues would indulge me, I yield to Senator Enzi.

Mr. GRAMM

Mr. GRAMM. If there is no further business to come before the Senate, I now ask unanimous consent that the Senate stand in adjournment under the previous order.