Jim Leach

Mr. LEACH

Mr. LEACH. I appreciate that. I would just like to make one modest point. That is, there is probably no single professional element of America that has been more unpersonally rewarded than volunteer firemen. What this bill does is create the first substantive reward for people that have served their communities so bravely for so long. I think this is a very appropriate endeavor. I want to thank the gentleman for insisting that this provision be designed in this fashion.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I ask unanimous consent that the Committee on Banking and Financial Services be permitted to file a supplemental report on the bill (H.R. 1776) to expand homeownership in the United States.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I rise simply to thank my distinguished colleague from Oklahoma and my distinguished friend from New York for this very thoughtful presentation. Charles Schulz had a greater impact on the life of America than perhaps all but a very few in literature and the arts. He brought to America something that is unique. He conveyed to the average American real human life and theology of a very deep human nature. We at one time almost had the ``Gospel According to Peanuts.'' But the one aspect of the ``Gospel According to Peanuts'' that always struck me was that life was happy; that the traumas that we all face were traumas that could be resolved in an uplifting way in which the American circumstance was reflected to ourselves and to the world. Charles Schulz, in many ways, when it comes to the creative arts, was the quintessential American artist, operating in a fashion of bringing art to the public and literature and theology and philosophy to America. And for this he is a treasure of this last century, and we all are deeply saddened at his passing.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I rise today to emphasize to my colleagues and the public that as part of the omnibus spending resolution just adopted, the United States House of Representatives has endorsed the most seminal bill ever advanced for the developing countries of the world. Comprehensive debt relief has been adopted for the poorest of the poor, many, but not all of which, are in Africa. Relieving the debt burdens of the world's poorest countries has become one of the foremost economic, humanitarian and moral challenges of our time. Indeed, seldom has there been such a compelling conjunction between abstract economics, ethics and public policy. In an effort to address this problem, earlier this year I introduced H.R. 1095, an act which authorizes debt relief for certain countries and conditions that relief on those countries transferring the savings from debt service obligations into poverty reduction and sustainable development. Although initially skeptical about the breadth of this legislative approach, the administration eventually embraced it, and I am particularly appreciative of the support of Secretary Summers in this cause. In Congress, a number of our colleagues have been instrumental in bringing this initiative to the floor, and I would like to thank the gentleman from Alabama (Mr. Bachus), the gentleman from Alabama (Mr. Callahan) and the gentleman from Texas (Mr. Armey) on this side of the aisle, and the gentleman from New York (Mr. LaFalce), the gentleman from Massachusetts (Mr. Frank), the gentlewoman from California (Ms. Waters) and the gentlewoman from California (Ms. Pelosi) on the other. That we are able to consider debt relief today is a result of extensive collaboration and dialogue with a coalition of non- traditional lobbyists. Such non-governmental organizations as OXFAM and Bread for the World have provided much needed impetus to the effort, and a group of some 200 religious groups embracing the entire spectrum of faiths and denominations have united under the banner of Jubilee 2000. The term ``jubilee'' is particularly appropriate, as it invokes the Old Testament Biblical concept of restoration, providing a fresh start, in this case for the most abject poor, at the beginning of the new millennium. A central text is Leviticus 25, which contains the injunction, ``and ye shall hallow the fiftieth year, and proclaim liberty throughout all the land . . . In the year of this jubilee, you shall return every man unto his possession.'' As the Book of Proverbs reminds, ``If you refuse to listen to the cry of the poor, your own cry will not be heard.'' The Jubilee movement is worldwide, but American leadership is critical. In recent years we have demonstrated to the world our capacity to lead in the use of force. Now we must show an equal commitment to leading in the delivery of compassion. In a world in which divisions between rich and poor daily become more accentuated, it is imperative that Jubilee relationships be righted, that the alternative to war and famine with their attendant social and capital costs be averted. Just as the Marshall Plan symbolized practicality and generosity at the end of the greatest war in human history, debt relief under the Jubilee banner stands at the end of the second millennium after the birth of Christ as a critical moral response to social challenges in parts of the world where poverty is endemic and governments have proven unable or unwilling to serve well their people.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

Mr. LEACH. Mr. Speaker, I have no speakers, and I yield back the balance of my time.

Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 3373, a bill that will, among other things, implement a unique program to issue a millennium commemorative dollar coin. The bill would permit the simultaneous issuance of a U.S. silver dollar and a silver 1000 Kronor Islandic coin, both produced by the United States Mint and both celebrating the 1000-year anniversary of Leif Ericson's voyage to the New World. Both of these coins would be produced in limited mintages. This will be a significant numismatic event, a 1000-year anniversary, the two countries jointly issuing coins commemorating the same event, and a limited boxed edition of both coins issued by the Mint. Interestingly, the Icelandic coin will depict Leif Ericson as he appears in a statue that stands today in Reykjavik. The statue of the great explorer was created by the sculptor Stirling Calder, father of Alexander Calder, and was presented by the United States Congress to the parliament of Iceland, known as the Althing, on its 1000th anniversary in 1930. Mr. Speaker, this bill also authorizes the Secretary of the Treasury to create two other coins commemorating significant events. One, an initiative of the bipartisan leadership in both the House and the Senate, would be the first commemorative coin dated 2001 and would mark the 200th anniversary of the United States Capitol building in which we now stand. Proceeds would be used to help build a Capitol Visitors Center. Also authorized in this bill is a coin dated 2004 to commemorate the bicentennial of the start of another epic discovery expedition, this one the 8,000-mile trek by Merriwether Lewis and William Clark, with the backing of President Thomas Jefferson, through land that is now part of the States of Illinois, Missouri, Kansas, Nebraska, Iowa, North Dakota, South Dakota, Montana, Idaho, Washington, and Oregon. The gentleman from Nebraska (Mr. Bereuter) has been a tireless and persuasive sponsor of this initiative. As my colleagues may recall, similar versions of the Leif Ericson and Lewis and Clark bills passed this chamber under suspension in both this and the last Congress, and the Congressional Budget Office has scored all the coins as budget neutral. In conclusion, Mr. Speaker, I would like to express my appreciation for the thoughtful judgment and advice of the gentleman from New York (Mr. LaFalce), my good friend, on this and so many other issues before the committee. I urge adoption of this bill. Mr. Speaker, I reserve the balance of my time.

Mr. LEACH. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 3373) to require the Secretary of the Treasury to mint coins in conjunction with the minting of coins by the Republic of Iceland in commemoration of the millennium of the discovery of the New World by Leif Ericson.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I rise to speak on the last day of the session about the introduction of a small bill related to what some might argue is a small event involving the loss by the Federal Government of an amount of money that would be considered gargantuan in every respect except its relative size to the United States Government budget. Given all the budget decisions involving issues like Medicare, defense spending, and U.N. funding, this Congress should be aware that three-quarters of $1 billion has just become obligated outside the budget process because of regulatory laxness related to the failure of one rural bank, the First National Bank of Keystone, West Virginia. The facts revealed to date suggest that this failure may cost the Bank Insurance Fund far more than the Federal Deposit Insurance Corporation estimated the fund would lose from all bank failures this year. Indeed, the expected loss is so high that it could make Keystone not only one of the 10 most expensive bank failures ever, but also one of the most spectacular for any institution of any size with losses approaching an astounding 70 percent of the bank's assets. The public first learned of the failure of First National Bank of Keystone September 1, 1999, when the Office of the Comptroller of the Currency (OCC) announced it was closing the bank and appointing the FDIC as receiver. Bank examiners had discovered that loans on the bank's books totaling $515 million were missing--items that represented roughly half the bank's $1.1 billion in total reported assets. Other overstated assets, questionable accounting practices, and credit quality problems push the total expected losses toward the 750 million dollar mark. The picture that is emerging is of an institution which, in recent years, reported high profits at the same time management pursued dubious investment strategies and, ultimately, mischievous techniques to hide massive losses from the scrutiny of examiners. It will take some time for criminal investigators and Federal bank regulators to unravel the full story of this bank failure, but it is not too early to ask if Federal regulators properly supervise the institution and prudentially stewarded the deposit insurance fund which back-stops risks in the banking system. For 5 or 6 years, red flag practices should have alerted regulators that the high-risk asset management strategies employed by Keystone were hardly of the kind expected in a rural institution situated in a West Virginia town of 627 residents and warranted vigilant supervisory measures. From 1992 to 1998, Keystone increased its assets tenfold to over $1 billion as it offered depositors up to 2 percentage points more in interest than competitor institutions. Rather than expanding small business and agricultural loans in its West Virginia market area, Keystone engaged in a high-risk strategy of buying, securitizing, and selling subprime loans made to and by people the bank hardly knew. Management practices were reminiscent of those witnessed during the S&L crisis of the 1980s. Rapid asset growth, risky investment activity, and the practice of paying hyper-competitive interest rates were augmented by legal and administrative tactics designed to thwart regulatory oversight. A combination of lax management and weak supervision by the bank's board were conducive to the imprudent and allegedly fraudulent activities that have been uncovered. Over the past several years, the OCC made futile attempts to curb Keystone's go-go activities with various enforcement actions and civil money penalties; but, in hindsight, the measures were too weak and too late. The OCC pushed for management changes, but the bank's board resisted. Several experienced officers were hired in 1999; however, the board gave them the cold shoulder and they quickly resigned. In May of 1999, an external accountant, Grant Thornton, conducted an independent audit as required by the OCC, and issued an unqualified opinion of the bank's 1998 financial statements. The firm detected no fraud. Just a few months later, however, federal examiners found that a half-billion dollars were missing from the bank's claimed assets. The delay in uncovering the losses apparently occurred in part because bank management engaged in a sustained pattern of obfuscation. Another tactic of Keystone management was not unlike that employed 15 years earlier by Charles Keating. One of the hallmarks of the Keating tenure to the S&L called Lincoln was the hiring of many high-powered attorneys to represent his interests. When challenged, Keating and his people had a habit of threatening regulators and the United States Government with lawsuits. In Keating-esque fashion, Keystone went so far as to hire a former Comptroller of the Currency to contest the OCC's supervisory activities. In an escalated twist, examiners on bank premises were so harassed and felt so threatened that the OCC had to request United States marshals to protect them when they were going over bank records. In addition to similarities with respect to the 1980's go-go activities of S&Ls that cost American taxpayers approximately $140 billion, the Keystone case adds new elements. The profile of questionable bank leadership is no longer simply the smooth-talking male huckster, but it would now appear that Keystone's cops, Federal banking authorities, were taken in by a scam perpetrated by an institution headed by a grandmother. With the threats to examiners and recent discovery that three truckloads of bank documents were buried on the property of a senior bank official, indictments have been issued for obstruction of a Federal examination, an unusual legal precept which some may find humorous; others, chilling. Keystone's failure has not only revealed costly inadequacies at the field supervisory level, but also flaws in interagency cooperation in Washington. For this reason, I have today introduced H.R. 3324, a bill designed to bolster the independence of the Federal Deposit Insurance Corporation. By background, state chartered banks are regulated primarily by state banking agencies with the Federal Reserve serving as the primary federal regulator for state members. National banks are regulated by the OCC, and holding companies of all banks are regulated by the Federal Reserve. Analogously, state agencies regulate state chartered savings and loans, and the Office of Thrift Supervision (OTS) serves as the federal thrift regulator. The FDIC is a back-up regulator for all federally-insured institutions (banks and S&Ls) because it is responsible for stewardship of the deposit insurance system. It is also the primary federal regulator for state chartered banks which are not members of the Federal Reserve system. In order to avoid, to the maximum extent possible, duplicative regulation, the regulators are expected to cooperate and coordinate their examination activities. On the whole, this cooperation works, well, in part because America's banking system is so strong. But just as there is private sector competition for profits, there can at times be public sector competition for power, in this case, regulatory jurisdiction. From a Congressional perspective, the Keystone failure is worrisome because it appears that the FDIC was stymied at key points in its desire to conduct reviews of the bank's activities. The regulators--the OCC and the FDIC--failed to cooperate closely. Although satisfactory communication among the FDIC, the OCC, and other federal regulators in routine cases appears to be the norm, the Keystone case reveals some potentially serious flaws in the federal oversight system. The tension between the OCC and the FDIC over Keystone was particularly evident in the period leading up to the 1998 examination of the bank. Instead of welcoming FDIC expertise and assistance in analyzing the increasingly complex operations of the bank, the OCC initially denied the FDIC's request to participate in a bank examination. The OCC says its decision was based in part largely on concerns that the inclusion of additional FDIC examiners might exacerbate the increasingly difficult environment for the examiners at the bank and heighten management's resistance to examiners' requests for information. Retired examiners, like old soldiers and athletes, sometimes have a tendency to exaggerate reminiscences. In a discussion about Keystone, one opined to me the other day that the old rule was if a bank ever displayed reluctance in cooperating with examiners, a swat team of accountants should immediately be brought in, and if intransigence continued, the bank should immediately be closed. This perspective may be callously insensitive to law and to a system where agencies because of their extraordinary authority have an obligation to act with great caution. But one truth is self-evident: bank intransigence is a reason for more, not fewer, examiners. In this regard, it is noteworthy that the OCC itself has acknowledged that by September of 1997 it considered Keystone's extensive problems required a ``significant amount of examiner expertise.'' For it then to suggest that its objection to having FDIC professionals join the OCC in examinations of Keystone related less to turf concerns, than to apprehension that feathers would be ruffled at the bank, is profoundly indefensible. Concerned that Keystone posed a serious risk to the insurance fund, FDIC staff decided to elevate their request to take part in the 1998 examination to the full FDIC board, of which the Comptroller is one of five statutory members. In the end, they chose not to present the case to the board because, after a lengthy delay, the OCC eventually acquiesced to limited FDIC participation. But what has become apparent in extensive discussions with FDIC and OCC staff is clear resistance on the OCC's part to FDIC review of banks in certain difficult situations and of some timidity of FDIC staff to challenge Treasury Department hegemony. Although the OCC reversed its original position just one week before the June 30, 1998, FDIC board meeting at which this issue was to be discussed, it would appear that the OCC's reluctance to involve the FDIC in the examination and other important meetings may have contributed to a lesser FDIC involvement than was warranted. For example, in February of 1998, the FDIC asked for three examiner slots for the upcoming 1998 examination, but the OCC agreed, in the week before the June Board meeting, to allow only one. Although the OCC later agreed to permit two FDIC examiners, its basis for wanting to limit FDIC involvement is not clear. Less than a year later, after Keystone's condition had further deteriorated, the OCC agreed to allow seven FDIC examiners to participate in the 1999 examination. It was during that examination that the stunning losses were uncovered. The turf battle over the number of examiners reflected the substantive disagreements the two agencies had over the bank's operations. The FDIC in 1998 questioned the valuation of the residual assets on Keystone's books and the potential loss exposure of the bank's subprime lending activities. In particular, the FDIC believed that Keystone's valuation of its residual assets, which comprised over 200 percent of keystone's capital, was not supported. After the OCC agreed to limited FDIC participation in the 1998 examination, the FDIC contends that its examiners were to remain on site until all questions about the bank's accounting and recordkeeping were answered. The OCC, however, completed the on-site portion of the examination in 15 workdays without obtaining sufficient support for the residual valuation and without completing the reconcilement of balance sheet accounts, leaving FDIC examiners with no resolution to this critical concern. When the bank's accountant finally provided the missing information to the OCC at a meeting in January 1999, the FDIC reports that it was neither invited nor even informed of the meeting--this despite the fact that the FDIC had specifically asked to be kept fully informed as insurer and backup supervisor on issues relating to Keystone. Similarly, the OCC did not invite the FDIC to an April 1999 meeting with the developers of the bank's residual valuation model, which was a primary FDIC concern because it was central to determining the risk to the Bank Insurance Fund. The bureaucratic turf battle over Keystone disturbingly reveals flaws in the current system. While the FDIC, to the maximum extent possible, should coordinate examinations with other regulators, it has long been the assumption of legislators that the FDIC could, at its discretion, fully participate in examinations with other regulators or conduct special examinations of any federally-insured institution without delay or interference whenever it identified a risk of loss to the insurance fund. The Keystone incident shows the FDIC to be coerced, not by the regulated, but by its fellow regulators, who have a shared accountability with the FDIC to the American taxpayer. The FDIC has a unique role in our financial system and it must be insulated from regulatory turf battles and political considerations. It is instrumental in maintaining the safety and soundness of the banking industry, and is responsible for safeguarding the deposits of customers of all insured financial institutions. Implicitly, the FDIC also has a role in assuring competitive equity. By safeguarding the insurance funds it keeps insurance premiums as low as possible and protects well- run institutions from assuming liabilities associated with high flyers. It would appear that the FDIC, in its role as guardian of the insurance funds, should have taken a more aggressive stance in insisting on its authority to examine Keystone. In response to a letter of mine on the subject, the FDIC made a strong case that it should have been given a more active role in Keystone examinations. Yet the agency did not rigorously pursue its rights and obligations in the matter. For example, the FDIC initially agreed to the OCC's terms of allowing only one FDIC examiner in the 1998 examination of Keystone despite its judgment four months earlier that it needed three. If the FDIC had serious concerns about Keystone's threat to the fund, it had a fiduciary obligation to press its case to the Board that three examiners were needed and should be approved. Concern also exists about the length of time that elapsed between the FDIC's February 1998 request to participate in the Keystone examination and its planned presentation of the case to the Board in June. While this delay allowed the agencies time to negotiate before the start of the examination, the FDIC should have acted on a more forceful and timely basis to resolve the disagreement. While coordination among the agencies is important, cooperation should not overshadow the FDIC's primary responsibility to protect the safety and soundness of the insurance funds. In attempting to understand the interagency conflict that existed in the supervision of Keystone, it is instructive to review the legislative history of the FDIC's authority to examine national banks and other insured institutions. Prior to 1950, the FDIC could utilize its special examination authority to examine a national bank only with the written consent of the OCC. This veto power over the FDIC proved untenable and the House passed legislation that year, which permitted the FDIC to examine national banks as back-up supervisor without the OCC's written consent. In conference with the Senate, however, the bill was modified to require the full FDIC board--of which the OCC is a member--to authorize any special examination requests. This provision has survived to this day as Section 10(b)(3) of the Federal Deposit Insurance Act. While more restrictive of FDIC independence than the original House language, the 1950 change in law ended the ability of other agencies to veto FDIC participation in examinations as back-up supervisor, as was possible from 1935 until 1950. In 1950, the FDIC board consisted of three members. Only the Comptroller was from the Treasury Department; the other two directors were affiliated only with the FDIC. In 1989, the board was changed to the current five-member format. There are now three independent members, plus the heads of the OCC and the OTS, who represent the Treasury Department. This arrangement does not give Treasury agencies majority control under normal circumstances. When, however, there is a vacancy in one of the three FDIC positions, half of the four remaining board members represent agencies of the Treasury Department. If two of the independent seats were to be vacant, the Treasury Department would effectively control the FDIC board. This is not an insignificant matter, considering that the current statutory language regarding FDIC back-up examination authority was written at a time when the majority of the FDIC's original three-member Board reflected control by an independent agency, rather than a Cabinet department. However, when there is a vacancy on the FDIC board, the Treasury Department assumes a larger role than Congress intended, and the FDIC's back-up authority can be subject to challenge. From 1983 until 1993, for example, the OCC and the FDIC operated under an agreement whereby the OCC would invite FDIC participation in examinations of banks with composite `4' and `5' ratings indicating a troubled bank; additionally, the OCC would allow FDIC participation in examination of higher rated banks, with an emphasis on `3'-rated banks. In September 1993, this collegial arrangement changed. Two of the independent seats were vacant, and the FDIC's board, then dominated by the two Treasury representatives voted to end this long-standing agreement. The new policy reserve to the FDIC Board all decisions regarding concurrent or special examinations, regardless of the rating of the institution. This change in policy was entered into despite an explicit written communication to the FDIC by then-House Banking Committee Chairman Henry B. Gonzalez and me, the then-Ranking Member, that Congress had serious reservations that the proposal under consideration would have the effect of the FDIC improperly derogating its authority. While the OCC board member seemed sympathetic at the time to the need for FDIC special examinations for `4'- and `5'-rated institutions, he clearly had concerns about FDIC involvement in higher-rated institutions. Yet, the FDIC Acting Chairman and FDIC staff who attended the meeting insisted that under certain circumstances it may be more important to involve the FDIC as back-up supervisor in examinations of deteriorating `3'-rated banks than in the examinations of `4'- and `5'- rated institutions with already identified and addressed problems. Keystone is a case in point. Two years later, in 1995, the FDIC board delegated authority to its Division of Supervision to authorize participation in certain back-up examination activities of institutions when the FDIC is invited by the primary regulator, or when the FDIC asks and the primary regulator does not object. In cases such as Keystone, however, when the primary regulator objects, FDIC policy dictates that the case must be brought to the full FDIC Board regardless of the rating or conditions of the bank. Unfortunately, the FDIC Board has not had its full complement of five directors since an independent director resigned over a year ago, which results in Treasury having influence disproportionate to Congressional intent. During this period of time, the Administration has failed to submit a nominee for this current vacancy on the FDIC board. The result is that proposed actions or policies supported by the two independent FDIC directors can be blocked by the two directors who are affiliated with the Treasury agencies, the OCC and the OTS. This is not good governance. By failing to nominate a person for the unfilled board position, the Administration has forced the FDIC to operate without clear independence from the power considerations of the OCC and OTS. Such a situation could have been a factor in the FDIC's decision not to vigorously pursue in the Spring of 1998 its original request in the Keystone case. The bottom line is that all regulators share a common responsibility to protect the safety and soundness of the U.S. financial system--a responsibility that should not be affected by turf concerns. The OCC's principal response to date in the aftermath of the Keystone failure has been to declare that all FDIC requests to participate in an OCC examination or conduct a special examination of a national bank will now be considered directly by the Comptroller himself. While this procedure is certainly better than having OCC staff deny a request and forcing the FDIC to ask the board for approval, the response is still inadequate because it would do nothing to address the potential for undue Treasury agency influence on the FDIC Board. When a vacancy exists, the Treasury is, in effect, in control; it has veto power over FDIC participation. This is clearly contrary to Congressional intent that the FDIC operate as an independent agency and that it alone be able to determine whether an examination is necessary for insurance purposes, without undue influence by another federal regulator. From a broader perspective, I might add that since looking into the details of the Keystone case, I have learned that a lack of cooperation is rare, but not isolated. Despite the generally constructive working relationship among federal bank regulators in some 90 instances of back-up examinations over the past four years, there have been, in addition to Keystone, four other cases in which the primary regulatory agency initially rejected the FDIC's request to participate in an examination. Three of these cased involved the OCC and the other the OTS. In all four instances, as with Keystone, the primary agency ultimately agreed to some form of FDIC participation without formal board action. The record of these five cases confirms that disagreements among agencies are the exception, rather than the norm There are also no indications that the FDIC is capriciously using its back-up authority. Nevertheless, the Keystone failure makes a graphic case that the current process needs improving. Accordingly, to reinforce FDIC independence on matters affecting the insurance fund, I have introduced today legislation (H.R. 3374) to give the FDIC Chairman authority in special circumstances to direct FDIC examiners to examine any insured institution, instead of the current provision vesting such authority with the FDIC Board of Directors. This authority will continue to be used only when, in the words of Section 10(b)(3) of the Federal Deposit Insurance Act, an examination is ``necessary to determine the condition of such depository institution for insurance purposes.'' The legislation would require that in exercising this authority all reasonable efforts be made to coordinate with any other appropriate regulator and to minimize any disruptive effect of a special examination on the operation of the depository institution. The intent is not to press new FDIC regulation on the banking system, but simply to stress that in unusual, special circumstances the FDIC must be able to act as an independent, rather than subordinate, agency of government. I believe this legislation will help assure the safety and soundness of the American financial system and protect the insurance funds by underscoring statutorily the long-term intent of Congress that FDIC back-up authority must be of an independent nature. The Chairman would be required to notify other FDIC board members (and the Federal Reserve and State banking authority as applicable) whenever he or she makes such a decision. As the custodian of the insurance funds, the FDIC must be allowed to perform its role as a backup regulator on a timely basis whenever circumstances warrant. It is worth noting that the Inspector General (IG) of the FDIC has come to similar conclusions. In an October 19, 1999, memorandum to the FDIC Chairman, the IG recommended that the FDIC board delegate its special examination authority to the FDIC Chairman or that the law be amended to vest that authority in the Chairman. The legislation I am introducing today would address the IG's concerns, as well as my own. The IG argued that the agency's backup examination authority was particularly critical in this era of increasing bank consolidation. While the ``megabanks'' created by recent mergers pose the greatest risks to the insurance funds, the FDIC is the primary regulator for only two of the nation's 39 largest institutions. Obstacles to future FDIC access to relevant information about megabank operations in its role as back-up supervisor could have consequences far greater than the Keystone case. To assess risk in large institutions where it does not have an ongoing presence, the FDIC requires timely information and records on important aspects of operations. Therefore, the bill I am introducing also includes language emphasizing the right of the FDIC to prompt access to information from other regulators and requiring the federal banking agencies to establish procedures for sharing other information, in addition to examination reports, whenever such information is relevant to the FDIC's responsibility to protect the insurance funds. This provision of the bill underscores the importance of interagency coordination and information sharing to ensure that the FDIC has the necessary data to assess risk to the insurance funds. It is intended to have the practical benefit of potentially minimizing the number of occasions in which the FDIC must exercise its special examination authority. The vast majority of institutions will not be affected in any way by this legislation. For most institutions, the FDIC does not need any special information other than that already available to it, nor does it need to perform any form of back-up examination. But, clearly, in cases where the potential risk to the fund is great--banks with significant weaknesses, especially if they are megabanks with exceedingly complex activities--the FDIC should be able to function as Congress expects it to function and receive from the primary regulator the information it needs to assess relevant risk. I might add before closing that my concerns in the Keystone case extend beyond the issues of regulatory cooperation and FDIC special examination authority. There are also troubling questions here about the regulators' ability to identify and stem high risk bank activities in a timely fashion. There was another bank failure involving extremely high losses relative to assets just over a year ago. On July 23, 1998, Colorado State Banking authorities closed BestBank--an FDIC-supervised state bank located in Boulder--after state and FDIC examiners found $134 million in losses in high-risk, unsecured subprime credit card accounts. Although the FDIC initially estimated the cost of that failure to the insurance fund at about $28 million, by year's end the estimate had risen 6-fold to $171.6 million. I mention the BestBank case because of its striking similarities to the Keystone case. Like the junk-bond investments of S&Ls in the 1980s, both BestBank and Keystone were disproportionately involved in high-risk activities, namely subprime loans. Both banks relied heavily on outside, third party servicers. Both banks had experienced extraordinarily high asset growth. Both banks had high public profiles: In the mid-1990's, BestBank was labeled in one banking publication as the ``best performer among U.S. banks,'' and Keystone captured the title of the nation's most profitable community bank for three straight years. Keystone and BestBank also engaged in similar tactics to frustrate federal examiners, and fraud is alleged to have played a part in the failure of both. Unfortunately, I suspect we may also find some parallels in how federal regulators handled the two cases. The FDIC IG, in conducting the material loss review in the BestBank case, concluded that the FDIC could have been more effective in controlling the bank's rapid asset growth and thus curbing losses to the insurance fund. While we do not yet know the final outcome of the investigations into either of these recent bank failures, it is clear that the banking agencies need to continue to review their supervisory strategies for banks engaging in inherently risky activities, such as subprime lending. Accordingly, I am asking each of the federal banking regulators to keep the Committee informed of any new policies and procedures for identifying institutions with profiles similar to those of Keystone and BestBank, and any changes in their supervisory practices with respect to such institutions. Also I am interested in any initiatives that would assist examiners in the detection of fraud, which is becoming a factor in an increasing percentage of failures. In this regard, I am pleased to note that FDIC Chairman Donna Tanoue recently announced that the FDIC is developing guidelines to require additional capital for subprime portfolios and reviewing potential increases in insurance premiums for banks that continue to engage in high risk activities of this nature without appropriate safeguards. In closing, the insurance fund should not have to suffer an excessive loss during this era of generally favorable economic conditions. Expensive failures impose unfair costs in the form of higher insurance premiums on honest, law abiding community banks around the country. Failures also impose costs on depositors whose accounts exceed insurance limits. And, as illustrated by the Keystone case, failure can take a heavy toll on the local community and those whose jobs depend on the survival of the bank. Clearly, it is critical that federal regulators cooperate with each other and pay particular attention to unusually rapid asset growth and potentially risky banking practices if future Keystones and BestBanks are to be averted.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I insert the following for printing in the Record: Unitary thrift holding companies--Section 401 closes the unitary thrift holding company loophole that permits commercial firms to acquire thrifts. This section contains a grandfather provision that permits a company that was a savings and loan holding company on May 4, 1999, or had an application on file as of that date, to acquire and continue to control a thrift and engage in commercial activities. It should be recognized that this exception to the general prohibitions in section 401 on commercial firms owning thrifts applies only to companies that owned or controlled thrifts as of that date (or pursuant to an application pending as of that date) and not to any subsequent acquirer of a grandfathered unitary thrift holding company. The intention of the conferees on this matter is very clear from the plain language of section 401. First, section 401 provides that no company may acquire a thrift after May 4, 1999, unless the company is engaged only in financial activities. Second, a company that does acquire a thrift after May 4, 1999 may not engage in commercial activities. As such, a grandfathered unitary thrift holding company could not be acquired by another commercial firm or financial firm and retain its commercial activities. A financial firm could not acquire a grandfathered unitary thrift holding company engaged in commercial activities unless such activities are divested because the acquiring financial firm would then be engaged in commercial activities directly and indirectly in violation of section 401. Insurance company portfolio investments--New section 4(k)(4)(I) of the Bank Holding Company Act permits insurance company subsidiaries of financial holding companies to acquire equity interests in nonfinancial companies (``portfolio companies''). Such acquisitions, however, must represent an investment made in the ordinary course of the insurance company's business and must be made in accordance with relevant state insurance law. The Act also prohibits a financial holding company from routinely managing or operating a portfolio company held pursuant to this section, except as necessary to obtain a reasonable return of the investment. It has been suggested that this would permit officer overlaps between the financial holding company and the portfolio company held under the authority granted by this section. This is not the case. The restriction in fact was intended to prohibit financial holding companies from becoming involved in the day-to-day operations or management of a portfolio company, except in unusual circumstances, and thereby maintain the Act's general prohibition on the mixing of banking and commerce. Since the officers of a company are involved in the day-to-day management of the company's affairs, officer interlock between a financial holding company and a portfolio company would, in most circumstances, involve the holding company in the routine management and operation of the portfolio company. Director interlocks, on the other hand, would properly allow a financial holding company to monitor its investment as long as the director was not involved in the day-to-day management of the portfolio company.

Mr. LEACH

Mr. LEACH. Madam Speaker, I yield 1 minute to the gentlewoman from New Jersey (Mrs. Roukema), the distinguished chairman of the Subcommittee on Financial Institutions and Consumer Credit.

Mr. LEACH. Madam Speaker, with change there are always doubts, but what is the truth about this bill? Let me affirm what the gentleman from New York (Mr. LaFalce) and the gentleman from Minnesota (Mr. Vento) have just noted. This bill solidifies, rather than weakens, CRA. No bank is exempted from community reinvestment responsibilities. No bank may take on any new powers without a satisfactory CRA rating. All banks must maintain a continuing CRA obligation. If not, if any fall out of compliance, no new activities or acquisitions will be allowed. Regarding privacy, let me say that seldom has this body heard such doubtful hyperbole. This bill, for the first time, bars financial institutions from disclosing customer account numbers or access codes to unaffiliated third parties for telemarketing purposes. This bill, for the first time, enables customers of financial institutions to opt out of having their personal financial information shared with unaffiliated third parties. This bill, for the first time, makes it a Federal crime punishable by up to 5 years in prison to obtain or attempt to obtain private customer financial information through fraudulent or deceptive means. These provisions apply to banks, securities companies and insurance firms. They also apply to mortgage companies, finance companies, travel agencies and credit card companies. As far as enforcement, the act subjects financial institutions to punishments that include termination of FDIC insurance, removal of officers and civil penalties up to $1 million or 1 percent of the assets of the institutions. These provisions are powerful. The penalties are severe. To vote against this legislation is to vote against the most powerful privacy provisions ever brought before this floor. This is a balanced, pro-consumer, pro-privacy bill, and I urge its adoption.

Mr. LEACH. Madam Speaker, I yield myself the balance of my time. The SPEAKER pro tempore (Mrs. Emerson) The gentleman from Iowa is recognized for 2 minutes.

Mr. LEACH. Madam Speaker, I yield 45 seconds to the gentlewoman from Illinois (Mrs. Biggert). (Mrs. BIGGERT asked and was given permission to revise and extend her remarks.)

Mr. LEACH. Madam Speaker, I yield 45 seconds to the distinguished gentlewoman from New York (Mrs. Kelly). (Mrs. KELLY asked and was given permission to revise and extend her remarks.)

Mr. LEACH. Madam Speaker, if the gentlewoman will yield, I agree with the interpretation just expressed.

Mr. LEACH. Yes, it is my understanding, and I understand as well that the gentleman may be inserting for the Record a further elaboration of this issue which reflects our mutual understanding of how this section is to be treated.

Mr. LEACH. Yes. There are two subsections that should be read together. One that calls for a listing of expenses and the other that stipulates regulations promulgated under this provision not establish undue regulatory burdens. While tensions exist between these two sections, the clear intent is for regulatory discretion in implementing the reporting requirements. For instance, meal expenses and taxicab receipts are not contemplated as having to be reported under this new section. In addition, it is clear, as indicated in the conference report, that in the vast majority of cases groups may comply with the disclosure and reporting requirements through the filing of audited statements or tax returns.

Mr. LEACH. Madam Speaker, will the gentleman yield?

Mr. LEACH. Madam Speaker, I yield 30 seconds to the gentleman from Florida (Mr. McCollum). (Mr. McCOLLUM asked and was given permission to revise and extend his remarks.)

Mr. LEACH. Madam Speaker, I yield myself such time as I may consume. Madam Speaker, yes, this is a historic day. If the House follows the Senate lead where on a 90 to 8 vote this conference report was adopted earlier today, the landscape for delivery of financial services will shift. American commerce will be made more competitive, and the American consumer will be better served. Under current law, financial institutions, banks, insurance companies, securities firms, are constrained in market niches. Under the new legislative framework, each industry will be allowed to compete head to head with a complete range of products and services. Over the decades, modernization approaches have been offered many times in many ways. The particular approach taken by the committees of jurisdiction is one based upon the following premises: 1, that no parts of America, whether an inner city or rural hamlet, should be denied access to credit; 2, that in a free market economy, expanding competition and finance should increase consumer access to a wider variety of products at the most affordable prices; 3, that while competition should be opened up in finance, the American model of separating commerce from banking should be maintained; 4, the privacy protections of American consumers should be expanded in unprecedented ways; 5, that the public protections contained in the prudential regulatory regime should be rationalized and made stronger; 6, that the international competitiveness of American firms should be bolstered. These are the premises and the effects of this legislation. If there is an institutional tilt to the balanced approach taken in this bill, it is to and for smaller institutions. In a David and Goliath competitive world, this legislation is the community bankers' and independent insurance agents' slingshot. They and the customers they serve will be empowered to a greater extent than under the status quo or any alternative modernization approach. Madam Speaker, I would simply conclude by expressing gratitude to all the participants in this process, particularly my friends, the gentleman from New York (Mr. LaFalce) and the gentleman from Minnesota (Mr. Vento), their Senate counterpart, Paul Sarbanes; the gentleman from Virginia (Mr. Bliley) and the gentleman from Ohio (Mr. Oxley) for their leadership in the Committee on Commerce, and the gentleman from Michigan (Mr. Dingell) and the gentleman from Massachusetts (Mr. Markey) for their constructive dissent. In the Committee on Banking and Financial Services, I am particularly grateful for the patience of so many Members, but I am obligated to cite in particular the wisdom and choice counsel of the vice chairman, the gentleman from Florida (Mr. McCollum), and an exceptionally strong team of advice the gentleman from Louisiana (Chairman Baker), the gentlewoman from New Jersey (Mrs. Roukema), the gentleman from Alabama (Mr. Bachus), the gentlemen from New York (Mr. Lazio and Mr. King). To them I express great personal gratitude for help, and profound apologies where I have differed or could not help them. As only Members understand, Congress has many dimensions, and this bill would not have been made possible without the input of a thoroughly professional staff. At the risk of oversight, let me thank on behalf of the House Tony Cole, Gary Parker, Laurie Schaffer, Jim Clinger, John Butler, John Land, Natalie Nguyen, Alison Watson, David Cavicke, Jeanne Roslanowick, and our counsels at the Legislative Counsel's office Jim Wert and Steve Cope. I would also like to express appreciation for the contributions of Virgil Mattingly of the Federal Reserve, Harvey Goldschmidt of the SEC, Undersecretary Gensler of the Treasury, Jerry Hawke, our comptroller, and Donna Tanoue, chair of the FDIC. Let me also make a comment about process. This bill has been led in the Senate by an extraordinarily strong chairman, Phil Gramm of Texas. While the House approach has differed somewhat with that of the Senate, the big picture is that the Senate acted decisively in a timely manner in legislation, the framework for which has been close to and is now identical with that offered this evening to the House. Each side has moved to the other, and the end product is overwhelmingly in the public interest. It has been my view from the beginning of consideration of financial reform several Congresses back that few legislative efforts require more bipartisan and biinstitutional cooperation than this one. The need for a cooperative approach has become more self-evident as issues of the day have become more personalized and partisan. In this light, I would like to thank the minority as well as the majority leadership of the House, Secretary Summers as well as Chairman Greenspan and Chairman Levitt, for their profound contributions to this legislation. It is truly bipartisan, supported by the executive branch and the Federal Reserve. Madam Speaker, the legislation before the House is historic win-win- win legislation, updating America's financial services system for the 21st Century. It's a win for consumers who will benefit from more convenient and less expensive financial services, from major consumer protection provisions and from the strongest privacy protections ever considered by the Congress. It's a win for the American economy by modernizing the financial services industry and saving an estimated $18 billion annually in unnecessary costs. And, it's a win for America's competitive position internationally by allowing U.S. companies to compete more effectively for business around the world and create more financial services jobs for Americans. It would be an understatement to say that this has not been an easy, nor a quickly-produced piece of legislation to bring before the House. For many of the 66 years since the Congress enacted the Glass- Steagall Act in 1933 to separate commercial banking from investment banking, there have been proposals to repeal the act. The Senate has thrice passed repeal legislation and last year the House approved the 105th Congress version of H.R. 10. The bill before us today is the result of months and months of tough negotiation and compromise: among different congressional committees, different political parties, different industrial groupings and different regulators. No single individual or group got all--or even most--of what it wanted. Equity and the public interest have prevailed. It should be remembered that while the work of Congress inevitably involves adjudicating regulatory turf battles or refereeing industrial groups fighting for their piece of the pie, the principal work of Congress is the work of the people--to ensure that citizens have access to the widest range of products at the lowest possible price; that taxpayers are not put at risk; that large institutions are able to compete against their larger international rivals; and that small institutions can compete effectively against big ones. We address this legislation in the shadow of major, ongoing changes in the financial services sector, largely the result of technological innovations and decisions by the courts and regulators, who have stepped forward in place of Congress. Many of us have concern about certain trends in finance. Whether one likes or dislikes what is happening in the marketplace, the key is to ensure that there is fair competition among industry groups and protection for consumers. In this regard, this bill provides for functional regulation with state and federal bank regulators overseeing banking activities, state and federal securities regulators governing securities activities and the state insurance commissioners looking over the operations of insurance companies and sales. The benefits to consumers in this bill cannot be stressed more. First, they will gain in improved convenience. This bill allows for one-stop shopping for financial services with banking, insurance and securities activities being available under one roof. Second, consumers will benefit from increased competition and the price advantages that competition produces. Third, there are increased protections on insurance and securities sales and a required disclosure on ATM machines and screens of bank fees. Fourth, the Federal Home Loan Bank reform provisions expand the availability of credit to farmers and small businesses. Fifth, the bill also contains important consumer privacy protections. Among other things, the bill: 1. Bars financial institutions--including banks, savings and loans, credit unions, securities firms and insurance companies--from disclosing customer account numbers or access codes to unaffiliated third parties for telemarketing or other direct marketing purposes. 2. Enables customers of financial institutions, for the first time, to ``opt out'' of having their personal financial information shared with unaffiliated third parties, subject to certain exceptions related largely to the processing of customer transactions. A financial institution would be permitted to share information with an unaffiliated third party to perform services or functions on behalf of the financial institution and to enter into certain joint marketing arrangements for financial products or services, as long as the institution fully discloses such activity to its customers and enters into a contractual agreement requiring the third party to maintain the confidentiality of any such information. 3. Requires all financial institutions to disclose annually to all customers, in clear and conspicuous terms, its policies and procedures for protecting customers' nonpublic personal information, including its policies and practices regarding the disclosure of information to both non-affiliated third parties and affiliated entities. 4. Directs relevant Federal and State regulators to establish comprehensive standards for ensuring the security and confidentiality of consumers' personal information maintained by financial institutions, and to protect against unauthorized access to or use of such information. 5. Accords supremacy to State laws that give consumers greater privacy protections than the provisions in the Act. 6. Makes it a federal crime, punishable by up to five years in prison, to obtain or attempt to obtain private customer financial information through fraudulent or deceptive means. Such means could include misrepresenting the identity of the person requesting the information or otherwise tricking an institution or customer into making unwitting disclosures of such information. In terms of enforcement, the Act subjects financial institutions that violate the new consumer privacy protections to a wide range of possible sanctions, including: Termination of FDIC insurance; implementation of Cease and Desist Orders barring policies or practices deemed violations of the Act's privacy provisions; removal of institution-affiliated parties, including bank directors and officers, from their positions, and permanent exclusion of such parties from further employment in the banking industry; and civil money penalties of up to $1,000,000 for an individual or the lesser of $1,000,000 or 1% of the total assets of the financial institution. The other major beneficiaries of this legislation are America's small community financial institutions. In this regard, I'd like to emphasize the philosophic underpinnings of this legislation. Americans have long held concerns about bigness in the economy. As we have seen in other countries, concentration of economic power does not automatically lead to increased competition, innovation or customer service. But the solution to the problem of concentration of economic power is to empower our smaller financial institutions to compete against large institutions, combining the new powers granted in this legislation with their personal service and local knowledge in order to maintain and increase their market share. For many communities, retaining their local, independent bank depends upon granting that bank the power to compete against mega-giants which are being formed under the current regulatory and legal framework. The conference report provides community banks with the tools to compete, not only against large mega-banks but also against new technologies such as Internet banking. Banks which stick with offering the same old accounts and services in the same old ways will find their viability threatened. Those that innovate and adapt under the provisions of this bill will be extraordinarily well positioned to grow and serve their customer base. Large financial institutions can already offer a variety of services. But community banks are usually not large enough to utilize legal loopholes like Section 20 affiliates or the creation of a unitary thrift holding company to which large financial institutions-- commercial as well as financial--have turned. One of the most controversial provisions prohibits commercial entities from establishing thrifts in the future and allows for those commercially owned thrifts currently in existence to be sold only within the financial community, the same rules which apply to banks. The reason this restriction on commerce and banking is being expanded is several fold. First, savings associations that once were exclusively devoted to providing housing loans, have become more like banks, devoting more of their assets to consumer and commercial loans. Hence, the appropriateness for comparability between the commercial bank and thrift charter is self-evident. Second, this provision must be viewed in light of the history of past legislative efforts affecting the banking and thrift industries. The S&L industry has tapped the U.S Treasury for $140 billion to clean up the 1980s S&L crisis. In 1996, savings associations received a multi- billion dollar tax break to facilitate their conversion to a bank charter. Also, in 1996, the S&Ls tapped the banking industry for $6 to $7 billion to help pay over the next 30 years for their FICO obligations, that part or the S&L bailout costs that remained with the thrift industry. During this time period, Congress has liberalized the qualified thrift lender test and the restrictions on the Federal savings association charter. These legislative changes are in addition to the numerous advantages that the industry has historically enjoyed, such as the broad preemption rights over state laws and more liberal branching laws. The conference report continues the Congressional grant of benefits to the thrift industry by repealing the SAIF special reserve, providing voluntary membership by Federal savings associations in the Federal Home Loan Bank System, allowing state thrifts to keep the term ``Federal'' in their names, and allowing mutual S&L holding companies to engage in the same activities as stock S&L holding companies. Opponents of this provision correctly argue that commercial companies that have acquired thrifts (so-called unitary thrift holding companies) before and after the S&L debacles of the 1980s have not, for the most part, caused taxpayer losses. However, the Federal deposit insurance fund that was bailed out by the taxpayers covered the entire thrift industry including the unitary thrift holding companies, and the $6 to $7 billion of thrift industry liabilities that were transferred to the commercial banking industry benefited unitaries as well as other S&Ls. The transfer was made with the understanding that sharing liabilities would be matched by ending special provisions for the S&L industry and that comparable regulation would ensue. The bill benefits smaller, community banks and the customers they serve in the following additional ways: 1. Federal Home Loan Bank System reforms. The FHLB charter is broadened to allow community banks to borrow for small business and family farm lending. The implications of this FHL 8 mission expansion are extraordinary. In rural areas, it allows, for the first time, community banks to have access to long-term capital comparable to the Farm Credit System, which like the Federal Home Loan Bank System is empowered as a Government Sponsored Enterprise to tap national credit markets at near Treasury rates. The bill thus creates greater competitive equity between community banks and the Farm Credit System and greater credit cost savings for farmers. With regard to the small business provision, the same principle applies. If larger financial institutions choose to emphasize relationships with larger corporate and individual customers, the ability of community banks to pledge small business loans as collateral for FHLB System advances will allow them to serve comprehensively a small business and middle class family market niche. Most importantly, if the present trend continues of American savers putting less money in banks and more in non-insured deposit accounts, such as money-market mutual funds, this FHLB reform assures community banks the liquidity--at competitive costs--they will need for generations to come. 2. Additional Powers. In recent years, sophisticated money-center banks have developed powers, under Federal Reserve and OCC rulings, that have allowed them to offer products which community banks in many states are frequently precluded from offering. This bill allows community banks all the powers as a matter of right that larger institutions have accumulated on an ad hoc basis. In addition, community banks for the first time are authorized to underwrite municipal revenue bonds. 3. Regulatory relief. The legislation provides modest regulatory relief for banks with assets under $250 million. Those with an ``outstanding'' Community Reinvestment Act rating will be examined for compliance only every five years, while those with a ``satisfactory'' rating will be reviewed every four years. 4. Special provisions. For a bill of this magnitude, there are surprisingly few special interest provisions. The Congress held the line to assure that breaches of imprudent regulation were not provided to specific institutions, therefore protecting the deposit insurance fund, to which community banks disproportionately provide resources, and the public, which is the last contingency backup. 5. Prohibition on deposit production offices. The legislation expands the prohibition on deposit production offices contained in the Reigle- Neal Interstate bill to include all branches of an out-of-state bank holding company. This prohibition ensures that large multi-state bank holding companies do not take deposits from communities without making loans within them. 6. Competition. The powers under the Act will provide community banks a credible basis to compete with financial institutions of any size or any specialty and, in addition, to offer, in similar ways, services that new entrants into financial markets, such as Internet or computer software companies, may originate. In a competitive world in which consolidation has been the hallmark of the past decade, the framework of this bill assures that community banks have the tools to remain competitive. If larger institutional arrangements ever become consumer-unfriendly or geographically- concentrated in their product offerings, the powers reserved for community banks will ensure their competitive viability and, where needed, incentivize the establishment of new community-based institutions. What the new flexibility provided community banks means is that consumers and small businesses in the most rural parts of America will be provided access to the most up-to-date, sophisticated financial products in the world, delivered by people they know and trust. Without financial modernization legislation, the trend towards commerce and banking, as well as more faceless interstate banking, will be unstoppable. Community based institutions need to be able to compete with larger institutions on equal terms or growth and economic stability in rural America will be jeopardized. Several other sections of the legislation also deserve comment: complementary activities The Act permits the Federal Reserve Board to allow financial holding companies to engage in activities that, while not financial in nature or incidental to financial activities, are complementary to financial activities. The Act provides that this authority be exercised on a case-by-case basis under the application procedure currently applicable under the Bank Holding Company Act to nonbanking proposals by bank holding companies. This procedure requires the Board to consider whether the public benefits of allowing the financial holding company to conduct the proposed complementary activity outweigh potential adverse effects. This would require the Board to consider whether the proposal is consistent with the purposes of the Bank Holding Company Act. It is expected that complementary activities would not be significant relative to the overall financial activities of the organization. foreign banks For foreign banks that wish to be treated as financial holding companies, Section 103 requires that the Federal Reserve Board establish capital and management standards comparable to those required for U.S. organizations, giving due regard to national treatment and equality of competitive opportunity. The purpose of the provision is to ensure that foreign banks continue to be provided national treatment, receiving neither advantages nor disadvantages as compared with U.S. organizations. Accordingly, foreign banks that meet comparable standards are entitled to the full benefits of the Act. The Act eliminates the application process for financial holding companies that meet the new criteria relating to capital and management. This is an important provision; it enhances efficiency and reduces regulatory burden but it also has certain consequences. One is that the Federal Reserve Board no longer has an application process through which to determine adherence by foreign banks to capital and management standards. Foreign banks operate in different home country regulatory environments, with differing accounting and reporting standards. In the past, the Board has used the applications process to assess the capital levels of individual banks seeking to expand their operations in the United States to ensure the equivalency of their capital to that required to U.S. banking organizations. Section 103 is intended to give the Board the ability to set comparable standards and establish a process for determining a foreign bank's adherence to those standards before the bank may take advantage of the Act's provisions. Such a determination could be accomplished in a pre-clearance evaluation conducted in connection with the foreign bank's certification to be treated as a financial holding company and thereby attain the benefits of the new powers. merchant banking One important provision of the Act is that it would authorize financial holding companies to engage in merchant banking activities but subject to a number of prudential limitations. For example, the Act would permit a financial holding company to engage in merchant banking only if the company has a securities affiliate, or a registered investment adviser that performs these functions for an affiliate insurance company. In addition, the Act allows a financial holdings company to retain a merchant banking investment for a period of time to enable the sale or disposition on a reasonable basis and generally prohibits the company from routinely managing or operating a nonfinancial company held as a merchant banking investment. Importantly, the Act also gives the Federal Reserve and the Treasury the authority to jointly develop implementing regulations on merchant banking activities that they deem appropriate to further the purposes and prevent evasions of the Act and the Bank Holding Company Act. Under the authority, the Federal Reserve and Treasury may define relevant terms and impose such limitations as they deem appropriate to ensure that this new authority does not foster conflicts of interest or undermine the safety and soundness of depository institutions or the Act's general prohibitions on the mixing of banking and commerce. securities activities of financial holding companies Currently, bank holding companies are generally prohibited from acquiring more than five percent of the voting stock or any company that conducts activities that are not closely related to banking. I would like to make clear that by permitting financial holding companies to engage in underwriting, dealing and market making. Congress intends that the five-percent limitation no longer applies to bona fide securities underwriting, dealing and market-making activities. In addition, voting securities held by a securities affiliate of a financial holding company in any underwriting, dealing or market-making capacity would not need to be aggregated with any shares that may be held by other affiliates of the financial holding company. This is necessary to allow bank-affiliated securities firms to conduct securities activities in the same manner and to the same extent as their nonbank affiliated competitors, which is one of the principal objectives of this legislation. I would also like to make clear that the elimination of the five-percent restriction is intended to apply to bona fide securities underwriting, dealing and market-making activities and not to permit financial holding companies and their affiliates to control non-financial firms in ways that are otherwise impermissible under this Act. Effective Date for Engaging in New Activities New Section 4(k)(4) of the Bank Holding Company Act, as added by Section 103 of the bill, explicitly authorizes bank holding companies that file the necessary certifications to engage in a laundry list of financial activities. These activities are permissible upon the effective date of the Act without further action by the regulators. However, refinements in rulemaking may be necessary and desirable going forward. For example, the Federal Reserve Board and the Treasury Department are specifically authorized to jointly issue rules on merchant banking activities. If the regulators determine that any such rulemaking is necessary, they should act expeditiously. In closing, while the financial modernization legislation provides for increased competition in the delivery of financial products, it repudiates the Japanese industrial model and forestalls trends toward mixing commerce and banking. The signal breach of banking and commerce that exists in current law is plugged, which has the effect of both stopping the potential ``keiretzuing'' of the American economy and protecting the viability, and therefore the value, of community bank charters. At many stages in consideration of bank modernization legislation, powerful interest groups attempted to introduce legislative language which would have allowed large banks to merge with large industrial concerns--i.e., to provide that Chase could merge with General Motors or Bank of America with Amoco. Instead, this bill precludes this prospect and, indeed, blocks America's largest retail company from owning a federally insured institution, for which an application is pending. To summarize, tonight this Congress will pass a bank modernization bill true to America's fundamental economic values: excessive conglomeration is deterred, consumer protections are enhanced, consumer choices are expanded, privacy protections are created for the first time under federal law, and the safety and soundness of the nation's financial system are maintained. Madam Speaker, I reserve the balance of my time.

Mr. LEACH. Madam Speaker, I ask unanimous consent to divide the time that I have been authorized in half and share it with the gentleman from Virginia (Mr. Bliley), the distinguished chairman of the Committee on Commerce.

Mr. LEACH. Madam Speaker, pursuant to House Resolution 355, I call up the conference report to accompany the Senate bill (S. 900) to enhance competition in the financial services industry by providing a prudential framework for the affiliation of banks, securities firms, insurance companies, and for other financial service providers, and for other purposes.

Mr. LEACH

Mr. LEACH. Mr. Speaker, during every stage in its development, financial modernization legislation has had controversial elements for all of the parties concerned. Differences will always remain between and within the banking, insurance, and securities industries. But it should be clear that in the final analysis the Gramm-Leach-Bliley Act which will be considered this week, relatively speaking, tilts in favor of the nation's community banks and the customers they serve. Seven areas deserve particular mention: 1. Unitary Thrifts. While the financial modernization legislation provides for increased competition in the delivery of financial products, it repudiates the Japanese industrial model and forestalls trends toward mixing commerce and banking. The unitary thrift loophole which allows commercial firms to control smaller S&L charters has been closed. Not only will no new unitaries be chartered, but those in existence cannot be sold to commercial firms. This means that the signal breach of banking and commerce that exists in current law is plugged, which has the effect of both stopping the potential ``keiretzuing'' of the American economy and protecting the viability, and therefore the value, of community bank charters. As close observers of the process understand, at many stages in consideration of bank modernization legislative, powerful interest groups attempted to introduce legislative language which would have allowed large banks to merge with large industrial concerns--i.e., to provide that Chase could merge with General Motors or Bank of America with Amoco. Instead, this bill precludes this prospect and, indeed, blocks America's largest retail company from owning a federally insured institution, for which an application is pending. Federal Home Loan Bank System reforms. 2. The FHLB charter is broadened to allow community banks to borrow for small business and family farm lending. The implications of this FHLB mission expansion are extraordinary. In rural areas it allows, for the first time, community banks to have access to long-term capital comparable to the Farm Credit System, which like the Federal Home Loan Bank System is empowered as a Government Sponsored Enterprise to tap national credit markets at near Treasury rates. The bill thus creates greater competitive equity between community banks and the Farm Credit System and greater credit cost savings for farmers. With regard to the small business provision, the same principle applies. If larger financial institutions choose to emphasize relationships with larger corporate and individual customers, the ability of community banks to pledge small business loans as collateral for FHLB System advances will allow them to serve comprehensively a small business and middle class family market niche. Most importantly, if the present trend continues of American savers putting less money in banks and more in non-insured deposit accounts, such as money-market mutual funds, this FHLB reform assures community banks the liquidity--at competitive costs--they will need for generations to come. 3. Additional Powers. In recent years, sophisticated money-center banks have developed powers, under Federal Reserve and OCC rulings, that have allowed them to offer products which community banks in many states are frequently precluded from offering. This bill allows community banks all the powers as a matter of right that larger institutions have accumulated on an ad hoc basis. In addition, community banks for the first time are authorized the right to underwrite municipal revenue bonds. 4. Regulatory relief. The legislation provides modest regulatory relief for banks with assets under $250 million. Those with an ``outstanding'' Community Reinvestment Act rating will be examined for compliance only every 5 years, while those with a ``satisfactory rating will be reviewed every 4 years. 5. Special provisions. For a bill of the magnitude for this one, there are surprisingly few special interest provisions. The Congress held the line to assure that breaches of imprudent regulation were not provided to specific institutions, therefore protecting the deposit insurance fund, to which community banks disproportionately provide resources, and the public, which is the last contingency backup. 6. Prohibition on deposit production offices. The legislation expands the prohibition on deposit production offices contained in the Reigle- Neal Interstate bill to include all branches of an out-of-state bank holding company. This prohibition ensures that large multi-state bank holding companies do not take deposits from communities without making loans within them. 7. Competition. The power under the act will provide community banks a credible basis to compete with financial institutions of any size or any speciality and in addition to offer, in similar ways, services that new entrants into financial markets, such as Internet or computer software companies, may originate. In a competitive world in which consolidation has been the hallmark of the past decade, the framework of this bill assures that community banks have the tools to remain competitive. If larger institutional arrangements ever become consumer-unfriendly or geographically- concentrated in their product offerings, the powers reserved for community banks will ensure competitive viability and, where needed, incentivize the establishment of new community-based institutions. What the new flexibility provided community banks means in that small businesses in the most rural parts of America will be provided access to the most up-to-date, sophisticated financial products in the world, delivered by people they know and trust. Without financial modernization legislation, the trend towards commerce and banking, as well as more faceless interstate banking, will be unstoppable. Community based institutions need to be able to compete with larger institutions on equal terms or growth and economic stability in rural America will be jeopardized.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I rise today to invite my colleagues' attention to the career of Dan Gable, an Iowan who has made a unique contribution to amateur wrestling, and in the process, become a hero and role model for athletes in the United States and around the world. Based on his personal record and that of his team's, Dan Gable may well be the greatest competitor and greatest coach in the history of sports. After winning a series of State championships for Waterloo West High School in Waterloo, Iowa, Dan attended Iowa State University, where he won two national collegiate championships. Subsequently he won the prestigious Tblisi Tournament in Russia, captured championships in the Pan American games, and the world wrestling tournament. In the 1992 Olympic games, Dan not only won a Gold Medal, but in the six matches he had to win to do so, he did not give up a single point. It was the first time an American had ever gone through an entire Olympics unscored upon. Dan concluded his career as a wrestler with an overall record of 307 wins and 7 losses, with no new worlds to conquer. He turned to coaching, beginning at the University of Iowa as an assistant, and soon taking over as head coach. As head coach of the Iowa Hawkeyes, his teams won 15 NCAA team championships in 21 years, including nine straight between 1978 to 1986, and three in a row on two subsequent sessions. In listing Iowa University wrestling alongside the New York Yankees and the Green Bay Packers as one of the greatest sports dynasties in the 20th century, Sports Illustrated said, in part: As terrifying as Dan Gable was to opposing wrestlers when he won the Olympic Gold Medal in 1972, he was just as discomfiting matside as he seemed to will his Hawkeyes to total dominance. In the final analysis, Dan Gable's influence cannot be measured simply in wins and losses. By precept and example, he has both taught and embodied the values wrestling preeminently imparts: equality of opportunity, discipline, and respect for self and opponent. There is no more egalitarian circle than a wrestling mat. While all sports involve God-given athleticism, wrestling eliminates the advantages of size and rewards hard work and conditioning. The talented, unschooled athlete simply cannot prevail over the dedicated plugger. Wrestling teaches a healthy respect for the role of limits in life. All experienced wrestlers know the structure of all the moves. Unlike the professional entertainment that is its namesake, amateur wrestling is devoid of tricks. Yet, within the context of a limited number of moves, each wrestler develops his own style which best reflects his nature, physique, and ability. Just as the successful wrestler must know his limits, he must understand his opponent, modifying his moves to adjust to his opponent's strengths and weaknesses. Wrestlers learn to live within limits imposed by the exacting discipline of the sport, a sport that is uniquely individualist, yet fosters team comraderie. Wrestling teaches that, as in life, nothing serious can be accomplished without a work ethic. Above anything else, Dan Gable exemplifies the work ethic. In his career as a wrestler and coach, he stands as the apotheosis of American competitive values. On Sunday, November 14, the cable television channel HBO Signature will air a documentary on the career of Dan Gable entitled ``Freestyle: The victories of Dan Gable.'' It will introduce millions to this exemplary American athlete. I highly recommend young people in particular to watch this program with the understanding that excellence is a worthy goal, but it does not come easily.