Jim Leach

Mr. LEACH

Mr. LEACH. Mr. Speaker, I offer a motion.

Mr. LEACH. Mr. Speaker, I ask unanimous consent to take from the Speaker's table 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 other financial service providers, and for other purposes, and ask for its immediate consideration.

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

Mr. LEACH

Mr. LEACH. If the gentleman will yield, that is what the legislation suggests, that is correct.

Mr. LEACH. Mr. Speaker, 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. 31, a bill that will implement a unique program to issue a millennium commemorative dollar coin. The year 2000 will mark the 1,000th anniversary of the voyage of discovery by Leif Ericson, an Icelander, who was the son of Eric the Red, a Norseman, in 1000 A.D. Ericson set off from Iceland to explore lands to the west, beyond Greenland. Recent archaeological research has confirmed evidence of contemporaneous European settlement on Newfoundland as a result of this voyage and its successors. A unique feature of this bill is that it would permit the simultaneous issuance of a commemorative U.S. silver dollar and a silver Kronor Icelandic coin, both produced by the United States Mint and both celebrating the voyage of Leif Ericson. Both of these coins would be produced in limited mintages with 250,000 silver dollars authorized. This will be a significant numismatic event, a 1,000-year anniversary, two countries jointly issuing coins commemorating the same event, a limited boxed edition of both coins being issued by the Mint and the surcharge proceeds going to promote scholarship and student exchanges between the two countries. Interestingly, the Icelandic coin will depict Leif Ericson as he appears on a statue that stands today in Reykjavik. This statue of the great explorer was created by the sculptor Stirling Calder, father of another great artist of this century, Alexander Calder, and was presented by the United States Congress to the parliament of Iceland, known as the Althing, on its 1,000th anniversary in 1930. It is very appropriate that our relatively young country take this opportunity to commemorate a 1,000-year link to Europe and one of the earliest of the many ethnic strains that make up our society today. During the year 2000 the Smithsonian will be mounting a traveling exhibition devoted to the millennium of the Viking contacts with the new world. It will trace how the Nordic sagas recorded during these voyages entered European consciousness and the myth describing a fertile land far to the west. Recent archaeological finds hint that 11th century Viking explorers might have visited coastal and interior areas considerably to the south of the Newfoundland site. Additional research and scholarship funded by this coin program is designed to contribute to a better understanding of this hardy folk and their relationship to modern peoples of this hemisphere. In conclusion, I would like to thank the gentleman from Alabama (Mr. Bachus), the subcommittee chairman; and the gentleman from New York (Mr. LaFalce) and the gentlewoman from California (Ms. Waters), the ranking members of the full committee and subcommittee, for their extraordinary cooperation. As Members may recall, this bill passed this Chamber in the last Congress. I urge its adoption today. 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. 31) 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. First, Mr. Speaker, let me express my appreciation for the thoughtfulness of the concerns of the proponents of this motion. At the risk of presumption, I would stress that the majority and the minority are not as far apart as the rhetoric might lead a listener to this debate to expect. There are two principal aspects to the amendment. One relates to the Lee amendment on redlining, which some of us on this side differ with, and others, like myself, find quite reasonable. The other relates to privacy. Here I would simply note that the bill before us represents the greatest expansion of privacy rights in modern day finance. Indeed, it represents, in the words of the gentlewoman from Oregon (Ms. Hooley), a movement far further than she would have ever have dreamed. In the words of the gentleman from Massachusetts (Mr. Markey), it is a good step forward. Actually, it is not one but a number of steps forward. Let me mention six. One, there is a mandatory disclosure by financial institutions of privacy policies. Two, there are consumer opt-out choices to prevent the sale of confidential information to unaffiliated third parties. Three, there is a medical opt-in choice to prevent the transfer of a consumer's medical information without the consumer's consent. Four, there is a prohibition on disclosure of consumer account numbers to third party telemarketers. Five, there are new privacy enforcement mechanisms for financial institution regulators. Six, there is a prohibition on pretext calling. This is a policy where individuals can call up an institution and claim they are someone else and get their information, and now that is outlawed. To object to this bill on final passage will be to vote against these privacy protections. Indeed, the biggest privacy vote of all our careers in the United States Congress will be on final passage of this bill. Let me repeat, the biggest privacy vote of all our careers in Congress will be on final passage of this bill. Now, what is the amendment before us? Basically, the amendment before us subtracts one feature of the bill and adds another. What it subtracts is the provision of the gentleman from Iowa (Mr. Ganske) which imposes important new protections for health and medical privacy. I have never known a more misunderstood provision, so let me stress what the Ganske provision does. It imposes a broad prohibition on the disclosure by an insurance company or its affiliates of individually identifiable health, medical, and genetic information, unless the customer expressly consents to such disclosure. If Members strip this provision of H.R. 10 from the bill, they are leaving customers of financial companies without any medical privacy protections, thereby leading to precisely the kinds of privacy umbrages that the opponents of the language claim they want to prevent. In this regard, I would stress again that there is no intent in this bill to preempt executive branch actions or jeopardize any confidences associated with doctor-patient relationships, nor the privacy protections currently afforded any medical records. Indeed, the intent is to strengthen these protections. To the degree that more precision in this area is required, this gentleman is prepared to work in conference to ensure that that occurs. What is it that this amendment adds? It adds a restriction on the ability of financial institutions to share consumer information with affiliates that are all part of the same financial organization. Unfortunately, there is some question whether this proposed restriction on affiliate information-sharing might needlessly and dramatically increase costs for consumers and financial institutions, reduce consumer convenience, impair fraud detection and prevention, and deny consumers new cost-effective products. It is the intention of the various committees of jurisdiction, including the Committee on Banking and Financial Services, to hold hearings on this issue in the near future. This Member has an open mind. The concerns I raise are questions without definitive answers. Accordingly, at this time, I would urge caution, and only ask that Members recognize the historical nature of the extraordinary expansion of privacy protection contained in this bill. In conclusion, I urge an enthusiastic yes vote on final passage, again, final passage on the greatest privacy expansion in the history of American finance, and a preliminary no vote on the Markey motion to recommit until the consequences of his approach receive careful scrutiny in the hearings process. I thank all, friend and foe, for their courtesies.

Mr. LEACH. Madam Chairman, fair enough. In addition, the New York Banking Department, the Texas Banking Department, the California Banking Department and the Conference of State Bank Supervisors are leaning in this direction. So I believe it is a very thoughtful, very professional amendment, and I certainly want to compliment the gentleman for bringing it forth, and I am just hopeful for getting unanimity.

Mr. LEACH. Madam Chairman, will the gentlewoman yield?

Mr. LEACH. Madam Chairman, we are very happy to accept this amendment. I would say it is brought to the Congress in a very thoughtful way by one of the most respected members of this body. I think that reflects on the amendment itself.

Mr. LEACH. Mr. Speaker, I demand a recorded vote.

Mr. LEACH

Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from Texas (Mr. Paul), one of the most thoughtful philosophers of the United States Congress. (Mr. PAUL asked and was given permission to revise and extend his remarks.)

Mr. LEACH. The answer to the gentleman's question is, yes, that is correct.

Mr. LEACH. If the gentleman will continue to yield, the answer to that question is also yes, that is correct, sir.

Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from Florida (Mr. Weldon).

Mr. LEACH. Madam Chairman, I yield myself such time as I may consume. (Mr. LEACH asked and was given permission to revise and extend his remarks.) Madam Chairman, I realize that feelings are imperfect with relation to the rule debate. For all the frustration on the minority side, it is more than matched by this Member whose advice was disregarded by the Rules Committee on key amendments. Nonetheless the big picture is that this is a good bill, good for individual citizens and the economy at large. I ask all my colleagues to vote on the quality of the end product, not the process of consideration which I acknowledge has been imperfect. In this regard, let me stress that the big picture is that financial modernization legislation will save the public approximately $15 billion a year. It will provide increased services to individuals and firms, particularly those in less comprehensively served parts of the country. It will also allow U.S. financial companies to compete more fully abroad. The economy on a global basis is changing and we must be prepared to lead market developments, rather than lose market share. In this effort, the fundamental precept of the bill is to end the arbitrary constraints on commerce implicit in the 65-year-old Glass-Steagall law. Competition is the American way and enhanced competition is the underlying precept of this bill. In this regard, I'd like to address the issues of bigness and of privacy. With regard to conglomeration which is proceeding at a pace with which I am deeply uncomfortable, it should be understood that the big are getting bigger from the top down, utilizing regulatory fiat. What this bill does is provide a modern regulation framework for change. It empowers all equally. Smaller institutions will be provided the same competitive tools that currently are only available to a few. Indeed, in a David and Goliath world, H.R. 10 is the community bankers and independent insurance agents' slingshot. Finally, with regard to privacy, let me stress no financial services bill in modern history has gone to this floor with stronger privacy provisions. Importantly, pretext calling--the idea that someone can call a financial institution and obtain your financial information--is now effectively outlawed; medical records are protected; and individuals are given powerful new rights to prevent financial institutions from transferring or selling information to third parties. Here, let me stress, if Congress subsequently passes more comprehensive medical records provisions, they will be allowed to bolster or supercede these safeguards and if HHS promulgates regulations in this area they would augment the provisions of this bill. Nothing in this act is intended to shackle Executive Branch actions in this area. In conclusion, I would like to thank my Democratic colleagues on the Banking Committee and, in particular, John LaFalce and Bruce Vento, and John Dingell of the Commerce Committee, whose support I have been appreciative in the past and whose dissent I respect today; also my friends Tom Bliley, Mike Oxley, David Dreier, John Boehner and so many others, like Marge Roukema, Sue Kelly, Pat Toomey and Rick Lazio, whose leadership has been so important to bringing this bill to the floor. 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 financial and medical privacy protections ever considered by the Congress. It's a win for the American economy by modernizing the financial services industry and savings an estimated $15 billion in unnecessary costs. And, it's a win for America's international competition position 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. But, this year it appears that we may be closer than ever before to final passage. 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 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, a required disclosure on ATM machines and screens of bank fees and a requirement that the Federal Reserve Board hold public hearings on large financial services merger proposals. Fourth, the Federal Home Loan Bank reform provisions expand the availability of credit to farmers and small businesses and for rural and low-income community economic development projects. Fifth, the bill also contains major consumer privacy protections making so-called pretext calling, in which a person uses fraudulent means to obtain private financial information of another person, a federal crime punishable by up to five years in jail and a fine of up to $250,000; would wall off the medical records held by insurance companies from transfer to any other party; and requires banks to disclose their privacy policies to customers. A bipartisan amendment developed by members of the Banking, Commerce and Rules Committee will further enhance these protections and I urge its adoption. In closing, I'd like to emphasize again 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. H.R. 10 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. By bolstering the viability of community-based institutions and providing greater flexibility to them, H.R. 10 increases the percentage of dollars retained in local communities. Community institutions are further protected by a small, but important provision that prohibits banks from setting up ``deposit production offices'' which gather up deposits in communities without lending out money to people in the community. Additionally, the bill before us strengthens the Community Reinvestment Act by making compliance with the act a condition for a bank to affiliate with a securities firm or securities company. CRA is also expanded to a newly created entity called Wholesale Financial Institutions. One of the most controversial provisions in H.R. 10 is the provision in Title IV which prohibits commercial entities from establishing thrifts in the future. Under current law, commercial entities are already prohibited from buying or owning commercial banks. This restriction between commercial banking and commerce is not only maintained in H.R. 10 but extended to restrict future commercial affiliations with savings associations. 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 with 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 of the S&L bailout costs that remained with the thrift industry. During this time period, Congress has liberalized the qualified thrift lending 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. H.R. 10 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 applied to the entire thrift industry including the unitary thrift holding companies. Three years ago some $6 billion to $7 billion in thrift industry liabilities left over from cleaning up the S&Ls were transferred to the commercial banking industry with the understanding that sharing liabilities would be matched by ending special provisions. This is another reason to provide comparable regulation. It is with this history and the assumption that decisions in this bill are made in the context of a legislative continuum that the provision in the bill was added to not only restrict the establishment of new unitary thrift holding companies, but also to require that commercial entities may not buy a thrift from an existing grandfathered company without first getting Federal Reserve Board approval. As we all know, there are complex issues involved in this legislation, and there will be differing judgments by Members. One thing we all may agree upon, however, is that Congress needs to reassert its Constitutional role in determining what should be the laws governing financial services, instead of allowing the regulators and courts to usurp this responsibility. If Congress turns its back on financial services modernization, we should not fool ourselves that rapid evolution in the fields of banking, securities and insurance will cease. It will not. Financial services modernization will take place with or without Congressional approval. Without this legislation, however, changes in financial services will continue unabated, but they will take place in an ad hoc manner through the courts and through regulatory fiat, and will not be subject to the safeguards and prudential parameters established in this legislation. Now is the time for Congress, to step up to the challenge of modernizing our nation's financial services sector for the 21st century, to ensure that it remains competitive internationally, that it is stable and poses the least possible threat to the taxpayer, and that it provides quality service to all our citizens and communities. Madam Chairman, I reserve the balance of my time.

Mr. LEACH. Madam Chairman, I yield 2 minutes to the gentlewoman from New Jersey (Mrs. Roukema) the distinguished chairperson of the Subcommittee on Financial Institutions, whose work on this bill is the most important of any Member of this body, and I very very much appreciate her friendship and leadership.

Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from Alabama (Mr. Bachus), the distinguished subcommittee chairman.

Mr. LEACH. Madam Chairman, I yield 1 minute to my great friend, the gentleman from Nebraska (Mr. Bereuter). (Mr. BEREUTER asked and was given permission to revise and extend his remarks.)

Mr. LEACH. Madam Chairman, I yield 1 minute to the gentleman from California (Mr. Royce), my colleague and great friend.

Mr. LEACH. Madam Chairman, I yield 2 minutes to the distinguished gentleman from Ohio (Mr. Boehner), who has worked on this legislation more than any noncommittee member in the history of the Congress. To him I am grateful. (Mr. BOEHNER asked and was given permission to revise and extend his remarks.)

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

Mr. LEACH

Mr. LEACH. Mr. Speaker, I thank the gentleman for yielding time to me. Frankly, Mr. Speaker, perspective is very difficult to bring to situations like this. Let me say that I believe both sides have some truth. I am not a great enthusiast for this rule, but I would urge serious consideration to its passage. I will vote for it. Frankly, the main two amendments that I asked to be placed in order were the Largent amendment, which would have protected community banks somewhat stronger, and the Lee amendment. By background, let me stress, the Lee amendment comes from the Committee on Banking and Financial Services. It passed by a one-vote margin in committee. I voted for the Lee amendment. I would have supported it on the House floor. But I would also say to my colleagues that if they look at the big picture, two aspects have to be understood. One, the principal committee of jurisdiction over the act that it modifies is the Committee on the Judiciary, and the Committee on the Judiciary objected to its consideration in this bill before it had a chance to look at it. That is something that in my view the Committee on Rules gave disproportionate attention to, but it was a valid consideration. Second, let me just say on redlining, it is an important issue. But the most important aspect on this bill relates to the Community Reinvestment Act, which this bill broadens in two profound ways. One, it makes CRA a condition of affiliation for banks if they want to affiliate with insurance companies and securities firms, and second, it applies the CRA to a newly created institution called wholesale financial institutions. These are strong steps towards protecting against redlining. Finally, I would caution people on the rhetoric of privacy. There has never been a bill in the modern generation that in its underlying text has brought more privacy protection to financial services than this one. The amendment that is being worked on brings even more. It may not go quite as far as some might want, but it nonetheless is the strongest privacy protection bill ever brought before this body in any modern Congress.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I thank my distinguished friend, the gentleman from Virginia (Mr. Goodlatte), for yielding me this time. Mr. Speaker, let me just stress that no one knows at this time either in America or worldwide if this is not the most exaggerated or the most understated issue in the history of the American or world economy. On the other hand, what this bill does is move in the direction of trying to deal with some potential problems which may arise, and in this regard, I would like to express particular thanks to the extraordinary leadership of the gentleman from Virginia (Mr. Davis) and the gentleman from Virginia (Mr. Goodlatte) and the constructive involvement of my good friend, the gentleman from Virginia (Mr. Moran). Mr. Speaker, I would like to submit additional comments on one very subtle aspect of this particular bill. These comments relate to Section 4(h) of the Senate amendment. A June 23, 1999, letter from four federal financial regulatory agencies--the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS)--warned that in their view, Section 4(h) was ``drafted so broadly that it could lead to significant unintended consequences having the potential to adversely affect the safety and soundness of the banking system and the national economy.'' In fact, the letter went so far as to assert that, ``. . . it is difficult to overstate the disruptions that a broad reading of this amendment could cause.'' Given that assessment, we worked closely with House and Senate Judiciary committees and with the federal regulatory agencies to develop compromise language which the conferees have adopted. The new language focuses narrowly on consumer mortgages and prohibits any party from taking action to foreclose on residential property if an actual Y2K failure early next year interferes with timely and accurate mortgage payments. A consumer who becomes aware that a Y2K failure has occurred, and that his or her mortgage payment was lost or delayed as result of that failure, will have seven business days to notify the mortgage service company in writing. The parties to the transaction will then have four weeks to work out a solution. This amendment in no way excuses anyone from fulfilling their legal and financial obligations but will allow for extra time to resolve what may be a once-in-a-lifetime problem. The bottom line is that this language accommodates potential homeowner concerns without having disruptive implications for how financial services are delivered or posing a litigative nightmare. I urge adoption of the conference report. Before concluding, I might add that yesterday, June 30, 1999, was a bellwether day in the banking industry's Y2K readiness program. Bank regulators had told financial institutions across the country that they were expected to finish fixing their mission critical systems and testing them for Y2K bugs by that date. The Committee expects to have data by Monday, July 26, on the numbers of institutions which met the deadline. I am hopeful that the regulatory agencies and the banking and financial services industry will prove to be sufficiently prepared that no homeowner will find it necessary to avail themselves of the relief in this bill.