Jim Leach

Mr. LEACH

Mr. LEACH. Madam Chairman, I yield 2 minutes to the gentleman from Massachusetts (Mr. Markey).

Mr. LEACH. Madam Chairman, I yield 3 minutes to the gentleman from Michigan (Mr. Dingell).

Mr. LEACH. Madam Chairman, I yield 4 minutes to the distinguished gentleman from Nebraska (Mr. Bereuter), who has such a thoughtful perspective on this issue, and who is also the chairman of the Subcommittee on Asia and the Pacific, and I think might want to address that perspective. (Mr. BEREUTER asked and was given permission to revise and extend his remarks.)

Mr. LEACH

Mr. LEACH. Mr. Chairman, with reluctance, I stand in opposition to this amendment. Let me say what is in the bill is a compromise between the Committee on Banking and Financial Services and the Committee on Commerce. If this amendment had gone back to the Committee on Banking and Financial Services' position, I probably would have been obligated to support it. But I will tell you, it goes further. What it does, it adds under the power of a bank, merchant banking authority. This is authority that is very, very significant. Merchant banking constitutes direct ownership and control of commercial investments. I used to argue in the 1980's that the two dirtiest words in the American language were ``direct investment,'' rights which were authorized S&L's in half a dozen states to use Federally insured deposits to make investments in entities that they would then control. Instead of making loans to people, they would simply own things. Here let me just comment on common sense. If you are an outsider listening to this debate, the esoterics of an operating subsidiary versus affiliate must seem very large. But does any common- sense American think that a bank ought to be able to come in and under its own volition start to own commercial businesses, rather than simply make loans, in ways that involve potentially the deposit insurance system and what could be a subsidy involved thereof? I know the subsidy issue is controversial. The Fed says one thing, the Treasury something else. In my time in public life, I always found the argument that a subsidy exists to be valid. Secondly, let me say there is a question of history that has been articulated. That is, the Department of Treasury has said no Treasury could support any position the one being taken. The gentleman from New York has suggested that his is a historical position of all Treasuries. Well, that, frankly, is not precisely the case. I would like to direct both the Treasury and my good friends to this statement of the Honorable Donald T. Regan, the Department of the Treasury Secretary under the Reagan Administration. Secretary Regan said, ``The administration,'' meaning the Reagan Administration: Does not believe that non-depository institution activities should be conducted through a subsidiary or service corporation in which a bank or a thrift has a direct equity investment. The investment would be at risk if the subsidiary's activities were to falter and the funds for the investment would be raised with Federal assistance not available to non-depository institution competitors and a cost advantage to the bank or the thrift. I raise this simply to note, as this testimony reflects, that the Reagan Administration was in opposition to this administration's position on this subject, and in consonance with this bill and with the position of Mr. Greenspan. Finally, let me just stress that there are articulated differences that relate to CRA. The Federal Reserve has a very profound letter out on this subject, and I commend it to my colleagues, which shows that the CRA argument has been widely exaggerated, and that the differences in CRA treatment of a national bank and a bank under the supervision of the Federal Reserve is very, very similar. This bill expands CRA, it does not contract it, in significant ways. What are the unarticulated differences, or some of the differences, between the Treasury and the Fed in which there is a major battle underway? Mr. Chairman, I would simply inform the membership that the rest of the words would have been extraordinarily compelling. Mr. Chairman, truth be told, the CRA argument on this bill is proffered to mask the extraordinary differences between the Treasury and the Federal Reserve Board on which institutions should be the primary federal regulator of the banking system. Just as the Fed perhaps exaggerates a bit the importance of the subsidy that exists with the offering of insured deposits, the Treasury magnifies the CRA argument. The reason these arguments are so critical to these two institutions is that the Treasury believes Congress will tilt to it if a case can be made that Fed supervised institutions have lower CRA obligations, and the Fed believes Congress may tilt to it if it can be shown that competitive advantages accrue to institutions with subsidized federally insured deposits. Actually, Congress has historically considered the Federal Reserve to be the appropriate principal regulator for new power approaches for a different set of reasons: (1) It is the Fed which has the predominance of experience with holding company regulations. (2) It is the Fed, and only the Fed, which has the resources to act on a moment's notice in a time of emergency. While the Treasury has no treasury, the Fed has the capacity to liquify virtually any problem of any size. (3) With its functional and precise regulatory approach, the bill is designed to resolve issues of regulatory turf in such a way that financial companies can't engage in regulatory arbitrage thus precipitating weaker regulation. (4) While sometimes controversial in its monetary policy deliberations, the Fed has a sterling record for being above politics on the regulatory front. From the very beginning of development of this bill I have been impressed with how much support exists for the general framework of change but how extraordinary the divisions on the subtleties are. In the private sector there are natural maximization of profit motivations; on the public side, there are maximization of power concerns. Ironically, as we come to the conclusion of the House consideration process, the rivalry between the Fed and the Treasury has come more to the fore than rivalries between and within industrial groupings. One of the most profound observations of the month was that of a prominent New York banker who told me: ``All I want is to get out of the Fed-Treasury crossfire.'' The bill provides certitude as well as fairness.

Mr. LEACH. Mr. Chairman, the gentleman has raised probably the most controversial section of the bill in terms of subtleties of language. I share some of his concerns, and I will assure the gentleman, as we move forward there, this language will be carefully reviewed. I cannot guarantee an outcome because there are people on all sides of this issue, but I do believe that a careful review is warranted, and I assure the gentleman that we will continue to look at that precise language.

Mr. LEACH. Madam Chairman, that is precisely my understanding, and I would like to compliment the gentleman for his work in this field as well as for his articulation of a very common-sense approach.

Mr. LEACH. Madam Chairman will the gentleman yield?

Mr. LEACH. Madam Chairman, I thank my distinguished friend for yielding to me. I rise also in support of this manager's amendment. The amendment before us was negotiated on a bipartisan, multiple-committee basis. It contains changes requested by the Committee on Agriculture, the Committee on the Judiciary, and the Committee on Ways and Means. The most significant changes are the insurance provisions and the provisions relating to antitrust. The revisions contained in the amendment relating to the insurance provisions are intended to help strike an appropriate balance between the need of the States to regulate insurance activities in banks and the ability of national banks to engage in insurance activities without being subject to State laws that prevent or significantly interfere with that activity. This House has been a firm supporter of States' rights and, in particular, leaving the regulation of insurance to the States. However, this House also believes that States should not regulate the manner which has, either directly or indirectly, the effect of preventing or significantly interfering with the ability of a bank to engage in activities that it is properly authorized to do by Federal law. The manager's amendment addresses this issue by clarifying these relationships. Second, the manager's amendment at my request strengthens the antitrust laws in a number of ways. It restores the Federal Reserve's ability to consider anticompetitive issues in reviewing the acquisition of banks; it bolsters the Federal Trade Commission's antitrust authority, and it assures that financial affiliations that will be permissible under this bill will receive appropriate antitrust review by the Department of Justice and the FTC. Other provisions of the manager's amendment incorporate amendments that were filed by the gentleman from Michigan (Mr. Dingell), the gentleman from Massachusetts (Mr. Markey), the gentleman from New York (Mr. LaFalce), and the gentleman from Minnesota (Mr. Vento) last month and during the most recent consideration of the bill. Finally, the manager's amendment includes a number of subtleties as well as a number of studies and consumer provisions. I believe it is well-balanced and thoughtful, protects the consumer, as well as establishes a clear guideline for certain competition in financial services. I think it deserves the support of this body.

Mr. LEACH. Yes, Madam Chairman, he certainly is. With great pride I designate him such.

Mr. LEACH. Madam Chairman, I yield myself such time as I may consume. Madam Chairman, first I would like to thank my good friend the gentleman from Virginia (Mr. Bliley) for his leadership, and also the gentleman from Michigan (Mr. Dingell), the gentleman from New York (Mr. Manton), and my distinguished friend in dissent, the gentleman from New York (Mr. LaFalce). To my colleagues who oppose the bill because they are concerned about consumers, I ask you, what happens if the bill does not pass? This bill contains new Federal consumer and CRA protections that are not now the law of the land. Inaction is anti-consumer. To my colleagues who object to megamerger trends, I ask, what happens if the bill does not pass? The mergers will continue, but under a regulatory regime with undefined cracks and competitive bureaucratic instincts to regulate weakly. Inaction is simply imprudent. To my colleagues who, like myself, worry about rural community banks, I ask what happens if the bill does not pass? Small banks will be saddled with competition from mega-businesses likely to sweep money from small communities, unless small institutions are given new powers, such as access to the Federal Home Loan Bank for small business and agricultural lending, and new restraints on the so-called unitary thrifts that merge so ignobly commerce and banking. Simply put, inaction is the friend of the big, not the small. Inaction puts the taxpayer at grave risk. That is why we need this bill at this time, and I would urge sympathetic consideration by my colleagues.

Mr. LEACH. Madam Chairman, I would be happy to close, but were there other speakers that wish to speak to the subject?

Mr. LEACH. Madam Chairman, the gentlewoman has precisely and correctly laid out the circumstances of the bill. This bill is designed to enhance functional regulation as she has described.

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

Mr. LEACH. Madam Chairman, I yield 1 minute to the distinguished gentlewoman from New York (Mrs. Kelly). (Mrs. KELLY asked and was given permission to revise and extend her remarks.)

Mr. LEACH

Mr. LEACH. Mr. Speaker, I thank the gentleman for yielding. First, let me acknowledge part of what my distinguished colleague and good friend, the gentleman from Louisiana (Mr. Livingston), said. This is not a perfect process, and I do not think that. I want to say to my distinguished friend that I appreciate very much the thoughtful attention his committee has given to this issue, and I am very much in his debt. Having said that, I am hard-pressed not to support a product that comes from my committee, not only a product that comes from my committee but a product that has been caught up in some very unusual political kinds of pitfall debates that I think are not altogether central to the IMF issue. So here let me just take a brief moment to talk about the IMF. The IMF, historically, was established in theory before the end of World War II and, in fact, right after the war to deal with the causes of war, the causes of depression. The rationale for the creation of the IMF is very much alive today and is symbolized in a circumstance in a part of the world that has fought three wars in the last 60 years. It is in the interest of the United States of America to stabilize the economic turmoil in Asia. It is in the interest of the United States economy to stabilize the circumstance in Asia and ensure that it does not widen and deepen in terms of a gulf of economic recession spreading from one region of the world to another. The word bailout is sometimes applied to the IMF. Actually, it is anything but. It is a lending, not aid-granting institution. It is an institution to which the United States proffers resources which amount to less than 20 percent of the total resources of the institution but resources which we have to call on on a very, very short notice, an institution that has almost $40 billion in gold reserves. In a way, one might argue the IMF is the cheapest conceivable stabilizing institution in the world today. Rather than relying on the United States taxpayer alone and ways it could cause enormous liabilities of the United States, we are drawing on over 80 percent of the resources from others in ways using an institution that has a triple-A rating. Finally, with regard to timing, I would also simply add that the longer we delay, the greater the likelihood that this problem deepens and widens. Delay is on the side of instability. Firm, direct, straightforward, prompt American action is on the side of stability. For the sake of stability and for the sake of the United States economy, for the sake of United States' leadership in international affairs today, I would urge that, as awkward as this type of resolution is, that it be supported. Mr. Speaker, I thank the gentleman for yielding me this time.

Mr. LEACH

Mr. LEACH. Mr. Speaker, I yield 2 minutes to the gentleman from New York (Mr. Solomon), the distinguished chairman of the Committee on Rules, who has been a staunch and consistent supporter of the credit union movement.

Mr. LEACH. Mr. Speaker, I yield 2 minutes to our distinguished colleague, the gentleman from Texas (Mr. Paul). (Mr. PAUL asked and was given permission to revise and extend his remarks.)

Mr. LEACH. Mr. Speaker, I yield 2 minutes to my wonderful friend and distinguished colleague, the gentleman from New York (Mr. Gilman), the chairman of the Committee on International Relations. (Mr. GILMAN asked and was given permission to revise and extend his remarks.)

Mr. LEACH. Mr. Speaker, may I ask how much time is remaining on each side?

Mr. LEACH. Mr. Speaker, I yield back the balance of my time.

Mr. LEACH. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 1151) to amend the Federal Credit Union Act to clarify existing law and ratify the longstanding policy of the National Credit Union Administration Board with regard to field of membership of Federal credit unions, as amended.

Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, first, let me thank my two good friends for their thoughtful words. As chairman of the Committee on Banking and Financial Services, I support a strong and competitive financial service sector. We need solid and viable banks, solid and viable saving and loans, insurance companies, mutual funds, securities firms, and credit unions. What is best for the American people is competition, choice. This bill ensures a stable future for a solid industry, one that deserves our respect because it has served the public so well. In huge letters in the basement of a credit union in Iowa City, Iowa is a quote from one of my State's heroes, a man a named Nile Kinnick. It was 3 years after Nile Kinnick won the Heisman Trophy in the few days before his death in World War II as a pilot that he wrote a letter home in which he said ``people must come before profits.'' That is what the credit union movement is all about. That is why I believe this House, despite angst from competitors, is obligated to give the benefit of doubt to the credit union movement. I would urge all my colleagues to support this bill.

Mr. LEACH. Mr. Speaker, this side would like to reserve its time until the conclusion.

Mr. LEACH. Mr. Speaker, I yield myself such time as I may consume. (Mr. Leach asked and was given permission to revise and extend his remarks.)

Mr. LEACH. Mr. Speaker, I yield 3 minutes to the gentlewoman from New Jersey (Mrs. Roukema), who played such a critical role in the development of this approach.