Paul Sarbanes

Mr. SARBANES

Mr. SARBANES. I rise today to pay tribute to a dedicated and effective leader of our Nation's transit program, Gordon J. Linton. Gordon recently resigned his post as the thirteenth head of the FTA to move on to other opportunities, and I would like to express my appreciation for the outstanding work that he has done. During his six-year tenure as head of the Federal Transit Administration (FTA), Gordon Linton has proved to be one of the best and most accomplished Administrators. He spearheaded the FTA's Livable Communities Initiative which has demonstrated that transit can make a substantial contribution toward improving the quality of life in communities all across the Nation by improving the links between transportation and housing, schools, places of worship, employment and recreation. He worked tirelessly to expand citizen participation in the decision-making process to help make transit facilities and services more customer friendly and community-oriented. He played a key role in shaping the transit portion of the landmark Transportation Equity Act for the 21st Century--or TEA-21--which is providing record levels of funding for public transportation and established the innovative Access to Jobs program which is designed to ensure that people in transition from welfare to work have adequate transportation services. I first came to know Gordon six years ago in July, when I chaired his nomination hearing in the Banking, Housing, and Urban Affairs Committee. It was clear that day, and evident throughout the past six years, that Gordon Linton was a passionate advocate for transit. He not only designed and directed over $37 billion in federal mass transit investments throughout the country--but never forgot that leadership begins by example and used public transportation himself to get to work and in traveling in communities around America. Mr. Linton came to Maryland on numerous occasions to support mass transit projects and improvements--projects such as the Baltimore Light Rail system; regional transit, such as the MARC commuter rail system; small town and rural systems to connect citizens in our rural areas to jobs, health care, education. He has done this in Maryland and he has done this in every state across the Nation. Mr. Linton has exemplified a steadfast commitment to public service and public transportation. He is the longest-serving head of the Federal transit program since it was enacted in 1961. Before coming to Washington, Mr. Linton served as a member of the Pennsylvania House of Representatives in Pennsylvania where he was instrumental in passage of the Commonwealth's first dedicated source of funding for transit and Pennsylvania's seat belt legislation. I am pleased to say that through his work as a Pennsylvania legislator and through his sincere, skillful shepherding of the Federal transit assistance program, Mr. Linton has proven his commitment to improve mobility, invest in our future and make America more livable for all Americans. Mr. President, I know that every one of us whose constituents have benefitted from Gordon J. Linton's leadership of our Federal Transit programs wish him well.

Mr. SARBANES

Mr. SARBANES. Mr. President, I rise in strong support of Senator Kennedy's amendment to raise the Federal minimum wage. I am proud to be an original co-sponsor of the legislation upon which this amendment is based to raise the minimum wage 50 cents a year over the next two years, bringing it to $6.15 per hour by the year 2001. For more than half a century, Congress has acted to guarantee minimum standards of decency for working Americans. The objective of a Federal minimum wage is to make work pay well enough to keep families out of poverty and off Government assistance. Any individual who works hard and plays by the rules should be assured a living standard for his or her family that can keep them out of poverty. If nothing is done during the year 2000, the real value of the minimum wage will be just $4.90 in 1998 dollars--about what it was before Congress last acted to increase the minimum wage in 1996. The proposed increase would restore the wage floor slightly above its 1983 level, still leaving it 13% below its 1979 peak. No one asserts that raising the minimum wage will correct every economic injustice, but it will certainly make a significant difference to those on the low end of the economic scale. We have the opportunity to enact what is in my view a modest increase to help curb the erosion of the value of the minimum wage in terms of real dollars, and it is an opportunity which we should not let pass us by. Currently, a full-time minimum wage worker earns just $10,712--$3,000 below the poverty level for a family of three. In 1998, about 4.4 million wage and salary workers, paid hourly rates, earned at and below the minimum wage--about 1.6 million at the minimum rate and 2.8 million below the minimum. A dollar increase in the minimum wage would provide a minimum wage worker with an additional $2,080 in income per year, helping to bring that family of three closer to the most basic standard of living. This extra income will help a family pay their bills and quite possibly even allow them to afford something above and beyond the bare essentials. According to the Department of Labor, 70 percent of workers who will benefit from an increase in the minimum wage are adults, 46 percent work full time, 60 percent are women and 40 percent are the sole breadwinners in their families. Mr. President, these are not the part- time workers and suburban teenagers many opponents of the minimum wage increase would have you believe. After 30 years of spiralling deficits, we now have budget surpluses projected, unemployment is at a 25-year low, and inflation is at a 30- year low. However, despite this period of economic prosperity, the disparity between the very rich in this country and the very poor continues to grow. According to the Economic Policy Institute, projections for 1997 indicate that the share of the wealth held by the top 1 percent of households grew by almost 2 percent since 1989. Over that same period, the share of the wealth held by families in the middle fifth of the population fell by half a percent. In light of these estimates, consider that the Department of Labor predicts that 57 percent of the gains from an increase in the minimum wage will go to families in the bottom 40 percent of the income scale. It is both reasonable and responsible for Congress to enact measures which provide a standard that allows decent, hard-working Americans a floor upon which they can stand. We did it back in 1996 when we approved, by a bipartisan vote of 74-24, a 90 cent increase in the minimum wage bringing it to its current level of $5.15 per hour, and it is appropriate to do it here again. With the economy strong, we have a responsibility to reinforce this basic economic floor for millions of American workers to prevent them from sliding further into the basement. This is, and always has been, an issue of equity and fairness for working men and women in this country. I strongly urge my colleagues to support this important amendment.

Mr. SARBANES

Mr. SARBANES. Mr. President, the Senate is not in order.

Mr. SARBANES

Mr. SARBANES. I move to reconsider the vote.

Mr. SARBANES. Mr. President, is there time remaining? I yield the Senator 2 minutes if there is.

Mr. SARBANES. Mr. President, will the Senator yield for a moment?

Mr. SARBANES. Both sides have tried very hard to canvas their members to see if anyone wishes to speak on this bill. At the moment, we have reached the point where we don't think there is anyone left to speak. The time for voting has been set for reasons of people having been drawn to other responsibilities. But if there is someone out there who wants a few minutes to speak on this legislation, now is the time. Otherwise, it is going to be closed out. We have tried very hard to offer all Members an opportunity to speak, if they wish to do so, on this conference report.

Mr. SARBANES. Mr. President, as we come to the closing moments of this discussion of the conference report, I want to recapitulate a few points. First of all, I think it must be understood that changes are taking place in the financial landscape at the moment. They have been taking place over the last 20 years. In some respects, this legislation is an effort to create a statutory framework which will encompass the changes that have been happening and which it is reasonable to assume will continue to happen, even if we do not have legislation. So many of the connections and the relationships about which some have expressed concern in the course of the debate--because they see this legislation as permitting them--are happening right now and will continue to happen. But they are happening without a rational legislative framework, without the Congress, in effect, having made judgments as to what the structure of the system is going to be, without the actors within the system knowing exactly what the rules are, and having the security that comes from knowing they are operating within a defined environment. I stress that because some have raised it in the course of the debate. Let me say in that respect I think we have had a very good debate on this conference report, if I may say so. I thank those of our colleagues who have spoken because of the depth of the perceptions and understanding they have brought to this debate. I think what transpired last night and today has been in the better traditions of the Senate. The marketplace in many respects has influenced the need for this legislation. Securities firms have been offering bank-like products. Banks have been offering insurance-like products. Both have been engaged in significant securities activities. This has been taking place out in the marketplace but without a statutory framework within which it clearly functions. These developments have now been going on for more than two decades. We have been wrestling in the Congress for approximately that length of time to see how to revise our laws concerning financial services in order to update them. We are about to accomplish that today. This will enable the regulators--and of course this bill is very strong on functional regulation--to maintain appropriate oversight as we deal with this evolving marketplace. At the same time, it will enable financial service firms to respond to the needs of their customers. Many assert the customers will receive very significant savings. Others say, no, no, it is going to result in greater costs. In a sense, we will have to see how it plays out. The administration sent a letter to us from the Secretary of the Treasury. I ask unanimous consent that letter be printed in the Record at the conclusion of my remarks.

Mr. SARBANES. Mr. President, I yield 10 minutes to the Senator from Indiana.

Mr. SARBANES. Mr. President, before yielding to the Senator from Connecticut, I acknowledge and express my deep appreciation to the Senator from North Carolina for his very positive and constructive contributions throughout the process of developing this legislation. He really made a very important difference in helping to get us through some satisfactory resolutions of some difficult questions. I am very appreciative to him. Mr. President, I yield 15 minutes to the Senator from Connecticut.

Mr. SARBANES. Mr. President, I thank the able Senator from Connecticut for his very fine remarks and also acknowledge the very positive and constructive role he played throughout this process that helped the Senate get a product that we can bring back and recommend to our colleagues in the Senate, after having it initially in the Senate on a very divided vote. There were a number of very difficult issues to work out and the Senator from Connecticut was intimately involved with all or most of those issues. We are very appreciative of him for the instructive contribution that was made. I yield 10 minutes to the Senator from Rhode Island.

Mr. SARBANES. The administration says the following: By allowing a single organization to offer any type of financial product, the bill will stimulate competition, thereby increasing choice and reducing costs for consumers, communities, and businesses. Americans spend over $350 billion per year on fees and commissions for brokerage, insurance and banking services. If increased competition yielded savings to consumers of even 5 percent, they would save over $18 billion per year. They go on to say: Removal of barriers to competition will also enhance the stability of our financial services system. Financial services firms will be able to diversify their product offerings and thus their sources of revenue. Financial firms will be able to diversify their product offerings and thus their sources of revenue. They also will be better able to compete in global financial markets. Which, of course, has become an increasingly relevant consideration as we consider our position vis-a-vis those of financial institutions headquartered in countries overseas. From the very beginning, many of us made it very clear there were important principles we thought had to be addressed with respect to this legislation if we were to support it. We had to face questions, of course, of the safety and soundness of our financial system. We had important questions of CRA, important questions of consumer protection, important questions of the line between banking and commerce, which has been an important principle in the American system. In the end, we have been able to work these issues in a way that we have addressed those concerns--not entirely in some instances. People have talked about privacy today. It is my expectation that issue will continue to remain on our agenda because we have not yet fully disposed of it, although I do note this bill put in some privacy protections where none now exists. People should bear that in mind. Those who look at these provisions and say: We want more--and I am essentially with them; I introduced a bill earlier in this session that had more such provisions, and I continue to support those concepts--for those who say they want more, they need to understand we have nothing at the moment. The privacy provisions that are in this bill represent an important step forward. I also have indicated that the too-big-to-fail issue--and the chairman has also commented on that--is an important matter that still remains before us. It is imperative this study the Federal Reserve and the Treasury are to do jointly come back with recommendations that enable us to address that issue. This is a risk that is present in the situation. We have confronted it in the past with respect to various financial institutions. We get the moral hazard question: Institutions which assume they have reached the size that they then become too big to fail have less of a constraint upon them in terms of their activities than smaller institutions because they begin to operate on the assumption that no one is going to require them to bear the consequences of their imprudence. There have been occasions, of course, in the past when regulators have said we simply cannot allow this institution to bear the full consequences of its bad judgments because if we do that, it will have an impact upon the financial system as an entirety; therefore, we need to work out ways in which we can address that question with respect to these large financial mergers and acquisitions which, of course, are going to happen under this legislation. Of course, they were already happening. What the legislation does is put a framework around this activity which will enable the regulators to exercise much more careful oversight. It is preferable to have a framework developed by the Congress, not on an ad hoc basis by one regulator or another regulator, not in situations where some perceive that regulators are being competitive with one another in terms of how they deal with the financial services sector. If we can have a responsible statutory framework established by the Congress which is contained in this legislation that is now before us, it will contribute to the safety and soundness of the financial system. This legislation better enables us to maintain the separation of banking and commerce. There are important consumer protections, including some protections about which the Securities and Exchange Commission was concerned, and the legislation that has been developed has the very clear support of the Securities and Exchange Commission. We have preserved the relevancy of the Community Reinvestment Act, and we have given banks the choice to conduct their expanded activities either through a holding company or, to a limited extent, through a subsidiary. That was the issue that had the Federal Reserve and the Treasury in deep discussions with one another, and in the end I believe they resolved that satisfactorily. Let me also observe that this rational legislative framework we are putting into place provides for the future evolution of the financial services industry. People will have the security of knowing what the playing field is, something they do not know today with assurance. Nowadays, they go to a regulator and get permission to engage in an activity. The next thing they know, they are in court, and then the case has to wind its way through the court system. They may either be upheld or turned down. No one is quite sure what they are permitted to do and what they are not permitted to do. People are constantly testing the edges of this. The regulators are in some confusion. In some instances we have overlap, and in other instances we seem to have no overlapping at all-- in fact, a vacuum--in terms of overseeing these activities. With this conference report and this legislation which represents a major change--there is no doubt about that--these are far-reaching and difficult public policy issues. They have not been solved for so long because they are far-reaching and difficult. We have had to address balancing the needs and concerns of the consumers--which, after all, ought to be one of our prime objectives--with a necessity of accommodating to new technology and new ways of doing business and the nature of the competition we are facing from abroad. In the course of working through this, it has been an extremely interesting process. I take considerable satisfaction from the fact that in working with the chairman and with many others, we have been able to go from a position where we had a bill that, when it left the Senate, was vehemently contested to where we now come back with a conference report that most of us, if not all, can join in supporting and commending to our colleagues. I recognize some of the points that were made here by some who were apprehensive about the future. I think those are reasonable arguments. They are arguments we considered. They were factors with which we had to wrestle. But I am hopeful that what we are doing here will represent a very important step forward in the workings of the financial services industry, in the protections for our consumers, in giving us a rational statutory framework, and in enabling the regulators to do their job. It sustains the relevancy of the Community Investment Act, which has been so important for some of the movement of capital into low- and moderate-income communities in this country. It has made such a difference. It is a very important first step, an important first step on the privacy issue. We have tried to safeguard the ability of State regulators to participate. On privacy, States can continue to enact legislation of a higher standard than the Federal standard. State insurance regulators will continue to play the role they have traditionally played with respect to State regulation of insurance. So I think, all in all, we have put together a good and balanced package. I commend it to my colleagues as we move to final passage. I thank the chairman of the committee. I yield the floor. Exhibit 1 Department of the Treasury, Washington, DC, November 3, 1999. Hon. Tom Daschle, U.S. Senate, Washington, DC. Dear Tom: The Administration strongly supports passage of S. 900, the Gramm-Leach-Bliley Act of 1999. This legislation will modernize our financial services laws to better enable American companies to compete in the new economy. The bill makes the most important legislative changes to the structure of the U.S. financial system since the 1930s. By allowing a single organization to offer any type of financial product, the bill will stimulate competition, thereby increasing choice and reducing costs for consumers, communities and businesses. Americans spent over $350 billion per year on fees and commissions for brokerage, insurance, and banking services. If increased competition yielded savings to consumers of even 5 percent, they would have over $18 billion per year. Removal of barriers to competition will also enhance the stability of our financial services system. Financial services firms will be able to diversify their product offerings and thus their sources of revenue. They also will be better able to compete in global financial markets. The President has strongly supported the elimination of barriers to financial services competition. He has made clear, however, that any financial modernization bill must also preserve the vitality of the Community Reinvestment Act, enhance consumer protection in the privacy and other areas, allow financial services firms to choose the corporate structure that best serves their customers, and continue the traditional separation of banking and commerce. As approved by the Conference Committee, S. 900 accomplishes each of these goals. With respect to CRA, S. 900 establishes an important, prospective principle: banking organizations seeking to take advantage of new, non-banking authority must demonstrate a satisfactory record of meeting the credit needs of all the communities they serve, including low and moderate income communities. Thus, S. 900 for the first time prohibits a bank or holding company from expanding into newly authorized businesses such as securities and insurance underwriting unless all of its insured depository institutions have a satisfactory or better CRA rating. Furthermore, CRA will continue to apply to all banks, and existing procedures for public comment on, and CRA review of, any application to acquire or merge with a bank will be preserved. The bill offers further support for community development in the form of a new program to provide technical help to low- and moderate-income micro-entrepreneurs. The bill includes other measures affecting CRA that have been narrowed significantly from their earlier Senate form. The bill includes a limited extension of the CRA examination cycle for small banks with outstanding or satisfactory CRA records, but expressly preserves the ability of regulators to examine a bank any time for reasonable cause, and does not affect regulators ability to inquire in connection with an application. Finally, the bill includes a requirement for disclosure and reporting of CRA agreements. We believe that the legislation and its legislative history have been constructed to prevent undue burdens from being imposed on banks and those working to stimulate investment in underserved communities. In May, the President stressed the importance of adopting strong and enforceable privacy protections for consumers financial information. S. 900 provides protections for consumers that extend far beyond existing law. For the first time, consumers will have an absolute right to know if their financial institution intends to share or sell their personal financial data, and will have the right to block sharing or sale outside the financial institutions' corporate family. Of equal importance, these restrictions have teeth. S. 900 gives regulatory agencies full authority to enforce privacy protections, as well as new rulemaking authority under the existing Fair Credit Reporting Act. The bill also expressly preserves the ability of states to provide stronger privacy protections. In addition, it establishes new safeguards to prevent pretext calling, by which unscrupulous operators seek to discover the financial assets of consumers. In sum, we believe that this reflects a real improvement over the status quo; but, we will not rest. We will continue to press for even greater protections--especially effective choice about whether personal financial information can be shared with affiliates. We are pleased that the bill promotes innovation and competition in the financial sector, by allowing banks to choose whether to conduct most new non-banking activities, including securities underwriting and dealing, in either a financial subsidiary or an affiliate of a bank. The bill also promotes the safety and soundness of the financial system by enhancing the traditional separation of banking and commerce. The bill strictly limits the ability of thrift institutions to affiliate with commercial companies, closing a gap in existing law. The bill also includes restrictions on control of commercial companies through merchant banking. Although the Administration strongly supports S. 900, there are provisions of the bill that concern us. The bill's redomestication provisions could allow mutual insurance companies to avoid state law protecting policyholders, enriching insiders at the expense of consumers. The Administration intends to monitor any redomestications and state law changes closely, and return to the Congress if necessary. The bill's Federal Home Loan Bank provisions fail to focus the System more on lending to community banks and less on arbitrage activities short-term lending that do not advance its public purpose. The Administration strongly supports S. 900, and urges its adoption by the Congress. Sincerely, Lawrence H. Summers, Secretary of the Treasury.

Mr. SARBANES. I yield 10 minutes of my time to the distinguished Senator from North Carolina.

Mr. SARBANES. Mr. President, are we back on the bill?

Mr. SARBANES. The Senator is correct. This is one of the fundamental aspects of this legislation.

Mr. SARBANES. I agree with my colleague. The regulatory structure for banks, securities firms, and insurance companies has not kept apace of the new activities in which these entities have been able to take part.

Mr. SARBANES. The Senator is correct. Under current law, banks are exempt from SEC regulation as brokers and dealers. The original version of S. 900 would have maintained this exemption and would have allowed banks to conduct a large range of securities transactions outside SEC regulation.

Mr. SARBANES. Yes, the conference report does uphold your approach.

Mr. SARBANES. Mr. President, I yield the Senator 5 minutes off the time.

Mr. SARBANES. Will the Senator yield to me for a second?

Mr. SARBANES. Mr. President, before the Senator leaves the floor, I thank the Senator from Rhode Island for his extraordinary contributions throughout the process of developing this conference report. He has made an extremely valuable contribution to a successful result. I am deeply appreciative.

Mr. SARBANES

Mr. SARBANES. Mr. President, I commend the Senator from New York for his statement. I underscore the positive and constructive role he played with respect to this legislation throughout, and thank him for his contribution to this effort.

Mr. SARBANES

Mr. SARBANES. Mr. President, I rise in support of the conference report on the Financial Services Modernization Act of 1999. The Congress has struggled for over two decades with the issue of whether to permit banks to affiliate with securities firms and insurance companies. This issue raises important questions for the safety and soundness of the financial system, important questions about the concentration of economic power, important questions about consumer protection, and important questions about access to credit for all Americans. These are far-reaching and difficult public policy issues. The fact that they are so far-reaching and difficult, combined with differences among affected financial sectors--sectors of the financial industry over what should be contained in legislation and how to balance the concerns of consumers, the important consideration of safety and soundness and of assuring that the credit system will work to the benefit of all Americans--has made the enactment of a bill a significant challenge over an extended period of time. In recent years, actions by regulators have permitted significant affiliations between banks and nonbank financial companies to take place. It is very important to keep that in mind as we consider enacting a piece of legislation because one has to be very much aware of what has transpired and the changes that have taken place in the financial arena as they consider the changes this legislation would now permit. Very frankly, the issue for Congress is not whether these affiliations should occur, because they have occurred one way or another, but whether they should take place on an orderly basis in the context of a responsible statutory framework or, instead, on an ad hoc basis as permitted by the regulators. In my view, the preferable circumstance is for these affiliations to take place in the context of a responsible statutory framework established by the Congress, a framework that provides the regulators sufficient authority to protect the safety and soundness of the financial system, which maintains the separation of banking and commerce, protects consumers, preserves the relevance of the Community Reinvestment Act, and provides a choice to banks to conduct their expanded activities either through a holding company or a subsidiary of the bank. It was not clear at the beginning of this Congress whether these goals could be achieved. The Senate passed a bill by the relatively close margin of 54-44 that, in my judgment, did not meet these objectives and was the object of a strong veto threat by the President. The House of Representatives, on the other hand, had passed a bill that largely met these objectives and that the Administration was prepared to support. Today I am pleased to say to my colleagues that, in my view and in the view of the Administration, the bill produced by the conference committee is perceived as basically meeting the necessary standards. It is for that reason I am prepared to support the conference report. It is my understanding that the President is prepared to sign this legislation into law. I ask unanimous consent that a letter from Secretary Summers to Senator Daschle stating the Administration's position, indicating their strong support for this legislation and urging its adoption, be printed in the Record at the end of my statement.

Mr. SARBANES. Mr. President, will the chairman yield?

Mr. SARBANES. If the chairman will yield, I want to echo the chairman's comments. I say to our colleagues, if Senators will come early on and we can perhaps sequence them, we can give them more time than if some of the time is used up in quorum calls. Waiting for people to come becomes lost time. Then, when people come over, we may be very limited in how much time we have available to give them. If Senators have statements they want to make of some consequence, we very much hope they will come over and do that.