Paul Sarbanes

Mr. SARBANES

Mr. SARBANES. Mr. President, I ask unanimous consent that when the Senate resumes its session, I believe it is now scheduled for 2:15-- after the party caucus break--Senator Wellstone be recognized to make his opening statement. I think he thought that was the understanding but we did not actually have a unanimous consent request. This has been cleared by both sides.

Mr. SARBANES. Will the Senator yield for a question?

Mr. SARBANES. Was the Canadian GNP figure the Senator was using a 1- year figure or a 10-year figure?

Mr. SARBANES. I thank the chairman.

Mr. SARBANES. The Senator isn't suggesting that I didn't lay out in the course of my statement the fact that it differed in this respect from last year's bill, is he?

Mr. SARBANES. Will the Senator yield on that point?

Mr. SARBANES. In conclusion, let me simply state, Mr. President, that on this side of the aisle we are very much committed to trying to get financial services modernization legislation. All of us supported it last year. In the Committee again this year we supported legislation which would accomplish that purpose. We do not believe that the bill brought forward by the Committee meets the very important goals which I outlined at the outset. I think the legislation introduced by Senator Daschle, and joined in by us, is a balanced, prudent approach to financial services modernization. It reflects last year's carefully struck bipartisan compromises. It is not opposed by any financial services industry actor or player. It is similar to the bill passed, by a broad bipartisan vote, by the House Banking Committee, and it is clearly the approach most likely to achieve the enactment of financial services modernization legislation. If you want to get legislation, given that at the end of the line it must not only pass the Congress, but be signed by the President, this approach is clearly the one that is most likely to achieve the enactment of financial services modernization legislation. When the opportunity presents itself, I urge my colleagues to shift off the path that is before us and to move on to that path. I yield the floor. Exhibit 1 The White House, Washington, March 2, 1999. Hon. Paul S. Sarbanes, U.S. Senate, Washington, DC Dear Paul: This Administration has been a strong proponent of financial legislation that would reduce costs and increase access to financial services for consumers, businesses and communities. Nevertheless, we cannot support the ``Financial Services Modernization Act of 1999,'' as currently proposed by Chairman Gramm, now pending before the Senate Banking Committee. In its current form, the bill would undermine the effectiveness of the Community Reinvestment Act (CRA), a law that has helped to build homes, create jobs, and restore hope in communities across America. The CRA is working, and we must preserve its vitality as we write the financial constitution for the 21st Century. The bill would deny financial services firms the freedom to organize themselves in the Way that best serves their customers, and prohibit a structure with proven advantages for safety and soundness. The bill would also provide inadequate consumer protections. Finally, the bill could expand the ability of depository institutions and nonfinancial firms to affiliate, at a time when experience around the world suggests the need for caution in this area. I agree that reform of the laws governing our nation's financial services industry would promote the public interest. However, I will veto the Financial Services Modernization Act if it is presented to me in its current form. Sincerely, Bill Clinton. Exhibit 2 Executive Office of the President, Office of Management and Budget, Washington, DC, May 3, 1999. Statement of Administration Policy s. 900--Financial Services Modernization Act of 1999 (Gramm (R) TX) The Administration strongly opposes S. 900, which would revise laws governing the financial services industry. This Administration has been a strong proponent of financial modernization legislation that would best serve the interests of consumers, businesses, and communities, while protecting the safety and soundness of our financial system. Consequently, it supports the bill's repeal of the Glass- Steagall Act's prohibition on banks affiliating with securities firms and of the Bank Holding Company Act's prohibitions on insurance underwriting. Nevertheless, because of crucial flaws in the bill, the President has stated that, if the bill were presented to him in its current form, he would veto it. In its current form, the bill would undermine the effectiveness of the Community Reinvestment Act (CRA), a law that has helped to build homes and create jobs by encouraging banks to serve creditworthy borrowers throughout the communities they serve. The bill fails to require that banks seeking to conduct new financial activities achieve and maintain a satisfactory CRA record. In addition, the bill's ``safe harbor'' provision would amend current law to effectively shield financial institutions from public comment on banking applications that they file with Federal regulators. The CRA exemption for banks with less than $100 million in assets would repeal CRA for approximately 4,000 banks and thrifts that banking agency rules already exempt from CRA paperwork reporting burdens. In all, these limitations constitute an assault upon CRA and are unacceptable. The bill would unjustifiably deny financial services firms holding 99 percent of national bank assets the choice of conducting new financial activities through subsidiaries, forcing them to conduct those activities exclusively through bank holding company affiliates. Thus the bill largely prohibits a structure with proven advantages for safety and soundness, effectively denying many financial services firms the freedom to organize themselves in the way that best serves their customers. The bill would also inadequately inform and protect consumers under the new system of financial products it authorizes. If Congress is to authorize large, complex organizations to offer a wide range of financial products, then consumers should be guaranteed appropriate disclosures and other protections. The bill would dramatically expand the ability of depository institutions and nonfinancial firms to affiliate. The Administration has serious concerns about mixing banking and commercial activity under any circumstances, and these concerns are heightened by the financial crises affecting other countries over the past few years. The Administration also opposes the bill's piecemeal modification of the Federal Home Loan Bank System. The Administration believes that the System must focus more on lending to community banks and less on arbitrage activities and short-term lending that do not advance its public purpose. The Administration opposes any changes to the System that do not include these crucial reforms. In addition, the Administration opposes granting the Federal Housing Finance Board independent litigation authority. Such authority would be inconsistent with the Attorney General's authority to coordinate and conduct litigation on behalf of the United States. Pay-As-You-Go Scoring S. 900 would affect direct spending and receipts. Therefore, it is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990. OMB's pay-as- you-go scoring of this bill is under development. Exhibit 3 [From the American Banker, September 2, 1998] Ex-FDIC Chiefs Unanimously Favor the Op-Sub Structure (By Ricki Tigert Helfer, William M. Isaac, and L. William Seidman) The debate on banks conducting financial activities through operating subsidiaries has been portrayed as a battle between the Treasury and the Federal Reserve. The Treasury believes banks should be permitted to conduct expanded activities through direct subsidiaries. The Fed wants these activities to be conducted only through holding company affiliates. Curiously, the concerns of the Federal Deposit Insurance Corp. have been largely ignored. The FDIC, alone among the agencies, has no ``turf'' at stake in this issue, as its supervisory reach extends to any affiliate of a bank. The FDIC's sole motivation is to safeguard the nation's banks against systemic risks. In the early 1980s, when one of us, William Isaac, became the first FDIC chairman to testify on this subject, he was responding to a financial modernization proposal to authorize banks to expand their activities through holding company affiliates. While endorsing the thrust of the bill, he objected to requiring that activities be conducted in the holding company format. Every subsequent FDIC chairman, including the current one, has taken the same position, favoring bank subsidiaries (except Bill Taylor who, due to his untimely death, never expressed his views). Each has had the full backing of the FDIC professional staff on this issue. The bank holding company is a U.S. invention; no other major country requires this format. It has inherent problems, apart from its inefficiency. For example, there is a built-in conflict of interest between a bank and its parent holding company when financial problems arise. The FDIC is still fighting a lawsuit with creditors of the failed Bank of New England about whether the holding company's directors violated their fiduciary duty by putting cash into the troubled lead bank. Whether financial activities such as securities and insurance underwriting are in a bank subsidiary or a holding company affiliate, it is important that they be capitalized and funded separately from the bank. If we require this separation, the bank will be exposed to the identical risk of loss whether the company is organized as a bank subsidiary or a holding company affiliate. The big difference between the two forms of organization comes when the activity is successful, which presumably will be most of the time. If the successful activity is conducted in a subsidiary of the bank, the profits will accrue to the bank. Should the bank get into difficulty, it will be able to sell the subsidiary to raise funds to shore up the bank's capital. Should the bank fail, the FDIC will own the subsidiary and can reduce its losses by selling the subsidiary. If the company is instead owned by the bank's parent, the profits of the company will not directly benefit the bank. Should the bank fail, the FDIC will not be entitled to sell the company to reduce its losses. Requiring that bank-related activities be conducted in holding company affiliates will place insured banks in the worst possible position. They will be exposed to the risk of the affiliates' failure without reaping the benefits of the affiliates' successes. Three times during the 1980s, the FDIC's warnings to Congress on safety and soundness issues went unheeded, due largely to pressures from special interests. The FDIC urged in 1980 that deposit insurance not be increased from $40,000 to $100,000 while interest rates were being deregulated. The FDIC urged in 1983 that money brokers be prohibited from dumping fully insured deposits into weak banks and S&Ls paying the highest interest. The FDIC urged in 1984 that the S&L insurance fund be merged into the FDIC to allow the cleanup of the S&L problems before they spun out of control. The failure to heed these warnings-from the agency charged with insuring the soundness of the banking system and covering its losses-cost banks and S&Ls, their customers, and taxpayers many tens of billions of dollars. Ignoring the FDIC's strongly held views on how bank-related activities should be organized could well lead to history repeating itself. The holding company model is inferior to the bank subsidiary approach and should not be mandated by Congress. Mr. GRAMM addressed the Chair.

Mr. SARBANES. Second, Mr. President, is the provision for a safe harbor for banks with a ``satisfactory'' CRA rating. Actually, what this provision would do is effectively eliminate public comment on CRA performance. Banks that had received a ``satisfactory'' or better rating at the recent exam, and during the preceding 3 years, would be deemed to be in compliance with CRA and immune from public comments on CRA performance. That would be the case unless you had substantial, verifiable information to the contrary--which of course is a very heavy burden of proof. Actually the regulators oppose this. Comptroller of the Currency Hawke stated: Public comment is extremely valuable in providing relevant information to an agency in its evaluation of an application under the CRA, convenience and needs and other applicable standards--even by an institution that has a ``satisfactory'' CRA rating. This amendment would limit or reduce public comment that is useful in our application process. And there is a similar comment from Ellen Seidman, the Director of the Office of Thrift Supervision. Public comment is useful because many banks or regulators sample only a portion of the markets to determine the institution's CRA rating. Public comment provides an opportunity for community members to point out facts and data that have been overlooked in a particular examination. Actually, 97 percent of the institutions get a ``satisfactory'' rating so you, in effect, are going to exclude out from this CRA review most of the institutions. None of the statistics support these assertions that there are too many challenges, that there is too much delay. In fact the percentages are quite small, in terms of the number of challenges that are filed, and then the number of instances in which the challenge gains any recognition from the regulators. The regulators, of course hear all of the comments. Individuals seeking to comment on other aspects of the bank's performance-- financial and managerial resources, or competitive implications--are not going to have their rights similarly curtailed. We do not think the rights on CRA should be so curtailed. We will develop this, of course, later in the debate. Let me now turn very quickly to the small bank exemption. The exemption for the rural institutions would exempt a vast number of institutions in underserved rural areas. It is asserted that these banks by their very nature serve their communities. But small banks have historically received the lowest CRA ratings. In fact, FDIC statistics show that 57 percent of small banks and thrifts have loan- to-deposit ratio below 70 percent, with 17 percent of those having levels below 50 percent. The Madison, Wisconsin Capital Times, in an editorial, summed up this practice in many rural communities as follows: [M]any rural banks establish a very different pattern [than reinvesting in their communities], where local lending takes a lower priority than making more assured investments, like federal government securities. Thus, such banks drain local resources of the very localities that support them, making it much harder for local citizens to get credit. We revised the regulations, I think in a very effective way, to slim them down in terms of the burden on the small banks. We don't think an exemption is necessary to relieve the regulatory burden. They now have a streamlined examination process. They generally do not need to keep paperwork or records beyond what they would do in the ordinary course of business. OTS Director Ellen Seidman stated: Small banks should be subject to CRA. The simple assumption that if an institution is small it must be serving its community is not entirely correct. Let me turn very quickly to the banking and commerce issue. Again, that is an area in which there is a difference between what was worked out last year and the bill that has been brought to the floor this year. A wide range of commentators including, interestingly enough on this issue, Chairman Greenspan and Secretary Rubin, former Federal Reserve Chairman Paul Volcker, banking industry associations and public interest groups, support retaining the separation of banking and commerce. Chairman Greenspan said: It seems to us wise to move first toward the integration of banking, insurance and securities and employ the lessons we learn from that important step before we consider whether and under what conditions it would be desirable to move to the second stage of the full integration of commerce and banking. And Secretary Rubin stated, ``We continue to oppose any efforts to expand the integration of banking and commerce.'' The Committee bill permits the continued existence of what is called a unitary thrift loophole; and, therefore, it permits a major breaching of the separation between banking and commerce. The American Bankers Association and the Independent Community Bankers of America have written to the Senate urging us to support the Johnson amendment on unitary thrifts that would prohibit existing unitary thrift holding companies to sell themselves to commercial firms going forward. I think it is very important that we try to check this loophole which continues to exist in the law. I simply say to the chairman that I share his view that we ought not to cross any line that is violative of the Constitution. We do not think this provision is violative of the Constitution. We think there is a lot of very good case law that would support that position. In addition to the unitary thrift loophole, the Committee-reported bill--and I will just touch on these--allows unnecessary, open-ended merchant banking investments. It permits holding companies to engage in any nonfinancial activities that regulators believe are ``complimentary'' to financial activities, which is, of course, a potentially very large stretch of these activities. Former Federal Reserve Chairman Paul Volcker gave very strong testimony on this very issue. And careful observers of the issue have said that they regard the failure to maintain this distinction between banking and commerce, which we have had in our law for a very long period of time, as one of the reasons that contributed to the Asian financial crisis. Economist Henry Kaufman warned us. He said that it would lead to conflicts of interest and unfair competition in the allocation of credit. He said: A large corporation that controls a big bank would use the bank for extending credit to those who can benefit the whole organization. . . . The bank would be inclined to withhold credit from those who are, or could be, competitors to the parent corporation. Thus, the cornerstone of effective banking, independent credit decisions based on objective evaluation of creditworthiness, would be undermined. And Paul Volcker, in commenting about the Asian financial crisis has written: Recent experience with the banking crises in countries as different in their stages of development as Japan, Indonesia and Russia demonstrates the folly of permitting industrial- financial conglomerates to dominate financial markets and potentially larger areas of the economy. Now, let me turn very quickly to some consumer protection issues which we think will be more adequately covered in our alternative than in the Committee bill. The alternative, which reflects last year's bipartisan agreement, provides mechanisms for regulators to receive and address consumer complaints. It provides that Federal regulations that provide a greater protection for consumers would apply rather than weaker State regulations. It provides that the securities activities of banks would be more closely checked on the broker-dealer question and with respect to mutual fund investors. The Committee bill extends the assessment differential on the special deposit insurance assessment paid by thrifts. We do not do that in our alternative. Let me turn quickly to the operating subsidiary issue. This is one area where we do differ from last year's joint bipartisan bill. We were much impressed by the fact that the Treasury Department agreed to significant additional safeguards regarding the scope and regulation of bank subsidiary activities. Therefore, we thought it now reasonable to permit activities to take place in an operating subsidiary with the safeguards the Treasury came forward with. First, that insurance underwriting may not take place in a bank's subsidiary; secondly, that the Federal Reserve shall have exclusive authority to define merchant banking activities in bank subsidiaries; thirdly, that the Treasury agrees that the Secretary and the Federal Reserve shall jointly determine which activities are financial in nature, both for a holding company and for a bank subsidiary, and that they shall jointly issue regulations and interpretations under the financial-in-nature standard. So we think that these changes on the part of the Treasury--including the requirement that every dollar of a bank's investment in a subsidiary would be deducted from the bank's capital for regulatory purposes, that a bank could not invest in a subsidiary in an amount the bank could not pay its holding company as a dividend, and the strict limits which now apply to transactions between a bank and its affiliates would apply to transactions between banks and their subsidiaries--we think this will level the playing field, eliminate any economic benefit, and provide for safety and soundness. So we take the view now, on the basis of this agreement that the Treasury has made, that permitting bank operating subsidiaries can be consistent with the goals of preserving safety and soundness, protecting consumers, and promoting comparable regulation. I ask unanimous consent that an article entitled ``Ex-FDIC Chiefs Unanimously Favor the Op-Sub Structure'' be printed in the Record at the end of my remarks.

Mr. SARBANES. You don't have any objection to that?

Mr. SARBANES. Certainly.

Mr. SARBANES. As I understand it, there are a number of people who want to make opening statements. Presumably we would complete opening statements after lunch if we have not completed them before lunch.

Mr. SARBANES. Surely.

Mr. SARBANES. Mr. President, my colleague from Texas, the chairman of the Committee, indicated in his remarks that he had doubts about the administration's seriousness about the bill. I don't quite know where those doubts come from. But let me simply say that I don't think they could be more serious about it than they have indicated, and I know the very strong feeling that the Secretary of Treasury and indeed the President hold on a number of these issues that we are debating here and seeking to try to resolve on the floor of the U.S. Senate. We have this situation where it is clear that unless these concerns enumerated and expressed by the President are resolved in a favorable way we are heading down a path towards a veto. That doesn't seem to me to be the most constructive or productive path on which to proceed in terms of trying to enact legislation. The Democratic Members of the Banking Committee have joined with Senator Daschle in introducing Senate bill 753, the Financial Services Act of 1999. That bill largely encompasses the compromises that were developed last year in the bipartisan legislation. It differs in one important respect, and that is with respect to the bank operating subsidiary provisions. I will discuss those in a little more detail shortly. But that alternative which reflects essentially last year's bipartisan agreement will be offered as an amendment in a the nature of a substitute to S. 900. That in fact will be the first amendment that will be offered. And obviously we expect to do that at the conclusion of opening statements when Members have had an opportunity to make their opening statements. We expect them to go to the alternative, and we will discuss it obviously in some detail. It is I think a very important proposal. If in fact the alternative were substituted for the bill we would be well on the way to getting legislation enacted into law, because it would remove the veto threat at the end of this path and would in effect put the Senate essentially in the same ballpark, although not exactly, with where the House Banking Committee was when it reported out, on a vote of 51 to 8, a bipartisan piece of legislation. It is quite true that bill now has to go through the House Commerce Committee because of the division of jurisdiction on the House side, and presumably differences between how the House Commerce Committee sees issues and how the House Banking Committee has seen them will have to be resolved on the floor of the House of Representatives. But at this stage, the first step, what the House Banking Committee has done--I underscore score again on a very strong 51 to 8 vote, an overwhelming bipartisan endorsement--parallels, is very similar, to what is contained in the alternative that we will be offering as an amendment as a substitute for the bill that is now before us. Let me turn to the bill that is now before us with special emphasis on its differences from the Committee reported bill last year with the 16 to 2 vote that we had in the Committee. It is important I think to try to develop a consensus on these issues. The Committee in the past has essentially worked in a nonpartisan way. We have divisions within the Committee but they have not usually been on a straight party basis. I share the regret expressed by the chairman that we have not been able to work this matter out this year in a way to avoid these sharp party differences. But the failure to do so relates back directly to these very critical issues that are at stake. These were issues on which last year we were able to work out accommodations and in fact the provisions we are advancing in the substitute are last year's agreed- upon provisions, the consensus provisions from last year with the one exception of the operating sub-affiliate issue which I will address shortly. Clearly one obvious and extremely important problem with S. 900, the bill now before us, brought out by the Committee is the treatment of the Community Reinvestment Act, or CRA. The agreement that we have reached in terms of the order of procedure provide that an amendment specifically directed to CRA will be in order as fourth in the line. We set out this order just for the first four amendments in an effort to structure at least the outset of the consideration of this very important legislation. I share the chairman's perception that this is very important legislation. It is an issue we have wrestled with for many years. It pertains to the workings of our financial services industry, which in turn, of course, pertains to the workings of our economy and our position in the international economic scene. These are important matters to which we are addressing ourselves. I echo the chairman's hope that Members will pay close attention. I assume that Members will pay close attention, and that they will come to it with an open mind as they weigh the various considerations that are before us. Let me turn to the CRA provisions. Let me first say that the Community Reinvestment Act, in the judgment of most objective observers, has played a critical role in expanding access to credit and investment in low- and moderate-income communities. We think it has been of critical importance in providing access to credit, which very frankly is, in today's context when we talk about civil rights in terms of economic opportunity, a very important aspect of civil rights. In 1977, the CRA was enacted to encourage banks and thrifts to serve the credit needs of their entire communities. Consistent with safe and sound banking practices, banks and thrifts must serve not just upper- income areas but low- and moderate-income neighborhoods, as well. CRA reflect the view that banks and thrifts receive public benefits such as deposit insurance, access to the Federal Reserve discount window and the Federal Reserve payment system, that they draw deposits out of these communities and that they have a responsibility to make loans into the communities in order to serve the entire community. In fact, the loan-to-deposit ratio is often an important standard to measure the extent to which the institutions drawing deposits out of the community are providing a flow of credit back into those communities. Now, my colleague, the chairman of the Committee, has talked about these very large amounts of money that have been committed for community reinvestment purposes. First of all, let me say those figures are grossly overstated. The figures cited reflect commitments made by financial institutions projected 10 years into the future. They are not the commitments for 1 year. He is upset by the size of them. I wish they were for 1 year. I am not upset by the size of them. I would like to see these kind of commitments made into reinvesting in our communities. In any event, in order to get this debate on an apples and apples basis, I think it is very important to understand that the figures that were being tossed around by the chairman reflect commitments made by the institutions over an extended period of time and not what is going to take place this year. CRA has significantly improved the availability of credit in historically underserved communities. There are any number of success stories. Obviously, we will address those when we turn to the specific CRA amendment. Let me just simply point out that CRA has been credited with a dramatic increase in homeownership by low- and moderate-income individuals. Between 1993 and 1997, private sector home mortgage lending and low- and moderate-income census tracks increased by 45 percent. CRA has helped spur community economic development. The number of loans for small business in low- and moderate-income areas has increased substantially. Now, the chairman says there has been this sharp increase in the amount of commitments. That is true, but there has been a very sharp increase in the amount of mergers and acquisitions which helped to trigger the CRA process. There has been a more receptive attitude toward CRA on the part of the regulatory agencies. In fact, regulatory agencies, community groups, local and State elected officials and many bankers agree that CRA has been beneficial. Chairman Greenspan specified that ``CRA has very significantly increased the amount of credit in communities,'' that the changes have been ``quite profound.'' The U.S. Conference of Mayors has promoted CRA as an essential tool in revitalizing cities, while the National League of Cities has listed CRA preservation as a major Federal priority for 1999. Bankers have been able to work with CRA, made it very effective and developed new relationships with their communities. As a consequence, the chairman and CEO of BankAmerica, Hugh McColl, stated earlier this year, My company supports the Community Reinvestment Act in spirit and in fact. To be candid, we have gone way beyond its requirements. CRA has accomplished these goals by encouraging banks and thrifts to make profitable market rate loans and investments. Chairman Greenspan noted last year that there is no evidence that banks' safety and soundness have been compromised by low- and moderate-income lending and bankers often report sound business opportunities. In fact, the CRA legislation requires that these loans are made consistent with safety and soundness criteria. My colleague suggests that somehow the CRA was put into law sort of unbeknownst to everyone, that the only vote was a 7-7 vote in Committee on an amendment to take the provision out of a bill that had been laid out for markup. When that bill came to the floor an amendment was proposed to strike the CRA title of the bill. That amendment was defeated on a vote of 31 in favor and 40 against. For whatever it is worth, I simply want to put down this notion that somehow this matter wasn't considered at the time it was first put into law in the Senate. It was considered in the Committee and it was considered on the floor of the Senate. It was voted on in both places and it remained in the law. That is the provision that we now have with some subsequent modifications. In the mid-1990s an effort was made to revise the CRA regulations and deal with the complaint that was being received from a number of financial institutions that the regulatory process was overly burdensome. Secretary Rubin actually took the lead in doing that. I think he did a very successful job, in effect trimming down CRA requirements, in order to ease that burden. In fact, at the time his work was received with great approval. Let me talk very quickly about the defects that are in the bill with respect to CRA. As I said, we had good agreement on this last year. This year, unfortunately, we really have had a major conflict over this extremely important issue. The chairman makes a number of assertions about CRA but we have never held any hearings to substantiate those assertions. We are constantly being told about how extensive the abuse is. I am prepared to consider the possibility that on occasion abuses occur, but I think the ones that took place and most of the ones talked about took place in the early years of the CRA and that, by and large, now the CRA process is working quite well. I know that doesn't meet my colleagues concern. I'm a little bit reminded of the story of the program that was working well in practice, but the objection was raised, Is it working well in theory? As I listen to this debate, I'm reminded of that story. Let me talk about the provisions in the bill as it differed from last year's approach. The bill eliminates the need to have a ``satisfactory'' CRA rating as a precondition of expanded affiliations. In other words, the substitute we will offer will provide that if a bank wants to go into securities or into insurance, that the bank must have a ``satisfactory'' CRA rating. In other words, a bank that has an unsatisfactory performance rating would not be able to move into those activities. It is asserted that that is a major expansion of CRA. The major expansion is the ability of the banks to go into those activities which heretofore they have been precluded from. That is the expansion. Our position is if that is going to take place, a CRA screening with respect to the bank's performance--not to the securities or insurance affiliate, the bank's performance--is a perfectly reasonable requirement to expanding the activities. Otherwise, this bill is not neutral. I mean, it allows the banks in effect to shift assets out. If they do not have the requirement of a ``satisfactory'' CRA rating, you would dramatically undermine CRA as it now exists. In fact, Secretary Rubin stated: If we wish to preserve the relevance of CRA at a time when the relative importance of bank mergers may decline and the establishment of non-bank financial services will become increasingly important, the authority to engage in newly authorized activities should be connected to a satisfactory CRA performance. The financial institutions are prepared, willing, to live with this requirement. They are not clamoring that it be dropped from the legislative package. In fact, they were supportive of it last year and accepting of it this year. Second, and I am touching on them very quickly because I know there are other Members wishing to make an opening statement.

Mr. SARBANES. Mr. President, the administration has also just submitted a Statement of Administration Policy, which starts out: The Administration strongly opposes S. 900, which would revise laws governing the financial services industry. This Administration has been a strong proponent of financial modernization legislation that would best serve the interests of consumers, businesses, and communities, while protecting the safety and soundness of our financial system. Consequently, it supports the bill's repeal of the Glass- Steagall Act's prohibition on banks affiliating with securities firms and of the Bank Holding Company Act's prohibitions on insurance underwriting. Nevertheless, because of crucial flaws in the bill, the President has stated that, if the bill were presented to him in its current form, he would veto it. And then it enumerates their concerns with the bill, most of which repeat the points made in the President's letter to the Committee of March 2. Mr. President, I ask unanimous consent that this Statement of Administration Policy be printed in the Record at the conclusion of my remarks, and following the letter from the President to the Committee.

Mr. SARBANES. Mr. President, for the fourth time in 11 years, the Senate is debating legislation to modernize the structure of the financial services industry. We are addressing this issue because we want our financial services statutes to keep pace with forces that are changing the financial marketplace, forces such as globalization, technological change, and the development of new products. Many experts agree that the time has come to allow affiliations between banks, securities firms, and insurance companies; in other words, those actors within the financial services industry that heretofore have been kept separate by existing statutes--although those statutes have, to some extent, been eroded either by regulatory decisions or by court decisions. It is, therefore, felt that financial services modernization legislation would be useful in helping to set the structure within which financial institutions are to operate, to provide a certainty and a stability that is now missing under the existing arrangements, and which is not altogether clear along the borderline of what activities are permitted and what activities are not permitted. Now, we have not only no objection, we are supportive of the effort to allow these affiliations to take place within the financial services industry. Therefore, we are anxious to obtain the enactment of financial services modernization legislation. However, it is important, in the course of doing that, that we achieve or preserve certain important goals: obviously, the safety and soundness of the financial system; the continuing access to credit for all communities in our country; protecting consumers, who, after all, are Mr. and Mrs. America. We are concerned that in this effort to create a new structure we don't lose sight of the very specific problems that relate to the ordinary American with respect to credit; and finally, maintaining the separation of banking and commerce. There are some who would like to cross that line as well, but we think that would be a great mistake to do that. Now, just a little bit of history here. Last year, every Democratic member of the Senate Banking Committee voted for financial services modernization in the form of what was then referred to as H.R. 10, the Financial Services Act of 1998. That bill was reported by the Senate Banking Committee on a bipartisan vote of 16-2. So there was a joint bipartisan effort last year, to try to obtain enactment of financial services modernization legislation, which didn't prove out-- unfortunately, in my view. Now, this year, unfortunately, the bill brought out of the Committee was on a vote of 11-9, a straight party vote, which I regret. I particularly regret that, since last year we were able to bring a bill out on a 16-2 vote, which, in effect, was a very strong bipartisan statement. That obviously raises the question: Why this dramatic change from last year to this year? I think, very simply, it is because the bill brought to the Senate now, S. 900, does not meet the important goals that I set out earlier of continuing access to credit for all communities in our country, protecting consumers, and maintaining the separation of banking and commerce. Before this year, the efforts of the Banking Committee to modernize financial services,--in other words, taking earlier efforts to which I referred, in which we moved legislation out and, on occasion, even moved it through the Senate, but weren't able to get it passed in the House--those efforts were, in each instance, bipartisan efforts. We reported legislation with support from both sides of the aisle. That effort, of course, earlier on, and certainly last year, reflected compromises among Committee members and among industry groups on a wide range of issues and, in fact, last year's bill was not opposed by a single major financial services industry association. Now, this year, the consensus so carefully developed last year has been abandoned. That decision, of course, has made this bill a controversial one and has led to opposition to it. As I indicated, all of the Members on this side of the aisle in the Committee opposed the Committee bill. Some financial industry groups oppose aspects of the Committee bill. Civil rights groups, community groups, consumer organizations, and local government officials also strongly oppose the Committee bill, especially with respect to the Community Reinvestment Act provision, which is an extremely important issue, as Members are well aware. Lastly, let me note, because it is highly relevant to the process in which we find ourselves, that the White House--the President himself-- strongly opposes this legislation. The President sent a letter to the Committee at the time of the markup, saying: This administration has been a strong proponent of financial legislation that would reduce costs and increase access to financial services for consumers, businesses and communities. Nevertheless, we cannot support the Financial Services Modernization Act of 1999, as currently proposed by Chairman Gramm, now pending before the Senate Banking Committee. They then go on to indicate their difficulties with the Community Reinvestment Act provisions, noting that: It is a law that has helped to build homes, create jobs and restore hopes in communities across America. They reference that: The bill would deny financial services firms the freedom to organize themselves in the way that best serves their customers, prohibits a structure with proven advantages for safety and soundness, which is the op-sub affiliate issue. The bill would provide inadequate consumer protections and, finally, the bill could expand the ability of depository institutions and non-financial firms to affiliate at a time when experience around the world suggests the need for caution in this area. The President concludes that letter by saying: I agree that reform of the laws governing our Nation's financial services industry would promote the public interest. However, I will veto the financial services modernization act if it is presented to me in its current form. I ask unanimous consent that the President's letter be printed in the Record at the conclusion of my remarks.

Mr. SARBANES. We will have to discuss that, because I think we may have a little problem with that. We may need to extend that a little bit.

Mr. SARBANES. Mr. President, I just want to underscore a couple of the things that the able chairman of the committee just stated. This is a partial agreement that was worked out and was an effort to get the Senate into its consideration of the bill in an orderly and prompt manner. I think it will accomplish that. A number of colleagues asked me during the last vote about making opening statements. I indicated that the chairman would be making an opening statement, and I would make one, and then the floor would be open for opening statements. We hope we can complete those, I assume, this morning before we take a break for the conference luncheons, and then we would be able to move on to the substitute amendment in the afternoon. So we hope Members will try to keep this schedule in mind and come over sometime during the morning here. I know a number have left to go to committee meetings, but they said they wanted to come back in order to make an opening statement. We want to try to accommodate our colleagues in that regard. On the vote schedule, I think we will have to work that out on the basis of the people who are away, so that we can accommodate everyone in terms of being able to vote, which I assume will be sometime tomorrow, as I understand it.

Mr. SARBANES

Mr. SARBANES. Mr. President, pursuant to the order that is governing our consideration of this bill, at least currently, I send an amendment in the nature of a substitute to the desk and ask for its immediate consideration.

Mr. SARBANES. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. SARBANES. Mr. President, we have been trying to accommodate Members who wish to make opening statements. We have been forbearing on offering the substitute, which is in order under the agreement as the first amendment. I guess I am really just trying to let colleagues know that I am sort of close to being ready to offer the substitute. I don't know whether there are others who want to make an opening statement before we get to that. I see the Senator from Nebraska may be interested in doing so. I withhold. Obviously, Members, once the substitute is offered, can make statements, too. But I withhold. I see the Senator is seeking recognition. Mr. ALLARD addressed the Chair.

Mr. SARBANES. Senator Kerry has been trying to make a statement all day. I guess, by this process he won't be able to do it now. What is the Senator's intention for tomorrow? How can we carve out some time?

Mr. SARBANES. Will the Senator yield?

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

Mr. SARBANES. If we have sufficient time before we vote on this substitute to take care of the Senator and a couple of others who want to speak on it, including the minority leader, I don't have a problem with that. But if the time period is extremely short, then we would be precluded from accomplishing this objective.

Mr. SARBANES

Mr. SARBANES. Mr. President, I call to the attention of my colleagues the recent Community-Wide Memorial Observance of Yom HaShoah V'Hagvurah held at Temple Beth Ami in Rockville, Maryland. I had the privilege of participating in this Holocaust remembrance ceremony sponsored by the Jewish Community Council of Greater Washington. I commend Temple Beth Ami for hosting this annual event and the Jewish Community Council for providing the community in Maryland and the Washington, D.C. area with so many valuable services year-round. The Holocaust represents the most tragic human chapter of the 20th century when six million Jews perished as the result of a systematic and deliberate policy of annihilation. Holocaust remembrance is an effort to pay homage to the victims and educate the public about the painful lessons of this horrible tragedy. As my colleagues are aware, this month marks the 54th year since the beginning of the liberation of the Nazi death camps in Europe and the 56th anniversary of the Warsaw Ghetto Uprising. The occasion also is an opportunity to remember the plight of the passengers aboard the S.S. St. Louis who sought to rebuild their shattered lives outside Europe. Most of the 937 men, women and children who fled Germany on the St. Louis on May 13, 1939 were seeking refuge from Nazi persecution but were turned back months before the outbreak of World War II. In his moving remarks at Temple Beth Ami, Benjamin Meed, the President of the American Gathering of Holocaust Survivors and a survivor himself of the Warsaw Ghetto Uprising, spoke eloquently before this assembly of the importance of overcoming indifference to genocide. Ben Meed has dedicated himself to working hard along with many other survivors to ensure that the memory of millions is still with us, and I believe that the United States Holocaust Memorial Museum is a fitting and exceptional tribute to his efforts. In his words, the Holocaust Museum is ``the culmination of our devotion to Remembrance.'' Mr. President, I ask unanimous consent that Benjamin Meed's remarks at Temple Beth Ami be entered into the Record at this point. Remarks by Benjamin Meed It is a special honor to be among such distinguished colleagues, especially Rabbi Jack Luxemburg, vice chairman of the Washington Jewish Community Council and the Rabbi here at Temple Beth Ami; and Manny (Emmanuel) Mandel, chairman of the Jewish Community Council's Holocaust Remembrance Committee. In this lovely new sanctuary that in itself demonstrates the vibrancy of the Jewish community in our nation's capital, we unite with Jewish people everywhere to remember those who were robbed and murdered by the German Nazis and their collaborators--only because they were born as Jews. Tonight, as we come together, we remember the people, places and events that shaped our memories: Memories of our ``childhood,'' of our parents and siblings, of the world which is now so far away. We remember the laughter of children at play, the murmur of prayers at Shul, the warm love of our family gathered for Shabbos meals. That world was shattered by the German Nazis' war against the Jews, while the world of bystanders around us was indifferent. Our memories are full of sorrow. Our dreams are not dreams, but nightmares of final separation from those we loved. Parading before us, when we sleep, are the experiences we endured--the endless years of ghettoes, labor camps, death camps, hiding places where betrayal was always imminent; the forests and caves of the partisans where life was always on the line. And no matter where we were, we were always hungry. Each of us has our own story. Fifty-five years ago, during the Warsaw Ghetto Uprising, I was in Krasinski Square, just outside of the walls of the Ghetto. I usually spent my days in the zoo because I knew that the animals could not denounce me to the German Nazis or to their collaborators. To the animals, I was just another human being. But on this Sunday, as an ``Aryan'' member of the Polish community, I went to church together with the Poles. As we came out of church into the Square, I heard the thunder of guns and the explosion of grenades and I could see that the Jewish Ghetto was on fire. It may have been a warm Spring day, but I stood frozen. In front of us in the Square, a carousel was turning around and around. The music attracted my Polish neighbors and their children. I watched in disbelief as they flocked to the merry-go-round, indifferent to the tragedy so nearby. With every cry for help from my Jewish people, tears swelled in my eyes. But the faces of those around me showed no concern, no compassion, not even any interest. The memory of this scene haunts and enrages me. How was it possible for these people to act ``normally'' while Jews, their neighbors for hundreds of years, burned and died inside the Ghetto walls? But they were not the only ones to ignore our plight. Indeed, the entire world stood by. No doors were opened, no policies were changed to make rescue possible. Why? The question cries out for an answer across the decades. If only there had been a State of Israel sixty years ago, how different this story could have been. Tonight, we especially remember the passengers on the S.S. St. Louis--more than nine hundred men, women and children. Robbed of their possessions, stunned and hurt during Kristallnacht, and threatened with their lives, many of them were forced to sign agreements never to return to Germany. Out on the high seas, powerless to affect their outcome, these nine hundred people floated between political infighting and immigration quarrels, both in Cuba and the United States. Their fates were in the hands of others whom they did not know and with whom they had no influence. Finally accepted by four European nations, many of these passengers were swept into ``the Final Solution'' when Western Europe fell to Nazi Germany. Why were these nine hundred denied entry into this country? Why was this tragedy allowed to happen? If only there had been a State of Israel sixty years ago! This year our commemoration falls within the anniversaries of the discovery of Buchenwald concentration camp. On April 11, the troops of the United States 6th Armored Division rolled into the camp, just one mile outside Weimer, the birthplace of German democracy. They were followed by the 80th Infantry Division on April 12, just 54 years ago tonight. These were war-weary, war-hardened soldiers, but none of their fierce combat had prepared them for Buchenwald--nor for the hundreds of other such camps that American and Allied soldiers came across in their march to end the war in Europe. We will always be grateful to these soldiers for their kindness and generosity, and we will always remember those young soldiers who sacrificed their lives to bring us liberty. Many American GIs who saw the camps join with us in declaring that genocide must not be allowed to happen again. But despite the echoes from the Holocaust, it has--in Cambodia, in Rwanda, in Bosnia, and now in Kosovo. We remember and our hearts go out to those who are caught in the web of destruction. For many years, we survivors were alone in our memories. We spoke among ourselves about the Holocaust, because no one else wanted to hear our stories. Still, we believed that the world must be told--must come to understand the significance of our experiences. Slowly, acceptance of our memories began--at first, only by our fellow Jews, who realized that what we had witnessed was vitally important to them. In time, other people began to understand the meaning and consequences of our experiences. They listened. We survivors were no longer silent presences. We became the bearers of tales--at once painful and precious. We survivors are now publicly bearing witness. We are offering challenges to the indifference of Western governments, to the complicity of the Church, to the anti- Semitism of Christianity, and to the evil of the perpetrators, collaborators and--not the least--to the bystanders. The movement to remember and to record is being led by survivors who accept the burden that history placed upon us. But whatever we know now, there is still so much that we do not know, we cannot know. There were the Six Million whose voices were silenced forever. We the few who survived must speak about them even though we cannot truly speak for them. Although living in almost every state of this Union and following many professions, survivors are united by a common memory. We walk the byways of this great country, appreciative of its blessings of freedom and possibilities. We try to express our gratitude for life by the quality of our lives, offering hope and solace, and teaching the mystery of starting anew. And now, over fifty years later, the world has come to Remember with us. In Germany, France, Austria, and England; in Colombia, Brazil, and Argentina; in Australia and New Zealand, as well as Canada, in Israel, and in our own beloved country, Yom Hashoah is on the calendar and commemorations are held in halls of honor. This is how memory is preserved-- by determined, directed, dedication to remembering--by telling and retelling the stories of the holocaust. You who live in this city are privileged to have the United States Holocaust Memorial Museum--the culmination of our devotion to Remembrance--to visit at your convenience. This extraordinary institution, the largest Holocaust Museum outside of Yad Vashem, has had more than twelve million visitors in just five years. People come from near and far, both within the United States and from around the world. This Museum represents the fulfillment of our pledge and more. It contains many documents and artifacts that testify about our experiences as well as photographs and notes from our loved ones. But more--it is an expression of the hope of every survivor--that no one anywhere in the world will ever have to endure what we did. And what lessons did we derive from these horrible experiences? The most important lesson is obvious--it can happen again, the impossible is possible again. Ethnic cleansing, genocide, is happening as I speak. It can happen to any one or any group of people. The slaughter in Kosovo and in other places must be brought to an end. Should there be another Holocaust, it may be on a cosmic scale. How can we prevent it? All of us must remain vigilant--always aware, always on guard against those who are determined to destroy innocent human life for no other reason than birthright. Just as we survivors have dedicated ourselves to preserving memory and bearing witness, we are now equally determined to make certain, in the little time we have left, that all survivors live out their years in security and dignity. Most of us have accomplished a great deal, but there are those who have been less fortunate. As you know, some live in distressing circumstances. Many are forsaken, afflicted by illness, and, perhaps worst of all, they carry the nightmares of the Holocaust with them. Although the government of Germany has acknowledged to some degree its responsibility for the robbery and murder of our people, the greatest in history, it has not fully assumed its obligations. Recently, some German companies admitted their use of Jewish slave labor during the Holocaust. The government and these companies have offered what they call reparations. But how can they ever provide compensation for our stolen real property, savings accounts, art, jewelry, and personal belongings--the gold in our teeth, the use of our skills and bodies, the pain and suffering inflicted upon each and every one of us? How can there ever be enough money to pay for the wrongful imprisonment, torture, starvation and murder of six million Jews--in their homes, on the streets, in fields and forests, in the gas chambers? Is there a way that they can restore our families, our youth, our health, our sense of personal security? Absolutely not! Germany wants to project a new image to the world, but it cannot be allowed to buy the honor it deserted during the Holocaust. It must account for the horrible atrocities of its past. We must not permit Germany to shift the focus away from its moral and financial responsibility for the slaughter of our people, acts for which there is no statute of limitations. Germany will be eternally responsible for the murder of the Six Million. At the least, Germany must provide appropriate care for the survivors of their atrocities who need help. More than anything, this is a moral issue. It is not welfare. It is not a business deal. It is a ``debt of honor,'' as Chancellor Adenauer said many years ago. Maybe the claims of Holocaust survivors are unprecedented; but so was the robbery and murder. We will not stop until Germany and all the other nations who participated in the extermination process fulfill their obligations. It is the right thing to do--for them and for us. Let us Remember! Thank you.