E PL UR UM IB N U U S Congressional Record th of America PROCEEDINGS AND DEBATES OF THE 105 CONGRESS, SECOND SESSION

Vol. 144 WASHINGTON, WEDNESDAY, MAY 13, 1998 No. 60 House of Representatives The House met at 9 a.m. Accordingly (at 9 o’clock and 5 min- ROLLCALL OF FORMER MEMBERS OF CONGRESS The Chaplain, Reverend James David utes a.m.), the House stood in recess ATTENDING 28TH ANNUAL SPRING MEETING, Ford, D.D., offered the following pray- subject to the call of the Chair. MAY 13, 1998 er: James Abdnor of South Dakota (R); f We are aware, O gracious God, that William V. (Bill) Alexander of Arkan- we are called to use our abilities in sas (D); RECEPTION OF FORMER MEMBERS Howard H. Baker, Jr., of Tennessee ways that serve people in their need. OF CONGRESS On this day we express our apprecia- (R); tion to those who have shown a com- The SPEAKER presided. Baker of mitment for public service, who seek The SPEAKER. If the Chair might (R); to fulfill the biblical injunction to do comment, on behalf of this chair and Perkins Bass of New Hampshire (R); justice, love mercy, and walk humbly the Chamber, it is a high honor and J. Glenn Beall, Jr., of Maryland (R); with You. May the values of justice distinct personal privilege to have the Berkeley Bedell of Iowa (D); and mercy and humility continue to in- opportunity of welcoming so many Daniel B. Brewster of Maryland (D); spire and encourage people of goodwill former Members and colleagues as are Don G. Brotzman of Colorado (R); to be good stewards of the resources of present here for this occasion. Glen Browder of Alabama (D); the Nation so that justice will flow Those of us serving in this body Clarence J. Brown of Ohio (R); down as waters and righteousness like today are engaged in a tiny piece of a John Buchanan of Alabama (R); an ever-flowing stream. Bless us this great conversation about self-govern- Jack Buechner of Missouri (R); day and every day, we pray. Amen. ment that stretches back in time and Beverly B. Byron of Maryland (D); f place to Philadelphia, Pennsylvania, on Elford A. Cederberg of (R); the 5th day of September, 1774. Today’s Rod Chandler of Washington (R); THE JOURNAL proceedings provide a unique oppor- James K. Coyne of Pennsylvania (R); The SPEAKER. The Chair has exam- tunity to reflect upon that conversa- Neiman Craley, Jr., of Pennsylvania ined the Journal of the last day’s pro- tion and to recognize that we truly (D); ceedings and announces to the House stand on the shoulders of giants. Robert W. Daniel, Jr., of (R); his approval thereof. Let me also mention, if I might, what John N. Erlenborn of Illinois (R); Pursuant to clause 1, rule I, the Jour- a pleasure it is for me to be here as we Peter H.B. Frelinghuysen of New Jer- nal stands approved. pay tribute to the achievements of sey (R); f Senators Howard Baker and Nancy Louis Frey, Jr., of Florida (R); Kassebaum Baker and their service to Don Fuqua of Florida (D); PLEDGE OF ALLEGIANCE this Nation. We all owe them a great Robert N. Giaimo of Connecticut (D); The SPEAKER. Will the gentleman deal of thanks, and I think it is quite Sam M. Gibbons of Florida (D); from Kansas (Mr. MORAN) come forward appropriate that the Former Members Robert P. Hanrahan of Illinois (R); and lead the House in the Pledge of Al- Association has decided to honor them Dennis M. Hertel of Michigan (D); legiance. with the Distinguished Service Award Jack Hightower of Texas (D); Mr. MORAN of Kansas led the Pledge here today. George J. Hochbrueckner of New of Allegiance as follows: Let me also recognize the Honorable York (D); I pledge allegiance to the Flag of the Matt McHugh, Vice President of the Lawrence J. Hogan of Maryland (R); United States of America, and to the Repub- Association, and ask him to come for- David S. King of Utah (D); lic for which it stands, one nation under God, ward and take the Chair. Herb Klein of New Jersey (D); indivisible, with liberty and justice for all. Mr. MCHUGH (presiding). Thank you Ernest L. Konnyu of California (R); f very much, Mr. Speaker, for your wel- Peter N. Kyros of Maine (D); come and your kind remarks. We very H. Martin Lancaster of North Caro- RECESS much appreciate your hosting us again. lina (D); The SPEAKER. Pursuant to the The Chair directs the Clerk to call Lawrence P. (Larry) LaRocco of order of the House of Thursday, May 7, the roll of former Members of Congress. Idaho (D); 1998, the House declares the House in The Clerk called the roll of the Norman Lent of New York (R); recess subject to the call of the Chair, former Members of the Congress, and Cathy Long of Louisiana (D); to receive the former Members of Con- the following former Members an- Bill Lowery of California (R); gress. swered to their names: Manual Lujan of New Mexico (R);

b This symbol represents the time of day during the House proceedings, e.g., b 1407 is 2:07 p.m. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor.

H3109 H3110 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Charles ‘‘Mac’’ Mathias of Maryland Hotel, I was thinking about welcoming tributions to America’s well-being, to (R); this group back. its role not only in this country, for its Wiley Mayne of Iowa (R); The thought occurred to me that it is own citizens, but around the world. Romano L. Mazzoli of Kentucky (D); so nice to have you back, the genera- God bless you, good health, and I John Y. McCollister of Nebraska (R); tion that had those raging deficits. We look forward to seeing you again, over Matthew F. McHugh of New York have balanced the budget, you know. It and over. Thank you very much, and (D); was your generation that gave us the welcome. Robert H. Michel of Illinois (R); unrestrained Cold War, and we are wel- Mr. MCHUGH. We thank our friend, Abner Mikva of Illinois (D); coming you back now that we have the gentleman from Maryland, for John S. Monagan of Connecticut (D); solved that problem. those very thoughtful remarks. Carlos John Moorhead of California But also I thought to myself, yours At this time, the Chair recognizes (R); was the generation of unapologetic ci- the gentleman from Florida, the Hon- Frank E. Moss of Utah (D); vility in the Congress of the United orable Louis Frey, Jr., who is the presi- John T. Myers of Indiana (R); States. Those were the good old days, dent of our association. Lucien N. Nedzi of Michigan (D); although I might observe, I am sure, Mr. FREY. Thank you, Mr. Speaker. of Kansas (R); that the civility is much greater in its I want to thank the Speaker for those Stan Parris of Virginia (R); recollection than it was in its experi- kind remarks. They are deeply appre- Shirley N. Pettis of California (R); ence, because I served with so many of ciated. Howard W. Pollock of Alaska (R); you, and I know that there were acri- Mr. Speaker, I am pleased and hon- Jim Quigley of Pennsylvania (D); monious times even then. ored to have the opportunity once Thomas F. Railsback of Illinois (R); We are very pleased to have you again to be in the Congress to present John J. Rhodes of Arizona (R); back, because you are part of the our 28th annual report to the Congress. John J. Rhodes, III, of Arizona (R); brotherhood and sisterhood of those We want to thank the Speaker, the Toby Roth of Wisconsin (R); who had the opportunity of serving the gentleman from Georgia (Mr. NEWT J. Roy Rowland of Georgia (D); peoples’ House. GINGRICH) and the minority leader, the I think all of us, and those who are in Marty Russo of Illinois (D); gentleman from Missouri (Mr. RICHARD the Senate, I see three of my Senators Ronald D. Sarasin of Connecticut (R); GEPHARDT) and all Members of Con- are here, Senator Mathias, Senator Bill Sarpalius of Texas (D); gress for the opportunity to allow us to Beall, and my patron, as all of you Jim Scheuer of New York (D); return to this place we dearly love. know, Senator Daniel Brewster, who Richard T. Schulze of Pennsylvania We want to thank the gentleman employed me, and effectively made it (R); from Maryland (Mr. HOYER) for his possible for me to get through George- Richard S. Schweiker of Pennsyl- warm and generous greeting to us. town Law School as a member of his vania (R); GENERAL LEAVE staff. I will forever be thankful for his Jim Slattery of Kansas (D); Mr. FREY. Mr. Speaker, I ask unani- contribution to my success. We have Lawrence Jack Smith of Florida (D); mous consent that all Members may two Republicans and a Democrat, great Don Sundquist of Tennessee (R); have 5 legislative days within which to friends and great patriots all. We are revise and extend their remarks. James W. Symington of Missouri (D); pleased to have you back. Harold L. Volkmer of Missouri (D); One of my predecessors is here, Con- The SPEAKER pro tempore. Is there Mike Ward of Kentucky (D); gressman Larry Hogan, who had the objection to the request of the gen- Charles W. Whalen, Jr., of Ohio (R); experience of having his son run tleman from Florida? , Jr., of Kansas (R); against me some 6 years ago; but we There was no objection. Mr. FREY. Mr. Speaker, there are no Lyle Williams of Ohio (R); have remained friends, and I am term limits on public service. The rea- Harris Wofford of Pennsylvania (D); pleased to see all of you back. Lester Wolff of New York (D); It is clear that this body and the son we are here today and why we have James C. Wright, Jr., of Texas (D); body across the Capitol are perceived approximately 600 Members is, each of Samuel H. Young of Illinois (R). correctly by the world’s population as us believes that serving our country is a lifetime job. b 0915 being the repositories of how people get together in peaceful ways and resolve When we were sworn in, we did not Mr. MCHUGH (presiding). The Chair differences. So many of you have been take an oath to a political party, we announces that 66 former Members of heroes in that effort. took it to our country. Our non- Congress have responded to their Senator Baker is mentioned most re- partisan organization has a budget of names. cently for his role in the crisis con- approximately three-quarters of a mil- The Chair now recognizes the gen- fronting a democracy that saw the lion dollars and is chartered, but not tleman from Maryland (Mr. HOYER) for Constitution of the United States work funded by the . remarks on behalf of the Democrats in its will, and the people’s will reflected Its purpose is to promote the improved the Congress. in a peaceful transition of power. So I public understanding of the role of Mr. HOYER. Speaker MCHUGH, for am pleased, because I know that so Congress as a unique institution, as some of us, that sounds pretty good; I much of what we do from a good stand- well as the crucial importance of rep- want you to know that. We are glad to point, we do and are enabled to do be- resentative democracy as a system of have you back. cause of the contributions that so government, both domestically and Speaker Wright, Speaker Michel, Mr. many of you made. internationally. Speaker, I want you to know that, with I had the privilege of coming to the We are not naive. We know that it is all due respect, I said to the gentleman House under Speaker Tip O’Neill, one a continuing struggle, especially in to- from Illinois (Mr. RAY LAHOOD), I said, of the beloved Speakers of this House. day’s cynical world, to try and get peo- Mr. LAHOOD, I will get you 207 votes if Then I had the great privilege of serv- ple to understand and appreciate the you will get 11, and we will make Bob ing in what I perceived to be, and I political institutions that have kept us Michel the Speaker. But he still has know that that may not be a universal free for over 200 years. We live in an not come up with those 11 votes, Bob. I judgment, as the most productive Con- age where bad news seems to dominate don’t know what the problem is, but we gress in which I served, the 100th Con- the airwaves, where a television talk are working on it. gress, under the leadership of Speaker show that highlights people verbally I am very pleased to have the oppor- Jim Wright. Speaker Wright, it is a and physically abusing each other is tunity once again to be the designated privilege and pleasure to have served the top-rated show. hitter to welcome you back to the halls with you and to have you back, and Yet, underneath the cynicism and of Congress. One of my constituents recognize your great contribution to sensationalism, most Americans under- from New Carrollton got an award this the history of this country and the his- stand intuitively what we have inher- morning from the Small Business Ad- tory of this House. ited from our Founding Fathers, and if ministration, so I was down there. As I I am so honored to be with all of you, given the chance, want to believe and was driving back from the Grand Hyatt and so honored to recognize your con- participate in our system. It is easy to May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3111 sit on the sidelines and just complain. great opportunity for those of us who istration, and of course, Seminole foot- It is a lot more difficult to be part of are Former Members to get out across ball. the process and work to make it better, the country and to share with the fu- b 0930 but that is our commitment, to spend ture leaders of our country, the current the rest of our lifetimes making it bet- college students, what the democratic The U.S. Association of Former ter. process is all about, since, unfortu- Members of Congress is assisted with The future of our country rests with nately, many of them get a skewed our Congress to Campus program by our young people, yet 3 decades after idea of what Congress is about through the Stennis Center for Public Service massive student unrest, demonstra- the media. of Mississippi. Since 1996, the Stennis tions on campuses, and the civil rights Since Members of Congress rarely Center has provided funding and struggle, fueled by students, a record can spend more than an hour or so on logistical assistance for the program. low number of college freshmen show a campus, having an opportunity for Congress to Campus started in 1976 and much interest in politics. two Former Members, a Democrat and since then 107 former Members have The annual survey by UCLA for the a Republican, to spend 21⁄2 days on a made 250 visits to 176 campuses in 49 Washington-based American Council campus is truly an outstanding oppor- States and the District of Columbia on Education found just 27 percent of tunity for those students to get a bet- and over 100,000 students have partici- the Nation’s 1.6 million freshmen be- ter understanding of Congress. pated. lieve that keeping up with political af- As Lou has indicated, a full schedule Mr. Speaker, I suspect most of us fairs is a very important life goal, less of meetings is usually a part of the who have had the honor to serve in than half the percentage than in 1966. agenda, with students teaching in Congress received important inspira- Fourteen percent said they frequently classes, doing civic club speeches in the tion or encouragement from some pub- discuss politics, down from 30 percent community, and meeting informally, lic servant who went before us. In my in 1968. one-on-one, with students in their var- case, it was governor Tom McCall of The most important program of this ious meeting places across campus. Oregon. All of us, believing in the con- association is our Congress to Campus I would encourage all of you who cept that there are no term limits on program. We began teaching in colleges have not done this, and for some of you public service, volunteer our time to in 1976, and have reached more than who have to make repeat visits. But it meet with interested young people and 100,000 students across this country. is, with the expansion of our program share our experience with them. Who However, we felt the program should be dollars, going to be a challenge to get knows when one of us will interest, formalized and upgraded, with a goal of 30 Democrats and 30 Republican perhaps inspire the next TRENT LOTT, reaching 30 college communities a Former Members to participate in this TOM DASCHLE, NEWT GINGRICH OR DICK year. program, so I hope that you will make GEPHARDT? Perhaps one of those stu- We started in 1996 our Congress to yourself available. It will be something dents will prove to be a Franklin Roo- Campus program, in conjunction with rewarding and worthwhile, and you sevelt or Ronald Reagan. At the very the Stennis Center for Public Service will come back with a much better feel least, we can hope that young men and at Mississippi State University. This for the future, seeing the quality of women will take a greater interest in program sent teams of two Former young people who are now enrolled in the very institutions our forefathers Members, one Democrat, one Repub- our colleges. Thank you. fought and died for. lican, to college communities to teach Mr. CHANDLER. Mr. Speaker, it has If we inspire students to be informed in colleges and high schools, spend 21⁄2 been my honor and pleasure to partici- and to vote, we accomplish a great days there, have formal and informal pate in the Congress to Campus pro- deal. meetings with the students, morning, gram on three separate occasions. I Mr. FREY. The Congress on Campus noon, and night, talk to the faculty, have visited California State Univer- program is not government funded. In the community civic clubs, and just be sity at Monterey Bay, the University order to help institutionalize the pro- part of that community. of Georgia and Florida State Univer- gram, we held our first annual States- The association arranges the partici- sity, and, as President Frey pointed manship Award Dinner at the Willard pation of Members who contribute out in his remarks, these were all on a Hotel on February 10, 1998. The dinner their time. The Stennis Center coordi- bipartisan basis. was highlighted by an award to the nates the trip, and the colleges and At all three campuses I found stu- Secretary of Agriculture, Dan Glick- universities pay lodging and meals for dents who were eager to learn more man. Cokie Roberts served as MC. The the visitors. We have an advisory team about their government. In political dinner also featured a public and silent of Members of Congress, the gentleman science classes, we talked about ca- auction of presidential and congres- from California (Mr. STEPHEN HORN), reers in public service and the personal sional memorabilia. I would like the the gentleman from Florida (Mr. CLAY rewards to be gained from a life of serv- co-chairmen of this incredibly success- SHAW), the gentlewoman from New ice. I recall well at a Florida State ful dinner, who did such a wonderful York (Ms. LOUISE MCINTOSH SLAUGH- University law class my colleague from job, the gentleman from Kansas, Mr. TER) and the gentleman from Ten- Michigan, Bill Ford, a former commit- Jim Slattery and the gentleman from nessee (Mr. JOHN TANNER), that we tee chairman, providing a lengthy but Missouri, Jack Buechner, to discuss work with. nevertheless fascinating lecture on the this dinner and next year’s event, I now would like to yield to the gen- development of legislative intent for which is already scheduled for Feb- tleman from North Carolina, the Hon- later interpretation by the courts. ruary 23 at the Columbia Club and East orable Martin Lancaster, Treasurer of At the University of Georgia, my Hall at Union Station. the association, and then the gen- Democratic colleague and I engaged in Mr. SLATTERY. The first thing I tleman from Washington, the Honor- a very spirited debate over the future want to do is express my gratitude to able Rod Chandler, to discuss their per- of Social Security, a rather perfect les- you for the tremendous leadership you sonal visits to college campuses. son of how adversaries can argue with have provided this organization over Martin? conviction and passion, and yet remain the last year. Let us join in giving Lou Mr. LANCASTER. Thank you, Mr. friends. Frey a great round of applause. You Speaker. It was a great pleasure for me We Former Members, when we go to are absolutely super, Lou. to have an opportunity to go with the campuses, meet with community As someone who worked in the capac- gentleman to the University of New groups, faculty members, and student ity with my friend from Missouri, Jack Mexico as a part of the Congress to government leaders. At the University Buechner, in trying to raise a little bit Campus program. of Georgia, I spent several hours with of money in the project, I know that it With the success of our dinner last activists from the Young Republican would not have been possible without year, we are pleased that we will be group. At Florida State University, the Lou Frey on the phone daily calling able to expand from approximately 10 elected student leaders invited us to a people all over the country. Lou, you schools a year to perhaps as many as 30 luncheon where we discussed campus are just a great inspiration to all of us. schools a year in the future. It is a elections, the limitations of the admin- You shamed us into action. H3112 CONGRESSIONAL RECORD — HOUSE May 13, 1998 It is great to see you all today and to cheaper than sitting Members of Con- Mr. FREY. Talking about the auc- have an opportunity to greet so many gress, it is former Members of Con- tion, Dick Schulze had the idea for it, friends of longstanding. I do not want gress. But throughout the efforts of so the gentleman from Pennsylvania. It to say old friends anymore as my hair many people from all across the United was his idea really about this and I greys with every passing day, but it is States, and I want you to remember would like to yield now to him. He co- great to see so many of you. I want to that Lou Frey was operating this out chaired the auction along with Chris thank you all. So many of you did ac- of Florida, and it was a real labor of LaRocco, President of the Auxiliary. tively get involved in supporting this love that he was contacting people that Dick? first effort, which I think is a very im- he had served with and getting them Mr. SCHULZE. I feel like we have portant project, this whole concept of energized. And probably one of most reached the point of redundancy here. trying to take the Congress to the amazing things that occurred was the The Congress to Campus program is a campuses of America and try to help accumulation of so many fine pieces of marvelous program. Those of you who educate young people all across this memorabilia that we were able to en- have participated know and understand country about the importance of our gage in the auction phase of it. I think that. You have heard enough about it. basic institutions of self-government. a special word of thanks needs to go So how do we support it? How do we en- The other day, one of the most dis- out to Jim Symington. Where are you, large it and how do we make it more tinguished and respected Members of Jim? Jim donated a family piece that successful? We have got to raise money this body currently serving, the gen- if you have read the materials it really to do it. Although Jack said that tleman from Illinois (Mr. HYDE), chair- did not adequately explain the impact former Members are almost tighter man of the Committee on the Judici- of it, which was a letter from a con- than sitting Members, we have found a ary, said, and let me quote what was in stituent to his Member of Congress way to reach our hands in their pock- the Washington Post, he said, ‘‘People who was a unionist from Kentucky, ets; that is, most of us do have boxes of today don’t understand how painful the asking that his grandson, excuse me, what we might term as junk in the development of self-government is. his nephew would be paroled from a basement or in the attic, various This is a great place,’’ referring to the union prison in Alton, Illinois because memorabilia from the time when we Congress, ‘‘and people demean it. They he was not really a reb, that his served in Congress, items, they do not do not realize what it cost to create grandpa had forced him from Missouri have to be quite as wonderful as that it.’’ to join the rebel army and that he which Jim Symington gave to us, but I It is this problem that I think the would support the union, but he needed wanted to give you an idea. And by the gentleman from Illinois (Mr. HYDE) was to be paroled out. And the Congress- way, let me tell you that we were very trying to identify that we are trying to man had sent a letter to President Lin- successful. We raised $18,000 from the correct with the Congress to Campus coln and President Lincoln had written auction and so even those little things program. The land is full of cynicism on the bottom of the letter, Find the that you may not think are very valu- and it is perhaps no deeper than on our boy, have him take the pledge, parole able, it all adds up. college campuses. With the Congress to him out, Abraham Lincoln. I wanted to give you an idea of those Campus program, we hope to be able to That was an unbelievable gift from a who did help so that you can help next go out on a bipartisan basis, spend great man and it set the tone for every- year. From David King, whose father quality time with students and young body to, if you didn’t have Abraham was William King, United States Sen- leaders all across this country talking Lincoln around, did you have Jim ator from Utah from 1916 to 1940 had, to them about self-government, talking Wright, did you have Bob Michel, did on a trip to the Soviet Union, had been to them about what really goes on in you have Howard Baker. We are trying given a set of dinnerware that either this, the people’s House. to get as many things for the next auc- by the Czar or that had been used by If we can do this successfully, hope- tion that are sitting in your closets the Czar that we auctioned off, which fully as previous speakers have said, we that maybe you do not want to give to was a marvelous one of a kind. We got will inspire a greater confidence in the your grandkids because they do not things from Jay Rhodes, from Jake basic institutions of our democracy. I really know much about politics, un- Pickle, we had Lyndon Johnson’s hat, happen to believe very strongly that fortunately, that is the way life is, but Jake got from Lady Bird, Dan Brew- the people’s confidence in the institu- to have an opportunity to help this ster, Jerry Ford, a variety of people, tions of our democracy is essential to Congress to Campus program. , TRENT LOTT, from the former the survival of this democracy. I think It was a great success. We are opti- Senator from Louisiana, Russell Long that is why we should be investing mistic. We picked a bigger venue next gave us an autographed copy of the what time we have and the talent of all time round. We want you to come autobiography of Huey Long, a lot of of you in trying to carry on this effort back. We want you to share with your those things that you or I may not across this country. It was a pleasure old colleagues a lot of old war stories think are extremely valuable but are of to work with you, Jack, on this but, more importantly, to help support value to other people. So I urge you in project, and I look forward to working this program because it is a great pro- this next couple of months, take time with you next year on it. gram. I want to tell you though that it to look at those boxes in the basement. Mr. BUECHNER. I thank the gen- does not always work the way you See if you can get us some letters, tleman from Kansas. What I am trying want it to. When Al Swift and I went some autographed photographs, any- to figure out is I have spent 16 years in down to Florida International, they thing like that, send it over to Former elective office in my life, always in the thought we were recruits and they took Members headquarters, to Linda and minority. And when the Republicans us to every possible corner of the cam- we will put it to good use next year. get control of the House, I end up in pus to show us the new boilers and the Mr. MAZZOLI. Mr. Speaker, will the the Democratic well. I guess I am just, new classrooms. So you have to remind gentleman yield? it is forecasted that this is what is them you are there to instruct, not to Mr. SCHULZE. I yield to the gen- going to happen. be recruited. But I want to thank the tleman from Kentucky. I do want to say that it is irrelevant gentleman from Kansas, he deserves an Mr. MAZZOLI. I want to thank my which side of the well I am on, because extraordinary amount of applause be- friend for his statement today for the what I want to talk about is the abso- cause he really did take the bull by the work that he has done for the associa- lute success that we were able to enjoy horns. And Missourians, we always fol- tion and being such a pleasant travel- with the dinner. We cannot talk about low our Kansas neighbors in basketball ing partner. The two of us went to the the nitty-gritty things about dollars and some other things, but he did a University of Maine in April and excel- and cents, but I will say that what we great job. I would just like to thank lent, I urge all of my colleagues and I have been able to achieve takes what you, Jim, and tell you it was a pleasure think the gentleman from Pennsyl- the Stennis Center has been able to working with you. vania would agree, that that was a very give to us and leapfrogs us into a com- Mr. SLATTERY. Thank you, Jack. wonderful couple of days we spent with pletely different dimension. Mr. BUECHNER. And to exhort you our students, with the faculty, with the When we started on this effort, the all to be participants in the program administration, talking about democ- old maxim was that if there is anybody next February. racy, hopefully making a few of the May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3113 converts that may actually become said we would like to go to Vietnam, a and pay our own way back and pay for part of this body at some point. I just phone call from Lou. And Lou said, I everything on it. want to thank the gentleman for all he understand you are a Vietnam veteran; And secondly, and Jim Slattery men- did and for being, again, such a pleas- and I said, I am. And he said, I under- tioned it before, but I think we should ant person for those two days. stand you went back to Vietnam a few all give Jim a round of applause for Mr. SCHULZE. It was my pleasure years ago with Pete Peterson; and I what he did. He set the tone for this and your contributions during that trip said, I did. And he said, I understand thing and that was an amazing gift were outstanding. I assume you have you are particularly close with Pete; that you gave. So, Jim, thank you so received a couple of letters from the and I said, I am. And he said, good, you much. people we talked to. I have. Those of are in charge of this trip; put it to- Mr. SYMINGTON. Thank you, Lou, you who have done a little teaching un- gether. By the time I could say, what Mr. President, colleagues. President derstand what it is like to turn, maybe do I look like, a travel agent, the Lou, you led the breakthrough visit to change a student’s life. Those of us who phone was dead. And this is the kind of Cuba a year ago December by a biparti- have not are kind of thrilled by that. leadership we get out of Frey, very ef- san delegation of former members and Some of the letters I have received just fective leadership. one sitting Member of Congress. The make me want to do it again. There is no saying, no, to Lou, so the delegation which you and I cochaired I would urge all of you, if you have answer is, we are going to Vietnam. Pe- consisted additionally of Toby Roth, the opportunity to get involved with terson wants us to come. Peterson Mike Barnes, Dennis DeConcini and the the Congress to Campus program, send would like us to come in October, if we gentleman from Nebraska (Mr. JON us your cards and letters, memorabilia, can put it together. CHRISTENSEN). Plus, of course, FMC’s photographs, hats, ties, whatever you I have been able to find an organiza- consultant, Walt Raymond, who did a have, send it to us and we will auction tion that actually does trips to Viet- lot to put it together. it off. nam. They have done 15 trips to Viet- We were both briefed and debriefed Mr. FREY. One of the things we have nam. They start with getting the visas by the gentleman from New York (Mr. decided to do is hold a meeting each and they end with taking the luggage GILMAN), the gentleman from Indiana year in November in California alter- off the carousel when you get back in (Mr. HAMILTON), and other key mem- nating between Northern and Southern the United States. bers of the Committee on International California. Our first California meeting We are looking at a trip that would Relations in the House and the Com- in Northern California was hosted by a include about 7 days in-country in mittee on Foreign Relations in the former member, Congressman Peter Vietnam; 2 or 3 days in Hanoi, a couple Senate. We also met senior officials in Smith, who is the founding President days in Hue and ending up in Saigon. the State Department, the National of California State University at Mon- The possibility for some side trips. Security Council, Stu Eizenstat, who terey Bay. We are in a relatively early planning was in Commerce at the time, but also We used this opportunity to teach in stage. We should be able to get you our government’s special emissary to at colleges and high schools. We went some details about cost and so forth Cuba. to something like 12 or 13 high schools within probably 2 to 3 weeks. We would In addition, we made a very con- all over and spent three or four hours still like to make it in October. The or- centrated effort to reach out and get there plus, of course, at the university. the views and input of experts on Cuba, This year we are going to go to South- ganization that will be helping us is in- from think tanks, other private groups, ern California, the Palm Springs area, dicating that may be a little bit of a including, of course, representatives of beginning in November 15, Shirley short fuse, but they are willing to try to get us there in October. the Cuban-American community. Pettis has agreed to have us at the Our report’s policy recommendations house; Railsback is going to teach us We have had preliminary expressions were entered in the CONGRESSIONAL golf. The college of the desert is going of indication from our membership of RECORD February 26, 1997, pages E. 315 to be our host school so it should be a about 45 to 50 individuals who would to 316. While acknowledging the unre- fun time to plan ahead. like to go, depending of course on time pentant nature and indeterminate du- One of the things we have tried to do and cost, and it could grow from that ration of Cuba’s rigid political system is give Members the ability to travel number. under Fidel Castro, the unanimously overseas. We have had 16 study tours in I think it is a very exciting prospect, signed report called for increased en- the past throughout the world. Bill Pe- and I am very encouraged that we have gagement, as preferable to the current terson from Florida is the ambassador been able to actually locate an organi- policy of isolation, as a way to prepare to Vietnam. Jay Rhodes, who is very zation that can do what Frey told me for a peaceful transition toward demo- close to him in the Congress, has to do all by myself. And so I think that cratic governance and free market talked with him and we are going over we will be organizing a trip that will go principles. there this October to Vietnam. I would to Vietnam, hopefully in October of Among the report’s recommenda- like to yield to the gentleman from Ar- this year, and if not, then early next tions, which have resonated positively izona, Jay Rhodes, to talk about this. year. So I would be happy to yield back to in the United States, are its emphasis b 0945 the unchallengeable leader of this or- on humanitarian aid and direct flights Mr. JOHN J. RHODES III. Thanks, ganization, unchallengeable only be- to relieve suffering and permit greater Lou. Briefly, on the Congress to Cam- cause he hangs up on you before you contact between ordinary citizens of pus, I have been there as well. It is a have a chance to say, Lou, I do not our two countries. The recent visit to marvelous experience. I went to know how to do that. Cuba by Pope John Paul not only Denison University with Austin Mur- We will see you in Vietnam in Octo- echoed these themes, but appears to phy. I do not know if we had any im- ber. have dramatically altered the reli- pact on the kids, but Austin and I had Mr. FREY. Jay, thanks for all that gious, if not the political, landscape of a wonderful time. hard work. the island. None of us served here in times of I would like to yield now to the We continue to monitor the situa- budget surplus. Now it seems there is a former president of the association, the tion, as you mentioned, Mr. President. budget surplus and our current col- gentleman from Missouri, the Honor- If we determine that another trip could leagues are hell-bent to try to find a able Jim Symington, to talk about the serve a useful purpose, we would cer- way to spend that money. Why do we trip to Cuba, which Jim really put to- tainly give it serious consideration. It not encourage them to spend some of it gether, and the upcoming trip possibly would seem that this year, 1998, mark- on the former Members of Congress and to Cuba. ing as it does the centennial of the the Congress to Campus program. I Before I do, there are two things I Spanish-American War, calls us now to think that is a wonderful way to spend would like to say. Number one, just for the colors of a new peace, beginning a budget surplus. the press, who is not always accurate, with the brush strokes of personal con- I got a phone call shortly after the we pay for these; this is not govern- tact, family visits and grass-roots di- board of directors of this organization ment funded. We pay our own way over plomacy. H3114 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Thank you. Mr. FREY. I thank the gentleman being spent on the Kyoto Conference Mr. FREY. Another one of our activi- from Michigan for that. and what action should or should not ties is that we are the secretary to the We also have a program with the Jap- be taken to address the global warming congressional study group in Germany anese, where we do the same kind of question. composed of 130 sitting Members of the thing, where we act as a secretariat. Another session considered some of House. It is a bipartisan group and, ob- We had a trilateral meeting between the contrasting political dynamics in viously, it works on trying to under- members of the Bundestag, the Diet, each country, such as the role of party stand better what is going on in Ger- and the U.S. Congress in West Virginia discipline in the legislative process and many and the Germans understanding a few weeks ago, and it was in the dis- the way in which political campaigns of what is going on here. trict of the gentleman from West Vir- are financed in each of our countries. It is funded primarily by a grant ginia (Mr. BOB WISE). A final session considered whether from the German Marshall Fund of the I would like the vice president of the these tripartite meetings should be United States to the association. We association, the gentleman from New continued and, if so, how they might had a meeting of the study group in York, the Honorable Matthew F. best be structured in the future. I April in the district of the gentleman McHugh, to report on this event. think there was general agreement from Virginia (Mr. OWEN PICKETT). I Mr. MCHUGH. Thank you very much, that the meetings are useful, but to be would like the gentleman from Vir- Lou. I would like to begin by seconding successful over time we have to iden- ginia, the Honorable , what Jim Slattery and others have said tify a core group of parliamentarians who attended the meeting, to discuss about Lou’s extraordinary leadership who will assume continuing respon- this event and explain the study group over the last 2 years. As an officer who sibility for the conferences, and that is to us a little bit. Dennis. has served with him, I can attest that a critical matter which will be pursued Mr. HERTEL. Thanks, Mr. President. he has done an enormous job of bring- in each of the capitals over the next It is still Michigan. I still pay taxes ing energy and broadening the pro- few months. there. grams of our association, which you The tentative conclusion was that we Mr. FREY. What did I say? have heard a great deal about already would hold another conference next Mr. HERTEL. Virginia. year, probably in Germany or Japan. In Mr. FREY. I apologize. I know better. and will hear more. That is a reflection in large measure of Lou’s leadership. the meantime, the association will Mr. HERTEL. I will be brief. The 15th continue to work with the existing Annual Congress-Bundestag Seminar One of the programs that we have been developing over the past year study groups on Germany and Japan, took place in Virginia Beach on April and subject to funding, will pursue our 6th through 9th, 1998. The main topics would periodically bring together legis- lators from the Congress, the German supportive role in putting together of discussion included current domes- that second conference in 1999. tic, economic and political issues, bi- Bundestag and the Japanese Diet. Given the importance of these three Thank you, Mr. President. lateral trade relations, the Euro, NATO Mr. FREY. We have a program in the countries, which account for almost enlargement, and policies toward the Ukraine where we train interns, which half the world’s GNP, we think that Middle East. is a really very interesting program to more dialogue involving the three The Members’ discussion of issues work with their Rada, and we have had groups of parliamentarians together arising out of the Middle East was par- 565 interns so far that we have worked would be constructive. ticularly noteworthy. In discussing with and we have trained. I would like We initially explored this idea with Turkey, its political situation, its role to yield to the gentleman from Michi- members of our congressional study in NATO, and its relationship to the gan, the Honorable Lucien Nedzi, to groups on Germany and Japan; and as European Union, it was clear that talk about that. you know, these two study groups have Members on both sides would benefit Lucien, you have been over there and been conducting bilateral meetings for from more attention to this important you speak the language, which helps some time, and those meetings will country. also. Likewise, the issue of how to deal continue in any case. They expressed with Iran in a constructive and effec- an interest in these proposed trilateral b 1000 tive manner was discussed at some sessions and so, after an initial plan- Mr. NEDZI. Mr. Speaker, what a length, a discussion which benefited ning session, we convened our first thrill it is to see all of you. And it is from the observations of a Bundestag group meeting of the three parliamen- also a great pleasure to add to the suc- member who recently visited Iran. Re- tarian groups earlier this month in cesses that have been reported on al- lated to that discussion was one of U.S. West Virginia. ready this morning. sanctions legislation directed towards It was hosted by the gentleman from Ukraine is the fourth largest recipi- Iran, the effectiveness of it, and the West Virginia (Mr. BOB WISE) in whose ent of American assistance in the fairness of its implementation. district the meeting was held. Rep- world; and it is in the strategic inter- What makes these discussions so use- resentatives from all three parliaments est of this country to help the Ukraine, ful is the friendship and underlying actively participated, as did represent- to help it achieve its potential as a se- values that we share, which enable the atives of our State Department and the cure, democratic, prosperous and self- Members to speak very openly and German and Japanese embassies. Mem- confident state. And we all know from frankly about matters of common in- bers of our association also partici- history and experience that a freely terest and concern. The discussion pated, in most cases chairing the pan- elected parliament is fundamental to a served to inform and clarify facts and els which took place during the pro- democracy. positions on issues. gram. We also know from experience that Disagreements are aired both within The subjects that we covered in these for a parliamentarian to be effective, and between the delegation, sometimes sessions reflected some of the common adequate staff is absolutely essential. passionately but always construc- interests and challenges that all three With this awareness, and after discus- tively. In fact, as are all of our pro- of our countries face. One session, for sions between the Ukrainian par- grams, we have a bipartisan delegation, example, covered international eco- liamentary leadership and the associa- sometimes our arguments are more nomic issues, including trade relations tion, a program has evolved, which is heated than they are with the foreign and the current crisis in East Asia. now in its fourth year, to develop and nations that we deal with. A second session focused on the secu- sustain a staff system in the par- We plan to follow up on these topics rity issues common to us all, such as liament. This program is a highlight of during the course of the year and we the different security arrangements association activities about which I look forward to meeting our German that have been developed in Europe and would like to report. colleagues at the 16th annual seminar Asia. The expansion of NATO and the During the past 3 years, we have sup- to be held next year in Germany. This emergence of China as a power in Asia ported a staff intern program in an is the longest-standing program of our were among the topics we discussed. overall total of 135 young Ukrainians. association, and it continues to be suc- A third session dealt with environ- Primarily economists, lawyers, and so- cessful. mental concerns, with significant time cial scientists have been competitively May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3115 selected and served as staff to the Rada traditions and a new system, takes its German Federation of Industries. And for 1 year. This year, as the president place as a nation-state in post-Cold when we see what is happening, for ex- mentioned, we are supporting 55 staff War Europe. We are convinced, and this ample, at Daimler-Benz and Chrysler, interns. view is shared incidentally by the U.S. we know how important these relation- Our program has been funded from ambassador to the Ukraine, that an in- ships are between Germany and the public and private sources, including tern program such as ours is the most United States. They are going to be- the Charles Stewart Mott Foundation cost-effective investment we can make come more and more important as we and the Eurasia Foundation, and we for a successful Ukrainian future. move more and more into that global are negotiating with the U.S. Agency We have observed with considerable economy. for International Development for ad- pride how many key positions many of So I wanted to thank you, the ditional support. the interns have been offered after Former Members, for what you are Interns in this program are given completion of their internships. Some doing for the present Members and for much more responsibility than most remained as permanent staff in the your country. Thank you very much. interns in the United States Congress. parliament. Others have been offered Mr. FREY. As you can see, we have We will not talk about White House in- important positions in the government, taken on a lot of tasks and have a terns. Strike that. They serve as main- the academic world, or private busi- great deal of involvement, e-mail, we line staff, and their responsibilities in- ness. Several have or will run for pub- are getting a chat room, and we are clude drafting legislation, analyzing lic office. And two have already been trying to catch up with the modern and researching legal issues, writing elected to city councils. times. briefing papers, and actively partici- We had the pleasure of having a I would like to recognize the Honor- pating in committee debates. By thus luncheon only yesterday, attended by a able Robert Whan, representing the As- strengthening the staff and providing a very prominent reformed politician sociation of Former Members of the critical amount of research and analy- from Ukraine. The chairman of our Parliament of Australia, accompanied sis, the FMC program has responded to Committee on Foreign Affairs, BEN by his wife Jill. They came all the way two vital needs for an effective par- GILMAN, also took the time to be from Australia to be with us. Could liament. present. And this politician said that you please stand up and be recognized? An important observation: To date, this program is not training clerks but And the Honorable Barry Turner, who is president of the Canadian Asso- this program has been developed in di- future competent politicians. rect negotiation with the parliamen- As a concluding comment, if any of ciation of Former Parliamentarians. tary leadership, thereby enabling the our former Members of Congress are in Barry has been with us three or four young staffers to steer clear of the old- Ukraine at any time, I can assure them times. Barry, please. Obviously, there are thanks to the of- line, largely unreformed parliamentary that they will be more than welcome to ficers and the counselors. I will not secretariat, which maintains control participate in discussions with our in- take the time to name everybody indi- over staff assignments and research ac- terns. vidually. But it was a great team ef- tivities. Mr. FREY. I thank the gentleman. I fort. The auxiliary headed by Chris Most intern staff assignments are ne- appreciate it. LaRocco has done a great job. We are gotiated directly with the committees, Our last speaker, I would like to pleased with the Caring Institute, who and therefore, committees which seek yield to the gentleman from Wisconsin, is our landlord; thanks to Frank Moss to develop reform legislation, particu- Toby Roth, who was involved in the and Val Halamandaris, the president of larly in the economic area, are able to Marshall Center, which is over in Ger- it, who have been wonderful to work secure critical staff assistance which many. And, Toby, will you tell us a lit- with. Senator, thank you very much would not otherwise be available. tle bit about that program briefly so for your help over there. And of course, Evidence of the success of this pro- we can move on to the main event. we mentioned Linda Reed and Walt gram is its increasing popularity. Our Mr. ROTH. Thank you, Mr. Presi- Raymond. dedicated field representative, Cliff dent. I get the gist, make it short. Now it is my sad duty to inform the Downen, has done an outstanding job of (Mr. ROTH asked and was given per- House of those persons who have served keeping the program on track, bal- mission to revise and extend his re- in the Congress and passed away since anced, and free of customary political marks.) our report last year; and, unfortu- heavy-handedness. And here we have to Mr. Speaker, it is wonderful to see all nately, the list is somewhat long. I will give some credit to Walt Raymond of you here today. Golly, you bring read it. also, who oversees these operations back so many memories when I look Bella Abzug of New York; Sonny from this side of the Atlantic. But Cliff into your faces, and so many great Bono of California; Walter Capps of Downen annually visits a large number anecdotes. I just want you to know how California; Peter J. DeMuth of Penn- of universities throughout Ukraine and much I appreciate a day like today. Let sylvania; Samuel L. Devine of Ohio; briefs graduate students on the pro- me say thank you to the Former Mem- Foster Furcolo of Massachusetts; Har- gram. bers Association for the Congressional old E. Hughes of Iowa; Robert E. Jones As testimony to its popularity, over Study Group on Germany and pro- of Alabama; Edna Flannery Kelly of 700 Ukrainians, ages 21 to 29, and these grams that you make possible. New York; Robert Leggett of Califor- are all well-educated individuals, ap- I served for 18 years on the Commit- nia; D.R. (Billy) Mathews of my State, plied for 55 internships in the 1997–98 tee on International Relations, and I Florida; Robert C. McEwen of New term. Moreover, during the 10-month benefited a great deal from our Former York; Dale Milford of Texas; Newt V. internship, a training seminar is main- Members and what they gave me that Mills of Louisiana; John Moss of Cali- tained to further broaden the interns’ allowed me to do a better job. And I fornia; Joel Pritchard of Washington; experience. This is designed not only to know that what you are doing, helping Jennings Randolph of West Virginia; better equip them for their parliamen- the present Members, is so extremely Terry Sanford of North Carolina; Steve tary responsibilities, but also to help important. I know how important Schiff of New Mexico; Garner Shriver develop a strong cadre of future these programs are because I benefited of Kansas; Frank E. Smith of Mis- Ukrainian political leaders. from them, as I know you have too. sissippi; William B. Spong of Virginia; The political challenges in the Let me just say that Lou Frey has Winifred C. Stanley of New York; and Ukraine increase as it prepares for the had many accolades here today, and he John H. Ware, III, of Pennsylvania. 1999 presidential election and digests deserves them because he has been a Mr. Speaker, I respectfully ask that the results of the March 1998 par- great president. But I also want to say, all of us rise in a moment of silence in liamentary election. I am pleased to we have had a great executive director, their memory. report that there is no evidence that Linda Reed, and I want to recognize May they rest in peace. Amen. the recent election will adversely im- her. Now to the highlight of this meeting. pact the association’s intern program. This week we have Dr. Ludolf von Each year the Association presents a There are major economic and politi- Wartenberg here, the executive direc- Distinguished Service Award to an out- cal problems as this country, with old tor, and a delegation from BDI, the standing public servant, and it rotates H3116 CONGRESSIONAL RECORD — HOUSE May 13, 1998 between parties, as do our offices. Last say, that I am a congressional brat and so many years great traditions and will year Bill Richardson was here to re- that I have been in and around this continue to carry it on. ceive the award. This year the recipi- chamber since I was a very young man, Mr. Speaker, this concludes our 28th ents are both Republicans, they are a condition from which I have now annual report by the United States As- both Senators, and they are married. fully recovered. sociation of Former Members of Con- How is that? Thirty questions. But as I approached the south side of gress. The recipients of the award are Sen- the Capitol, I was reminded of the Mr. Speaker, I yield back my time. ator Nancy Kassebaum Baker of Kan- times when my father brought me here Mr. MCHUGH (presiding). Thank you. sas and the former Republican leader of and how awestruck I was by the maj- The Chair thanks the President and the Senate, Howard Baker of Ten- esty of this place, of this institution, again wishes to thank all of the feather nessee. The plaque reads ‘‘Presented by and the inspiration I took from not dusters, I mean former Members of the U.S. Association of Former Mem- only his service but that of you and Congress for their presence here today. bers of Congress jointly to the Honor- many others like you who preceded us, Before terminating these proceed- able Howard H. Baker, Jr., and the and then my chance to serve in the ings, the Chair would like to invite Honorable Nancy Kassebaum Baker, Senate of the United States and to say those former Members who did not re- spond when the roll was called to give each of whom extended the family tra- there were many days when I envied their names to the reading clerks for dition of public service in the highest you the rules of this body, especially inclusion on the roll. on the opportunity of leadership to degree in many areas, including a total Again, thank you all very much for challenge and limit the direction of de- of four decades of exemplary leadership being with us. It is great to see you, in the where bate and deliberation. It will always be each and every one. And we wish you their country and colleagues benefited the high point of my public career that the very best of luck. immeasurably from their intuition, I have had an opportunity to serve in The House will stand in recess until their judgment, their humanity and the Congress. 10:35 a.m. their tireless dedication to the welfare I will not speak further except to say Accordingly (at 10 o’clock and 20 of the Republic, Washington, D.C., May that I believe, as I think you believe, minutes a.m.), the House continued in 13, 1998.’’ that our constitutional form of presi- recess. Just very briefly, because everybody dential government, of congressional f here and everybody listening knows government, and judicial oversight is their backgrounds. But what is really unique in the world. It is very much a b 1036 interesting, among other things, is continuing process. As you have con- AFTER RECESS both obviously came from a political tributed to its unfolding development, The recess having expired, the House family. Nancy Kassebaum’s father was so will our successors. I am greatly was called to order by the Speaker pro honored to be included in this award. I the former governor of Kansas and ran tempore (Mr. CAMP) at 10 o’clock and 36 in 1936 for the Republican nomination. yield the floor to my senior partner. minutes p.m. Ms. KASSEBAUM-BAKER. Thank Senator Baker’s mother and father f both served in the House of Represent- you. There is an old Russian political atives. And his father-in-law, Senator adage that says a rooster today, a MESSAGE FROM THE SENATE Dirksen, was the majority leader in the feather duster tomorrow. There are a A message from the Senate by Mr. United States Senate for some time. few of us here that I could say a hen Lundregan, one of its clerks, an- And of course, in the Senate, Senator today. But all of us as feather dusters nounced that the Senate had passed Kassebaum Baker chaired the Commit- who are gathered here were gathered, with an amendment in which the con- tee on Labor and Human Resources, and I think the reason becomes such a currence of the House is requested, a the Subcommittee on Africa of the unifying experience and pleasure, is be- bill of the House of the following title: Committee on Foreign Relations, and cause of the friendships formed when H.R. 1273. An act to authorize appropria- the Committee on Commerce, Science, one serves in either the United States tions for fiscal years 1998 and 1999 for the Na- and Transportation Subcommittee on Senate or the United States House of tional Science Foundation, and for other aviation, serving today on many non- Representatives. It cuts across party purposes. profit boards. And of course, Senator lines. The message also announced that the Baker was the first Republican ever We may have debated, as it has been Senate agrees to the report of the com- popularly elected in Tennessee, won said before, against each other against mittee of conference on the disagreeing elections, served both as the minority the issues or for the issues, but always votes of the two Houses on the amend- leader and the leader in the Senate. remaining friends. It is a tie that does ment of the House to the bill (S. 1150) Everybody remembers Senator Baker bind. ‘‘An Act to ensure that federally fund- as the vice chairman of the Watergate Secondly, the tie that binds, I be- ed agricultural research, extension, Committee, the keynote speaker at the lieve, is a respect for the institution in and education address high-priority Republican National Convention, can- which we have served. It is a respect concerns with national or multistate didate for President in 1980, received that we should continue to honor. I am significance, to reform, extend, and all sorts of awards and medals, which I so impressed with all that former col- eliminate certain agricultural research will not go into because I think we leagues are doing to continue that in- programs, and for other purposes.’’ would rather hear from both of you volvement. The message also announced that the than read any more of it. So with Howard having said that we Senate passed a bill and a concurrent I would like you both to come up so always wanted to be able to speak on resolution of the following titles, in I may present this plaque to you. the House floor, thank you for this op- which concurrence of the House is re- portunity and thank you for this quested: b 1015 honor. S. 1618. An act to amend the Communica- We also have a scrapbook of letters Mr. FREY. Mr. Speaker, as I said tions Act of 1934 to improve the protection of from many of your colleagues which we when I began, it is our belief that there consumers against ‘‘slamming’’ by tele- will add to along the line. Now we are no term limits in public service. communications carriers, and for other pur- poses. would be very privileged if we could Every time I have the privilege to step S. Con. Res. 75. Concurrent resolution hon- hear some remarks from both of you. back on the floor, it is like getting re- oring the sesquicentennial of Wisconsin Mr. BAKER. Mr. Speaker, and Lou charged. I love this body. I am proud of statehood. Frey, ladies and gentlemen, as you can my service in the Congress, as each and f observe, Nancy always has the last every one of us are. word, and that is as it should be. We have served our country and we ELECTION OF MEMBERS TO CER- When I answered my name on the roll are continuing to serve our country. TAIN STANDING COMMITTEES OF call this morning, that was the first This is the greatest legislative body in THE HOUSE word I had ever spoken on the floor of the world. The country is lucky to Mr. DREIER. Mr. Speaker, by direc- this chamber, notwithstanding, as you have a Congress that has carried on for tion of the Republican Conference, I May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3117 offer a privileged resolution (H. Res. international justice, it should begin A QUESTION OF NATIONAL 429) and ask for its immediate consider- there. SECURITY ation. f (Mr. TRAFICANT asked and was The Clerk read the resolution, as fol- TIME TO TAKE A STAND ON given permission to address the House lows: HUMAN RIGHTS for 1 minute and to revise and extend H. RES. 429 his remarks.) (Mr. STRICKLAND asked and was Mr. TRAFICANT. Mr. Speaker, the Resolved, That the following Members be, given permission to address the House and they are hereby, elected to the following White House slapped sanctions on India for 1 minute and to revise and extend standing committees of the House of Rep- because India was conducting nuclear his remarks.) resentatives: tests. Unbelievable. It is like Mike Mr. STRICKLAND. Mr. Speaker, I Committee on Education and the Work- Tyson beating up Woody Allen for fail- rise in support of the bill of the gen- force: Mr. PARKER. ing to fight. Committee on Government Reform and tleman from Virginia (Mr. WOLF), the India is not the problem, White Oversight: Mr. LEWIS of Kentucky. Freedom from Religious Persecution House; China is the problem. And the Committee on International Relations: Mr. bill, which this House will consider this White House policy with China is now BURR of North Carolina. week. Committee on the Judiciary: Mrs. BONO. not only stupid, Congress, it is dan- While in southern Ohio this past Committee on National Security: Mrs. gerous. weekend, I had the unique opportunity BONO. China, with our tax dollars, is desta- of meeting and speaking with China’s The resolution was agreed to. bilizing and threatening the entire newly appointed ambassador to our A motion to reconsider was laid on world, and we are putting sanctions on country, Mr. Li Zhaoxing. I must the table. India for protecting themselves. admit that my concerns about reli- Beam me up. The truth of the matter f gious persecution, both inside China’s is, this White House does not have the borders and around the world, have ANNOUNCEMENT BY THE SPEAKER balsam to confront the real problem, been significantly reinforced by my PRO TEMPORE which is China, so they kick India discussions with Ambassador Li. around. The SPEAKER pro tempore. There I believe it is imperative that Con- I say it is time, Congress, to develop will be 15 one-minute speeches on each gress convey unambiguously its resolve a sound strategy and show some anat- side. and to take action to defend the in- omy. We should rescind MFN for China. f alienable rights of self-expression and It is not just about trade, Congress, it the pursuit of intellectual and religious PRINTING OF PROCEEDINGS HAD is about national security. DURING RECESS freedom, which are fundamental human rights. They demand our atten- f Mr. HAYWORTH. Mr. Speaker, I ask tion and are in need of safeguarding. TAX FREEDOM DAY IN NEVADA unanimous consent that the proceed- If we choose not to act, China and ings held during the recess be printed many other nations around the world (Mr. GIBBONS asked and was given in the RECORD and that all Members will continue with strong-arm tactics permission to address the House for 1 and former Members who spoke during and repressive actions in an attempt to minute and to revise and extend his re- the recess have the privilege of revis- stifle free thinking. We owe it to the marks.) ing and extending their remarks. thousands of prisoners of conscience to Mr. GIBBONS. Mr. Speaker, this The SPEAKER pro tempore. Is there take a stand on this issue. morning, when Nevadans head off to objection to the request of the gen- If we do not, who will? work, they are going to have a little tleman from Arizona? f extra spring in their step and little There was no objection. lighter burden on their shoulders, be- f QUESTIONS IN NEED OF ANSWERS cause this fine morning, not only is the (Ms. DUNN asked and was given per- sun starting to peak through the TRUE INTERNATIONAL JUSTICE mission to address the House for 1 clouds, but working men and women in SHOULD BEGIN AT HOME minute and to revise and extend her re- Nevada are finally going to work for (Mr. HAYWORTH asked and was marks.) themselves, their families, their fu- given permission to address the House Ms. DUNN. Mr. Speaker, I have some tures, and not the government. for 1 minute and to revise and extend questions for the other side, some ques- That is right, Mr. Speaker, today, his remarks.) tions that I believe need to be asked, May 13th, is Tax Freedom Day in Ne- Mr. HAYWORTH. Mr. Speaker, I given that so many witnesses, 92 at last vada. During 1998, so far Nevadans have would note for the record that less count, have either fled the country or worked 91 days, almost 3 months, to than one-half hour ago, among the taken the Fifth Amendment in order to pay their Federal taxes, and an addi- former Members of this Congress stood avoid testifying to Congressional com- tional 41 days to pay their State and the former Senator from Tennessee, mittees. local taxes. Howard Baker, who was recognized for Does the other side really believe The fact that these hard working his distinguished service. I would ask that the President is above the law? men and women in this country have all of us who serve in this chamber to Does the other side really believe to spend nearly one-half of the year remember the example of Howard that the White House should not have working to pay the government ought Baker and put principle ahead of par- to tell the truth about how it ended up to concern, if not outrage, all of us in tisanship when we deal with awesome with 900 FBI files of Republicans? this room. Surely, not even the most questions of constitutional authority. Does the other side really believe liberal of my colleagues on the other Indeed, Mr. Speaker, I noted with that it does not matter whether or not aisle can defend this tax level. great interest yesterday that the Presi- the President lied under oath or en- I call on my colleagues to join me in dent held a ceremony dealing with couraged others to lie under oath about instituting common sense tax relief in international justice and the pursuit of a personal matter? this country. Let us begin by eliminat- international justice as our Nation’s Does the other side really believe ing the marriage tax and the death tax leading law enforcement officer. that how women are treated in the as well. Let us start moving the proc- Mr. Speaker, I would suggest that workplace is not relevant, if the econ- ess back, not forward. the President could allow his actions omy is doing great and the Dow is over f to speak louder than words if he and 9,000 points? members of his party would seek the Does the other side really, truly, ac- HEAR NO EVIL, SEE NO EVIL testimony of those over 90 individuals tually believe that how women are (Mr. PITTS asked and was given per- who have either taken the Fifth treated in the workplace matters only mission to address the House for 1 Amendment or fled the country, be- when it comes to Republicans? minute and to revise and extend his re- cause, Mr. Speaker, if we want true I wonder. marks.) H3118 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Mr. PITTS. Mr. Speaker, in a way, minute and to revise and extend his re- tional Park at an average cost of the stonewalling done by the hear no marks.) $584,000. One of the homes cost $700,000. evil, see no evil Members on the Com- Mr. BLILEY. Mr. Speaker, last week Now, I know the Federal bureaucracy mittee on House Oversight is a good I introduced legislation to put an ab- can rationalize or justify almost any- thing, but only in a political sense. breviated version of the Constitution thing, and I know that because the na- Hear no evil, see no evil Members re- on the reverse side of the $1 bill. tional parks are so popular, the Park fused to grant immunity to four key The aim of this legislation is to cele- Service feels it is above criticism and witnesses in the campaign finance in- brate the Constitution as a living can do just about anything it wants. vestigations, even though the Justice American symbol and integrate it into However, Federal employees already Department does not oppose the grant- our lives on a daily basis. Studies have have pay and pensions and hours that ing of immunity to these four wit- consistently shown that Americans do are far better than just about everyone nesses so that their testimony may be not know all the rights and freedoms except for movie stars and athletes. To heard. guaranteed to them by the Constitu- build Park Service employees $584,000 The behavior of the hear no evil, see tion. homes on top of what they are already no evil Members is an insult to mil- Placing an abbreviated version of the getting is ridiculous. lions of proud Democrats who do be- Constitution on the $1 bill will serve as The really sad part, though, is that lieve in the rule of law, who do believe a daily reminder and teaching tool of very few are shocked about this. We that politicians should be held ac- the principles upon which the United have just come to expect things like countable for their behavior, and who States was founded. It will spread the this from an agency that last year do believe that truth matters more philosophy of representative democ- spent almost $400,000 on a fancy two- than polls, more than spin, more than racy and freedom around the world. It hole outhouse. Once again, Mr. Speak- political gain. will allow Americans to take pride in The truth will eventually come out, er, the Federal Government has proved this living document, the values for the truth about which Members sought that it cannot do anything in an eco- which it stands, and in their Nation. the truth, and which Members did ev- nomical manner. It has been my pleasure to work with erything in their power to prevent the f the students at Liberty Middle School truth from ever seeing the light of day. in Hanover County, Virginia and their MESSAGE FROM THE PRESIDENT f teacher, Randy Wright, on this bill. I A message in writing from the Presi- b 1045 commend them for their active partici- dent of the United States was commu- GREAT STONEWALL OF CONGRESS pation in our government and am nicated to the House by Mr. Sherman BY DEMOCRATS proud to sponsor this legislation on Williams, one of his secretaries. their behalf. (Mr. BOB SCHAFFER of Colorado f f asked and was given permission to ad- NORWEGIANS IN VIOLATION OF dress the House for 1 minute and to re- DESPITE EXCESSIVE SURPLUS, MORATORIUM ON COMMERCIAL vise and extend his remarks.) POSTAL SERVICE TO IMPOSE Mr. BOB SCHAFFER of Colorado. STAMP TAX WHALING Mr. Speaker, as a young boy, I learned (Mr. SHIMKUS asked and was given (Mr. METCALF asked and was given that the great wall of China was in permission to address the House for 1 permission to address the House for 1 China. But today, we learn that the minute and to revise and extend his re- minute and to revise and extend his re- Democrats in Congress have extended marks.) marks.) this great inpenetrable stone wall of Mr. SHIMKUS. Mr. Speaker, I rise Mr. METCALF. Mr. Speaker, this China right through the White House today to recall a tax imposed on our year Norway plans to increase the and down the center aisle of Congress. colonial forefathers by the British hunting of whales by 30 percent. Yes, Let me rephrase that. These monarchy in the days before the birth my colleagues heard me correctly. The stonewallers of justice have been busy of our Nation. Like the British monar- Norwegians plan to kill 671 whales this erecting a new world wonder: A total, chy, the United States Postal Service year. This action will violate the mora- air-tight, round-the-clock stonewall by has imposed a Stamp Tax upon the torium imposed on commercial whal- refusing to grant immunity to 4 key American people. Despite recording a ing in 1982 by the IWC, the Inter- witnesses so that they might testify net operating surplus of more than $4.5 national Whaling Commission. about illegal campaign contributions billion over the past 3 years and a sur- At the 1997 meeting of the IWC, the to the Democrat party from Com- U.S. administration supported a step munist China. Those witnesses are plus of over $1.3 billion already in 1998, the Postal Rate Commission has ap- backward toward the killing of whales. Kent La, Irene Wu, Larry Wong and Mr. Speaker, I have recently intro- Nancy Lee, witnesses that President proved a 1 cent increase in the price of a stamp. duced House Resolution 425 to express Clinton’s own Justice Department does opposition of the House toward com- not oppose granting immunity to. Mr. Speaker, I do not understand how the Postal Service can justify this tax mercial whaling. Last week the Senate Let me repeat that again, Mr. Speak- unanimously approved legislation to er. The same Democrats who deny they increase on the working families of America, as the agency itself runs a express their opposition to commercial are stonewalling refuse to grant immu- whaling. nity to 4 key witnesses, even though record billion-dollar profit. Our colonial forefathers would be Please contact my office to become a the Justice Department does not op- cosponsor and help send a signal to the pose granting immunity to these 4 wit- ashamed of the Postal Service that is now imposing this unnecessary tax on IWC from this House of Representa- nesses. tives. The same Democrats who defend con- its people. victed felon Susan McDougal’s refusal f f to tell the truth are the same Demo- FEDERAL GOVERNMENT LACKING INDIA TESTS NUCLEAR DEVICE crats who are blocking these 4 key wit- IN ECONOMIC KNOW-HOW nesses from coming forward to tell the (Mr. BEREUTER asked and was truth. Mr. Speaker, the great wall of (Mr. DUNCAN asked and was given given permission to address the House China has nothing over congressional permission to address the House for 1 for 1 minute and to revise and extend Democrats, for their great stonewall of minute.) his remarks.) Congress is an even bigger spectacle. Mr. DUNCAN. Mr. Speaker, a few Mr. BEREUTER. Mr. Speaker, as f days ago at a hearing of the Committee Chairman of the Subcommittee on Asia on Resources, the Inspector General of and the Pacific, this Member rises to CELEBRATING THE U.S. CONSTITU- the Interior Department reported some express his deep regret and disappoint- TION ON THE ONE DOLLAR BILL shocking findings. He said that the Na- ment at the series of underground nu- (Mr. BLILEY asked and was given tional Park Service had built 19 em- clear tests staged May 11 and 13 by permission to address the House for 1 ployee houses at the Yosemite Na- India. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3119 While offering assurances of their minute and to revise and extend her re- H. RES. 426 commitment to world peace, India’s ac- marks.) Resolved, That at any time after the adop- tions have quite possibly triggered a Ms. GRANGER. Mr. Speaker, as a tion of this resolution the Speaker may, pur- chain of events that could set back member of the Speaker’s Task Force suant to clause 1(b) of rule XXIII, declare the global efforts of nonproliferation and For a Drug-Free America, I am proud House resolved into the Committee of the severely increase tensions throughout Whole House on the state of the Union for to support the Drug-Free Borders consideration of the bill (H.R. 3534) to im- the region and the world. In Pakistan, Week. prove congressional deliberation on proposed public pressure is mounting on the gov- Our Nation’s drug crisis is real and it Federal private sector mandates, and for ernment to proceed with similar nu- is also rising, but I have always be- other purposes. The first reading of the bill clear testing. China also has expressed lieved that what is wrong with Amer- shall be dispensed with. Points of order its concern about the tests, and there ica can be cured by what is right with against consideration of the bill for failure are some suggestions that Beijing may America. That is why I am so pleased to comply with section 306 of the Congres- consider resuming its nuclear testing to be a member of this task force. sional Budget Act of 1974 are waived. General program. debate shall be confined to the bill and shall We believe the war on drugs is one not exceed one hour equally divided and con- This Member would note that the law that can be won, must be won, and will is quite specific on this matter. If a trolled by chairman and ranking minority be won if only we have the courage to member of the Committee on Rules. After non-nuclear State tests a nuclear de- dream of a drug-free America. general debate the bill shall be considered vice, sanctions must be imposed by our Where can we begin? We can begin by for amendment under the five-minute rule. government. Failure to do so would bringing some order to our borders. The amendment recommended by the Com- render U.S. nonproliferation policy im- Seventy percent of all illegal drugs mittee on Rules now printed in the bill shall potent. found in the U.S. originally cross the be considered as adopted in the House and in the Committee of the Whole. The bill, as The United States was required to U.S.-Mexican border. Eradicating drugs impose the sanctions mandated by law amended, shall be considered as the original meanings interdicting them. Interdict- bill for the purpose of further amendment. on India. Mr. Speaker, this member ing them means stopping them in calls upon the government of India to The bill shall be considered as read. During Brownsville, El Paso and San Diego. consideration of the bill for further amend- carefully reconsider and attempt to The Drug-Free Borders Act stiffens ment, the Chairman of the Committee of the back away from what it has unleashed, the penalties for those convicted of Whole may accord priority in recognition on and urges the government of Pakistan smuggling drugs over the border. The the basis of whether the Member offering an to exercise restraint in its response. bill says to drug smugglers all over the amendment has caused it to be printed in the f portion of the Congressional Record des- world: If you bring drugs into this ignated for that purpose in clause 6 of rule WITHOUT TRUTH, THERE IS NO country, we will bring you to justice. XXIII. Amendments so printed shall be con- JUSTICE This bill acknowledges that only when sidered as read. The chairman of the Com- (Mr. TIAHRT asked and was given we close our borders to drugs can we mittee of the Whole may: (1) postpone until permission to address the House for 1 open the doors of opportunity for our a time during further consideration in the minute and to revise and extend his re- children. In short, by working to- Committee of the Whole a request for a re- corded vote on any amendment; and (2) re- marks.) gether, we can save America from the scourge of drugs. duce to five minutes the minimum time for Mr. TIAHRT. Mr. Speaker, without electronic voting on any postponed question truth, there is no justice. f that follows another electronic vote without I would like to address the vicious at- intervening business, provided that the mini- tacks made by the liberals on the Mem- DETONATION OF NUCLEAR EXPLO- mum time for electronic voting on the first bers of Congress who are tasked with SIVE DEVICE IN INDIA—MES- in any series of questions shall be 15 min- finding out the truth about the allega- SAGE FROM THE PRESIDENT OF utes. At the conclusion of consideration of tions of crimes by the Clinton White THE UNITED STATES (H. DOC. the bill for amendment the Committee shall House. These vicious attacks are re- NO. 105-250) rise and report the bill, as amended, to the markably similar to the mean and un- House with such further amendments as may The SPEAKER pro tempore (Mr. have been adopted. The previous question fair attacks directed at Judge Starr, CAMP) laid before the House the fol- shall be considered as ordered on the bill and who is also charged with finding out lowing message from the President of amendments thereto to final passage with- the truth about the allegations of the United States; which was read and, out intervening motion except one motion to crimes by the White House. without objection, referred to the Com- recommit with or without instructions. We have heard this before directed at mittee on International Relations and b 1100 Senator THOMPSON, at Senator ordered to be printed: D’AMATO, also tasked with finding out The SPEAKER pro tempore (Mr. To the Congress of the United States: the truth about the allegations of CAMP). The gentleman from California Pursuant to section 102(b)(1) of the crimes at the White House. As before, (Mr. DREIER) is recognized for 1 hour. Arms Export Control Act, I am hereby these attacks on the gentleman from Mr. DREIER. Mr. Speaker, for pur- reporting that, in accordance with that Indiana (Mr. BURTON), the chairman of poses of debate only, I yield the cus- section, I have determined that India, a the Committee on Government Reform tomary 30 minutes to my good friend, non-nuclear-weapon state, detonated a and Oversight, are misleading and ab- the gentleman from South Boston, nuclear explosive device on May 11, surd. Massachusetts (Mr. MOAKLEY), and The tapes released by the Chairman 1998. I have further directed the rel- pending that, I yield myself such time were not doctored, not a single bit. All evant agencies and instrumentalities of as I may consume. Mr. Speaker, all the tapes were available to anyone in the United States Government to take time yielded will be for purposes of de- the press who would bother to listen to the necessary actions to impose the bate only. them. Transcripts which were made sanctions described in section 102(b)(2) (Mr. DREIER asked and was given available to the press were not taken of that Act. permission to revise and extend his re- out of context. Indeed, we would be ex- WILLIAM J. CLINTON. marks and to include extraneous mate- tremely pleased to hear the spin on THE WHITE HOUSE, May 13, 1998. rial). Webster Hubbell’s comment that he f Mr. DREIER. Mr. Speaker, this rule ‘‘needs to roll over one more time.’’ We makes in order H.R. 3534, the Mandates PROVIDING FOR CONSIDERATION would like to know what he really Information Act of 1998, under a com- OF H.R. 3534, MANDATES INFOR- meant by that. But once again, it is a pletely open rule providing for 1 hour MATION ACT OF 1998 same old story: Attack the accuser and of general debate, equally divided and hide the truth. Mr. DREIER. Mr. Speaker, by direc- controlled by the chairman and rank- f tion of the Committee on Rules, I call ing minority member of the Committee up House Resolution 426 and ask for its on Rules. This is an appropriate rule, RIDDING AMERICA OF DRUGS immediate consideration. since the purpose of H.R. 3534 is to im- (Ms. GRANGER asked and was given The Clerk read the resolution, as fol- prove deliberation on proposed private permission to address the House for 1 lows: sector mandates. H3120 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Mr. Speaker, in the first 2 years that I just wish I could give the same un- Then, during the markup, just as my the Unfunded Mandates Reform Act qualified support to the bill we are friend, the gentleman from California went into effect, Congress passed 13 about to consider. Unfortunately, there (Mr. DREIER) was preparing to read the bills with private sector mandates are some troubling things about the motion and call for a vote, an amend- costing more than $100 million. In con- bill and about the way it moved ment was dropped into my lap exempt- trast, only one bill passed with inter- through the committee and onto the ing certain tax revenues from the point governmental mandates, costing more floor. of order. than $50 million. My dear friend, the gentleman from Mr. Speaker, under the new lan- To address the very clear bias California (Mr. DREIER) who is an ex- guage, a point of order would not apply against the private sector and the way pert on the rules, knows that I sup- to a bill that includes a tax increase if we consider legislation containing Fed- ported the unfunded mandate law we the revenue is used for tax breaks. This eral mandates, our colleagues, the gen- enacted just a little over 3 years ago. issue was never raised at our hearings, tleman from California (Mr. CONDIT), In fact, he and I worked together to it was not raised in the time we spent and the gentleman from Ohio (Mr. fine tune the process, to make it more working, trying to develop a mutually PORTMAN), introduced H.R. 3534, the institutionally sound. So I have no agreed-upon improvement. It seems, Mandates Information Act of 1998. I quarrel with the purpose of the law, or once again, that politics prevailed. want to commend them on a job well the change which the gentleman from The Dreier amendment says that we done. California (Mr. CONDIT) and the gen- have to know how the revenue is spent H.R. 3534 is a revised version of an tleman from Ohio (Mr. PORTMAN) pro- before we can judge whether a tax is a earlier bill introduced by the same posed in this new bill. These changes burden on private business. It bases the sponsors. It contains necessary safe- are in order for Congress to do its job judgment on a simple-minded theory guards to ensure that the Unfunded well. that every tax break is good and every Mandates Reform Act procedures can- We need to know the costs of pro- government spending is bad. not be abused. The bill was further im- posed legislation on businesses and on Think about what that means for ex- proved in the Committee on Rules last individuals, just as we do on the costs cise taxes, like gas and tobacco. If a week with an amendment providing an of State and local governments. Mr. measure increases gas taxes and re- exception to the point of order proce- Speaker, I am very encouraged that we quires that the money be spent on dure for legislation that results in an were already seeing a lot of informa- highway construction, it is subject to a overall net reduction of tax or tariff tion as a result of the 1995 bill. CBO’s point of order. But it is completely off- revenue over a 5-year period, and pro- report on the financial modernization set by a provision allowing billionaires vided that the bill does not include bill, which may be on the floor this to avoid Federal taxes. A point of order week, contains 11 pages of detailed in- other non-revenue-related mandates does not apply. formation on the cost to the private that costs $100 million or more. A tobacco bill that raises cigarette This change is needed to address a sector. taxes and spends all of that money on CBO’s report on the religious perse- bias in our procedures against tax cuts, programs to prevent teenaged smoking, cution bill, which we will consider and against efforts to overhaul and health care costs for tobacco farmers, later this week, puts Members on no- simplify the tax code. this will trigger a point of order. But if tice that it, too, will impose costs on Mr. Speaker, the current Unfunded that revenue that is gained as a result private business. Mandates Reform Act does not go far But my concern, Mr. Speaker, has al- of that bill is given away in tax breaks enough to discourage Congress from ways been with the point of order to the very wealthy, the point of order imposing costly mandates on the pri- scheme developed in the original bill will not apply. vate sector. Such mandates cost busi- and continued in this one. It can be too Mr. Speaker, I can only conclude nesses, consumers, and workers about easily abused and used for partisan po- that my Republican colleagues really $700 million annually, or $7,000 per litical purposes. As we know, Mr. have not thought through this one. American household. That is more Speaker, it is not a true point of order. Why would we subject the tobacco bill than one-third the size of the entire There is never a strict finding of fact. to a point of order if the money raised Federal budget. All a Member has to do is to claim is used to stop kids from smoking? These mandates are particularly bur- that an unfunded mandate exists. That Why would we stop a highway bill that densome on families attempting to claim is enough to trigger an auto- uses the money from the gas tax to climb the economic ladder, Mr. Speak- matic vote on whether the House wants build and repair our roads? er. Over the next 5 years, 3 million peo- to consider the issue. In other words, The answer, Mr. Speaker, is we ple will move from welfare to private Mr. Speaker, a Member can block con- should not. I will not oppose the rule sector payrolls. Small businesses will sideration of an issue, whether it in- because it does allow for the amend- provide most of those jobs, yet the im- volves an unfunded mandate or not. ment process, but I will urge my col- position of new mandates upon existing I tried to stop the potential for abuse leagues to vote no on the bill if the burdens will reduce the resources avail- in 1995. Guess what? The very first time Dreier amendment is not removed. able to create those much needed jobs. the point of order was raised it was Mr. Speaker, I reserve the balance of It is important to note that H.R. 3534 used to avoid a politically charged my time. does nothing to roll back some of those question which did not include an un- Mr. DREIER. Mr. Speaker, I yield unnecessary mandates, nor does it pre- funded mandate, but it was used in the such time as he may consume to the vent the enactment of additional man- most partisan possible way against the gentleman from Glens Falls, New York dates. But it will make Congress more motion to recommit, which, as we well (Mr. SOLOMON), chairman of the Com- accountable by requiring more delib- know, Mr. Speaker, is the only motion mittee on Rules. eration and more information when reserved solely for the minority in a Mr. SOLOMON. Mr. Speaker, I thank Federal mandates are proposed. House run and ruled by the majority. my vice chairman of the Committee on Likewise, Mr. Speaker, this rule Mr. Speaker, Members might imag- Rules, a real leader in defending the would allow us to fully deliberate H.R. ine my doubts when we started to ex- economy of this country, for yielding 3534, so I urge adoption of the rule and tend the point of order to private sec- me the time. adoption of the bill. tor mandates. The Committee on Rules Mr. Speaker, I just have to say that Mr. Speaker, I reserve the balance of heard testimony a few months ago I do not know whether I am shocked or my time. which highlighted some of the poten- not, but to hear my good friend, the Mr. MOAKLEY. Mr. Speaker, I yield tial mischief which could occur under gentleman from Massachusetts (Mr. myself such time as I may consume. the bill which had been introduced. We MOAKLEY), and he is one of my best Mr. Speaker, I will support the rule worked on a bipartisan basis to im- friends in this entire body, even though for consideration of H.R. 3534, the Un- prove the legislation. We worked infor- he is probably more liberal on the funded Mandate Reform Act, because it mally through our staffs. We had a new Democratic side, but he is a great con- is an open rule. It allows the Members proposal. We had another hearing. I gressman and I have a great respect for to offer amendments. thought we had made some progress. him, but I think I heard him say that May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3121 the Republican majority had not given willing and able to vote for the un- Mr. Speaker, I thank the gentleman this thought. funded mandate bill, but can the gen- for yielding to me. Mr. Speaker, I came here 2 years be- tleman tell me why a point of order Mr. MOAKLEY. Mr. Speaker, as I fore Ronald Reagan, and then fought, would lie against a bill that is going to said before, I have no problem with the along with others, to bring Ronald spend money to stop kids from smok- bill. It is the amendment that will not Reagan here so we could start the ing, but yet if we use that same money allow monies derived from gas taxes to Reagan revolution. But I have been to give it back to the very rich as a tax be spent on improving roads, the point giving this thought for 20 years, be- break, a point of order would not lie? of order lies against it; improving safe- cause I was a small business man in up- Can the gentleman just explain that to ty in the roads, a point of order lies state New York, had several busi- me? against it, but it does not lie if the nesses, as a matter of fact, all success- Mr. SOLOMON. Mr. Speaker, will the money is given back as a tax rebate. ful. gentleman yield? That is wrong. When I started out I did not have any Mr. MOAKLEY. I yield to the gen- Mr. DREIER. If my friend, the gen- money. We started from scratch, my tleman from New York. tleman from Massachusetts, would fur- wife and I and five children. I was Mr. SOLOMON. Mr. Speaker, with all ther yield, I would simply say that working three different jobs. I can re- due respect to the gentleman, any time clearly there is nothing in the Dreier call going to the bank, and the bank we are going to raise taxes on the amendment that prevents us from hav- would not loan me $50,000 to get going. American people, there is going to be a ing a debate and having a discussion on Then when I did get going, I saw all net increase in taxes. The American this issue. We are doing that right now, these regulations that were out there, people are already taxed too much. We and I think we will continue to. both on local governments and on the ought to have that debate. Do not pick The question really will come down private sector. I said to myself, one of out these heartrending situations. Let to a very simple and basic point. My these days, if I ever get to Congress, we us bring that up. If that were the case, friends on the other side of the aisle are going to do something about that. then let us debate it on the floor, so all support tax increases. Those on this Four years ago, did we ever do some- the American people know about it. side of the aisle are passionately com- That is all we are asking. thing about it. I also served as a town mitted to reducing that tax burden. Mr. MOAKLEY. This is all we are supervisor, that is like a town mayor, trying to do about it is debate it on the b 1115 for 5 years, and as a county legislator, floor. This amendment was dropped in and as a State legislator. Time after Mr. MOAKLEY. We can have the at the last minute. I am ready to vote time after time we would see these fight on taxes in another bill. But this for the unfunded mandate bill, I think Federal Government regulations piled amendment specifically says a point of it is a good idea. But I cannot see why, on not only the public sector but the order will lie against a bill if monies if the money from the taxes is given private sector. On the public sector, it raised from tobacco, the sale of to- back as tax rebates to the very rich, no just drove taxes skyrocketing, so peo- bacco or cigarettes, if that money is point of order would lie against it, but spent to educate youth or to have stop- ple living on fixed incomes could not if it is used to educate children, to stop even live in their homes. They could smoking programs, but yet if this children from smoking, a point of order money is sent back in the form of tax not pay the taxes. lies. In the private sector, small business rebates, there is no point of order. No- Mr. DREIER. Mr. Speaker, will the body is going to explain that problem men like me had to take so much of gentleman yield? to me. It cannot be explained away. whatever little cash we had, and we Mr. MOAKLEY. I yield to the gen- Mr. Speaker, I yield 2 minutes to the had to divert that from expanding our tleman from California. businesses into paying all these extra Mr. DREIER. Mr. Speaker, I thank gentleman from California (Mr. costs from these Federal regulations. the gentleman for yielding. CONDIT), who was the originator of the So 4 years ago, the gentleman from It is very clear that my friends on basic bill, which is a good bill. California (Mr. DAVID DREIER) and my- the other side of the aisle are very con- (Mr. CONDIT asked and was given self and others, we implemented the cerned about the idea of an overall tax permission to revise and extend his re- unfunded mandate legislation on the cut, and in spending more time looking marks.) public sector. Now we are following at the Dreier amendment, I think peo- Mr. CONDIT. Mr. Speaker, I rise in through, after giving it a lot of ple have found that clearly, if we look support of the rule. I am going to en- thought and a lot of hearings, and lis- at a question like capital gains, we courage everyone to vote in favor of tening to both sides. We have decided it have found within the past several the rule. This is an open rule and for is the right thing to do. weeks that reducing the top rate on those Members who think that this is So here we have this legislation be- capital gains has actually increased not perfection and they want to change fore us, and now, before this Congress the flow of revenues to the Federal the bill or have a suggestion that is a ever effects any kind of legislation that Treasury. good idea, they ought to come to the is going to increase taxes on the Amer- When we have a broad bill, a bill that floor and do that, and then we will ican people, take more money out of is actually cutting taxes, if there is have the opportunity to vote on their their pockets, we are going to have a some adjustment in there, for example, idea. debate about that. We are going to if we were looking at tax simplifica- I do want to thank the chairman of have a debate on this floor set aside tion, which this Republican Congress is the Committee on Rules, the gen- just to discuss what the fiscal ramifica- focusing attention on, the idea of a flat tleman from New York (Mr. SOLOMON), tions are, not only on the public sector tax, the idea of a consumption tax, an for his leadership and his effort in but on the private sector. That is what overhaul of the present tax code, if we bringing this to the floor. I would like this debate is all about. look at the grand scheme of things as well to thank the gentleman from I would say to the gentleman from there, and there is some modification California (Mr. DREIER) for his efforts Massachusetts (Mr. MOAKLEY), we have which would have the slightest in- in the subcommittee for bringing this given it 20 years of hard thought. Now crease in some area, and I know my to the floor, and certainly I want to is the time to go. Let us go. Let us pass friend, as is so often the case from the thank my colleague, the gentleman the Dreier amendment and pass this other side of the aisle, is perpetuating from Massachusetts (Mr. MOAKLEY), legislation. the class warfare of the poor versus the whom I respect and admire, for his Mr. MOAKLEY. Mr. Speaker, I yield rich, us versus them, but the fact of leadership. I thank him very much for myself such time as I may consume. the matter is that there is even a his help and, hopefully, we will take up Mr. Speaker, it is always a pleasure minor technical correction in there. his suggestion as it relates to the to be with my chairman, and if he All we are saying is that the overall Dreier amendment a little bit later in would listen for a moment, maybe I bill cuts taxes. Let us be in favor of re- the debate, either today or tomorrow. can show him the error of his ways. ducing that burden on working people I just want to say, the intent of this I would say to the gentleman from in this country. That is the reason we bill is about information. That is, to New York (Mr. SOLOMON), I am ready, are going ahead with this amendment. give the Members of this House more H3122 CONGRESSIONAL RECORD — HOUSE May 13, 1998 information so they can make a better us whose pocketbooks are affected. So The Congress should take prudent decision on public policy. It is about I want to applaud the Committee on steps and exercise due diligence in information. It is about accountability. Rules for the open rule and the full and passing laws that impact upon the lives I want to assure everyone, this will not open debate I am sure we are going to and pocketbooks of average citizens in stop unfunded mandates. It will simply have on this. reasonable ways only. Sometimes there require a debate when there is an un- Second, I want to commend them for are real costs associated with legisla- funded mandated and a point of order working with us to perfect this legisla- tive changes, costs that may not al- is made. We then can make a decision tion and, frankly, to move the legisla- ways be obviously stated in the text of by a vote whether or not we want to tion forward. There is a lot going on a bill or even realized. Sometimes, be- stop an unfunded mandate with the right now in this Congress despite what lieve it or not, we have unintended neg- point of order process. we might hear out there, and the agen- ative consequences from some of our So really this is a pretty simple idea. da is busy. There are a lot of different legislation. It just requires us to get the informa- items the Committee on Rules is tak- This legislation sets up a process to tion and then be held accountable for ing up. This one is in their jurisdiction, force some added scrutiny and hope- how we respond to that information. and they were willing to put it, frank- fully ensure that we minimize costly, I would encourage Members to vote ly, on the front burner and deal with it unintended consequences. I have long for this rule, and if they have a sugges- in an expeditious manner, I think supported this type of change because tion on how we can improve this idea, again not only to move it forward, but it strengthens accountability and pro- this simple idea, come over here, to improve it. motes sunshine, two fundamental prin- present their ideas, and then we will I want to thank the gentleman from ciples of government that should be the vote it up or down. California (Mr. DREIER) and I want to hallmark of everything we do. With that, I want to thank my col- thank the chairman, the gentleman Mr. DREIER. Mr. Speaker, as has leagues for giving us this opportunity. from New York (Mr. SOLOMON), and the been said probably most eloquently by I would also like to thank the gen- ranking member, the gentleman from the gentleman from South Boston, this tleman from Ohio (Mr. PORTMAN), who Massachusetts (Mr. MOAKLEY) for mov- is an open rule. For that reason, I urge has been a leader in the unfunded man- ing this process forward. I look forward my colleagues on both sides of the aisle to the debate. dates effort for his involvement, for his to support the measure. Mr. DREIER. Mr. Speaker, I yield 2 help and his assistance. Mr. Speaker, I yield back the balance minutes to the gentleman from Mr. MOAKLEY. Mr. Speaker, I hope of my time, and I move the previous the rule passes. I think the gentleman Sanibel, Florida (Mr. GOSS), chairman of the Permanent Select Committee on question on the resolution. from California (Mr. CONDIT) is exactly The previous question was ordered. correct, that we should debate the Intelligence and the Subcommittee on Legislative and Budget Process of the The resolution was agreed to. amendments on the floor. A motion to reconsider was laid on Mr. Speaker, I yield back the balance Committee on Rules. Mr. GOSS. Mr. Speaker, I thank my the table. of my time. Mr. DREIER. Mr. Speaker, I yield friend, the distinguished gentleman f from greater metropolitan San Dimas, such time as he may consume to the and my equally good friend from the gentleman from Cincinnati, Ohio (Mr. FINANCIAL SERVICES Commonwealth of Massachusetts for PORTMAN), the lead author on this leg- COMPETITION ACT OF 1997 their graciousness in allowing me to islation. speak this morning on this subject. Ob- Mr. SOLOMON. Mr. Speaker, by di- Mr. PORTMAN. Mr. Speaker, I thank viously, I think it is an important rection of the Committee on Rules, I the gentleman from California for issue. call up House Resolution 428 and ask yielding me the time. I think this is a good rule, an open for its immediate consideration. Let me say, I appreciate the words rule. I congratulate the leadership for The Clerk read the resolution, as fol- from the gentleman from California these open rules, especially on things lows: (Mr. CONDIT), who is the lead sponsor; I like the Mandates Information Act of am his cosponsor, on this. This thing is H. RES. 428 1998. Resolved, That at any time after the adop- just common sense, good government. I think this bill takes the next step I applaud the Committee on Rules for tion of this resolution the Speaker may, pur- on the issue of unfunded mandates that suant to clause 1(b) of rule XXIII, declare the two reasons, one, for coming up with we need to take. It recognizes the need House resolved into the Committee of the an open rule. I think it is as fair a rule for greater accountability in this Con- Whole House on the state of the Union for as we are going to get. I think we will gress for the impact that our actions consideration of the bill (H.R. 10) to enhance have a lively debate on a number of have on the lives of real people outside competition in the financial services indus- amendments that will be offered on the the Beltway. Those are the people we try by providing a prudential framework for floor. We may have some debate on the work for. the affiliation of banks, securities firms, and other financial service providers, and for legislation itself, the basic bill, one as- In the 104th Congress, the new major- pect of it, and that is healthy and that other purposes. The first reading of the bill ity broke ground on this subject, im- shall be dispensed with. All points of order is good. plementing changes in our House rules against consideration of the bill are waived. One of best things about this is it to make sure that Members are aware General debate shall be confined to the bill gives us an opportunity to talk about of the fiscal impact on State and local and shall not exceed one hour, with thirty an important issue which is, how does governments of legislation when we minutes equally divided and controlled by this Congress go about determining pass it. At that time, we included illus- the chairman and ranking minority member whether to impose a mandate, in this trative provisions relating to so-called, of the Committee on Banking and Financial case, on the private sector. We did this quote, ‘‘private sector mandates’’ or Services and thirty minutes equally divided and controlled by the chairman and ranking in the public sector 3 years ago; now it ‘‘Federal actions and requirements’’ is time to talk about the private sec- minority member of the Committee on Com- that impose significant costs on ele- merce. It shall be in order to consider as an tor. ments of the private sector. original bill for the purpose of amendment My view is that we ought to do it in Today we move that commitment on under the five-minute rule the amendment a much more informed way, knowing private sector mandates to a par with in the nature of a substitute printed in part what the costs are, having an honest what we are already doing vis-a-vis the 1 of the report of the Committee on Rules ac- debate about that and then, in the end, public sector. It makes sense. It is companying this resolution. That amend- determining by a majority vote wheth- what we said we were going to do. ment in the nature of a substitute shall be er in fact to proceed with legislation This legislation is technical, and it considered as read. All points of order that imposes new burdens, particularly sounds a little complicated, but what it against that amendment in the nature of a substitute are waived. No amendment to on smaller businesses. Where the bur- really boils down to is a straight- that amendment in the nature of a sub- den is on the business, it is on the forward concern to American business- stitute shall be in order except those printed workers whose job opportunities are re- men, consumers, workers, taxpayers, in part 2 of the report of the Committee on duced; and it is on the consumer, all of that is, all of us across the country. Rules. Each amendment may be offered only May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3123 in the order printed in the report, may be of- amendment and shall be considered as bank performed in an operating sub- fered only by a Member designated in the re- read. sidiary structure, and revises section port, shall be considered as read, shall be de- This text, which has been available 104 of the bill governing insurance batable for the time specified in the report to the House since March 30, is iden- sales. equally divided and controlled by the pro- That is a very, very controversial ponent and an opponent, shall not be subject tical, and Members back in their of- to amendment except as specified in the re- fices or wherever they might be, this is issue, but it speaks to this divided port, and shall not be subject to a demand very important, the text that is before House on the issue. And the amend- for division of the question in the House or us today is identical to the text the ment of the the gentleman from New in the Committee of the Whole. All points of Committee on Rules made in order dur- York (Mr. LAFALCE) will speak very order against the amendments printed in the ing an earlier rule for this bill, except clearly to that. report are waived. The Chairman of the Com- the credit union title, which was In addition, I would point out that mittee of the Whole may: (1) postpone until dropped and passed by the House under the gentleman from New York (Mr. LA- a time during further consideration in the suspension of the rules on April 1. So FALCE) is the ranking member of the Committee of the Whole a request for a re- Committee on Banking and Financial corded vote on any amendment; and (2) re- the legislation is identical, minus the duce to five minutes the minimum time for credit union legislation. Services and, therefore, he should have electronic voting on any postponed question In addition, for the further informa- the first priority of offering that that follows another electronic vote without tion of Members, the gentleman from amendment dealing with operating intervening business, provided that the mini- Iowa (Mr. LEACH) printed this text in subsidiaries. But in addition to that, mum time for electronic voting on the first the CONGRESSIONAL RECORD on April 30 the gentleman from Louisiana (Mr. in any series of questions shall be 15 min- so, again, if they do not have a copy of BAKER), a Republican, who is a member utes. At the conclusion of consideration of of the Committee on Banking and Fi- the bill for amendment the Committee shall the bill itself, if Members get the CON- GRESSIONAL RECORD of April 30, it lays nancial Services and a subcommittee rise and report the bill to the House with chairman, also has a comprehensive such amendments as may have been adopted. out the entire matter before us. Any Member may demand a separate vote in The rule also waives all points of amendment which makes several major the House on any amendment adopted in the order against the amendment in the changes in the bill, including operating Committee of the Whole to the bill or to the nature of a substitute. subsidiaries. amendment in the nature of a substitute So Members have two bites at the made in order as original text. The previous b 1130 apple dealing with that very, very con- question shall be considered as ordered on The rule further provides that no troversial issue. His amendment the bill and amendments thereto to final amendment shall be in order except amends also the insurance title of the passage without intervening motion except those printed in the Committee on bill. It eliminates community reinvest- one motion to recommit with or without in- ment requirements for institutions structions. Rules report, which may be offered only in the order printed, which may with assets less than $100 million. And, The SPEAKER pro tempore. The gen- be offered only by a Member designated finally, it contains an operating sub- tleman from New York (Mr. SOLOMON) in the report, which shall be considered sidiary proposal, as I just outlined. is recognized for 1 hour. These two amendments are debatable Mr. SOLOMON. Mr. Speaker, for the as read, shall be debatable for the time specified in the report, equally divided for 40 minutes each. And I would sug- purposes of debate only, I yield the cus- gest that Members ought to come over tomary 30 minutes to the gentleman and controlled by the proponent and an opponent, and shall not be subject to here and they ought to listen to that from Texas (Mr. FROST), pending which amendment except as specified in the debate in about an hour because it is I yield myself such time as I may con- very, very important to the final pas- sume. During consideration of this res- report. The rule also waives all points of sage of the bill. olution, all time yielded is for the pur- The rule also addresses the conten- order except the amendments printed pose of debate only. tious issue of commercial baskets in an in the report. The rule allows the Mr. Speaker, this legislation before evenhanded manner as well. The gen- chairman of the Committee of the us is a structured rule providing for the tlewoman from New Jersey (Mrs. ROU- Whole to stack votes, and, finally, the consideration of H.R. 10, the infamous KEMA), who is chairman of a sub- rule provides for one motion to recom- H.R. 10. It is the Financial Services committee of the Committee on Bank- mit with our without instructions. Modernization Act of 1998. ing and Financial Services, will offer Mr. Speaker, this rule allows for con- This rule is balanced and fair to both her amendment to increase the percent sideration of a total of 12 amendments supporters and opponents of the legis- of the amount of annual gross revenue and one bipartisan manager’s amend- lation. The rule allows for consider- from which a financial holding com- ment. There are 7 Republican amend- ation of all of the major substantive pany would be permitted to derive from issues in the realm of financial services ments and there are 4 Democratic commercial activities. reform dealing with banking, dealing amendments. The rule, like the under- The bill, keep in mind, has a 5 per- with securities and dealing with the in- lying legislation, enjoys bipartisan cent basket in it, and the gentleman surance industry, three of the most im- support, strong support from both sides from Iowa (Mr. LEACH) will then offer portant industries in this Nation be- of the aisle. an amendment to eliminate the com- cause, as their success goes, so goes the The manager’s amendment, which in- mercial basket entirely. Each of the success of all of the other industries cludes important consumer protection basket amendments are debatable for throughout our country. provisions, agreed to by the chairman 30 minutes. Passage of the rule today is another of the committee of jurisdiction and So the bill, containing a 5 percent step forward in the deliberative process the ranking member of the Committee basket, is then allowed to be amended in this Congress on this issue that has on Commerce, the gentleman from by Members from both sides of the been going on now for more than a dec- Michigan (Mr. DINGELL), one of the issue, one that would increase that bas- ade, and it is important that we take most respected Members of this body, ket and another that would decrease it this stride here today. and the most senior Member of this en- to zero. That is fair and that is why Mr. Speaker, the rule provides for 1 tire body, by the way, will be consid- Members should come over and vote for hour of general debate, 30 minutes ered first after general debate. this rule. equally divided between the chairman The House will then proceed imme- The rule then allows for seven other and ranking member of the Committee diately, and this is important for Mem- amendments debatable for 10 minutes on Banking and Financial Services. bers to be listening to, the House will each, and that could be expanded by The rule also waives all points of then proceed immediately to a major unanimous consent if need be, which order against consideration of the bill. substantial proposal offered by the address several issues in the insurance The rule makes in order an amendment ranking member of the Committee on field, the thrift field, and the small in the nature of a substitute which is Banking and Financial Services, the bank areas, all of which Members have printed in part 1 of the committee re- gentleman from my home State of New divided attention to. In this way, the port and which shall be considered as York (Mr. LAFALCE), which allows for rule allows significant financial serv- an original bill for the purposes of additional financial activities by a ices alternatives to be debated and H3124 CONGRESSIONAL RECORD — HOUSE May 13, 1998 voted on this floor. Everybody will be banking industry, the insurance indus- Mr. Speaker, I would urge Members heard. try and the securities industries of the to move this process forward. We have Mr. Speaker, this rule meets the twin United States be able to compete inter- studied these issues extensively in our goals the Committee on Rules grappled nationally, because our whole economy committees for years now. More than with yesterday, allowing fair and vig- depends on it. Jobs in America depend 10 years. We now have an appropriate orous debate on various alternatives on it. A healthy and competitive finan- rule before the House. Let us pass the and yet moving this delicate com- cial services sector of the economy rule and then the bill and send it to the promise forward to House passage. leads to overall growth and stability in other body for their consideration. Mr. Speaker, the rule continues the this country. Mr. Speaker, I reserve the balance of spirit of compromise surrounding this Mr. Speaker, the recent waive of my time. legislation. I have learned many things mega-mergers and the resulting media Mr. FROST. Mr. Speaker, I yield my- in my 20 years in this institution, but attention to those activities only point self such time as I may consume. one of the best lessons I have learned out further the need for this legislation Mr. Speaker, 7 weeks ago the House was the value of compromise for the in the way that it is crafted today, and Republican leadership was forced to public good, and that is what we need the way it will be crafted on this floor withdraw from consideration an unfair to have here today to move this legis- under a fair debate. and ill-considered rule. Today the Re- lation forward. A bipartisan consensus has coalesced publican leadership has recommended a In this regard, I wish to salute my around the bank holding company rule which, while not perfect, is much friend, the gentleman from Virginia structure as the prudent way to allow more fair and one which allows the (Mr. BLILEY), the chairman of the Com- for increased financial activities, and House to debate many of the issues re- mittee on Commerce, and the gen- the chairman of the Federal Reserve lated to modernizing the financial tleman from Iowa (Mr. LEACH), chair- Board has weighed in in strong favor of services industry in this country. man of the Committee on Banking and this report. One of the most respected Most importantly, the ranking mem- Financial Services, as well as the gen- people in the United States. Any at- bers of both the committees of jurisdic- tleman from Ohio (Mr. BOEHNER), tempt to modernize our financial serv- tion have been given the opportunity chairman of the Republican Conference ices law should clearly not toss out the to offer important amendments to the conference. These Members deserve lessons of history, and I will talk about bill. Seven weeks ago, the Republican great acclaim, as well as the gen- that in just a minute. majority denied these Members the op- tleman from Michigan (Mr. DINGELL) Mr. Speaker, having served in the portunity to offer these amendments and the gentleman from New York (Mr. House during the S&L crisis, I can as- and that action contributed to the LAFALCE) for their patient attention to sure Members that financial services eventual withdrawal of the rule. this very, very important matter. modernization should be crafted in a Mr. Speaker, without a doubt, H.R. 10 Mr. Speaker, many Members of Con- manner which does not jeopardize the is a controversial bill, but I think all gress on both sides of the aisle have interest of the investor, and that Members will agree that financial mod- made substantial compromises in order means not only people living on fixed ernization is essential to ensure that to move this legislation forward. In ad- incomes that have accumulated a little our financial services industry can re- dition, the affected industries have par- stock over their lives and now live on main competitive in today’s global ticipated in good faith in these talks that income, it means the pension sys- economy. More than ever, the ability and made significant changes in their tems throughout this country, union of our financial institutions to compete positions to accommodate the concerns pensions or the New York State retire- globally is critical to maintaining our of other stakeholders. position of economic strength. There is Mr. Speaker, the willingness to com- ment system, all investing in the stock little debate on that point. Moreover, promise among several major banks market. These have to be protected. We the question of how we construct a fi- and the insurance industry and the se- cannot let the same thing happen to nancial modernization scheme is a sub- curities industries have allowed this them that happened with the S&L cri- legislation to proceed to where it is sis back in the early 1980s. ject of heated debate. This rule, unlike today. Unfortunately, this spirit of Mr. Speaker, the news in the last few the rule brought up last month, allows compromise was not pervasive in the weeks should be enough evidence for for debate on some of the major points Washington-based banking trade asso- Members to be convinced the time has of contention in the whole question of ciations, who have flatly rejected any finally arrived to pass this bill, to get financial services modernization. compromise. it over to the Senate, and then get it to First, Mr. Speaker, this rule allows The letter that we received from the conference so that the administration for the House to choose between two Business Bankers Roundtable, from the can weigh in as well as the Senate and structures for modernizing financial in- American Bankers Association, and the as well as the House. Defeat of the bill stitutions and for eliminating the bar- Independent Bankers Association had today will prevent that from happening riers between banking securities and the mitigated gall to write a letter and and could, my colleagues, result in insurance activities. As currently writ- say no matter what this Congress does chaos throughout the financial mar- ten, H.R. 10 allows for a direct affili- on this floor, no matter what combina- kets of not only the United States but ation of these activities through the tion of amendments are adopted, that the world itself. creation of a new holding company they oppose the bill. If my colleagues The world market has changed right structure which would be overseen by want to know why, it is because they before our eyes and we are diminishing the Federal Reserve Board. Each affili- want a free reign. I will get back to the credibility of this lawmaking body ate, however, would be subject to regu- that in just a minute. This is so dis- if we do not act here today. lation by its own functional regulator; appointing, given the strong support Mr. Speaker, the Committee on Rules in other words, banks by banking regu- for this legislation among some of the is presenting the House with a variety lators, securities by the SEC, and in- country’s most prominent financial in- of alternatives on this financial serv- surance by State insurance regulators. stitutions. ices reform with this rule today. The This rule, unlike its predecessor, al- When I was 3 years old, the Glass- House will have an opportunity to lows the ranking member of the Com- Steagall Act prohibiting affiliation work its will, and that is the way that mittee on Banking and Financial Serv- with commercial banking and securi- it should be. ices the opportunity to offer an amend- ties activities was passed. And that Mr. Speaker, I believe that Members ment to this key provision. The La- was 64 years ago. The pace of change in of Congress have a responsibility to Falce-Vento amendment would allow the world and in the marketplace has lead and to legislate. If Congress does banks to choose between the holding been absolutely stunning over time. not act now, one day we will wake up company concept or an operating sub- Our financial services laws are, with- and the world will suddenly be so com- sidiary system, which would be subject out question, obsolete for a modern pletely different it will be unrecogniz- to regulation by the office of Comptrol- global economy. able and we will have done nothing to ler of the Currency. Without going into Mr. Speaker in, this new global envi- shape it, and every Member of this the details of the differences between ronment it is imperative that the body can be ashamed of themselves. those two regulatory schemes, suffice May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3125 it to say that this is a critical dif- our ranking member on the Committee this House will face this Congress. The ference which deserves consideration on Commerce, working very closely implications of mixing commerce and and debate in the House. with the gentleman from Virginia (Mr. banking raise sensitive questions in- In addition, Mr. Speaker, the rule in- BLILEY) and the gentleman from New volving the safety and soundness of our cludes as a manager’s amendment, pro- York (Mr. MANTON), our ranking mem- federally insured banking system. posals first brought up by the ranking ber on my subcommittee; as well as the The viability of the traditional na- member of the Committee on Com- Committee on Banking and Financial tional bank charter and the issue of merce. In the first rule proposed for Services members, led by the gen- what we expect in return for the grant- consideration of H.R. 10, the Repub- tleman from Iowa (Mr. LEACH) the gen- ing of these charters in the form of lican leadership excluded from debate tleman from Minnesota (Mr. VENTO) Bank Community Reinvestment Act the consumer protection amendments and the gentleman from New York (Mr. obligations will be forcefully and pas- proposed by the gentleman from Michi- LAFALCE) and others who were able to sionately debated under this rule. That gan (Mr. DINGELL). However, in round craft this very important manager’s was not true of the rule a month or so two, the Dingell amendment has now amendment that provides some reason- ago. I commend the chairman of the become the Bliley-Dingell-Leach man- able consumer protection, but still al- Committee on Rules for permitting it ager’s amendment and will be the first lows the competitive nature of the en- under today’s rule. amendment considered under the rule. terprises to go forward. However, in speaking for the Demo- Allowing these amendments to be In addition, the rule also eliminates crats on the House Committee on considered is not only fair, Mr. Speak- the bulk of the thrift title, which has Banking and Financial Services, I am er, it is necessary for the House to con- been of great concern to many thrifts not able to say that we are adequately sider them if we are to truly debate the throughout the country who under- satisfied with the rule. Simply stated, issue of modernizing banking laws that standably have not wanted to give up it is incomplete. The issue of financial are from another age. Regardless of their charter. The legislation will now modernization is one of the most com- each Member’s position of how to ac- essentially leave all thrifts as they are plex bills we shall ever consider. We complish this long overdue change in under current law. must try to anticipate the future and our banking laws, it is important the I look forward, Mr. Speaker, to an in- interject policy considerations into an House be able to examine this issue formed debate on these necessary intense marketplace struggle between thoroughly, something that the Repub- changes to enhance the competitive- industry giants. lican earlier had not tried to do. This is ness of our financial services system. Why must we consider such matters? a much better rule and will allow for Let us hope that, after all these years, Millions of our constituents use finan- comprehensive debate on bringing our Congress can come together, pass a cial services daily and depend on the financial services industry into the 21st measured bill that breaks down a lot of accuracy and dependability of these century. these barriers to competition, allows services. They demand to be protected Mr. Speaker, I reserve the balance of for the affiliation between banks and against abusive business practices and my time. insurance companies and securities insured against the loss of their sav- Mr. SOLOMON. Mr. Speaker, I yield companies to give the consumer the ings. such time as he may consume to the kind of savings that have been pro- The rule we have before us is incom- gentleman from Finley, Ohio (Mr. jected in the $15 billion and more range plete. The managers of the Financial OXLEY), one of the most respected per year with the reduction of fees and Services Act of 1998 have expended hun- Members of this body, who has contrib- the necessary advantages that come dreds and hundreds of hours of work in uted so much time to this issue as a with these changes that are inherent in the two major committees of the House subcommittee chairman of the Com- this bill. that have considered this bill; and So this is a fair rule. It is one that mittee on Commerce. under the rule, we each will have but 15 was carefully crafted to allow all sides Mr. OXLEY. Mr. Speaker, I thank minutes to present our views in general in the debate to have their say and to the gentleman from New York for debate. I think that is inadequate. yielding me this time and congratulate have their vote, and I commend it to Secondly, while there are a dozen him on an excellent product, this rule. the membership. amendments that have been made in Indeed, this does allow the House to Mr. FROST. Mr. Speaker, I yield 4 order, most of them are either studies work its will on several important minutes to the gentleman from New or peripheral issues to the key provi- issues dealing with H.R. 10, and I do York (Mr. LAFALCE). sions of the legislation. They could rise in support of the rule for the Fi- Mr. LAFALCE. Mr. Speaker, I thank have been accepted in large part in the nancial Services Act of 1997. the gentleman for yielding me the manager’s amendment. This is the 10th time that Congress time. has tried to repeal Glass-Steagall since The bill does some good things with On the other hand, 17 amendments 1979. In the absence of congressional respect to the Glass-Steagall law with were filed by Democratic members and action, regulators have stepped in and respect to bank holding company law. not made in order. I do not say every essentially usurped congressional au- But it does some very bad things with one should have been made in order. thority to make national policy for fi- respect to the totality of the national But many of those amendments went nancial services. I believe it is time bank charter. It is primarily for those to the heart of the bill’s purpose. now for Congress to consider this issue reasons and the adverse impact that For example, amendments were filed and for elected representatives to dis- those changes would have on consum- by the gentleman from Massachusetts charge their constitutional authority ers and the ability of any administra- (Mr. KENNEDY) that would condition rather than unelected regulators. We tion to effectuate bank policy and eco- the affiliation of financial giants on are, indeed, responsible and answerable nomic policy that virtually every con- their compliance with fair housing and to our constituents, and that is the sumer organization in America that I anti-redlining practices. The gen- way it should be. Accountability is am aware of opposes H.R. 10, even with tleman from New York (Mr. HINCHEY) what this body is all about. the passage of the manager’s amend- filed amendments that dealt with ATM ment, and that the administration a fees and the practice of consumers re- b 1145 month ago, yesterday, and today has ceiving unsolicited loan checks in the The rule makes in order a bipartisan indicated that it would veto H.R. 10 in mail. The gentlewoman from California manager’s amendment dealing with its present form even with the passage (Ms. WATERS) raised real questions important issues, including consumer of the manager’s amendment. That is about the commitments of financial in- protection, SEC backup authority, in- the bill that we have, and we will ad- stitutions to their community needs. formation sharing among the regu- dress that later. These amendments should also have lators, and provides for a study of com- Now to the rule. The rule under con- been made in order. munity needs. sideration makes in order a number of Mr. FROST. Mr. Speaker, I yield 5 And indeed, I congratulate the gen- thoughtful amendments which do minutes to the gentleman from Michi- tleman from Michigan (Mr. DINGELL), frame some of the most difficult issues gan (Mr. DINGELL). H3126 CONGRESSIONAL RECORD — HOUSE May 13, 1998 (Mr. DINGELL asked and was given The choice, then, here before us is Mrs. ROUKEMA. Mr. Speaker, I permission to revise and extend his re- clear. I intend to vote for the rule on thank the chairman of the Committee marks.) H.R. 10, and I intend to vote for the on Rules. Mr. DINGELL. Mr. Speaker, I rise in manager’s amendment. I intend to vote Mr. Speaker, I rise in strong, strong support of the rule, and I rise in sup- against all other amendments, includ- support of this rule. We have to have port of the bill, and I rise in support of ing amendments which would permit this debate today. It is an essential de- the manager’s amendment. greatly expanded high-risk activities bate, and it must move forward with This is a fair rule. It deserves the in bank operating subsidies, a real dan- approval of this rule. If we fail to act consideration and support of every ger to our economic system, and great- today, and I have got to stress this, I Member of the House. The rule makes er mixing of banking and commerce ac- have been on this Committee on Bank- in order 12 amendments to be offered tivities than the bill allows. ing and Financial Services for a long by Members of the majority and the I urge my colleagues to support the time, and I have seen lots of changes minority. These amendments deal with rule. I urge them to support the man- here, but I have got to stress that if we the major issues that were raised dur- ager’s amendment. And I urge my col- fail to act today, we are losing the op- ing the committee consideration of leagues to oppose all those other portunity to reform our financial sys- this legislation, and they make pos- amendments which I view as unwise. tem in a meaningful and rational way. sible full and fair and open debate on This is a good rule. The bill, if craft- In my opinion, it is now or never for an important piece of legislation. ed according to the language of the this Congress. I am pleased to tell my colleagues rule, will be a good bill. Let us pass the I certainly appreciate the strong sup- that the process that has brought us to rule. Let us pass the bill. Let us sup- port of the ranking member of the where we are at this moment is a fair, port the manager’s amendment. And Committee on Commerce, the gen- open, and bipartisan one. I want to let us resolve an issue that has plagued tleman from Michigan (Mr. DINGELL), thank my good friend, the gentleman this country for a long time, in an hon- who brings not only his own personal from Virginia (Mr. BLILEY), of the orable fashion, in a way which serves strong support but establishes biparti- Committee on Commerce and the gen- the interest of the country. san cooperation here. tleman from Iowa (Mr. LEACH) of the I want to again commend my col- I might stress to those who are not Committee on Banking and Financial leagues who have made this possible, on the Committee that may have fol- Services for their leadership and for including my good friend, the gen- lowed this, particularly our newer their courage and for their willingness Members, we will lose the opportunity tleman from New York (Mr. SOLOMON), to work with me to build reasonable the chairman of the Committee on here to bring to conclusion the Depres- consumer and investor protection into Rules. sion era. We are talking about Depres- this bill. The SPEAKER pro tempore (Mr. sion era laws, 1930s, we have got to up- I want to point out that the leader- CAMP). The gentleman from New York date them. The important thing is that ship of the majority has been fair in if we do not do it here today, we will (Mr. SOLOMON) has 14 minutes remain- their actions on this matter and that ing, and the gentleman from Texas lose the opportunity to stop the regu- we on this side should appreciate that lators and the courts from doing the (Mr. FROST) has 18 minutes remaining. fact. With the support of my good Mr. SOLOMON. Mr. Speaker, I yield jobs that Members of Congress should friend, the gentleman from California myself such time as I may consume. be doing. (Mr. FAZIO) and many other Members Even though the time is not balanced b 1200 on both sides of this aisle, I am pleased yet, Mr. Speaker, I will yield some to be joining the gentleman from Vir- Congress must act now, not allow the more time. ginia (Mr. BLILEY) and the gentleman regulators, in an ad hoc, piecemeal ac- But I want to say to my good friend, from Iowa (Mr. LEACH) in offering the tion and the courts to do what Con- the gentleman from Michigan (Mr. DIN- manager’s amendment, which is made gress is refusing to do with its statu- GELL), the senior Member of this entire in order under the rule. tory responsibility. That amendment includes the con- body from either side of the aisle, he is Technology and market forces have sumer and investor protections that I one of the most respected Members on broken down the barriers between have sought throughout the process. It the other side of the aisle, and we ap- banking, securities, and insurance. Our provides a safe and sound framework so preciate his statement. current framework, our current law, that the financial services industry, Let me just briefly take to task my however, is stuck in the 1930s, and it which accounts for some 18 percent of good friend, the gentleman from New has limited our financial institutions’ the GNP of this Nation, can compete York (Mr. LAFALCE), because he has in- ability to compete in the marketplace, efficiently and effectively in the new sinuated that we have discriminated the global marketplace. global financial marketplace of the against the minority in this rule; and By not acting here today, we do not 21st century. let me just state for the record, and change what is transpiring around the With recently announced mergers, in- here is the record, that every single world and here in our own domestic cluding giant banks and other large fi- Democratic amendment that was of- market with foreign bankers and secu- nancial institutions, a lot of fear has fered dealing with policy was made in rities people coming in. In the absence been raised over what the new financial order in one form or another. That in- of our action here today, again, I want marketplace will look like. The truth cludes LAFALCE and VENTO and MAR- to repeat it, Federal agencies and the is that, without H.R. 10, the financial KEY and SANDERS and DINGELL and courts will find the loopholes and novel industry megamergers and consolida- MORAN. interpretations to allow financial insti- tions will continue. The regulators will So the gentleman, if he had other tutions to adapt to the marketplace. It continue their turf wars. The new fi- issues in mind, other policies, he will be a blot on the reputation of this nance giants will overwhelm a regu- should have introduced them as amend- Congress. latory patchwork process that lacks ments. And out of respect to him as the We have had recent examples of the adequate authority. And U.S. tax- ranking member of the Committee on Comptroller’s decision to allow na- payers will probably face another sav- Banking and Financial Services, I tional bank subsidiaries to engage in ings and loan bailout situation and liti- would have made them in order with- activities that they never should have gation will prevail. This time, however, out question. been allowed to accept under new stat- it will be the banks. Mr. Speaker, I yield 3 minutes to the utes. Congressional inaction has led to On the other hand, if H.R. 10 is en- gentlewoman from New Jersey (Mrs. this piecemeal kind of regulatory re- acted, clear regulatory authority will ROUKEMA) one of the most distin- form, and honestly, Members do not be present, boundaries will be estab- guished Members of this body. She is want to go home and tell their people lished within which financial services the gentlewoman from the Fifth Con- in a few years, when we have another firms will be free to compete in a fair gressional District in New Jersey, savings and loan type debacle, that and open manner, and litigation, confu- chairman of the Subcommittee on Fi- they voted against strong statutory sion, and taxpayer exposure will be re- nancial Institutions and Consumer reasons to redefine financial institu- duced. Credit. tions. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3127 Mr. Speaker, I do congratulate and in a state of denial. It is like finally we ment that the gentleman from New concur with the Committee on Rules. dropped somebody in the middle of the York (Mr. LAFALCE) and myself have They dealt with a very difficult sub- ocean; they admit they are in the offered, but that is about the only hope ject, and they have provided for a fair water, but they have not got the abil- we have to come through this process and comprehensive debate under this ity to swim, or to take a boat for that and keep this process moving. rule with complexities here that it is matter. Maybe the boat they are tak- Frankly, this bill is a mess. I sug- hard to find a parallel to; but I think ing here is referred to as the H.R. Ti- gest, even if we pass it today, it is they have done it in a very fair way, 12 tanic. going to go to the Senate. It is not amendments with all the substance of The fact is that this bill is still in de- going to fare very well unless it gets the issues. nial. It is a grudging permission. In substantially changed. I think most of The rule for H.R. 10 makes in order 12 fact, what happens in this bill in the us have a good deal of reticence about amendments, two of which are mine. The name of modernization is that we take trusting that the Senate will straight- Rules Committee worked hard on this Rule, the national bank charter, and it gets en everything out, as my colleagues and Mr. SOLOMON and his Committee should shredded. We shred it. That is what might agree, and of course the adminis- be commended. The new Rule is an improve- happens in this bill. tration strong opposition and veto ment over the rule from late March. Under the You permit States bank subsidiaries threat persists. I think it is time to sit new Rule, members will get a chance to vote to do certain activities. You permit down and work out what needs to be on many of the most contentious issuesÐin- bank subsidiaries to do activities in done and really do true modernization. surance sales by bank, deference to the foreign countries, but you will not let It should be noted that the basic text of this, Comptroller, the National Bank Operating Sub- the banks subsidiaries function in the some 400 page, measure is a curious product, sidiary, CRA relief for small banks, and other U.S. In this bill, incredibly, at a time claimed to be derived from the Banking and provisions. Giving the members a chance to of megamergers and acquisitions, we Commerce Committee products, but frankly vote on the issues is a measure of our com- diminish the voice of consumers in many provisions and specifics were in neither mitment to fair and comprehensive full debate terms of programs like CRA the Com- of the committee products. That is why, I am on the complexities of modernization of finan- munity Reinvestment Act. Some inter- strongly opposed to the underlying text of H.R. cial institutions today's global financial net- ests do not like CRA, but it is one of 10. The manager's amendment made in order work. the only voices that we have for con- under this rule does next to nothing to address I am disappointed, however, that one sumers. So there is a grudging reluc- the serious concerns I have about the overall amendment was not permitted. Mr. MCCOLLUM tance. industry balance of this bill. No doubt many offered an amendment to the thrift title. His I admit we have to face up and deal Members have heard from consumer groups, amendment was similar to provisions of the with this. The fact is, this bill is mud- community groups, bankers, and state groups bill which were voted out of both the Banking dled. The administration does not sup- alike, that this bill is flawed. I hope we can and Commerce Committees. Regardless of port the bill in this form, and 49 of the make some substantial improvements. And your position on the issue, it should have been 50 banking associations do not. Why? therefore be able to move forward with this ruled in order. Members should have had an In the name of modernization, this bill measure with some hope of a workable meas- opportunity to vote on this issue. is not worthy of its name because it ure and better policy. Mr. Speaker, as with most things in life, takes away from financial institutions I would argue that on an issue of such im- things are not always perfect. I will support the activities what they can do today, and portance, the future of our financial services Rule. I urge my colleagues to vote ``for'' the then it calls it modernization. That industries in our country, Members may need rule. does not make any sense. more than an hour of general debate. While Mr. FROST. Mr. Speaker, I yield 4 That is why every bank in the coun- the amendments made in order have done a minutes to the gentleman from Min- try, practically, is in an uproar, other better job of making time to address the key nesota (Mr. VENTO). than those that need this fig leaf in issues on this bill, there actually are some (Mr. VENTO asked and was given order to accomplish their acquisition issues that are not addressed clearly, among permission to revise and extend his re- and merger activities. them, the thrift charter issues. Fortunately the marks.) That is where this Congress is at. I credit union measure, H.R. 1151, is not cloud- Mr. VENTO. Mr. Speaker, I rise with think we can do a lot better. I do not ing the issue, as in the March 30 version concern for this rule and significant blame the Committee on Rules. This which was pulled from consideration. concern for the outcome of this prod- rule, they have done the best they The rule importantly does make in order the uct, based on the amendments and sta- could. They had a bill that was deliv- key amendment, that is, the LaFalce-Vento tus that exists. ered to them, 400-plus pages, that in a amendment to preserve the national bank We are really facing here a bill that sense is going to grow, that they did charter. This amendment makes some bal- was not written in the Committee on not have anything to do with; and I did ancing changes in the insurance provisions, Banking and Financial Services, not not have very much to do with as one assures stronger consumer laws apply when written in the Committee on Com- of the ranking members in the Com- there are both federal and state laws, clarifies merce, a 400-page bill and a smor- mittee on Banking and Financial Serv- the matter of deference to the federal banking gasbord of amendments to it that, ices. And that is what is being proposed regulator, reinstates important study and re- frankly, will tend to grow if, indeed, to be moved. This is put together by port provisions previously in the bill, and re- some of these amendments are added people who really, in my judgment, do stores a financially viable and safe operating and as consumed could provide acute not want banking modernization. It is subsidiary for national banks so that national indigestion. a grudging, limited approach that has bank subs can engaged in all activities that Mr. Speaker, I am for banking mod- bound them. It is a balkanized, a re- are financial in nature except insurance under- ernization; I am for deregulation. But regulation of the financnail institu- writing and real estate development and in- the fact of the matter is that what has tions market. vestment. This national bank amendment worked itself into this bill in a hap- Banks in this country, my friends, raises issues of great import to the overall hazard manner and a muddled manner are the foundation of our economic issue of financial modernization, to the Mem- is obviously, on one hand, we claim to growth. We ought to be wise enough bers of the Banking Committee and the Ad- be repealing Glass-Steagall, which, of and prudent enough in this body to ministration. Its passage will be critical to the course, the regulators have helped us admit that. Nobody may love banks, I future of H.R. 10. along with over the years; and the fact guess, but the fact is that they are es- The Baker amendment that was made in is that there is a mixture today just in sential to our economic development order in my judgment a troublesome amend- the very instruments of loans, of annu- and growth. We are writing them off in ment made in order by this rule. It attempts to ities, and securities which constitute this bill. That is what we are doing. address several issues and has some positive our financial entities, so much so that The national bank charter is being points. However, it does bring in this bill the they are almost a distinction without a shredded; it is being written off in this issue of even further exempting banks from difference. bill. the Community Reinvestment Act. Under the I am for modernization, but the fact We can make some changes, modi- Baker amendment, banks with less than $100 is that this bill is really, and it is still, fications by adopting the good amend- million in assets will be exempt from CRA. H3128 CONGRESSIONAL RECORD — HOUSE May 13, 1998 That is not modernization. If we are to bring bill is going to affect the poor. No- I want to focus my remarks at this par- extraneous issues into this bill, I would sug- where in these long pages do we see ticular moment on the rule. gest that we should have looked to amend- any indication of whether or not small Although this rule, as has been ments that helped consumers, like banning business lending is going to increase. noted, is a better rule and a more open live loan checks, instead of those that hurt Every major study shows that once rule than the one which was originally consumers and communities. this legislation passes, we will see the advanced for this bill some time ago, it It should be noted that the new text of H.R. number of branch offices shrink. We is still, nevertheless, seriously defi- 10 in an era of mega-merger and acquisition will see the number of employees that cient in that it is still too closed and across financial entities lines shrinks the op- are going to be working for these insti- not open enough. portunities for consumers and communities to tutions shrink. We are going to see, This particular bill, H.R. 10, is the have a voice through CRA. much more importantly, the amount of most substantial and significant piece Further, the Baker amendment muddies the coverage under the Community Rein- of financial legislation to come before water with regard to what would be an appro- vestment Act dramatically reduced. this House in a very long time. I dare priate financial operating subsidiary of national We are going to see the tremendous en- say that there will be few Members banks. Make no mistake Mr. Baker's operating gine of growth that we have seen in our presently serving here who will vote on subsidiary is not workable or fair has been re- urban areas dry up as a result of the more significant legislation, even if jected by the Administration, or for others who shrinkage of the Community Reinvest- they stay as long as the dean of the want to see a strong and viable national bank ment Act. House, our revered friend, the gen- with real strength for the federal bank regu- Yet, even the Fair Housing Act, the tleman from Michigan (Mr. DINGELL), lator, for communities and for consumers. Fur- Fair Housing Act, which just says that some 30 years. This bill is critically thermore this amendment further seriously un- the biggest banks and the insurance important and is far-reaching. dermines the community reinvestment act. companies and the real estate firms in Let me just talk a little bit about the Having the Federal Reserve Board define this country cannot discriminate based issue of fees and how this rule refused what the OCC's banks' subsidiaries can do is on race, color, or creed, when the Jus- to address the issue of bank fees. Cus- the fox guarding the hen house, a hollow sub- tice Department has entered into con- tomers of banks find themselves in- sidiary for symbolic purposes isn't the answer sent decrees with various banks and in- creasingly paying more and more and to avoid concentration, promote competition surance companies in the United more in fees. and serve our communities. States of America, we are still going to This bill fails to address that prob- Mr. Speaker, I have worked long and hard allow them, without any hindrance, to lem, and the rule objected to our intro- and in good faith on a financial services mod- go out and merge and acquire one an- ducing an amendment which would ernization bill for many years as have most of other. have limited ATM fees. This is an my colleagues on the Banking and Financial We ought to say, fine, it is great. I amendment which had the support of Services Committee. This bill jeopardizes the think it is wonderful that we are going the very respected gentleman from appropriate balance and marginalizes the de- to allow our biggest companies to get Iowa (Mr. LEACH), the chairman of the liberate consideration and contributions of bigger and to be able to compete with Committee on Banking and Financial many Members. While this rule is not egre- other nations’ large institutions. There Services. gious as the rule was in March, the process is nothing wrong with growing big in- Nevertheless, the Committee on leaves must to be desired. Without passage of stitutions. But what we ought to make Rules decided that they should not key amendments, H.R. 10 will not have my certain of, if we are going to grow allow an amendment on this floor support. With passage of certain amendments, those big institutions, is that they which would restrict or prevent banks H.R. 10 will not have my support. look out for the little people. That is from charging their customers at ATM The rule today is apparently as good as it what this bill misses. machines. There are 90 percent of the gets in the House this Congress, hopefully we There is nothing in this bill that banks across the country now charging will be able to work the will of the House and makes certain that people are no at ATM machines, and those fees are made a good judgment on the final product. longer discriminated against because going up. They were $1 in most in- This measure H.R. 10 in its current form even of the color of their skin. Believe me, stances. Now they are going up to $1.50. with amendments is not a product which I in the financial institutions of this How long will it be before they are $2 would take any pride we could and should country, we have rampant discrimina- and $2.50 and $5? The banks are insatia- have done much better. tion. You go in and try to look at how ble in this regard. This rule does noth- Mr. FROST. Mr. Speaker, how much many minorities get home mortgage ing to prevent them from continuing to time is remaining on each side. loans, get small business loans, com- fleece the American public by charging The SPEAKER pro tempore (Mr. pared to whites coming from the same them higher and higher fees. HANSEN). The gentleman from Texas neighborhoods with the same income Furthermore, there is a broad, sweep- (Mr. FROST) has 14 minutes remaining. levels. It is atrocious. ing provision in this bill. It is section The gentleman from New York (Mr. Look at how insurance companies 104(b)(1), which preempts State legisla- SOLOMON) has 10 minutes remaining. discriminate against people around tive bodies in a very broad, sweeping Mr. FROST. Mr. Speaker, I yield 3 America. We do not do anything, and way from enacting protections for cus- minutes to the gentleman from Massa- we are going to allow them to gobble tomers, consumers across this country. chusetts (Mr. KENNEDY). one another up, to protect the poorest So even if this Congress is not pre- Mr. KENNEDY of Massachusetts. Mr. people in America. Come on, this pared to protect the banking cus- Speaker, I rise in strong opposition to ‘‘chamber of deputies’’ of America. tomers, to protect financial consumers, this rule, and I think that it is impor- Come on and stand up as parliamentar- the bill goes beyond that and makes it tant that we recognize that, while all ians for the people that in the United difficult, if not impossible, for State of us are focused on the whole issue of States need you. legislative bodies to enact fair, reason- how this bill is going to affect the big- The big banks and insurance compa- able consumer protection laws. gest and most powerful institutions in nies do not need us. It is the working This is an outrageous position, and it this country, and perhaps now, in the families of America that need their is an outrageous position on the part of world, with the new speed of mergers representatives. Stand up against the the Committee on Rules to prevent an and acquisitions taking place, we are insurance. Stand up against the securi- amendment which was suggested and creating ever larger, ever more power- ties. Stand up against the banks. Stand offered by the gentleman from Ohio ful banks and insurance companies and for the working families of America. (Mr. KUCINICH), which would have pre- securities firms. Mr. FROST. Mr. Speaker, I yield 3 empted this particular sweeping provi- We are allowing them to gobble up minutes to the gentleman from New sion of the bill. one another in a situation that makes York (Mr. HINCHEY). These are just some of the reasons a Pacman machine look, itself, like Mr. HINCHEY. Mr. Speaker, I thank why this outrageous, tight, wrong rule child’s play. But the fact of the matter the gentleman for yielding to me. ought to be defeated. is, that nowhere in this legislation is Mr. Speaker, I have some very seri- Mr. SOLOMON. Mr. Speaker, I yield there a word printed about how this ous objections to the bill in chief, but myself 1 minute to take exception to May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3129 the previous speaker and to my good bank and into these various affiliates adverse, and gives less voice to con- friend, the gentleman from Massachu- and will no longer be covered under sumers than what they have in today’s setts (Mr. KENNEDY), as well. CRA. marketplace. Mr. Speaker, in this legislation, ev- I know that the chairman is about to Mr. KENNEDY of Massachusetts. Mr. eryone knows that Jerry Solomon is make the point to me that he has an Speaker, reclaiming my time, I would proinsurance and has been for many amendment, which I think most people also point out that while the commit- years. The very fact that I am up here do not believe is going to pass, or the tee of the gentleman from Iowa (Mr. supporting this rule and supporting gentleman from New York (Mr. LA- LEACH) incorporated an amendment to this bill is because the insurance indus- FALCE) and the gentleman from Min- handle the Federal Housing Adminis- try is protected. State regulation is nesota (Mr. VENTO) have an amend- tration, the discrimination in housing protected in this bill; and do not think ment which we believe is going to have when it went to the Committee on it is not, or I would not be standing a very difficult time getting through, Rules, when the banking bill went to here supporting it. because of the fact that it stands up for the Committee on Rules that amend- As far as the gentleman from Massa- the consumer. ment was conspicuously dropped, chusetts (Mr. KENNEDY) is concerned, I would like to get back to the point which is one of the reasons I am oppos- you know, we are talking about bank of the gentleman from New York (Mr. ing the bill, despite being one of the modernization and how to protect the SOLOMON). The gentleman indicates few Democrats that supported the bill investor. We are not talking about red- that this bill is about looking out after of the gentleman from Iowa (Mr. lining districts. We are not talking the stockholders and the shareholders LEACH) in the committee. about fair housing authorities. That is of the banks of America. That is al- Mr. SOLOMON. Mr. Speaker, I yield a subject from a different committee, most directly what the gentleman said. myself such time as I may consume to from the Committee on the Judiciary. I cannot believe that that is what in respond to my very good friend, the It ought it be brought to the floor fact we view our job in the Congress of gentleman from Massachusetts (Mr. under those jurisdictions, not under the United States to be. It is not to KENNEDY), who is retiring, and this this banking bill. look out after the stockholders and body is going to miss him because he shareholders of these institutions; it is b 1215 brings a lot to the body. to look out after the people whose I want to just clarify what the gen- We ought to be concentrating on taxes back up the Federal Deposit In- tleman was trying to quote me as say- this, because it is so terribly impor- surance, the BIF, the SAIF, and all of ing. I said, ‘‘This Financial Services tant, and I will tell you why in a the basic protections, to make certain Modernization Act should be crafted in minute. that people are not discriminated a manner which does not jeopardize the Mr. Speaker, I yield one minute to against. interests of the investor or the deposi- the gentleman from Iowa (Mr. LEACH). To say we are not going to stand idly tor.’’ Mr. LEACH. Mr. Speaker, I want to by as banks suck the deposits out of a Who are those investors and who are make several points on the consumer local community, as insurance compa- those depositors? Are they all these protection and CRA protection issue. nies refuse to write insurance policies rich moguls all over this country and In several ways, CRA is expanded in to particular sections of communities, the world? I am going to tell you who this bill. One is all subsidiary deposi- as insurance companies refuse to invest they are. They are all of your constitu- tory institutions will have to have a their huge deposit base into whole sec- ents, who are investing their lifetime satisfactory CRA rating to take on any tions of America, those are the protec- savings. new powers. That is the first extension tions that we are missing in this bill. I am going to sum up when we get of CRA in this regard. Those are the protections that should done here and tell you what happened Secondly, for the first time, CRA is be foremost on the minds of the people in the S&L crisis, where the investors partially placed on the securities in- that make up the Congress of the lost their money, the depositors lost dustry and the so-called wholesale fi- United States. their money and the taxpayers lost nancial institutions. Those are expan- Mr. VENTO. Mr. Speaker, will the their money, and that is why we ought sions, not contractions, of CRA. gentleman yield? to be dealing with this legislation The third point I would like to stress Mr. KENNEDY of Massachusetts. I today. is that we are looking at expanding in yield to the gentleman from Min- Mr. Speaker, I yield one minute to addition the antitrust authorities of nesota. the gentleman from Iowa (Mr. LEACH), the United States of America. If the Mr. VENTO. Mr. Speaker, I would the chairman of the Committee on managers amendment is adopted, we point out that one of the Dingell-La- Banking and Financial Services. will have stronger antitrust laws. We Falce amendments, which was offered Mr. LEACH. Mr. Speaker, just briefly will move in the direction of greater on March 30th, which was supposed to to respond to the gentleman from Mas- oversight, not less, of the antitrust have been in order, would have pro- sachusetts (Mr. KENNEDY), whose per- laws of the United States, as applied to vided an expansion of CRA to some of spective I think we should listen to financial institutions. the other financial entities. That is very carefully, this bill does advance These are very important consumer conspicuously absent from consider- low cost banking accounts as obliga- provisions, and I think that one should ation of what is being considered on tions of certain kinds of banking insti- be very cautious about reaching judg- today. I would just point out that that tutions, which is a very powerful step ments to the contrary. is conspicuously absent from the man- forward to protect low income people. Mr. FROST. Mr. Speaker, I yield 3 agers amendment today. Secondly, in terms of protecting minutes to the gentleman from Massa- I intend to support the managers smaller institutions, this bill allows chusetts (Mr. KENNEDY). amendment. I think it is good, as far as community institutions of a smaller Mr. KENNEDY of Massachusetts. Mr. it goes. I think the concern is that, in size to tap into the Federal Home Loan Speaker. I want to thank my good and of itself, it does not go far enough Bank system, which is a government- friend for yielding me time. to address the concerns of consumers sponsored enterprise, to be able then to Mr. Speaker, I just would like to re- and the community. marshal low cost loans for farmers and spond by pointing out that the chair- I appreciate the antitrust provisions, for small businesses. This is a new man of the Committee on Banking and as our chairman, the gentleman from power designed for small institutions, Financial Services knows full well that Iowa (Mr. LEACH) and I together had basically to serve smaller commu- under the legislation that is before us written and worked on those and put nities. These are very extraordinary there will be a dramatic shrinking of them in the bill and are now included new powers. the amount of money that goes into in the managers amendment. It is one Finally, let me just conclude by say- the communities across this country good thing we brought back that was ing all of us are concerned about some under the Community Reinvestment not in the March 30 configuration. But of the trends in finance today. The Act, by virtue of the fact that the sub- the fundamental issue is that there is a question is not whether the trends are sidiaries will now be pushed out of the shrinkage of CRA that goes on, will be all wrong, but whether this bill applies H3130 CONGRESSIONAL RECORD — HOUSE May 13, 1998 more humanity and more reasonable- say, you should have thought about services industry and result in lower ness in controlling and constraining that before you decided to spend most prices and better services. This could those trends. I believe it does. of the Congress in recess, instead of save $15 billion each year. Mr. FROST. Mr. Speaker, I yield 3 staying here and doing your work. Support the bill and the rule. minutes to the gentleman from Texas, We could have tried to work on this Mr. FROST. Mr. Speaker, I yield 30 Mr. BENTSEN. earlier. We could have brought the par- seconds to the gentleman from Texas (Mr. BENTSEN asked and was given ties together, instead of having three (Mr. BENTSEN). permission to revise and extend his re- or four people put the bill together in Mr. BENTSEN. Mr. Speaker, with all marks.) a back room. We could have tried to due respect to the chairman, actually Mr. BENTSEN. Mr. Speaker, first of pass it. We can always change it. That the gentleman did not make my all I want to say I have the greatest re- is what we are elected to do. But we amendment in order. It was the Vento- spect for the chairman of the banking chose not to do so. Bentsen amendment. It was a narrow committee, as well as the ranking So, unfortunately, and with all due operating subsidiary amendment, member of the Committee on Com- respect for the chairman, I am going to which was not made in order, just for merce, but I am opposed to this rule. have to oppose the rule. I think this the record. This bill, first of all, will not greatly, bill in its current form is a real step But with respect to being here at if at all, in my opinion, affect the an- backward. It may be good for the Con- 11:30, I am happy to be here at 11:30. nounced mergers that are going on. A gress, but the marketplace is going to That is what we get paid to do. I guess lot are going to occur regardless, and run circles around it. my point is, why do we have to do it all others, like the Citigroup merger, real- Mr. SOLOMON. Mr. Speaker, I yield in one day? If it is such an important ly are not affected by this bill. They myself such time as I may consume bill, let us spend a lot of time on it. I have other fish to fry down the road. just briefly to say to the gentleman, think that is what the American people This bill is not about size, it is about the gentleman is new here, but he was would want us to do. powers and who has what powers. This a cosponsor of an amendment dealing Mr. SOLOMON. Mr. Speaker, I yield bill has changed as it left the Commit- with the operating subsidiaries. We myself such time as I may consume. tee on Banking and Financial Services made both of those amendments in Mr. Speaker, let me just say to the from Glass-Steagell reform to a bal- order in LaFalce and we made in order gentleman that we could make all of kanization of the Nation’s financial the gentleman from Louisiana’s these amendments in order. We could services structure. It is no longer about amendment. spend four days on this. But, there are financial modernization in the whole; But let me say, if the gentleman had things like ISTEA, which deal with it is about who gets to protect what other amendments, the gentleman roads and bridges and construction in powers, and that is unfortunate. Maybe should have offered them, and perhaps this country, there are things like we want to do that, but we ought to be we could have looked on them kindly. campaign finance reform, all of which honest about what we are doing here. Let me just point to the fact that the have to get done before the time that With all due respect to the chairman gentleman said there is only one hour we go home for the break. of the Committee on Rules, and grant- of general debate. I want the gen- Mr. Speaker, I yield one minute to ed, I am new, I am only in my second tleman to come back here at 11:30 to- my good friend, the gentleman from term, but the fact we are only going to night and tell me that there is only one Ohio (Mr. GILLMOR). (Mr. GILLMOR asked and was given spend one hour of general debate on a hour of debate on this issue. We will permission to revise and extend his re- 400 page bill dealing with the bank laws still be on this floor debating this issue marks.) that was filed in the CONGRESSIONAL at 11:30 tonight, and the gentleman Mr. GILLMOR. Mr. Speaker, I thank RECORD a week and a half ago, is ab- should pay attention to the clock. the gentleman for yielding me time. surd to me. Mr. Speaker, I yield one minute to Mr. Speaker, I am happy to rise in In the business the gentleman was in my very good friend, the gentleman support of this rule, and I am also before and the business I was in before, from Des Moines, Iowa, (Mr. GANSKE) a happy that the bill includes an amend- we would be subject to violations of member of the Committee on Com- ment that I offered which has been not having proper disclosure, because merce. called Fed Lite. we clearly are not disclosing what is Mr. GANSKE. Mr. Speaker, I rise in Earlier versions of this legislation going on in this bill today. support of the rule and the bill. would have created an umbrella-like If one is concerned about protecting Mr. Speaker, let me speak about con- regulatory framework subjecting many Members from voting against various sumers. This bill utilizes the holding financial entities to excessive and con- amendments so they are not voting company structure to build safe fire flicting regulatory requirements. No against particular interest groups that walls to separate insured bank liabil- clear argument had been made to au- are affected by this bill, you just not ities from uninsured liabilities of other thorize Federal Reserve umbrella regu- are going to be able to do that and deal financial obligations. I think the hold- lation over securities and insurance en- with the issues. This bill is fraught ing company approach is safer for con- tities that had functioned effectively with peril for Members trying to hide sumers than having insurance and se- without Federal Reserve supervision. from various interest groups. curity subsidiaries. Functional regula- That is why I offered an amendment in Now, I am for modernization, prob- tion is a consumer safeguard. the Committee on Commerce to scale ably for more modernization than some Mr. Speaker, this bill ensures that back this broad expansion of unwar- of my colleagues on the other side of banks which become holding compa- ranted regulatory authority and em- the aisle and colleagues on this side of nies will provide low cost basic bank- phasize true functional regulation. the aisle. But this bill, unfortunately, ing accounts to consumers, that there My amendment, which was passed will not have the Congress moving the is full disclosure on which bank prod- unanimously in the Committee on banking laws and the financial laws to ucts are and are not insured, that loan Commerce, is commonly known as Fed where the marketplace is today. In ef- applications cannot be conditioned on Lite because it scales back much of the fect, I think it will have us moving the purchase of insurance, that com- unnecessary authority of the Federal backwards. plaints can be referred to the appro- Reserve to require reports and conduct There are some amendments that we priate regulator and that a new source examinations in nonbank subsidiaries can address, that we can try and adopt. of low cost credit through the Federal of a holding company. The LaFalce-Vento amendment and Home Loan Bank system is available Essentially, Fed Lite eliminates the Bliley-Dingell-Leach amendment to farmers, small businesses and per- most duplicative and burdensome regu- are good amendments and they ought sons involved in community develop- lations. to be adopted. But, otherwise, if they ment. are not, I think to argue that this is Most importantly, Mr. Speaker, mod- b 1230 our last chance to pass this bill in this ernizing these depression-era laws as Mr. FROST. Mr. Speaker, I yield 1 Congress really reminds me of what my we enter this next century will allow minute to the gentleman from Massa- mother would say. My mother would greater competition in the financial chusetts (Mr. KENNEDY). May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3131 Mr. KENNEDY of Massachusetts. Mr. Let me just say one more thing. I Cook Johnson, E.B. Pryce (OH) Cooksey Johnson, Sam Quinn Speaker, I think that what we are was here in 1980; I came here in 1978. In Cox Kaptur Rahall hearing on the floor here at the mo- 1980 a little, small, innocuous bill came Coyne Kasich Ramstad ment is that this bill is designed to ex- on the floor. What it did, among other Crane Kelly Rangel pand the powers and the capabilities of things, was raise the guarantee on de- Crapo Kennedy (RI) Redmond Cubin Kennelly Regula the major financial institutions of this posits from $25,000 up to $100,000 and it Cummings Kildee Reyes country. While I support that and said to Jerry Solomon, who had just Cunningham Kim Rivers while I was one of 10 Democrats on the sold all of his businesses and had come Davis (FL) Kind (WI) Rodriguez Deal King (NY) Roemer Committee on Banking and Financial to Washington, you can invest all of DeGette Kingston Rogan Services that voted for this bill, 9 of your money in all of these new start-up DeLauro Kleczka Rogers them are now off of it. banks that are going to risk your in- DeLay Klink Rohrabacher The reason why is because when the vestments; but it is going to be pro- Deutsch Klug Ros-Lehtinen Diaz-Balart Knollenberg Roukema gentleman from Iowa (Mr. LEACH), tected by the FDIC, every single Dingell Kolbe Royce chairman of the Committee on Bank- $100,000 account that I invest in. Doggett Largent Rush ing and Financial Services, a few mo- Well, guess what happened? That Dooley Latham Ryun ments ago referred to lifeline banking Doolittle LaTourette Sabo brought on the S&L crisis. And then Doyle Lazio Salmon and the fact that that is contained in what happened? In a lot of cases, peo- Dreier Leach Sanchez the bill, something happened between ple lost their money. In other cases, Dunn Levin Sanders the lifeline banking we passed in the the Federal Government came in with Edwards Lewis (CA) Sanford Ehlers Linder Saxton Committee on Banking and Financial the taxpayers’ money and bailed them Ehrlich Livingston Scarborough Services and the lifeline banking por- out. Emerson LoBiondo Schaefer, Dan tion of this bill that is on the House I say to my colleagues, we have seen Engel Lofgren Schaffer, Bob floor today; and that is that it no English Lucas Sensenbrenner nothing like what is going to happen in Ensign Maloney (NY) Sessions longer has any teeth. It no longer is a the years down the pike if we have to Eshoo Manton Shadegg requirement. It is now something that come in and bail out all of these Etheridge Manzullo Shaw a bank might opt to do; they might not megamergers. We let all of this happen Fawell Markey Shays Fazio Mascara Shimkus opt to do it, as well. They do not do it with no controls out there. My col- Foley McCarthy (NY) Shuster now, so I do not know why they would leagues had better be responsible and Forbes McCrery Sisisky opt in. vote for this legislation. Ford McDade Skeen The fact is that what we see here is Fossella McGovern Smith (MI) Let us go to the Senate, and then let Fowler McHugh Smith (NJ) a grab by the powerful interests of us sit down and negotiate with the Fox McInnis Smith (OR) America without even an acknowledg- White House about making sure that Franks (NJ) McIntosh Smith (TX) ment of the base of the financial insti- the Federal Reserve Board and the Se- Frelinghuysen McKeon Smith, Linda Frost McKinney Snowbarger tutions. curities and Exchange Commission and Furse McNulty Snyder I wish we were not all done, Mr. others outside this government are Gallegly Meeks (NY) Solomon Speaker. We have more to say, but not going to have a say, because we all Ganske Metcalf Souder enough time to say it. Gejdenson Mica Spence know how we politicians are some- Gibbons Miller (FL) Spratt The SPEAKER pro tempore (Mr. times. We do not always look out for Gillmor Minge Stabenow HANSEN). The gentleman from Texas the best interests of the people. Some- Gilman Moakley Stark (Mr. FROST) has 30 seconds remaining. times we are looking out for our own Goodlatte Mollohan Stearns Mr. FROST. Mr. Speaker, I yield my- Goodling Moran (KS) Stenholm backsides. Let us do not do it today. Gordon Moran (VA) Strickland self the balance of my time. Mr. Speaker, I yield back the balance Goss Morella Stump Mr. Speaker, we have heard the sharp of my time, and I move the previous Graham Murtha Stupak differences on this piece of legislation. question on the resolution. Granger Myrick Sununu We should move to consideration of the Green Nadler Talent The previous question was ordered. Greenwood Neal Tanner bill, and I urge adoption of the rule. The SPEAKER pro tempore. The Gutknecht Nethercutt Tauscher Mr. SOLOMON. Mr. Speaker, I yield question is on the resolution. Hall (TX) Neumann Tauzin myself the balance of my time. Hamilton Ney Taylor (NC) The question was taken; and the Hansen Northup Thomas Let me come over on this side and Speaker pro tempore announced that Hastert Norwood Thornberry talk to some of my good friends for a the ayes appeared to have it. Hastings (WA) Nussle Thurman minute. Mr. FROST. Mr. Speaker, I object to Hayworth Oberstar Towns Mr. Speaker, my good friend from Herger Ortiz Traficant the vote on the ground that a quorum Hill Oxley Upton Massachusetts just said it is a power is not present and make the point of Hinojosa Packard Velazquez grab by the strong interests of Amer- order that a quorum is not present. Hobson Pallone Visclosky Hoekstra Pappas Walsh ica. That is exactly what we are trying The SPEAKER pro tempore. Evi- to prevent here. Holden Parker Watkins dently a quorum is not present. Hooley Pascrell Watts (OK) Mr. Speaker, the administration does The Sergeant at Arms will notify ab- Horn Pastor Weldon (FL) not want a bill. They do not want a bill Hostettler Paul Weldon (PA) sent Members. Houghton Paxon Weller under any circumstances. Why? It is a The vote was taken by electronic de- turf war where the Government of the Hulshof Pease Wexler vice, and there were—yeas 311, nays Hunter Peterson (MN) Weygand United States wants to control all of 105, not voting 16, as follows: Hutchinson Peterson (PA) White this stuff. Well, that is a shame. Alan Hyde Petri Whitfield Greenspan, the Federal Reserve Board [Roll No. 142] Inglis Pickering Wicker YEAS—311 Jackson-Lee Pickett Wise Chairman, one of the most respected (TX) Pitts Wolf people in the country, wants this bill. Abercrombie Bishop Buyer Jefferson Pombo Woolsey Arthur Levitt, who is the Chairman of Ackerman Blagojevich Callahan Jenkins Pomeroy Wynn Allen Bliley Calvert John Porter Young (AK) the Securities and Exchange Commis- Andrews Blumenauer Camp Johnson (CT) Portman Young (FL) sion, wants this bill, because they want Archer Blunt Campbell to make sure we are going to protect Armey Boehlert Canady NAYS—105 Baker Boehner Cannon Aderholt Brown (FL) DeFazio the investors and depositors and tax- Ballenger Bonilla Capps Bachus Cardin Delahunt Barcia payers of this Nation. Bonior Castle Baesler Carson Dickey Barr Mr. Speaker, anyone who comes over Bono Chabot Baldacci Clyburn Dicks Barrett (NE) Boucher Chambliss Barrett (WI) Coburn Dixon here and votes against this rule, I say Bartlett Boyd Chenoweth Becerra Conyers Duncan to my colleagues, in my opinion, is vot- Barton Brady Clayton Bentsen Costello Evans Bass ing to protect their own backsides. My Brown (OH) Clement Berman Cramer Everett Bereuter colleagues do not want to have to cast Bryant Coble Borski Danner Farr Berry Bunning Collins Boswell Davis (IL) Fattah the tough votes. They do not want to Bilbray Burr Combest Brown (CA) Davis (VA) Filner debate this issue on the floor. Bilirakis Burton Condit H3132 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Frank (MA) Luther Sandlin Mr. LEACH. Madam Chairman, we the only institution of the United Gephardt Maloney (CT) Sawyer Goode Martinez Schumer come to the Congress today to deal States Government that has signifi- Gutierrez Matsui Scott with truly historic legislation. Every- cant experience in the holding com- Hastings (FL) McCarthy (MO) Serrano body knows there are massive changes pany regulatory area, which is what we Hefley McCollum Sherman underway in the financial landscape. are really getting into with this legis- Hilleary McDermott Skelton Hinchey McHale Slaughter Not all of us like all of these changes. lation. Hoyer McIntyre Smith, Adam In fact, I would suspect the majority of It is also the only institution that Istook Meehan Stokes the country and the majority of this has resources available in a time of Jackson (IL) Meek (FL) Taylor (MS) Johnson (WI) Menendez Thompson body have serious doubts. But the bill emergency, absolutely extraordinary Jones Millender- Thune we are bringing before the Congress is and stunning resources that can be Kanjorski McDonald Tiahrt about the question of whether we want brought to bear in an instantaneous Kennedy (MA) Miller (CA) Tierney to have a government of laws or of Kucinich Obey Torres time period. It also has the greatest LaFalce Olver Turner men, whether we want to have laws reputation for being a nonpoliticized LaHood Owens Vento shaped and constrained to defend the institution of the government. Lampson Payne Wamp financial system for the benefit of the These are reasons that this Congress Lantos Pelosi Waters Lee Poshard Watt (NC) public. has historically tilted, not just this Lewis (GA) Price (NC) Waxman What we really have before us as we legislative body, but historically tilted Lewis (KY) Riley Yates deal with issues of this nature are dif- to the Fed. My own view is, the Depart- Lipinski Rothman ferences between and within industrial Lowey Roybal-Allard ment of the Treasury has some reason- groupings, differences between and able positions that this Congress is NOT VOTING—16 within regulatory bodies, and questions going to have to take into consider- Bateman Gonzalez Mink of the public interest. ation. The gentleman from New York Christensen Hall (OH) Radanovich In my view, the principal issue is the Clay Harman Riggs (Mr. LAFALCE) will offer an amendment Ewing Hefner Skaggs latter, what is in the public interest. tilting in that direction, I think, frac- Gekas Hilliard What we have in the bill that is being tionally too far, but in any regard, tilt- Gilchrest Kilpatrick brought before us is a bill designed to ing in that direction. b 1254 be pro-competitive. In its broadest out- Certainly, whatever happens on this lines, there is enormous support in the floor, if this bill passes, if we go to con- Messrs. WAMP, LEWIS of Kentucky, administration, both sides of Congress, EVERETT, HASTINGS of Florida, ference, I would expect the Treasury to both committees for the principle that have a seat at the table, and we will DICKEY, DELAHUNT, WAXMAN, we ought to have more competition STOKES, and CRAMER changed their certainly take into consideration their within financial services; banks being views. But I would simply say to my vote from ‘‘yea’’ to ‘‘nay.’’ allowed to offer more securities and in- So the resolution was agreed to. friends and colleagues that have lis- surance services, insurance companies tened to the Department of the Treas- The result of the vote was announced more banking and securities products, as above recorded. ury about certain concerns, I would securities firms more insurance and hope that the Department of the Treas- A motion to reconsider was laid on banking products. That is a pro-com- the table. ury would recognize that the major petitive circumstance. issue is what is in the public interest, The SPEAKER pro tempore (Mr. Now, there are many differences of HANSEN). Pursuant to House Resolu- not what is in the parochial interests judgment on the subtleties: who regu- of any particular institution of govern- tion 428 and rule XXIII, the Chair de- lates, who gets what powers relative to clares the House in the Committee of ment. what other institutions. My view is We have to be enormously cautious the Whole House on the State of the very simple. We ought to put a great Union for the consideration of the bill, as we proceed that, as new powers are emphasis on antitrust, we ought to put undertaken, as new changes occur in H.R. 10. a great emphasis and decide as many f the marketplace, that we have a credi- issues as possible on what is the most ble regulatory framework set in place. b 1255 pro-competitive option, and we ought That is what I believe this bill in its to be, most of all, concerned for small final measure accomplishes. Certainly, IN THE COMMITTEE OF THE WHOLE individuals and small institutions. Accordingly, the House resolved there are nuanced changes that can itself into the Committee of the Whole b 1300 occur without great damage to that House on the State of the Union for the Here let me just stress from the per- structure, but I would hope very much consideration of the bill (H.R. 10) to en- spective of a Midwesterner, for the first that the administration and the other hance competition in the financial time we have historic new powers side would recognize that these are services industry by providing a pru- granted to community banks to allow honest differences of opinion that this dential framework for the affiliation of them to offer lower-cost services for body will have to deal with over time. banks, securities firms, and other fi- small business and for agriculture Madam Chairman, In this context, H.R. 10, nancial service providers, and for other based on access to capital from a gov- the Financial Services Act, references a his- purposes, with Mrs. Emerson in the ernment-sponsored enterprise, the Fed- toric effort to modernize the basic laws gov- chair. eral Home Loan Bank system. We also erning the financial services sector of the The Clerk read the title of the bill. have the capacity of the consumers to economy so that our banks, securities and in- The CHAIRMAN. Pursuant to the get services from more sources in a sin- surance firms can better serve customers in rule, the bill is considered as having gle moment, what is called one-stop the United States and remain world leaders as been read the first time. shopping. That is the framework of the financial services providers. Under the rule, the gentleman from bill. I think it makes sense. The Glass-Steagall Act, which has sepa- Iowa (Mr. LEACH), the gentleman from There are different subtleties that we rated commercial banking from investment New York (Mr. LAFALCE), the gen- will get into and certainly an amend- banking, turns 65 years old this year. During tleman from Virginia (Mr. BLILEY), and ment that I will be offering that I feel these past six decades, financial services has the gentleman from Michigan (Mr. DIN- is of enormous consequence. Having proved to be one of the fastest evolving sec- GELL) each will control 15 minutes. said that, let me turn for a moment to tors of the economy, yet it continues to be The Chair recognizes the gentleman the regulatory situation. governed by legislation that is antiquated. from Iowa (Mr. LEACH). What this bill does is establish func- H.R. 10 has been several years in the mak- Mr. LEACH. Madam chairman, I tional regulation with a bit of a tilt to ing, and has involved negotiations and com- yield myself such time as I may con- the Federal Reserve Board. The De- promises: between different congressional sume. partment of the Treasury has some ob- committees, different political parties, different (Mr. LEACH asked and was given per- jection to this tilt. industrial groupings and different regulators. mission to revise and extend his re- I would only say for Members of this No single individual or group got allÐor even marks.) body that the Federal Reserve Board is mostÐof what it wanted. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3133 But it should be remembered that while the otherwise feel they have outgrown a commu- ginia (Mr. BLILEY) and the gentleman work of Congress inevitably involves adjudicat- nity institution. Large financial institutions can from Michigan (Mr. DINGELL). ing regulatory turf battles and refereeing in- already offer a variety of services. But commu- We have some differences of opinion. dustrial groups fighting for their piece of the nity banks are usually not large enough to uti- There are some very good provisions pie, the principal work of Congress in the work lize legal loopholes like Section 20 affiliates or within the most recent iteration of of the people. To ensure that citizens have ac- creation of the unitary thrift holding company H.R. 10, but in my judgment there are cess to the widest range of products at the which large institutionsÐcommercial as well some very, very bad provisions that lowest possible price; that taxpayers are not as financialÐhave turned to. take significant steps backward. The threatened by institutions that take unaccept- Second, H.R. 10 gives community banks ac- issue is, how do we best advance the able risks; that institutions are able to compete cess to low cost federal funds through the cause of the American consumer? How against their international rivals, which far out- Home Loan Bank System, letting small banks do we best protect the cause of the weigh even our largest financial services compete against the Farm Credit System in American consumer? groups. providing credit for agricultural and rural devel- Every consumer group in America The trick in crafting financial services legis- opment projects. Not only will community that I am aware of opposes H.R. 10, lation that works to the public interest is to en- banks benefit from this provision, but in- even with the manager’s amendment. hance competitiveness abroad, while advanc- creased competition in rural lending will lower The administration opposes it, even ing competition here at home. In this contest, costs to farmers. with the manager’s amendment, to H.R. 10 strengthens the competitive position Third, H.R. 10 prohibits what are called ``de- such an extent that the Secretary of of America's financial services sector inter- posit production offices''Ðthat is, offices which the Treasury had a press conference nationally and at some time empowers com- are designed to gather up deposits in commu- yesterday, appeared before Congress munity banks and small financial institutions to nities without lending out money to people in today, and indicated that he would ensure competition and consumer choice. these communities. This provision helps en- strongly recommend a veto of it be- We address this legislation, of course, in the sure that deposits made by members of a cause it is not in the public interest. I side with all of these consumer or- shadow of large mergers that have been an- community stay in the community, thereby cre- ganizations. I side with the administra- nounced in the financial services sector. Many ating economic growth and opportunity. tion. I also side on these issues with of us have concerns about certain trends in fi- By bolstering the viability of community- the State banking regulators and the nances. The key, whether one likes or dislikes based institutions and providing greater flexi- chairman of the FDIC, the insurance what is happening in the market place, is to bility to them, H.R. 10 increases the percent- fund. age of dollars retained in local communities. ensure that appropriate regulation is in Now, in its current form, unfortu- It should be our goal to approve a bill that placeÐanti-trust, consumer, and perhaps, nately, this bill reduces competition; it first of all gives greater choice and lowers most critically regulation related to derivatives does not enhance competition. It fuels prices to the consumers of financial services; always and other complex financial products. concentration. I think that is why second, protects the taxpayer; and third, is In this regard, this bill opts for functional regu- most of the bigger banks and bigger in- lations and for the primary of non-politicized balanced between the various industrial and surance companies and bigger securi- Federal Reverse supervision. commercial interests. ties firms are for it, but the smaller As we all know, there are complex issues Here it deserves stressing that amid all the banks of America, for example, and the involved in this legislation, and there will be publicity about large financial institutions, the consumers are opposed to it. It leaves true beneficiaries of this legislation are small differing judgments on major issues by mem- smaller and medium-size banks at a se- community banks and the ordinary citizens bers. One thing we all may agree upon, how- rious competitive disadvantage, and it and small businesses they serve. This bill is ever, is that Congress needs to reassert its flatly discriminates against national opposed by many of the largest banks in the Constitutional role in determining what should banks as providers of new financial country, because they can already take part in be the laws governing financial services, in- services. most of the activities the bill permits. stead of allowing the regulators and courts to Perhaps most importantly, the bill Americans have long held concerns about usurp this responsibility. requires national banks to move assets bigness in the economy. As we have seen in If Congress turns its back on financial serv- out of institutions covered by the Com- other countries, concentration of economic ices modernization, we should not fool our- munity Reinvestment Act in order to power does not lead to increased competition, selves that rapid evolution in the fields of offer new products and services. innovation or customer service. banking, securities and insurance will cease. It We Democrats have worked hard for But the solution to the problem of con- will not. Financial services modernization will years to ensure that banks actively in- centration of economic power is not to deny take place with or without Congressional ap- vest in the communities from which small banks the new powers included in H.R. proval. Without this legislation, however, they draw their funds. No such require- 10. It is to empower them to compete against changes in financial services will continue ments apply to the new conglomerates large institutions, combining the new powers unabated, but they will take place in an ad hoc that will be created as the result of granted in this legislation with their personal manner through the courts and through regu- this bill. Only banks are covered by the service and local knowledge in order to main- latory fiat, and will not be subject to the safe- CRA, and traditional banking institu- tain and increase their market share. guards and prudential parameters established tions are put at a competitive dis- In order to compete against large regional in this legislation. advantage under this bill. institutions or new technologies like Internet Now is the time for Congress, not the regu- The strength of CRA is substantially banking, community based institutions need lators and the courts, to step up to the chal- dependent on the strength of the na- new powers like the ones granted in H.R. 10. lenge of modernizing our nation's financial tional bank system. This bill under- Banks which stick with offering the same old services sector for the 21st century, to ensure mines both. For this and a number of accounts and services in the same old ways that it remains competitive internationally, that other reasons, consumer and commu- will find their viability threatened. it is stable and poses no threat to the tax- nity groups generally oppose this legis- For many communities, retaining their local, payer, and that it provides quality service to all lation. independent bank depends upon granting that our citizens and communities. The creation of large, diversified fi- bank the power to compete against mega-gi- Madam Chairman, I reserve the bal- nancial institutions that can compete ants which are being formed under the current ance of my time. in global markets must be a part of fi- regulatory and legal framework. In a David Mr. LAFALCE. Madam Chairman, I nancial modernization, but there must versus Goliath circumstance, H.R. 10 is the yield myself such time as I may con- be room in this country and in this bill small banks' slingshot. sume. for the community-based institutions H.R. 10 provides community banks with the First of all, I want to acknowledge that we so heavily rely on to provide tools to compete, not only against large mega- the fact that it has been a pleasure to credit to consumers and local busi- banks but also against new technologies such work with the chairman of the Com- nesses and to fuel community develop- as Internet banking. mittee on Banking and Financial Serv- ment. First, H.R. 10 gives community banks the ices, the gentleman from Iowa (Mr. Many Members have also asked me ability to offer ``one stop shopping,'' so that LEACH), and the chairman of the Com- whether this bill is good for consumers they can attract new individual and business mittee on Commerce and the ranking and good for their communities. Con- customers and retain customers who might Democrat, the gentleman from Vir- sumers benefit from innovation and H3134 CONGRESSIONAL RECORD — HOUSE May 13, 1998 competition. Communities benefit When our committee heard from the compete to see who can offer me the from investment in their citizens and OCC bank regulator that they consid- lowest price for my business? Abso- businesses that can spur economic de- ered critical securities and insurance lutely. Do I want American consumers velopment. This bill, unfortunately, consumer protection regulations to be to have the same savings? Yes, abso- would impede innovation by preventing only guidelines that banks may or may lutely yes. national banks from offering new prod- not have to comply with, I worried Last month we all heard about the ucts and services within their existing about his future. This bill protects us. Travelers-Citibank merger which cre- structure. It would reduce competition Last year, the citizens of Illinois en- ated the biggest corporation in the Na- by eliminating the historical tension couraged their legislature to sign a tion. I am told that they cannot do this between different bank charters and comprehensive law governing bank in- under current law, that we have re- different bank regulators, forcing all surance sales. It was a bipartisan con- strictions in place against this sort of institutions into one mold governed by sensus, worked out with the support of thing, but they did it and more compa- one regulator. For those who fear the all the affected industries. We have nies will do it, and we do not have the power of the Federal Reserve Board, taken this great compromise from Illi- framework in place to regulate it. This this is not a slight tilt in the Federal nois and made it one of the central bill creates that framework. Reserve Board’s direction; this is a keys to this legislation. We have pro- With H.R. 10 we create a standard for massive shift. tected or safe-harbored any State con- protecting consumer laws and the safe- It virtually compels smaller banks to sumer protection law which is no more ty of our country’s finances. Without become part of a larger-scale conglom- restrictive than the Illinois consensus. H.R. 10, we are diving into a river of erate in order to compete. It forces as- This means that if my grandson, TJ, uncertainty at night hoping what sets out of banks and, therefore, out of goes into a bank in New York, the New somehow we will make it to the oppo- the reach of the CRA. I cannot hon- York law guaranteeing consumers in- site shore in one piece. estly say that any one of these things formation that their choice of insur- I have heard from the administration is good for either consumers or commu- ance providers will not affect the loan and the Treasury Department that nities. application will be a requirement, not they oppose this bill because it hurts The gentleman from Minnesota (Mr. a guideline. It means if he goes into a the national bank charter. Do not be VENTO) and I will be offering an amend- financial institution in Florida, that fooled. They are simply losing a turf ment to cure many of these defects. I that State’s laws providing disclosures battle between two agencies, the OCC would urge Members’ strong support of will be requirements, not guidelines. and the Federal Reserve, over who gets our amendment to cure so many of And if he goes to Louisiana, which has control over these megamergers. these defects. a law protecting the confidentiality of If I have to choose between a Federal If our amendment should not pass, I a consumer’s insurance history, some- Reserve Board that has kept inflation would be constrained to oppose the bill thing very important to all of us, that at a long-term low, made the American as the consumer groups of America do, such privacy protections will be a re- dollar the envy of the world and as this administration does. quirement that banks have to follow, strengthened our financial payment Madam Chairman, I reserve the bal- not just a guideline. But even if those system into the best shape it has ever ance of my time. State laws are protected, how much been in versus the OCC bureaucrats Mr. BLILEY. Madam Chairman, I competition will be left by the time he that go around threatening to preempt yield myself such time as I may con- grows up? State consumer protection laws and sume. Our committee has been inundated then join political fund-raisers to so- I would like to begin by thanking my with letters and calls by consumers licit campaign money from the affected good friend and ranking Democratic worried about the ongoing institutions, then I choose the Federal member on the Committee on Com- megamergers, such as First Union Reserve. merce, the gentleman from Michigan bank’s purchase of CoreStates Bank in b 1315 (Mr. DINGELL), as well as the gen- Pennsylvania, which included plans to tleman from Ohio (Mr. OXLEY), the cut 4,400 jobs, close 172 bank branches If we do not care more about protect- gentleman from New York (Mr. MAN- and turn Philadelphia into the top 10 ing the American people than protect- TON), the gentleman from Ohio (Mr. market most dominated by a single ing a bank charter, then we should BOEHNER), and the gentleman from bank at an amazing 53 percent of the turn in our election certificates and Iowa (Mr. LEACH), who have spent hun- market. If we do not remove the gov- find someone who can better represent dreds of hours in meetings and negotia- ernment restrictions preventing new our country. tions working on a bipartisan basis to competition in the banking industry, Vote ‘‘yes’’ on H.R. 10 to ensure that create our best opportunity in 65 years consumers will continue to face higher my grandson TJ and millions of other to modernize our financial system. fees and increased charges into the fu- Americans do not lose the protection of Every step of the way we were op- ture. our securities and insurance laws. Vote posed by lobbyists and special interest This bill immediately triples the ‘‘yes’’ on H.R. 10 because it opens up groups who said it could not be done. number of providers that can poten- competition and protects consumers But we heard the concerns of the tially offer competing products and from these mega-mergers. Vote ‘‘yes’’ American people about all of these will ensure new competition to reduce because, after all, there are millions of megamergers. We heard the concerns of prices and surcharges. industry lobbying dollars spent to de- the local businessmen who want to bet- And banks are not the only ones feat this bill every year. Our country ter compete but have one hand tied be- abusing the protectionist loopholes in needs reform, and they are depending hind their backs by the archaic Glass- the current system. Our committee has on us to do the right thing. Steagall restrictions that current law investigated extensive fraud by insur- Madam Chairman, I reserve the bal- imposes. And we heard from the Fed- ance agents who have swindled con- ance of my time. eral and State financial regulators who sumers out of huge premiums for little The CHAIRMAN. Without objection, expressed concern about the safety and to no extra policy benefits. H.R. 10 the gentleman from New York (Mr. soundness of the financial system and would not only let insurance compa- MANTON) will control the time. their consumer protections as we enter nies bring competition into the bank- There was no objection. into the 21st century if we do not enact ing industry, but it also allows banks Mr. MANTON. Madam Chairman, I reform. the ability to offer competing insur- yield myself 2 minutes. It is a testament to the will of the ance products in every branch and lo- Today we have before us legislation American people that we have heard cation and at a huge potential savings involving the reform of our financial your concerns and are here today to for customers. services marketplace. As the ranking pass legislation to protect your future I happen to be a friend of both my member of the Subcomittee on Finance and that of your children. local bank and my insurance agent. and Hazardous Materials of the Com- I have a grandson who is almost 2 Both are honest and hard-working indi- mittee on Commerce, and having seen years old, Thomas J. Bliley, the 4th. viduals. But would I like to see them this particular financial services bill May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3135 die and resurrect itself several times ginia (Mr. BLILEY), the chairman, the working families. Financial moderniza- over the last year, I fully appreciate gentleman from Ohio (Mr. OXLEY), and tion will give families greater choices that simply getting this far is quite a the chairman, the gentleman from New where and how to invest their hard- feat. York (Mr. MANTON) for their extraor- earned savings. Make no mistake, the This legislation is very complex and dinary work in moving this forward. positive impact of this bill will stretch will dramatically affect both financial This was never inevitable. Only be- from Wall Street to Main Street to M and nonfinancial companies in the way cause of the hard work and the consen- Street, from the cradle to the wedding they do business in the future. There is sus building that they were able to to retirement. little disagreement as to the need for achieve are we here today. This bill breaks the chains of Glass- reform, the problem is just how to go Let us go back to the early 1930’s, Steagall that no longer serve the inter- about it. I believe the package we have Madam Chairman, and the movie the ests of American families without before us today, while not perfect, is an ‘‘Wizard of Oz’’. The stock market col- sweeping us away in the tide of eco- excellent step in the right direction lapsed. The Securities and Exchange nomic euphoria. This bill sustains us as and will significantly move this proc- Commission did not exist and few secu- the caretakers of senior citizens’ nest ess forward. rities laws were enacted. Between 1930 eggs and ensures that the life savings This legislation repeals the anti-af- and 1933, 8,000 banks with $5 billion of of working families are not lost in eco- filiation provisions of the Glass- deposits, an enormous sum at the time, nomic downturns. Steagall Act that have kept various fi- went bankrupt. American families suf- We, as legislators, do not know what nancial industries from affiliating with fered. Their life’s savings, money for financial products and services will be one another for the last 65 years. While food and shelter was lost. demanded by the public in the future, this restriction may have been a good To restore American confidence in but we should break down barriers and idea in the 1930’s, the landscape has so our banks, Glass-Steagall erected a encourage competition creating envi- significantly changed since that time wall between commercial banks and in- ronments for more innovative products that maintaining such a limitation no vestment banks. Deposit insurance was and better prices. A vibrant financial longer makes sense. created so American families knew base is at the core of a healthy econ- With an increasingly global market- their financial nest egg was safe. In the omy. place, and consolidation within the in- fragile days of the Great Depression, Without this bill, ominous news is in dustry, the need for this regulation leg- Glass-Steagall made sense. store for some American financial in- islation is abundantly clear. Within the Years ago, families kept the bulk of stitutions and thousands of their work- last year alone we have witnessed the their savings in banks, earning low ers. We risk trapping some of them by merging of large financial institutions rates of interest. Today, families invest barring them from competition. The at an unprecedented rate, especially in the stock market. In the last 7 years United States should make its destiny. banks buying up securities firms, while stock ownership has doubled. Now, 43 We should not stand on the sidelines the same securities firms are unable to percent of adults’ own them. Ameri- while foreign banks take over Ameri- acquire banks. Rapdily evolving bank- cans are seeking higher returns. ca’s oldest securities firms. ing laws have allowed for such com- Consumer behavior changed because Madam Chairman, the Congress has binations, while potential competitors stocks and mutual funds achieved supe- tried time and time again to modernize are still stuck under the restrictions of rior long-term results. People began our financial services laws. I am not Glass-Steagall. managing their own retirement funds. certain that we will get another I believe this legislation will create In short, Americans are no longer hid- chance, and we certainly cannot afford competitive parity and thereby level ing their savings in their mattresses. to standstill. I urge my colleagues, Re- the playing field between banks and Today, we stand at the center of an publican and Democrat, to let Amer- other financial providers. The ultimate electronic revolution; computer bank- ican finance step into the future. Sup- beneficiaries of this increased competi- ing, cash management accounts, on- port this fine bill, because it will be a tion will be consumers; who will have a line mutual fund investing, moving positive, constructive part of Ameri- greater number of products and serv- money to Tokyo and back again in an ca’s financial services history. ices to choose from, in a more conven- instant. We can pay our bills through Mr. LAFALCE. Madam Chairman, I ient forum, and at lower prices. TV, and a customer can see and speak yield 4 minutes to the gentleman from I would like to to take a moment to to a teller via the Internet. We simply Minnesota (Mr. VENTO), the distin- thank the chairman of the Committee no longer live in the depression era guished ranking Democrat on the Sub- on Commerce, the gentleman from Vir- that gave birth to Glass-Steagall. committee on Financial Institutions ginia (Mr. BLILEY), and the full com- Madam Chairman, this bill rids us of and Consumer Credit of the Committee mittee ranking member, the gentleman the inefficiencies of the financial serv- on Banking and Financial Services. from Michigan (Mr. DINGELL) for all of ices system. American families and (Mr. VENTO asked and was given their hard work and diligence in ensur- small businesses should have the same permission to revise and extend his re- ing that adequate consumer and inves- investment and borrowing choices that marks.) tor protection provisions be built into have been enjoyed for years by large Mr. VENTO. Madam Chairman, I rise the manager’s amendment which we businesses, foreigners and millionaires. in opposition to H.R. 10. This rule that will consider later today. Each year we spend $300 billion for has structured our consideration of The manager’s amendment ensures brokerage, insurance and banking serv- this bill will, hopefully, make improve- that consumers will be true bene- ices. Some of that money belongs in ments to the bill, but for now I am op- ficiaries of the increased competition the pockets of folks living in places posed to the substance of this so-called this legislation seeks to promote. I be- like Bayshore, Long Island. modernization bill. lieve this overall package is a good Families go to one place to open a As I stated earlier, I do not believe it one, and I urge my colleagues to sup- checking account, to another to invest is worthy of its name. This is sort of a port it. in a mutual fund, then to a third to get one-size-fits-all bill, forcing, or trying Madam Chairman, I reserve the bal- an annuity for their retirement. At to superimpose upon the dynamic U.S. ance of my time. each of these stops a transaction fee, or marketplace in our economy, probably Mr. LEACH. Madam Chairman, I a cost, is charged. the most advanced economy that the yield 2 minutes to the gentleman from Mr. BLILEY. Madam Chairman, I world has ever seen, this sort of con- New York (Mr. LAZIO), our distin- yield 2 minutes to the gentleman from voluted regulatory structure. As I said guished colleague and close friend. New York (Mr. LAZIO). in the consideration of the rule, our Mr. LAZIO of New York. Madam Mr. LAZIO of New York. Madam banks provide the foundation of this Chairman, I thank the gentleman for Chairman, I thank the distinguished dynamic economy. yielding me this time, and I want to gentleman for yielding me this time. A bill worthy of the name moderniza- begin by complimenting the chairman, While millionaires have been getting tion ought to, in fact, eliminate some the gentleman from Iowa (Mr. LEACH), the best service at the best price, one- of the barriers. The fact is these bar- the chairman, the gentleman from Vir- stop shopping is still not available to riers have never been black and white H3136 CONGRESSIONAL RECORD — HOUSE May 13, 1998 with regard to the Glass-Steagall laws. reading the litany of groups against securities and insurance firms that become fi- There have been many gray areas. this bill, I think, would astound the nancial holding companies. There is no reason Banks have been involved in insurance, Members, looking at the banking insti- for the competitive inequity for banks other banks have been involved in the sale of tutions, the consumer groups, Acorn, than it fits with the entire bill in its antagonism insurance, they have been involved in many of the other groups that are towards banks and their future options. the sale of securities. against the bill. The fact is, who is for Furthermore, H.R. 10 would undermine the We have seen the regulators move it also tells us or suggests what this Community Reinvestment Act (CRA) by requir- banking financial institutions forward bill does. Obviously, those that need to ing that new financial products and services to try and address the reality of the be for this measure are the Citibanks be offered outside of banks and their subsidi- marketplace. And rather than try and and Travelers that have basically en- aries and only in holding company affiliates. get out in front of that and rationalize tered into agreements which are not Of course, these concerns could be remedied that process in this bill, as my col- permitted under current law. There- by adopting the LaFalce-Vento operating sub- league from Texas (Mr. BENTSEN) fore, the bill is a must pass measure for pointed out, this bill moves to balkan- sidiary amendment and the Roukema-Vento- such institutions. Baker-McCollum-LaFalce basket amendment. ize those issues and to limit financial As we see the bill grow, we should institutions, especially the national At this point, however, their success is not also put in place the safeguards that preordained. banks, in terms of the exercise of those are absolutely necessary so that the responsibilities and such powers. consumer and so that the economy and This bill has a number of other flaws. It will The bill in its current form is a step the government and the deposit insur- undermine our federal banking regulator in the backwards. It denies the benefits of fi- ance programs are protected. courts by altering the deference standard. If nancial modernization not just to the Madam Chairman, I rise in opposition to H.R. 10 were to pass as written now, the medium and small banks that we are H.R. 10. The rule that structured our consider- precedent could be detrimental to other areas talking about but also to the commu- ation of this bill will hopefully help make im- of law as well. The complex provisions regard- nities that, after all, are the true bene- provements to the bill, but for now I am op- ing the interface of state and federal law on in- ficiaries, and stacks the deck against posed to the substance of this so-called ``mod- surance have become confusing at best. I these financial institutions by forcing ernization'' bill. would prefer that the bill return to the Banking them to give up profitable, existing, I would like to be making a statement in Committee's balanced provision in Section valid and workable lines of business for strong support of financial services moderniza- 104 that would have clarified that no state, by no compelling public policy reasons. tion legislation this afternoon. Our laws need statute, regulation, or order, could prevent or Our national banks have been and re- to catch up with reality by mapping a path of restrict affiliations between financial compa- main a source of economic strength true modernization for financial institutions in nies, nor prevent or restrict activities author- and a solid foundation on which to con- the financial services marketplace for today ized under this Act. H.R. 10 now only serves struct an economic framework for and tomorrow. We need to enhance the com- to confuse the issue and could no doubt send growth. This bill changes the balance petitiveness of our financial services sector everyone back to the courts for decades to between national and State bank char- and to move forward with predictable, certain, come. ters. It will likely result in some char- logical, and uniform regulation. Financial services modernization must do ters flipping. If it is all right for a As written today, H.R. 10 would force banks far more than just pave the road with a Con- State bank to conduct an activity in to move financial innovation out of the bank, gressional stamp of approval on the acquisi- an operating subsidiary, and it is ap- a loss of diversity that is disadvantageous for tion and merger phenomena. As I said in the propriate for an international U.S. many reasons. Structurally, banks would fun- Banking Committee hearing on bank mergers bank to function in an operating sub- damentally be forced to choose a holding sidiary, why do we then limit national a couple of weeks ago, we need to be vigilant banks in that very function and cor- company structure in order to participate in a and the regulators need to be vigorous in ap- porate structure, within the national meaningful way in the 21st Century financial plying the laws we have today. I do not find U.S. economy. services landscape. This is essentially a busi- heartening, for example, the Federal Reserve This so-called modernization bill ness decision that should be made on a busi- Board's current laissez faire attitude with re- should, in fact, restore competitive ness basis, not because options have been gard to the Citicorp/Travelers merger. In fact, balance, but this bill, at every turn in closed down by this ``modernization'' bill. I find it less than comforting that the Fed is the policy decision, fences in activities The bill in its current form is a step back- coming out so strong in support of the holding and tries to protect and insulate and wards because it denies the benefits of finan- company model (as opposed to an op sub op- balkanize what is becoming apparent cial modernization to communities and con- tion) when they seem sanguine about this pre- to all of us, and that is that the lines sumers, and stacks the deck against many fi- modernization merger. of business of insurance, the line of nancial institutions by forcing them to give up Nonetheless, these are not mere matters of business of securitization of banking profitable existing, valid and workable lines of turf. They are not just matters of committee ju- loans is something that has, in fact, business for no compelling public policy rea- risdiction. Our nation and economy demands a greatly changed. These financial in- sons. strong national bank charter today and tomor- struments have become a distinction Our national banks have been and should row. Without changes in this bill to ensure but they really look and perform no remain a source of economic strength and a strong national banks, this ``modernization'' ini- different. solid foundation to construct an economic tiative will atrophy bank powers that are being These new limits and proposed law framework of growth. This bill changes the employed today. It will not be worthy of its comes with few, if any, competitive balance between the national bank and state name or the positive support of Congress. gain for a small or medium sized bank. bank charters and may push banks to charter Madam Chairman, while some of the laws I hope we can correct that with the La- flip to state banks where flexibility will remain. governing the financial services sector are Falce-Vento amendment and help con- True financial reform need not play off one overdue for reform, we should not be replac- sumers and help institutions. segment of the financial services industry Furthermore, Madam Chairman, the against another. Rather it should provide com- ing old law with bad law. Moving the process commercial basket in this bill which petitive balance. H.R. 10 plainly discriminates forward is not enough for this Member be- again discriminates against banks. I against national banks by taking away existing cause I cannot logically defend this bill as it is think that a reasonable, a level playing powers and creating uncertainty in the conduct not written. There must be some reason, field with regards to commercial bas- of their business. These limits come with few, some fair rationale. ket should be included. And I am if any, competitive gains for small- or medium- Financial services modernization for the fu- pleased to have joined in sponsorship of sized national banks which today ironically ture should be balanced; should enhance an amendment with the gentlewoman have more options and exercise more powers competition, and should not foster industry from New Jersey (Mrs. ROUKEMA), the than they would under this H.R. 10. concentration and corporate restructuring at chairwoman of the subcommittee, in The commercial basket in this bill is not the expense of consumers and communities. sponsoring such amendments to this level between banks and other financial serv- Mr. Chairman, the Administration has made measure. ices companies as the bill envisions a limited their concerns known throughout this process. The bill has any number of flaws that 5% basket for financial service holding compa- Unfortunately, their input has been largely ig- need to be corrected. Clearly, I think nies affiliated with banks and a 15% basket for nored and this has resulted in a veto threat for May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3137 this bill. I urge Members to keep these fun- needs. They want to be able to have the erty, casualty and life insurers from damentals in mind as we move to the amend- opportunity to choose from a variety of discriminating against survivors of do- ments on H.R. 10 and to oppose this bill with- hybrid products without artificial lim- mestic violence. out passage of LaFalce-Vento and other parity its placed on their choices. And they I first raised this issue last October amendments. want to take advantage of the $15 bil- during the Committee on Commerce Mr. BLILEY. Madam Chairman, I lion per year in consumer savings that consideration of H.R. 10. Many of my yield 3 minutes to the gentleman from would result from repealing the ineffi- colleagues on both sides of the aisle Ohio (Mr. OXLEY), the very able chair- cient and archaic Glass-Steagall bill. were stunned to learn that insurers man of the subcommittee. b 1330 routinely use domestic violence as an (Mr. OXLEY asked and was given underwriting criterion. Many insurers permission to revise and extend his re- The Washington lobbyists and the treat a person’s history of abuse as if it marks.) media have panned this bill from day were a life-style choice like skydiving Mr. OXLEY. Madam Chairman, first I one. They said it could not be done. or car racing. Domestic violence is in- would like to thank the chairman of They said the Congress will not have deed dangerous, but it is in no way a the full committee, the gentleman the will to buck the tide and pass a bill life-style choice. from Virginia (Mr. BLILEY), as well as that does not have the unanimous sup- During the intense and often acri- the ranking member, the gentleman port of all segments of the financial in- monious negotiations over this legisla- from Michigan (Mr. DINGELL), and my dustry. Each step of the way we have tion, the chairman and ranking mem- good friend the gentleman from New proved them wrong. We are going to ber of the Committee on Commerce did York (Mr. MANTON), the ranking mem- prove them wrong again today. not lose sight of the importance of this ber of our subcommittee, for their good Congress will not be paralyzed by issue. I am grateful to the gentleman work in bringing this bill to the floor lobbyists who get paid to stop good leg- from Virginia (Mr. BLILEY), the gen- today. islation. At the beginning of this year, tleman from Ohio (Mr. OXLEY), the We have reached a critical watershed the gentleman from Ohio (Mr. gentleman from Michigan (Mr. DIN- in the evolution of the financial serv- BOEHNER) and I decided to go around GELL), and the gentleman from New ices industry. Congress has been trying the lobbyists and convened a meeting York (Mr. MANTON) for their steadfast for 63 years to modernize our financial with top CEOs of the financial industry commitment to including these impor- markets; trying for 63 years to allow for their commitment to getting finan- tant protections in the underlying bill. banks to diversify their portfolios, to cial reform. I would also like to thank the gentle- protect the solvency of the banking in- Some lawyers are continuing to try woman from Maryland (Mrs. MORELLA) dustry, to provide our American com- to pick apart our efforts. Some compa- and the gentleman from Vermont (Mr. panies with some abilities that their nies do not want to face increased com- SANDERS), who are the original spon- foreign competitors already have, and petition and are afraid of H.R. 10’s sors of the legislation upon which the to provide a fair and comprehensive brave new financial world that forces amendment was built and whose lead- system of functional regulation to pro- them to be more responsive to their ership has been instrumental in push- tect consumers and the American tax- consumers. But the leaders of Amer- ing this issue to the forefront of de- payer. ican business know this bill is good for bate. When my subcommittee began work their shareholders and good for their While 23 States have passed this pro- on H.R. 10, we focused on three fun- country. Eventually they came to us tection, H.R. 10 will help all victims of damental goals: Protect consumers, in- and said, we will support your efforts. domestic abuse. It will also help con- crease competition and maintain the Let us support H.R. 10. It is a well- sumers. I urge support of the man- safety and soundness of our Nation’s fi- balanced and well-crafted piece of leg- agers’ amendment. I urge support of nancial system. This legislation, H.R. islation. the legislation. 10, achieves those goals. Mr. MANTON. Madam Chairman, I Mr. LEACH. Madam Chairman, I H.R. 10 establishes full functional yield 2 minutes to the gentlewoman yield 3 minutes to the gentlewoman regulation of financial activities, bal- from Colorado (Ms. DeGette). from New Jersey (Mrs. ROUKEMA), dis- ancing Federal and State regulations Ms. DEGETTE. Madam Chairman, I tinguished chairman of the Sub- to ensure maximum protection to con- thank the gentleman for yielding. committee on Financial Institutions sumers. It repeals the depression era I rise in support of H.R. 10, the Fi- and Consumer Credit. 1930’s restrictions on competition so nancial Services Competitiveness Act. (Mrs. ROUKEMA asked and was that banks will no longer be forced to We have an opportunity today to mod- given permission to revise and extend make riskier and riskier investments ernize financial laws that have not her remarks.) to hang on to a dwindling share of con- changed since the 1930s. This legisla- Mrs. ROUKEMA. Madam Chairman, I sumer savings. And it brings our Amer- tion takes some important steps to rise in strong support of this legisla- ican financial industry into the 21st modernize Depression-era banking laws tion. century on an even footing with our that no longer reflect the reality of to- I base my support for this bill on foreign competitors with full competi- day’s marketplace. some very fundamental principles. One, tion and consumer choice. I know there are fears about the com- it must preserve the safety and sound- When H.R. 10 came to our committee, plexity of this legislation. I know that ness of our Federal deposit system and it was opposed by almost every regu- those changes make everybody nerv- the rest of the Federal safety net and lator and industry group. Now, after ous. But this is a complex issue and it protect the taxpayers. This bill does months of hard work by Republican demands a complex solution. The good that. It must protect against con- and Democrat bipartisan committee news is the bill has the potential to centration of economic power. And I staff, we have a bill that has the sup- foster free-market competition and believe that H.R. 10 maintains both port of the Federal Reserve and Chair- protect the interests of the public with these fundamental principles. man Greenspan, Securities and Ex- the consumer protections included in The bill permits banks, security change Commission, Chairman Arthur the managers’ amendment. firms, and insurance companies to af- Levitt, Consumers First, the National Supporters of this bill have heralded filiate under one holding company, and Association of Home Builders, insur- how much it will benefit consumers. the bill grants bank holding companies ance agents, insurance underwriters, And it will if we pass the managers’ the authority to engage in virtually securities firms, mutual funds and amendment, which includes the very any activity financial in nature. It banks representing a quarter of their important Bliley-Dingell consumer grants holding companies the author- market. protection language. ity it make modest amounts of invest- Most importantly, this bill helps ad- There is an additional consumer pro- ment in commercial activities. And the vance the interests of consumers. Con- tection that is included in the underly- bill grants authority to banks to deal sumers want to be able to go to a fi- ing bill and deserves recognition. Bur- in insurance activities while assuring, nancial planner or investment adviser ied in H.R. 10 is the first-ever Federal and I stress that, assuring that the and take care of all their financial protection aimed at preventing prop- consumers will be protected. H3138 CONGRESSIONAL RECORD — HOUSE May 13, 1998 But the bill does not permit under- I am afraid that it will destroy flexi- Now, tearing down Glass-Steagall is writing of insurance and real estate in- bility in the banking system and will a good idea if we build in the proper vestments in the holding company. The not allow the innovation that we need safeguards, fire walls to protect inves- bill sets up a nuclear regulatory struc- to have going into the 21st century. I tors and depositors and taxpayers. If ture. And, my colleagues, this is fun- am worried that it increases the we do not, it is a disaster for this coun- damental to understanding why I sup- amount of regulation, rather than de- try and it would be a great mistake for port this bill. We are adopting func- creasing it, on our financial services us to pass legislation here today. tional regulation here. While banks, se- system. I am concerned that the bill We have tried to pass legislation for curity firms, and insurance companies does not provide, as the committee the last 15 years or so in this area. But will be permitted to affiliate, the bank- bills did out of both Banking and Com- like the character created by Albert ing securities and insurance regulators merce, for the merger of the bank and Camus in his famous novel, ‘‘The Myth will continue to regulate and supervise thrift insurance funds, which very of Sisyphus,’’ in 1942, Congress has these entities. This will provide the so- much needs to be done for safety and pretty much engaged in an exercise called level playing field, and it will be soundness; and frankly, it is very dis- where we gain great satisfaction from level for all participants in a particular appointing we are not doing that here just trying to get the boulder up to the area of financial services regardless of today. And I am fearful that we will in- top of the mountain but never success- what that corporate structure may be. vite more litigation because of the fully making it. And in fact, that is But here I want to get to the safety vague standards that are in this bill. how this whole exercise may actually and soundness question and I want to For those reasons, I am opposed to the end. But it is worth the effort. stress that the affiliation will not un- bill. Over the years, however, it has dermine safety and soundness. The bill I am not speaking to it for any other foundered because, while banks have protects the Federal deposit system so reason than to lay out the predicate for wanted the extra powers that would that it will not be used to bail out se- it today. It is a sad moment for me to come with repealing Glass-Steagall, curities or insurance affiliates of the be here opposing my chairman on this they have always wanted to do so with- banks. The transaction with affiliates’ issue. I respect him a great deal. I re- out the requisite safeguards being put ‘‘restrictions’’ found in sections 23(a) spect all of the people who worked hard into place so that we do not repeat the and 23(b) will continue to apply to in- on this bill. And I truly hope that we past. surance and securities affiliates in this get to a flexible, innovative financial The bill before us now has good and holding company structure. I stress, services modernization piece of legisla- bad and ugly, like that old Clint these types of fire walls are absolutely tion. Eastwood spaghetti western. The good Mr. BLILEY. Madam Chairman, I re- essential to protect the consumers and is that we keep out Op-subs. We will serve the balance of my time. the taxpayers. Mr. MANTON. Madam Chairman, I keep hearing that. It will be defined to I would like to tangentially make the yield 4 minutes to the gentleman from us as an operating subsidiary. What point that I oppose the operating sub- Op-sub really stands for is ‘‘ordinary Massachusetts (Mr. MARKEY). sidiary amendments which will be of- Mr. MARKEY. Madam Chairman, I people subsidizing’’ banks. That is fered later, but we will debate that at thank the gentleman from New York what Op-sub means, spreading the Fed- the appropriate time. for yielding me the time, and I want to eral protection for banking activities This legislation is also necessary, ab- congratulate him and the gentleman over into securities, over into insur- solutely necessary, to keep us competi- from Ohio (Mr. OXLEY) along with the ance areas. Ordinary people subsidizing tive with our foreign competition. Out- chairman of the full committee, the risky business, that is bad. It is not in dated laws need to be updated, and this gentleman from Virginia (Mr. BLILEY) the bill. bill does that; but as well as protecting and the ranking Democrat for the full However there are some things in the us in world markets, it also protects us committee, the gentleman from Michi- bill which are bad and ugly. The Leach here at home. gan (Mr. DINGELL) for their excellent amendment seeks to deal with the mix- I want, in conclusion, to say that we work on this bill; and all the other ture of commerce and banking. I sup- need this legislation to set a statutory members, the gentleman from New port that amendment. It is a good framework to direct the regulators who York (Mr. LAFALCE) and the gentleman amendment. The Bliley-Dingell amend- have, I am afraid, in the absence of from Iowa (Mr. LEACH) and everyone ment seeks to deal with the defi- congressional action, taken arbitrary else who has worked on this bill. ciencies which exist in the protections and ad hoc actions and have rewritten Banking, insurance, securities. Now, for depositors and investors, and I sup- the rules. But they are not directly ac- to the ordinary person listening to this port that amendment. They should countable to the voters, my colleagues. debate, it sounds like a struggle be- both be adopted if our goal is to form I want to repeat that. The regulators tween the very rich and the extremely a more perfect version of what this leg- are not accountable to the voters and wealthy. ‘‘What is my stake in this de- islation should be so that we can move the taxpayers. We are. bate?’’ the ordinary person says. Well, to a future without Glass-Steagall, but Today we must take action, act now, it is really a debate about investors at the same time give the protections and take this away from those regu- and depositors and businesses and con- to investors, to depositors, to tax- lators who have been acting in the ab- sumers. And, in fact, it is a debate payers which they deserve. sence of our action. about a fundamental change being pro- b 1345 Mr. LAFALCE. Madam Chairman, I posed in the capital formation system yield 1 minute to the gentleman from in the United States that is the very Mr. LEACH. Madam Chairman, I Florida (Mr. MCCOLLUM). engine which drives capitalism in the yield 2 minutes to the gentleman from (Mr. MCCOLLUM asked and was United States. Delaware (Mr. CASTLE), my distin- given permission to revise and extend Now, back in 1933, when Glass- guished friend and colleague, the sub- his remarks.) Steagall was put on the books, it was committee chairman. Mr. MCCOLLUM. Madam Chairman, in the aftermath of a great economic Mr. CASTLE. Madam Chairman, I today I very reluctantly rise in opposi- collapse in the United States, and thank the gentleman for yielding. tion to the bill in its present form. there was great concern about the mix- Madam Chairman, I, too, like most of Like every other member, I think, of ture of investment banking with ordi- the other speakers here, rise in support the Committee on Banking and Finan- nary banking. of the repeal of Glass-Steagall and the cial Services, on both sides of the aisle, Now many people argue times have modernization of financial institutions I want very badly to see moderniza- changed. And they have. But some- across the United States of America. I tion. But I do not believe that this bill thing has not changed. That is human think this is very, very important to fulfills the flexibility test that I wish nature. It is still the same. And the do. that it did. And unless we amend it in very same forces of greed and fear I will submit a fuller statement for significant ways that I do not expect which existed in 1929, 1930, 1931, and the RECORD, but I would just like to today, I am going to have to vote 1932, throughout the 1930s, still exists take the little bit of time I have, to against it. today. first of all, thank all those who put May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3139 this together, there is too many to very important to my State of Delaware and peting interests affected by H.R. 10. As mention in 2 minutes, and to state that our banks are split over the bill. I will support I noted, I am not entirely happy with the most important reason for support- several of the key amendments to the bill, in every provision in this bill, and I will ing this legislation that I can find and an effort to improve some provisions, but re- work to improve those provisions be- I hope others can find is that it will gardless of what happens on those amend- fore it becomes law. But overall, H.R. benefit every American seeking to im- ments, I believe this legislation is a step for- 10 is a well-crafted effort to make our prove their family’s financial security ward and should be passed today. financial services system ready for the by saving and investing more. As a member of the House Banking Com- 21st century and to meet the needs of This legislation will help them mittee, I have been directly involved in the American consumers and business. I achieve that goal by making more sav- work to modernize our financial services laws urge my colleagues to keep this effort ings and investment products available since I came to Congress in 1993. It has been alive and pass H.R. 10 today. in one-stop shopping at competitive a difficult struggle to update our laws to keep Mr. LAFALCE. Madam Chairman, I prices. In addition, the bill contains pace with and manage what is happening in yield 2 minutes to the gentlewoman important disclosure and sales stand- the market place, while seeking to balance the from California (Ms. WATERS). ards that protect consumers as they competing interests of the banking, securities (Ms. WATERS asked and was given shop for these products. and insurance industries. permission to revise and extend her re- The legislation will help consumers, Now is the time to act. We must do this to marks.) but it will also benefit the businesses benefit consumers who need a variety of fi- Ms. WATERS. Madam Chairman, I seeking to provide these financial prod- nancial products to help them plan for their rise in opposition to the Financial ucts. It will enable banks, insurance economic futures. In addition, we must update Services Act of 1998. I am not opposed companies, and securities firms to af- these laws to allow our financial services pro- to the reform of our banking laws. filiate and operate more competitively, viders to compete effectively in the next cen- However, I oppose this bill because it which is good for all of us on a level tury. sacrifices the needs of the American playing field. The most important reason for supporting consumer and underserved commu- It will expand the products that this legislation is that it will benefit every nities in order to benefit our Nation’s these financial services can offer to American seeking to improve their family's fi- huge banking securities and insurance their customers while maintaining ade- nancial security by saving and investing more. industries. quate regulation to preserve the safety This legislation will help them achieve that H.R. 10 undermines the Community and soundness of the system. That is goal by making more savings and investment Reinvestment Act. Many of us inside what it is all about. products available in one-stop shopping at and outside of Congress have struggled We needed to find a piece of legisla- competitive prices. In addition, the bill contains to make financial institutions more ac- tion after 60 years, and Glass-Steagall important disclosure and sales standards to countable to the communities they was questioned almost on the day it protect consumers as they shop for these serve. This bill weakens the CRA by al- passed, I might add, but we needed to products. lowing banks to shift assets to affili- find something which we had proper This legislation will help consumers, but it ates with no CRA obligation. regulation, good capital requirements, will also benefit the businesses seeking to pro- H.R. 10 does not adequately protect the fire walls that we are concerned vide these financial products. It will enable consumers. The bill permits the un- about in order to move it forward. banks, insurance companies and securities precedented preemption of stronger In my judgment, this piece of legisla- firms to affiliate and operate more competi- State consumer protection laws. State tion does that. H.R. 10 meets those tively on a level playing field. It will expand the banking laws that prohibit ATM sur- standards. I am supportive of a number products that these financial services firms charges or require the provision of low- of the amendments which are going to can offer to their customers, while maintaining cost bank accounts would be subject to come up, because I feel it should be adequate regulation to preserve the safety and Federal preemption. tilted a little bit one way or the other, soundness of the system. H.R. 10 allows the dangerous mixing as others may feel, too. But in the long Madam Chairman, as part of the long of banking and commerce. H.R. 10 per- run, I intend to support this legislation deliberations seeking to treat all finan- mits banks to merge with retail and regardless of how these amendments cial services providers fairly, I have manufacturing companies. This would may come out. been particularly interested in assur- undermine the critical role of banks as I must say I have a sense of deja vu ing that national banks are permitted the impartial providers of credit and about all this. My State went through to compete fairly in selling and under- concentrate economic power in the this in the 1980s. We liberalized our writing insurance products. Bank sales hands of just a few institutions. banking laws a great deal. Our banks and underwriting of insurance will be None of the national consumer orga- were among the first in the country good for competition and good for nizations support this bill, and neither which were allowed to do a number of American consumers. do I. I urge my colleagues to vote things that are being talked about in To be candid, in my view the provi- against H.R. 10. this legislation when the States were sions in this legislation regarding Mr. BLILEY. Madam Chairman, I allowed to regulate it. banking and insurance are not perfect. yield 2 minutes to the gentleman from I cannot tell my colleagues how well I believe the language that was con- Ohio (Mr. BOEHNER), the chairman of it has worked. We have regulated well. tained in the Banking Committee’s the Republican Conference. We have been careful about what they version of H.R. 10 is superior. The im- Mr. BOEHNER. Madam Chairman, let could do. We have made sure the cap- proved compromise language is ade- me first begin by congratulating the ital requirements were high. Delaware quate in protecting the right of na- Members from both the Committee on has prospered mightily as a part of all tional banks to participate in the in- Banking and Financial Services and of this. surance business, but it has been as- the Committee on Commerce from the I would also say that there are many serted that section 104 could leave Democrat and Republican side of the banks who are opposed to this legisla- some chance that a State could at- aisles for their outstanding work in tion, and I think we will find in the tempt to treat banks less fairly than bringing this piece of legislation to long run, when we are through in the other providers of insurance. We should this floor today. House and the Senate, that they will be continue to work to further clarify this Once again, I think that Congress is pleased. So support the legislation. provision in a potential conference on about to make history. Despite count- Madam Chairman, I rise in support of H.R. the bill before it becomes law. I am less changes in our economy, there has 10, the Financial Services Competition Act. committed to working toward that been no significant reform of America’s This legislation is long-overdue to modernize goal. financial service laws since the Great our Nation's banking, securities and insurance Finally, Madam Chairman, I say to Depression, but we have never been laws. While the bill before us is not perfect, it my colleagues that this is historic leg- closer to making these changes than does represent a fair compromise on impor- islation that has been a long-time in we are now. There is today a broad bi- tant issues. As is the case with any com- coming and it has been an extremely partisan consensus that the time to promise, not every group is happy. Banking is difficult effort to balance all the com- move forward has finally come. H3140 CONGRESSIONAL RECORD — HOUSE May 13, 1998

We have worked hard for a consensus Mr. LAFALCE. Madam Chairman, I We hear that the other body will not bill that ensures that every American yield 1 minute to the gentleman from take it up. We hear that the White is a winner: consumers, bankers, insur- Minnesota (Mr. VENTO). House might veto it. We will never ers, brokers. American consumers de- Mr. VENTO. Madam Chairman, I know until we send it to them. So let serve the freedom of one-stop shopping thank the gentleman for yielding, and, us do our duty. Let us send it to them. for inspection services which we be- again, I would reiterate my opposition. I say to those interested who feel lieve will mean about $15 billion sav- I think this bill, frankly, for many of that everything in this bill is not to ings directly passed to themselves and us simply reregulates rather than their liking, go next-door. Make your to their families. But we should not unregulates what is portrayed as being case. Perhaps you will be successful. forget that the financial sector of our a modernization bill. When we get to the conference, which I economy is also the foundation of our It is grudging in a sense to the point hope we will, as the gentleman from country and the foundation of our of fencing in many activities and not Iowa has so ably pointed out, the ad- economy today. being responsive to the market. It tries ministration will have a seat at the Madam Chairman, America cannot to superimpose on the market some- table, and we will attempt to address meet the challenges of the 21st Century thing that will not work that will con- their concerns. But the most important with financial service laws that are de- tinue to frustrate the efforts of finan- thing today is to pass this bill and send signed for the 1930s. Financial services cial institutions to respond to the mar- it to the other body. reform is not about politics. It is about ket. Mr. MANTON. Madam Chairman, we what is good for America. We are hope- The opposition from the Clinton ad- continue our reservation of time. ful that the White House would join ministration is very strong. It is not Mr. LEACH. Madam Chairman, I Chairman Greenspan, Republicans, about turf. It is not about committee would be happy to close, but were there Democrats together in this bipartisan jurisdiction. It is about trying to write other speakers that wish to speak to reform of these financial service laws. laws that make common sense that re- the subject? Mr. MANTON. Madam Chairman, we spond to today’s marketplace and let Mr. LAFALCE. Madam Chairman, I have only one speaker left on our side, these capital flows move forward, respect the gentleman’s right to close, and we would inquire of the Chair who which, in the end, serve all the vital and I believe I have a right to speak has the right to close. purposes of our economy. immediately preceding him. Therefore, The CHAIRMAN. The gentleman National banks functioning under the if there are going to be any other from Iowa (Mr. LEACH) has the right to 1862 bank law which created the na- speakers from either the side of the close. The gentleman from New York tional bank charter, have been a great gentleman from Virginia (Mr. BLILEY) (Mr. MANTON) has 7 minutes remaining. success and has led to and provided the or the gentleman from New York (Mr. Mr. MANTON. Madam Chairman, I economic foundation for today’s econ- MANTON), they should precede me. reserve the balance of my time. omy. This bill, frankly, reneges on The CHAIRMAN. The gentleman Mr. LEACH. Madam Chairman, I that. Again, I would reiterate the im- from Virginia (Mr. BLILEY) has no more yield 1 minute to the distinguished portance of acting on the LaFalce- time remaining. The gentleman from gentlewoman from New York (Mrs. Vento amendment in the amendment New York (Mr. MANTON) has 7 minutes KELLY). process to safeguard and preserve the remaining. (Mrs. KELLY asked and was given Mr. MANTON. Madam Chairman, permission to revise and extend her re- national bank charter. Mr. BLILEY. Madam Chairman, how does the gentleman from New York marks.) much time do I have remaining? have any speakers besides himself? Mrs. KELLY. Madam Chairman, one Mr. LAFALCE. Madam Chairman, The CHAIRMAN. The gentleman of the most important aspects of H.R. 1 how much time do I have remaining? 10 is that it is designed to enhance from Virginia (Mr. BLILEY) has 2 ⁄4 min- The CHAIRMAN. The gentleman utes remaining. functional regulation of holding com- from New York (Mr. LAFALCE) has 2 Mr. BLILEY. Madam Chairman, I panies. As such, it is my understanding minutes remaining. yield myself the balance of the time. that insurance companies within the Mr. LAFALCE. Madam Chairman, I Madam Chairman, I rise in strong holding company structure will be reg- will be using that 2 minutes. support of this bill. The gentleman ulated by the State insurance regu- Mr. MANTON. Madam Chairman, I from Ohio (Mr. BOEHNER) who pre- lators, and securities firms will be reg- yield as much time as he may consume viously spoke in the well met with the ulated by the SCC and the State securi- to the gentleman from Michigan (Mr. banking industry this week and said, ties regulators. DINGELL), the ranking member of the While the Federal Reserve Board will what is your bottom line? What do you Committee on Commerce. remain the umbrella supervisor, H.R. want? The bottom line is they want no (Mr. DINGELL asked and was given 10 will assure that firms within the bill. Why do they want no bill? Because permission to revise and extend his re- holding company such as insurance the OCC is giving them everything marks.) companies will be able to continue to they want. Guess what. The OCC is Mr. DINGELL. Madam Chairman, operate in the manner in which they leaving. Guess where the OCC is going. this is a remarkable day. I never operate today. It is going to work for Banker’s Trust thought I would live long enough to see Madam Chairman, I simply want to in New York. Isn’t that a surprise. And us discuss this issue with such har- confirm with the gentleman from Iowa we will get a new one. mony on the House floor. We have a bi- If we defeat this bill, this issue will (Mr. LEACH) that this is his under- partisan bill. We have a bipartisan standing of the bill as well. be dead in the House and in the Con- managers’ amendment, and we have a Mr. LEACH. Madam Chairman, will gress this year. When the Congress result which is going to be in the pub- the gentlewoman yield? goes out this fall for the elections, and lic interest. Mrs. KELLY. I yield to the gen- the new Congress between that time I urge my colleagues to support the tleman from Iowa. and the time the new Congress comes managers’ amendment. I urge them to Mr. LEACH. Madam Chairman, the in, it is this gentleman’s prediction support the bill. This will resolve an gentlewoman has precisely and cor- that more authority will be given to issue which has cursed this Congress rectly laid out the circumstances of the banks. Perhaps they will be al- for better than 20 years, and it will do the bill. This bill is designed to en- lowed into real estate sales, and then it on terms which meet the public in- hance functional regulation as she has try to move the legislation. terest. described. My friends, there is never a perfect H.R. 10 provides a safe and sound Mrs. KELLY. Madam Chairman, I time. There is never such a thing as a framework for the financial services ask unanimous consent to incorporate perfect piece of legislation as complex industries of this country. It does so in a further explanation of this aspect of as this issue. But the time is now. For a way which protects consumers, which the bill after consultation with Chair- 10 separate Congresses, we have wres- protects investors, and which protects man LEACH. tled with this issue to no avail. Today, the economy of this Nation. The CHAIRMAN. A colloquy may not we are further along then we have ever It also sees to it that the new global be inserted into the official RECORD. been. economy of the world is going to have May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3141 active, vigorous, capable American ates, insofar as humanly possible, a National banks have existed within participants in it. The legislation will fair, two-way street for all players. the United States for over 100 years. not spur megamergers. Passing it will And it does something else: It sees to it They have always been controversial. mean that we will assure that, if such that when bankers are engaged in these But, thankfully, we have always been occurs, there will be reasonable protec- kinds of activities, they play by the able to preserve their vitality and their tion for investors and for consumers. same rules that everybody else does. viability, and I think it has been the b 1400 It does not undermine the Commu- vitality of our national bank system nity Reinvestment Act. That is left as that has contributed to the economic H.R. 10 draws a clear line between it is. I would urge my colleagues to rec- growth of the United States of Amer- bank activities, those which are going ognize that that is a good thing. ica. to be insured and subsidized by the tax- The choice is clear. I intend to vote Every administration has wanted to payers, and far riskier exercises, such for the managers’ amendment; I intend preserve that economic viability of our as the sale of securities and other ac- to vote against other amendments. I national bank system. In our most re- tivities of that sort. intend to try and see to it that we do cent tenure, whether it is the Carter H.R. 10, along with the managers’ not expand high risk activities of administration, or the Reagan adminis- amendment, protects the consumer. banks. I intend to try to see that we do tration, or the Bush administration, or Just last week NationsBank paid a not include operating subsidies inside now the Clinton administration, they large fine because their employees sold the banks which can pervert the pur- have said do not undermine the na- risky uninsured derivative securities to poses of the managers’ amendment or tional bank charter; do not undermine elderly holders of securities of deposit, indeed to put at risk taxpayers’ guar- the regulator of the national banks. telling them that their money was as antees of bank deposits. This bill does that. It undermines the safe as the Capitol of the United I urge my colleagues to support the national bank regulator, it undermines States. managers’ amendment and to oppose the national bank charter. That is the H.R. 10, along with the managers’ other amendments. principal reason that the administra- amendment, protects the investor. It Madam Chairman, this is good legis- tion says they would veto the bill in its says you are not going to sell stocks or lation. With the managers’ amend- present form, unless the LaFalce-Vento bonds or other instruments under con- ment, it is an excellent piece of legisla- amendment passes. ditions which are going to hurt the tion. It resolves the problems which The by-product of that, the fact that consumers, and you are going to have banks complain about. To the degree so many assets would potentially be re- to make, if you do so, the same disclo- that it is proper to do so, it protects moved from the jurisdiction of the sures and satisfy the same regulatory competition inside the financial serv- Community Reinvestment Act, is why requirements as everyone else in the ices industry. It protects investors, it every consumer group that I am aware business. protects consumers. of, in any event, opposes the bill also, It also says some other things which I would point out that the bankers or at least the principal reason. are important. With the managers’ have said they are going to oppose this I will offer an amendment to cure amendment, it will protect the tax- legislation, regardless of how amended, these defects. If it goes down, I will payer. It prevents FDIC insurance, whether the amendment offered by my also offer a motion to recommit that which is paid for by the taxpayer, from dear friend the gentleman from New would continue the essence of the bill, being extended to cover the losses that York (Mr. LAFALCE) is included or not. the repeal of Glass-Stegall and the might come from risky, speculative ac- I would point out that the consumers changes in the Bank Holding Company tivities. of this country, through the Consumers Act and the consumer protections that I would remind my colleagues that Union, have said that they support the we all want, but would not deal with not long back we passed legislation managers’ amendment. this undermining of the national bank which unleashed the savings & loan in- I would urge my colleagues to vote charter. dustry, and that led to the problem for the bipartisan legislation and the Mr. LEACH. Madam Chairman, I which was called the savings & loan de- bipartisan amendment. It is an oppor- yield myself such time as I may con- bacle, which cost the taxpayers of this tunity to resolve a long-standing prob- sume. country better than $500 billion. This lem in honorable, effective, decent, Madam Chairman, first I would like will protect against that kind of exer- public serving, and public interest to thank my good friend the gentleman cise by bank management. ways. from Virginia (Mr. BLILEY) for his lead- It promotes fair competition. Banks Mr. LAFALCE. Madam Chairman, I ership, and also the gentleman from have lower costs of capital. Why? Be- yield myself such time as I may con- Michigan (Mr. DINGELL), the gentleman cause they are taxpayer insured. That sume. from New York (Mr. MANTON), and my is an effective taxpayer subsidy. In Madam Chairman, the gentleman distinguished friend in dissent, the gen- fact, it might even be called corporate from Michigan (Mr. DINGELL) said that tleman from New York (Mr. LAFALCE). welfare. But, if it is, and if banks are today is a remarkable day, and I con- To my colleagues who oppose the bill going to function, they should see to it cur with him. The gentleman comes be- because they are concerned about con- that that kind of exercise is kept sepa- fore us today and he advocates repeal sumers, I ask you, what happens if the rate from their other activities, so that of Glass-Stegall and significant bill does not pass? This bill contains they cannot use taxpayer subsidies to changes in the Bank Holding Company new Federal consumer and CRA protec- compete with others in the financial Act. You think that is remarkable, and tions that are not now the law of the services industry, and also to see to it, I concur with him. land. Inaction is anti-consumer. as the Congress acted back in the thir- This is something I have fought for To my colleagues who object to ties, to assure that banks do not put at for 20 years. But, unfortunately, the megamerger trends, I ask, what hap- risk Federal taxpayer financed insur- bill makes not only those changes; the pens if the bill does not pass? The ance of their activities. bill makes significant other changes. It mergers will continue, but under a reg- H.R. 10, with the managers’ amend- is those other changes that I am con- ulatory regime with undefined cracks ment, will prevent an Asian banking cerned about. and competitive bureaucratic instincts crisis from spreading like Asian flu to Now, the managers’ amendment will to regulate weakly. Inaction is simply the United States, by putting intel- add consumer protections that the gen- imprudent. ligent limits on the mixing of banking tleman from Michigan (Mr. DINGELL) To my colleagues who, like myself, and commerce. and I were fighting for a month or so worry about rural community banks, I Finally, H.R. 10, with the managers’ ago as part of the Dingell-LaFalce ask what happens if the bill does not amendment, does nothing to hurt the amendment, but there are significant pass? Small banks will be saddled with banks. It expands the range of allow- other provisions that I wanted ad- competition from mega-businesses able bank activities. Any bank can en- dressed that are not addressed, and likely to sweep money from small com- gage in any financial activity, so long that is the way in which the bill under- munities, unless small institutions are as it sets up a separate affiliate. It cre- mines the national bank charter. given new powers, such as access to the H3142 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Federal Home Loan Bank for small I am concerned that this proposal could ac- H.R. 10 sharply reduces community input, business and agricultural lending, and tually limit credit availability by adversely af- giving automatic approvals FHCs whose new restraints on the so-called unitary fecting the two government sponsored enter- banks have Satisfactory or Outstanding CRA thrifts that merge so ignobly com- prises chartered to serve rural markets: the ratings. This means that 98% of financial insti- merce and banking. Farm Credit System (FCS) and the Federal tutions will be beyond community input. It con- Simply put, inaction is the friend of Agricultural Mortgage Corporation tinues a trend brought into sharp national the big, not the small. Inaction puts (FarmerMac). Expanding the Federal Home focus with the publication of William Greider's the taxpayer at grave risk. That is why Loan Bank mission will convert every commer- book Secrets of the Temple in 1987. we need this bill at this time, and I cial bank with assets of less than $500 million Secrets brought to the attention of the na- would urge sympathetic consideration into a retail GSE. tion how the Federal Reserve had been given by my colleagues. As the ranking Democrat on the Agriculture greater command over many issues over the Mr. HASTINGS of Washington. Madam Committee, I have had a keen interest in rural years and how many of the decisions en- Chairman, I appreciate the opportunity to credit availability for many years. Credit is trusted to them, regardless of how wrong they share my views on this legislation. quite literally the lifeblood of our nation's agri- might be, were made without public input or As my colleagues know, this legislation has cultural producers. As a result, I am very inter- control. supporters and detractors. Several hundred of ested in new ways to provide additional credit H.R. 10 ignores history, ignores the lessons my own constituents have contacted me on to farmers and rural communities. However, I of other nations, ignores the interests of poor this issue over the past several months. And am concerned that we have not had ample and working Americans, ignores consumer in- while many support our efforts here today, time to fully consider the serious policy impli- terests, ignores community reinvestment pro- others, particularly small banks in my district, cations of expanding the FHLB System's mis- tections and ignores increased risk to our fi- are concerned that the legislation does not do sion. nancial infrastructure. enough to assist their industry. While I support an appropriate expansion of Madam Chairman, I urge a vote against this In particular, I strongly share their concerns credit for rural Americans, doing so through legislation. about the lack of relief from the burdensome the FHLB System, without making important Mr. HYDE. Madam Chairman, I rise in sup- Community Reinvestment Act. Let me share a changes in the lending charter of the Farm port of H.R. 10, the ``Financial Services Com- few statistics. Credit System, could potentially disrupt the petition Act of 1998.'' For many years, we The CRA, first passed in 1977, took only competitive balance that exists in rural mar- have been trying to repeal the outdated re- two pages of bill language when first authored kets today. Currently, commercial banks, the strictions that keep banks, securities firms, by former Senator William Proxmire. Yet our Farm Credit System and FarmerMac work to and insurance companies from getting into federal regulators have now promulgated more provide competitively priced credit to those one another's businesses. After all the debate, than 275 pages of regulationsÐin microscopic who live and work in rural America. We all I think we have finally come up with something government type, mind youÐgoverning this have an interest in seeing that that competitive in this bill that will open up a whole new world provision. As a result, what was meant to be balance continues. of competition. a community based, largely voluntary program The Agriculture Committee is aware of ef- Now I know that some of the players in this to infuse private capital into struggling areas forts by all participants in the rural credit mar- debate have problems with this bill. That is al- has now become a massive, burdensome, and kets to expand their lending authority. I am ways the case with major deregulation bills. counterproductive federal mandate. convinced that if we proceed down the path of But we cannot ignore the future. Financial According to one study, our financial com- expanding authorities, then we must consider services are becoming increasingly globalized, munity spends more than $1 billion each year, all players that provide rural credit. increasingly computerized, and increasingly and 15 million man hours, complying with the Mr. DAVIS of Illinois. Madam Chairman, I seamless. Banking laws passed during the CRA. The impact is particularly hard on small- rise today in strong opposition to H.R. 10, the Depression simply will not do in the 21st cen- er banks, which incur three times the compli- ``Financial Services Competition Act.'' tury. ance costs of larger institutions. I rise in opposition not because the laws Do I wish that we could maintain a world Some had suggested that CRA require- governing our financial system are immune to where everyone knew their banker on a first ments be reformed to bring them back in line change * * * just the opposite, in our rapidly name basis and loans were made on a hand- with the original intent of the 1977 law. One changing world our financial system is under- shake? Sure, and I think in the new world proposal would have provided relief for all going a veritable transformation and our legal some banks will provide that kind of service to banks smaller than $100 million in assets, and framework must change to correspond to the those who demand it. But we need not have for rural banks with assets of under $250 mil- new realities. However, let us remember that laws that limit us to that kind of service, as de- lion. This would have gone a long way to- many of our financial laws and regulations sirable as it may seem. Everyone is better off wards relieving this tremendous financial and grew out of our great failures of the past in if the market decides what kinds of services all paperwork burden on the small community protecting the interests of the great masses of financial firms will offer. banks in my district. Unfortunately, the bill Americans. In addressing the need for change Just think about the progress we have made does not include this common sense reform. we must also learn from our history. in the past 10 years. When I was a child, only While I am very disappointed with this re- H.R. 10 weakens the Community Reinvest- the wealthy owned stocks. Now, with the sult, I nonetheless believe that we must take ment Act, a critical tool for low-income com- growth of the mutual fund industry and self-di- action to reform our depression era banking munities to develop housing, small business rected retirement funds, millions and millions statutes. In addition, many of my constituents and financial services. CRA should be ex- of average Americans not only own stocks, have contacted me to urge their support of tended to all bank affiliates: insurance compa- but make their own investment decisions. this legislation. As a result, I will support this nies, securities firms and mortgage compa- These developments create wealth, increase bill today in an effort to keep the reform effort nies. Instead, H.R. 10 encourages the move- people's incentive to produce, and relieve alive. But I will work during the next few ment of bank assets beyond the reach of the some of the entitlement burden of govern- months to ensure that critical reforms, like CRA and, indeed, beyond the bank charter. ment. I believe that this bill will bring more CRA reform, are included in any final package H.R. 10 does not address insurance redlin- such positive developments. approved by both the House and the Senate ing, still a major problem in many communities I want to say a word about my friends JIM and sent to the President. and one which I recently called upon the Attor- LEACH, chairman of the Banking Committee, Mr. STENHOLM. Madam Chairman, the leg- ney General to investigate in my district as re- and TOM BLILEY, chairman of the Commerce islation pending before the House, H.R. 10, gards to auto insurance. Committee. They have done an excellent job the Financial Services Competition Act, con- H.R. 10 should prohibit insurance compa- of putting this package together. I commend tains numerous provisions that cause concern. nies from merging with banks until the com- them for their work in bringing about this bill Specifically, I'd like to bring to the attention of pany is in full compliance with the Fair Hous- in a very difficult and contentious environment. the Members of this body the section of the ing Act and other relevant legislation. I especially want to commend them for bill that proposes to broadly expand the mis- H.R. 10 breaks down the final protective working with me on the bank merger provi- sion of the Federal Home Loan Bank (FHLB) barriers between banks and commercial firms sions of the bill. Under current law, bank System. The authorities of the FHLB System and adds a new level of risk to our financial mergers are reviewed under special bank would be expanded to provide advances to stability, one we have not seen in our country merger statutes, and they do not go through commercial banks for a variety of purposes, in generations, but which we can all see in the Hart-Scott-Rodino merger review process including agricultural lending. Southeast Asia today. that covers most other mergers. Now banks May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3143 will be able to get into other businesses which economy and provide consumers with more private and public, benefit from the financial they have not been able to do before. savings and investment options. Unfortunately, prosperity of a developing and growing finan- The principle that we have tried to follow is the Depression era laws that regulate our fi- cial market in the U.S. that when mergers occur, the bank part of that nancial markets have not kept pace with these Mr. FAZIO of California. Mr. Speaker, the merger will be judged under the current bank market forces, leaving American consumers Financial Services Act of 1998 revolutionizes merger statutes, and we do not intend any faced with a ``catch 22''. Consumers have ac- American financial institutions and it ensures change in that process or in any of the agen- cess to more advanced, enhanced financial the United States continued cutting edge suc- cies' respective jurisdictions. The nonbank part products, but are not adequately protected cess in the world market. of that merger, which will fall under the new from fraud and abuse by the laws that cur- The rules and regulations of the Great De- section 6 of the Bank Holding Company Act, rently regulate their financial investments and pression aren't enough to maintain a healthy will be subject to the normal Hart-Scott-Rodino savings. As a result, the regulatory agencies and increasingly globalized interdependent merger review by either the Justice Depart- responsible for enforcing those laws are U.S. economy. The rules have changed and H.R. 10 recog- ment or the Federal Trade Commission. The forced to deal with new entities using old for- managers' amendment has language that em- nizes these changes. mulas that fail to fully appreciate the complex- In the old days, banking, insurance and se- bodies that principle. In short, no bank is treat- ities of the evolving marketplace. curity institutions each provided a distinct, The world recently witnessed in Asia that ed differently than it otherwise would be be- clear financial service. But in the modern fi- cause it has some other business within its unregulated financial markets can lead to cor- nancial marketplace, financial innovations and corporate family. Likewise, no other business ruption and weakened economic conditions. globalization have increasingly blurred these is treated differently than it otherwise would be With America's financial markets slowly evolv- institution's activities. because it has a bank within its corporate ing in the same direction as those in Asia, it H.R. 10 reflects the dynamic changes occur- family. is crucial that our country learns from Asia's ring in the marketplace. We have embodied that same principle with misfortune and take the initiative to develop Republicans and Democrats have crafted a respect to the Federal Trade Commission's appropriate measures that will deter similar balanced bill that fosters open, fair competi- authority to enforce the Federal Trade Com- negative repercussions in our own financial tion, protects consumers and promotes U.S. fi- mission Act and other laws. Section 5 of the markets. nancial services' competitiveness in the world Federal Trade Commission Act specifically In the House of Representatives, the House economy. prohibits the FTC from enforcing the Act Committees on Commerce and Banking have Our financial sector contributes over 18 per- against banks because they are heavily regu- worked to develop a legislative response to cent to our GNPÐthis is an economic force lated. The language in the managers' amend- these changes for the past year and a half. that can't be ignored any longer. ment does not change that, but it does clarify We recently reached a critical juncture in the Today, my colleagues from both sides of the that the bank prohibition does not extend to legislative processÐthe Committees have de- aisle have the opportunity to enhance com- any other nonbank parts of a bank's corporate vised a plan that lays the groundwork for car- petition in the financial services and maintain family. I would also note that similar language rying our financial markets safely and soundly U.S. prominence in the international economic was not necessary for the Justice Department into the 21st century. As a member of the arena. because there are no specific statutory prohi- House Commerce Committee, I support initia- I strongly encourage both Republicans and bitions on its ability to enforce laws against tives that address our antiquated laws and am Democrats to vote ``yes'' for fair competition banks, other than the Hart-Scott-Rodino ex- committed to ensuring that the legislative proc- and ``yes'' for a prosperous, strong American emption that I have already discussed. ess continues unhindered by powerful special economy that will take us safely into the 21st I think that we all agree on this principle interest groups. Century. both with respect to the mergers and the other H.R. 10, the Financial Services Act, permits The CHAIRMAN. All time for general laws, but the specific language may require financial entities, such as banks, insurance debate has expired. some further refinement in conference. For and securities groups, to merge, affiliate and Pursuant to the rule, the amendment that reason, I will be requesting Judiciary associate activities. One of the most pivotal in the nature of a substitute printed in Committee conferees on this narrow part of components of H.R. 10 is the concept of func- part 1 of House Report 105–531 is consid- the bill, and I look forward to continuing to tional regulation. Functional regulation would ered as an original bill for the purpose of amendment under the 5 minute rule work with my Banking Committee and Com- certify that all financial providers would be reg- and is considered read. merce Committee colleagues in this area. ulated according to the services which they The text of the amendment in the na- I also want to announce that the Judiciary provide. For example, a financial holding com- ture of a substitute is as follows: Committee will hold a hearing on bank merg- pany that has an insurance entity as an oper- ers on June 3, and I am hopeful that this hear- ating subsidiary would be regulated by both Be it enacted by the Senate and House of Rep- resentatives of the United States of America in ing will help us determine whether we need to the state insurance commission (insurance ac- Congress assembled, make any further revisions to this language tivities) and the Office of the Comptroller of SECTION 1. SHORT TITLE; PURPOSES; TABLE OF Let me again commend my friends JIM the Currency and the Federal Reserve (bank- CONTENTS. LEACH and TOM BLILEY and everyone else who ing activities). As a result, financial activities (a) SHORT TITLE.—This Act may be cited as has worked on this legislation, and I ask my would be regulated by experts in that respec- the ‘‘Financial Services Act of 1998’’. colleagues to support it. tive financial field. (b) PURPOSES.—The purposes of this Act Mr. STRICKLAND. Madam Chairman, to- The House leadership has reached an are as follows: (1) To enhance competition in the financial day's financial services marketplace is an in- agreement on a financial package that I be- services industry, in order to foster innova- creasingly complex web of interconnecting lieve is fair to all industries and best serves tion and efficiency. products and service providers. In the 1990's, the public interest. The compromise on (2) To ensure the continued safety and consumers are going to their bank not just to H.R. 10 will create a modernized financial soundness of depository institutions. deposit money in a traditional passbook sav- system that will allow our country to be finan- (3) To provide necessary and appropriate ings account, but also, increasingly, to pur- cially competitive into the next century. How- protections for investors and ensure fair and chase insurance products. They visit their in- ever, H.R. 10 can still be improved with the honest markets in the delivery of financial surance broker not only for simple, term life in- adoption of a package of consumer protection services. (4) To provide for appropriate functional surance, but also for insurance products that amendments which will be offered by com- regulation of insurance activities. include a long-term investment component. merce Committee Chairman TOM BLILEY (R± (5) To reduce and, to the maximum extent Consumers are no longer content with the VA) and Ranking Member (D± practicable, to eliminate the legal barriers choices of the past, but are demanding more MI). This amendment will provide the nec- preventing affiliation among depository in- advanced financial products and often want essary safeguards for consumers while provid- stitutions, securities firms, insurance com- the convenience of ``one stop shopping.'' At ing enough freedoms to financial providers to panies, and other financial service providers the same time, financial institutions are con- compete globally on a level playing field. and to provide a prudential framework for solidating at an increasing rateÐbanks are Congress has waited long enough to enact achieving that result. (6) To enhance the availability of financial merging with other banks and insurance and legislation to guarantee the solvency of Amer- services to citizens of all economic cir- securities dealers are combining forcesÐlead- ican financial markets. Congress must move cumstances and in all geographic areas. ing to new types of financial entities. the process forward and provide the nec- (7) To enhance the competitiveness of These changes are enhancing the success essary consumer protections and regulations United States financial service providers of U.S. financial markets. They stimulate the to guarantee that all players, big and small, internationally. H3144 CONGRESSIONAL RECORD — HOUSE May 13, 1998 (8) To ensure compliance by depository in- Subtitle F—Applying the Principles of Na- Subtitle C—Securities and Exchange Com- stitutions with the provisions of the Commu- tional Treatment and Equality of Competi- mission Supervision of Investment Bank nity Reinvestment Act of 1977 and enhance tive Opportunity to Foreign Banks and Holding Companies the ability of depository institutions to meet Foreign Financial Institutions Sec. 231. Supervision of investment bank the capital and credit needs of all citizens Sec. 151. Applying the principles of national holding companies by the Secu- and communities, including underserved treatment and equality of com- rities and Exchange Commis- communities and populations. petitive opportunity to foreign sion. (c) TABLE OF CONTENTS.—The table of con- banks that are financial hold- Subtitle D—Study tents for this Act is as follows: ing companies. Sec. 241. Study of methods to inform inves- Sec. 1. Short title; purposes; table of con- Sec. 152. Applying the principles of national tors and consumers of unin- tents. treatment and equality of com- sured products. petitive opportunity to foreign TITLE I—FACILITATING AFFILIATION TITLE III—INSURANCE banks and foreign financial in- AMONG SECURITIES FIRMS, INSUR- Subtitle A—State Regulation of Insurance ANCE COMPANIES, AND DEPOSITORY stitutions that are wholesale fi- Sec. 301. State regulation of the business of INSTITUTIONS nancial institutions. Subtitle G—Federal Home Loan Bank insurance. Subtitle A—Affiliations Sec. 302. Mandatory insurance licensing re- System Sec. 101. Glass-Steagall Act reformed. quirements. Sec. 102. Activity restrictions applicable to Sec. 161. Federal home loan banks– Sec. 303. Functional regulation of insurance. bank holding companies which Sec. 162. Membership and collateral. Sec. 304. Insurance underwriting in national are not financial holding com- Sec. 163. The Office of Finance. banks. panies. Sec. 164. Management of banks. Sec. 305. New bank agency activities only Sec. 103. Financial holding companies. Sec. 165. Advances to nonmember borrowers. through acquisition of existing Sec. 104. Certain State laws preempted. Sec. 166. Powers and duties of banks. licensed agents. Sec. 105. Mutual bank holding companies Sec. 167. Mergers and consolidations of Fed- Sec. 306. Title insurance activities of na- authorized. eral home loan banks. tional banks and their affili- Sec. 106. Prohibition on deposit production Sec. 168. Technical amendments. ates. offices. Sec. 169. Definitions. Sec. 307. Expedited and equalized dispute Sec. 107. Clarification of branch closure re- Sec. 170. Resolution funding corporation resolution for financial regu- quirements. Sec. 171. Capital structure of the Federal lators. Sec. 308. Consumer protection regulations. Sec. 108. Amendments relating to limited home loan banks. ‘‘Sec. 45. Consumer protection regulations.’’ purpose banks. Sec. 172. Investments. Sec. 173. Federal Housing Finance Board. Sec. 309. Certain State affiliation laws pre- Subtitle B—Streamlining Supervision of empted for insurance compa- Financial Holding Companies Subtitle H—Direct Activities of Banks nies and affiliates. Sec. 111. Streamlining financial holding Sec. 181. Authority of national banks to un- Subtitle B—Redomestication of Mutual company supervision. derwrite certain municipal Insurers bonds Sec. 112. Elimination of application require- Sec. 311. General application. ment for financial holding com- Subtitle I—Effective Date of Title Sec. 312. Redomestication of mutual insur- panies. Sec. 191. Effective date. ers. Sec. 113. Authority of State insurance regu- TITLE II—FUNCTIONAL REGULATION Sec. 313. Effect on State laws restricting re- lator and Securities and Ex- domestication. change Commission. Subtitle A—Brokers and Dealers Sec. 314. Other provisions. Sec. 114. Prudential safeguards. Sec. 201. Definition of broker. Sec. 315. Definitions. Sec. 115. Examination of investment compa- Sec. 202. Definition of dealer. Sec. 316. Effective date. nies. Sec. 203. Registration for sales of private se- Subtitle C—National Association of Sec. 116. Limitation on rulemaking, pruden- curities offerings. Registered Agents and Brokers tial, supervisory, and enforce- Sec. 204. Sales practices and complaint pro- Sec. 321. State flexibility in multistate li- ment authority of the Board. cedures. censing reforms. Subtitle C—Subsidiaries of National Banks Sec. 205. Information sharing. Sec. 322. National Association of Registered Sec. 206. Definition and treatment of bank- Sec. 121. Permissible activities for subsidi- Agents and Brokers. ing products. aries of national banks. Sec. 323. Purpose. Sec. 207. Derivative instrument and quali- Sec. 324. Relationship to the Federal Gov- Sec. 122. Misrepresentations regarding de- fied investor defined. ernment. pository institution liability Sec. 208. Government securities defined. Sec. 325. Membership. for obligations of affiliates. Sec. 209. Effective date. Sec. 326. Board of directors. Sec. 123. Repeal of stock loan limit in Fed- Sec. 327. Officers. eral reserve act. Subtitle B—Bank Investment Company Activities Sec. 328. Bylaws, rules, and disciplinary ac- Subtitle D—Wholesale Financial Holding tion. Companies; Wholesale Financial Institutions Sec. 211. Custody of investment company as- Sec. 329. Assessments. sets by affiliated bank. CHAPTER 1—WHOLESALE FINANCIAL HOLDING Sec. 330. Functions of the NAIC. Sec. 212. Lending to an affiliated investment Sec. 331. Liability of the Association and the COMPANIES company. directors, officers, and employ- Sec. 131. Wholesale financial holding compa- Sec. 213. Independent directors. ees of the Association. nies established. Sec. 214. Additional SEC disclosure author- Sec. 332. Elimination of NAIC oversight. Sec. 132. Authorization to release reports. ity. Sec. 333. Relationship to State law. Sec. 133. Conforming amendments. Sec. 215. Definition of broker under the In- Sec. 334. Coordination with other regulators. CHAPTER 2—WHOLESALE FINANCIAL vestment Company Act of 1940. Sec. 335. Judicial review. INSTITUTIONS Sec. 216. Definition of dealer under the In- Sec. 336. Definitions. Sec. 136. Wholesale financial institutions. vestment Company Act of 1940. TITLE IV—UNITARY SAVINGS AND LOAN Sec. 217. Removal of the exclusion from the HOLDING COMPANIES Subtitle E—Streamlining Antitrust Review definition of investment adviser of Bank Acquisitions and Mergers Sec. 401. Termination of expanded powers for banks that advise invest- for new unitary S&L holding Sec. 141. Amendments to the Bank Holding ment companies. companies. Company Act of 1956. Sec. 218. Definition of broker under the In- Sec. 142. Amendments to the Federal De- vestment Advisers Act of 1940. TITLE I—FACILITATING AFFILIATION posit Insurance Act to vest in Sec. 219. Definition of dealer under the In- AMONG SECURITIES FIRMS, INSUR- the Attorney General sole re- vestment Advisers Act of 1940. ANCE COMPANIES, AND DEPOSITORY sponsibility for antitrust re- Sec. 220. Interagency consultation. INSTITUTIONS view of depository institution Sec. 221. Treatment of bank common trust Subtitle A—Affiliations mergers. funds. SEC. 101. GLASS-STEAGALL ACT REFORMED. Sec. 143. Information filed by depository in- Sec. 222. Investment advisers prohibited (a) SECTION 20 REPEALED.—Section 20 (12 stitutions; interagency data from having controlling inter- U.S.C. 377) of the Banking Act of 1933 (com- sharing. est in registered investment monly referred to as the ‘‘Glass-Steagall Sec. 144. Applicability of antitrust laws. company. Act’’) is repealed. Sec. 145. Clarification of status of subsidi- Sec. 223. Conforming change in definition. (b) SECTION 32 REPEALED.—Section 32 (12 aries and affiliates. Sec. 224. Conforming amendment. U.S.C. 78) of the Banking Act of 1933 is re- Sec. 146. Effective date. Sec. 225. Effective date. pealed. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3145

SEC. 102. ACTIVITY RESTRICTIONS APPLICABLE ‘‘(3) LIMITED EXCLUSIONS FROM COMMUNITY ing an investment company (as defined in TO BANK HOLDING COMPANIES NEEDS REQUIREMENTS FOR NEWLY ACQUIRED section 3 of the Investment Company Act of WHICH ARE NOT FINANCIAL HOLD- DEPOSITORY INSTITUTIONS.— 1940). ING COMPANIES. ‘‘(A) IN GENERAL.—If the requirements of ‘‘(D) Issuing or selling instruments rep- (a) IN GENERAL.—Section 4(c)(8) of the subparagraph (B) are met, any depository in- resenting interests in pools of assets permis- Bank Holding Company Act of 1956 (12 U.S.C. stitution acquired by a bank holding com- sible for a bank to hold directly. 1843(c)(8)) is amended to read as follows: pany during the 24-month period preceding ‘‘(E) Underwriting, dealing in, or making a ‘‘(8) shares of any company the activities the submission of a declaration under para- market in securities. of which had been determined by the Board graph (1)(E) and any depository institution ‘‘(F) Engaging in any activity that the by regulation under this paragraph as of the acquired after the submission of such dec- Board has determined, by order or regulation day before the date of the enactment of the laration may be excluded for purposes of that is in effect on the date of enactment of Financial Services Act of 1998, to be so close- paragraph (1)(C) until the later of— the Financial Services Act of 1998, to be so ly related to banking as to be a proper inci- ‘‘(i) the end of the 24-month period begin- closely related to banking or managing or dent thereto (subject to such terms and con- ning on the date the acquisition of the depos- controlling banks as to be a proper incident ditions contained in such regulation, unless itory institution by such company is con- thereto (subject to the same terms and con- modified by the Board);’’. summated; or ditions contained in such order or regula- (b) CONFORMING CHANGES TO OTHER STAT- ‘‘(ii) the date of completion of the 1st ex- tion, unless modified by the Board). UTES.— amination of such depository institution ‘‘(G) Engaging, in the United States, in (1) AMENDMENT TO THE BANK HOLDING COM- under the Community Reinvestment Act of any activity that— PANY ACT AMENDMENTS OF 1970.—Section 105 of 1977 which is conducted after the date of the ‘‘(i) a bank holding company may engage the Bank Holding Company Act Amend- acquisition of the depository institution. in outside the United States; and ments of 1970 (12 U.S.C. 1850) is amended by ‘‘(B) REQUIREMENTS.—The requirements of ‘‘(ii) the Board has determined, under regu- striking ‘‘, to engage directly or indirectly in this subparagraph are met with respect to lations issued pursuant to section 4(c)(13) of a nonbanking activity pursuant to section 4 any bank holding company referred to in this Act (as in effect on the day before the of such Act,’’. subparagraph (A) if— date of enactment of the Financial Services (2) AMENDMENT TO THE BANK SERVICE COM- ‘‘(i) the bank holding company has submit- Act of 1998) to be usual in connection with PANY ACT.—Section 4(f) of the Bank Service ted an affirmative plan to the appropriate the transaction of banking or other financial Company Act (12 U.S.C. 1864(f)) is amended Federal banking agency to take such action operations abroad. by striking the period and adding at the end as may be necessary in order for such insti- ‘‘(H) Directly or indirectly acquiring or the following: ‘‘as of the day before the date tution to achieve a rating of ‘satisfactory controlling, whether as principal, on behalf of enactment of the Financial Services Act record of meeting community credit needs’, of 1 or more entities (including entities, of 1998.’’. or better, at the next examination of the in- other than a depository institution or sub- SEC. 103. FINANCIAL HOLDING COMPANIES. stitution under the Community Reinvest- sidiary of a depository institution, that the ment Act of 1977; and bank holding company controls) or other- (a) IN GENERAL.—The Bank Holding Com- pany Act of 1956 is amended by inserting ‘‘(ii) the plan has been approved by such wise, shares, assets, or ownership interests after section 5 (12 U.S.C. 1844) the following agency. (including without limitation debt or equity ‘‘(c) ENGAGING IN ACTIVITIES FINANCIAL IN new section: securities, partnership interests, trust cer- NATURE.— tificates or other instruments representing ‘‘SEC. 6. FINANCIAL HOLDING COMPANIES. ‘‘(1) IN GENERAL.—Notwithstanding section ownership) of a company or other entity, ‘‘(a) FINANCIAL HOLDING COMPANY DE- 4(a), a financial holding company and a whether or not constituting control of such FINED.—For purposes of this section, the wholesale financial holding company may company or entity, engaged in any activity term ‘financial holding company’ means a engage in any activity, and acquire and re- not authorized pursuant to this section if— bank holding company which meets the re- tain the shares of any company engaged in ‘‘(i) the shares, assets, or ownership inter- quirements of subsection (b). any activity, which the Board has deter- ests are not acquired or held by a depository ‘‘(b) ELIGIBILITY REQUIREMENTS FOR FINAN- mined (by regulation or order) to be finan- institution or subsidiary of a depository in- CIAL HOLDING COMPANIES.— cial in nature or incidental to such financial stitution; ‘‘(1) IN GENERAL.—No bank holding com- activities. ‘‘(ii) such shares, assets, or ownership in- pany may engage in any activity or directly ‘‘(2) FACTORS TO BE CONSIDERED.—In deter- terests are acquired and held by a securities or indirectly acquire or retain shares of any mining whether an activity is financial in affiliate or an affiliate thereof as part of a company under this section unless the bank nature or incidental to financial activities, bona fide underwriting or merchant banking holding company meets the following re- the Board shall take into account— activity, including investment activities en- quirements: ‘‘(A) the purposes of this Act and the Fi- gaged in for the purpose of appreciation and ‘‘(A) All of the subsidiary depository insti- nancial Services Act of 1998; ultimate resale or disposition of the invest- tutions of the bank holding company are ‘‘(B) changes or reasonably expected ment; well capitalized. changes in the marketplace in which bank ‘‘(iii) such shares, assets, or ownership in- ‘‘(B) All of the subsidiary depository insti- holding companies compete; terests, are held only for such a period of tutions of the bank holding company are ‘‘(C) changes or reasonably expected time as will permit the sale or disposition well managed. changes in the technology for delivering fi- thereof on a reasonable basis consistent with ‘‘(C) All of the subsidiary depository insti- nancial services; and the nature of the activities described in tutions of the bank holding company have ‘‘(D) whether such activity is necessary or clause (ii); and achieved a rating of ‘satisfactory record of appropriate to allow a bank holding com- ‘‘(iv) during the period such shares, assets, meeting community credit needs’, or better, pany and the affiliates of a bank holding or ownership interests are held, the bank at the most recent examination of each such company to— holding company does not actively partici- institution under the Community Reinvest- ‘‘(i) compete effectively with any company pate in the day to day management or oper- ment Act of 1977. seeking to provide financial services in the ation of such company or entity, except inso- ‘‘(D) All of the subsidiary insured deposi- United States; far as necessary to achieve the objectives of tory institutions of the bank holding com- ‘‘(ii) use any available or emerging techno- clause (ii). pany (other than any such depository insti- logical means, including any application ‘‘(I) Directly or indirectly acquiring or tution which does not, in the ordinary course necessary to protect the security or efficacy controlling, whether as principal, on behalf of the business of the depository institution, of systems for the transmission of data or fi- of 1 or more entities (including entities, offer consumer transaction accounts to the nancial transactions, in providing financial other than a depository institution or sub- general public) offer and maintain low-cost services; and sidiary of a depository institution, that the basic banking accounts. ‘‘(iii) offer customers any available or bank holding company controls) or other- ‘‘(E) The company has filed with the Board emerging technological means for using fi- wise, shares, assets, or ownership interests a declaration that the company elects to be nancial services. (including without limitation debt or equity a financial holding company and certifying ‘‘(3) ACTIVITIES THAT ARE FINANCIAL IN NA- securities, partnership interests, trust cer- that the company meets the requirements of TURE.—The following activities shall be con- tificates or other instruments representing subparagraphs (A) through (D). sidered to be financial in nature: ownership) of a company or other entity, ‘‘(2) FOREIGN BANKS AND COMPANIES.—For ‘‘(A) Lending, exchanging, transferring, in- whether or not constituting control of such purposes of paragraph (1), the Board shall es- vesting for others, or safeguarding money or company or entity, engaged in any activity tablish and apply comparable capital stand- securities. not authorized pursuant to this section if— ards to a foreign bank that operates a branch ‘‘(B) Insuring, guaranteeing, or indemnify- ‘‘(i) the shares, assets, or ownership inter- or agency or owns or controls a bank or com- ing against loss, harm, damage, illness, dis- ests are not acquired or held by a depository mercial lending company in the United ability, or death, or providing and issuing institution or a subsidiary of a depository in- States, and any company that owns or con- annuities, and acting as principal, agent, or stitution; trols such foreign bank, giving due regard to broker for purposes of the foregoing. ‘‘(ii) such shares, assets, or ownership in- the principle of national treatment and ‘‘(C) Providing financial, investment, or terests are acquired and held by an insurance equality of competitive opportunity. economic advisory services, including advis- company that is predominantly engaged in H3146 CONGRESSIONAL RECORD — HOUSE May 13, 1998 underwriting life, accident and health, or 180-day period beginning on the date such no- ‘‘(A) 5 percent of the consolidated annual property and casualty insurance (other than tice is received by the company (or such gross revenues of the foreign bank or com- credit-related insurance); other period permitted by the Board); or pany in the United States derived from any ‘‘(iii) such shares, assets, or ownership in- ‘‘(D) in the case of a notice of failure to branch, agency, commercial lending com- terests represent an investment made in the comply with subparagraph (B) or (C) of sub- pany, or depository institution controlled by ordinary course of business of such insurance section (b)(1), restore compliance with any the foreign bank or company and any sub- company in accordance with relevant State such subparagraph by the date the next ex- sidiary engaged in the United States in ac- law governing such investments; and amination of the depository institution sub- tivities permissible under section 4 or 6; or ‘‘(iv) during the period such shares, assets, sidiary is completed or by the end of such ‘‘(B) $500,000,000. or ownership interests are held, the bank other period as the Board determines to be ‘‘(4) INDEXING REVENUE TEST.—After De- holding company does not directly or indi- appropriate, cember 31, 1998, the Board shall annually ad- rectly participate in the day-to-day manage- the Board may require such company, under just the dollar amount contained in para- ment or operation of the company or entity such terms and conditions as may be im- graphs (1)(A) and (3) by the annual percent- except insofar as necessary to achieve the posed by the Board and subject to such ex- age increase in the Consumer Price Index for objectives of clauses (ii) and (iii). tension of time as may be granted in the Urban Wage Earners and Clerical Workers ‘‘(4) ACTIONS REQUIRED.—The Board shall, Board’s discretion, to divest control of any published by the Bureau of Labor Statistics. by regulation or order, define, consistent depository institution subsidiary or, at the ‘‘(5) NONAPPLICABILITY OF OTHER EXEMP- with the purposes of this Act, the following election of the financial holding company, TION.—Any foreign bank or company that activities as, and the extent to which such instead to cease to engage in any activity owns or controls a foreign bank which en- activities are, financial in nature or inciden- conducted by such company or its subsidi- gages in any activity or acquires or retains tal to activities which are financial in na- aries pursuant to this section. ownership or control of shares of any com- ture: ‘‘(5) CONSULTATION.—In taking any action pany pursuant to this subsection shall not be ‘‘(A) Lending, exchanging, transferring, in- under this subsection, the Board shall con- eligible for any exception described in sec- vesting for others, or safeguarding financial sult with all relevant Federal and State reg- assets other than money or securities. ulatory agencies. tion 2(h). ‘‘(B) Providing any device or other instru- ‘‘(e) SAFEGUARDS FOR BANK SUBSIDIARIES.— ‘‘(g) AUTHORITY TO RETAIN LIMITED NON- mentality for transferring money or other fi- A financial holding company shall assure FINANCIAL ACTIVITIES AND AFFILIATIONS.— nancial assets; that— ‘‘(1) IN GENERAL.—Notwithstanding sub- ‘‘(C) Arranging, effecting, or facilitating fi- ‘‘(1) the procedures of the holding company section (f)(1) and section 4(a), a company nancial transactions for the account of third for identifying and managing financial and that is not a bank holding company or a for- parties. operational risks within the company, and eign bank (as defined in section 1(b)(7) of the ‘‘(5) POST CONSUMMATION NOTIFICATION.— the subsidiaries of such company, adequately International Banking Act of 1978) and be- ‘‘(A) IN GENERAL.—A financial holding protect the subsidiaries of such company comes a financial holding company after the company and a wholesale financial holding which are insured depository institutions date of the enactment of the Financial Serv- company that acquires any company, or from such risks; ices Act of 1998 may continue to engage in ‘‘(2) the holding company has reasonable commences any activity, pursuant to this any activity and retain direct or indirect policies and procedures to preserve the sepa- subsection shall provide written notice to ownership or control of shares of a company rate corporate identity and limited liability the Board describing the activity com- engaged in any activity if— of such company and the subsidiaries of such menced or conducted by the company ac- ‘‘(A) the holding company lawfully was en- company, for the protection of the compa- quired no later than 30 calendar days after gaged in the activity or held the shares of commencing the activity or consummating ny’s subsidiary insured depository institu- such company on September 30, 1997; the acquisition. tions; and ‘‘(B) the holding company is predomi- ‘‘(B) APPROVAL NOT REQUIRED FOR CERTAIN ‘‘(3) the holding company complies with nantly engaged in financial activities as de- FINANCIAL ACTIVITIES.—Except as provided in this section. fined in paragraph (2); and section 4(j) with regard to the acquisition of ‘‘(f) NONFINANCIAL ACTIVITIES.— a savings association, a financial holding ‘‘(1) IN GENERAL.—Notwithstanding section ‘‘(C) the company engaged in such activity company and a wholesale financial holding 4(a), a financial holding company may en- continues to engage only in the same activi- company may commence any activity, or ac- gage in activities which are not (or have not ties that such company conducted on Sep- quire any company, pursuant to paragraph been determined to be) financial in nature or tember 30, 1997, and other activities permis- (3) or any regulation prescribed or order incidental to activities which are financial sible under this Act. issued under paragraph (4), without prior ap- in nature, or acquire and retain ownership ‘‘(2) PREDOMINANTLY FINANCIAL.—For pur- proval of the Board. and control of the shares of a company en- poses of this subsection, a company is pre- ‘‘(d) PROVISIONS APPLICABLE TO FINANCIAL gaged in such activities, if— dominantly engaged in financial activities if, HOLDING COMPANIES THAT FAIL TO MEET RE- ‘‘(A) the aggregate annual gross revenues as of the day before the company becomes a QUIREMENTS.— derived from all such activities and all such financial holding company, the annual gross ‘‘(1) IN GENERAL.—If the Board finds that a companies does not exceed the lesser of— revenues derived by the holding company financial holding company is not in compli- ‘‘(i) 5 percent of the consolidated annual and all subsidiaries of the holding company, ance with the requirements of subparagraph gross revenues of the financial holding com- on a consolidated basis, from engaging in ac- (A), (B), or (C) of subsection (b)(1), the Board pany; or tivities that are financial in nature or are in- shall give notice of such finding to the com- ‘‘(ii) $500,000,000; cidental to activities that are financial in pany. ‘‘(B) the consolidated total assets of any nature under subsection (c) represent at ‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE- company the shares of which are acquired by least 85 percent of the consolidated annual QUIRED.—Within 45 days of receipt by a fi- the financial holding company pursuant to gross revenues of the company. nancial holding company of a notice given this paragraph are less than $750,000,000 at ‘‘(3) NO EXPANSION OF GRANDFATHERED COM- under paragraph (1) (or such additional pe- the time the shares are acquired by the hold- MERCIAL ACTIVITIES THROUGH MERGER OR CON- riod as the Board may permit), the company ing company; and SOLIDATION.—A financial holding company shall execute an agreement acceptable to the ‘‘(C) the holding company provides notice that engages in activities or holds shares Board to comply with the requirements ap- to the Board within 30 days of commencing pursuant to this subsection, or a subsidiary plicable to a financial holding company. the activity or acquiring the ownership or of such financial holding company, may not ‘‘(3) BOARD MAY IMPOSE LIMITATIONS.—Until control. acquire, in any merger, consolidation, or the conditions described in a notice to a fi- ‘‘(2) INCLUSION OF GRANDFATHERED ACTIVI- other type of business combination, assets of nancial holding company under paragraph (1) TIES.—For purposes of determining the lim- any other company which is engaged in any are corrected, the Board may impose such its contained in paragraph (1)(A), the gross activity which the Board has not determined limitations on the conduct or activities of revenues derived from all activities con- to be financial in nature or incidental to ac- the company or any affiliate of the company ducted, and companies the shares of which tivities that are financial in nature under as the Board determines to be appropriate are held, under subsection (g) shall be con- subsection (c). under the circumstances. sidered to be derived or held under this sub- ‘‘(4) CONTINUING REVENUE LIMITATION ON ‘‘(4) FAILURE TO CORRECT.—If, after receiv- section. GRANDFATHERED COMMERCIAL ACTIVITIES.— ing a notice under paragraph (1), a financial ‘‘(3) FOREIGN BANKS.—In lieu of the limita- Notwithstanding any other provision of this holding company does not— tion contained in paragraph (1)(A) in the subsection, a financial holding company may ‘‘(A) execute and implement an agreement case of a foreign bank or a company that continue to engage in activities or hold in accordance with paragraph (2); owns or controls a foreign bank which en- shares in companies pursuant to this sub- ‘‘(B) comply with any limitations imposed gages in any activity or acquires or retains section only to the extent that the aggregate under paragraph (3); ownership or control of shares of any com- annual gross revenues derived from all such ‘‘(C) in the case of a notice of failure to pany pursuant to paragraph (1), the aggre- activities and all such companies does not comply with subsection (b)(1)(A), restore gate annual gross revenues derived from all exceed 15 percent of the consolidated annual each depository institution subsidiary to such activities and all such companies in the gross revenues of the financial holding com- well capitalized status before the end of the United States shall not exceed the lesser of— pany. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3147

‘‘(5) CROSS MARKETING RESTRICTIONS APPLI- (A) State statutes and regulations govern- (2) in paragraph (2), by striking subpara- CABLE TO COMMERCIAL ACTIVITIES.—A deposi- ing insurance sales and solicitations which graph (B) and inserting the following new tory institution controlled by a financial are no more restrictive than provisions in subparagraphs: holding company shall not— the Illinois ‘‘Act Authorizing and Regulating ‘‘(B) any bank subsidiary of such company ‘‘(A) offer or market, directly or through the Sale of Insurance by Financial Institu- engages in any activity in which the bank any arrangement, any product or service of a tions, Public Act 90–41’’ (215 ILCS 5/1400– was not lawfully engaged as of March 5, 1987, company whose activities are conducted or 1416), as in effect on October 1, 1997, shall not unless the bank is well managed and well whose shares are owned or controlled by the be deemed to prevent or significantly inter- capitalized; financial holding company pursuant to this fere with the ability of an insured depository ‘‘(C) any bank subsidiary of such company subsection, subsection (f), or subparagraph institution or wholesale financial institution both— (H) or (I) of subsection (c)(3); or to engage, directly or indirectly, or in con- ‘‘(i) accepts demand deposits or deposits ‘‘(B) permit any of its products or services junction with an affiliate, in any insurance that the depositor may withdraw by check or to be offered or marketed, directly or sales or solicitation activity; and similar means for payment to third parties; through any arrangement, by or through any (B) subparagraph (A) shall not create any and company described in subparagraph (A). inference regarding State statutes, and regu- ‘‘(ii) engages in the business of making ‘‘(6) TRANSACTIONS WITH NONFINANCIAL AF- lations governing insurance sales and solici- commercial loans (and, for purposes of this FILIATES.—An insured depository institution tations which are more restrictive than any clause, loans made in the ordinary course of controlled by a financial holding company provision in the Illinois ‘‘Act Authorizing a credit card operation shall not be treated may not engage in a covered transaction (as and Regulating the Sale of Insurance by Fi- as commercial loans); or defined by section 23A(b)(7) of the Federal nancial Institutions’’, (Public Act 90–41; 215 ‘‘(D) after the date of the enactment of the Reserve Act) with any affiliate controlled by ILCS 5/1400–1416), as in effect on October 1, Competitive Equality Amendments of 1987, the company pursuant to this subsection, 1997. any bank subsidiary of such company per- subsection (f), or subparagraph (H) or (I) of (3) State statutes, regulations, orders, and mits any overdraft (including any intraday subsection (c)(3). interpretations which are applicable to and overdraft), or incurs any such overdraft in ‘‘(h) DEVELOPING ACTIVITIES.—A financial are applied in the same manner with respect such bank’s account at a Federal reserve holding company and a wholesale financial to insurance underwriting activities of an af- bank, on behalf of an affiliate, other than an holding company may engage directly or in- filiate of an insured depository institution or overdraft described in paragraph (3).’’; and directly, or acquire shares of any company a wholesale financial institution as they are (3) by striking paragraphs (3) and (4) and engaged, in any activity that the Board has applicable to and are applied to an insurance inserting the following new paragraphs: not determined to be financial in nature or underwriter which is not affiliated with an ‘‘(3) PERMISSIBLE OVERDRAFTS DESCRIBED.— incidental to financial activities under sub- insured depository institution or a wholesale For purposes of paragraph (2)(D), an over- section (c) if— financial institution shall not be preempted draft is described in this paragraph if— ‘‘(1) the holding company reasonably con- under paragraph (1). ‘‘(A) such overdraft results from an inad- cludes that the activity is financial in na- SEC. 105. MUTUAL BANK HOLDING COMPANIES vertent computer or accounting error that is ture or incidental to financial activities; AUTHORIZED. beyond the control of both the bank and the ‘‘(2) the gross revenues from all activities (a) IN GENERAL.—Section 3(g)(2) of the affiliate; or conducted under this subsection represent Bank Holding Company Act of 1956 (12 U.S.C. ‘‘(B) such overdraft— less than 5 percent of the consolidated gross 1842(g)(2)) is amended to read as follows: ‘‘(i) is permitted or incurred on behalf of revenues of the holding company; ‘‘(2) REGULATIONS.—A bank holding com- an affiliate which is monitored by, reports ‘‘(3) the aggregate total assets of all com- pany organized as a mutual holding company to, and is recognized as a primary dealer by panies the shares of which are held under shall be regulated on terms, and shall be sub- the Federal Reserve Bank of New York; and this subsection do not exceed 5 percent of the ject to limitations, comparable to those ap- ‘‘(ii) is fully secured, as required by the holding company’s consolidated total assets; plicable to any other bank holding com- Board, by bonds, notes, or other obligations ‘‘(4) the total capital invested in activities pany.’’. which are direct obligations of the United conducted under this subsection represents SEC. 106. PROHIBITION ON DEPOSIT PRODUC- States or on which the principal and interest less than 5 percent of the consolidated total TION OFFICES. are fully guaranteed by the United States or capital of the holding company; (a) IN GENERAL.—Section 109(d) of the Rie- by securities and obligations eligible for set- ‘‘(5) the Board has not determined that the gle-Neal Interstate Banking and Branching tlement on the Federal Reserve book entry activity is not financial in nature or inciden- Efficiency Act of 1994 (12 U.S.C. 1835a(d)) is system. tal to financial activities under subsection amended— ‘‘(4) DIVESTITURE IN CASE OF LOSS OF EX- (c); and (1) by inserting ‘‘, the Financial Services EMPTION.—If any company described in para- ‘‘(6) the holding company provides written Act of 1998,’’ after ‘‘pursuant to this title’’; graph (1) fails to qualify for the exemption notification to the Board describing the ac- and provided under such paragraph by operation tivity commenced or conducted by the com- (2) by inserting ‘‘or such Act’’ after ‘‘made of paragraph (2), such exemption shall cease pany acquired no later than 10 business days by this title’’. to apply to such company and such company after commencing the activity or con- (b) TECHNICAL AND CONFORMING AMEND- shall divest control of each bank it controls summating the acquisition.’’. MENT.—Section 109(e)(4) of the Riegle-Neal before the end of the 180-day period begin- Interstate Banking and Branching Efficiency ning on the date that the company receives SEC. 104. CERTAIN STATE LAWS PREEMPTED. Act of 1994 (12 U.S.C. 1835a(e)(4)) is amended notice from the Board that the company has (a) AFFILIATIONS.—No State may by stat- by inserting ‘‘and any branch of a bank con- failed to continue to qualify for such exemp- ute, regulation, order, interpretation, or oth- trolled by an out-of-State bank holding com- tion, unless before the end of such 180-day erwise, prevent or restrict an insured deposi- pany (as defined in section 2(o)(7) of the period, the company has— tory institution or a wholesale financial in- Bank Holding Company Act of 1956)’’ before ‘‘(A) corrected the condition or ceased the stitution from being affiliated with an entity the period. (including an entity engaged in insurance ac- activity that caused the company to fail to SEC. 107. CLARIFICATION OF BRANCH CLOSURE continue to qualify for the exemption; and tivities) as authorized by this Act or any REQUIREMENTS. other provision of Federal law. Section 42(d)(4)(A) of the Federal Deposit ‘‘(B) implemented procedures that are rea- (b) ACTIVITIES—. Insurance Act (12 U.S.C. 1831r–1(d)(4)(A)) is sonably adapted to avoid the reoccurrence of (1) Except as provided in paragraphs (2) and amended by inserting ‘‘and any bank con- such condition or activity.’’. (3) and subject to section 18(c) of the Securi- trolled by an out-of-State bank holding com- Subtitle B—Streamlining Supervision of ties Act of 1933, no State may by statute, pany (as defined in section 2(o)(7) of the Financial Holding Companies regulation, order, interpretation, or other- Bank Holding Company Act of 1956)’’ before SEC. 111. STREAMLINING FINANCIAL HOLDING wise, prevent or restrict an insured deposi- the period. COMPANY SUPERVISION. tory institution or a wholesale financial in- SEC. 108. AMENDMENTS RELATING TO LIMITED Section 5(c) of the Bank Holding Company stitution from engaging, directly or indi- PURPOSE BANKS. Act of 1956 (12 U.S.C. 1844(c)) is amended to rectly or in conjunction with an affiliate, in Section 4(f) of the Bank Holding Company read as follows: any activity authorized under this Act or Act of 1956 (12 U.S.C. 1843(f)) is amended— ‘‘(c) REPORTS AND EXAMINATIONS.— any other provision of Federal law.÷ (1) in paragraph (2)(A)(ii)— ‘‘(1) REPORTS.— (2) As stated by the United States Supreme (A) by striking ‘‘and’’ at the end of sub- ‘‘(A) IN GENERAL.—The Board from time to Court in Barnett Bank of Marion County, N.A. clause (IX); time may require any bank holding company v. Nelson, 116 S.Ct. 1103 (1996), no State may, (B) by inserting ‘‘and’’ after the semicolon and any subsidiary of such company to sub- by statute, regulation, order, interpretation, at the end of subclause (X); and mit reports under oath to keep the Board in- or otherwise, prevent or significantly inter- (C) by inserting after subclause (X) the fol- formed as to— fere with the ability of an insured depository lowing new subclause: ‘‘(i) its financial condition, systems for institution or wholesale financial institution ‘‘(XI) assets that are derived from, or are monitoring and controlling financial and op- to engage, directly or indirectly, or in con- incidental to, activities in which institutions erating risks, and transactions with deposi- junction with an affiliate, in any insurance described in section 2(c)(2)(F) are permitted tory institution subsidiaries of the holding sales or solicitation activity, except that— to engage,’’; company; and H3148 CONGRESSIONAL RECORD — HOUSE May 13, 1998 ‘‘(ii) compliance by the company or sub- subparagraph (A)(i) of each bank holding engaged in nonbanking activities, the Board, sidiary with applicable provisions of this company and each subsidiary of such holding in consultation with the appropriate Federal Act. company in order to— banking agency, may designate the appro- ‘‘(B) USE OF EXISTING REPORTS.— ‘‘(i) inform the Board of the nature of the priate Federal banking agency of the lead in- ‘‘(i) IN GENERAL.—The Board shall, to the operations and financial condition of the sured depository institution subsidiary of fullest extent possible, accept reports in ful- holding company and such subsidiaries; such holding company as the appropriate fillment of the Board’s reporting require- ‘‘(ii) inform the Board of— Federal banking agency for the bank holding ments under this paragraph that a bank ‘‘(I) the financial and operational risks company. holding company or any subsidiary of such within the holding company system that ‘‘(B) AUTHORITY TRANSFERRED.—An agency company has provided or been required to may pose a threat to the safety and sound- designated by the Board under subparagraph provide to other Federal and State super- ness of any subsidiary depository institution (A) shall have the same authority as the visors or to appropriate self-regulatory orga- of such holding company; and Board under this Act to— nizations. ‘‘(II) the systems for monitoring and con- ‘‘(i) examine and require reports from the ‘‘(ii) AVAILABILITY.—A bank holding com- trolling such risks; and bank holding company and any affiliate of pany or a subsidiary of such company shall ‘‘(iii) monitor compliance with the provi- such company (other than a depository insti- provide to the Board, at the request of the sions of this Act and those governing trans- tution) under section 5; Board, a report referred to in clause (i). actions and relationships between any sub- ‘‘(ii) approve or disapprove applications or ‘‘(iii) REQUIRED USE OF PUBLICLY REPORTED sidiary depository institution and its affili- transactions under section 3; INFORMATION.—The Board shall, to the fullest ates. ‘‘(iii) take actions and impose penalties extent possible, accept in fulfillment of any ‘‘(C) RESTRICTED FOCUS OF EXAMINATIONS.— under subsections (e) and (f) of section 5 and reporting or recordkeeping requirements The Board shall, to the fullest extent pos- section 8; and under this Act information that is otherwise sible, limit the focus and scope of any exam- ‘‘(iv) take actions regarding the holding required to be reported publicly and exter- ination of a bank holding company to— company, any affiliate of the holding com- nally audited financial statements. ‘‘(i) the bank holding company; and pany (other than a depository institution), ‘‘(iv) REPORTS FILED WITH OTHER AGEN- ‘‘(ii) any subsidiary of the holding com- or any institution-affiliated party of such CIES.—In the event the Board requires a re- pany that, because of— company or affiliate under the Federal De- port from a functionally regulated non- ‘‘(I) the size, condition, or activities of the posit Insurance Act and any other statute depository institution subsidiary of a bank subsidiary; which the Board may designate. holding company of a kind that is not re- ‘‘(II) the nature or size of transactions be- ‘‘(C) AGENCY ORDERS.—Section 9 (of this quired by another Federal or State regulator tween such subsidiary and any depository in- Act) and section 105 of the Bank Holding or appropriate self-regulatory organization, stitution which is also a subsidiary of such Company Act Amendments of 1970 shall the Board shall request that the appropriate holding company; or apply to orders issued by an agency des- regulator or self-regulatory organization ob- ‘‘(III) the centralization of functions with- ignated under subparagraph (A) in the same tain such report. If the report is not made in the holding company system, manner such sections apply to orders issued available to the Board, and the report is nec- could have a materially adverse effect on the by the Board. essary to assess a material risk to the bank safety and soundness of any depository insti- ‘‘(5) FUNCTIONAL REGULATION OF SECURITIES holding company or its subsidiary depository tution affiliate of the holding company. AND INSURANCE ACTIVITIES.—The Board shall institution or compliance with this Act, the ‘‘(D) DEFERENCE TO BANK EXAMINATIONS.— defer to— Board may require such subsidiary to pro- The Board shall, to the fullest extent pos- ‘‘(A) the Securities and Exchange Commis- vide such a report to the Board. sible, use, for the purposes of this paragraph, sion with regard to all interpretations of, ‘‘(C) DEFINITION.—For purposes of this sub- the reports of examinations of depository in- and the enforcement of, applicable Federal section, the term ‘functionally regulated stitutions made by the appropriate Federal securities laws relating to the activities, nondepository institution’ means— and State depository institution supervisory conduct, and operations of registered bro- ‘‘(i) a broker or dealer registered under the authority. kers, dealers, investment advisers, and in- Securities Exchange Act of 1934; ‘‘(E) DEFERENCE TO OTHER EXAMINATIONS.— ‘‘(ii) an investment adviser registered The Board shall, to the fullest extent pos- vestment companies; and under the Investment Advisers Act of 1940, sible, address the circumstances which might ‘‘(B) the relevant State insurance authori- with respect to the investment advisory ac- otherwise permit or require an examination ties with regard to all interpretations of, and tivities of such investment adviser and ac- by the Board by forgoing an examination and the enforcement of, applicable State insur- tivities incidental to such investment advi- instead reviewing the reports of examination ance laws relating to the activities, conduct, sory activities; made of— and operations of insurance companies and ‘‘(iii) an insurance company subject to su- ‘‘(i) any registered broker or dealer or reg- insurance agents.’’. pervision by a State insurance commission, istered investment adviser by or on behalf of SEC. 112. ELIMINATION OF APPLICATION RE- agency, or similar authority; and the Securities and Exchange Commission; QUIREMENT FOR FINANCIAL HOLD- ‘‘(iv) an entity subject to regulation by the ‘‘(ii) any licensed insurance company by or ING COMPANIES. Commodity Futures Trading Commission, on behalf of any state regulatory authority (a) PREVENTION OF DUPLICATIVE FILINGS.— with respect to the commodities activities of responsible for the supervision of insurance Section 5(a) of the Bank Holding Company such entity and activities incidental to such companies; and Act of 1956 (12 U.S.C. 1844(a)) is amended by commodities activities. ‘‘(iii) any other subsidiary that the Board adding the following new sentence at the ‘‘(2) EXAMINATIONS.— finds to be comprehensively supervised by a end: ‘‘A declaration filed in accordance with ‘‘(A) EXAMINATION AUTHORITY.— Federal or State authority. section 6(b)(1)(E) shall satisfy the require- ‘‘(i) IN GENERAL.—The Board may make ex- ‘‘(3) CAPITAL.— ments of this subsection with regard to the aminations of each bank holding company ‘‘(A) IN GENERAL.—The Board shall not, by registration of a bank holding company but and each subsidiary of a bank holding com- regulation, guideline, order or otherwise, not any requirement to file an application to pany. prescribe or impose any capital or capital acquire a bank pursuant to section 3.’’. ‘‘(ii) FUNCTIONALLY REGULATED NONDEPOSI- adequacy rules, guidelines, standards, or re- (b) DIVESTITURE PROCEDURES.—Section TORY INSTITUTION SUBSIDIARIES.—Notwith- quirements on any subsidiary of a financial 5(e)(1) of the Bank Holding Company Act of standing clause (i), the Board may make ex- holding company that is not a depository in- 1956 (12 U.S.C. 1844(e)(1)) is amended— aminations of a functionally regulated non- stitution and— (1) by striking ‘‘Financial Institutions Su- depository institution subsidiary of a bank ‘‘(i) is in compliance with applicable cap- pervisory Act of 1966, order’’ and inserting holding company only if— ital requirements of another Federal regu- ‘‘Financial Institutions Supervisory Act of ‘‘(I) the Board has reasonable cause to be- latory authority (including the Securities 1966, at the election of the bank holding com- lieve that such subsidiary is engaged in ac- and Exchange Commission) or State insur- pany— tivities that pose a material risk to an affili- ance authority; or ‘‘(A) order’’; and ated depository institution, or ‘‘(ii) is registered as an investment adviser (2) by striking ‘‘shareholders of the bank ‘‘(II) based on reports and other available under the Investment Advisers Act of 1940. holding company. Such distribution’’ and in- information, the Board has reasonable cause ‘‘(B) RULE OF CONSTRUCTION.—Subpara- serting ‘‘shareholders of the bank holding to believe that a subsidiary is not in compli- graph (A) shall not be construed as prevent- company; or ance with this Act or with provisions relat- ing the Board from imposing capital or cap- ‘‘(B) order the bank holding company, after ing to transactions with an affiliated deposi- ital adequacy rules, guidelines, standards, or due notice and opportunity for hearing, and tory institution and the Board cannot make requirements with respect to activities of a after consultation with the bank’s primary such determination through examination of registered investment adviser other than in- supervisor, which shall be the Comptroller of the affiliated depository institution or bank vestment advisory activities or activities in- the Currency in the case of a national bank, holding company. cidental to investment advisory activities. and the Federal Deposit Insurance Corpora- ‘‘(B) LIMITATIONS ON EXAMINATION AUTHOR- ‘‘(4) TRANSFER OF BOARD AUTHORITY TO AP- tion and the appropriate State supervisor in ITY FOR BANK HOLDING COMPANIES AND SUB- PROPRIATE FEDERAL BANKING AGENCY.— the case of an insured nonmember bank, to SIDIARIES.—Subject to subparagraph (A)(ii), ‘‘(A) IN GENERAL.—In the case of any bank terminate (within 120 days or such longer pe- the Board may make examinations under holding company which is not significantly riod as the Board may direct) the ownership May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3149

or control of any such bank by such com- ‘‘(h) PRUDENTIAL SAFEGUARDS.— SEC. 116. LIMITATION ON RULEMAKING, PRUDEN- pany. ‘‘(1) IN GENERAL.—The Board may, by regu- TIAL, SUPERVISORY, AND ENFORCE- ‘‘The distribution referred to in subpara- lation or order, impose restrictions or re- MENT AUTHORITY OF THE BOARD. graph (A)’’. quirements on relationships or transactions The Bank Holding Company Act of 1956 (12 SEC. 113. AUTHORITY OF STATE INSURANCE REG- between a depository institution subsidiary U.S.C. 1841 et seq.) is amended by inserting ULATOR AND SECURITIES AND EX- of a bank holding company and any affiliate after section 10 the following new section: CHANGE COMMISSION. of such depository institution (other than a Section 5 of the Bank Holding Company subsidiary of such institution) which the ‘‘SEC. 10A. LIMITATION ON RULEMAKING, PRU- Act of 1956 (12 U.S.C. 1844) is amended by add- Board finds is consistent with the public in- DENTIAL, SUPERVISORY, AND EN- ing at the end the following new subsection: terest, the purposes of this Act, the Finan- FORCEMENT AUTHORITY OF THE BOARD. ‘‘(g) AUTHORITY OF STATE INSURANCE REGU- cial Services Act of 1998, the Federal Reserve LATOR AND THE SECURITIES AND EXCHANGE Act, and other Federal law applicable to de- ‘‘(a) LIMITATION ON DIRECT ACTION.— COMMISSION.— pository institution subsidiaries of bank ‘‘(1) IN GENERAL.—The Board may not pre- ‘‘(1) IN GENERAL.—Notwithstanding any holding companies and the standards in scribe regulations, issue or seek entry of or- other provision of law, any regulation, order, paragraph (2). ders, impose restraints, restrictions, guide- or other action of the Board which requires ‘‘(2) STANDARDS.—The Board may exercise lines, requirements, safeguards, or stand- a bank holding company to provide funds or authority under paragraph (1) if the Board ards, or otherwise take any action under or other assets to a subsidiary insured deposi- finds that such action will have any of the pursuant to any provision of this Act or sec- tory institution shall not be effective nor en- following effects: tion 8 of the Federal Deposit Insurance Act forceable if— ‘‘(A) Avoid any significant risk to the safe- against or with respect to a regulated sub- ‘‘(A) such funds or assets are to be provided ty and soundness of depository institutions sidiary of a bank holding company unless the by— or any Federal deposit insurance fund. action is necessary to prevent or redress an ‘‘(i) a bank holding company that is an in- ‘‘(B) Enhance the financial stability of unsafe or unsound practice or breach of fidu- surance company or is a broker or dealer bank holding companies. ciary duty by such subsidiary that poses a registered under the Securities Exchange ‘‘(C) Avoid conflicts of interest or other material risk to— Act of 1934; or abuses. ‘‘(A) the financial safety, soundness, or ‘‘(ii) an affiliate of the depository institu- ‘‘(D) Enhance the privacy of customers of stability of an affiliated depository institu- tion which is an insurance company or a depository institutions. tion; or broker or dealer registered under such Act; ‘‘(E) Promote the application of national ‘‘(B) the domestic or international pay- and treatment and equality of competitive op- ment system. ‘‘(B) the State insurance authority for the portunity between nonbank affiliates owned ‘‘(2) CRITERIA FOR BOARD ACTION.—The insurance company or the Securities and Ex- or controlled by domestic bank holding com- Board shall not take action otherwise per- change Commission for the registered broker panies and nonbank affiliates owned or con- mitted under paragraph (1) unless the Board or dealer, as the case may be, determines in trolled by foreign banks operating in the finds that it is not reasonably possible to ef- writing sent to the holding company and the United States. fectively protect against the material risk at Board that the holding company shall not issue through action directed at or against ‘‘(3) REVIEW.—The Board shall regularly— provide such funds or assets because such ac- the affiliated depository institution or ‘‘(A) review all restrictions or require- tion would have a material adverse effect on against depository institutions generally. ments established pursuant to paragraph (1) the financial condition of the insurance com- to determine whether there is a continuing ‘‘(b) LIMITATION ON INDIRECT ACTION.—The pany or the broker or dealer, as the case may need for any such restriction or requirement Board may not prescribe regulations, issue be. to carry out the purposes of the Act, includ- or seek entry of orders, impose restraints, ‘‘(2) NOTICE TO STATE INSURANCE AUTHORITY ing any purpose described in paragraph (2); OR SEC REQUIRED.—If the Board requires a restrictions, guidelines, requirements, safe- and bank holding company, or an affiliate of a guards, or standards, or otherwise take any ‘‘(B) modify or eliminate any restriction or bank holding company, which is an insur- action under or pursuant to any provision of requirement the Board finds is no longer re- ance company or a broker or dealer described this Act or section 8 of the Federal Deposit quired for such purposes.’’. in paragraph (1)(A) to provide funds or assets Insurance Act against or with respect to a fi- to an insured depository institution subsidi- SEC. 115. EXAMINATION OF INVESTMENT COMPA- nancial holding company or a wholesale fi- ary of the holding company pursuant to any NIES. nancial holding company where the purpose regulation, order, or other action of the (a) EXCLUSIVE COMMISSION AUTHORITY.— or effect of doing so would be to take action Board referred to in paragraph (1), the Board (1) IN GENERAL.—The Commission shall be indirectly against or with respect to a regu- shall promptly notify the State insurance the sole Federal agency with authority to in- lated subsidiary that may not be taken di- authority for the insurance company or the spect and examine any registered investment rectly against or with respect to such sub- Securities and Exchange Commission, as the company that is not a bank holding com- case may be, of such requirement. sidiary in accordance with subsection (a). pany. ‘‘(3) DIVESTITURE IN LIEU OF OTHER AC- ‘‘(c) ACTIONS SPECIFICALLY AUTHORIZED.— (2) PROHIBITION ON BANKING AGENCIES.—A TION.—If the Board receives a notice de- Notwithstanding subsection (a), the Board Federal banking agency may not inspect or scribed in paragraph (1)(B) from a State in- may take action under this Act or section 8 surance authority or the Securities and Ex- examine any registered investment company that is not a bank holding company. of the Federal Deposit Insurance Act to en- change Commission with regard to a bank force compliance by a regulated subsidiary holding company or affiliate referred to in (b) EXAMINATION RESULTS AND OTHER IN- with Federal law that the Board has specific such paragraph, the Board may order the FORMATION.—The Commission shall provide jurisdiction to enforce against such subsidi- bank holding company to divest the insured to any Federal banking agency, upon re- ary. depository institution within 180 days of re- quest, the results of any examination, re- ceiving notice or such longer period as the ports, records, or other information with re- ‘‘(d) REGULATED SUBSIDIARY DEFINED.—For Board determines consistent with the safe spect to any registered investment company purposes of this section, the term ‘regulated and sound operation of the insured deposi- to the extent necessary for the agency to subsidiary’ means any company that is not a tory institution. bank holding company and is— carry out its statutory responsibilities. ‘‘(4) CONDITIONS BEFORE DIVESTITURE.—Dur- ‘‘(1) a broker or dealer registered under the ing the period beginning on the date an order (c) DEFINITIONS.—For purposes of this sec- Securities Exchange Act of 1934; to divest is issued by the Board under para- tion, the following definitions shall apply: ‘‘(2) an investment adviser registered under graph (3) to a bank holding company and (1) BANK HOLDING COMPANY.—The term the Investment Advisers Act of 1940, with re- ending on the date the divestiture is com- ‘‘bank holding company’’ has the meaning spect to the investment advisory activities pleted, the Board may impose any conditions given to such term in section 2 of the Bank of such investment adviser and activities in- or restrictions on the holding company’s Holding Company Act of 1956. cidental to such investment advisory activi- ownership or operation of the insured deposi- (2) COMMISSION.—The term ‘‘Commission’’ ties; tory institution, including restricting or pro- means the Securities and Exchange Commis- ‘‘(3) an investment company registered hibiting transactions between the insured sion. under the Investment Company Act of 1940; depository institution and any affiliate of (3) FEDERAL BANKING AGENCY.—The term ‘‘(4) an insurance company or an insurance the institution, as are appropriate under the ‘‘Federal banking agency’’ has the meaning agency subject to supervision by a State in- circumstances.’’. given to such term in section 3(z) of the Fed- surance commission, agency, or similar au- SEC. 114. PRUDENTIAL SAFEGUARDS. eral Deposit Insurance Act. thority; or Section 5 of the Bank Holding Company (4) REGISTERED INVESTMENT COMPANY.—The ‘‘(5) an entity subject to regulation by the Act of 1956 (12 U.S.C. 1844) is amended by in- term ‘‘registered investment company’’ Commodity Futures Trading Commission, serting after subsection (g) (as added by sec- means an investment company which is reg- with respect to the commodities activities of tion 113 of this subtitle) the following new istered with the Commission under the In- such entity and activities incidental to such subsection: vestment Company Act of 1940. commodities activities.’’. H3150 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Subtitle C—Subsidiaries of National Banks of managerial resources that the Comptrol- affiliate of an insured depository institution SEC. 121. PERMISSIBLE ACTIVITIES FOR SUBSIDI- ler determines are satisfactory. shall fraudulently represent that the institu- ARIES OF NATIONAL BANKS. ‘‘(b) LIMITED EXCLUSIONS FROM COMMUNITY tion is or will be liable for any obligation of (a) FINANCIAL SUBSIDIARIES OF NATIONAL NEEDS REQUIREMENTS FOR NEWLY ACQUIRED a subsidiary or other affiliate of the institu- BANKS.—Chapter one of title LXII of the Re- DEPOSITORY INSTITUTIONS.—Any depository tion. vised Statutes of United States (12 U.S.C. 21 institution which becomes affiliated with a ‘‘(b) CRIMINAL PENALTY.—Whoever violates et seq.) is amended— national bank during the 24-month period subsection (a) shall be fined under this title, (1) by redesignating section 5136A as sec- preceding the submission of an application imprisoned for not more than 1 year, or both. tion 5136C; and to acquire a subsidiary under subsection ‘‘(c) INSTITUTION-AFFILIATED PARTY DE- (2) by inserting after section 5136 (12 U.S.C. (a)(2), and any depository institution which FINED.—For purposes of this section, the 24) the following new section: becomes so affiliated after the approval of term ‘institution-affiliated party’ with re- ‘‘SEC. 5136A. SUBSIDIARIES OF NATIONAL BANKS. such application, may be excluded for pur- spect to a subsidiary or affiliate has the ‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AU- poses of subsection (a)(2)(B) during the 24- same meaning as in section 3 except ref- THORIZED TO ENGAGE IN FINANCIAL ACTIVI- month period beginning on the date of such erences to an insured depository institution TIES.— acquisition if— shall be deemed to be references to a subsidi- ‘‘(1) EXCLUSIVE AUTHORITY.—No provision ‘‘(1) the depository institution has submit- ary or affiliate of an insured depository in- of section 5136 or any other provision of this ted an affirmative plan to the appropriate stitution. title LXII of the Revised Statutes shall be Federal banking agency (as defined in sec- ‘‘(d) OTHER DEFINITIONS.—For purposes of construed as authorizing a subsidiary of a tion 3 of the Federal Deposit Insurance Act) this section, the terms ‘affiliate’, ‘insured national bank to engage in, or own any share to take such action as may be necessary in depository institution’, and ‘subsidiary’ have of or any other interest in any company en- order for such institution to achieve a ‘satis- same meanings as in section 3 of the Federal gaged in, any activity that— factory record of meeting community credit Deposit Insurance Act.’’. ‘‘(A) is not permissible for a national bank needs’, or better, at the next examination of (b) CLERICAL AMENDMENT.—The table of to engage in directly; or the institution under the Community Rein- sections for chapter 47 of title 18, United ‘‘(B) is conducted under terms or condi- vestment Act of 1977; and States Code, is amended by inserting after tions other than those that would govern the ‘‘(2) the plan has been approved by the ap- the item relating to section 1007 the follow- conduct of such activity by a national bank, propriate Federal banking agency.’’. ing new item: unless a national bank is specifically author- (b) LIMITATION ON CERTAIN ACTIVITIES IN ‘‘1008. Misrepresentations regarding financial ized by the express terms of a Federal stat- SUBSIDIARIES.—Section 21(a)(1) of the Bank- institution liability for obliga- ute and not by implication or interpretation ing Act of 1933 (12 U.S.C. 378(a)(1)) is amend- tions of affiliates.’’. to acquire shares of or an interest in, or to ed— control, such subsidiary, such as by para- (1) by inserting ‘‘, or to be a subsidiary of SEC. 123. REPEAL OF STOCK LOAN LIMIT IN FED- ERAL RESERVE ACT. graph (2) of this subsection and section 25A any person, firm, corporation, association, Section 11 of the Federal Reserve Act (12 of the Federal Reserve Act. business trust, or similar organization en- U.S.C. 248) is amended by striking the para- ‘‘(2) SPECIFIC AUTHORIZATION TO CONDUCT gaged (unless such subsidiary (A) was en- graph designated as ‘‘(m)’’ and inserting AGENCY ACTIVITIES WHICH ARE FINANCIAL IN gaged in such securities activities as of Sep- ‘‘(m) [Repealed]’’. NATURE.—A national bank may control a tember 15, 1997, or (B) is a nondepository sub- company that engages in agency activities sidiary of a foreign bank and is not also a Subtitle D—Wholesale Financial Holding that have been determined to be financial in subsidiary of a domestic depository institu- Companies; Wholesale Financial Institutions nature or incidental to such financial activi- tion),’’ after ‘‘to engage at the same time’’; CHAPTER 1—WHOLESALE FINANCIAL ties pursuant to and in accordance with sec- and HOLDING COMPANIES tion 6(c) of the Bank Holding Company Act (2) by inserting ‘‘or any subsidiary of such of 1956 if— SEC. 131. WHOLESALE FINANCIAL HOLDING COM- bank, company, or institution’’ after ‘‘or pri- PANIES ESTABLISHED. ‘‘(A) the company engages in such activi- vate bankers’’. ties solely as agent and not directly or indi- (a) DEFINITION AND SUPERVISION.—Section (c) TECHNICAL AND CONFORMING AMEND- 10 of the Bank Holding Company Act of 1956 rectly as principal, MENTS.— ‘‘(B) the national bank is well capitalized (12 U.S.C. 1841 et seq.) is amended to read as (1) ANTITYING.—Section 106(a) of the Bank follows: and well managed, and has achieved a rating Holding Company Act Amendments of 1970 is of satisfactory or better at the most recent ‘‘SEC. 10. WHOLESALE FINANCIAL HOLDING COM- amended by adding at the end the following PANIES. examination of the bank under the Commu- new sentence: ‘‘For purposes of this section, ‘‘(a) COMPANIES THAT CONTROL WHOLESALE nity Reinvestment Act of 1977; a subsidiary of a national bank which en- FINANCIAL INSTITUTIONS.— ‘‘(C) all depository institution affiliates of gages in activities as an agent pursuant to ‘‘(1) WHOLESALE FINANCIAL HOLDING COM- the national bank are well capitalized and section 5136A(a)(2) shall be deemed to be a well managed, and have achieved a rating of PANY DEFINED.—The term ‘wholesale finan- subsidiary of a bank holding company, and cial holding company’ means any company satisfactory or better at the most recent ex- not a subsidiary of a bank.’’. amination of each such depository institu- that— ECTION 23B.—Section 23B(a) of the Fed- (2) S ‘‘(A) is registered as a bank holding com- tion under the Community Reinvestment eral Reserve Act (12 U.S.C. 371c–1(a)) is pany; Act of 1977; and amended by adding at the end the following ‘‘(D) the bank has received the approval of ‘‘(B) is predominantly engaged in financial new paragraph: the Comptroller of the Currency. activities as defined in section 6(g)(2); ‘‘(4) SUBSIDIARY OF NATIONAL BANK.—For ‘‘(3) DEFINITIONS.— ‘‘(C) controls 1 or more wholesale financial purposes of this section, a subsidiary of a na- ‘‘(A) COMPANY; CONTROL; SUBSIDIARY.—The institutions; tional bank which engages in activities as an terms ‘company’, ‘control’, and ‘subsidiary’ ‘‘(D) does not control— agent pursuant to section 5136A(a)(2) shall be have the meanings given to such terms in ‘‘(i) a bank other than a wholesale finan- deemed to be an affiliate of the national section 2 of the Bank Holding Company Act cial institution; bank and not a subsidiary of the bank.’’ of 1956. ‘‘(ii) an insured bank other than an institu- (d) CLERICAL AMENDMENT.—The table of ‘‘(B) WELL CAPITALIZED.—The term ‘well tion permitted under subparagraph (D), (F), sections for chapter one of title LXII of the capitalized’ has the same meaning as in sec- or (G) of section 2(c)(2); or Revised Statutes of the United States is tion 38 of the Federal Deposit Insurance Act ‘‘(iii) a savings association; and amended— and, for purposes of this section, the Comp- ‘‘(E) is not a foreign bank (as defined in (1) by redesignating the item relating to troller shall have exclusive jurisdiction to section 1(b)(7) of the International Banking section 5136A as section 5136C; and determine whether a national bank is well Act of 1978). (2) by inserting after the item relating to capitalized. ‘‘(2) SAVINGS ASSOCIATION TRANSITION PE- section 5136 the following new item: ‘‘(C) WELL MANAGED.—The term ‘well man- RIOD.—Notwithstanding paragraph (1)(C)(iii), aged’ means— ‘‘5136A. Financial subsidiaries of national the Board may permit a company that con- ‘‘(i) in the case of a bank that has been ex- banks.’’. trols a savings association and that other- amined, unless otherwise determined in writ- SEC. 122. MISREPRESENTATIONS REGARDING DE- wise meets the requirements of paragraph (1) ing by the Comptroller— POSITORY INSTITUTION LIABILITY to become supervised under paragraph (1), if ‘‘(I) the achievement of a composite rating FOR OBLIGATIONS OF AFFILIATES. the company divests control of any such sav- of 1 or 2 under the Uniform Financial Insti- (a) IN GENERAL.—Chapter 47 of title 18, ings association within such period not to tutions Rating System (or an equivalent rat- United States Code, is amended by inserting exceed 5 years after becoming supervised ing under an equivalent rating system) in after section 1007 the following new section: under paragraph (1) as permitted by the connection with the most recent examina- ‘‘§ 1008. Misrepresentations regarding finan- Board. tion or subsequent review of the bank; and cial institution liability for obligations of ‘‘(b) SUPERVISION BY THE BOARD.— ‘‘(II) at least a rating of 2 for management, affiliates ‘‘(1) IN GENERAL.—The provisions of this if that rating is given; or ‘‘(a) IN GENERAL.—No institution-affiliated section shall govern the reporting, examina- ‘‘(ii) in the case of any national bank that party of an insured depository institution or tion, and capital requirements of wholesale has not been examined, the existence and use institution-affiliated party of a subsidiary or financial holding companies. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3151

‘‘(2) REPORTS.— ‘‘(ii) any subsidiary (other than an insured ‘‘(ii) NO UNWEIGHTED CAPITAL RATIO.—The ‘‘(A) IN GENERAL.—The Board from time to depository institution subsidiary) of the Board shall not, by regulation, guideline, time may require any wholesale financial holding company that, because of the size, order, or otherwise, impose under this sec- holding company and any subsidiary of such condition, or activities of the subsidiary, the tion a capital ratio that is not based on ap- company to submit reports under oath to nature or size of transactions between such propriate risk-weighting considerations. keep the Board informed as to— subsidiary and any affiliated depository in- ‘‘(iii) NO CAPITAL REQUIREMENT ON REGU- ‘‘(i) the company’s or subsidiary’s activi- stitution, or the centralization of functions LATED ENTITIES.—The Board shall not, by ties, financial condition, policies, systems within the holding company system, could regulation, guideline, order or otherwise, for monitoring and controlling financial and have a materially adverse effect on the safe- prescribe or impose any capital or capital operational risks, and transactions with de- ty and soundness of any depository institu- adequacy rules, standards, guidelines, or re- pository institution subsidiaries of the hold- tion affiliate of the holding company. quirements upon any subsidiary that— ing company; and ‘‘(C) DEFERENCE TO BANK EXAMINATIONS.— ‘‘(I) is not a depository institution; and ‘‘(ii) the extent to which the company or The Board shall, to the fullest extent pos- ‘‘(II) is in compliance with applicable cap- subsidiary has complied with the provisions sible, use the reports of examination of de- ital requirements of another Federal regu- of this Act and regulations prescribed and pository institutions made by the Comptrol- latory authority (including the Securities orders issued under this Act. ler of the Currency, the Federal Deposit In- and Exchange Commission) or State insur- surance Corporation, the Director of the Of- ‘‘(B) USE OF EXISTING REPORTS.— ance authority. fice of Thrift Supervision or the appropriate ‘‘(i) IN GENERAL.—The Board shall, to the ‘‘(iv) LIMITATION.—The Board shall not, by State depository institution supervisory au- fullest extent possible, accept reports in ful- regulation, guideline, order or otherwise, thority for the purposes of this section. fillment of the Board’s reporting require- prescribe or impose any capital or capital ‘‘(D) DEFERENCE TO OTHER EXAMINATIONS.— ments under this paragraph that the whole- adequacy rules, standards, guidelines, or re- The Board shall, to the fullest extent pos- sale financial holding company or any sub- quirements upon any subsidiary that is not a sible, address the circumstances which might sidiary of such company has provided or been depository institution and that is registered otherwise permit or require an examination required to provide to other Federal and as an investment adviser under the Invest- by the Board by forgoing an examination and State supervisors or to appropriate self-regu- ment Advisers Act of 1940, except that this by instead reviewing the reports of examina- clause shall not be construed as preventing latory organizations. tion made of— ‘‘(ii) AVAILABILITY.—A wholesale financial the Board from imposing capital or capital ‘‘(i) any registered broker or dealer or any adequacy rules, guidelines, standards, or re- holding company or a subsidiary of such registered investment adviser by or on behalf company shall provide to the Board, at the quirements with respect to activities of a of the Commission; and registered investment adviser other than in- request of the Board, a report referred to in ‘‘(ii) any licensed insurance company by or clause (i). vestment advisory activities or activities in- on behalf of any State government insurance cidental to investment advisory activities. ‘‘(C) EXEMPTIONS FROM REPORTING REQUIRE- agency responsible for the supervision of the ‘‘(v) APPROPRIATE EXCLUSIONS.—The Board MENTS.— insurance company. ‘‘(i) IN GENERAL.—The Board may, by regu- shall take full account of— ‘‘(E) CONFIDENTIALITY OF REPORTED INFOR- ‘‘(I) the capital requirements made appli- lation or order, exempt any company or class MATION.— cable to any subsidiary that is not a deposi- of companies, under such terms and condi- ‘‘(i) IN GENERAL.—Notwithstanding any tory institution by another Federal regu- tions and for such periods as the Board shall other provision of law, the Board shall not be latory authority or State insurance author- provide in such regulation or order, from the compelled to disclose any nonpublic informa- ity; and provisions of this paragraph and any regula- tion required to be reported under this para- ‘‘(II) industry norms for capitalization of a tion prescribed under this paragraph. graph, or any information supplied to the company’s unregulated subsidiaries and ac- ‘‘(ii) CRITERIA FOR CONSIDERATION.—In Board by any domestic or foreign regulatory tivities. making any determination under clause (i) agency, that relates to the financial or oper- ‘‘(vi) INTERNAL RISK MANAGEMENT MOD- with regard to any exemption under such ational condition of any wholesale financial ELS.—The Board may incorporate internal clause, the Board shall consider, among such holding company or any subsidiary of such risk management models of wholesale finan- other factors as the Board may determine to company. cial holding companies into its capital ade- be appropriate, the following factors: ‘‘(ii) COMPLIANCE WITH REQUESTS FOR INFOR- quacy guidelines or rules and may take ac- ‘‘(I) Whether information of the type re- MATION.—No provision of this subparagraph quired under this paragraph is available from shall be construed as authorizing the Board count of the extent to which resources of a a supervisory agency (as defined in section to withhold information from the Congress, subsidiary depository institution may be 1101(7) of the Right to Financial Privacy Act or preventing the Board from complying used to service the debt or other liabilities of of 1978) or a foreign regulatory authority of with a request for information from any the wholesale financial holding company. a similar type. other Federal department or agency for pur- ‘‘(c) NONFINANCIAL ACTIVITIES AND INVEST- ‘‘(II) The primary business of the company. poses within the scope of such department’s MENTS.— ‘‘(III) The nature and extent of the domes- or agency’s jurisdiction, or from complying ‘‘(1) AUTHORITY FOR LIMITED AMOUNTS OF tic and foreign regulation of the activities of with any order of a court of competent juris- NEW ACTIVITIES AND INVESTMENTS.— the company. diction in an action brought by the United ‘‘(A) IN GENERAL.—Notwithstanding section ‘‘(3) EXAMINATIONS.— States or the Board. 4(a), a wholesale financial holding company ‘‘(A) LIMITED USE OF EXAMINATION AUTHOR- ‘‘(iii) COORDINATION WITH OTHER LAW.—For may engage in activities which are not (or ITY.—The Board may make examinations of purposes of section 552 of title 5, United have not been determined to be) financial in each wholesale financial holding company States Code, this subparagraph shall be con- nature or incidental to activities which are and each subsidiary of such company in sidered to be a statute described in sub- financial in nature, or acquire and retain order to— section (b)(3)(B) of such section. ownership and control of the shares of a ‘‘(i) inform the Board regarding the nature ‘‘(iv) DESIGNATION OF CONFIDENTIAL INFOR- company engaged in such activities if— of the operations and financial condition of MATION.—In prescribing regulations to carry ‘‘(i) the aggregate annual gross revenues the wholesale financial holding company and out the requirements of this subsection, the derived from all such activities and of all its subsidiaries; Board shall designate information described such companies does not exceed 5 percent of ‘‘(ii) inform the Board regarding— in or obtained pursuant to this paragraph as the consolidated annual gross revenues of ‘‘(I) the financial and operational risks confidential information. the wholesale financial holding company or, within the wholesale financial holding com- ‘‘(F) COSTS.—The cost of any examination in the case of a foreign bank or any company pany system that may affect any depository conducted by the Board under this section that owns or controls a foreign bank, the ag- institution owned by such holding company; may be assessed against, and made payable gregate annual gross revenues derived from and by, the wholesale financial holding company. any such activities in the United States does ‘‘(II) the systems of the holding company ‘‘(4) CAPITAL ADEQUACY GUIDELINES.— not exceed 5 percent of the consolidated an- and its subsidiaries for monitoring and con- ‘‘(A) CAPITAL ADEQUACY PROVISIONS.—Sub- nual gross revenues of the foreign bank or trolling those risks; and ject to the requirements of, and solely in ac- company in the United States derived from ‘‘(iii) monitor compliance with the provi- cordance with, the terms of this paragraph, any branch, agency, commercial lending sions of this Act and those governing trans- the Board may adopt capital adequacy rules company, or depository institution con- actions and relationships between any depos- or guidelines for wholesale financial holding trolled by the foreign bank or company and itory institution controlled by the wholesale companies. any subsidiary engaged in the United States financial holding company and any of the ‘‘(B) METHOD OF CALCULATION.—In develop- in activities permissible under section 4 or 6 company’s other subsidiaries. ing rules or guidelines under this paragraph, or this subsection; ‘‘(B) RESTRICTED FOCUS OF EXAMINATIONS.— the following provisions shall apply: ‘‘(ii) the consolidated total assets of any The Board shall, to the fullest extent pos- ‘‘(i) FOCUS ON DOUBLE LEVERAGE.—The company the shares of which are acquired sible, limit the focus and scope of any exam- Board shall focus on the use by wholesale fi- pursuant to this subsection are less than ination of a wholesale financial holding com- nancial holding companies of debt and other $750,000,000 at the time the shares are ac- pany under this paragraph to— liabilities to fund capital investments in quired by the wholesale financial holding ‘‘(i) the holding company; and subsidiaries. company; and H3152 CONGRESSIONAL RECORD — HOUSE May 13, 1998 ‘‘(iii) such company provides notice to the nancial holding companies under this section of national treatment and equality of com- Board within 30 days of commencing the ac- may not exceed 5 percent of the total con- petitive opportunity. tivity or acquiring the ownership or control. solidated assets of the wholesale financial ‘‘(4) NONAPPLICABILITY OF OTHER EXEMP- ‘‘(B) INCLUSION OF GRANDFATHERED ACTIVI- holding company, except that the Board may TION.—Any foreign bank or company which TIES.—For purposes of determining compli- increase such percentage of total consoli- is treated as a wholesale financial holding ance with the limits contained in subpara- dated assets by such amounts and under such company under this subsection shall not be graph (A), the gross revenues derived from circumstances as the Board considers appro- eligible for any exception described in sec- all activities conducted and companies the priate, consistent with the purposes of this tion 2(h). shares of which are held under paragraph (2) Act. ‘‘(5) SUPERVISION OF FOREIGN BANK WHICH shall be considered to be derived or held ‘‘(4) CROSS MARKETING RESTRICTIONS.—A MAINTAINS NO BANKING PRESENCE OTHER THAN under this paragraph. wholesale financial holding company shall CONTROL OF A WHOLESALE FINANCIAL INSTITU- ‘‘(C) REPORT.—No later than 5 years after not permit— TION.—A foreign bank that owns or controls the date of enactment of the Financial Serv- ‘‘(A) any company whose shares it owns or a wholesale financial institution but does ices Act of 1998, the Board shall submit to controls pursuant to paragraph (1), (2), or (3) not operate a branch, agency, or commercial the Congress a report regarding the activi- to offer or market any product or service of lending company in the United States (and ties conducted and companies held pursuant an affiliated wholesale financial institution; any company that owns or controls such for- to this paragraph and the effect, if any, that or eign bank) may request a determination affiliations permitted under this paragraph ‘‘(B) any affiliated wholesale financial in- from the Board that such bank or company have had on affiliated depository institu- stitution to offer or market any product or be treated as a wholesale financial holding tions. The report shall include recommenda- service of any company whose shares are company for purposes of subsection (c), ex- tions regarding the appropriateness of re- owned or controlled by such wholesale finan- cept that such bank or company shall be sub- taining, increasing, or decreasing the limits cial holding company pursuant to such para- ject to the restrictions of paragraphs (2)(A), contained in those provisions. graphs. (3), and (4) of this subsection. ‘‘(d) QUALIFICATION OF FOREIGN BANK AS ‘‘(2) GRANDFATHERED ACTIVITIES.— ‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This ‘‘(A) IN GENERAL.—Notwithstanding para- WHOLESALE FINANCIAL HOLDING COMPANY.— section shall not be construed as limiting graph (1)(A) and section 4(a), a company that ‘‘(1) IN GENERAL.—Any foreign bank, or any the authority of the Board under the Inter- becomes a wholesale financial holding com- company that owns or controls a foreign national Banking Act of 1978 with respect to bank, that— pany may continue to engage, directly or in- the regulation, supervision, or examination ‘‘(A) operates a branch, agency, or com- directly, in any activity and may retain of foreign banks and their offices and affili- mercial lending company in the United ownership and control of shares of a com- ates in the United States. pany engaged in any activity if— States, including a foreign bank or company ‘‘(7) APPLICABILITY OF COMMUNITY REIN- ‘‘(i) on the date of the enactment of the Fi- that owns or controls a wholesale financial VESTMENT ACT OF 1977.—The branches in the institution; and nancial Services Act of 1998, such wholesale United States of a foreign bank that is, or is ‘‘(B) owns, controls, or is affiliated with a financial holding company was lawfully en- affiliated with a company that is, treated as security affiliate that engages in underwrit- gaged in that nonfinancial activity, held the a wholesale financial holding company shall ing corporate equity securities, shares of such company, or had entered into be subject to section 9B(b)(11) of the Federal a contract to acquire shares of any company may request a determination from the Board Reserve Act as if the foreign bank were a engaged in such activity; and that such bank or company be treated as a wholesale financial institution under such ‘‘(ii) the company engaged in such activity wholesale financial holding company for pur- section. The Board and the Comptroller of continues to engage only in the same activi- poses of subsection (c). the Currency shall apply the provisions of ties that such company conducted on the ‘‘(2) CONDITIONS FOR TREATMENT AS A sections 803(2), 804, and 807(1) of the Commu- date of the enactment of the Financial Serv- WHOLESALE FINANCIAL HOLDING COMPANY.—A nity Reinvestment Act of 1977 to branches of ices Act of 1998, and other activities permis- foreign bank and a company that owns or foreign banks which receive only such depos- sible under this Act. controls a foreign bank may not be treated its as are permissible for receipt by a cor- ‘‘(B) NO EXPANSION OF GRANDFATHERED COM- as a wholesale financial holding company poration organized under section 25A of the MERCIAL ACTIVITIES THROUGH MERGER OR CON- unless the bank and company meet and con- Federal Reserve Act, in the same manner SOLIDATION.—A wholesale financial holding tinue to meet the following criteria: company that engages in activities or holds ‘‘(A) NO INSURED DEPOSITS.—No deposits and to the same extent such sections apply shares pursuant to this paragraph, or a sub- held directly by a foreign bank or through an to such a corporation.’’. sidiary of such wholesale financial holding affiliate (other than an institution described (b) UNINSURED STATE BANKS.—Section 9 of company, may not acquire, in any merger, in subparagraph (D) or (F) of section 2(c)(2)) the Federal Reserve Act (U.S.C. 321 et seq.) is consolidation, or other type of business com- are insured under the Federal Deposit Insur- amended by adding at the end the following bination, assets of any other company which ance Act. new paragraph: is engaged in any activity which the Board ‘‘(B) CAPITAL STANDARDS.—The foreign ‘‘(24) ENFORCEMENT AUTHORITY OVER UNIN- has not determined to be financial in nature bank meets risk-based capital standards SURED STATE MEMBER BANKS.—Section 3(u) of or incidental to activities that are financial comparable to the capital standards required the Federal Deposit Insurance Act, sub- in nature under section 6(c). for a wholesale financial institution, giving sections (j) and (k) of section 7 of such Act, ‘‘(C) LIMITATION TO SINGLE EXEMPTION.—No due regard to the principle of national treat- and subsections (b) through (n), (s), (u), and company that engages in any activity or ment and equality of competitive oppor- (v) of section 8 of such Act shall apply to an controls any shares under subsection (f) or tunity. uninsured State member bank in the same (g) of section 6 may engage in any activity or ‘‘(C) TRANSACTION WITH AFFILIATES.— manner and to the same extent such provi- own any shares pursuant to this paragraph Transactions between a branch, agency, or sions apply to an insured State member bank or paragraph (1). commercial lending company subsidiary of and any reference in any such provision to ‘‘(3) COMMODITIES.— the foreign bank in the United States, and ‘insured depository institution’ shall be ‘‘(A) IN GENERAL.—Notwithstanding section any securities affiliate or company in which deemed to be a reference to ‘uninsured State 4(a), a wholesale financial holding company the foreign bank (or any company that owns member bank’ for purposes of this para- which was predominately engaged as of Jan- or controls such foreign bank) has invested graph.’’. uary 1, 1997, in financial activities in the pursuant to subsection (d) comply with the SEC. 132. AUTHORIZATION TO RELEASE RE- United States (or any successor to any such provisions of sections 23A and 23B of the Fed- PORTS. company) may engage in, or directly or indi- eral Reserve Act in the same manner and to rectly own or control shares of a company the same extent as such transactions would (a) FEDERAL RESERVE ACT.—The last sen- engaged in, activities related to the trading, be required to comply with such sections if tence of the 8th undesignated paragraph of sale, or investment in commodities and un- the bank were a member bank. section 9 of the Federal Reserve Act (12 derlying physical properties that were not ‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL U.S.C. 326) is amended to read as follows: permissible for bank holding companies to INSTITUTION.—Any foreign bank which is, or ‘‘The Board of Governors of the Federal Re- conduct in the United States as of January 1, is affiliated with a company which is, treat- serve System, at its discretion, may furnish 1997, if such wholesale financial holding com- ed as a wholesale financial holding company reports of examination or other confidential pany, or any subsidiary of such holding com- under this subsection shall be treated as a supervisory information concerning State pany, was engaged directly, indirectly, or wholesale financial institution for purposes member banks or any other entities exam- through any such company in any of such ac- of subsection (c)(4) of this section and sub- ined under any other authority of the Board tivities as of January 1, 1997, in the United sections (c)(1)(C) and (c)(3) of section 9B of to any Federal or State authorities with su- States. the Federal Reserve Act, and any such for- pervisory or regulatory authority over the ‘‘(B) LIMITATION.—Notwithstanding para- eign bank or company shall be subject to examined entity, to officers, directors, or re- graph (1)(A)(i), the attributed aggregate con- paragraphs (3), (4), and (5) of section 9B(d) of ceivers of the examined entity, and to any solidated assets of a wholesale financial the Federal Reserve Act, except that the other person that the Board determines to be holding company held under the authority Board may adopt such modifications, condi- proper.’’. granted under this paragraph and not other- tions, or exemptions as the Board deems ap- (b) COMMODITY FUTURES TRADING COMMIS- wise permitted to be held by all wholesale fi- propriate, giving due regard to the principle SION.— May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3153 (1) Section 1101(7) of the Right to Financial Federal Reserve Act and the limitations and be deemed to be a banking institution, and Privacy Act of 1978 (12 U.S.C. 3401(7)) is restrictions contained therein. the Board shall be the appropriate Federal amended— ‘‘(c) COMMUNITY REINVESTMENT ACT OF banking agency for such bank and all such (A) by redesignating subparagraphs (G) and 1977.—A national wholesale financial institu- bank’s affiliates, for purposes of the Inter- (H) as subparagraphs (H) and (I), respec- tion shall be subject to the Community Rein- national Lending Supervision Act. tively; and vestment Act of 1977. ‘‘(5) BANK MERGER ACT.—A wholesale finan- (B) by inserting after subparagraph (F) the ‘‘(d) EXAMINATION REPORTS.—The Comp- cial institution shall be subject to sections following new subparagraph: troller of the Currency shall, to the fullest 18(c) and 44 of the Federal Deposit Insurance ‘‘(G) the Commodity Futures Trading Com- extent possible, use the report of examina- Act in the same manner and to the same ex- mission; or’’ and tions made by the Board of Governors of the tent the wholesale financial institution (2) Section 1112(e) of the Right to Financial Federal Reserve System of a wholesale fi- would be subject to such sections if the insti- Privacy Act (12 U.S.C. 3412(e)) is amended by nancial institution.’’. tution were a State member insured bank. striking ‘‘and the Securities and Exchange (2) CLERICAL AMENDMENT.—The table of ‘‘(6) BRANCHING.—Notwithstanding any Commission’’ and inserting ‘‘, the Securities sections for chapter one of title LXII of the other provision of law, a wholesale financial and Exchange Commission, and the Commod- Revised Statutes of the United States is institution may establish and operate a ity Futures Trading Commission’’. amended by inserting after the item relating branch at any location on such terms and SEC. 133. CONFORMING AMENDMENTS. to section 5136A (as added by section 121(d) of conditions as established by the Board and, (a) BANK HOLDING COMPANY ACT OF 1956.— this title) the following new item: in the case of a State-chartered wholesale fi- (1) DEFINITIONS.—Section 2 of the Bank ‘‘5136B. National wholesale financial institu- nancial institution, with the approval of the Holding Company Act of 1956 (12 U.S.C. 1842) tions.’’. Board, and, in the case of a national bank is amended by adding at the end the follow- (b) STATE WHOLESALE FINANCIAL INSTITU- wholesale financial institution, with the ap- proval of the Comptroller of the Currency. ing new subsections: TIONS.—The Federal Reserve Act (12 U.S.C. ‘‘(p) WHOLESALE FINANCIAL INSTITUTION.— 221 et seq.) is amended by inserting after sec- ‘‘(7) ACTIVITIES OF OUT-OF-STATE BRANCHES The term ‘wholesale financial institution’ tion 9A the following new section: OF WHOLESALE FINANCIAL INSTITUTIONS.— ‘‘(A) GENERAL.—A State-chartered whole- means a wholesale financial institution sub- ‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS. ject to section 9B of the Federal Reserve Act. sale financial institution shall be deemed a ‘‘(a) APPLICATION FOR MEMBERSHIP AS State bank and an insured State bank and a ‘‘(q) COMMISSION.—The term ‘Commission’ WHOLESALE FINANCIAL INSTITUTION.— means the Securities and Exchange Commis- national wholesale financial institution ‘‘(1) APPLICATION REQUIRED.— shall be deemed a national bank for purposes sion. ‘‘(A) IN GENERAL.—Any bank may apply to ‘‘(r) DEPOSITORY INSTITUTION.—The term of paragraphs (1), (2), and (3) of section 24(j) the Board of Governors of the Federal Re- of the Federal Deposit Insurance Act. ‘depository institution’— serve System to become a wholesale finan- ‘‘(1) has the meaning given to such term in ‘‘(B) DEFINITIONS.—The following defini- cial institution and, as a wholesale financial tions shall apply solely for purposes of apply- section 3 of the Federal Deposit Insurance institution, to subscribe to the stock of the Act; and ing paragraph (1): Federal reserve bank organized within the ‘‘(i) HOME STATE.—The term ‘home State’ ‘‘(2) includes a wholesale financial institu- district where the applying bank is located. tion.’’. means— ‘‘(B) TREATMENT AS MEMBER BANK.—Any ‘‘(I) with respect to a national wholesale fi- (2) DEFINITION OF BANK INCLUDES WHOLE- application under subparagraph (A) shall be nancial institution, the State in which the SALE FINANCIAL INSTITUTION.—Section 2(c)(1) treated as an application under, and shall be main office of the institution is located; and of the Bank Holding Company Act of 1956 (12 subject to the provisions of, section 9. U.S.C. 1841(c)(1)) is amended by adding at the ‘‘(II) with respect to a State-chartered ‘‘(2) INSURANCE TERMINATION.—No bank the wholesale financial institution, the State by end the following new subparagraph: deposits of which are insured under the Fed- which the institution is chartered. ‘‘(C) A wholesale financial institution.’’. eral Deposit Insurance Act may become a ‘‘(ii) HOST STATE.—The term ‘host State’ (3) INCORPORATED DEFINITIONS.—Section wholesale financial institution unless it has means a State, other than the home State of 2(n) of the Bank Holding Company Act of met all requirements under that Act for vol- the wholesale financial institution, in which 1956 (12 U.S.C. 1841(n)) is amended by insert- untary termination of deposit insurance. the institution maintains, or seeks to estab- ing ‘‘ ‘insured bank’,’’ after ‘‘ ‘in danger of de- ‘‘(b) GENERAL REQUIREMENTS APPLICABLE lish and maintain, a branch. fault’,’’. TO WHOLESALE FINANCIAL INSTITUTIONS.— ‘‘(iii) OUT-OF-STATE BANK.—The term ‘out- (4) EXCEPTION TO DEPOSIT INSURANCE RE- ‘‘(1) FEDERAL RESERVE ACT.—Except as oth- of-State bank’ means, with respect to any QUIREMENT.—Section 3(e) of the Bank Hold- erwise provided in this section, wholesale fi- State, a wholesale financial institution ing Company Act of 1956 (12 U.S.C. 1842(e)) is nancial institutions shall be member banks whose home State is another State. amended by adding at the end the following: and shall be subject to the provisions of this ‘‘(8) DISCRIMINATION REGARDING INTEREST ‘‘This subsection shall not apply to a whole- Act that apply to member banks to the same RATES.—Section 27 of the Federal Deposit In- sale financial institution.’’ extent and in the same manner as State surance Act shall apply to State-chartered (b) FEDERAL DEPOSIT INSURANCE ACT.—Sec- member insured banks, except that a whole- wholesale financial institutions in the same tion 3(q)(2)(A) of the Federal Deposit Insur- sale financial institution may terminate manner and to the same extent as such pro- ance Act (12 U.S.C. 1813(q)(2)(A)) is amended membership under this Act only with the visions apply to State member insured banks to read as follows: prior written approval of the Board and on and any reference in such section to a State- ‘‘(A) any State member insured bank (ex- terms and conditions that the Board deter- chartered insured depository institution cept a District bank) and any wholesale fi- mines are appropriate to carry out the pur- shall be deemed to include a reference to a nancial institution as authorized pursuant to poses of this Act. State-chartered wholesale financial institu- section 9B of the Federal Reserve Act;’’. ‘‘(2) PROMPT CORRECTIVE ACTION.—A whole- tion. CHAPTER 2—WHOLESALE FINANCIAL sale financial institution shall be deemed to ‘‘(9) PREEMPTION OF STATE LAWS REQUIRING INSTITUTIONS be an insured depository institution for pur- DEPOSIT INSURANCE FOR WHOLESALE FINANCIAL SEC. 136. WHOLESALE FINANCIAL INSTITUTIONS. poses of section 38 of the Federal Deposit In- INSTITUTIONS.—The appropriate State bank- (a) NATIONAL WHOLESALE FINANCIAL INSTI- surance Act except that— ing authority may grant a charter to a TUTIONS.— ‘‘(A) the relevant capital levels and capital wholesale financial institution notwith- (1) IN GENERAL.—Chapter one of title LXII measures for each capital category shall be standing any State constitution or statute of the Revised Statutes of the United States the levels specified by the Board for whole- requiring that the institution obtain insur- (12 U.S.C. 21 et seq.) is amended by inserting sale financial institutions; and ance of its deposits and any such State con- after section 5136A (as added by section ‘‘(B) all references to the appropriate Fed- stitution or statute is hereby preempted 121(a) of this title) the following new section: eral banking agency or to the Corporation in solely for purposes of this paragraph. ‘‘SEC. 5136B. NATIONAL WHOLESALE FINANCIAL that section shall be deemed to be references ‘‘(10) PARITY FOR WHOLESALE FINANCIAL IN- INSTITUTIONS. to the Board. STITUTIONS.—A State bank that is a whole- ‘‘(a) AUTHORIZATION OF THE COMPTROLLER ‘‘(3) ENFORCEMENT AUTHORITY.—Sub- sale financial institution under this section REQUIRED.—A national bank may apply to sections (j) and (k) of section 7, subsections shall have all of the rights, powers, privi- the Comptroller on such forms and in accord- (b) through (n), (s), and (v) of section 8, and leges, and immunities (including those de- ance with such regulations as the Comptrol- section 19 of the Federal Deposit Insurance rived from status as a federally chartered in- ler may prescribe, for permission to operate Act shall apply to a wholesale financial in- stitution) of and as if it were a national as a national wholesale financial institution. stitution in the same manner and to the bank, subject to such terms and conditions ‘‘(b) REGULATION.—A national wholesale fi- same extent as such provisions apply to as established by the Board. nancial institution may exercise, in accord- State member insured banks and any ref- ‘‘(11) COMMUNITY REINVESTMENT ACT OF ance with such institution’s articles of incor- erence in such sections to an insured deposi- 1977.—A State wholesale financial institution poration and regulations issued by the tory institution shall be deemed to include a shall be subject to the Community Reinvest- Comptroller, all the powers and privileges of reference to a wholesale financial institu- ment Act of 1977. a national bank formed in accordance with tion. ‘‘(c) SPECIFIC REQUIREMENTS APPLICABLE TO section 5133 of the Revised Statutes of the ‘‘(4) CERTAIN OTHER STATUTES APPLICA- WHOLESALE FINANCIAL INSTITUTIONS.— United States, subject to section 9B of the BLE.—A wholesale financial institution shall ‘‘(1) LIMITATIONS ON DEPOSITS.— H3154 CONGRESSIONAL RECORD — HOUSE May 13, 1998

‘‘(A) MINIMUM AMOUNT.— wholesale financial institution that is affili- (1) SECTION 8 DESIGNATIONS.—Section 8(a) of ‘‘(i) IN GENERAL.—No wholesale financial ated with an insured bank shall not be a the Federal Deposit Insurance Act (12 U.S.C. institution may receive initial deposits of bank. 1818(a)) is amended— $100,000 or less, other than on an incidental ‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This (A) by striking paragraph (1); and and occasional basis. section shall not be construed as limiting (B) by redesignating paragraphs (2) ‘‘(ii) LIMITATION ON DEPOSITS OF LESS THAN the Board’s authority over member banks through (10) as paragraphs (1) through (9), re- $100,000.—No wholesale financial institution under any other provision of law, or to cre- spectively. may receive initial deposits of $100,000 or less ate any obligation for any Federal reserve (2) VOLUNTARY TERMINATION OF INSURED if such deposits constitute more than 5 per- bank to make, increase, renew, or extend STATUS.—The Federal Deposit Insurance Act cent of the institution’s total deposits. any advance or discount under this Act to (12 U.S.C. 1811 et seq.) is amended by insert- ‘‘(B) NO DEPOSIT INSURANCE.—No deposits any member bank or other depository insti- ing after section 8 the following new section: held by a wholesale financial institution tution. ‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS shall be insured deposits under the Federal AS INSURED DEPOSITORY INSTITU- ‘‘(d) CAPITAL AND MANAGERIAL REQUIRE- Deposit Insurance Act. TION. MENTS.— ‘‘(C) ADVERTISING AND DISCLOSURE.—The ‘‘(a) IN GENERAL.—Except as provided in ‘‘(1) IN GENERAL.—A wholesale financial in- Board shall prescribe regulations pertaining subsection (b), an insured State bank or a stitution shall be well capitalized and well to advertising and disclosure by wholesale fi- national bank may voluntarily terminate managed. nancial institutions to ensure that each de- such bank’s status as an insured depository ‘‘(2) NOTICE TO COMPANY.—The Board shall positor is notified that deposits at the whole- institution in accordance with regulations of promptly provide notice to a company that sale financial institution are not federally the Corporation if— controls a wholesale financial institution insured or otherwise guaranteed by the ‘‘(1) the bank provides written notice of whenever such wholesale financial institu- United States Government. the bank’s intent to terminate such insured tion is not well capitalized or well managed. ‘‘(2) MINIMUM CAPITAL LEVELS APPLICABLE status— ‘‘(3) AGREEMENT TO RESTORE INSTITUTION.— TO WHOLESALE FINANCIAL INSTITUTIONS.—The ‘‘(A) to the Corporation and the Board of Within 45 days of receipt of a notice under Board shall, by regulation, adopt capital re- Governors of the Federal Reserve System paragraph (2) (or such additional period not quirements for wholesale financial institu- not less than 6 months before the effective to exceed 90 days as the Board may permit), tions— date of such termination; and the company shall execute an agreement ac- ‘‘(A) to account for the status of wholesale ‘‘(B) to all depositors at such bank, not ceptable to the Board to restore the whole- financial institutions as institutions that ac- less than 6 months before the effective date sale financial institution to compliance with cept deposits that are not insured under the of the termination of such status; and all of the requirements of paragraph (1). Federal Deposit Insurance Act; and ‘‘(2) either— ‘‘(4) LIMITATIONS UNTIL INSTITUTION RE- ‘‘(B) to provide for the safe and sound oper- ‘‘(A) the deposit insurance fund of which STORED.—Until the wholesale financial insti- ation of the wholesale financial institution such bank is a member equals or exceeds the tution is restored to compliance with all of without undue risk to creditors or other per- fund’s designated reserve ratio as of the date the requirements of paragraph (1), the Board sons, including Federal reserve banks, en- the bank provides a written notice under may impose such limitations on the conduct gaged in transactions with the bank. paragraph (1) and the Corporation deter- or activities of the company or any affiliate ‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE mines that the fund will equal or exceed the of the company as the Board determines to TO WHOLESALE FINANCIAL INSTITUTIONS.—In applicable designated reserve ratio for the 2 be appropriate under the circumstances. addition to any requirement otherwise appli- semiannual assessment periods immediately ‘‘(5) FAILURE TO RESTORE.—If the company cable to State member insured banks or ap- following such date; or does not execute and implement an agree- plicable, under this section, to wholesale fi- ‘‘(B) the Corporation and the Board of Gov- ment in accordance with paragraph (3), com- nancial institutions, the Board may impose, ernors of the Federal Reserve System ap- ply with any limitation imposed under para- by regulation or order, upon wholesale finan- proved the termination of the bank’s insured graph (4), restore the wholesale financial in- cial institutions— status and the bank pays an exit fee in ac- stitution to well capitalized status within ‘‘(A) limitations on transactions, direct or cordance with subsection (e). indirect, with affiliates to prevent— 180 days after receipt by the company of the ‘‘(b) EXCEPTION.—Subsection (a) shall not ‘‘(i) the transfer of risk to the deposit in- notice described in paragraph (2), or restore apply with respect to— surance funds; or the wholesale financial institution to well ‘‘(1) an insured savings association; or ‘‘(ii) an affiliate from gaining access to, or managed status within such period as the ‘‘(2) an insured branch that is required to the benefits of, credit from a Federal reserve Board may permit, the company shall, under be insured under subsection (a) or (b) of sec- bank, including overdrafts at a Federal re- such terms and conditions as may be im- tion 6 of the International Banking Act of serve bank; posed by the Board and subject to such ex- 1978. ‘‘(B) special clearing balance requirements; tension of time as may be granted in the ‘‘(c) ELIGIBILITY FOR INSURANCE TERMI- and Board’s discretion, divest control of its sub- NATED.—Any bank that voluntarily elects to ‘‘(C) any additional requirements that the sidiary depository institutions. terminate the bank’s insured status under Board determines to be appropriate or nec- ‘‘(6) WELL MANAGED DEFINED.—For purposes subsection (a) shall not be eligible for insur- essary to— of this subsection, the term ‘well managed’ ance on any deposits or any assistance au- ‘‘(i) promote the safety and soundness of has the same meaning as in section 2 of the thorized under this Act after the period spec- the wholesale financial institution or any in- Bank Holding Company Act of 1956. ified in subsection (f)(1). sured depository institution affiliate of the ‘‘(e) CONSERVATORSHIP AUTHORITY.— ‘‘(d) INSTITUTION MUST BECOME WHOLESALE wholesale financial institution; ‘‘(1) IN GENERAL.—The Board may appoint a FINANCIAL INSTITUTION OR TERMINATE DE- ‘‘(ii) prevent the transfer of risk to the de- conservator to take possession and control of POSIT-TAKING ACTIVITIES.—Any depository posit insurance funds; or a wholesale financial institution to the same institution which voluntarily terminates ‘‘(iii) protect creditors and other persons, extent and in the same manner as the Comp- such institution’s status as an insured depos- including Federal reserve banks, engaged in troller of the Currency may appoint a con- itory institution under this section may not, transactions with the wholesale financial in- servator for a national bank under section upon termination of insurance, accept any stitution. 203 of the Bank Conservation Act, and the deposits unless the institution is a wholesale ‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL conservator shall exercise the same powers, financial institution subject to section 9B of INSTITUTIONS.—The Board may, by regulation functions, and duties, subject to the same the Federal Reserve Act. or order, exempt any wholesale financial in- limitations, as are provided under such Act ‘‘(e) EXIT FEES.— stitution from any provision applicable to a for conservators of national banks. ‘‘(1) IN GENERAL.—Any bank that volun- member bank that is not a wholesale finan- ‘‘(2) BOARD AUTHORITY.—The Board shall tarily terminates such bank’s status as an cial institution, if the Board finds that such have the same authority with respect to any insured depository institution under this exemption is not inconsistent with— conservator appointed under paragraph (1) section shall pay an exit fee in an amount ‘‘(A) the promotion of the safety and and the wholesale financial institution for that the Corporation determines is sufficient soundness of the wholesale financial institu- which such conservator has been appointed to account for the institution’s pro rata tion or any insured depository institution af- as the Comptroller of the Currency has under share of the amount (if any) which would be filiate of the wholesale financial institution; the Bank Conservation Act with respect to a required to restore the relevant deposit in- ‘‘(B) the protection of the deposit insur- conservator appointed under such Act and a surance fund to the fund’s designated reserve ance funds; and national bank for which the conservator has ratio as of the date the bank provides a writ- ‘‘(C) the protection of creditors and other been appointed. ten notice under subsection (a)(1). persons, including Federal reserve banks, en- ‘‘(2) PROCEDURES.—The Corporation shall gaged in transactions with the wholesale fi- ‘‘(f) EXCLUSIVE JURISDICTION.—Subsections prescribe, by regulation, procedures for as- nancial institution. (c) and (e) of section 43 of the Federal De- sessing any exit fee under this subsection. ‘‘(5) LIMITATION ON TRANSACTIONS BETWEEN posit Insurance Act shall not apply to any ‘‘(f) TEMPORARY INSURANCE OF DEPOSITS IN- A WHOLESALE FINANCIAL INSTITUTION AND AN wholesale financial institution.’’. SURED AS OF TERMINATION.— INSURED BANK.—For purposes of section (c) VOLUNTARY TERMINATION OF INSURED ‘‘(1) TRANSITION PERIOD.—The insured de- 23A(d)(1) of the Federal Reserve Act, a STATUS BY CERTAIN INSTITUTIONS.— posits of each depositor in a State bank or a May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3155 national bank on the effective date of the (2) in subsection (c)— (4) by striking paragraph (6) and redesig- voluntary termination of the bank’s insured (A) by striking paragraph (1); and nating paragraphs (7) through (11) as para- status, less all subsequent withdrawals from (B) by redesignating paragraphs (2) graphs (6) through (10), respectively; any deposits of such depositor, shall con- through (5) as paragraphs (1) through (4), re- (5) in subparagraph (A) of paragraph (6) (as tinue to be insured for a period of not less spectively. so redesignated by paragraph (4) of this sec- than 6 months and not more than 2 years, as (b) AMENDMENTS TO SECTION 11 TO MODIFY tion)— determined by the Corporation. During such JUSTICE DEPARTMENT NOTIFICATION AND (A) by striking ‘‘(5)’’ and inserting ‘‘(4)’’; period, no additions to any such deposits, POST-APPROVAL WAITING PERIOD FOR SECTION and and no new deposits in the depository insti- 3 TRANSACTIONS.—Section 11 of the Bank (B) by striking ‘‘(6)’’ and inserting ‘‘(5)’’; tution made after the effective date of such Holding Company Act of 1956 (12 U.S.C. 1849) (C) by striking ‘‘In any such action, the termination shall be insured by the Corpora- is amended— court shall review de novo the issues pre- tion. (1) in subsection (b)(1)— sented.’’; ‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS (A) by striking ‘‘, if the Board has not re- (6) in paragraph (6) (as so redesignated by AND DUTIES.—During the period specified in ceived any adverse comment from the Attor- paragraph (4) of this section)— paragraph (1) with respect to any bank, the ney General of the United States relating to (A) by striking subparagraphs (B) and (D); bank shall continue to pay assessments competitive factors,’’; and under section 7 as if the bank were an in- (B) by striking ‘‘as may be prescribed by (B) by redesignating subparagraph (C) as sured depository institution. The bank shall, the Board with the concurrence of the Attor- subparagraph (B); in all other respects, be subject to the au- ney General, but in no event less than 15 cal- (7) in paragraph (8) (as so redesignated by thority of the Corporation and the duties endar days after the date of approval.’’ and paragraph (4) of this section)— and obligations of an insured depository in- inserting ‘‘as may be prescribed by the ap- (A) by inserting ‘‘and’’ after the semicolon stitution under this Act during such period, propriate antitrust agency.’’; and at the end of subparagraph (A): and in the event that the bank is closed due (C) by striking the 3d to last sentence and (B) by striking subparagraph (B); and to an inability to meet the demands of the (C) by redesignating subparagraph (C) as the penultimate sentence; and bank’s depositors during such period, the subparagraph (B); and (2) by striking subsections (c) and (e) and Corporation shall have the same powers and (8) by inserting after paragraph (10) (as so redesignating subsections (d) and (f) as sub- rights with respect to such bank as in the redesignated by paragraph (4) of this section) sections (c) and (d), respectively. case of an insured depository institution. the following new paragraph: ‘‘(g) ADVERTISEMENTS.— (c) DEFINITIONS.—Section 2(o) of the Bank ‘‘(11) REQUIREMENT TO FILE INFORMATION ‘‘(1) IN GENERAL.—A bank that voluntarily Holding Company Act of 1956 (12 U.S.C. WITH ATTORNEY GENERAL.—Any applicant terminates the bank’s insured status under 1841(o)) is amended by adding at the end the seeking prior written approval of the respon- this section shall not advertise or hold itself following new paragraphs: sible Federal banking agency to engage in a out as having insured deposits, except that ‘‘(8) ANTITRUST AGENCIES.—The term ‘anti- merger transaction under this subsection the bank may advertise the temporary insur- trust agencies’ means the Attorney General shall file simultaneously with the Attorney ance of deposits under subsection (f) if, in and the Federal Trade Commission. General copies of any documents regarding connection with any such advertisement, the ‘‘(9) APPROPRIATE ANTITRUST AGENCY.— the proposed transaction required by the advertisement also states with equal promi- With respect to a particular transaction, the Federal banking agency.’’. nence that additions to deposits and new de- term ‘appropriate antitrust agency’ means SEC. 143. INFORMATION FILED BY DEPOSITORY posits made after the effective date of the the antitrust agency engaged in reviewing INSTITUTIONS; INTERAGENCY DATA termination are not insured. the competitive effects of such trans- SHARING. ‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS, action.’’. (a) FORMAT OF NOTICE.— AND SECURITIES.—Any certificate of deposit SEC. 142. AMENDMENTS TO THE FEDERAL DE- (1) IN GENERAL.—Notice of any proposed or other obligation or security issued by a POSIT INSURANCE ACT TO VEST IN transaction for which approval is required State bank or a national bank after the ef- THE ATTORNEY GENERAL SOLE RE- under section 3 of the Bank Holding Com- fective date of the voluntary termination of SPONSIBILITY FOR ANTITRUST RE- pany Act of 1956 or section 18(c) of the Fed- the bank’s insured status under this section VIEW OF DEPOSITORY INSTITUTION eral Deposit Insurance Act shall be in a for- shall be accompanied by a conspicuous, MERGERS. mat designated and required by the appro- prominently displayed notice that such cer- Section 18(c) of the Federal Deposit Insur- priate Federal banking agency (as defined in tificate of deposit or other obligation or se- ance Act (12 U.S.C. 1828) is amended— section 3 of the Federal Deposit Insurance curity is not insured under this Act. (1) in paragraph (3)(C) by striking ‘‘during Act) and shall contain a section on the likely ‘‘(h) NOTICE REQUIREMENTS.— a period at least as long as the period al- competitive effects of the proposed trans- ‘‘(1) NOTICE TO THE CORPORATION.—The no- lowed for furnishing reports under paragraph action. tice required under subsection (a)(1)(A) shall (4) of this subsection’’; (2) DESIGNATION BY AGENCY.—The appro- be in such form as the Corporation may re- (2) by striking paragraph (4) and inserting priate Federal banking agency, with the con- quire. the following new paragraph: currence of the antitrust agencies, shall des- ‘‘(2) NOTICE TO DEPOSITORS.—The notice re- ‘‘(4) FACTORS TO BE CONSIDERED.—In deter- ignate and require the form and content of quired under subsection (a)(1)(B) shall be— mining whether to approve a transaction, the competitive effects section. ‘‘(A) sent to each depositor’s last address the responsible agency shall in every case (3) NOTICE OF SUSPENSION.—Upon notifica- of record with the bank; and take into consideration the financial and tion by the appropriate antitrust agency ‘‘(B) in such manner and form as the Cor- managerial resources and future prospects of that the competitive effects section of an ap- poration finds to be necessary and appro- the existing and proposed institutions, and plication is incomplete, the appropriate Fed- priate for the protection of depositors.’’. the convenience and needs of the community eral banking agency shall notify the appli- (3) DEFINITION.—Section 19(b)(1)(A)(i) of the to be served.’’; cant that the agency will suspend processing Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) (3) by striking paragraph (5) and inserting of the application until the appropriate anti- is amended by inserting ‘‘, or any wholesale the following new paragraph: trust agency notifies the agency that the ap- financial institution subject to section 9B of ‘‘(5) NOTICE TO ATTORNEY GENERAL.—The re- plication is complete. this Act’’ after ‘‘such Act’’. sponsible agency shall immediately notify (4) EMERGENCY ACTION.—This provision Subtitle E—Streamlining Antitrust Review the Attorney General of any approval by it shall not affect the appropriate Federal of Bank Acquisitions and Mergers pursuant to this subsection of a proposed banking agency’s authority to act imme- SEC. 141. AMENDMENTS TO THE BANK HOLDING merger transaction. If the responsible agen- diately— COMPANY ACT OF 1956. cy has found that it must act immediately in (A) to prevent the probable failure of 1 of (a) AMENDMENTS TO SECTION 3 TO REQUIRE order to prevent the probable failure of one the banks involved; or FILING OF APPLICATION COPIES WITH ANTI- of the banks involved, the transaction may (B) to reduce or eliminate a post approval TRUST AGENCIES.—Section 3 of the Bank be consummated immediately upon approval waiting period in case of an emergency re- Holding Company Act of 1956 (12 U.S.C. 1842) by the agency. If the responsible agency has quiring expeditious action. is amended— notified the other Federal banking agencies (5) EXEMPTION FOR CERTAIN FILINGS.—With (1) in subsection (b) by inserting after referred to in this section of the existence of the concurrence of the antitrust agencies, paragraph (2) the following new paragraph: an emergency requiring expeditious action the appropriate Federal banking agency may ‘‘(3) REQUIREMENT TO FILE INFORMATION and has required the submission of views and exempt classes of persons, acquisitions, or WITH ANTITRUST AGENCIES.—Any applicant recommendations within 10 days, the trans- transactions that are not likely to violate seeking prior approval of the Board to en- action may not be consummated before the the antitrust laws from the requirement that gage in an acquisition transaction under this 5th calendar day after the date of approval of applicants file a competitive effects section. section must file simultaneously with the the responsible agency. In all other cases, (b) INTERAGENCY DATA SHARING REQUIRE- Attorney General and, if the transaction also the transaction may not be consummated be- MENT.— involves an acquisition under section 4 or 6, fore the 30th calendar day after the date of (1) IN GENERAL.—To the extent not prohib- the Federal Trade Commission copies of any approval by the agency, or such shorter pe- ited by other law, the Federal banking agen- documents regarding the proposed trans- riod of time as may be prescribed by the At- cies shall make available to the antitrust action required by the Board.’’; and torney General.’’; agencies any data in their possession that H3156 CONGRESSIONAL RECORD — HOUSE May 13, 1998 the antitrust agencies deem necessary for under section 6 of such Act shall terminate less than $500,000,000 in total assets for the antitrust reviews of transactions requiring immediately. purpose of funding small businesses, agri- approval under section 3 of the Bank Holding ‘‘(B) RESTRICTIONS AND REQUIREMENTS AU- culture, rural development, or low-income Company Act of 1956 or section 18(c) of the THORIZED.—If a foreign bank or company community development (as defined by the Federal Deposit Insurance Act. that engages, directly or through an affiliate Board).’’; and (2) CONTINUATION OF DATA COLLECTION AND pursuant to paragraph (1), in an activity (3) by redesignating paragraph (5) as para- ANALYSIS.—The Federal banking agencies which the Board has determined to be per- graph (6) and inserting after paragraph (4) shall continue to provide market analysis, missible for financial holding companies the following new paragraph: deposit share information, and other rel- under section 6 of the Bank Holding Com- ‘‘(5) In the case of any member insured by evant information for determining market pany Act of 1956 has not filed a declaration the Federal Deposit Insurance Corporation competition as needed by the Attorney Gen- with the Board of its status as a financial which has total assets of less than eral in the same manner such agencies pro- holding company under such section or re- $500,000,000, secured loans for small business, vided analysis and information under section ceived a determination under section 10(d)(1) agriculture, rural development, or low-in- 18(c) of the Federal Deposit Insurance Act by the end of the 2-year period beginning on come community development, or securities and 3(c) of the Bank Holding Company Act of the date of enactment of the Financial Serv- representing a whole interest in such secured 1956 (as such sections were in effect on the ices Act of 1998, the Board, giving due regard loans.’’. day before the date of the enactment of this to the principle of national treatment and (d) Section 4(a) of the Federal Home Loan Act) and shall continue to collect informa- equality of competitive opportunity, may Bank Act (12 U.S.C. 1424(a)) is amended by tion necessary or useful for such analysis. impose such restrictions and requirements adding at the end the following new para- (c) DEFINITIONS.—For purposes of this sec- on the conduct of such activities by such for- graph: tion, the following definitions shall apply: eign bank or company as are comparable to ‘‘(3) ELIGIBILITY REQUIREMENTS FOR COMMU- (1) ANTITRUST AGENCIES.—The term ‘‘anti- those imposed on a financial holding com- NITY FINANCIAL INSTITUTIONS.—The require- trust agencies’’ means the Attorney General pany organized under the laws of the United ments of paragraph (2) (other than subpara- and the Federal Trade Commission. States, including a requirement to conduct graph (B) of such paragraph) shall not apply (2) APPROPRIATE ANTITRUST AGENCY.—With such activities in compliance with any pru- to any insured depository institution which respect to a particular transaction, the term dential safeguards established under section has total assets of less than $500,000,000. ‘‘appropriate antitrust agency’’ means the 5(h) of the Bank Holding Company Act of (e) Section 10 of the Federal Home Loan antitrust agency engaged in reviewing the 1956.’’. Bank Act (12 U.S.C. 1430) is amended by competitive effects of such transaction. SEC. 152. APPLYING THE PRINCIPLES OF NA- striking the 1st of the 2 subsections des- SEC. 144. APPLICABILITY OF ANTITRUST LAWS. TIONAL TREATMENT AND EQUALITY ignated as subsection (e) (relating to quali- No provision of this subtitle shall be con- OF COMPETITIVE OPPORTUNITY TO fied thrift lender status). strued as affecting— FOREIGN BANKS AND FOREIGN FI- SEC. 163. THE OFFICE OF FINANCE. (1) the applicability of antitrust laws (as NANCIAL INSTITUTIONS THAT ARE The Federal Home Loan Bank Act (12 WHOLESALE FINANCIAL INSTITU- defined in section 11(d) of the Bank Holding TIONS. U.S.C. 1421) is amended by inserting after Company Act of 1956; as so redesignated pur- Section 8A of the Federal Deposit Insur- section 4 the following new section: suant to this subtitle); or ance Act (as added by section 136(c)(2) of this ‘‘SEC. 5. THE OFFICE OF FINANCE. (2) the applicability, if any, of any State Act) is amended by adding at the end the fol- ‘‘(a) OPERATION.—The Federal home loan law which is similar to the antitrust laws. lowing new subsection: banks shall operate jointly an office of fi- SEC. 145. CLARIFICATION OF STATUS OF SUBSIDI- ‘‘(i) VOLUNTARY TERMINATION OF DEPOSIT nance (hereafter in this section referred to as ARIES AND AFFILIATES. INSURANCE.—The provisions on voluntary the ‘Office’) to issue the notes, bonds, and de- (a) CLARIFICATION OF FEDERAL TRADE COM- termination of insurance in this section bentures of the Federal home loan banks in MISSION JURISDICTION.—Any person which di- shall apply to an insured branch of a foreign accordance with this Act. rectly or indirectly controls, is controlled di- bank (including a Federal branch) in the ‘‘(b) POWERS.—Subject to the other provi- rectly or indirectly by, or is directly or indi- same manner and to the same extent as they sions of this Act and such safety and sound- rectly under common control with, any bank apply to an insured State bank or a national ness regulations as the Finance Board may or savings association (as such terms are de- bank.’’. prescribe, the Office shall be authorized by fined in section 3 of the Federal Deposit In- the Federal home loan banks to act as the Subtitle G—Federal Home Loan Bank surance Act) and is not itself a bank or sav- agent of such banks to issue Federal home System ings association shall not be deemed to be a loan bank notes, bonds and debentures pur- bank or savings association for purposes of SEC. 161. FEDERAL HOME LOAN BANKS– suant to section 11 of this Act on behalf of the Federal Trade Commission Act or any The 1st sentence of section 3 of the Federal the banks. other law enforced by the Federal Trade Home Loan Bank Act (12 U.S.C. 1423) is ‘‘(c) CENTRAL BOARD OF DIRECTORS.— Commission. amended— ‘‘(1) ESTABLISHMENT.—The Federal home (b) SAVINGS PROVISION.—No provision of (1) by striking ‘‘the continental United loan banks shall establish a central board of this section shall be construed as restricting States’’ and all that follows through the directors of the Office to administer the af- the authority of any Federal banking agency ‘‘eight’’; and fairs of the Office in accordance with the (as defined in section 3 of the Federal De- (2) by inserting ‘‘the States into not less provisions of this Act. posit Insurance Act) under any Federal than 1’’ before ‘‘nor’’. ‘‘(2) COMPOSITION OF BOARD.—Each Federal banking law, including section 8 of the Fed- SEC. 162. MEMBERSHIP AND COLLATERAL. home loan bank shall annually select 1 indi- eral Deposit Insurance Act. (a) Subsection (f) of section 5 of the Home vidual who, as of the time of the election, is SEC. 146. EFFECTIVE DATE. Owners’ Loan Act (12 U.S.C. 1464) is amended an officer or director of such bank to serve This subtitle shall take effect 6 months to read as follows: as a member of the central board of directors after the date of enactment of this Act. ‘‘(f) FEDERAL HOME LOAN BANK MEMBER- of the Office. Subtitle F—Applying the Principles of Na- SHIP.—A Federal savings association may be- ‘‘(d) STATUS.—Except to the extent ex- tional Treatment and Equality of Competi- come a member, of the Federal Home Loan pressly provided in this Act, the Office shall tive Opportunity to Foreign Banks and Bank System, and shall qualify for such be treated as a Federal home loan bank for Foreign Financial Institutions membership in the manner provided by the purposes of any law.’’. Federal Home Loan Bank Act, beginning SEC. 164. MANAGEMENT OF BANKS. SEC. 151. APPLYING THE PRINCIPLES OF NA- TIONAL TREATMENT AND EQUALITY January 1, 1999.’’. (a) Subsections (a) and (b) of section 7 of OF COMPETITIVE OPPORTUNITY TO (b) Section 10(a)(5) of the Federal Home the Federal Home Loan Bank Act (12 U.S.C. FOREIGN BANKS THAT ARE FINAN- Loan Bank Act (12 U.S.C. 1430(a)(5)) is 1427(a) and (b)) are amended to read as fol- CIAL HOLDING COMPANIES. amended— lows: Section 8(c) of the International Banking (1) in the 2d sentence, by striking ‘‘and the ‘‘(a) The management of each Federal Act of 1978 (12 U.S.C. 3106(c)) is amended by Board’’; and home loan bank shall be vested in a board of adding at the end the following new para- (2) in the 3d sentence, by striking ‘‘Board’’ 15 directors, 9 of whom shall be elected by graph: and inserting ‘‘Bank’’. the members in accordance with this section, ‘‘(3) TERMINATION OF GRANDFATHERED (c) Section 10(a) of the Federal Home Loan 6 of whom shall be appointed by the Board RIGHTS.— Bank Act (12 U.S.C. 1430(a)) is amended— referred to in section 2A, and all of whom ‘‘(A) IN GENERAL.—If any foreign bank or (1) in the 2d sentence, by striking ‘‘All shall be citizens of the United States and foreign company files a declaration under long-term advances’’ and inserting ‘‘Except bona fide residents of the district in which section 6(b)(1)(E) or which receives a deter- as provided in the succeeding sentence, all such bank is located. At least 2 of the Fed- mination under section 10(d)(1) of the Bank long-term advances’’; eral home loan bank directors who are ap- Holding Company Act of 1956, any authority (2) by inserting after the 2d sentence, the pointed by the Board shall be representatives conferred by this subsection on any foreign following sentence: ‘‘Notwithstanding the chosen from organizations with more than a bank or company to engage in any activity preceding sentence, long-term advances may 2-year history of representing consumer or which the Board has determined to be per- be made to members insured by the Federal community interests on banking services, missible for financial holding companies Deposit Insurance Corporation which have credit needs, housing, or financial consumer May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3157 protections. No Federal home loan bank di- the preceding sentence, if an advance is SEC. 168. TECHNICAL AMENDMENTS. rector who is appointed pursuant to this sub- made for the purpose of facilitating mort- (a) REPEAL OF SECTIONS 22A AND 27.—The section may, during such bank director’s gage lending that benefits individuals and Federal Home Loan Bank Act (12 U.S.C. 1421 term of office, serve as an officer of any Fed- families that meet the income requirements et seq.) is amended by striking sections 22A eral home loan bank or a director or officer set forth in section 142(d) or 143(f) of the In- (12 U.S.C. 1442a) and 27 (12 U.S.C. 1447). of any member of a bank, or hold shares, or ternal Revenue Code of 1986, the advance (b) SECTION 12.— any other financial interest in, any member may be collateralized as provided in section (1) Section 12(a) of the Federal Home Loan of a bank. 10(a) of this Act.’’; and Bank Act (12 U.S.C. 1432(a)) is amended— ‘‘(b) The elective directors shall be divided (3) by striking subsection (b). (A) by striking ‘‘subject to the approval of the Board’’ immediately following ‘‘trans- into three classes, designated as classes A, B, SEC. 166. POWERS AND DUTIES OF BANKS. and C, as nearly equal in number as possible. (a) Subsection (a) of section 11 of the Fed- action of its business’’; and Each directorship shall be filled by a person eral Home Loan Bank Act (12 U.S.C. 1431(a)) (B) by striking ‘‘and, by its Board of direc- who is an officer or director of a member lo- is amended— tors, to prescribe, amend, and repeal by-laws, rules, and regulations governing the manner cated in that bank’s district. Each class (1) by inserting ‘‘through the Office of Fi- in which its affairs may be administered; and shall represent members of similar asset nance’’ after ‘‘to issue’’; the powers granted to it by law may be exer- size, and the Board shall, to the maximum (2) by striking ‘‘Board’’ after ‘‘upon such cised and enjoyed subject to the approval of extent possible, seek to achieve geographic terms and conditions as the’’ and inserting the Board. The president of a Federal Home diversity. The Finance Board shall establish ‘‘board of directors of the bank’’. the minimum and maximum asset size for (b) Subsection (b) of section 11 of the Fed- Loan Bank may also be a member of the each class. Any member shall be entitled to eral Home Loan Bank Act (12 U.S.C. 1431(b)) Board of directors thereof, but no other offi- nominate and elect eligible persons for its is amended to read as follows: cer, employee, attorney, or agent of such class of directorship; such offices shall be ‘‘(b) ISSUANCE OF FEDERAL HOME LOAN bank,’’ and inserting ‘‘and, by the board of filled from such nominees by a plurality of BANK CONSOLIDATED BONDS.— directors of the bank, to prescribe, amend, the votes which members of each class may ‘‘(1) IN GENERAL.— The Office of Finance and repeal by-laws governing the manner in cast for nominees in their corresponding may issue consolidated Federal home loan which its affairs may be administered, con- class of directors in an election held for the bank bonds and other consolidated obliga- sistent with applicable statute and regula- purpose of filling such offices. Each member tions on behalf of the banks. tion, as administered by the Finance Board. shall be permitted to cast one vote for each ‘‘(2) JOINT AND SEVERAL OBLIGATION; TERMS No officer, employee, attorney, or agent of a share of Federal home loan bank stock AND CONDITIONS.—Consolidated obligations Federal home loan bank’’. owned by that member. No person who is an issued by the Office of Finance under para- (2) Section 12 of the Federal Home Loan officer or director of a member that fails to graph (1) shall— Bank Act (12 U.S.C. 1432) is amended by in- meet any applicable capital requirement is ‘‘(A) be the joint and several obligations of serting after subsection (b) the following new eligible to hold the office of Federal Home all the Federal home loan banks; and subsection: Loan Bank director. As used in this sub- ‘‘(B) shall be issued upon such terms and ‘‘(c) PROHIBITION ON EXCESSIVE COMPENSA- section, the term ‘‘member’’ means a mem- conditions as shall be established by the Of- TION.— ber of a Federal home loan bank which was fice of Finance subject to such rules and reg- ‘‘(1) IN GENERAL.—The Finance Board shall a member of such Bank as of a record date ulations as the Finance Board may pre- prohibit the Federal home loan banks from established by the Bank.’’. scribe.’’. providing compensation to any officer, direc- (b) Section 7 of the Federal Home Loan (c) Section 11(f) of the Federal Home Loan tor, or employee that is not reasonable and Bank Act (12 U.S.C. 1427) is amended— Bank Act (12 U.S.C. 1430(f) (as designated be- comparable with the compensation for em- (1) by striking subsections (c) and (h); and fore the redesignation by subsection (e) of ployment in other similar businesses involv- (2) by redesignating subsections (d), (e), (f), this section) is amended by striking both ing similar duties and responsibilities. How- (g), (i), (j), and (k) as subsections (c), (d), (e), commas immediately following ‘‘permit’’ ever, the Finance Board may not prescribe or (f), (g), (h), and (i), respectively. and inserting ‘‘or’’. set a specific level or range of compensation (c) Subsection (c) of section 7 of the Fed- (d) Subsection (i) of section 11 of the Fed- for any officer, director, or employee. eral Home Loan Bank Act (12 U.S.C. 1427(d)) eral Home Loan Bank Act (12 U.S.C. 1431(i)) ‘‘(2) REGULATIONS.—The Finance Board, by (as so redesignated by subsection (b) of this is amended by striking the 2d undesignated regulation, may provide for the requirements section) is amended by striking the 1st and paragraph. of paragraph (1) to be phased-in over a period 2d sentences and inserting the following 2 (e) Section 11 of the Federal Home Loan not to exceed 3 years. new sentences: ‘‘The term of each position of Bank Act (12 U.S.C. 1431) is amended— ‘‘(3) EXCEPTION FOR EXISTING CONTRACTS.— director shall be 3 years. No director serving (1) by striking subsection (c); and Paragraph (1) shall not apply to any contract for 3 consecutive terms, nor any other offi- (2) by redesignating subsections (d) entered into before June 1, 1997.’’. cer, director or that member or any affili- through (k) as subsections (c) through (j), re- (c) POWERS AND DUTIES OF FEDERAL HOUS- ated depository institution, shall be eligible spectively. ING FINANCE BOARD.— for another term earlier than 3 years after SEC. 167. MERGERS AND CONSOLIDATIONS OF (1) Subsection (a)(1) of section 2B of the the expiration of the last expiring of said 3- FEDERAL HOME LOAN BANKS. Federal Home Loan Bank Act (12 U.S.C. year terms. 3 elected directors of different Section 26 of the Federal Home Loan Bank 1422b(a)(1)) is amended by striking the period classes as specified by the Finance Board Act (12 U.S.C. 1446) is amended by designat- at the end of the sentence and inserting ‘‘; shall be elected by ballot annually.’’. ing the current paragraph as ‘‘(a)’’ and add- and to have the same powers, rights, and du- (d) Subsection (d) of section 7 of the Fed- ing the following new sections: ties to enforce this Act with respect to the eral Home Loan Bank Act (12 U.S.C. 1427(e)) ‘‘(b) Nothing in this section shall preclude Federal home loan banks and the senior offi- (as so redesignated by subsection (b) of this voluntary mergers, combinations or consoli- cers and directors of such banks as the Office section) is amended to read as follows: dation by or among the Federal home loan of Federal Housing Enterprise Oversight has ‘‘(d) TRANSITION PROVISION.—In the 1st banks pursuant to such regulations as the over the Federal housing enterprises and the election after the date of the enactment of Finance Board may prescribe. senior officers and directors of such enter- the Financial Services Act of 1998, 3 direc- ‘‘(c) NUMBER OF ELECTED DIRECTORS OF RE- prises under the Federal Housing Enterprises tors shall be elected in each of the 3 classes SULTING BANK.— Subject to section 7 of this Financial Safety and Soundness Act of of elective directorship. The Finance Board Act, any bank resulting from a merger, com- 1992.’’. may, in the 1st election after such date of bination, or consolidation pursuant to this (2) Subsection (b) of section 2B of the Fed- enactment, designate the terms of each section may have a number of elected direc- eral Home Loan Bank Act (12 U.S.C. 1422b(b)) elected director in each class, not to exceed tors equal to or less than the total number of is amended— 3 years, to assure that, in each subsequent elected directors of all the banks which par- (A) by striking ‘‘(1) BOARD STAFF.—’’; election, 3 directors from different classes of ticipated in such transaction (as determined (B) by striking ‘‘function to any employee, elective directorships are elected each immediately before such transaction). administrative unit’’ and inserting ‘‘function year.’’. ‘‘(d) NUMBER OF APPOINTED DIRECTORS OF to any employee or administrative unit’’; (e) Subsection (g) of section 7 of the Fed- RESULTING BANK.—The number of appointed (C) by striking the 2d sentence in para- eral Home Loan Bank Act (12 U.S.C. 1427(i)) directors of any bank resulting from a merg- graph (1); and (as so redesignated by subsection (b) of this er, combination, or consolidation pursuant (D) by striking paragraph (2). section) is amended by striking ‘‘subject to to this section shall be a number that is (3) Section 111 of Public Law 93–495 (12 the approval of the board’’. three less than the number of elected direc- U.S.C. 250) is amended by striking ‘‘Federal SEC. 165. ADVANCES TO NONMEMBER BORROW- tors. Home Loan Bank Board’’ and inserting ‘‘Fed- ERS. ‘‘(e) ADJUSTMENT OF DISTRICT BOUND- eral Housing Finance Board’’. Section 10b of the Federal Home Loan ARIES.—After consummation of any merger, (d) ELIGIBILITY TO SECURE ADVANCES.— Bank Act (12 U.S.C. 1430b) is amended— combination, or consolidation of 2 or more (1) SECTION 9.—Section 9 of the Federal (1) in subsection (a), by striking ‘‘(a) IN Federal home loan banks, the Finance Board Home Loan Bank Act (12 U.S.C. 1429) is GENERAL.—’’; shall adjust the districts established in sec- amended— (2) by striking the 4th sentence of sub- tion 3 of this Act to reflect such merger, (A) in the second sentence, by striking section (a), and inserting ‘‘Notwithstanding combination, or consolidation.’’. ‘‘with the approval of the Board’’; and H3158 CONGRESSIONAL RECORD — HOUSE May 13, 1998

(B) in the third sentence, by striking ‘‘, ‘‘(D) AFFORDABLE.—For purposes of para- quire the shareholders of the bank to main- subject to the approval of the Board,’’. graph (2)(B), the term ‘‘affordable’’ means tain an investment in the stock of the bank (2) SECTION 10.— that the rent with respect to a unit shall not in amount not less than— (A) Subsection (a) of section 10 of the Fed- exceed 30 percent of the income limitation ‘‘(i) a minimum percentage of the total as- eral Home Loan Bank Act (12 U.S.C. 1430(a)) under paragraph (2)(B) applicable to occu- sets of the shareholder; and is amended in paragraph (3), by striking ‘‘De- pants of such unit.’’. ‘‘(ii) a minimum percentage of the out- posits’’ and inserting ‘‘Cash or deposits’’. (e) SECTION 16.—Subsection (a) of section 16 standing advances from the bank to the (B) Subsection (c) of section 10 of the Fed- of the Federal Home Loan Bank Act (12 shareholder. eral Home Loan Bank Act (12 U.S.C. 1430(c)) U.S.C. 1436) is amended in the 3d sentence by ‘‘(B) MINIMUM PERCENTAGE LEVELS.—The is amended— striking ‘‘net earnings’’ and inserting ‘‘pre- minimum percentages established pursuant (i) in the 1st sentence by striking ‘‘Board’’ viously retained earnings or current net to subparagraph (A) shall be set at levels suf- and inserting ‘‘Federal home loan bank’’; earnings’’; by striking ‘‘, and then only with ficient to meet the bank’s minimum capital and the approval of the Federal Housing Finance requirements established by the Finance (ii) by striking the 2d sentence. Board’’; and by striking the 4th sentence. Board under subsection (c). (C) Subsection (d) of section 10 of the Fed- (f) SECTION 18.—Subsection (b) of section 18 ‘‘(C) MAXIMUM ASSET BASED CAPITAL RE- eral Home Loan Bank Act (12 U.S.C. 1430(d)) of the Federal Home Loan Bank Act (12 QUIREMENT.—The asset-based capital require- is amended— U.S.C. 1438) is amended by striking para- ment applicable to any shareholder of a Fed- (i) in the 1st sentence, by striking ‘‘and the graph (4). eral home loan bank in any year shall not approval of the Board’’; (g) SECTION 11.—Section 11 of the Federal exceed the lesser of— (ii) in the last sentence, by striking ‘‘Sub- Home Loan Bank Act (12 U.S.C. 1431) is ‘‘(i) 0.6 percent of a shareholder’s total as- ject to the approval of the Board, any’’ and amended by inserting after subsection (j) (as sets at the close of the preceding year; or inserting ‘‘Any’’. so redesignated by section 166(e) of this sub- ‘‘(ii) $300,000,000. (D) Section 10(j) of the Federal Home Loan title) the following subsection: ‘‘(D) MAXIMUM ADVANCE-BASED REQUIRE- Bank Act (12 U.S.C. 1430(j)) is amended— ‘‘(k) PROHIBITION ON OTHER ACTIVITIES.— MENT.—The advance-based capital require- (i) in the 1st sentence of paragraph (1) by ‘‘(1) A Federal home loan bank may not en- ment applicable to any shareholder of a Fed- striking ‘‘to subsidize the interest rate on gage in any activity other than the activi- eral home loan bank shall not exceed 6 per- advances’’ and inserting ‘‘to provide sub- ties authorized under this Act and activities cent of the total outstanding advances from sidies, including subsidized interest rates on incidental to such authorized activities. the bank to the shareholder. advances’’; ‘‘(2) All activities specified in paragraph (1) ‘‘(E) MINIMUM STOCK PURCHASE REQUIRE- (ii) in paragraphs (2), (3), (4), (5), (9), (11), are subject to Finance Board approval.’’. MENT AUTHORIZED.—A capital structure plan and (12) by striking ‘‘advances’’ and ‘‘sub- SEC. 169. DEFINITIONS. may establish a minimum dollar amount of sidized advances’’ each place such terms ap- Paragraph (3) of section 2 of the Federal stock of a Federal home loan bank in which pear and inserting ‘‘subsidies, including sub- Home Loan Bank Act (12 U.S.C. 1422(3)) is a shareholder shall be required to invest. ‘‘(2) ADJUSTMENTS TO STOCK PURCHASE RE- sidized advances’’; amended to read as follows: (iii) in paragraph (1), by inserting ‘‘(A)’’ be- QUIREMENTS.—The capital structure plan ‘‘(3) The term ‘‘State’’ in addition to the fore the 1st sentence, and inserting the fol- adopted by each Federal home loan bank states of the United States, includes the Dis- lowing at the end of the paragraph: shall impose a continuing obligation on the trict of Columbia, Guam, Puerto Rico, the ‘‘(B) Subject to such regulations as the Fi- board of directors of the bank to review and United States Virgin Islands, American nance Board may prescribe, the board of di- adjust as necessary member stock purchase Samoa, and the Commonwealth of the North- rectors of each Federal home loan bank may requirements in order to ensure that the ern Mariana Islands.’’ approve or disapprove requests from mem- bank remains in compliance with applicable bers for Affordable Housing Program sub- SEC. 170. RESOLUTION FUNDING CORPORATION minimum capital levels established by the sidies, and may not delegate such author- (a) IN GENERAL.—Section 21B(f)(2)(C) of the Finance Board. ity.’’; Federal Home Loan Bank Act (12 U.S.C. ‘‘(3) TRANSITION RULE FOR STOCK PURCHASE (iv) in paragraph (2), by striking subpara- 1441b(f)(2)(C)) is amended to read as follows: REQUIREMENTS.— graph (B) and inserting the following new ‘‘(C) PAYMENTS BY FEDERAL HOME LOAN ‘‘(A) IN GENERAL.—A capital structure plan subparagraph: BANKS.—To the extent the amounts available may allow shareholders who were members ‘‘(B) finance the purchase, construction or pursuant to subparagraphs (A) and (B) are of a Federal home loan bank on the date of rehabilitation of rental housing if, for a pe- insufficient to cover the amount of interest the enactment of the Financial Services Act riod of at least 15 years, either 20 percent or payments, each Federal home loan bank of 1998 to come into compliance with the more of the units in such housing are occu- shall pay to the Funding Corporation each asset-based stock purchase requirement es- pied by and affordable for households whose calendar year 20.75 percent of the net earn- tablished under paragraph (1) during a tran- income is 50 percent or less of area median ings of such bank (after deducting expenses sition period established under the plan of income (as determined by the Secretary of relating to subsection (j) of section 10 and not more than 3 years, if such requirement Housing and Urban Development, and as ad- operating expenses).’’. exceeds the asset-based stock purchase re- justed for family size); or 40 percent or more (b) EFFECTIVE DATE.—The amendment quirement in effect on such date of enact- of the units in such housing are occupied by made by subsection (a) shall take effect on ment. and affordable for households whose income January 1, 1999. ‘‘(B) INTERIM PURCHASE REQUIREMENTS.—A is 60 percent or less of area median income SEC. 171. CAPITAL STRUCTURE OF THE FEDERAL capital structure plan may establish interim (as determined by the Secretary of Housing HOME LOAN BANKS. asset-based stock purchase requirements ap- and Urban Development, and as adjusted for (a) IN GENERAL.—Section 6 of the Federal plicable to members referred to in subpara- family size).’’; Home Loan Bank Act (12 U.S.C. 1426) is graph (A) during a transition period estab- (v) in paragraph (5)— amended to read as follows: lished under subparagraph (A). (I) by striking the colon after ‘‘Affordable ‘‘SEC. 6. CAPITAL STRUCTURE OF FEDERAL ‘‘(4) CLASSES OF STOCK.— Housing Program’’; HOME LOAN BANKS. ‘‘(A) IN GENERAL.—Each capital structure (II) by striking subparagraphs (A) and (B); ‘‘(a) CAPITAL STRUCTURE PLAN.—On or be- plan shall afford each shareholder of a Fed- and fore January 1, 1999, the board of directors of eral home loan bank the option of meeting (III) by striking ‘‘(C) In 1995, and subse- each Federal home loan bank shall submit the shareholder’s stock purchase require- quent years,’’; for Finance Board approval a plan establish- ments through the purchase of any combina- (vi) in paragraph (11)— ing and implementing a capital structure for tion of Class A or Class B stock. (I) by inserting ‘‘, pursuant to a nomina- such bank which— ‘‘(B) CLASS A STOCK.—Class A stock shall tion process that is as broad and as ‘‘(1) the board of directors determines is be stock of a Federal home loan bank that participatory as possible, and giving consid- the best suited for the condition and oper- shall be redeemed in cash and at par by the eration to the size of the District and the di- ation of the bank and the interests of the bank no later than 12 months following sub- versity of low- and moderate-income housing shareholders of the bank; mission of a written notice by a shareholder needs and activities within the District,’’ ‘‘(2) meets the requirements of subsection of the shareholder’s intention to divest all after ‘‘Advisory Council of 7 to 15 persons’’; (b); and shares of stock in the bank. (II) by inserting ‘‘a diverse range of’’ before ‘‘(3) meets the minimum capital standards ‘‘(C) CLASS B STOCK.—Class B stock shall be ‘‘community and nonprofit organizations’’; and requirements established under sub- stock of a Federal home loan bank that shall and section (c) and any regulations prescribed by be redeemed in cash and at par by the bank (III) by inserting after the 1st sentence, the the Finance Board pursuant to such sub- no later than 5 years following submission of following new sentence: ‘‘Representatives of section. a written notice by a shareholder of the no one group shall constitute an undue pro- ‘‘(b) CONTENTS OF PLAN.—The capital shareholder’s intention to divest all shares portion of the membership of the Advisory structure plan of each Federal home loan of stock in the bank. Council.’’; and bank shall meet the following requirements: ‘‘(D) RIGHTS REQUIREMENT.—The Class B (vii) in paragraph (13), by striking subpara- ‘‘(1) STOCK PURCHASE REQUIREMENTS.— stock of a Federal home loan bank may re- graph (D) and inserting the following new ‘‘(A) IN GENERAL.—Each capital structure ceive a dividend premium over that paid on subparagraph: plan of a Federal home loan bank shall re- Class A stock, and may have preferential May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3159 voting rights in the election of Federal home ‘‘(A) in the opinion of the board of direc- state, including any municipal corporate in- loan bank directors. tors, such shareholder has failed to comply strumentality of 1 or more states, or any ‘‘(E) LOWER STOCK PURCHASE REQUIREMENTS with a provision of this Act or any regula- public agency or authority of any state or FOR CLASS B STOCK.—A capital structure plan tion prescribed under this Act; or political subdivision of a state, if the na- may provide for lower stock purchase re- ‘‘(B) the shareholder has been determined tional banking association is well capitalized quirements with respect to those sharehold- to be insolvent, or otherwise subject to the (as defined in section 38 of the Federal De- er’s that elect to purchase Class B stock in appointment of a conservator, receiver, or posit Insurance Act).’’. a manner that is consistent with meeting other legal custodian, by a State or Federal Subtitle I—Effective Date of Title the bank’s own minimum capital require- authority with regulatory and supervisory ments as established by the Finance Board. responsibility for such shareholder. SEC. 191. EFFECTIVE DATE. ‘‘(F) NO OTHER CLASSES OF STOCK PER- ‘‘(4) RETIREMENT OF EXCESS STOCK.—Any Except with regard to any subtitle or other MITTED.—No class of stock other than the shareholder may— provision of this title for which a specific ef- Class A and Class B stock described in sub- ‘‘(A) retire shares of Class A stock or, at fective date is provided, this title and the paragraphs (B) and (C) may be issued by a the option of the shareholder, shares of Class amendments made by this title shall take ef- Federal home loan bank. B stock, or any combination of Class A and fect at the end of the 270-day period begin- ‘‘(5) LIMITED TRANSFERABILITY OF STOCK.— Class B stock, that are excess to the mini- ning on the date of the enactment of this Each capital structure plan shall provide mum stock purchase requirements applica- Act. that any equity securities issued by the bank ble to the shareholder; and shall be available only to, held only by, and ‘‘(B) receive from the Federal home loan TITLE II—FUNCTIONAL REGULATION tradable only among shareholders of the bank a prompt payment in cash equal to the Subtitle A—Brokers and Dealers bank. par value of such stock. ‘‘(c) CAPITAL STANDARDS.— ‘‘(5) IMPAIRMENT OF CAPITAL.—If the Fi- SEC. 201. DEFINITION OF BROKER. ‘‘(1) IN GENERAL.—The Finance Board shall nance Board or the board of directors of a Section 3(a)(4) of the Securities Exchange prescribe, by regulation, uniform capital Federal home loan bank determines that the Act of 1934 (15 U.S.C. 78c(a)(4)) is amended to standards applicable to each Federal home paid-in capital of the bank is, or is likely to read as follows: loan bank which shall include— be, impaired as a result of losses in or depre- ‘‘(4) BROKER.— ‘‘(A) a leverage limit in accordance with ciation of the assets of the bank, the Federal ‘‘(A) IN GENERAL.—The term ‘broker’ paragraph (2); and home loan bank shall withhold that portion means any person engaged in the business of ‘‘(B) a risk-based capital requirement in of the amount due any shareholder with re- effecting transactions in securities for the accordance with paragraph (3). spect to any redemption or retirement of any account of others. ‘‘(2) MINIMUM LEVERAGE LIMIT.—The lever- class of stock which bears the same ratio to ‘‘(B) EXCEPTION FOR CERTAIN BANK ACTIVI- age limit established by the Finance Board the total of such amount as the amount of TIES.—A bank shall not be considered to be a shall require each Federal home loan bank to the impaired capital bears to the total broker because the bank engages in any of maintain total capital in an amount not less amount of capital allocable to such class of the following activities under the conditions than 5 percent of the total assets of the stock. described: bank. In determining compliance with the ‘‘(6) POLICIES.—Subject to the require- ‘‘(i) THIRD PARTY BROKERAGE ARRANGE- minimum leverage ratio, the amount of re- ments of this section, the board of directors MENTS.—The bank enters into a contractual tained earnings and the paid-in value of of each Federal home loan bank shall or other arrangement with a broker or dealer Class B stock, if any, shall be multiplied by promptly establish policies, consistent with registered under this title under which the 1.5 and such higher amount shall be deemed this Act, governing the capital stock of such broker or dealer offers brokerage services on to be capital for purposes of meeting the 5 bank and other provisions of this section.’’. or off the premises of the bank if— percent minimum leverage ratio. SEC. 172. INVESTMENTS. ‘‘(I) such broker or dealer is clearly identi- ‘‘(3) RISK-BASED CAPITAL STANDARD.—The Subsection (j) of section 11 of the Federal fied as the person performing the brokerage risk-based capital requirement shall be com- Home Loan Bank Act (12 U.S.C. 1431) (as so services; posed of the following components: redesignated by section 166(e) of this sub- ‘‘(II) the broker or dealer performs broker- ‘‘(A) Capital sufficient to meet the credit title) is amended to read as follows: age services in an area that is clearly risk to which a Federal home loan bank is ‘‘(j) INVESTMENTS.—Each bank shall reduce marked and, to the extent practicable, phys- subject, based on an amount which is not its investments to those necessary for liquid- ically separate from the routine deposit-tak- less than the amount of tier 1, risk-based ity purposes, for safe and sound operation of ing activities of the bank; capital required by regulations prescribed, or the banks, or for housing finance, as admin- ‘‘(III) any materials used by the bank to guidelines issued under section 38 of the Fed- istered by the Finance Board.’’. advertise or promote generally the availabil- eral Deposit Insurance Act for a well capital- SEC. 173. FEDERAL HOUSING FINANCE BOARD. ity of brokerage services under the contrac- ized insured depository institution. Section 2A(b)(1) of the Federal Home Loan tual or other arrangement clearly indicate ‘‘(B) Capital sufficient to meet the interest Bank Act (12 U.S.C. 1422(b)(1)) is amended— that the brokerage services are being pro- rate risk to which a Federal home loan bank (1) by redesignating subparagraphs (A) and vided by the broker or dealer and not by the is subject, based on an interest rate stress (B) as subparagraphs (B) and (C), respec- bank; test applied by the Finance Board that rigor- tively; ‘‘(IV) any materials used by the bank to ously tests for changes in interest rates, rate (2) by inserting before subparagraph (B) (as advertise or promote generally the availabil- volatility, and changes in the shape of the so redesignated by paragraph (1) of this sec- ity of brokerage services under the contrac- yield curve. tion) the following new subparagraph: tual or other arrangement are in compliance ‘‘(d) REDEMPTION OF CAPITAL.— ‘‘(A) The Secretary of the Treasury (or the with the Federal securities laws before dis- ‘‘(1) IN GENERAL.—Any shareholder of a Secretary of the Treasury’s designee), who tribution; Federal home loan bank shall have the right shall serve without additional compensa- ‘‘(V) bank employees (other than associ- to withdraw the shareholder’s membership tion.’’; and ated persons of a broker or dealer who are from a Federal home loan bank and to re- (3) in subparagraph (C) (as so redesignated qualified pursuant to the rules of a self-regu- deem the shareholder’s stock in accordance by paragraph (1) of this section) by striking latory organization) perform only clerical or with the redemption rights associated with ‘‘Four’’ and inserting ‘‘3’’. ministerial functions in connection with bro- the class of stock the shareholder holds, if— Subtitle H—Direct Activities of Banks kerage transactions including scheduling ap- ‘‘(A) such shareholder has filed a written SEC. 181. AUTHORITY OF NATIONAL BANKS TO pointments with the associated persons of a notice of an intention to redeem all such UNDERWRITE CERTAIN MUNICIPAL broker or dealer, except that bank employ- shares; and BONDS ees may forward customer funds or securities ‘‘(B) the shareholder has no outstanding The paragraph designated the Seventh of and may describe in general terms the range advances from any Federal home loan bank section 5136 of the Revised Statutes of the of investment vehicles available from the at the time of such redemption. United States (12 U.S.C. 24(7)) is amended by bank and the broker or dealer under the con- ‘‘(2) PARTIAL REDEMPTION.—A shareholder adding at the end the following new sen- tractual or other arrangement; who files notice of intention to redeem all tence: ‘‘In addition to the provisions in this ‘‘(VI) bank employees do not directly re- shares of stock in a Federal home loan bank paragraph for dealing in, underwriting or ceive incentive compensation for any broker- may redeem not more than 1/2 of all such purchasing securities, the limitations and re- age transaction unless such employees are shares, in cash and at par, 6 months before strictions contained in this paragraph as to associated persons of a broker or dealer and the date by which the bank is required to re- dealing in, underwriting, and purchasing in- are qualified pursuant to the rules of a self- deem such stock pursuant to subparagraph vestment securities for the national bank’s regulatory organization, except that the (B) or (C) of subsection (b)(4). own account shall not apply to obligations bank employees may receive compensation ‘‘(3) DIVESTITURE.—The board of directors (including limited obligation bonds, revenue for the referral of any customer if the com- of any Federal home loan bank may, after a bonds, and obligations that satisfy the re- pensation is a nominal one-time cash fee of hearing, order the divestiture by any share- quirements of section 142(b)(1) of the Inter- a fixed dollar amount and the payment of holder of all ownership interests of such nal Revenue Code of 1986) issued by or on be- the fee is not contingent on whether the re- shareholder in the bank, if— half of any state or political subdivision of a ferral results in a transaction; H3160 CONGRESSIONAL RECORD — HOUSE May 13, 1998 ‘‘(VII) such services are provided by the respect to the purchase or sale of securities bank, in connection with such activities, broker or dealer on a basis in which all cus- in connection with the plan or program; acts in the United States as a carrying tomers which receive any services are fully ‘‘(BB) the bank does not net shareholders’ broker (as such term, and different formula- disclosed to the broker or dealer; buy and sell orders, other than for programs tions thereof, are used in section 15(c)(3) and ‘‘(VIII) the bank does not carry a securities for odd-lot holders or plans registered with the rules and regulations thereunder) for any account of the customer except in a cus- the Commission; and broker or dealer, unless such carrying broker tomary custodian or trustee capacity; and ‘‘(CC) the bank’s compensation for such activities are engaged in with respect to gov- ‘‘(IX) the bank, broker, or dealer informs plan or program consists of administration ernment securities (as defined in paragraph each customer that the brokerage services fees, or flat or capped per order processing (42) of this subsection). are provided by the broker or dealer and not fees, or both, plus the cost incurred by the ‘‘(ix) BANKING PRODUCTS.—The bank effects by the bank and that the securities are not bank in connection with executing securities transactions in traditional banking prod- deposits or other obligations of the bank, are transactions resulting from such plan or pro- ucts, as defined in section 206(a) of the Fi- not guaranteed by the bank, and are not in- gram. nancial Services Act of 1998. sured by the Federal Deposit Insurance Cor- ‘‘(II) PERMISSIBLE DELIVERY OF MATE- ‘‘(x) DE MINIMIS EXCEPTION.—The bank ef- poration. RIALS.—The exception to being considered a fects, other than in transactions referred to broker for a bank engaged in activities de- in clauses (i) through (ix), not more than 500 ‘‘(ii) TRUST ACTIVITIES.—The bank— ‘‘(I) effects transactions in a trustee capac- scribed in subclause (I) will not be affected transactions in securities in any calendar ity and is primarily compensated based on by a bank’s delivery of written or electronic year, and such transactions are not effected plan materials to employees of the issuer, by an employee of the bank who is also an an annual fee (payable on a monthly, quar- shareholders of the issuer, or members of af- employee of a broker or dealer. terly, or other basis) or percentage of assets finity groups of the issuer, so long as such ‘‘(C) BROKER DEALER EXECUTION.—The ex- under management, or both; or materials are— ception to being considered a broker for a ‘‘(II) effects transactions in a fiduciary ca- ‘‘(aa) comparable in scope or nature to bank engaged in activities described in pacity in its trust department or other de- that permitted by the Commission as of the clauses (ii), (iv), and (viii) of subparagraph partment that is regularly examined by bank date of the enactment of the Financial Serv- (B) shall not apply if the activities described examiners for compliance with fiduciary ices Act of 1998; or in such provisions result in the trade in the principles and standards and— ‘‘(bb) otherwise permitted by the Commis- United States of any security that is a pub- ‘‘(aa) is primarily compensated on the sion. licly traded security in the United States, basis of either an annual fee (payable on a ‘‘(v) SWEEP ACCOUNTS.—The bank effects unless— monthly, quarterly, or other basis), a per- transactions as part of a program for the in- ‘‘(i) the bank directs such trade to a reg- centage of assets under management, or vestment or reinvestment of bank deposit istered or broker dealer for execution; both, and does not receive brokerage com- funds into any no-load, open-end manage- ‘‘(ii) the trade is a cross trade or other sub- missions or other similar remuneration ment investment company registered under stantially similar trade of a security that— based on effecting transactions in securities, the Investment Company Act of 1940 that ‘‘(I) is made by the bank or between the other than the cost incurred by the bank in holds itself out as a money market fund. bank and an affiliated fiduciary; and connection with executing securities trans- ‘‘(vi) AFFILIATE TRANSACTIONS.—The bank ‘‘(II) is not in contravention of fiduciary actions for fiduciary customers; and effects transactions for the account of any principles established under applicable Fed- ‘‘(bb) does not publicly solicit brokerage affiliate of the bank (as defined in section 2 eral or State law; or business, other than by advertising that it of the Bank Holding Company Act of 1956) ‘‘(iii) the trade is conducted in some other effects transactions in securities in conjunc- other than— manner permitted under rules, regulations, tion with advertising its other trust activi- ‘‘(I) a registered broker or dealer; or or orders as the Commission may prescribe ties. ‘‘(II) an affiliate that is engaged in mer- or issue. ‘‘(iii) PERMISSIBLE SECURITIES TRANS- chant banking, as described in section ‘‘(D) NO EFFECT OF BANK EXEMPTIONS ON ACTIONS.—The bank effects transactions in— 6(c)(3)(H) of the Bank Holding company Act OTHER COMMISSION AUTHORITY.—The excep- ‘‘(I) commercial paper, bankers accept- of 1956. tion to being considered a broker for a bank ances, or commercial bills; ‘‘(vii) PRIVATE SECURITIES OFFERINGS.—The engaged in activities described in subpara- ‘‘(II) exempted securities; bank— graphs (B) and (C) shall not affect the com- ‘‘(III) qualified Canadian government obli- ‘‘(I) effects sales as part of a primary offer- mission’s authority under any other provi- gations as defined in section 5136 of the Re- ing of securities not involving a public offer- sion of this Act or any other securities law. vised Statutes, in conformity with section ing, pursuant to section 3(b), 4(2), or 4(6) of ‘‘(E) FIDUCIARY CAPACITY.—For purposes of 15C of this title and the rules and regulations the Securities Act of 1933 or the rules and subparagraph (B)(ii), the term ‘fiduciary ca- thereunder, or obligations of the North regulations issued thereunder; pacity’ means— American Development Bank; or ‘‘(II) at any time after one year after the ‘‘(i) in the capacity as trustee, executor, ‘‘(IV) any standardized, credit enhanced date of enactment of the Financial Services administrator, registrar of stocks and bonds, debt security issued by a foreign government Act of 1998, is not affiliated with a broker or transfer agent, guardian, assignee, receiver, pursuant to the March 1989 plan of then Sec- dealer that has been registered for more than or custodian under a uniform gift to minor retary of the Treasury Brady, used by such one year; and act, or as an investment adviser if the bank foreign government to retire outstanding ‘‘(III) effects transactions exclusively with receives a fee for its investment advice; commercial bank loans. qualified investors. ‘‘(ii) in any capacity in which the bank ‘‘(iv) CERTAIN STOCK PURCHASE PLANS.— ‘‘(viii) SAFEKEEPING AND CUSTODY ACTIVI- possesses investment discretion on behalf of ‘‘(I) IN GENERAL.—The bank effects trans- TIES.— another; or actions, as part of its transfer agency activi- ‘‘(I) IN GENERAL.—The bank, as part of cus- ‘‘(iii) in any other similar capacity. ties, in— tomary banking activities— ‘‘(F) EXCEPTION FOR ENTITIES SUBJECT TO ‘‘(aa) the securities of an issuer as part of ‘‘(aa) provides safekeeping or custody serv- SECTION 15(e).—The term ‘broker’ does not in- any pension, retirement, profit-sharing, ices with respect to securities, including the clude a bank that— bonus, thrift, savings, incentive, or other exercise of warrants and other rights on be- ‘‘(i) was, immediately prior to the enact- similar benefit plan for the employees of half of customers; ment of the Financial Services Act of 1998, that issuer or its subsidiaries, if the bank ‘‘(bb) facilitates the transfer of funds or se- subject to section 15(e); and does not solicit transactions or provide in- curities, as a custodian or a clearing agency, ‘‘(ii) is subject to such restrictions and re- vestment advice with respect to the purchase in connection with the clearance and settle- quirements as the Commission considers ap- or sale of securities in connection with the ment of its customers’ transactions in secu- propriate.’’. plan; rities; SEC. 202. DEFINITION OF DEALER. ‘‘(bb) the securities of an issuer as part of ‘‘(cc) effects securities lending or borrow- Section 3(a)(5) of the Securities Exchange that issuer’s dividend reinvestment plan, if ing transactions with or on behalf of cus- Act of 1934 (15 U.S.C. 78c(a)(5)) is amended to the bank does not— tomers as part of services provided to cus- read as follows: ‘‘(AA) solicit transactions or provide in- tomers pursuant to division (aa) or (bb) or ‘‘(5) DEALER.— vestment advice with respect to the purchase invests cash collateral pledged in connection ‘‘(A) IN GENERAL.—The term ‘dealer’ means or sale of securities in connection with the with such transactions; or any person engaged in the business of buying plan; ‘‘(dd) holds securities pledged by a cus- and selling securities for such person’s own ‘‘(BB) net shareholders’ buy and sell or- tomer to another person or securities subject account through a broker or otherwise. ders, other than for programs for odd-lot to purchase or resale agreements involving a ‘‘(B) EXCEPTION FOR PERSON NOT ENGAGED IN holders or plans registered with the Commis- customer, or facilitates the pledging or THE BUSINESS OF DEALING.—The term ‘dealer’ sion; or transfer of such securities by book entry or does not include a person that buys or sells ‘‘(cc) the securities of an issuer as part of as otherwise provided under applicable law. securities for such person’s own account, ei- a plan or program for the purchase or sale of ‘‘(II) EXCEPTION FOR CARRYING BROKER AC- ther individually or in a fiduciary capacity, that issuer’s shares, if— TIVITIES.—The exception to being considered but not as a part of a regular business. ‘‘(AA) the bank does not solicit trans- a broker for a bank engaged in activities de- ‘‘(C) EXCEPTION FOR CERTAIN BANK ACTIVI- actions or provide investment advice with scribed in subclause (I) shall not apply if the TIES.—A bank shall not be considered to be a May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3161 dealer because the bank engages in any of SEC. 204. SALES PRACTICES AND COMPLAINT ‘‘(A) the term ‘security’ has the meaning the following activities under the conditions PROCEDURES. provided in section 3(a)(10) of the Securities described: Section 18 of the Federal Deposit Insurance Exchange Act of 1934; ‘‘(i) PERMISSIBLE SECURITIES TRANS- Act is amended by adding at the end the fol- ‘‘(B) the term ‘registered broker or dealer’ ACTIONS.—The bank buys or sells— lowing new subsection: has the meaning provided in section 3(a)(48) ‘‘(I) commercial paper, bankers accept- ‘‘(s) SALES PRACTICES AND COMPLAINT PRO- of such Act; and ances, or commercial bills; CEDURES WITH RESPECT TO BANK SECURITIES ‘‘(C) the term ‘associated person’ has the ‘‘(II) exempted securities; ACTIVITIES.— meaning provided in section 3(a)(18) of such ‘‘(III) qualified Canadian government obli- ‘‘(1) REGULATIONS REQUIRED.—Each Federal Act.’’. gations as defined in section 5136 of the Re- banking agency shall prescribe and publish SEC. 205. INFORMATION SHARING. vised Statutes of the United States, in con- in final form, not later than 6 months after Section 18 of the Federal Deposit Insurance formity with section 15C of this title and the the date of enactment of the Financial Serv- Act is amended by adding at the end the fol- rules and regulations thereunder, or obliga- ices Act of 1998, regulations which apply to lowing new subsection: tions of the North American Development retail transactions, solicitations, advertis- ‘‘(t) RECORDKEEPING REQUIREMENTS.— Bank; or ing, or offers of any security by any insured ‘‘(1) REQUIREMENTS.—Each appropriate ‘‘(IV) any standardized, credit enhanced depository institution or any affiliate there- Federal banking agency, after consultation debt security issued by a foreign government of other than a registered broker or dealer or with and consideration of the views of the pursuant to the March 1989 plan of then Sec- an individual acting on behalf of such a Commission, shall establish recordkeeping retary of the Treasury Brady, used by such broker or dealer who is an associated person requirements for banks relying on exceptions foreign government to retire outstanding of such broker or dealer. Such regulations contained in paragraphs (4) and (5) of section commercial bank loans. shall include— 3(a) of the Securities Exchange Act of 1934. ‘‘(ii) INVESTMENT, TRUSTEE, AND FIDUCIARY ‘‘(A) requirements that sales practices Such recordkeeping requirements shall be TRANSACTIONS.—The bank buys or sells secu- comply with just and equitable principles of sufficient to demonstrate compliance with rities for investment purposes— trade that are substantially similar to the the terms of such exceptions and be designed ‘‘(I) for the bank; or Rules of Fair Practice of the National Asso- to facilitate compliance with such excep- ‘‘(II) for accounts for which the bank acts ciation of Securities Dealers; and tions. Each appropriate Federal banking as a trustee or fiduciary. ‘‘(B) requirements prohibiting (i) condi- agency shall make any such information ‘‘(iii) ASSET-BACKED TRANSACTIONS.—The tioning an extension of credit on the pur- available to the Commission upon request. bank engages in the issuance or sale to chase or sale of a security; and (ii) any con- ‘‘(2) DEFINITIONS.—As used in this sub- qualified investors, through a grantor trust duct leading a customer to believe that an section the term ‘Commission’ means the Se- or otherwise, of securities backed by or rep- extension of credit is conditioned upon the curities and Exchange Commission.’’. resenting an interest in notes, drafts, accept- purchase or sale of a security. SEC. 206. DEFINITION AND TREATMENT OF BANK- ances, loans, leases, receivables, other obli- ‘‘(2) PROCEDURES REQUIRED.—The appro- ING PRODUCTS. gations, or pools of any such obligations pre- priate Federal banking agencies shall jointly (a) DEFINITION OF TRADITIONAL BANKING dominantly originated by the bank, or a syn- establish procedures and facilities for receiv- PRODUCT.— dicate of banks of which the bank is a mem- ing and expeditiously processing complaints (1) IN GENERAL.—For purposes of para- ber, or an affiliate of any such bank other against any bank or employee of a bank aris- graphs (4) and (5) of section 3(a) of the Secu- than a broker or dealer. ing in connection with the purchase or sale rities Exchange Act of 1934 (15 U.S.C. ‘‘(iv) BANKING PRODUCTS.—The bank buys of a security by a customer, including a com- 78c(a)(4), (5)), the term ‘traditional banking or sells traditional banking products, as de- plaint alleging a violation of the regulations product’ means— fined in section 206(a) of the Financial Serv- prescribed under paragraph (1), but excluding (A) a deposit account, savings account, cer- ices Act of 1998. a complaint involving an individual acting tificate of deposit, or other deposit instru- ‘‘(v) DERIVATIVE INSTRUMENTS.—The bank on behalf of such a broker or dealer who is ment issued by a bank; issues, buys, or sells any derivative instru- an associated person of such broker or deal- (B) a banker’s acceptance; ment to which the bank is a party— er. The use of any such procedures and facili- (C) a letter of credit issued or loan made by ‘‘(I) to or from a corporation, limited li- ties by such a customer shall be at the elec- a bank; ability company, or partnership that owns tion of the customer. Such procedures shall (D) a debit account at a bank arising from and invests on a discretionary basis, not less include provisions to refer a complaint alleg- a credit card or similar arrangement; than $10,000,000 in investments, or to or from ing fraud to the Securities and Exchange (E) a participation in a loan which the a qualified investor, except that if the in- Commission and appropriate State securities bank or an affiliate of the bank (other than strument provides for the delivery of one or commissions. a broker or dealer) funds, participates in, or more securities (other than a derivative in- ‘‘(3) REQUIRED ACTIONS.—The actions re- owns that is sold— strument or government security), the trans- quired by the Federal banking agencies (i) to qualified investors; or action shall be effected with or through a under paragraph (2) shall include the follow- (ii) to other persons that— registered broker or dealer; or ing: ‘‘(I) have the opportunity to review and as- ‘‘(II) to or from other persons, except that ‘‘(A) establishing a group, unit, or bureau sess any material information, including in- if the derivative instrument provides for the within each such agency to receive such formation regarding the borrower’s credit- delivery of one or more securities (other complaints; worthiness; and than a derivative instrument or government ‘‘(B) developing and establishing proce- ‘‘(II) based on such factors as financial so- security), or is a security (other than a gov- dures for investigating, and permitting cus- phistication, net worth, and knowledge and ernment security), the transaction shall be tomers to investigate, such complaints; experience in financial matters, have the ca- effected with or through a registered broker ‘‘(C) developing and establishing proce- pability to evaluate the information avail- or dealer; or dures for informing customers of the rights able, as determined under generally applica- ‘‘(III) to or from any person if the instru- they may have in connection with such com- ble banking standards or guidelines; or ment is neither a security nor provides for plaints; (F) any derivative instrument, whether or the delivery of one or more securities (other ‘‘(D) developing and establishing proce- not individually negotiated, involving or re- than a derivative instrument).’’. dures that allow customers a period of at lating to— SEC. 203. REGISTRATION FOR SALES OF PRIVATE least 6 years to make complaints and that do (i) foreign currencies, except options on SECURITIES OFFERINGS. not require customers to pay the costs of the foreign currencies that trade on a national Section 15A of the Securities Exchange Act proceeding; and securities exchange; of 1934 (15 U.S.C. 78o–3) is amended by insert- ‘‘(E) developing and establishing proce- (ii) interest rates, except interest rate de- ing after subsection (i) the following new dures for resolving such complaints, includ- rivative instruments (I) that are based on a subsection: ing procedures for the recovery of losses to security; or (II) that provide for the delivery ‘‘(j) REGISTRATION FOR SALES OF PRIVATE the extent appropriate. of one or more securities; or SECURITIES OFFERINGS.—A registered securi- ‘‘(4) CONSULTATION AND JOINT REGULA- (iii) commodities, other rates, indices, or ties association shall create a limited quali- TIONS.—The Federal banking agencies shall other assets, except derivative instruments fication category for any associated person consult with each other and prescribe joint that are securities or that provide for the de- of a member who effects sales as part of a regulations pursuant to paragraphs (1) and livery of one or more securities. primary offering of securities not involving a (2), after consultation with the Securities (2) CLASSIFICATION LIMITED.—Classification public offering, pursuant to section 3(b), 4(2), and Exchange Commission. of a particular product as a traditional bank- or 4(6) of the Securities Act of 1933 and the ‘‘(5) PROCEDURES IN ADDITION TO OTHER ing product pursuant to this subsection shall rules and regulations thereunder, and shall REMEDIES.—The procedures and remedies not be construed as finding or implying that deem qualified in such limited qualification provided under this subsection shall be in ad- such product is oris not a security for any category, without testing, any bank em- dition to, and not in lieu of, any other rem- purpose under the securities laws, or is or is ployee who, in the six month period preced- edies available under law. not an account, agreement, contract, or ing the date of enactment of this Act, en- ‘‘(6) DEFINITION.—As used in this sub- transaction for any purpose under the Com- gaged in effecting such sales.’’. section— modity Exchange Act. H3162 CONGRESSIONAL RECORD — HOUSE May 13, 1998

(3) DEFINITIONS.—For purposes of this sub- Services Act of 1998, the term ‘qualified in- SEC. 209. EFFECTIVE DATE. section— vestor’ means— This subtitle shall take effect at the end of (A) the term ‘‘bank’’ has the meaning pro- ‘‘(i) any investment company registered the 270-day period beginning on the date of vided in section 3(a)(6) of the Securities Ex- with the Commission under section 8 of the the enactment of this Act. change Act of 1934 (15 U.S.C. 78c(a)(6); Investment Company Act of 1940; Subtitle B—Bank Investment Company (B) the term ‘‘qualified investor’’ has the ‘‘(ii) any issuer eligible for an exclusion Activities meaning provided in section 3(a)(55) of such from the definition of investment company SEC. 211. CUSTODY OF INVESTMENT COMPANY Act; and pursuant to section 3(c)(7) of the Investment ASSETS BY AFFILIATED BANK. (C) the term ‘‘Federal banking agency’’ has Company Act of 1940; (a) MANAGEMENT COMPANIES.—Section 17(f) the meaning provided in section 3(z) of the ‘‘(iii) any bank (as defined in paragraph (6) of the Investment Company Act of 1940 (15 Federal Deposit Insurance Act (12 U.S.C. of this subsection), savings and loan associa- U.S.C. 80a–17(f)) is amended— 1813(z)). tion (as defined in section 3(b) of the Federal (1) by redesignating paragraphs (1), (2), and (b) TREATMENT OF NEW BANKING PRODUCTS Deposit Insurance Act), broker, dealer, in- (3) as subparagraphs (A), (B), and (C), respec- FOR PURPOSES OF BROKER/DEALER REQUIRE- surance company (as defined in section tively; MENTS.—Section 15 of the Securities Ex- change Act of 1934 (15 U.S.C. 78o) is amended 2(a)(13) of the Securities Act of 1933), or busi- (2) by striking ‘‘(f) Every registered’’ and by adding at the end the following new sub- ness development company (as defined in inserting the following: section: section 2(a)(48) of the Investment Company ‘‘(f) CUSTODY OF SECURITIES.— ‘‘(i) RULEMAKING TO EXTEND REQUIREMENTS Act of 1940); ‘‘(1) Every registered’’; TO NEW BANKING PRODUCTS.— ‘‘(iv) any small business investment com- (3) by redesignating the 2d, 3d, 4th, and 5th ‘‘(1) LIMITATION.—The Commission shall pany licensed by the United States Small sentences of such subsection as paragraphs not— Business Administration under section 301(c) (2) through (5), respectively, and indenting ‘‘(A) require a bank to register as a broker or (d) of the Small Business Investment Act the left margin of such paragraphs appro- or dealer under this section because the bank of 1958; priately; and engages in any transaction in, or buys or ‘‘(v) any State sponsored employee benefit (4) by adding at the end the following new sells, a new banking product; or plan, or any other employee benefit plan, paragraph: ‘‘(B) bring an action against a bank for a within the meaning of the Employee Retire- ‘‘(6) The Commission may adopt rules and failure to comply with a requirement de- ment Income Security Act of 1974, other regulations, and issue orders, consistent scribed in subparagraph (A); than an individual retirement account, if the with the protection of investors, prescribing unless the Commission has imposed such re- investment decisions are made by a plan fi- the conditions under which a bank, or an af- quirement by rule or regulation issued in ac- duciary, as defined in section 3(21) of that filiated person of a bank, either of which is cordance with this section. Act, which is either a bank, savings and loan an affiliated person, promoter, organizer, or sponsor of, or principal underwriter for, a ‘‘(2) CRITERIA FOR RULEMAKING.—The Com- association, insurance company, or reg- mission shall not impose a requirement istered investment adviser; registered management company may serve under paragraph (1) of this subsection with ‘‘(vi) any trust whose purchases of securi- as custodian of that registered management respect to any new banking product unless ties are directed by a person described in company.’’. the Commission determines that— clauses (i) through (v) of this subparagraph; (b) UNIT INVESTMENT TRUSTS.—Section 26 ‘‘(A) the new banking product is a security; ‘‘(vii) any market intermediary exempt of the Investment Company Act of 1940 (15 and under section 3(c)(2) of the Investment Com- U.S.C. 80a–26) is amended— ‘‘(B) imposing such requirement is nec- pany Act of 1940; (1) by redesignating subsections (b) essary or appropriate in the public interest ‘‘(viii) any associated person of a broker or through (e) as subsections (c) through (f), re- and for the protection of investors, consist- dealer other than a natural person; or spectively; and ent with the requirements of section 3(f). ‘‘(ix) any foreign bank (as defined in sec- (2) by inserting after subsection (a) the fol- ‘‘(3) NEW BANKING PRODUCT.—For purposes tion 1(b)(7) of the International Banking Act lowing new subsection: ‘‘(b) The Commission may adopt rules and of this subsection, the term ‘new banking of 1978). regulations, and issue orders, consistent product’ means a product that— ‘‘(B) ADDITIONAL QUALIFICATIONS DEFINED.— with the protection of investors, prescribing ‘‘(A) was not subjected to regulation by the For purposes of paragraphs (4)(B)(vii) and the conditions under which a bank, or an af- Commission as a security prior to the date of (5)(C)(iii) of this subsection, and section filiated person of a bank, either of which is enactment of this subsection; and 206(a)(1)(E) of the Financial Services Act of an affiliated person of a principal under- ‘‘(B) is not a traditional banking product, 1998, the term ‘qualified investor’ also writer for, or depositor of, a registered unit as such term is defined in section 206(a) of means— the Financial Services Act of 1998. investment trust, may serve as trustee or ‘‘(i) any corporation, company, or partner- custodian under subsection (a)(1).’’. ‘‘(4) CONSULTATION.—In promulgating rules ship that owns and invests on a discretionary under this subsection, the Commission shall (c) FIDUCIARY DUTY OF CUSTODIAN.—Sec- basis, not less than $10,000,000 in invest- tion 36(a) of the Investment Company Act of consult with and consider the views of the ments; appropriate regulatory agencies concerning 1940 (15 U.S.C. 80a–35(a)) is amended— ‘‘(ii) any natural person who owns and in- (1) in paragraph (1), by striking ‘‘or’’ at the the proposed rule and the impact on the vests on a discretionary basis, not less than banking industry.’’. end; $10,000,000 in investments; (2) in paragraph (2), by striking the period SEC. 207. DERIVATIVE INSTRUMENT AND QUALI- ‘‘(iii) any government or political subdivi- FIED INVESTOR DEFINED. at the end and inserting ‘‘; or’’; and sion, agency, or instrumentality of a govern- Section 3(a) of the Securities Exchange Act (3) by inserting after paragraph (2) the fol- ment who owns and invests on a discre- of 1934 is amended by adding at the end the lowing: following new paragraphs: tionary basis not less than $50,000,000 in in- ‘‘(3) as custodian.’’. vestments; or ‘‘(54) DERIVATIVE INSTRUMENT.— SEC. 212. LENDING TO AN AFFILIATED INVEST- ‘‘(iv) any multinational or supranational ‘‘(A) DEFINITION.—The term ‘derivative in- MENT COMPANY. strument’ means any individually negotiated entity or any agency or instrumentality Section 17(a) of the Investment Company contract, agreement, warrant, note, or op- thereof. Act of 1940 (15 U.S.C. 80a–17(a)) is amended— tion that is based, in whole or in part, on the ‘‘(C) ADDITIONAL AUTHORITY.—The Commis- (1) by striking ‘‘or’’ at the end of paragraph value of, any interest in, or any quantitative sion may, by rule or order, define a ‘qualified (2); measure or the occurrence of any event re- investor’ as any other person, other than a (2) by striking the period at the end of lating to, one or more commodities, securi- natural person, taking into consideration paragraph (3) and inserting ‘‘; or’’; and ties, currencies, interest or other rates, indi- such factors as the person’s financial sophis- (3) by adding at the end the following new ces, or other assets, but does not include a tication, net worth, and knowledge and expe- paragraph: traditional banking product, as defined in rience in financial matters.’’. ‘‘(4) to loan money or other property to such registered company, or to any company section 206(a) of the Financial Services Act SEC. 208. GOVERNMENT SECURITIES DEFINED. of 1998. controlled by such registered company, in ‘‘(B) CLASSIFICATION LIMITED.— Classifica- Section 3(a)(42) of the Securities Exchange contravention of such rules, regulations, or tion of a particular contract as a derivative Act of 1934 (15 U.S.C. 78c(a)(42)) is amended— orders as the Commission may prescribe or instrument pursuant to this paragraph shall (1) by striking ‘‘or’’ at the end of subpara- issue consistent with the protection of inves- not be construed as finding or implying that graph (C); tors.’’. such instrument is or is not a security for (2) by striking the period at the end of sub- SEC. 213. INDEPENDENT DIRECTORS. any purpose under the securities laws, or is paragraph (D) and inserting ‘‘; or’’; and (a) IN GENERAL.—Section 2(a)(19)(A) of the or is not an account, agreement, contract, or (3) by adding at the end the following new Investment Company Act of 1940 (15 U.S.C. transaction for any purpose under the Com- subparagraph: 80a–2(a)(19)(A)) is amended— modity Exchange Act. ‘‘(E) for purposes of section 15C as applied (1) by striking clause (v) and inserting the ‘‘(55) QUALIFIED INVESTOR.— to a bank, a qualified Canadian government following new clause: ‘‘(A) DEFINITION.—For purposes of this title obligation as defined in section 5136 of the ‘‘(v) any person or any affiliated person of and section 206(a)(1)(E) of the Financial Revised Statutes.’’. a person (other than a registered investment May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3163 company) that, at any time during the 6- gether with its affiliates and subsidiaries) or (b) SEPARATELY IDENTIFIABLE DEPARTMENT month period preceding the date of the de- any one bank holding company (together OR DIVISION.—Section 202(a) of the Invest- termination of whether that person or affili- with its affiliates and subsidiaries) (as such ment Advisers Act of 1940 (15 U.S.C. 80b–2(a)) ated person is an interested person, has exe- terms are defined in section 2 of the Bank is amended by adding at the end the follow- cuted any portfolio transactions for, engaged Holding Company Act of 1956), except’’. ing: in any principal transactions with, or dis- (d) EFFECTIVE DATE.—The amendments ‘‘(26) The term ‘separately identifiable de- tributed shares for— made by this section shall take effect at the partment or division’ of a bank means a ‘‘(I) the investment company, end of the 1-year period beginning on the unit— ‘‘(II) any other investment company hav- date of enactment of this subtitle. ‘‘(A) that is under the direct supervision of ing the same investment adviser as such in- SEC. 214. ADDITIONAL SEC DISCLOSURE AU- an officer or officers designated by the board vestment company or holding itself out to THORITY. of directors of the bank as responsible for investors as a related company for purposes Section 35(a) of the Investment Company the day-to-day conduct of the bank’s invest- of investment or investor services, or Act of 1940 (15 U.S.C. 80a–34(a)) is amended to ment adviser activities for one or more in- ‘‘(III) any account over which the invest- read as follows: vestment companies, including the super- ment company’s investment adviser has bro- ‘‘(a) MISREPRESENTATION OF GUARANTEES.— vision of all bank employees engaged in the kerage placement discretion,’’; ‘‘(1) IN GENERAL.—It shall be unlawful for performance of such activities; and (2) by redesignating clause (vi) as clause any person, issuing or selling any security of ‘‘(B) for which all of the records relating to (vii); and which a registered investment company is its investment adviser activities are sepa- (3) by inserting after clause (v) the follow- the issuer, to represent or imply in any man- rately maintained in or extractable from ing new clause: ner whatsoever that such security or com- such unit’s own facilities or the facilities of ‘‘(vi) any person or any affiliated person of pany— the bank, and such records are so maintained a person (other than a registered investment ‘‘(A) has been guaranteed, sponsored, rec- or otherwise accessible as to permit inde- company) that, at any time during the 6- ommended, or approved by the United pendent examination and enforcement by the month period preceding the date of the de- States, or any agency, instrumentality or of- Commission of this Act or the Investment termination of whether that person or affili- ficer of the United States; Company Act of 1940 and rules and regula- ated person is an interested person, has ‘‘(B) has been insured by the Federal De- tions promulgated under this Act or the In- loaned money or other property to— posit Insurance Corporation; or vestment Company Act of 1940.’’. ‘‘(I) the investment company, ‘‘(C) is guaranteed by or is otherwise an ob- SEC. 218. DEFINITION OF BROKER UNDER THE ‘‘(II) any other investment company hav- ligation of any bank or insured depository INVESTMENT ADVISERS ACT OF 1940. ing the same investment adviser as such in- institution. Section 202(a)(3) of the Investment Advis- vestment company or holding itself out to ‘‘(2) DISCLOSURES.—Any person issuing or ers Act of 1940 (15 U.S.C. 80b–2(a)(3)) is investors as a related company for purposes selling the securities of a registered invest- amended to read as follows: of investment or investor services, or ment company that is advised by, or sold ‘‘(3) The term ‘broker’ has the same mean- ‘‘(III) any account for which the invest- through, a bank shall prominently disclose ing as in the Securities Exchange Act of ment company’s investment adviser has bor- that an investment in the company is not in- 1934.’’. rowing authority,’’. SEC. 219. DEFINITION OF DEALER UNDER THE IN- (b) CONFORMING AMENDMENT.—Section sured by the Federal Deposit Insurance Cor- VESTMENT ADVISERS ACT OF 1940. 2(a)(19)(B) of the Investment Company Act of poration or any other government agency. Section 202(a)(7) of the Investment Advis- 1940 (15 U.S.C. 80a–2(a)(19)(B)) is amended— The Commission may adopt rules and regula- ers Act of 1940 (15 U.S.C. 80b–2(a)(7)) is (1) by striking clause (v) and inserting the tions, and issue orders, consistent with the amended to read as follows: following new clause: protection of investors, prescribing the man- ‘‘(7) The term ‘dealer’ has the same mean- ‘‘(v) any person or any affiliated person of ner in which the disclosure under this para- ing as in the Securities Exchange Act of 1934, a person (other than a registered investment graph shall be provided. but does not include an insurance company company) that, at any time during the 6- ‘‘(3) DEFINITIONS.—The terms ‘insured de- or investment company.’’. month period preceding the date of the de- pository institution’ and ‘appropriate Fed- termination of whether that person or affili- eral banking agency’ have the meaning given SEC. 220. INTERAGENCY CONSULTATION. ated person is an interested person, has exe- to such terms in section 3 of the Federal De- The Investment Advisers Act of 1940 (15 cuted any portfolio transactions for, engaged posit Insurance Act.’’. U.S.C. 80b–1 et seq.) is amended by inserting in any principal transactions with, or dis- SEC. 215. DEFINITION OF BROKER UNDER THE after section 210 the following new section: tributed shares for— INVESTMENT COMPANY ACT OF 1940. ‘‘SEC. 210A. CONSULTATION. ‘‘(I) any investment company for which the Section 2(a)(6) of the Investment Company ‘‘(a) EXAMINATION RESULTS AND OTHER IN- investment adviser or principal underwriter Act of 1940 (15 U.S.C. 80a–2(a)(6)) is amended FORMATION.— serves as such, to read as follows: ‘‘(1) The appropriate Federal banking agen- ‘‘(II) any investment company holding ‘‘(6) The term ‘broker’ has the same mean- cy shall provide the Commission upon re- itself out to investors, for purposes of invest- ing as in the Securities Exchange Act of 1934, quest the results of any examination, re- ment or investor services, as a company re- except that such term does not include any ports, records, or other information to which lated to any investment company for which person solely by reason of the fact that such such agency may have access with respect to the investment adviser or principal under- person is an underwriter for one or more in- the investment advisory activities— writer serves as such, or vestment companies.’’. ‘‘(A) of any— ‘‘(III) any account over which the invest- SEC. 216. DEFINITION OF DEALER UNDER THE IN- ‘‘(i) bank holding company, ment adviser has brokerage placement dis- VESTMENT COMPANY ACT OF 1940. ‘‘(ii) bank, or cretion,’’; Section 2(a)(11) of the Investment Com- ‘‘(iii) separately identifiable department or (2) by redesignating clause (vi) as clause pany Act of 1940 (15 U.S.C. 80a–2(a)(11)) is division of a bank, (vii); and amended to read as follows: that is registered under section 203 of this (3) by inserting after clause (v) the follow- ‘‘(11) The term ‘dealer’ has the same mean- title; and ing new clause: ing as in the Securities Exchange Act of 1934, ‘‘(B) in the case of a bank holding company ‘‘(vi) any person or any affiliated person of but does not include an insurance company or bank that has a subsidiary or a separately a person (other than a registered investment or investment company.’’. identifiable department or division reg- company) that, at any time during the 6- SEC. 217. REMOVAL OF THE EXCLUSION FROM istered under that section, of such bank or month period preceding the date of the de- THE DEFINITION OF INVESTMENT bank holding company. termination of whether that person or affili- ADVISER FOR BANKS THAT ADVISE ‘‘(2) The Commission shall provide to the ated person is an interested person, has INVESTMENT COMPANIES. appropriate Federal banking agency upon re- loaned money or other property to— (a) INVESTMENT ADVISER.—Section quest the results of any examination, re- ‘‘(I) any investment company for which the 202(a)(11) of the Investment Advisers Act of ports, records, or other information with re- investment adviser or principal underwriter 1940 (15 U.S.C. 80b–2(a)(11)) is amended in sub- spect to the investment advisory activities serves as such, paragraph (A), by striking ‘‘investment com- of any bank holding company, bank, or sepa- ‘‘(II) any investment company holding pany’’ and inserting ‘‘investment company, rately identifiable department or division of itself out to investors, for purposes of invest- except that the term ‘investment adviser’ in- a bank, any of which is registered under sec- ment or investor services, as a company re- cludes any bank or bank holding company to tion 203 of this title. lated to any investment company for which the extent that such bank or bank holding ‘‘(b) EFFECT ON OTHER AUTHORITY.—Noth- the investment adviser or principal under- company serves or acts as an investment ad- ing in this section shall limit in any respect writer serves as such, or viser to a registered investment company, the authority of the appropriate Federal ‘‘(III) any account for which the invest- but if, in the case of a bank, such services or banking agency with respect to such bank ment adviser has borrowing authority,’’. actions are performed through a separately holding company, bank, or department or di- (c) AFFILIATION OF DIRECTORS.—Section identifiable department or division, the de- vision under any provision of law. 10(c) of the Investment Company Act of 1940 partment or division, and not the bank ‘‘(c) DEFINITION.—For purposes of this sec- (15 U.S.C. 80a–10(c)) is amended by striking itself, shall be deemed to be the investment tion, the term ‘appropriate Federal banking ‘‘bank, except’’ and inserting ‘‘bank (to- adviser’’. agency’ shall have the same meaning as in H3164 CONGRESSIONAL RECORD — HOUSE May 13, 1998 section 3 of the Federal Deposit Insurance ‘‘(ii) vote the shares of the investment may elect to become supervised by filing Act.’’. company held by it in the same proportion with the Commission a notice of intention to SEC. 221. TREATMENT OF BANK COMMON TRUST as shares held by all other shareholders of become supervised, pursuant to subpara- FUNDS. the investment company; or graph (B) of this paragraph. Any investment (a) SECURITIES ACT OF 1933.—Section 3(a)(2) ‘‘(iii) vote the shares of the investment bank holding company filing such a notice of the Securities Act of 1933 (15 U.S.C. company as otherwise permitted under such shall be supervised in accordance with this 77c(a)(2)) is amended by striking ‘‘or any in- rules, regulations, or orders as the Commis- section and comply with the rules promul- terest or participation in any common trust sion may prescribe or issue consistent with gated by the Commission applicable to su- fund or similar fund maintained by a bank the protection of investors. pervised investment bank holding compa- exclusively for the collective investment and ‘‘(2) EXEMPTION.—Paragraph (1) shall not nies. reinvestment of assets contributed thereto apply to any investment adviser to a reg- ‘‘(B) NOTIFICATION OF STATUS AS A SUPER- by such bank in its capacity as trustee, ex- istered investment company, or any affili- VISED INVESTMENT BANK HOLDING COMPANY.— ecutor, administrator, or guardian’’ and in- ated person of that investment adviser, that An investment bank holding company that serting ‘‘or any interest or participation in holds shares of the investment company in a elects under subparagraph (A) to become su- any common trust fund or similar fund that trustee or fiduciary capacity if that reg- pervised by the Commission shall file with is excluded from the definition of the term istered investment company consists solely the Commission a written notice of intention ‘investment company’ under section 3(c)(3) of assets held in such capacities. to become supervised by the Commission in of the Investment Company Act of 1940’’. ‘‘(3) SAFE HARBOR.—No investment adviser such form and containing such information (b) SECURITIES EXCHANGE ACT OF 1934.— to a registered investment company or any and documents concerning such investment Section 3(a)(12)(A)(iii) of the Securities Ex- bank holding company as the Commission, change Act of 1934 (15 U.S.C. affiliated person of such investment adviser shall be deemed to have acted unlawfully or by rule, may prescribe as necessary or appro- 78c(a)(12)(A)(iii)) is amended to read as fol- priate in furtherance of the purposes of this lows: to have breached a fiduciary duty under State or Federal law solely by reason of act- section. Unless the Commission finds that ‘‘(iii) any interest or participation in any such supervision is not necessary or appro- common trust fund or similar fund that is ing in accordance with clause (i), (ii), or (iii) of paragraph (1)(B).’’. priate in furtherance of the purposes of this excluded from the definition of the term ‘in- section, such supervision shall become effec- vestment company’ under section 3(c)(3) of SEC. 223. CONFORMING CHANGE IN DEFINITION. Section 2(a)(5) of the Investment Company tive 45 days after receipt of such written no- the Investment Company Act of 1940;’’. tice by the Commission or within such short- (c) INVESTMENT COMPANY ACT OF 1940.—Sec- Act of 1940 (15 U.S.C. 80a–2(a)(5)) is amended er time period as the Commission, by rule or tion 3(c)(3) of the Investment Company Act by striking ‘‘(A) a banking institution orga- order, may determine. of 1940 (15 U.S.C. 80a–3(c)(3)) is amended by nized under the laws of the United States’’ ‘‘(2) ELECTION NOT TO BE SUPERVISED BY THE inserting before the period the following: ‘‘, and inserting ‘‘(A) a depository institution if— (as defined in section 3 of the Federal De- COMMISSION AS AN INVESTMENT BANK HOLDING COMPANY.— ‘‘(A) such fund is employed by the bank posit Insurance Act) or a branch or agency of ‘‘(A) VOLUNTARY WITHDRAWAL.—A super- solely as an aid to the administration of a foreign bank (as such terms are defined in vised investment bank holding company that trusts, estates, or other accounts created and section 1(b) of the International Banking Act is supervised pursuant to paragraph (1) may, maintained for a fiduciary purpose; of 1978)’’. upon such terms and conditions as the Com- ‘‘(B) except in connection with the ordi- SEC. 224. CONFORMING AMENDMENT. mission deems necessary or appropriate, nary advertising of the bank’s fiduciary serv- Section 202 of the Investment Advisers Act elect not to be supervised by the Commission ices, interests in such fund are not— of 1940 (15 U.S.C. 80b–2) is amended by adding by filing a written notice of withdrawal from ‘‘(i) advertised; or at the end the following new subsection: Commission supervision. Such notice shall ‘‘(ii) offered for sale to the general public; ‘‘(c) CONSIDERATION OF PROMOTION OF EFFI- not become effective until one year after re- and CIENCY, COMPETITION, AND CAPITAL FORMA- ceipt by the Commission, or such shorter or ‘‘(C) fees and expenses charged by such TION.—Whenever pursuant to this title the longer period as the Commission deems nec- fund are not in contravention of fiduciary Commission is engaged in rulemaking and is essary or appropriate to ensure effective su- principles established under applicable Fed- required to consider or determine whether an pervision of the material risks to the super- eral or State law’’. action is necessary or appropriate in the vised investment bank holding company and SEC. 222. INVESTMENT ADVISERS PROHIBITED public interest, the Commission shall also to the affiliated broker or dealer, or to pre- FROM HAVING CONTROLLING IN- consider, in addition to the protection of in- vent evasion of the purposes of this section. TEREST IN REGISTERED INVEST- vestors, whether the action will promote ef- MENT COMPANY. ‘‘(B) DISCONTINUATION OF COMMISSION SU- Section 15 of the Investment Company Act ficiency, competition, and capital forma- PERVISION.—If the Commission finds that any of 1940 (15 U.S.C. 80a–15) is amended by add- tion.’’. supervised investment bank holding com- ing at the end the following new subsection: SEC. 225. EFFECTIVE DATE. pany that is supervised pursuant to para- ‘‘(g) CONTROLLING INTEREST IN INVESTMENT This subtitle shall take effect 90 days after graph (1) is no longer in existence or has COMPANY PROHIBITED.— the date of the enactment of this Act. ceased to be an investment bank holding ‘‘(1) IN GENERAL.—If an investment adviser Subtitle C—Securities and Exchange Com- company, or if the Commission finds that to a registered investment company, or an mission Supervision of Investment Bank continued supervision of such a supervised affiliated person of that investment adviser, Holding Companies investment bank holding company is not holds a controlling interest in that reg- SEC. 231. SUPERVISION OF INVESTMENT BANK consistent with the purposes of this section, istered investment company in a trustee or HOLDING COMPANIES BY THE SECU- the Commission may discontinue the super- fiduciary capacity, such person shall— RITIES AND EXCHANGE COMMIS- vision pursuant to a rule or order, if any, ‘‘(A) if it holds the shares in a trustee or fi- SION. promulgated by the Commission under this duciary capacity with respect to any em- (a) AMENDMENT.—Section 17 of the Securi- section. ployee benefit plan subject to the Employee ties Exchange Act of 1934 (15 U.S.C. 78q) is ‘‘(3) SUPERVISION OF INVESTMENT BANK Retirement Income Security Act of 1974, amended— HOLDING COMPANIES.— transfer the power to vote the shares of the (1) by redesignating subsection (i) as sub- ‘‘(A) RECORDKEEPING AND REPORTING.— investment company through to another per- section (l); and ‘‘(i) IN GENERAL.—Every supervised invest- son acting in a fiduciary capacity with re- (2) by inserting after subsection (h) the fol- ment bank holding company and each affili- spect to the plan who is not an affiliated per- lowing new subsections: ate thereof shall make and keep for pre- son of that investment adviser or any affili- ‘‘(i) INVESTMENT BANK HOLDING COMPA- scribed periods such records, furnish copies ated person thereof; or NIES.— thereof, and make such reports, as the Com- ‘‘(B) if it holds the shares in a trustee or fi- ‘‘(1) ELECTIVE SUPERVISION OF AN INVEST- mission may require by rule, in order to keep duciary capacity with respect to any person MENT BANK HOLDING COMPANY NOT HAVING A the Commission informed as to— or entity other than an employee benefit BANK OR SAVINGS ASSOCIATION AFFILIATE.— ‘‘(I) the company’s or affiliate’s activities, plan subject to the Employee Retirement In- ‘‘(A) IN GENERAL.—An investment bank financial condition, policies, systems for come Security Act of 1974— holding company that is not— monitoring and controlling financial and ‘‘(i) transfer the power to vote the shares ‘‘(i) an affiliate of a wholesale financial in- operational risks, and transactions and rela- of the investment company through to— stitution, an insured bank (other than an in- tionships between any broker or dealer affili- ‘‘(I) the beneficial owners of the shares; stitution described in subparagraph (D), (F), ate of the supervised investment bank hold- ‘‘(II) another person acting in a fiduciary or (G) of section 2(c)(2), or held under section ing company; and capacity who is not an affiliated person of 4(f), of the Bank Holding Company Act of ‘‘(II) the extent to which the company or that investment adviser or any affiliated 1956), or a savings association, affiliate has complied with the provisions of person thereof; or ‘‘(ii) a foreign bank, foreign company, or this Act and regulations prescribed and or- ‘‘(III) any person authorized to receive company that is described in section 8(a) of ders issued under this Act. statements and information with respect to the International Banking Act of 1978, or ‘‘(ii) FORM AND CONTENTS.—Such records the trust who is not an affiliated person of ‘‘(iii) a foreign bank that controls, directly and reports shall be prepared in such form that investment adviser or any affiliated or indirectly, a corporation chartered under and according to such specifications (includ- person thereof; section 25A of the Federal Reserve Act, ing certification by an independent public May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3165

accountant), as the Commission may require ‘‘(4) HOLDING COMPANY CAPITAL.— ‘‘(j) AUTHORITY TO LIMIT DISCLOSURE OF IN- and shall be provided promptly at any time ‘‘(A) AUTHORITY.—If the Commission finds FORMATION.—Notwithstanding any other pro- upon request by the Commission. Such that it is necessary to adequately supervise vision of law, the Commission shall not be records and reports may include— investment bank holding companies and compelled to disclose any information re- ‘‘(I) a balance sheet and income statement; their broker or dealer affiliates consistent quired to be reported under subsection (h) or ‘‘(II) an assessment of the consolidated with the purposes of this subsection, the (i) or any information supplied to the Com- capital of the supervised investment bank Commission may adopt capital adequacy mission by any domestic or foreign regu- holding company; rules for supervised investment bank holding latory agency that relates to the financial or ‘‘(III) an independent auditor’s report at- companies. operational condition of any associated per- testing to the supervised investment bank ‘‘(B) METHOD OF CALCULATION.—In develop- son of a broker or dealer, investment bank holding company’s compliance with its in- ing rules under this paragraph: holding company, or any affiliate of an in- ternal risk management and internal control ‘‘(i) DOUBLE LEVERAGE.—The Commission vestment bank holding company. Nothing in objectives; and shall consider the use by the supervised in- ‘‘(IV) reports concerning the extent to vestment bank holding company of debt and this subsection shall authorize the Commis- which the company or affiliate has complied other liabilities to fund capital investments sion to withhold information from Congress, with the provisions of this title and any reg- in affiliates. or prevent the Commission from complying ulations prescribed and orders issued under ‘‘(ii) NO UNWEIGHTED CAPITAL RATIO.—The with a request for information from any this title. Commission shall not impose under this sec- other Federal department or agency or any ‘‘(B) USE OF EXISTING REPORTS.— tion a capital ratio that is not based on ap- self-regulatory organization requesting the ‘‘(i) IN GENERAL.—The Commission shall, to propriate risk-weighting considerations. information for purposes within the scope of the fullest extent possible, accept reports in ‘‘(iii) NO CAPITAL REQUIREMENT ON REGU- its jurisdiction, or complying with an order fulfillment of the requirements under this LATED ENTITIES.—The Commission shall not, of a court of the United States in an action paragraph that the supervised investment by rule, regulation, guideline, order or other- brought by the United States or the Commis- bank holding company or its affiliates have wise, impose any capital adequacy provision sion. For purposes of section 552 of title 5, been required to provide to another appro- on a nonbanking affiliate (other than a United States Code, this subsection shall be priate regulatory agency or self-regulatory broker or dealer) that is in compliance with considered a statute described in subsection organization. applicable capital requirements of another (b)(3)(B) of such section 552. In prescribing ‘‘(ii) AVAILABILITY.—A supervised invest- Federal regulatory authority or State insur- regulations to carry out the requirements of ment bank holding company or an affiliate ance authority. this subsection, the Commission shall des- of such company shall provide to the Com- ‘‘(iv) APPROPRIATE EXCLUSIONS.—The Com- ignate information described in or obtained mission, at the request of the Commission, mission shall take full account of the appli- pursuant to subparagraphs (A), (B), and (C) any report referred to in clause (i). cable capital requirements of another Fed- of subsection (i)(5) as confidential informa- ‘‘(C) EXAMINATION AUTHORITY.— eral regulatory authority or State insurance tion for purposes of section 24(b)(2) of this ‘‘(i) FOCUS OF EXAMINATION AUTHORITY.— regulator. title.’’. The Commission may make examinations of ‘‘(C) INTERNAL RISK MANAGEMENT MODELS.— any supervised investment bank holding The Commission may incorporate internal (b) CONFORMING AMENDMENTS.— company and any affiliate of such company risk management models into its capital (1) Section 3(a)(34) of the Securities Ex- in order to— adequacy rules for supervised investment change Act of 1934 (15 U.S.C. 78c(a)(34)) is ‘‘(I) inform the Commission regarding— bank holding companies. amended by adding at the end the following ‘‘(aa) the nature of the operations and fi- ‘‘(5) FUNCTIONAL REGULATION OF BANKING new subparagraphs: nancial condition of the supervised invest- AND INSURANCE ACTIVITIES OF SUPERVISED IN- ‘‘(H) When used with respect to an institu- ment bank holding company and its affili- VESTMENT BANK HOLDING COMPANIES.—The tion described in subparagraph (D), (F), or ates; Commission shall defer to— (G) of section 2(c)(2), or held under section ‘‘(bb) the financial and operational risks ‘‘(A) the appropriate regulatory agency 4(f), of the Bank Holding Company Act of within the supervised investment bank hold- with regard to all interpretations of, and the 1956— ing company that may affect any broker or enforcement of, applicable banking laws re- ‘‘(i) the Comptroller of the Currency, in dealer controlled by such supervised invest- lating to the activities, conduct, ownership, the case of a national bank or a bank in the ment bank holding company; and and operations of banks, and institutions de- District of Columbia examined by the Comp- ‘‘(cc) the systems of the supervised invest- scribed in subparagraph (D), (F), and (G) of troller of the Currency; ment bank holding company and its affili- section 2(c)(2), or held under section 4(f), of ‘‘(ii) the Board of Governors of the Federal ates for monitoring and controlling those the Bank Holding Company Act of 1956; and Reserve System, in the case of a State mem- risks; and ‘‘(B) the appropriate State insurance regu- ber bank of the Federal Reserve System or ‘‘(II) monitor compliance with the provi- lators with regard to all interpretations of, any corporation chartered under section 25A sions of this subsection, provisions governing and the enforcement of, applicable State in- of the Federal Reserve Act; transactions and relationships between any surance laws relating to the activities, con- ‘‘(iii) the Federal Deposit Insurance Cor- broker or dealer affiliated with the super- duct, and operations of insurance companies poration, in the case of any other bank the vised investment bank holding company and and insurance agents. deposits of which are insured in accordance any of the company’s other affiliates, and ‘‘(6) DEFINITIONS.—For purposes of this sub- with the Federal Deposit Insurance Act; or applicable provisions of subchapter II of section— ‘‘(iv) the Commission in the case of all chapter 53, title 31, United States Code (com- ‘‘(A) The term ‘investment bank holding other such institutions.’’. monly referred to as the ‘Bank Secrecy Act’) company’ means— (2) Section 1112(e) of the Right to Financial and regulations thereunder. ‘‘(i) any person other than a natural person Privacy Act of 1978 (12 U.S.C. 3412(e)) is ‘‘(ii) RESTRICTED FOCUS OF EXAMINATIONS.— that owns or controls one or more brokers or amended— The Commission shall limit the focus and dealers; and (A) by striking ‘‘this title’’ and inserting scope of any examination of a supervised in- ‘‘(ii) the associated persons of the invest- ‘‘law’’; and vestment bank holding company to— ment bank holding company. (B) by inserting ‘‘, examination reports’’ ‘‘(I) the company; and ‘‘(B) The term ‘supervised investment bank after ‘‘financial records’’. ‘‘(II) any affiliate of the company that, be- holding company’ means any investment cause of its size, condition, or activities, the bank holding company that is supervised by Subtitle D—Study nature or size of the transactions between the Commission pursuant to this subsection. SEC. 241. STUDY OF METHODS TO INFORM INVES- such affiliate and any affiliated broker or ‘‘(C) The terms ‘affiliate’, ‘bank’, ‘bank TORS AND CONSUMERS OF UNIN- dealer, or the centralization of functions holding company’, ‘company’, ‘control’, and SURED PRODUCTS. within the holding company system, could, ‘savings association’ have the meanings in the discretion of the Commission, have a given to those terms in section 2 of the Bank Within one year after the date of enact- materially adverse effect on the operational Holding Company Act of 1956 (12 U.S.C. 1841). ment of this Act, the Comptroller General of or financial condition of the broker or deal- ‘‘(D) The term ‘insured bank’ has the the United States shall submit a report to er. meaning given to that term in section 3 of the Congress regarding the efficacy, costs, ‘‘(iii) DEFERENCE TO OTHER EXAMINATIONS.— the Federal Deposit Insurance Act. and benefits of requiring that any depository For purposes of this subparagraph, the Com- ‘‘(E) The term ‘foreign bank’ has the mean- institution that accepts federally insured de- mission shall, to the fullest extent possible, ing given to that term in section 1(b)(7) of posits and that, directly or through a con- use the reports of examination of an institu- the International Banking Act of 1978. tractual or other arrangement with a broker, tion described in subparagraph (D), (F), or ‘‘(F) The terms ‘‘person associated with an dealer, or agent, buys from, sells to, or ef- (G) of section 2(c)(2), or held under section investment bank holding company’ and ‘‘as- fects transactions for retail investors in se- 4(f), of the Bank Holding Company Act of sociated person of an investment bank hold- curities or consumers of insurance to inform 1956 made by the appropriate regulatory ing company’ means any person directly or such investors and consumers through the agency, or of a licensed insurance company indirectly controlling, controlled by, or use of a logo or seal that the security or in- made by the appropriate State insurance under common control with, an investment surance is not insured by the Federal De- regulator. bank holding company. posit Insurance Corporation. H3166 CONGRESSIONAL RECORD — HOUSE May 13, 1998 TITLE III—INSURANCE uct that includes an insurance component ance sales or solicitation activity is properly Subtitle A—State Regulation of Insurance such that if the product is offered or pro- treated as preempted under Federal law, ei- posed to be offered by the bank as principal— ther regulator may seek expedited judicial SEC. 301. STATE REGULATION OF THE BUSINESS OF INSURANCE. (I) it would be treated as a life insurance review of such determination by the United The Act entitled ‘‘An Act to express the in- contract under section 7702 of the Internal States Court of Appeals for the circuit in tent of the Congress with reference to the Revenue Code of 1986, as amended; or which the State is located or in the United regulation of the business of insurance’’ and (II) in the event that the product is not a States Court of Appeals for the District of approved March 9, 1945 (15 U.S.C. 1011 et letter of credit or other similar extension of Columbia Circuit by filing a petition for re- seq.), commonly referred to as the credit, a qualified financial contract, or a fi- view in such court. ‘‘McCarran—Ferguson Act’’) remains the law nancial guaranty, it would qualify for treat- (b) EXPEDITED REVIEW.—The United States of the United States. ment for losses incurred with respect to such court of appeals in which a petition for re- product under section 832(b)(5) of the Inter- view is filed in accordance with paragraph (1) SEC. 302. MANDATORY INSURANCE LICENSING REQUIREMENTS. nal Revenue Code of 1986, as amended, if the shall complete all action on such petition, No person or entity shall provide insurance bank were subject to tax as an insurance including rendering a judgment, before the in a State as principal or agent unless such company under section 831 of such Code; or end of the 60-day period beginning on the person or entity is licensed as required by (3) any annuity contract the income on date such petition is filed, unless all parties the appropriate insurance regulator of such which is subject to tax treatment under sec- to such proceeding agree to any extension of State in accordance with the relevant State tion 72 of the Internal Revenue Code of 1986, such period. insurance law, subject to section 104 of this as amended. (c) SUPREME COURT REVIEW.—Any request Act. SEC. 305. NEW BANK AGENCY ACTIVITIES ONLY for certiori to the Supreme Court of the THROUGH ACQUISITION OF EXIST- United States of any judgment of a United SEC. 303. FUNCTIONAL REGULATION OF INSUR- ING LICENSED AGENTS. ANCE. States court of appeals with respect to a pe- If a national bank or a subsidiary of a na- The insurance sales activity of any person tition for review under this section shall be tional bank is not providing insurance as or entity shall be functionally regulated by filed with the United States Supreme Court agent in a State as of the date of the enact- the States, subject to section 104 of this Act. as soon as practicable after such judgment is ment of this Act, the national bank and the issued. SEC. 304. INSURANCE UNDERWRITING IN NA- subsidiary of the national bank may provide (d) STATUTE OF LIMITATION.—No action TIONAL BANKS. insurance (which such bank or subsidiary is (a) IN GENERAL.—Except as provided in sec- may be filed under this section challenging otherwise authorized to provide) as agent in an order, ruling, determination, or other ac- tion 306, a national bank and the subsidiaries such State after such date only by acquiring of a national bank may not provide insur- tion of a Federal financial regulator or State a company which has been licensed by the insurance regulator after the later of— ance in a State as principal except that this appropriate State regulator to provide insur- prohibition shall not apply to authorized (1) the end of the 12-month period begin- ance as agent in such State for not less than ning on the date the first public notice is products. 2 years before such acquisition. (b) AUTHORIZED PRODUCTS.—For the pur- made of such order, ruling, or determination SEC. 306. TITLE INSURANCE ACTIVITIES OF NA- in its final form; or poses of this section, a product is authorized TIONAL BANKS AND THEIR AFFILI- if— (2) the end of the 6-month period beginning ATES. on the date such order, ruling, or determina- (1) as of January 1, 1997, the Comptroller of (a) AUTHORITY.— tion takes effect. the Currency had determined in writing that (1) IN GENERAL.—Notwithstanding any (e) STANDARD OF REVIEW.—The court shall national banks may provide such product as other provision of this Act or any other law, decide an action filed under this section principal, or national banks were in fact law- no national bank, and no subsidiary of a na- based on its review on the merits of all ques- fully providing such product as principal; tional bank, may engage in any activity in- tions presented under State and Federal law, (2) no court of relevant jurisdiction had, by volving the underwriting or sale of title in- including the nature of the product or activ- final judgment, overturned a determination surance other than title insurance activities ity and the history and purpose of its regula- of the Comptroller of the Currency that na- in which such national bank or subsidiary tion under State and Federal law, without tional banks may provide such product as was actively and lawfully engaged before the unequal deference. principal; and date of the enactment of this Act. SEC. 308. CONSUMER PROTECTION REGULA- (3) the product is not title insurance, or an (2) INSURANCE AFFILIATE.—In the case of a TIONS. annuity contract the income of which is sub- national bank which has an affiliate which ject to tax treatment under section 72 of the provides insurance as principal and is not a (a) REGULATIONS REQUIRED.— Internal Revenue Code of 1986. subsidiary of the bank, the national bank (1) IN GENERAL.—The Federal Deposit In- (c) DEFINITION.—For purposes of this sec- and any subsidiary of the national bank may surance Act (12 U.S.C. 1811 et seq.) is amend- tion, the term ‘‘insurance’’ means— not engage in any activity involving the un- ed by adding at the end the following new (1) any product regulated as insurance as derwriting or sale of title insurance pursuant section: of January 1, 1997, in accordance with the to paragraph (1). ‘‘SEC. 45. CONSUMER PROTECTION REGULA- TIONS. relevant State insurance law, in the State in (3) INSURANCE SUBSIDIARY.—In the case of a which the product is provided; national bank which has a subsidiary which ‘‘(a) REGULATIONS REQUIRED.— (2) any product first offered after January provides insurance as principal and has no ‘‘(1) IN GENERAL.—The Federal banking 1, 1997, which— affiliate which provides insurance as prin- agencies shall prescribe and publish in final (A) a State insurance regulator determines cipal and is not a subsidiary, the national form, before the end of the 1-year period be- shall be regulated as insurance in the State bank may not engage in any activity involv- ginning on the date of the enactment of this in which the product is provided because the ing the underwriting or sale of title insur- Act, consumer protection regulations (which product insures, guarantees, or indemnifies ance pursuant to paragraph (1). the agencies jointly determine to be appro- against liability, loss of life, loss of health, (4) AFFILIATE AND SUBSIDIARY DEFINED.— priate) that— or loss through damage to or destruction of For purposes of this section, the terms ‘‘af- ‘‘(A) apply to retail sales, solicitations, ad- property, including, but not limited to, sur- filiate’’ and ‘‘subsidiary’’ have the meaning vertising, or offers of any insurance product ety bonds, life insurance, health insurance, given such terms in section 2 of the Bank by any insured depository institution or title insurance, and property and casualty Holding Company Act of 1956. wholesale financial institution or any person insurance (such as private passenger or com- (b) PARITY EXCEPTION.—Notwithstanding who is engaged in such activities at an office mercial automobile, homeowners, mortgage, subsection (a), in the case of any State in of the institution or on behalf of the institu- commercial multiperil, general liability, which banks organized under the laws of tion; and professional liability, workers’ compensa- such State were authorized to sell title in- ‘‘(B) are consistent with the requirements tion, fire and allied lines, farm owners surance as agent as of January 1, 1997, a na- of this Act and provide such additional pro- multiperil, aircraft, fidelity, surety, medical tional bank and a subsidiary of a national tections for consumers to whom such sales, malpractice, ocean marine, inland marine, bank may sell title insurance as agent in solicitations, advertising, or offers are di- and boiler and machinery insurance); and such State in the same manner and to the rected as the agency determines to be appro- (B) is not a product or service of a bank same extent such State banks are authorized priate. that is— to sell title insurance as agent in such State. ‘‘(2) APPLICABILITY TO SUBSIDIARIES.—The (i) a deposit product; SEC. 307. EXPEDITED AND EQUALIZED DISPUTE regulations prescribed pursuant to paragraph (ii) a loan, discount, letter of credit, or RESOLUTION FOR FINANCIAL REGU- (1) shall extend such protections to any sub- other extension of credit; LATORS. sidiaries of an insured depository institu- (iii) a trust or other fiduciary service; (a) FILING IN COURT OF APPEAL.—In the tion, as deemed appropriate by the regu- (iv) a qualified financial contract (as de- case of a regulatory conflict between a State lators referred to in paragraph (3), where fined in or determined pursuant to section insurance regulator and a Federal regulator such extension is determined to be necessary 11(e)(8)(D)(i) of the Federal Deposit Insur- as to whether any product is or is not insur- to ensure the consumer protections provided ance Act); or ance as defined in section 304(c) of this Act, by this section. (v) a financial guaranty, except that this or whether a State statute, regulation, ‘‘(3) CONSULTATION AND JOINT REGULA- subparagraph (B) shall not apply to a prod- order, or interpretation regarding any insur- TIONS.—The Federal banking agencies shall May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3167 consult with each other and prescribe joint any person or otherwise cause a reasonable ‘‘(A) Attempting to cause or causing or regulations pursuant to paragraph (1), after person to reach an erroneous belief with re- threatening another person physical harm, consultation with the State insurance regu- spect to— severe emotional distress, psychological lators, as appropriate. ‘‘(A) the uninsured nature of any insurance trauma, rape, or sexual assault. ‘‘(b) SALES PRACTICES.—The regulations product sold, or offered for sale, by the insti- ‘‘(B) Engaging in a course of conduct or re- prescribed pursuant to subsection (a) shall tution or any subsidiary of the institution; peatedly committing acts toward another include anticoercion rules applicable to the or person, including following the person with- sale of insurance products which prohibit an ‘‘(B) in the case of a variable annuity or out proper authority, under circumstances insured depository institution from engaging other insurance product that involves an in- that place the person in reasonable fear of in any practice that would lead a consumer vestment risk, the investment risk associ- bodily injury or physical harm. to believe an extension of credit, in violation ated with any such product. ‘‘(C) Subjecting another person to false im- of section 106(b) of the Bank Holding Com- ‘‘(d) SEPARATION OF BANKING AND NON- prisonment. pany Act Amendments of 1970, is conditional BANKING ACTIVITIES.— ‘‘(D) Attempting to cause or cause damage upon— ‘‘(1) REGULATIONS REQUIRED.—The regula- to property so as to intimidate or attempt to ‘‘(1) the purchase of an insurance product tions prescribed pursuant to subsection (a) control the behavior of another person. from the institution or any of its affiliates shall include such provisions as the Federal ‘‘(f) CONSUMER GRIEVANCE PROCESS.—The or subsidiaries; or banking agencies consider appropriate to en- Federal banking agencies shall jointly estab- ‘‘(2) an agreement by the consumer not to sure that the routine acceptance of deposits lish a consumer complaint mechanism, for obtain, or a prohibition on the consumer and the making of loans is kept, to the ex- receiving and expeditiously addressing con- from obtaining, an insurance product from sumer complaints alleging a violation of reg- an unaffiliated entity. tent practicable, physically segregated from insurance product activity. ulations issued under the section, which ‘‘(c) DISCLOSURES AND ADVERTISING.—The shall— ‘‘(2) REQUIREMENTS.—Regulations pre- regulations prescribed pursuant to sub- ‘‘(1) establish a group within each regu- section (a) shall include the following provi- scribed pursuant to paragraph (1) shall in- clude the following requirements: latory agency to receive such complaints; sions relating to disclosures and advertising ‘‘(2) develop procedures for investigating in connection with the initial purchase of an ‘‘(A) SEPARATE SETTING.—A clear delinea- tion of the setting in which, and the cir- such complaints; insurance product: ‘‘(3) develop procedures for informing con- ‘‘(1) DISCLOSURES.— cumstances under which, transactions in- sumers of rights they may have in connec- ‘‘(A) IN GENERAL.—Requirements that the volving insurance products should be con- tion with such complaints; and following disclosures be made orally and in ducted in a location physically segregated ‘‘(4) develop procedures for addressing con- writing before the completion of the initial from an area where retail deposits are rou- cerns raised by such complaints, as appro- sale and, in the case of clause (iv), at the tinely accepted. priate, including procedures for the recovery time of application for an extension of cred- ‘‘(B) REFERRALS.—Standards which permit of losses to the extent appropriate. it: any person accepting deposits from, or mak- ‘‘(g) EFFECT ON OTHER AUTHORITY.— ing loans to, the public in an area where ‘‘(i) UNINSURED STATUS.—As appropriate, ‘‘(1) No provision of this section shall be such transactions are routinely conducted in the product is not insured by the Federal De- construed as granting, limiting, or otherwise an insured depository institution to refer a posit Insurance Corporation, the United affecting— customer who seeks to purchase any insur- States Government, or the insured deposi- ‘‘(A) any authority of the Securities and ance product to a qualified person who sells tory institution. Exchange Commission, any self-regulatory such product, only if the person making the ‘‘(ii) INVESTMENT RISK.—In the case of a organization, the Municipal Securities Rule- referral receives no more than a one-time variable annuity or other insurance product making Board, or the Secretary of the Treas- nominal fee of a fixed dollar amount for each which involves an investment risk, that ury under any Federal securities law; or referral that does not depend on whether the there is an investment risk associated with ‘‘(B) any authority of any State insurance referral results in a transaction. the product, including possible loss of value. commissioner or other State authority under ‘‘(C) QUALIFICATION AND LICENSING REQUIRE- ‘‘(iv) COERCION.—The approval of an exten- any State law. MENTS.—Standards prohibiting any insured sion of credit may not be conditioned on— ‘‘(2) Regulations prescribed by a Federal depository institution from permitting any ‘‘(I) the purchase of an insurance product banking agency under this section shall not person to sell or offer for sale any insurance from the institution in which the application apply to retail sales, solicitations, advertis- product in any part of any office of the insti- for credit is pending or any of its affiliates or ing, or offers of any insurance product by tution, or on behalf of the institution, unless subsidiaries; or any insured depository institution or whole- such person is appropriately qualified and li- ‘‘(II) an agreement by the consumer not to sale financial institution or to any person censed. obtain, or a prohibition on the consumer who is engaged in such activities at an office from obtaining, an insurance product from ‘‘(e) DOMESTIC VIOLENCE DISCRIMINATION of such institution or on behalf of the insti- an unaffiliated entity. PROHIBITION.— tution, in a State where the State has in ef- ‘‘(B) MAKING DISCLOSURE READILY UNDER- ‘‘(1) IN GENERAL.—In the case of an appli- fect statutes, regulations, orders, or inter- STANDABLE.—Regulations prescribed under cant for, or an insured under, any insurance pretations, that are inconsistent with or subparagraph (A) shall encourage the use of product described in paragraph (2), the sta- contrary to the regulations prescribed by the disclosure that is conspicuous, simple, di- tus of the applicant or insured as a victim of Federal banking agencies. rect, and readily understandable, such as the domestic violence, or as a provider of serv- ‘‘(h) INSURANCE PRODUCT DEFINED.—For following: ices to victims of domestic violence, shall purposes of this section, the term ‘insurance ‘‘(i) ‘NOT FDIC–INSURED’. not be considered as a criterion in any deci- product’ includes an annuity contract the in- ‘‘(ii) ‘NOT GUARANTEED BY THE BANK’. sion with regard to insurance underwriting, come of which is subject to tax treatment ‘‘(iii) ‘MAY GO DOWN IN VALUE’. pricing, renewal, or scope of coverage of in- under section 72 of the Internal Revenue ‘‘(C) ADJUSTMENTS FOR ALTERNATIVE METH- surance policies, or payment of insurance Code of 1986.’’. ODS OF PURCHASE.—In prescribing the re- claims, except as required or expressly per- SEC. 309. CERTAIN STATE AFFILIATION LAWS quirements under subparagraphs (A) and (D), mitted under State law. PREEMPTED FOR INSURANCE COM- necessary adjustments shall be made for pur- ‘‘(2) SCOPE OF APPLICATION.—The prohibi- PANIES AND AFFILIATES. chase in person, by telephone, or by elec- tion contained in paragraph (1) shall apply to No State may, by law, regulation, order, tronic media to provide for the most appro- any insurance product which is sold or of- interpretation, or otherwise— priate and complete form of disclosure and fered for sale, as principal, agent, or broker, (1) prevent or restrict any insurer, or any acknowledgments. by any insured depository institution or any affiliate of an insurer (whether such affiliate ‘‘(D) CONSUMER ACKNOWLEDGMENT.—A re- person who is engaged in such activities at is organized as a stock company, mutual quirement that an insured depository insti- an office of the institution or on behalf of holding company, or otherwise), from becom- tution shall require any person selling an in- the institution. ing a financial holding company or acquiring surance product at any office of, or on behalf ‘‘(3) SENSE OF THE CONGRESS.—It is the control of an insured depository institution; of, the institution to obtain, at the time a sense of the Congress that, by the end of the (2) limit the amount of an insurer’s assets consumer receives the disclosures required 30-month period beginning on the date of the that may be invested in the voting securities under this paragraph or at the time of the enactment of this Act, the States should of an insured depository institution (or any initial purchase by the consumer of such enact prohibitions against discrimination company which controls such institution), product, an acknowledgment by such con- with respect to insurance products that are except that the laws of an insurer’s State of sumer of the receipt of the disclosure re- at least as strict as the prohibitions con- domicile may limit the amount of such in- quired under this subsection with respect to tained in paragraph (1). vestment to an amount that is not less than such product. ‘‘(4) DOMESTIC VIOLENCE DEFINED.—For pur- 5 percent of the insurer’s admitted assets; or ‘‘(2) PROHIBITION ON MISREPRESENTATIONS.— poses of this subsection, the term ‘domestic (3) prevent, restrict, or have the authority A prohibition on any practice, or any adver- violence’ means the occurrence of 1 or more to review, approve, or disapprove a plan of tising, at any office of, or on behalf of, the of the following acts by a current or former reorganization by which an insurer proposes insured depository institution, or any sub- family member, household member, intimate to reorganize from mutual form to become a sidiary as appropriate, which could mislead partner, or caretaker: stock insurer (whether as a direct or indirect H3168 CONGRESSIONAL RECORD — HOUSE May 13, 1998 subsidiary of a mutual holding company or a majority of the policyholders who vote insurer or any affiliate thereof any dif- otherwise) unless such State is the State of after notice, disclosure of the reorganization ferently than an insurer operating in that domicile of the insurer. and the effects of the transaction on policy- State that is not a redomesticating or re- Subtitle B—Redomestication of Mutual holder contractual rights, and reasonable op- domesticated insurer. Insurers portunity to vote, in accordance with such (c) LAWS PROHIBITING OPERATIONS.—If any notice, disclosure, and voting procedures as licensed State fails to issue, delays the SEC. 311. GENERAL APPLICATION. are approved by the State insurance regu- issuance of, or seeks to revoke an original or This subtitle shall only apply to a mutual lator of the transferee domicile. renewal certificate of authority of a re- insurance company in a State which has not (2) CONTINUED VOTING CONTROL BY POLICY- domesticated insurer immediately following enacted a law which expressly establishes HOLDERS; REVIEW OF PUBLIC STOCK OFFER- redomestication, except on grounds and in a reasonable terms and conditions for a mu- ING.—After the consummation of a reorga- manner consistent with its past practices re- tual insurance company domiciled in such nization, the policyholders of the reorga- garding the issuance of certificates of au- State to reorganize into a mutual holding nized insurer shall have the same voting thority to foreign insurers that are not re- company. rights with respect to the mutual holding domesticating, then the redomesticating in- SEC. 312. REDOMESTICATION OF MUTUAL INSUR- company as they had before the reorganiza- surer shall be exempt from any State law of ERS. tion with respect to the mutual insurer. the licensed State to the extent that such (a) REDOMESTICATION.—A mutual insurer With respect to an initial public offering of State law or the operation of such State law organized under the laws of any State may stock, the offering shall be conducted in would make unlawful, or regulate, directly transfer its domicile to a transferee domicile compliance with applicable securities laws or indirectly, the operation of the redomes- as a step in a reorganization in which, pursu- and in a manner approved by the State in- ticated insurer, except that such licensed ant to the laws of the transferee domicile surance regulator of the transferee domicile. State may require the redomesticated in- and consistent with the standards in sub- (3) AWARD OF STOCK OR GRANT OF OPTIONS surer to— section (f), the mutual insurer becomes a TO OFFICERS AND DIRECTORS.—For a period of (1) comply with the unfair claim settle- stock insurer that is a direct or indirect sub- 6 months after completion of an initial pub- ment practices law of the licensed State; sidiary of a mutual holding company. lic offering, neither a stock holding company (2) pay, on a nondiscriminatory basis, ap- (b) RESULTING DOMICILE.—Upon complying nor the converted insurer shall award any plicable premium and other taxes which are with the applicable law of the transferee stock options or stock grants to persons who levied on licensed insurers or policyholders domicile governing transfers of domicile and are elected officers or directors of the mu- under the laws of the licensed State; completion of a transfer pursuant to this tual holding company, the stock holding (3) register with and designate the State section, the mutual insurer shall cease to be company, or the converted insurer, except insurance regulator as its agent solely for a domestic insurer in the transferor domicile with respect to any such awards or options the purpose of receiving service of legal doc- and, as a continuation of its corporate exist- to which a person is entitled as a policy- uments or process; ence, shall be a domestic insurer of the holder and as approved by the State insur- (4) submit to an examination by the State transferee domicile. ance regulator of the transferee domicile. insurance regulator in any licensed state in (c) LICENSES PRESERVED.—The certificate (4) CONTRACTUAL RIGHTS.—Upon reorga- which the redomesticated insurer is doing of authority, agents’ appointments and li- nization into a mutual holding company, the censes, rates, approvals and other items that business to determine the insurer’s financial contractual rights of the policyholders are condition, if— a licensed State allows and that are in exist- preserved. ence immediately prior to the date that a re- (A) the State insurance regulator of the (5) FAIR AND EQUITABLE TREATMENT OF POL- transferee domicile has not begun an exam- domesticating insurer transfers its domicile ICYHOLDERS.—The reorganization is approved pursuant to this subtitle shall continue in ination of the redomesticated insurer and as fair and equitable to the policyholders by has not scheduled such an examination to full force and effect upon transfer, if the in- the insurance regulator of the transferee surer remains duly qualified to transact the begin before the end of the 1-year period be- domicile. ginning on the date of the redomestication; business of insurance in such licensed State. SEC. 313. EFFECT ON STATE LAWS RESTRICTING (d) EFFECTIVENESS OF OUTSTANDING POLI- and REDOMESTICATION. (B) any such examination is coordinated to CIES AND CONTRACTS.— (a) IN GENERAL.—Unless otherwise per- avoid unjustified duplication and repetition; (1) IN GENERAL.—All outstanding insurance mitted by this subtitle, State laws of any (5) comply with a lawful order issued in— policies and annuities contracts of a re- transferor domicile that conflict with the (A) a delinquency proceeding commenced domesticating insurer shall remain in full purposes and intent of this subtitle are pre- by the State insurance regulator of any li- force and effect and need not be endorsed as empted, including but not limited to— censed State if there has been a judicial find- to the new domicile of the insurer, unless so (1) any law that has the purpose or effect ing of financial impairment under paragraph ordered by the State insurance regulator of a of impeding the activities of, taking any ac- (7); or licensed State, and then only in the case of tion against, or applying any provision of (B) a voluntary dissolution proceeding; outstanding policies and contracts whose law or regulation to, any insurer or an affili- (6) comply with any State law regarding owners reside in such licensed State. ate of such insurer because that insurer or deceptive, false, or fraudulent acts or prac- (2) FORMS.— any affiliate plans to redomesticate, or has tices, except that if the licensed State seeks (A) Applicable State law may require a re- redomesticated, pursuant to this subtitle; an injunction regarding the conduct de- domesticating insurer to file new policy (2) any law that has the purpose or effect scribed in this paragraph, such injunction forms with the State insurance regulator of of impeding the activities of, taking action must be obtained from a court of competent a licensed State on or before the effective against, or applying any provision of law or jurisdiction as provided in section 314(a); date of the transfer. regulation to, any insured or any insurance (7) comply with an injunction issued by a (B) Notwithstanding subparagraph (A), a licensee or other intermediary because such court of competent jurisdiction, upon a peti- redomesticating insurer may use existing person or entity has procured insurance from tion by the State insurance regulator alleg- policy forms with appropriate endorsements or placed insurance with any insurer or affil- ing that the redomesticating insurer is in to reflect the new domicile of the redomes- iate of such insurer that plans to redomes- hazardous financial condition or is finan- ticating insurer until the new policy forms ticate, or has redomesticated, pursuant to cially impaired; are approved for use by the State insurance this subtitle, but only to the extent that (8) participate in any insurance insolvency regulator of such licensed State. such law would treat such insured licensee or guaranty association on the same basis as (e) NOTICE.—A redomesticating insurer other intermediary differently than if the any other insurer licensed in the licensed shall give notice of the proposed transfer to person or entity procured insurance from, or State; and the State insurance regulator of each li- placed insurance with, an insured licensee or (9) require a person acting, or offering to censed State and shall file promptly any re- other intermediary which had not redomes- act, as an insurance licensee for a redomes- sulting amendments to corporate documents ticated; ticated insurer in the licensed State to ob- required to be filed by a foreign licensed mu- (3) any law that has the purpose or effect tain a license from that State, except that tual insurer with the insurance regulator of of terminating, because of the redomestica- such State may not impose any qualification each such licensed State. tion of a mutual insurer pursuant to this or requirement that discriminates against a (f) PROCEDURAL REQUIREMENTS.—No mu- subtitle, any certificate of authority, agent nonresident insurance licensee. tual insurer may redomesticate to another appointment or license, rate approval, or State and reorganize into a mutual holding other approval, of any State insurance regu- SEC. 314. OTHER PROVISIONS. company pursuant to this section unless the lator or other State authority in existence (a) JUDICIAL REVIEW.—The appropriate State insurance regulator of the transferee immediately prior to the redomestication in United States district court shall have exclu- domicile determines that the plan of reorga- any State other than the transferee domi- sive jurisdiction over litigation arising nization of the insurer includes the following cile. under this section involving any redomes- requirements: (b) DIFFERENTIAL TREATMENT PROHIB- ticating or redomesticated insurer. (1) APPROVAL BY BOARD OF DIRECTORS AND ITED.—No State law, regulation, interpreta- (b) SEVERABILITY.—If any provision of this POLICYHOLDERS.—The reorganization is ap- tion, or functional equivalent thereof, of a section, or the application thereof to any proved by at least a majority of the board of State other than a transferee domicile may person or circumstances, is held invalid, the directors of the mutual insurer and at least treat a redomesticating or redomesticated remainder of the section, and the application May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3169 of such provision to other persons or cir- the 3-year period beginning on the date of producer to be licensed or otherwise quali- cumstances, shall not be affected thereby. the enactment of this Act at least a majority fied to do business as a nonresident that has SEC. 315. DEFINITIONS. of the States— the effect of limiting or conditioning that For purposes of this subtitle, the following (1) have enacted uniform laws and regula- producer’s activities because of its residence definitions shall apply: tions governing the licensure of individuals or place of operations, except that (1) COURT OF COMPETENT JURISDICTION.—The and entities authorized to sell and solicit the countersignature requirements imposed on term ‘‘court of competent jurisdiction’’ purchase of insurance within the State; or nonresident producers shall not be deemed to means a court authorized pursuant to sec- (2) have enacted reciprocity laws and regu- have the effect of limiting or conditioning a tion 314(a) to adjudicate litigation arising lations governing the licensure of non- producer’s activities because of its residence under this subtitle. resident individuals and entities authorized or place of operations under this section. (2) DOMICILE.—The term ‘‘domicile’’ means to sell and solicit insurance within those (4) RECIPROCAL RECIPROCITY.—Each of the the State in which an insurer is incor- States. States that satisfies paragraphs (1), (2), and porated, chartered, or organized. (b) UNIFORMITY REQUIRED.—States shall be (3) grants reciprocity to residents of all of (3) INSURANCE LICENSEE.—The term ‘‘insur- deemed to have established the uniformity the other States that satisfy such para- ance licensee’’ means any person holding a necessary to satisfy subsection (a)(1) if the graphs. license under State law to act as insurance States— (d) DETERMINATION.— agent, subagent, broker, or consultant. (1) establish uniform criteria regarding the (1) NAIC DETERMINATION.—At the end of (4) INSTITUTION.—The term ‘‘institution’’ integrity, personal qualifications, education, the 3-year period beginning on the date of means a corporation, joint stock company, training, and experience of licensed insur- the enactment of this Act, the National As- limited liability company, limited liability ance producers, including the qualification sociation of Insurance Commissioners shall partnership, association, trust, partnership, and training of sales personnel in determine, in consultation with the insur- or any similar entity. ascertaining the appropriateness of a par- ance commissioners or chief insurance regu- (5) LICENSED STATE.—The term ‘‘licensed ticular insurance product for a prospective latory officials of the States, whether the State’’ means any State, the District of Co- customer; uniformity or reciprocity required by sub- lumbia, American Samoa, Guam, Puerto (2) establish uniform continuing education sections (b) and (c) has been achieved. Rico, or the United States Virgin Islands in requirements for licensed insurance produc- (2) JUDICIAL REVIEW.—The appropriate which the redomesticating insurer has a cer- ers; United States district court shall have exclu- tificate of authority in effect immediately (3) establish uniform ethics course require- sive jurisdiction over any challenge to the prior to the redomestication. ments for licensed insurance producers in National Association of Insurance Commis- (6) MUTUAL INSURER.—The term ‘‘mutual conjunction with the continuing education sioners’ determination under this section insurer’’ means a mutual insurer organized requirements under paragraph (2); and such court shall apply the standards set under the laws of any State. (4) establish uniform criteria to ensure forth in section 706 of title 5, United States (7) PERSON.—The term ‘‘person’’ means an that an insurance product, including any an- Code, when reviewing any such challenge. individual, institution, government or gov- nuity contract, sold to a consumer is suit- (e) CONTINUED APPLICATION.—If, at any ernmental agency, State or political subdivi- able and appropriate for the consumer based time, the uniformity or reciprocity required sion of a State, public corporation, board, as- on financial information disclosed by the by subsections (b) and (c) no longer exists, sociation, estate, trustee, or fiduciary, or consumer; and the provisions of this subtitle shall take ef- other similar entity. (5) do not impose any requirement upon fect within 2 years, unless the uniformity or (8) POLICYHOLDER.—The term ‘‘policy- any insurance producer to be licensed or oth- reciprocity required by those provisions is holder’’ means the owner of a policy issued erwise qualified to do business as a non- satisfied before the expiration of that 2-year by a mutual insurer, except that, with re- resident that has the effect of limiting or period. spect to voting rights, the term means a conditioning that producer’s activities be- (f) SAVINGS PROVISION.—No provision of member of a mutual insurer or mutual hold- cause of its residence or place of operations, this section shall be construed as requiring ing company granted the right to vote, as de- except that counter-signature requirements that any law, regulation, provision, or action termined under applicable State law. imposed on nonresident producers shall not of any State which purports to regulate in- (9) REDOMESTICATED INSURER.—The term be deemed to have the effect of limiting or surance producers, including any such law, ‘‘redomesticated insurer’’ means a mutual conditioning a producer’s activities because regulation, provision, or action which pur- insurer that has redomesticated pursuant to of its residence or place of operations under ports to regulate unfair trade practices or es- this subtitle. this section. tablish consumer protections, including (10) REDOMESTICATING INSURER.—The term (c) RECIPROCITY REQUIRED.—States shall be countersignature laws, be altered or amend- ‘‘redomesticating insurer’’ means a mutual deemed to have established the reciprocity ed in order to satisfy the uniformity or reci- insurer that is redomesticating pursuant to required to satisfy subsection (a)(2) if the procity required by subsections (b) and (c), this subtitle. following conditions are met: unless any such law, regulation, provision, (11) REDOMESTICATION OR TRANSFER.—The (1) ADMINISTRATIVE LICENSING PROCE- or action is inconsistent with a specific re- terms ‘‘redomestication’’ and ‘‘transfer’’ DURES.—At least a majority of the States quirement of any such subsection and then mean the transfer of the domicile of a mu- permit a producer that has a resident license only to the extent of such inconsistency. tual insurer from one State to another State for selling or soliciting the purchase of in- SEC. 322. NATIONAL ASSOCIATION OF REG- pursuant to this subtitle. surance in its home State to receive a li- ISTERED AGENTS AND BROKERS. (12) STATE INSURANCE REGULATOR.—The cense to sell or solicit the purchase of insur- (a) ESTABLISHMENT.—There is established term ‘‘State insurance regulator’’ means the ance in such majority of States as a non- the National Association of Registered principal insurance regulatory authority of a resident to the same extent such producer is Agents and Brokers (hereafter in this sub- State, the District of Columbia, American permitted to sell or solicit the purchase of title referred to as the ‘‘Association’’) Samoa, Guam, Puerto Rico, or the United insurance in its State, without satisfying (b) STATUS.—The Association shall— States Virgin Islands. any additional requirements other than sub- (1) be a nonprofit corporation and be pre- (13) STATE LAW.—The term ‘‘State law’’ mitting— sumed to have the status of an organization means the statutes of any State, the District (A) a request for licensure; described in section 501(c)(6) of the Internal of Columbia, American Samoa, Guam, Puer- (B) the application for licensure that the Revenue Code of 1986 unless the Secretary of to Rico, or the United States Virgin Islands producer submitted to its home State; the Treasury determines that the Associa- and any regulation, order, or requirement (C) proof that the producer is licensed and tion does not meet the requirements of such prescribed pursuant to any such statute. in good standing in its home State; and section; (14) TRANSFEREE DOMICILE.—The term (D) the payment of any requisite fee to the (2) have succession until dissolved by an ‘‘transferee domicile’’ means the State to appropriate authority, Act of Congress; which a mutual insurer is redomesticating if the producer’s home State also awards (3) not be an agency or establishment of pursuant to this subtitle. such licenses on such a reciprocal basis. the United States Government; and (15) TRANSFEROR DOMICILE.—The term (2) CONTINUING EDUCATION REQUIREMENTS.— (4) except as otherwise provided in this ‘‘transferor domicile’’ means the State from A majority of the States accept an insurance Act, be subject to, and have all the powers which a mutual insurer is redomesticating producer’s satisfaction of its home State’s conferred upon a nonprofit corporation by pursuant to this subtitle. continuing education requirements for li- the District of Columbia Nonprofit Corpora- SEC. 316. EFFECTIVE DATE. censed insurance producers to satisfy the tion Act (D.C. Code, sec. 29y–1001 et seq.). This subtitle shall take effect on the date States’ own continuing education require- SEC. 323. PURPOSE. of enactment of this Act. ments if the producer’s home State also rec- The purpose of the Association shall be to Subtitle C—National Association of ognizes the satisfaction of continuing edu- provide a mechanism through which uniform Registered Agents and Brokers cation requirements on such a reciprocal licensing, appointment, continuing edu- SEC. 321. STATE FLEXIBILITY IN MULTISTATE LI- basis. cation, and other insurance producer sales CENSING REFORMS. (3) NO LIMITING NONRESIDENT REQUIRE- qualification requirements and conditions (a) IN GENERAL.—The provisions of this MENTS.—A majority of the States do not im- can be adopted and applied on a multistate subtitle shall take effect unless by the end of pose any requirement upon any insurance basis, while preserving the right of States to H3170 CONGRESSIONAL RECORD — HOUSE May 13, 1998

license, supervise, and discipline insurance (g) CONTINUING EDUCATION.—The Associa- (B) ALTERNATE COMPOSITION.—If any of the producers and to prescribe and enforce laws tion shall establish, as a condition of mem- State insurance regulators described in sub- and regulations with regard to insurance-re- bership, continuing education requirements paragraph (A) declines to serve on the Board, lated consumer protection and unfair trade which shall be comparable to or greater than the State insurance regulator with the next practices. the continuing education requirements greatest total dollar amount of commercial- SEC. 324. RELATIONSHIP TO THE FEDERAL GOV- under the licensing laws of a majority of the lines insurance in place, as determined by ERNMENT. States. the NAIC as of the end of such period, shall The Association shall be subject to the su- (h) SUSPENSION AND REVOCATION.—The As- serve as a member of the Board. pervision and oversight of the National Asso- sociation may— (C) INOPERABILITY.—If fewer than 7 State ciation of Insurance Commissioners (here- (1) inspect and examine the records and of- insurance regulators accept appointment to after in this subtitle referred to as the fices of the members of the Association to the Board, the Association shall be estab- ‘‘NAIC’’) and shall not be an agency or an in- determine compliance with the criteria for lished without NAIC oversight pursuant to strumentality of the United States Govern- membership established by the Association; section 332. ment. and (d) TERMS.—The term of each director SEC. 325. MEMBERSHIP. (2) suspend or revoke the membership of an shall, after the initial appointment of the members of the Board, be for 3 years, with 1⁄3 (a) ELIGIBILITY.— insurance producer if— of the directors to be appointed each year. (1) IN GENERAL.—Any State-licensed insur- (A) the producer fails to meet the applica- ble membership criteria of the Association: (e) BOARD VACANCIES.—A vacancy on the ance producer shall be eligible to become a Board shall be filled in the same manner as member in the Association. or (B) the producer has been subject to dis- the original appointment of the initial Board (2) INELIGIBILITY FOR SUSPENSION OR REV- for the remainder of the term of the vacating OCATION OF LICENSE.—Notwithstanding para- ciplinary action pursuant to a final adjudica- tory proceeding under the jurisdiction of a member. graph (1), a State-licensed insurance pro- (f) MEETINGS.—The Board shall meet at the State insurance regulator, and the Associa- ducer shall not be eligible to become a mem- call of the chairperson, or as otherwise pro- tion concludes that retention of membership ber if a State insurance regulator has sus- vided by the bylaws of the Association. pended or revoked such producer’s license in in the Association would not be in the public interest. SEC. 327. OFFICERS. that State during the 3-year preceding the (a) IN GENERAL.— (i) OFFICE OF CONSUMER COMPLAINTS.— date such producer applies for membership. (1) POSITIONS.—The officers of the Associa- (3) RESUMPTION OF ELIGIBILITY.—Paragraph (1) IN GENERAL.—The Association shall es- tablish an office of consumer complaints tion shall consist of a chairperson and a vice (2) shall cease to apply to any insurance pro- chairperson of the Board, a president, sec- ducer if— that shall— (A) receive and investigate complaints retary, and treasurer of the Association, and (A) the State insurance regulator renews such other officers and assistant officers as the license of such producer in the State in from both consumers and State insurance regulators related to members of the Asso- may be deemed necessary. which the license was suspended or revoked; (2) MANNER OF SELECTION.—Each officer of or ciation; and (B) recommend to the Association any dis- the Board and the Association shall be elect- (B) the suspension or revocation is subse- ed or appointed at such time and in such quently overturned. ciplinary actions that the office considers appropriate, to the extent that any such rec- manner and for such terms not exceeding 3 (b) AUTHORITY TO ESTABLISH MEMBERSHIP years as may be prescribed in the bylaws of CRITERIA.—The Association shall have the ommendation is not inconsistent with State law. the Association. authority to establish membership criteria (b) CRITERIA FOR CHAIRPERSON.— Only indi- (2) RECORDS AND REFERRALS.—The office of that— viduals who are members of the National As- consumer complaints of the Association (1) bear a reasonable relationship to the sociation of Insurance Commissioners shall shall— purposes for which the Association was es- be eligible to serve as the chairperson of the tablished; and (A) maintain records of all complaints re- board of directors. ceived in accordance with paragraph (1) and (2) do not unfairly limit the access of SEC. 328. BYLAWS, RULES, AND DISCIPLINARY AC- smaller agencies to the Association member- make such records available to the NAIC and TION. ship. to each State insurance regulator for the (a) ADOPTION AND AMENDMENT OF BY- (c) ESTABLISHMENT OF CLASSES AND CAT- State of residence of the consumer who filed LAWS.— EGORIES.— the complaint; and (1) COPY REQUIRED TO BE FILED WITH THE (1) CLASSES OF MEMBERSHIP.—The Associa- (B) refer, when appropriate, any such com- NAIC.—The board of directors of the Associa- tion may establish separate classes of mem- plaint to any appropriate State insurance tion shall file with the NAIC a copy of the bership, with separate criteria, if the Asso- regulator. proposed bylaws or any proposed amendment ciation reasonably determines that perform- (3) TELEPHONE AND OTHER ACCESS.—The of- to the bylaws, accompanied by a concise gen- ance of different duties requires different fice of consumer complaints shall maintain a eral statement of the basis and purpose of levels of education, training, or experience. toll-free telephone number for the purpose of such proposal. (2) CATEGORIES.—The Association may es- this subsection and, as practicable, other al- (2) EFFECTIVE DATE.—Except as provided in tablish separate categories of membership ternative means of communication with con- paragraph (3), any proposed bylaw or pro- for individuals and for other persons. The es- sumers, such as an Internet home page. posed amendment shall take effect— tablishment of any such categories of mem- SEC. 326. BOARD OF DIRECTORS. (A) 30 days after the date of the filing of a bership shall be based either on the types of (a) ESTABLISHMENT.—There is established copy with the NAIC; licensing categories that exist under State the board of directors of the Association (B) upon such later date as the Association laws or on the aggregate amount of business (hereafter in this subtitle referred to as the may designate; or handled by an insurance producer. No special ‘‘Board’’) for the purpose of governing and (C) such earlier date as the NAIC may de- categories of membership, and no distinct supervising the activities of the Association termine. membership criteria, shall be established for and the members of the Association. (3) DISAPPROVAL BY THE NAIC.—Notwith- members which are insured depository insti- (b) POWERS.—The Board shall have such standing paragraph (2), a proposed bylaw or tutions or wholesale financial institutions or powers and authority as may be specified in amendment shall not take effect if, after for their employees, agents, or affiliates. the bylaws of the Association. public notice and opportunity to participate (d) MEMBERSHIP CRITERIA.— (c) COMPOSITION.— in a public hearing— (1) IN GENERAL.—The Association may es- (1) MEMBERS.—The Board shall be com- (A) the NAIC disapproves such proposal as tablish criteria for membership which shall posed of 7 members appointed by the NAIC. being contrary to the public interest or con- include standards for integrity, personal (2) REQUIREMENT.—At least 4 of the mem- trary to the purposes of this subtitle and qualifications, education, training, and expe- bers of the Board shall have significant expe- provides notice to the Association setting rience. rience with the regulation of commercial forth the reasons for such disapproval; or (2) MINIMUM STANDARD.—In establishing lines of insurance in at least 1 of the 20 (B) the NAIC finds that such proposal in- criteria under paragraph (1), the Association States in which the greatest total dollar volves a matter of such significant public in- shall consider the highest levels of insurance amount of commercial-lines insurance is terest that public comment should be ob- producer qualifications established under the placed in the United States. tained, in which case it may, after notifying licensing laws of the States. (3) INITIAL BOARD MEMBERSHIP.— the Association in writing of such finding, (e) EFFECT OF MEMBERSHIP.—Membership (A) IN GENERAL.—If, by the end of the 2- require that the procedures set forth in sub- in the Association shall entitle the member year period beginning on the date of the en- section (b) be followed with respect to such to licensure in each State for which the actment of this Act, the NAIC has not ap- proposal, in the same manner as if such pro- member pays the requisite fees, including li- pointed the initial 7 members of the Board of posed bylaw change were a proposed rule censing fees and, where applicable, bonding the Association, the initial Board shall con- change within the meaning of such para- requirements, set by such State. sist of the 7 State insurance regulators of graph. (f) ANNUAL RENEWAL.—Membership in the the 7 States with the greatest total dollar (b) ADOPTION AND AMENDMENT OF RULES.— Association shall be renewed on an annual amount of commercial-lines insurance in (1) FILING PROPOSED REGULATIONS WITH THE basis. place as of the end of such period. NAIC.— May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3171

(A) IN GENERAL.—The board of directors of priate in the public interest, for the protec- SEC. 329. ASSESSMENTS. the Association shall file with the NAIC a tion of insurance producers or policyholders, (a) INSURANCE PRODUCERS SUBJECT TO AS- copy of any proposed rule or any proposed or otherwise in furtherance of the purposes SESSMENT.—The Association may establish amendment to a rule of the Association of this subtitle. such application and membership fees as the which shall be accompanied by a concise (ii) EFFECT OF RECONSIDERATION BY THE Association finds necessary to cover the general statement of the basis and purpose of NAIC.—Any action of the NAIC pursuant to costs of its operations, including fees made such proposal. clause (i) shall— reimbursable to the NAIC under subsection (B) OTHER RULES AND AMENDMENTS INEFFEC- (I) not affect the validity or force of a rule (b), except that, in setting such fees, the As- TIVE.—No proposed rule or amendment shall change during the period such rule or amend- sociation may not discriminate against take effect unless approved by the NAIC or ment was in effect; and smaller insurance producers. otherwise permitted in accordance with this (II) not be considered to be final action. (b) NAIC ASSESSMENTS.—The NAIC may as- paragraph. sess the Association for any costs it incurs (c) ACTION REQUIRED BY THE NAIC.—The under this subtitle. (2) INITIAL CONSIDERATION BY THE NAIC.— NAIC may, in accordance with such rules as SEC. 330. FUNCTIONS OF THE NAIC. Within 35 days after the date of publication the NAIC determines to be necessary or ap- (a) ADMINISTRATIVE PROCEDURE.—Deter- of notice of filing of a proposal, or before the propriate to the public interest or to carry end of such longer period not to exceed 90 minations of the NAIC, for purposes of mak- out the purposes of this subtitle, require the days as the NAIC may designate after such ing rules pursuant to section 328, shall be Association to adopt, amend, or repeal any date if the NAIC finds such longer period to made after appropriate notice and oppor- bylaw, rule or amendment of the Associa- be appropriate and sets forth its reasons for tunity for a hearing and for submission of tion, whenever adopted. so finding, or as to which the Association views of interested persons. consents, the NAIC shall— (d) DISCIPLINARY ACTION BY THE ASSOCIA- (b) EXAMINATIONS AND REPORTS.— (A) by order approve such proposed rule or TION.— (1) The NAIC may make such examinations amendment; or (1) SPECIFICATION OF CHARGES.—In any pro- and inspections of the Association and re- (B) institute proceedings to determine ceeding to determine whether membership quire the Association to furnish it with such whether such proposed rule or amendment shall be denied, suspended, revoked, and not reports and records or copies thereof as the should be modified or disapproved. renewed (hereafter in this section referred to NAIC may consider necessary or appropriate (3) NAIC PROCEEDINGS.— as a ‘‘disciplinary action’’), the Association in the public interest or to effectuate the (A) IN GENERAL.—Proceedings instituted by shall bring specific charges, notify such purposes of this subtitle. the NAIC with respect to a proposed rule or member of such charges and give the mem- (2) As soon as practicable after the close of amendment pursuant to paragraph (2) shall— ber an opportunity to defend against the each fiscal year, the Association shall sub- (i) include notice of the grounds for dis- charges, and keep a record. mit to the NAIC a written report regarding approval under consideration; (2) SUPPORTING STATEMENT.—A determina- the conduct of its business, and the exercise (ii) provide opportunity for hearing; and tion to take disciplinary action shall be sup- of the other rights and powers granted by (iii) be concluded within 180 days after the ported by a statement setting forth— this subtitle, during such fiscal year. Such date of the Association’s filing of such pro- (A) any act or practice in which such mem- report shall include financial statements set- posed rule or amendment. ber has been found to have been engaged; ting forth the financial position of the Asso- (B) DISPOSITION OF PROPOSAL.—At the con- (B) the specific provision of this subtitle, ciation at the end of such fiscal year and the clusion of any proceeding under subpara- the rules or regulations under this subtitle, results of its operations (including the graph (A), the NAIC shall, by order, approve or the rules of the Association which any source and application of its funds) for such or disapprove the proposed rule or amend- such act or practice is deemed to violate; and fiscal year. The NAIC shall transmit such re- ment. (C) the sanction imposed and the reason for port to the President and the Congress with (C) EXTENSION OF TIME FOR CONSIDER- such sanction. such comment thereon as the NAIC deter- ATION.—The NAIC may extend the time for (e) NAIC REVIEW OF DISCIPLINARY AC- mines to be appropriate. concluding any proceeding under subpara- TION.— SEC. 331. LIABILITY OF THE ASSOCIATION AND graph (A) for— (1) NOTICE TO THE NAIC.—If the Association THE DIRECTORS, OFFICERS, AND (i) not more than 60 days if the NAIC finds orders any disciplinary action, the Associa- EMPLOYEES OF THE ASSOCIATION. good cause for such extension and sets forth tion shall promptly notify the NAIC of such (a) IN GENERAL.—The Association shall not its reasons for so finding; or action. be deemed to be an insurer or insurance pro- (ii) for such longer period as to which the (2) REVIEW BY THE NAIC.—Any disciplinary ducer within the meaning of any State law, Association consents. action taken by the Association shall be sub- rule, regulation, or order regulating or tax- (4) STANDARDS FOR REVIEW.— ject to review by the NAIC— ing insurers, insurance producers, or other (A) GROUNDS FOR APPROVAL.—The NAIC (A) on the NAIC’s own motion; or entities engaged in the business of insurance, shall approve a proposed rule or amendment (B) upon application by any person ag- including provisions imposing premium if the NAIC finds that the rule or amend- grieved by such action if such application is taxes, regulating insurer solvency or finan- ment is in the public interest and is consist- filed with the NAIC not more than 30 days cial condition, establishing guaranty funds ent with the purposes of this Act. after the later of— and levying assessments, or requiring claims (B) APPROVAL BEFORE END OF NOTICE PE- (i) the date the notice was filed with the settlement practices. RIOD.—The NAIC shall not approve any pro- (b) LIABILITY OF THE ASSOCIATION, ITS DI- NAIC pursuant to paragraph (1); or posed rule before the end of the 30-day period RECTORS, OFFICERS, AND EMPLOYEES.—Nei- (ii) the date the notice of the disciplinary beginning on the date the Association files ther the Association nor any of its directors, action was received by such aggrieved per- proposed rules or amendments in accordance officers, or employees shall have any liabil- son. with paragraph (1) unless the NAIC finds ity to any person for any action taken or good cause for so doing and sets forth the (f) EFFECT OF REVIEW.—The filing of an ap- omitted in good faith under or in connection reasons for so finding. plication to the NAIC for review of a discipli- with any matter subject to this subtitle. (5) ALTERNATE PROCEDURE.— nary action, or the institution of review by SEC. 332. ELIMINATION OF NAIC OVERSIGHT. (A) IN GENERAL.—Notwithstanding any pro- the NAIC on the NAIC’s own motion, shall (a) IN GENERAL.—The Association shall be vision of this subsection other than subpara- not operate as a stay of disciplinary action established without NAIC oversight and the graph (B), a proposed rule or amendment re- unless the NAIC otherwise orders. provisions set forth in section 324, sub- lating to the administration or organization (g) SCOPE OF REVIEW.— sections (a), (b), (c), and (e) of section 328, of the Association may take effect— (A) IN GENERAL.—In any proceeding to re- and sections 329(b) and 330 of this subtitle (i) upon the date of filing with the NAIC, if view such action, after notice and the oppor- shall cease to be effective if, at the end of such proposed rule or amendment is des- tunity for hearing, the NAIC shall— the 2-year period after the date on which the ignated by the Association as relating solely (i) determine whether the action should be provisions of this subtitle take effect pursu- to matters which the NAIC, consistent with taken; ant to section 321— the public interest and the purposes of this (ii) affirm, modify, or rescind the discipli- (1) at least a majority of the States rep- subsection, determines by rule do not require nary sanction; or resenting at least 50 percent of the total the procedures set forth in this paragraph; or (iii) remand to the Association for further United States commercial-lines insurance (ii) upon such date as the NAIC shall for proceedings. premiums have not satisfied the uniformity good cause determine. (B) DISMISSAL OF REVIEW.—The NAIC may or reciprocity requirements of subsections (B) ABROGATION BY THE NAIC.— dismiss a proceeding to review disciplinary (a) and (b) of section 321; and (i) IN GENERAL.—At any time within 60 action if the NAIC finds that— (2) the NAIC has not approved the Associa- days after the date of filing of any proposed (i) the specific grounds on which the action tion’s bylaws as required by section 328, the rule or amendment under subparagraph is based exist in fact; NAIC is unable to operate or supervise the (A)(i) or (B)(ii), the NAIC may repeal such (ii) the action is in accordance with appli- Association, or the Association is not con- rule or amendment and require that the rule cable rules and regulations; and ducting its activities as required under this or amendment be refiled and reviewed in ac- (iii) such rules and regulations are, and Act. cordance with this paragraph, if the NAIC were, applied in a manner consistent with (b) BOARD APPOINTMENTS.—If the repeals finds that such action is necessary or appro- the purposes of this Act. required by subsection (a) are implemented— H3172 CONGRESSIONAL RECORD — HOUSE May 13, 1998

(1) GENERAL APPOINTMENT POWER.—The ing bonding requirements, based on its resi- insurance by the appropriate State insurance President, with the advice and consent of the dency. regulatory authority. United States Senate, shall appoint the (3) No State shall impose any licensing, ap- (2) INSURANCE PRODUCER.—The term ‘‘insur- members of the Association’s Board estab- pointment, integrity, personal or corporate ance producer’’ means any insurance agent lished under section 326 from lists of can- qualifications, education, training, experi- or broker, surplus lines broker, insurance didates recommended to the President by the ence, residency, or continuing education re- consultant, limited insurance representa- National Association of Insurance Commis- quirement upon a member of the Association tive, and any other person that solicits, ne- sioners. that is different than the criteria for mem- gotiates, effects, procures, delivers, renews, (2) PROCEDURES FOR OBTAINING NATIONAL bership in the Association or renewal of such continues or binds policies of insurance or ASSOCIATION OF INSURANCE COMMISSIONERS AP- membership, except that counter-signature offers advice, counsel, opinions or services POINTMENT RECOMMENDATIONS.— requirements imposed on nonresident pro- related to insurance. (A) INITIAL DETERMINATION AND REC- ducers shall not be deemed to have the effect (3) STATE LAW.—The term ‘‘State law’’ in- OMMENDATIONS.—After the date on which the of limiting or conditioning a producer’s ac- cludes all laws, decisions, rules, regulations, provisions of part a of this section take ef- tivities because of its residence or place of or other State action having the effect of fect, then the National Association of Insur- operations under this section. law, of any State. A law of the United States ance Commissioners shall have 60 days to (4) No State shall implement the proce- applicable only to the District of Columbia provide a list of recommended candidates to dures of such State’s system of licensing or shall be treated as a State law rather than a the President. If the National Association of renewing the licenses of insurance producers law of the United States. Insurance Commissioners fails to provide a in a manner different from the authority of (4) STATE.—The term ‘‘State’’ includes any list by that date, or if any list that is pro- the Association under section 325. State, the District of Columbia, American vided does not include at least 14 rec- (b) SAVINGS PROVISION.—Except as provided Samoa, Guam, Puerto Rico, and the United ommended candidates or comply with the re- in subsection (a), no provision of this section States Virgin Islands. quirements of section 326(c), the President shall be construed as altering or affecting (5) HOME STATE.—The term ‘‘home State’’ shall, with the advice and consent of the the continuing effectiveness of any law, reg- means the State in which the insurance pro- United States Senate, make the requisite ap- ulation, provision, or action of any State ducer maintains its principal place of resi- pointments without considering the views of which purports to regulate insurance produc- dence and is licensed to act as an insurance the NAIC. ers, including any such law, regulation, pro- producer. (B) SUBSEQUENT APPOINTMENTS.—After the vision, or action which purports to regulate TITLE IV—UNITARY SAVINGS AND LOAN initial appointments, the National Associa- unfair trade practices or establish consumer HOLDING COMPANIES tion of Insurance Commissioners shall pro- protections, including, but not limited to, countersignature laws. SEC. 401. TERMINATION OF EXPANDED POWERS vide a list of at least 6 recommended can- FOR NEW UNITARY S&L HOLDING didates for the Board to the President by SEC. 334. COORDINATION WITH OTHER REGU- COMPANIES. LATORS. January 15 of each subsequent year. If the (a) IN GENERAL.—Section 10(c) of the Home National Association of Insurance Commis- (a) COORDINATION WITH STATE INSURANCE Owners’ Loan Act (12 U.S.C. 1467a(c)) is sioners fails to provide a list by that date, or REGULATORS.—The Association shall have amended by adding at the end the following if any list that is provided does not include the authority to— new paragraph: (1) issue uniform insurance producer appli- at least 6 recommended candidates or com- ‘‘(9) TERMINATION OF EXPANDED POWERS FOR cations and renewal applications that may ply with the requirements of section 326(c), NEW UNITARY S&L HOLDING COMPANY.— be used to apply for the issuance or removal the President, with the advice and consent of ‘‘(A) IN GENERAL.—Subject to subparagraph the Senate, shall make the requisite appoint- of State licenses, while preserving the abil- (B), paragraph (3) shall not apply with re- ments without considering the views of the ity of each State to impose such conditions spect to any company that becomes a sav- NAIC. on the issuance or renewal of a license as are ings and loan holding company pursuant to (C) PRESIDENTIAL OVERSIGHT.— consistent with section 333; an application filed after March 31, 1998. (2) establish a central clearinghouse (i) REMOVAL.—If the President determines ‘‘(B) EXISTING UNITARY S&L HOLDING COMPA- through which members of the Association that the Association is not acting in the in- NIES AND THE SUCCESSORS TO SUCH COMPA- may apply for the issuance or renewal of li- terests of the public, the President may re- NIES.—Subparagraph (A) shall not apply, and move the entire existing Board for the re- censes in multiple States; and paragraph (3) shall continue to apply, to a mainder of the term to which the members (3) establish or utilize a national database company (or any subsidiary of such com- of the Board were appointed and appoint, for the collection of regulatory information pany) that— with the advice and consent of the Senate, concerning the activities of insurance pro- ‘‘(i) either— new members to fill the vacancies on the ducers. ‘‘(I) acquired 1 or more savings associa- (b) COORDINATION WITH THE NATIONAL ASSO- Board for the remainder of such terms. tions described in paragraph (3) pursuant to CIATION OF SECURITIES DEALERS.—The Asso- (ii) SUSPENSION OF RULES OR ACTIONS.—The applications at least 1 of which was filed be- ciation shall coordinate with the National President, or a person designated by the fore April 1, 1998; or Association of Securities Dealers in order to President for such purpose, may suspend the ‘‘(II) became a savings and loan holding ease any administrative burdens that fall on effectiveness of any rule, or prohibit any ac- company by acquiring ownership or control persons that are members of both associa- tion, of the Association which the President of the company described in subclause (I); tions, consistent with the purposes of this or the designee determines is contrary to the subtitle and the Federal securities laws. and public interest. ‘‘(ii) continues to control the savings asso- SEC. 335. JUDICIAL REVIEW. (d) ANNUAL REPORT.—As soon as prac- ciations referred to in clause (i)(I) or the suc- (a) JURISDICTION.—The appropriate United ticable after the close of each fiscal year, the cessor to any such savings association.’’. States district court shall have exclusive ju- Association shall submit to the President (b) TECHNICAL AND CONFORMING AMEND- risdiction over litigation involving the Asso- and to Congress a written report relative to MENT.—Section 10(c)(3) of the Home Owners’ ciation, including disputes between the Asso- the conduct of its business, and the exercise Loan Act (12 U.S.C. 1467a(c)(3)) is amended ciation and its members that arise under of the other rights and powers granted by by striking ‘‘Notwithstanding’’ and inserting this subtitle. Suits brought in State court this subtitle, during such fiscal year. Such ‘‘Except as provided in paragraph (9) and involving the Association shall be deemed to report shall include financial statements set- notwithstanding’’. have arisen under Federal law and therefore ting forth the financial position of the Asso- be subject to jurisdiction in the appropriate The CHAIRMAN. No amendment to ciation at the end of such fiscal year and the United States district court. that amendment in the nature of a sub- results of its operations (including the (b) EXHAUSTION OF REMEDIES.—An ag- stitute is in order unless printed in source and application of its funds) for such grieved person must exhaust all available ad- fiscal year. part 2 of that report. Each amendment ministrative remedies before the Association may be offered only in the order print- SEC. 333. RELATIONSHIP TO STATE LAW. and the NAIC before it may seek judicial re- ed in the report, may be offered only by (a) PREEMPTION OF STATE LAWS.—State view of an Association decision. laws, regulations, provisions, or actions pur- (c) STANDARDS OF REVIEW.—The standards a Member designated in the report, porting to regulate insurance producers shall set forth in section 553 of title 5, United shall be considered read, shall be con- be preempted in the following instances: States Code, shall be applied whenever a rule sidered debatable for the time specified (1) No State shall impede the activities of, or bylaw of the Association is under judicial in the report, equally divided and con- take any action against, or apply any provi- review, and the standards set forth in section trolled by the proponent and an oppo- sion of law or regulation to, any insurance 554 of title 5, United States Code, shall be ap- nent, shall not be subject to amend- producer because that insurance producer or plied whenever a disciplinary action of the ment, and shall not be subject to a de- any affiliate plans to become, has applied to Association is judicially reviewed. mand for division of the question. become, or is a member of the Association. SEC. 336. DEFINITIONS. (2) No State shall impose any requirement For purposes of this subtitle, the following The Chair may postpone a request for upon a member of the Association that it definitions shall apply: a recorded vote on any amendment and pay different fees to be licensed or otherwise (1) INSURANCE.—The term ‘‘insurance’’ may reduce to a minimum of 5 minutes qualified to do business in that State, includ- means any product defined or regulated as the time for voting on any postponed May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3173 question that immediately follows an- stitute, redesignate subsection (j) as sub- ‘‘(A) IN GENERAL.—Except as provided in other vote, provided that the time for section (k) and before such redesignated sub- subparagraph (B), regulations’’. voting on the first question shall be a section (k) insert the following new sub- At the end of paragraph (2) of section 45(g) section: minimum of 15 minutes. of the Federal Deposit Insurance Act, as ‘‘(j) COMMISSION BACKUP AUTHORITY.— added by section 308(a) of the Amendment in It is now in order to consider Amend- ‘‘(1) AUTHORITY.—The Commission may the Nature of a Substitute, add the following ment No. 1 printed in part 2 of House make inspections of any wholesale financial new subparagraph: Report 105–531. holding company that— (B) PREEMPTION.—If, with respect to any AMENDMENT NO. 1 OFFERED BY MR. BLILEY ‘‘(A) controls a wholesale financial institu- provision of the regulations prescribed under tion, Mr. BLILEY. Madam Chairman, I this section, the Board of Governors of the ‘‘(B) is not a foreign bank, and Federal Reserve System, the Comptroller of offer an amendment. ‘‘(C) does not control an insured bank the Currency, and the Board of Directors of The CHAIRMAN. The Clerk will des- (other than an institution permitted under the Federal Deposit Insurance Corporation ignate the amendment. subparagraph (D), (F), or (G) of section determine jointly that the protection af- The text of the amendment is as fol- 2(c)(2), or held under section 4(f), of the Bank forded by such provision for consumers is lows: Holding Company Act of 1956) or a savings greater than the protection provided by a association, Amendment No. 1 printed in part 2 of comparable provision of the statutes, regula- House Report 105–531 offered by Mr. BLILEY: and any affiliate of such company, for the tions, orders, or interpretations referred to purpose of monitoring and enforcing compli- in subparagraph (A) of any State, such provi- [1. CUSTOMER FEE DISCLOSURE] ance by the wholesale financial holding com- sion of the regulations prescribed under this At the end of title II of the Amendment in pany with the Federal securities laws. section shall supersede the comparable pro- the Nature of a Substitute, insert the follow- ‘‘(2) LIMITATION.—The Commission shall vision of such State statute, regulation, ing new subtitle (and conform the table of limit the focus and scope of any inspection order, or interpretation. contents accordingly): under paragraph (1) to those transactions, [5. LIFELINE BANKING] policies, procedures, or records that are rea- Subtitle E—Disclosure of Customer Costs of In paragraph (1) of section 6(d) of the Bank Acquiring Financial Products sonably necessary to monitor and enforce compliance by the wholesale financial hold- Holding Company Act of 1956, as added by SEC. 251. IMPROVED AND CONSISTENT DISCLO- ing company or any affiliate with the Fed- section 103(a) of the Amendment in the Na- SURE. eral securities laws. ture of a Substitute, strike ‘‘or (C)’’ and in- (a) REVISED REGULATIONS REQUIRED.— sert ‘‘(C), or (D)’’. ‘‘(3) DEFERENCE TO EXAMINATIONS.—To the Within one year after the date of enactment fullest extent possible, the Commission shall In paragraph (4)(D) of section 6(d) of the of this Act, each Federal financial regu- use, for the purposes of this subsection, the Bank Holding Company Act of 1956, as added latory authority shall prescribe rules, or re- reports of examinations— by section 103(a) of the Amendment in the visions to its rules, to improve the accuracy, ‘‘(A) made by the Board of Governors of Nature of a Substitute, strike ‘‘or (C)’’ and simplicity, and completeness, and to make the Federal Reserve System of any wholesale insert ‘‘(C), or (D)’’. more consistent, the disclosure of informa- financial holding company that is supervised [6. STATE SECURITIES AND INSURANCE] tion by persons subject to the jurisdiction of by the Board; In section 104(a)(1) of the Amendment in such regulatory authority concerning any ‘‘(B) made by or on behalf of any State reg- commissions, fees, markups, or other costs the Nature of a Substitute, strike ‘‘restrict’’ ulatory agency responsible for the super- and insert ‘‘significantly interfere with the incurred by customers in the acquisition of vision of an insurance company of any li- financial products. ability of’’. censed insurance company; and In section 104(a)(1) of the Amendment in (b) CONSULTATION.—In prescribing rules ‘‘(C) made by any Federal or State banking the Nature of a Substitute, strike ‘‘from and revisions under subsection (a), the Fed- agency of any bank or institution described being’’ and insert ‘‘to be’’. eral financial regulatory authorities shall in subparagraph (D), (F), or (G) of section In section 104(b)(1) of the Amendment in consult with each other and with appropriate 2(c)(2), or held under section 4(f), of the Bank State financial regulatory authorities. the Nature of a Substitute, strike ‘‘para- Holding Company Act of 1956. graphs (2) and (3) and subject to section 18(c) (c) CONSIDERATION OF EXISTING DISCLO- ‘‘(4) NOTICE.—To the fullest extent pos- of the Securities Act of 1933’’ and insert SURES.—In prescribing rules and revisions sible, the Commission shall notify the appro- ‘‘paragraphs (2), (3), and (4)’’. under subsection (a), the Federal financial priate regulatory agency prior to conducting In section 104(b)(1) of the Amendment in regulatory authorities shall consider the suf- an inspection of a wholesale financial insti- the Nature of a Substitute, strike ‘‘restrict’’ ficiency and appropriateness of then existing tution or institution described in subpara- and insert ‘‘significantly interfere with the laws and rules applicable to persons subject graph (D), (F), or (G) of section 2(c)(2), or ability of’’. to their jurisdiction, and may prescribe ex- held under section 4(f), of the Bank Holding In section 104(b)(1) of the Amendment in emptions from the rules and revisions re- Company Act of 1956. the Nature of a Substitute, strike ‘‘from en- quired by subsection (a) to the extent appro- [3. SAVINGS CLAUSE FOR CFTC] gaging,’’ and insert ‘‘to engage,’’. priate in light of the objective of this section At the end of subtitle A of title II of the to increase the consistency of disclosure In section 104(b)(2) of the Amendment in Amendment in the Nature of a Substitute, practices. the Nature of a Substitute, strike ‘‘As stated insert the following new section (and con- by the United States Supreme Court’’ and in- (d) ENFORCEMENT.—Any rule prescribed by form the table of contents accordingly): sert ‘‘In accordance with the decision of the a Federal financial regulatory authority pur- SEC. 210. RULE OF CONSTRUCTION. Supreme Court of the United States’’. suant to this section shall, for purposes of In section 104(b)(2) of the Amendment in enforcement, be treated as a rule prescribed Nothing in this Act shall supersede, affect, the Nature of a Substitute, strike subpara- by such regulatory authority pursuant to the or otherwise limit the scope and applicabil- ity of the Commodity Exchange Act (7 U.S.C. graph (B) and insert the following new sub- statute establishing such regulatory 1 et seq.). paragraph: authority’s jurisdiction over the persons to (B) subparagraph (A) shall not create any whom such rule applies. [4. CONSUMER PROTECTION] inference regarding State statutes and regu- (e) DEFINITION.—As used in this section, In subparagraph (A) of section 45(a)(1) of lations governing insurance sales and solici- the term ‘‘Federal financial regulatory au- the Federal Deposit Insurance Act, as added tations other than State statutes and regula- thority’’ means the Board of Governors of by section 308(a) of the Amendment in the tions described in subparagraph (A). the Federal Reserve System, the Securities Nature of a Substitute, insert ‘‘practices’’ In section 104(b) of the Amendment in the and Exchange Commission, the Comptroller after ‘‘retail sales’’. Nature of a Substitute, strike paragraph (3) of the Currency, the Federal Deposit Insur- In paragraph (1) of section 45(g) of the Fed- and insert the following new paragraph: ance Corporation, the Commodity Futures eral Deposit Insurance Act, as added by sec- (3) State statutes, regulations, orders, and Trading Commission, and any self-regulatory tion 308(a) of the Amendment in the Nature interpretations or otherwise shall not be pre- organization under the supervision of any of of a Substitute, strike ‘‘(1) No provision’’ and empted under paragraph (1) if they— the foregoing. insert ‘‘(1) IN GENERAL.—No provision’’. In paragraph (1)(B) of section 45(g) of the (A) relate to, or are enacted or issued for [2. SEC BACKUP AUTHORITY] Federal Deposit Insurance Act, as added by the purpose of regulating, the business of in- In section 17(i)(6) of the Securities Ex- section 308(a) of the Amendment in the Na- surance in accordance with the McCarran- change Act of 1934, as amended by section ture of a Substitute, insert ‘‘except as pro- Ferguson Act; 231(a) of the Amendment in the Nature of a vided in paragraph (2),’’ after ‘‘(B)’’. (B) apply only to entities that are not in- Substitute, after ‘‘For purposes of this sub- In paragraph (2) of section 45(g) of the Fed- sured depository institutions or wholesale fi- section’’ insert ‘‘and subsection (j)’’. eral Deposit Insurance Act, as added by sec- nancial institutions but which are engaged In section 17 of the Securities Exchange tion 308(a) of the Amendment in the Nature in the business of insurance; Act of 1934, as amended by section 231(a) of of a Substitute, strike ‘‘(2) Regulations’’ and (C) do not relate to, and are not enacted or the Amendment in the Nature of a Sub- insert ‘‘ ‘(2) COORDINATION WITH STATE LAW.— issued for the purpose of regulating— H3174 CONGRESSIONAL RECORD — HOUSE May 13, 1998 (i) cross-marketing; or regarding any transaction or relationship be- Federal banking agency or State insurance (ii) activities, including cross-marketing, tween such an insurance company and any regulator shall not constitute a waiver of, or which are subject to paragraph (2); affiliated depository institution. The Board otherwise affect, any privilege to which the (D) are applicable to and are applied in the may provide any other information to the information or material is otherwise subject. same manner with respect to an affiliate of appropriate State insurance regulator that (f) DEFINITIONS.—For purposes of this sec- an insured depository institution or a whole- the Board believes is necessary or appro- tion, the following definitions shall apply: sale financial institution as they are applica- priate to permit the State insurance regu- (1) APPROPRIATE FEDERAL BANKING AGENCY; ble to and are applied to those entities that lator to administer and enforce applicable INSURED DEPOSITORY INSTITUTION.—The terms are not affiliated with an insured depository State insurance laws. ‘‘appropriate Federal banking agency’’ and institution or a wholesale financial institu- (2) BANKING AGENCY INFORMATION.—Upon ‘‘insured depository institution’’ shall have tion; and the request of the appropriate insurance reg- the same meanings as in section 3 of the Fed- (E) do not prevent or significantly inter- ulator of any State, the appropriate Federal eral Deposit Insurance Act. fere with the ability of an insured depository banking agency may provide any informa- (2) BOARD; FINANCIAL HOLDING COMPANY; institution or wholesale financial institution tion of the agency regarding any transaction AND WHOLESALE FINANCIAL INSTITUTION.—The to engage in activities authorized for such or relationship between a depository institu- terms ‘‘Board’’, ‘‘financial holding com- institution under this Act or any other pro- tion supervised by such Federal banking pany’’, and ‘‘wholesale financial institution’’ vision of Federal law. agency and any affiliated company that is shall have the same meanings as in section 2 In section 104(b) of the Amendment in the engaged in insurance activities regulated by of the Bank Holding Company Act of 1956. Nature of a Substitute, after paragraph (3) such State insurance regulator. The appro- insert the following new paragraph: priate Federal banking agency may provide In paragraph (1) of section 309 of the (4) Paragraphs (1) and (2) shall not be con- any other information to the appropriate Amendment in the Nature of a Substitute, strued as affecting the jurisdiction of the se- State insurance regulator that the agency strike ‘‘restrict’’ and insert ‘‘significantly curities commission (or any agency or office believes is necessary or appropriate to per- interfere with the ability of’’. performing like functions) of any State, mit the State insurance regulator to admin- In paragraph (1) of section 309 of the under the laws of such State, to investigate ister and enforce applicable State insurance Amendment in the Nature of a Substitute, and bring enforcement actions, consistent laws. strike ‘‘from becoming’’ and insert ‘‘to be- with section 18(c) of the Securities Act of (3) STATE INSURANCE REGULATOR INFORMA- come’’. 1933, with respect to fraud or deceit or un- TION.—Upon the request of the Board or the In paragraph (1) of section 309 of the lawful conduct by any person, in connection appropriate Federal banking agency, a State Amendment in the Nature of a Substitute, with securities or securities transactions. insurance regulator may provide any exam- strike ‘‘from acquiring’’ and insert ‘‘to ac- After section 116 of the Amendment in the ination or other reports, records, or other in- quire’’. Nature of a Substitute, insert the following formation to which such insurance regulator In paragraph (3) of section 309 of the new section (and amend the table of contents may have access with respect to a company Amendment in the Nature of a Substitute, accordingly): which— strike ‘‘restrict’’ and insert ‘‘significantly SEC. 117. INTERAGENCY CONSULTATION. (A) is engaged in insurance activities and interfere with’’. (a) PURPOSE.—It is the intention of Con- regulated by such insurance regulator; and gress that the Board of Governors of the Fed- (B) is an affiliate of an insured depository [7. BROKERAGE COMMISSIONS] eral Reserve System, as the umbrella super- institution, wholesale financial institution, In section 3(a)(4)(B) of the Securities Ex- visor for financial holding companies, and or financial holding company. change Act of 1934, as amended by section 201 the State insurance regulators, as the func- (c) CONSULTATION.—Before making any de- of the Amendment in the Nature of a Sub- tional regulators of companies engaged in in- termination relating to the initial affiliation stitute, strike clause (ii) (relating to trust surance activities, coordinate efforts to su- of, or the continuing affiliation of, an in- activities) and insert the following: pervise companies that control both a depos- sured depository institution, wholesale fi- ‘‘(ii) TRUST ACTIVITIES.—The bank effects itory institution and a company engaged in nancial institution, or financial holding transactions in a trustee capacity, or effects insurance activities regulated under State company with a company engaged in insur- transactions in a fiduciary capacity in its law. In particular, Congress believes that the ance activities, the appropriate Federal trust department or other department that Board and the State insurance regulators banking agency shall consult with the appro- is regularly examined by bank examiners for should share, on a confidential basis, infor- priate State insurance regulator of such compliance with fiduciary principles and mation relevant to the supervision of compa- company and take the views of such insur- standards, and (in either case)— nies that control both a depository institu- ance regulator into account in making such ‘‘(I) is primarily compensated on the basis tion and a company engaged in insurance ac- determination. of an administration or annual fee (payable tivities, including information regarding the (d) EFFECT ON OTHER AUTHORITY.—Nothing on a monthly, quarterly, or other basis), a financial health of the consolidated organi- in this section shall limit in any respect the percentage of assets under management, or a zation and information regarding trans- authority of the appropriate Federal banking flat or capped per order processing fee, or actions and relationships between insurance agency with respect to an insured depository any combination of such fees, but does not companies and affiliated depository institu- institution, wholesale financial institution, otherwise receive brokerage commissions, or tions. The appropriate Federal banking agen- or bank holding company or any affiliate other similar remuneration based on effect- cies for depository institutions should also thereof under any provision of law. ing transactions in securities, that exceed share, on a confidential basis, information (e) CONFIDENTIALITY AND PRIVILEGE.— the cost incurred by the bank in connection with the relevant State insurance regulators (1) CONFIDENTIALITY.—The appropriate with executing securities transactions for regarding transactions and relationships be- Federal banking agency shall not provide trustee or fiduciary customers; and tween depository institutions and affiliated any information or material that is entitled ‘‘(II) does not publicly solicit brokerage companies engaged in insurance activities. to confidential treatment under applicable business, other than by advertising that it The purpose of this section is to encourage Federal banking agency regulations, or other effects transactions in securities in conjunc- this coordination and confidential sharing of applicable law, to a State insurance regu- tion with advertising its other trust activi- information, and to thereby improve both lator unless such regulator agrees to main- ties. the efficiency and the quality of the super- tain the information or material in con- vision of financial holding companies and fidence and to take all reasonable steps to In section 3(a)(4)(B) of the Securities Ex- their affiliated depository institutions and oppose any effort to secure disclosure of the change Act of 1934, as amended by section 201 companies engaged in insurance activities. information or material by the regulator. of the Amendment in the Nature of a Sub- (b) EXAMINATION RESULTS AND OTHER IN- The appropriate Federal banking agency stitute, strike clause (iv) (relating to certain FORMATION.— shall treat as confidential any information stock purchase plans) and insert the follow- (1) INFORMATION OF THE BOARD.—Upon the or material obtained from a State insurance ing: request of the appropriate insurance regu- regulator that is entitled to confidential ‘‘(iv) CERTAIN STOCK PURCHASE PLANS.— lator of any State, the Board may provide treatment under applicable State regula- ‘‘(I) EMPLOYEE BENEFIT PLANS.—The bank any information of the Board regarding the tions, or other applicable law, and take all effects transactions, as part of its transfer financial condition, risk management poli- reasonable steps to oppose any effort to se- agency activities, in the securities of an cies, and operations of any financial holding cure disclosure of the information or mate- issuer as part of any pension, retirement, company that controls a company that is en- rial by the Federal banking agency. profit-sharing, bonus, thrift, savings, incen- gaged in insurance activities and is regu- (2) PRIVILEGE.—The provision pursuant to tive, or other similar benefit plan for the em- lated by such State insurance regulator, and this section of information or material by a ployees of that issuer or its subsidiaries, if— May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3175 (aa) the bank does not solicit transactions Subtitle E—Preservation of FTC Authority area markets, and submarkets thereof or on or provide investment advice with respect to SEC. 141. AMENDMENT TO THE BANK HOLDING registered securities brokers and dealers the purchase or sale of securities in connec- COMPANY ACT OF 1956 TO MODIFY which have been purchased by depository in- tion with the plan; and NOTIFICATION AND POST-APPROVAL stitutions or depository institution holding ‘‘(bb) the bank’s compensation for such WAITING PERIOD FOR SECTION 3 companies; TRANSACTIONS. plan or program consists of administration Section 11(b)(1) of the Bank Holding Com- (2) the changes in business practices and fees, or flat or capped per order processing pany Act of 1956 (12 U.S.C. 1849(b)(1)) is the effects of any such changes on the avail- fees, or both, but the bank does not other- amended by inserting ‘‘and, if the trans- ability of venture capital, consumer credit, wise receive brokerage commissions, or action also involves an acquisition under and other financial services or products and other similar remuneration based on effect- section 4 or section 6, the Board shall also the availability of capital and credit for ing transactions in securities, that exceed notify the Federal Trade Commission of such small businesses; and the cost incurred by the bank in connection approval’’ before the period at the end of the (3) the acquisition patterns among deposi- with executing securities transactions under 1st sentence. tory institutions, depository institution this subclause (I). SEC. 142. INTERAGENCY DATA SHARING. holding companies, securities firms, and in- ‘‘(II) DIVIDEND REINVESTMENT PLANS.—The To the extent not prohibited by other law, surance companies including acquisitions bank effects transactions, as part of its the Comptroller of the Currency, the Direc- among the largest 20 percent of firms and ac- transfer agency activities, in the securities tor of the Office of Thrift Supervision, the quisitions within regions or other limited of an issuer as part of that issuer’s dividend Federal Deposit Insurance Corporation, and geographical areas. reinvestment plan, if— the Board of Governors of the Federal Re- [9. DERIVATIVE INSTRUMENTS] ‘‘(aa) the bank does not solicit trans- serve System shall make available to the At- actions or provide investment advice with torney General and the Federal Trade Com- In section 206(a)(1)(F) of the Amendment in respect to the purchase or sale of securities mission any data in the possession of any the Nature of a Substitute, strike clauses (ii) in connection with the plan; such banking agency that the antitrust and (iii), and insert the following: ‘‘(bb) the bank does not net shareholders’ agency deems necessary for antitrust review (ii) interest rates, except interest rate de- buy and sell orders, other than for programs of any transaction requiring notice to any rivative instruments (I) that are based on a for odd-lot holders or plans registered with such antitrust agency or the approval of security or a group or index of securities the Commission; and such agency under section 3, 4, or 6 of the (other than government securities or a group ‘‘(cc) the bank’s compensation for such Bank Holding Company Act of 1956, section or index of government securities); (II) that plan or program consists of administration 18(c) of the Federal Deposit Insurance Act, provide for the delivery of one or more secu- fees, or flat or capped per order processing the National Bank Consolidation and Merger rities (other than government securities); or fees, or both, but the bank does not other- Act, section 10 of the Home Owners’ Loan (III) that trade on a national securities ex- wise receive brokerage commissions, or Act, or the antitrust laws. change; or other similar remuneration based on effect- SEC. 143. CLARIFICATION OF STATUS OF SUBSIDI- ing transactions in securities, that exceed ARIES AND AFFILIATES. (iii) commodities, other rates, indices, or the cost incurred by the bank in connection (a) CLARIFICATION OF FEDERAL TRADE COM- other assets, except derivative instruments with executing securities transactions under MISSION JURISDICTION.—Any person which di- (I) that are securities or that are based on a this subclause (II). rectly or indirectly controls, is controlled di- group or index of securities (other than gov- ernment securities or a group or index of ‘‘(III) ISSUER PLANS.—The bank effects rectly or indirectly by, or is directly or indi- transactions, as part of its transfer agency rectly under common control with, any bank government securities); (II) that provide for activities, in the securities of an issuer as or savings association (as such terms are de- the delivery of one or more securities (other part of a plan or program for the purchase or fined in section 3 of the Federal Deposit In- than government securities); or (III) that sale of that issuer’s shares, if— surance Act) and is not itself a bank or sav- trade on a national securities exchange. ‘‘(aa) the bank does not solicit trans- ings association shall not be deemed to be a In section 206(a)(3) of the Amendment in actions or provide investment advice with bank or savings association for purposes of the Nature of a Substitute, strike ‘‘and’’ at respect to the purchase or sale of securities the Federal Trade Commission Act or any the end of subparagraph (B); redesignate sub- in connection with the plan or program; other law enforced by the Federal Trade paragraph (C) as subparagraph (D); and after Commission. ‘‘(bb) the bank does not net shareholders’ subparagraph (B), insert the following new (b) SAVINGS PROVISION.—No provision of buy and sell orders, other than for programs subparagraph: this section shall be construed as restricting for odd-lot holders or plans registered with (C) the term ‘government securities’ has the authority of any Federal banking agency the Commission; and the meaning provided in section 3(a)(42) of (as defined in section 3 of the Federal De- such Act, and, for purposes of this sub- ‘‘(cc) the bank’s compensation for such posit Insurance Act) under any Federal section, commercial paper, bankers accept- plan or program consists of administration banking law, including section 8 of the Fed- ances, and commercial bills shall be treated fees, or flat or capped per order processing eral Deposit Insurance Act. in the same manner as government securi- fees, or both, but the bank does not other- (c) HART–SCOTT–RODINO AMENDMENT.—Sec- ties; and wise receive brokerage commissions, or tion 7A(c)(7) of the Clayton Act (15 U.S.C. other similar remuneration based on effect- 18a(c)(7)) is amended by inserting before the [10. QUALIFIED INVESTOR] ing transactions in securities, that exceed semicolon at the end thereof the following: the cost incurred by the bank in connection ‘‘, except that a portion of a transaction is In paragraph (55)(A) of section 3(a) of the with executing securities transactions under not exempt under this paragraph if such por- Securities Exchange Act of 1934, as added by this subclause (III). tion of the transaction (A) requires notice section 207 of the Amendment in the Nature ‘‘(IV) PERMISSIBLE DELIVERY OF MATE- under section 6 of the Bank Holding Com- of a Substitute, strike ‘‘or’’ at the end of RIALS.—The exception to being considered a pany Act of 1956; and (B) does not require ap- clause (viii). broker for a bank engaged in activities de- proval under section 3 or 4 of the Bank Hold- In paragraph (55)(A) of section 3(a) of the scribed in subclauses (I), (II), and (III) will ing Company Act of 1956’’. Securities Exchange Act of 1934, as added by not be affected by a bank’s delivery of writ- SEC. 144. ANNUAL GAO REPORT. section 207 of the Amendment in the Nature ten or electronic plan materials to employ- (a) IN GENERAL.—By the end of the 1-year of a Substitute, strike the period at the end ees of the issuer, shareholders of the issuer, period beginning on the date of the enact- of clause (ix) and insert ‘‘; or’’. or members of affinity groups of the issuer, ment of this Act and annually thereafter, so long as such materials are— In paragraph (55)(A) of section 3(a) of the the Comptroller General of the United States Securities Exchange Act of 1934, as added by ‘‘(aa) comparable in scope or nature to shall submit a report to the Congress on section 207 of the Amendment in the Nature that permitted by the Commission as of the market concentration in the financial serv- of a Substitute, insert the following new date of the enactment of the Financial Serv- ices industry and its impact on consumers. clause after clause (ix): ices Act of 1998; or (b) ANALYSIS.—Each report submitted ‘‘(bb) otherwise permitted by the Commis- under subsection (a) shall contain an analy- ‘‘(x) the government of any foreign coun- sion. sis of— try. (1) the positive and negative effects of af- [8. ANTITRUST] [11. COMMUNITY NEEDS] filiations between various types of financial Strike subtitle E of title I of the Amend- companies, and of acquisitions pursuant to At the end of subtitle A of title I of the ment in the Nature of a Substitute and in- this Act and the amendments made by this Amendment in the Nature of a Substitute, sert the following new subtitle (and conform Act to other provisions of law, including any insert the following new section (and amend the table of contents accordingly): positive or negative effects on consumers, the table of contents accordingly): H3176 CONGRESSIONAL RECORD — HOUSE May 13, 1998

SEC. 109. RESPONSIVENESS TO COMMUNITY this legislation. They deserve a great Mr. LAFALCE. Madam Chairman, I NEEDS FOR FINANCIAL SERVICES. deal of credit for being able to roll up yield myself 4 minutes. (a) STUDY.—The Secretary of the Treasury, their sleeves and make reasonable Madam Chairman, the bill before us in consultation with the Federal banking compromises. The result is one every agencies (as defined in section 3(z) of the today is extremely complex and con- Federal Deposit Insurance Act) and the Se- Member can be proud to support, for it troversial. It would usher in a new era curities and Exchange Commission, shall promotes good public policy for Amer- and a new structure for financial serv- conduct a study of the extent to which ade- ican consumers and American busi- ices, one in which banking, investment, quate services are being provided as intended nesses. insurance and other services would be by the Community Reinvestment Act of 1977, The managers’ amendment will merged, and enormous financial re- including services in low- and moderate-in- strengthen investor and consumer pro- sources could be concentrated in huge come neighborhoods and for persons of mod- tection, clarify regulations for the financial conglomerates. est means, as a result of the enactment of businesses that have to comply with this Act. them, and make regulatory standards b 1415 (b) REPORT.—Before the end of the 2-year more consistent for all parties in the period beginning on the date of the enact- I wish to commend the authors of the ment of this Act, the Secretary of the Treas- insurance business, including banks. manager’s amendment, therefore, for ury, in consultation with the Federal bank- The agreement accomplishes all this offering a number of important ing agencies and the Securities and Ex- without imposing any needless regu- changes in H.R. 10 that I believe are es- change Commission, shall submit a report to latory burdens. sential if this legislation is to serve the the Congress on the study conducted pursu- The managers’ amendment improves needs and interests of consumers and ant to subsection (a) and shall include such upon investor and consumer protection investors. recommendations as the Secretary deter- by providing for SEC regulatory au- The amendment would correct a pro- mines to be appropriate for administrative thority over securities activities of vision relating to consumer protections and legislative action with respect to insti- wholesale financial institutions. It tutions covered under the Community Rein- in bank sales of insurance products charges Federal regulators to review vestment Act of 1977. that would otherwise have permitted the adequacy of the disclosure of fees any related State statute or regulation [12. PRIVACY STUDY] charged by financial institutions, but After section 109 (as so added) of the to preempt and nullify the consumer requires those regulators to consider protections in Federal law and regula- Amendment in the Nature of a Substitute, the sufficiency of existing regulations insert the following new section (and amend tion. the table of contents accordingly): when making that determination. The manager’s amendment clarifies Consumers have a rate to understand SEC. 110. REPORTS ON ONGOING FTC STUDY OF that the stronger Federal or State CONSUMER PRIVACY ISSUES. the fees they are charged by their fi- standard in terms of these specific pro- With respect to the ongoing multistage nancial institutions. This amendment tections provided to consumers will study being conducted by the Federal Trade will help ensure they get or continue to prevail. We had this in the Committee Commission on consumer privacy issues, the get the disclosure they need. on Banking and Financial Services Commission shall submit to the Congress an The amendment preserves the au- interim report on the findings and conclu- product; it is absolutely essential. I am thorities of State insurance and securi- delighted it is in the manager’s amend- sions of the Commission, together with such ties regulators. The amendment also ment. recommendations for legislative and admin- makes the applicability of the Barnett This change relates to specific con- istrative action as the Commission deter- ‘‘significant interference’’ test more mines to be appropriate, at the conclusion of sumer protection rules for insurance uniform throughout the bill to prevent each stage of such study and a final report at sales which, as I said, were in the origi- State insurance regulations from un- the conclusion of the study. nal Committee on Banking and Finan- fairly interfering with the insurance [13. TECHNICAL CORRECTION] cial Services product. A number of col- activities of banks. In section 322(b) of the Amendment in the leagues have related concerns which I The amendment ensures that banks Nature of a Substitute, strike paragraph (1) share about how the broader preemp- can enter the brave new world of affili- and insert the following: tion language in section 104 will affect (1) be a nonprofit corporation; ations and continue to provide and be paid for trust and other securities-re- and possibly preempt other State con- The CHAIRMAN. Is the gentleman lated services. sumer statutes. Regrettably, the man- from Virginia (Mr. BLILEY) the des- The managers’ amendment also re- ager’s amendment does not address ignee of the gentleman from Iowa (Mr. serve the application of Hart-Scott-Ro- this issue. LEACH)? dino, the act that requires certain fil- The amendment corrects a serious Mr. LEACH. Yes, Madam Chairman, ings with the Justice Department when shortcoming of the bill relating to a he certainly is. With great pride I des- big companies merge. The act does not provision originally sponsored by the ignate him such. eliminate any exemption that cur- gentlewoman from California (Ms. WA- The CHAIRMAN. Under the rule, the rently applies under that act. Rather, TERS) that now requires financial serv- gentleman from Virginia (Mr. BLILEY) it preserves current law as it would ices holding companies to offer and does offer the amendment in his own apply once H.R. 10 were signed into maintain low-cost, basic banking ac- right. law. counts for lower-income consumers, Pursuant to House Resolution 428, The managers’ amendment enjoys but provides for no enforcement au- the gentleman from Virginia (Mr. BLI- the strong support of Federal Reserve thority. The amendment, the man- LEY) and a Member opposed each will Board Chairman Greenspan, SEC ager’s amendment, provides this need- control 15 minutes. Chairman Levitt, State securities and ed authority to assure ongoing compli- The Chair recognizes the gentleman insurance regulators and a wide array ance with this important requirement. from Virginia (Mr. BLILEY). of financial service providers. The manager’s amendment also ad- Mr. BLILEY. Madam Chairman, I This amendment will benefit every dresses the problem of potential new yield myself such time as I may con- participant in our Nation’s financial and undisclosed charges to consumers sume. markets, from businesses to consum- in the cross-marketing of financial Madam Chairman, I rise in strong ers. I urge every Member of this body products by banks. It gives the finan- support of the managers’ amendment, to support this amendment. cial regulators authority to issue new which represents a bipartisan, bi-com- Madam Chairman, I reserve the bal- or revised rules that will improve the mittee agreement that will signifi- ance of my time. disclosure of information about fees, cantly improve H.R. 10. Mr. LaFALCE. Madam Chairman, I commissions and other costs to con- I thank my good friend and ranking claim the time in opposition to the sumers. Member, JOHN DINGELL, and Commit- amendment. The manager’s amendment also tee on Banking and Financial Services The CHAIRMAN. The gentleman makes other important changes to en- chairman, the gentleman from Iowa from New York (Mr. LAFALCE) is recog- hance SEC authority, to protect indi- (Mr. LEACH), for their commitment to nized for 15 minutes. vidual investors, to preserve the FTC’s May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3177 authority to review the antitrust im- sumer groups complain that it will be It is nevertheless clear that banking laws plications of bank mergers and to re- too easy for banks to woo customers designed for an economy 65 years ago don’t quire expanded studies of consumer pri- into higher-risk, higher-paying invest- work as well now. The goal of the 1933 Glass- ments with consumers thinking that Steagall Act was to keep banks separate vacy issues and CRA compliance by from insurance and securities firms as a way banks. their assets are protected. Clear guide- to protect banks. Madam Speaker, financial mod- lines are a must, says USA Today. Our But the law has weakened banks. They’ve ernization presents enormous potential amendment provides them. lost ground at home and abroad to more benefits to consumers in terms of new Taxpayers’ risks. Taxpayers are also flexible foreign financial firms. products, greater convenience and facing heightened risks. Banks might Responding to this concern, the Federal lower cost. But if we permit this proc- be tempted to use insured deposits as Reserve Board over the past decade used its leverage to make riskier investments, authority as regulatory of bank holding ess to undermine consumer rights and companies to chip away slowly at the Glass- rob their pocketbooks, we have knowing that if the investments turn Steagall wall, giving banks more leeway to achieved neither reform nor mod- sour, taxpayers will bail them out. set up securities subsidiaries. The Fed has ernization. That is what happened to the savings gone about as far as it can under the law. The manager’s amendment makes a and loans in the bailouts of the late Congress has to tear down the rest of the number of needed changes in H.R. 10 1980s. It cost taxpayers hundreds of bil- wall. that can help assure that the consumer lions of dollars. As lawmakers remove obstacles to the These are things against which the brave new world of finance, they must take will benefit. It does not go far enough, care not to leave the consumer behind. but what it does do it does in the right manager’s amendment protects. The direction, and therefore, I would urge manager’s amendment will also protect CONSUMERS UNION, adoption of the manager’s amendment. customers and consumers with strong Washington, DC, May 13, 1998. Madam Chairman, I reserve the bal- protections against risks and abuses as VOTE FOR PRO-CONSUMER AMENDMENTS TO H.R. ance of my time. banks move into other financial fields. 10 Mr. BLILEY. Madam Chairman, I Madam Chairman, I would urge my DEAR REPRESENTATIVE: We are writing to yield 6 minutes to the gentleman from colleagues to support this amendment, urge you to vote for amendments to H.R. 10 Michigan (Mr. DINGELL) and I ask and at this time I will include for the that make substantial improvements for unanimous consent that he may con- RECORD the previously referred to ma- consumers. If these amendments are not terials. adopted, we urge you to oppose the bill. The trol that time. following amendments will help make the PROTECTING CONSUMERS IS BIG PART OF The CHAIRMAN. Is there objection bill better for consumers. REFORMING BANK LAWS to the request of the gentleman from Restoration of Consumer Protections, Virginia? For many, many years, overhauling the Basic Banking Enforcement and Fee Disclo- banking industry has been one of Congress’ There was no objection. sure—Bliley-Dingell-Leach Amendment: favorite pastimes. Just promise to change H.R. 10 includes a package of consumer safe- (Mr. DINGELL asked and was given the nation’s Depression-era banking laws, permission to revise and extend his re- guards against deceptive and misleading and a host of competing industries starts bank insurance sales practices. Section marks.) flooding campaign coffers with cash in an ef- 308(g)(2) would undo these safeguards by al- Mr. DINGELL. Madam Chairman, I fort to protest their interests. The trick for lowing states to preempt them with laws lawmakers was to not actually pass any- want to thank my good friend, the gen- that are ‘‘contrary or inconsistent’’ to the thing. tleman from Virginia (Mr. BLILEY), the protections provided. The amendment would This week’s announcement of an $83 billion chairman of the Committee on Com- merger of Citicorp and Travelers Group fix the standard to conform with other con- merce. I yield myself 3 minutes. could bring that game to a halt. The mar- sumer banking laws, ensuring state laws Last month, Madam Chairman, USA riage will likely prompt other banks to start that provide greater protection than the fed- Today carried an editorial with a title, courting insurance and securities firms. All eral regulations would not be preempted. The amendment also mandates ongoing of which will put intense pressure on law- ‘‘Protecting Consumers Is a Big Part of commonplace with H.R. 10’s requirement makers to get off the dime and kill the 1933 Reforming Bank Laws.’’ With this that all depository institutions affiliated law that sought to minimize risks to deposi- amendment, the House will say re- with financial services holding companies soundingly, ‘‘We agree.’’ I would note tors by preventing banks from underwriting securities or insurance products. But break- provide low-cost, basic banking accounts. In to my colleagues that we have heard no ing down the financial service industry’s addition, the amendment requires improved condemnation nor criticism of the firewalls also raises serious risks to consum- fee and commission disclosures to enhance amendment. ers. comparison shopping; deletes sections relat- Consumers Union today submitted a Rip-off risks. The big promise to consum- ing to antitrust authority that would limit letter urging Members to vote for the ers from merging banking, securities and in- the ability of regulators to assess certain surance firms is one-stop shopping. But will competition problems associated with merg- manager’s amendment, and I will in- ers; preserves the authority of antitrust reg- sert that letter, and an explanation of those looking for a mortgage be pressured into buying other services from the lender? ulators; and closes further certain loopholes the manager’s amendment, following Or will banks offer package deals that seem in the securities laws as they apply to banks. my remarks. appealing but are far more expensive than if We urge you to vote for the amendment. Breaking down the barriers between each were bought separately? Some con- We strongly urge you to oppose the Baker financial services industries raises seri- sumer-protection ground rules are needed amendment that would rollback consumer ous risks to consumers. USA Today here. safeguards for retail sales activities and Uninsured risks. Will bank customers be eliminate Community Reinvestment Act raised some of these. (CRA) requirements for institutions with Rip-off risks. The big promise to con- misled about which products are insured and which aren’t? Bank deposits are FDIC in- less than $100 million in assets. sumers from merging banking, securi- sured—if the bank goes under, taxpayers Elimination of Banking and Consumer Pro- ties and insurance firms is one-stop pony up to cover the deposits. Stock funds visions—Leach-Bereuter-Campbell Amend- shopping. But that opens consumers up and other investment vehicles aren’t. Con- ment: The longstanding barrier between to enormous pressure to absorb all of sumer groups complain that it will be too banking and commerce is still needed to pre- the services that the banks can give. easy for banks to woo customers to riskier, vent our taxpayer-backed banking system Clearly, a person badly in need of a higher-paying investments, with customers from being exposed to the kinds of risks that have plagued Asian neighbors. H.R. 10 cur- loan is going to be extremely respon- thinking their assets are protected. Clear guidelines are a must. rently allows holding companies to derive 5% sive to that, hardly a situation which Taxpayer risks. Taxpayers also face of their revenues from commercial activi- we want. The manager’s amendment heightened risks. Banks might be tempted to ties, with some dollar limits. Some argue protects against that. use insured deposits as leverage to make that this is small enough to avoid risks but Uninsured risks is another. Will bank riskier investments, knowing that if the in- many large firms may still come under that customers be misled about which prod- vestments turn sour, taxpayers will bail limit and the commercial firm can grow once ucts are insured and which are not? them out. That’s what happened in the S&L in financial services holding company. The Bank deposits are FDIC insured; if the bailout of the late ’80s. It cost taxpayers amendment would delete the 5% basket. On hundreds of billions of dollars. Firms also the other hand, we urge you to oppose the bank goes under, taxpayers pony up to might be tempted to loan that money to Roukema-Vento-Baker-McCollum-LaFalce cover the deposits, as we had to do on struggling subsidiaries—again boosting tax- amendment that would increase the basket savings and loans. Stock funds and payer risk. Strong safeguards against this to 10% or, in some cases, 15% and thereby other investment vehicles are not. Con- ‘‘moral hazard’’ problem have to be in place. create more risks to taxpayers. H3178 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Even with the adoption of these pro-con- spection under this subsection. It is the in- hance the safety and soundness of the finan- sumer amendments that substantially im- tent of Congress that this Act maintain the cial system and the protection of consumers. prove the bill, we are extremely concerned SEC’s ability to enforce the Federal securi- 7. Brokerage Commission. Title II of the about language that would place at risk ties laws vigorously for the protection of in- bill requires the functional regulation of state consumer laws that are critical in this vestors. bank securities activities. Subtitle A amends increasingly complicated marketplace. Sec- 3. Saving Clause For CFTC: By letter dated the Securities Exchange Act of 1934 to elimi- tion 104(b)(1) would extend a sweeping pre- March 19, 1998, the Commodity Futures Trad- nate the outdated blanket exceptions for emption standard to any activity authorized ing Commission (CFTC) complained that the banks from the definitions of ‘‘broker’’ and not only under H.R. 10 but also under ‘‘any bill designates many CFTC-regulated prod- ‘‘dealer.’’ The bill preserves specific excep- other provision of Federal law.’’ Although ucts as ‘‘traditional banking products,’’ tions for some existing bank securities ac- this section was designed to address regu- thereby creating a misconception that banks tivities based on the limited nature of those latory turf disagreements between insur- dealing in certain defined derivatives might activities. In general, the fifteen exceptions ance, securities and banking interests, this need only comply with Federal banking laws reflect our intent to exclude certain existing language places at risk a host of state con- and not the Commodity Exchange Act (CEA). banking activities while ensuring that ac- sumer laws that protect consumers from ex- This is not the intent of the Congress. This tivities that require securities regulation are subject to the securities laws. These excep- cessive fees and otherwise protect consumers bill and this amendment do not address the tions are designed to assure that activities and has a chilling effect on state legislators. scope of the CFTC’s jurisdiction under the that most need to be subject to securities The Kucinich amendment, that would have CEA. Accordingly, section 210 explicitly pre- regulation in an era of financial moderniza- addressed this problem, was not ruled in serves the current extent of the authority of tion and increasing competition do not es- order. Because consumers are still at risk the CFTC under the CEA. 4. Consumer Protection. Section 308 of the cape that regulation. under this bill, Consumers Union cannot sup- It is the intent of Congress that banks that port the bill. bill adds a new section 45 of the Federal De- posit Insurance Act directing the Federal act like brokerage firms must be regulated Sincerely, banking agencies to prescribe consumer pro- as brokerage firms unless these activities MARY GRIFFIN. tection regulations for insurance sales by in- are limited in nature, narrowly constrained, sured depository institutions and wholesale and subject to limits to preclude the con- EXPLANATION OF MANAGER’S AMENDMENT financial institutions. The regulations cover cerns that require broker-dealer oversight. The Bliley-Dingell-Leach manager’s retail sales practices, disclosures and adver- To that end, the amendment makes clear amendment consists in the main of the in- tising (especially with respect to uninsured that a bank will not be considered a vestor and consumer protections originally status, investment risk, and coercion), prohi- ‘‘broker’’ only when it effects transactions in contained in the Dingell amendment. It ad- bition on misrepresentations and domestic a trustee capacity, or in a fiduciary capacity dresses concerns raised by the Federal and violence discrimination, separation of some in its trust department, subject to key limi- State regulators and consumer groups, and activities, and the establishment of a con- tations, or when, acting in its transfer agent incorporates the historical positions of the sumer grievance mechanism. The amend- capacity, it conducts brokerage transactions Commerce Committee on matters within its ment responds to concerns of consumer for: (1) employee benefit plans, (2) dividend securities and insurance jurisdiction under groups and banks with the effect of this pro- reinvestment plans, and (3) open enrollment the rules of the House. This statement is of- vision on other laws. It provides that the plans, as long as the bank does not solicit fered as clarification of the meaning of those regulations prescribed under section 45 will transactions, or provide investment advice provisions and shall constitute the legisla- preempt State law only if the Federal Re- concerning the purchase and sale of securi- tive history. I am pleased to have been able serve, Comptroller of the Currency, and ties, or receive brokerage commissions ex- to contribute to this important effort. FDIC jointly determine that the joint Fed- ceeding the bank’s execution costs. To take 1. Customer Fee Disclosure. Section 251 di- eral regulations provide consumers with advantage of this exception, these excepted bank activities must be regularly examined rects the Federal financial regulators to re- greater protection. It is not the intention of by bank examiners for compliance with fidu- view the adequacy of existing disclosures of Congress that this preemption provision ciary principles and standards. It is the in- fees, commissions, markups, and other costs, shall override or be read in a manner incon- tent of Congress that such examinations be and, using existing authorities, to consider sistent with section 104 of this Act. improving their accuracy, simplicity, com- 5. Lifeline Banking. Section 103 of the bill specifically focused on these activities and pleteness, and consistency. It is the intent of adds new section 6 to the Bank Holding Com- rigorous in nature. The amendment also this provision that the regulators, prior to pany Act. Section 6(b) establishes eligibility spells out that banks that use these excep- adopting any new rules or rule amendments criteria for forming a financial holding com- tions may be primarily compensated by an administration or annual fee, a percentage of pursuant to section 251, would first consult pany and engaging in its expanded activities. assets under management, a flat or capped with each other, and with the appropriate One of the requirements is that the subsidi- per order processing fee, or any combination State financial regulators, in determining ary insured depository institutions of such of such fees. Such fees must not be struc- whether any new rules or rule amendments company offer and maintain low-cost basic tured in such a way that they give rise to the are appropriate, necessary, and in the public banking accounts. The amendment provides sales incentives inherent in brokerage com- interest. It is the intent of Congress that the for ongoing compliance as is the case with Securities and Exchange Commission (SEC) missions. the other requirements. The provision does 8. Antitrust. The bill substantially stream- should take the lead in setting disclosure not affect banks who choose not to form fi- lines antitrust review of bank acquisitions standards with respect to securities, and nancial holding companies. and mergers under the Federal Reserve. The that the Federal bank regulators should 6. State Securities and Insurance. Section amendment strikes that language and re- apply the same standards as those adopted 104 of the bill would preempt all State laws, places it with language preserving the au- by the SEC with respect to securities sold by including State securities law and State in- thority of the appropriate antitrust regu- banks. It is the intent of Congress that dis- surance solvency laws, not specifically pre- lators, the Attorney General and the Federal closure for consumers and investors be im- served with regard to affiliations and activi- Trade Commission. It provides for inter- proved so that they can make informed deci- ties authorized by this Act or any other pro- agency data sharing to facilitate antitrust sions. The Congress intends to give the fi- vision of Federal law. The amendment adds a reviews and requires a GAO report on mar- nancial regulators flexibility to achieve this new paragraph (4) to section 104(b) to pre- ket concentration in the financial services goal through any effective means, including serve State regulation of securities. State industry and its impact on consumers. It is increasing the disclosure of prices for debt regulation of insurance underwriting is pre- the intent of Congress that the ongoing con- securities. served under a new paragraph (3) that sets solidation and merger activity in the finan- 2. SEC Backup Authority. Section 231(a) forth five tests that must be met. The cial services industry undergo complete and adds a new subsection (j) to section 17 of the amendment makes clear that the U.S. Su- rigorous review in order to preserve competi- Securities Exchange Act to give the SEC ex- preme Court Barnett Bank decision’s ‘‘pre- tion and protect consumers. plicit securities inspection backup authority vent or significantly interfere’’ standard will 9. Derivative Instruments. The bill pre- over wholesale financial holding companies be applicable to both affiliations and activi- serves the ability of the SEC to determine and other bank affiliates for the purpose of ties with respect to allowable State regula- what is a ‘‘security,’’ and when new bank monitoring and enforcing compliance with tion of bank insurance sales. Federal bank- products are ‘‘securities,’’ by providing a def- the Federal securities laws. In the same ing and State insurance regulators are di- inition of ‘‘traditional banking product’’ as a manner as bank regulators are required to rected to share information (consistent with stand-alone statute—not in the Federal secu- rely on the SEC’s oversight before inspecting applicable confidentiality and other privi- rities laws or in the banking laws. The defi- registered broker-dealer affiliates of banks, leges) regarding financial holding companies nition includes such things as deposit ac- the SEC is required, to the fullest extent that own insurance companies, and Federal counts, letters of credit, credit card debit ac- possible, to defer to the reports of examina- banking agencies shall consult with the ap- counts, certain loan participations, and cer- tions of banks made by bank regulators and propriate State insurance regulator before tain derivative instruments that tradition- of insurance companies made by insurance making any determination regarding initial ally have not been regulated as securities. If regulators and to provide notice to the ap- or continued affiliations with insurance banks sell products within the scope of this propriate regulatory agency. Reasonable companies. It is the intent of Congress that definition, they are not required to register limits are imposed on the scope of any in- these regulators cooperate in order to en- as a broker or a dealer. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3179 Derivatives involving or relating to foreign with two or three, because it is attrac- This House has been a firm supporter currencies, interest rates, commodities, tive to come in and buy a variety of of States’ rights and, in particular, other rates, indices or other assets, except services. I think there is a great need leaving the regulation of insurance to instruments that are (1) based on a security for that. It certainly protects and regu- the States. However, this House also including a group or index of securities, (2) that provide for the delivery of one or more lates the whole question of dealing believes that States should not regu- securities, or (3) that trade on a national se- with what is insured and what is not late the manner which has, either di- curities exchange, are defined as traditional insured, and provides that kind of secu- rectly or indirectly, the effect of pre- banking products. If a derivative other than rity for the consumer that uses these venting or significantly interfering an interest rate swap or a foreign currency services. It brings a sense of balance with the ability of a bank to engage in swap is a security, it would not qualify as a between our insurance entities and, as activities that it is properly authorized traditional banking product unless it was well, our banking entities; and I would to do by Federal law. The manager’s based on a government security, commercial say, Madam Chairman, that it helps us amendment addresses this issue by paper, banker’s acceptance or commercial understand this merging market and clarifying these relationships. bill or a group or index of one of more of Second, the manager’s amendment at these products. The amendment makes tech- brings protection there as well. nical and clarifying changes to this provision I simply say that we are going in the my request strengthens the antitrust to ensure that the SEC maintains jurisdic- right direction, but I would also argue laws in a number of ways. It restores tion over derivatives that are securities. very vigorously against the Baker the Federal Reserve’s ability to con- The bill includes a new provision that es- amendment that seeks to eliminate the sider anticompetitive issues in review- tablishes a process by which the SEC shall Community Reinvestment Act. We can ing the acquisition of banks; it bolsters decide whether banks that sell ‘‘new banking protect small banks, but we need to the Federal Trade Commission’s anti- products’’ that are securities must register protect small business owners and mi- trust authority, and it assures that fi- with the SEC as brokers, dealers, or both. nancial affiliations that will be permis- Specifically, the SEC must engage in a rule- nority communities who have yet to making proceeding and must determine (1) participate in the financial structure of sible under this bill will receive appro- that the new product is a security and (2) this Nation. priate antitrust review by the Depart- that imposing a registration requirement on The Community Reinvestment Act ment of Justice and the FTC. a bank to sell the new product is necessary has for long years provided investment Other provisions of the manager’s or appropriate in the public interest and for in the inner cities, rebuilding homes amendment incorporate amendments the protection of investors. Under this provi- and businesses. How dare we go to that were filed by the gentleman from sion, during the rulemaking process, the SEC Michigan (Mr. DINGELL), the gentleman is also required to consult with and consider move to eliminate an act that has just begun? We may need some tinkering, from Massachusetts (Mr. MARKEY), the the views of the appropriate banking agen- gentleman from New York (Mr. LA- cies concerning the proposed rules and the but we do not need any elimination. FALCE), and the gentleman from Min- impact of those rules on the banking indus- I stand on behalf of the women busi- try. ness owners in inner-city communities, nesota (Mr. VENTO) last month and dur- 10. Qualified Investors. The amendment ex- minorities, Hispanics, African Ameri- ing the most recent consideration of pands the bill’s definition of ‘‘qualified in- cans and Asians who are seeking to re- the bill. Finally, the manager’s amendment vestor’’ to include the governments of for- build their communities, the innova- eign countries. includes a number of subtleties as well tive American community who is just 11. Community Needs. The amendment re- as a number of studies and consumer beginning to use the Community Rein- sponds to the concerns of consumer and com- provisions. I believe it is well-balanced vestment Act and having banking in- munity groups about the impact of this bill and thoughtful, protects the consumer, and the recent megamergers on the cost and stitutions that are supportive. as well as establishes a clear guideline availability of financial services to commu- The Baker amendment is wrong-di- for certain competition in financial nities and persons of modest means. The rected in eliminating the Community services. I think it deserves the support amendment requires the Treasury Depart- Reinvestment Act. The manager’s of this body. ment, in consultation with the Federal bank- amendment does attack the problem ing regulators and the SEC, to study the im- Mr. LAFALCE. Madam Chairman, I pact of the changes affected by this Act on from a consumer’s perspective and yield 1 minute to the gentleman from brings the right kind of balancing to Community Reinvestment Act obligations Minnesota (Mr. VENTO). and performance, and to submit a report to this industry. I thank the ranking Mr. VENTO. Madam Chairman, I in- Congress with any appropriate recommenda- member, and as well the chairman of tend to enter into a colloquy with the tions based on the results of that study. this committee for this legislation. gentleman from Iowa (Mr. LEACH), 12. Privacy Study. The amendment re- Mr. BLILEY. Madam Chairman, I chairman of the Committee on Bank- quires the Federal Trade Commission to sub- yield such time as he may consume to mit to Congress an interim report on its on- ing and Financial Services. the gentleman from Iowa (Mr. LEACH), going study of consumer privacy issues to- Madam Chairman, I would ask the gether with recommendations for legislative chairman of the Committee on Bank- gentleman to clarify that it is our mu- and administrative action. This responds to ing and Financial Services. tual understanding that the soon-to-be growing concerns about the use and sharing Mr. LEACH. Madam Chairman, I created electronic accounts, ETA ac- of confidential customer information for thank my distinguished friend for counts, would be one way to satisfy the cross-marketing and other purposes. yielding to me. low-cost, basic banking provisions in Madam Chairman, I reserve the bal- I rise also in support of this man- the bill and the requirement that ance of my time. ager’s amendment. The amendment be- banks help meet the credit needs of Mr. LAFALCE. Madam Chairman, I fore us was negotiated on a bipartisan, local communities under the Commu- yield 2 minutes to the gentlewoman multiple-committee basis. It contains nity Reinvestment Act. The ETA ac- from Texas (Ms. JACKSON-LEE). changes requested by the Committee counts are those that are required to (Ms. JACKSON-LEE of Texas asked on Agriculture, the Committee on the be established for Americans to receive and was given permission to revise and Judiciary, and the Committee on Ways Federal benefits or payments by the extend her remarks.) and Means. The most significant Debt Collection Improvement Act of Ms. JACKSON-LEE of Texas. Madam changes are the insurance provisions 1996 (Chapter 10, Public Law 104–134). Chairman, on Court TV we always hear and the provisions relating to anti- Mr. LEACH. Madam Chairman will ‘‘order in the court’’ as one of the call- trust. the gentleman yield? ing cries of that popular show. I think The revisions contained in the Mr. VENTO. I yield to the gentleman this manager’s amendment brings amendment relating to the insurance from Iowa. order to the financial services struc- provisions are intended to help strike Mr. LEACH. Madam Chairman, that ture that is so much needed by the con- an appropriate balance between the is precisely my understanding, and I sumers. need of the States to regulate insur- would like to compliment the gen- It particularly regulates and protects ance activities in banks and the ability tleman for his work in this field as well the consumers as they come into the of national banks to engage in insur- as for his articulation of a very com- banking institution needing a variety ance activities without being subject mon-sense approach. of services, maybe needing only one to State laws that prevent or signifi- Mr. VENTO. Madam Chairman, re- and winding up buying or going away cantly interfere with that activity. claiming my time, I want to thank the H3180 CONGRESSIONAL RECORD — HOUSE May 13, 1998 chairman for his clarification, and I provisions with respect to the required pened in the recent penalty that is would urge Members to support this ongoing GAO annual reports, the dif- being highlighted by my colleagues. It amendment, and I intend to speak on it ferent cultures that exist within the fi- is exactly this type of rigorous regula- further myself. nancial entities, insurance, securities, tion and rigorous exercise by the regu- Mr. BLILEY. Madam Chairman, and banking. I am very concerned what lators that will prevent the type of could I inquire as to how much time I this may do in terms of venture capital abuses that occurred with the S&L cri- have remaining? and the other capacities. sis. Without rigorous regulation no The CHAIRMAN. The gentleman The consumer protection provisions corporate structure will suffice. The from Virginia (Mr. BLILEY), has 4 min- with regard to this, I think there are law must provide for enforcement and utes, the gentleman from Michigan some concerns that banks have even a willing watch dog. (Mr. DINGELL) has 3 minutes, and the with this manager’s amendment con- gentleman from New York (Mr. LA- cerning what happens with insurance We worked mightily in 1989 and 1991 FALCE) has 81⁄2 minutes. sales. Obviously, the banks are not sat- to pass new regulations on banks and Mr. BLILEY. Madam Chairman, do I isfied even with the LaFalce-Vento S&Ls to prevent any repeat of that have the right to close? amendment, but I think we are willing type of crisis. We hope that law works. The CHAIRMAN. The gentleman is to accept that and move forward; such We have not seen the ups and downs in correct. provisions represent progress. the economy to demonstrate that it Mr. BLILEY. Madam Chairman, I re- I appreciate the lifeline provisions will work, I will admit freely, but I serve the balance of my time. and note the CRA study provisions and think we have some pretty sound law Mr. LAFALCE. Madam Chairman, I question the focus. What is conspicu- in place to deal with that, forged in the yield 2 minutes to the gentleman from ously absent from this, of course, is the heat of a red hot furnace catastrophe, Texas (Mr. BENTSEN). good work in terms of extending CRA (Mr. BENTSEN asked and was given the S&L crisis. that was actually initiated in a pre- I think what is proved or dem- permission to revise and extend his re- vious March 30 Dingell-LaFalce amend- onstrated by the reports that we have marks.) ment. Mr. BENTSEN. Madam Chairman, I would also like to comment on SEC had here with regard to Nations Bank/ this is an amendment on which I am in enforcement, and the National Associa- Dean Witter role with profound agreement with my colleague tion of Securities Dealers, enforcement NationsSecurities, is that the operat- from Michigan (Mr. DINGELL) and the they do very important regulatory ing subsidiary, when functionally regu- two managers of the bill, the gen- work. My colleague from the Commit- lated, can be adequately controlled and tleman from Virginia (Mr. BLILEY), and tee on Banking and Financial Services penalized, just as we control securities the gentleman from Iowa (Mr. LEACH). just pointed out the important work in firms when indeed they do run afoul of When H.R. 10 left the Committee on terms of having functional regulation. the law, as we did in 1996 with $325 mil- Banking and Financial Services last In 1996, as an example, the Securities lion worth payback and $67 million in year, it included an amendment that I and Exchange Commission, under its fines. and our colleague, the gentleman from authority, actually imposed over $325 North Carolina (Mr. WATT), had drafted Mr. DINGELL. Madam Chairman, I million worth of assessments reflected yield 1 minute to the distinguished which would provide for securities in terms of illegal profits, and $67 mil- gentleman from New York (Mr. MAN- sales in banks to be under the auspices lion worth of civil penalties. The S.E.C. of the National Association of Security TON), the ranking member of the sub- in 1996 noted 180 civil actions, 239 ad- committee. Dealers. I think that the idea of in- ministrative proceedings and 32 civil creasing SEC regulatory oversight of and criminal contempt proceedings. Mr. MANTON. Madam Chairman, I Bank Securities sales that is in the It has been pointed out repeatedly rise in strong support of the manager’s manager’s amendment is a step in the here that Nations Securities, amendment. By voting for the man- right direction. I commend the gen- NationsBank’s Nations Securities, has ager’s amendment, we ensure the most tleman for offering it. had a penalty most recently reported important goal of this legislation is re- b 1430 in the paper derived from a 1994 inci- alized. I think we should have functional dent. Incidentally, it was not just Na- This amendment will make certain regulation, and I think we have to have tions Securities, it was Dean Witter that consumers and investors receive market modernization, but I think we and Nation’s Bank who jointly owned clear and meaningful fee disclosure also need to ensure that consumers are Nation’s Securities. Dean Witter, of when buying products from a financial protected, and that the playing field is course, is a securities firm, but other institution. Simply stated, this means equal between both in-bank and out-of- firms have also had some problems. It that when someone buys a product bank securities sales. This amendment was, of course, functional regulation from a bank, they will be provided with that, in that instance, actually penal- moves in that direction. information on all of the costs associ- ized Nations Securities. That is not I would encourage my colleagues to ated with that purchase. vote for the manager’s amendment. We changed in this measure or in the La- obviously have profound disagreements Falce-Vento amendment. This amendment also considers how on other issues, but this is, I think, a But other firms also have had some the Community Reinvestment Act good amendment. As the gentleman very significant fines in 1996, and I re- should be incorporated under this new mentioned the issue of proper regula- alize it is very important we see this holding company structure, where fi- tion of bank mutual fund sales has type of discipline, this regulatory en- nancial holding companies or their sub- come up, and we know that the Federal forcement. A securities firm Lazard sidiaries can potentially hold the as- bank regulators have had difficulties in along with Merrill Lynch had a $10 mil- sets of a bank. their ability to properly regulate the lion fine in 1996. PaineWebber was fined This amendment requires that a sales of these instruments and protect in a number of instances, as were many study be conducted on whether ade- investors. This amendment should go a others. I could go through the entire quate services are being provided to long way toward correcting this mat- list and point out the violations of se- low- and moderate-income neighbor- ter. curities firms—mistakes have been hoods. Because the new holding com- I appreciate the gentleman for offer- made and penalties exacted. pany regime will allow for greater Suffice it to say that the Securities ing it, and I intend to support it. flexibility in how financial institutions Mr. LAFALCE. Madam Chairman, I and Exchange Commission is doing its job. I commend them for that. I com- are structured and financed, how CRA yield 3 minutes to the gentleman from will be affected should certainly be ex- Minnesota (Mr. VENTO). mend them for the work they did with amined by the regulators that oversee Mr. VENTO. Madam Chairman, I Nations Bank and Dean Witter, the thank the gentleman for yielding me owners of Nations Securities. It is in- them. the time. teresting to note that, but functional These are just a few of the consumer Madam Chairman, I rise in support of regulation would not change under this and investors’ protections built into this manager’s amendment, which in- bill, under the operating subsidiary, the manager’s amendment. I believe clude the Vento amendment antitrust any different from what actually hap- H.R. 10 is improved significantly by May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3181 this amendment, and I urge all of my financial institutions. I thank the gen- The manager’s amendment does not colleagues to support it. tleman for making that possible. deal with that. So vote yes on the man- Mr. DINGELL. Madam Chairman, I The CHAIRMAN. All time of the gen- ager’s amendment, but that is not yield 1 minute to the distinguished tleman from Michigan (Mr. DINGELL) enough to turn a bad bill into a good gentlewoman from Colorado (Ms. has expired. bill. DEGETTE). The gentleman from New York (Mr. Mr. BLILEY. Madam Chairman, I Ms. DEGETTE. Madam Chairman, I LAFALCE) has 4 minutes remaining. yield myself such time as I may con- thank the gentleman for yielding me Mr. LAFALCE. Madam Chairman, I sume. the time. yield myself such time as I may con- Madam Chairman, this has been a Madam Chairman, I am in strong sume. good debate. It is now coming to a support of the manager’s amendment, Madam Chairman, I am delighted close, and we will shortly have a vote. primarily because of the numerous con- that everyone who has spoken has spo- This amendment is a good amendment. sumer protection provisions that it ken in support of this manager’s It represents the House at its best: two contains. I am particularly concerned amendment, because the objectives committees, two parties working side about preservation of the community that it would effectuate are certainly by side in the interests of the Nation. services that are intended by the Com- in the public interest. That is the way it should be more munity Reinvestment Act. There are still, however, even after often. Sadly, unfortunately, it is not. The Community Reinvestment Act is we pass this manager’s amendment, a But this is a good amendment. We are vitally important to many, many areas number of deficiencies. One of them going to have a long day, so let us have in this country. In my district in Den- has not been mentioned very much, the question. ver, for example, the Community Rein- and I would like to address that now. Madam Chairman, I yield back the vestment Act has been used to revital- That is the issue of the redomestica- balance of my time. ize our local urban economy. tion of mutual insurance companies. I The CHAIRMAN. The question is on I was concerned in the underlying am very concerned about that. the amendment offered by the gen- bill that because of the structuring, It is my understanding that there are tleman from Virginia (Mr. BLILEY). that the Community Reinvestment Act approximately 70 million Americans The question was taken; and the would be undermined. I retain those who have ownership in mutual insur- Chairman announced that the ayes ap- concerns, but I feel that the 2-year re- ance companies. It is my understand- peared to have it. ing that this bill has a provision within view period contained in the manager’s RECORDED VOTE it that would allow State law to pre- amendment will give us ample time to Mr. BLILEY. Madam Chairman, I de- empt Federal law, not when the State see the effect of H.R. 10 on the CRA. mand a recorded vote. I hope and I urge that Congress, at law gives greater consumer protection, A recorded vote was ordered. the end of this 2-year period, will take but when the State law gives lesser The vote was taken by electronic de- a strong look as if the CRA is being consumer protection. Further, I under- vice, and there were—ayes 407, noes 11, preserved and expanded, and take stand that this State law then could not voting 14, as follows: quick legislative action if it is not, so become the operative national law for our urban communities, our small these mutual insurance holding compa- [Roll No. 143] women- and minority-owned busi- nies. AYES—407 nesses, can be preserved, while at the This is very worrisome to me, be- Abercrombie Campbell Dunn same time we have financial expansion cause there are a good many States Ackerman Canady Edwards Aderholt Cannon Ehlers and modernization. that want to protect the rights of indi- Allen Capps Ehrlich Mr. DINGELL. Madam Chairman, I viduals who own a stake in mutual in- Andrews Cardin Emerson yield 1 minute to my distinguished surance companies. This Federal legis- Archer Carson Engel Armey Castle English friend, the gentleman from Massachu- lation will permit certain State legis- Baesler Chabot Ensign setts (Mr. MARKEY). latures to enact legislation which Baker Chambliss Eshoo Mr. MARKEY. Madam Chairman, I would then entice the transfer of the Baldacci Chenoweth Etheridge thank the gentleman for yielding me corporate headquarters to their State, Ballenger Clayton Evans Barcia Clement Everett the time, and I want to congratulate and enable them to operate on a na- Barr Clyburn Ewing him and the gentleman from Virginia tional basis on the basis of the lowest Barrett (NE) Coble Farr (Mr. BLILEY) and the gentleman from common denominator. The manager’s Barrett (WI) Coburn Fawell Bartlett Collins Fazio A ALCE New York (Mr. L F ), and all those amendment does not deal with this Barton Combest Filner that worked to put together this bipar- issue. Bass Condit Foley tisan manager’s amendment, because it The other big provision, of course, is Becerra Conyers Forbes really does help to close up a lot of the the Community Reinvestment Act. Bentsen Cook Ford Bereuter Cooksey Fossella problem areas that had developed in This is very fundamental. The man- Berman Costello Fowler the drafting of the legislation with re- ager’s amendment does nothing about Berry Cox Fox gard to how investors and depositors the mandate in the bill that if they Bilbray Coyne Frank (MA) want to engage in new, innovative Bilirakis Cramer Franks (NJ) were going to be protected in the legis- Bishop Crane Frelinghuysen lation. products and services, they must, they Blagojevich Crapo Frost Specifically, I speak here as the must move their activities into an af- Bliley Cubin Furse ranking Democrat on the Subcommit- filiate that is not subject to the Com- Blumenauer Cummings Gallegly Blunt Cunningham Ganske tee on Telecommunications, Trade, and munity Reinvestment Act; that is, if Boehlert Danner Gejdenson Consumer Protection. We had real they want to remain a national bank. Boehner Davis (FL) Gekas questions about whether or not the So they have the option of either be- Bonilla Davis (IL) Gephardt Federal Trade Commission was going coming a financial services holding Bonior Davis (VA) Gillmor Bono Deal Gilman to have the authority to be able to fol- company, which most small national Borski DeFazio Goodlatte low these antitrust questions, as banks banks would not want to do, or they Boswell DeGette Goodling affiliated with insurance or with finan- have the option of converting from the Boucher Delahunt Gordon Boyd DeLauro Goss cial institutions, securities institu- national bank charter to a State bank Brady DeLay Graham tions, or even with nonfinancial insti- charter, because most State banks Brown (CA) Deutsch Granger tutions. would permit them to conduct these Brown (FL) Diaz-Balart Green In this amendment, we clarify that activities in operating subsidiaries, Brown (OH) Dickey Greenwood Bryant Dicks Gutierrez the Federal Trade Commission has the where the regulators have said that Bunning Dingell Gutknecht antitrust authority to be able to look you have as much safety and soundness Burr Dixon Hall (OH) at these transactions, and that the as you would in the affiliate. So it Burton Doggett Hall (TX) Buyer Dooley Hamilton Hart-Scott-Rodino antitrust review is would permit the undermining of the Callahan Doolittle Hansen retained in a way that covers these Community Reinvestment Act, the un- Calvert Doyle Hastert bank mergers with financial and non- dermining of the national bank system. Camp Duncan Hastings (FL) H3182 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Hastings (WA) McHugh Salmon b 1503 ‘‘(A) the activity is a financial activity (as Hayworth McInnis Sanchez defined in paragraph (4)); Hefley McIntosh Sanders Mr. BACHUS changed his vote from ‘‘(B) the national bank is well capitalized, Herger McIntyre Sandlin ‘‘aye’’ to ‘‘no.’’ well managed, and achieved a rating of ‘sat- Hill McKeon Sanford Mr. HEFLEY and Mr. BOSWELL Hilleary McKinney Sawyer isfactory record of meeting community cred- Hinchey McNulty Saxton changed their vote from ‘‘no’’ to ‘‘aye.’’ it needs’, or better, at the most recent exam- Hinojosa Meehan Schaefer, Dan So the amendment was agreed to. ination of the bank; Hobson Meek (FL) Schumer The result of the vote was announced ‘‘(C) all depository institution affiliates of Hoekstra Meeks (NY) Scott such national bank are well capitalized, well Holden Menendez Sensenbrenner as above recorded. The CHAIRMAN pro tempore (Mr. managed, and have achieved a rating of ‘sat- Hooley Metcalf Serrano isfactory record of meeting community cred- Horn Mica Sessions DICKEY). It is now in order to consider it needs’, or better, at the most recent exam- Hostettler Millender- Shadegg amendment No. 2 printed in part 2 of Houghton McDonald Shaw ination of each such institution; and Hoyer Miller (CA) Shays House Report 105–531. ‘‘(D) the bank has received the approval of Hulshof Miller (FL) Sherman AMENDMENT NO. 2 OFFERED BY MR. LAFALCE the Comptroller of the Currency. Hunter Minge Shimkus Mr. LAFALCE. Mr. Chairman, I offer ‘‘(2) NO EFFECT ON EDGE ACT OR AGREEMENT Hutchinson Mink Shuster an amendment. CORPORATIONS.—Paragraph (1) shall not Hyde Moakley Sisisky apply with respect to any subsidiary which is Inglis Mollohan Skeen The CHAIRMAN pro tempore. The a corporation organized under section 25A of Istook Moran (KS) Skelton Clerk will designate the amendment. Jackson (IL) Moran (VA) Slaughter the Federal Reserve Act or a corporation op- Jackson-Lee Morella Smith (MI) The text of the amendment is as fol- erating under section 25 of such Act. (TX) Murtha Smith (NJ) lows: ‘‘(3) OTHER SUBSIDIARIES PROHIBITED.—A Jefferson Myrick Smith (OR) Part 2, Amendment No. 2, printed in House national bank may not control any subsidi- Jenkins Nadler Smith (TX) Report 105–531 offered by Mr. LAFALCE: ary other than a subsidiary— John Neal Smith, Adam ‘‘(A) which engages solely in activities [1. INSURANCE] Johnson (CT) Nethercutt Smith, Linda that are permissible for a national bank to Johnson (WI) Neumann Snowbarger In section 104(b)(2) of the Amendment in engage in directly or are authorized under Johnson, E.B. Ney Snyder the Nature of a Substitute, strike ‘‘As stated paragraph (1); or Jones Northup Solomon by the United States Supreme Court’’ and in- Kanjorski Norwood Souder ‘‘(B) which a national bank may control Kaptur Nussle Spence sert ‘‘In accordance with the decision of the pursuant to section 25 or 25A of the Federal Kasich Oberstar Spratt Supreme Court of the United States’’. Reserve Act, the Bank Service Company Act, Kelly Obey Stabenow In section 104(b)(2) of the Amendment in or any other Act that expressly by its terms Kennedy (MA) Olver Stark the Nature of a Substitute, strike ‘‘to en- authorizes national banks to control subsidi- Kennedy (RI) Ortiz Stearns gage’’ each place such term appears and in- aries. Kennelly Owens Stenholm sert ‘‘, or any subsidiary or other affiliate ‘‘(4) FINANCIAL ACTIVITY DEFINED.—For pur- Kildee Oxley Stokes thereof, from engaging’’. Kim Packard Strickland poses of this section and subject to para- Kind (WI) Pallone Stump In section 104(b)(2) of the Amendment in graph (5), the term ‘financial activity’ means King (NY) Pappas Stupak the Nature of a Substitute, strike subpara- any 1 or more of the following: Kingston Parker Sununu graph (B) and insert the following new sub- ‘‘(A) Receiving money subject to a deposit Kleczka Pascrell Talent paragraph: or other repayment obligation. Klink Pastor Tanner (B) subparagraph (A) shall not apply after ‘‘(B) Lending, exchanging, transferring, in- Klug Paul Tauscher the end of the 5-year period beginning on the vesting, or safeguarding money or other fi- Knollenberg Paxon Tauzin date of the enactment of this Act. nancial assets. Kolbe Payne Taylor (MS) In section 104(b)(3) of the Amendment in Kucinich Pease Taylor (NC) ‘‘(C) Providing any device or other instru- LaFalce Pelosi Thomas the Nature of a Substitute, insert ‘‘not relat- mentality for transferring money or other fi- Lampson Peterson (MN) Thompson ing to crossmarketing activities subject to nancial assets. Lantos Peterson (PA) Thornberry paragraph (2)’’ after ‘‘orders, and interpreta- ‘‘(D) Acting as agent or broker in the Largent Petri Thurman tions’’. placement of annuities contracts or con- Latham Pickering Tierney In section 104(b)(3) of the Amendment in tracts insuring, guaranteeing, or indemnify- LaTourette Pickett Torres the Nature of a Substitute, insert ‘‘to the ex- ing against loss, harm, damage, illness, dis- Lazio Pitts Towns tent that such statutes, regulations, orders, Leach Pombo Traficant ability, or death. Lee Pomeroy Turner and interpretations do not have a disparate ‘‘(E) Providing financial, investment, or Levin Porter Upton impact on insurance underwriters affiliated economic advisory or information services, Lewis (CA) Portman Velazquez with an insured depository institution or including advising an investment company Lewis (GA) Poshard Vento wholesale financial institution’’ before the (as defined in section 3 of the Investment Lewis (KY) Price (NC) Visclosky period at the end. Company Act of 1940). Linder Pryce (OH) Walsh [2. OP-SUBS] ‘‘(F) Issuing or selling instruments rep- Lipinski Quinn Wamp resenting interests in pools of assets permis- Livingston Rahall Waters Strike the heading for subtitle C of title I sible for a bank to hold directly. LoBiondo Ramstad Watkins of the Amendment in the Nature of a Sub- ‘‘(G) Arranging, effecting, or facilitating Lofgren Rangel Watt (NC) stitute and insert the following new heading: Lowey Redmond Watts (OK) financial transactions for the account of Lucas Regula Waxman Subtitle C—Subsidiaries of Insured third parties. Luther Reyes Weldon (FL) Depository Institutions ‘‘(H) Directly or indirectly acquiring or Maloney (CT) Riggs Weldon (PA) Strike section 121 of the Amendment in the controlling, whether as principal, on behalf Maloney (NY) Rivers Weller Nature of a Substitute and insert the follow- of 1 or more entities (including entities that Manton Rodriguez Wexler ing new sections (and redesignate subsequent Manzullo Roemer Weygand the financial subsidiary controls) or other- Markey Rogan Whitfield sections and amend the table of contents ac- wise, shares, assets, or ownership interests Martinez Rogers Wicker cordingly): (including without limitation debt or equity Mascara Rohrabacher Wise SEC. 121. SUBSIDIARIES OF NATIONAL BANKS AU- securities, partnership interests, trust cer- Matsui Ros-Lehtinen Wolf THORIZED TO ENGAGE IN FINAN- tificates or other instruments representing McCarthy (MO) Rothman Woolsey CIAL ACTIVITIES. ownership) of a company or other entity, McCarthy (NY) Roukema Wynn (a) FINANCIAL SUBSIDIARIES OF NATIONAL whether or not constituting control of such McCrery Roybal-Allard Yates BANKS.—Chapter one of title LXII of the Re- McDade Royce Young (AK) company or entity, engaged in any activity McDermott Rush Young (FL) vised Statutes of United States (12 U.S.C. 21 not authorized pursuant to this section if— McGovern Ryun et seq.) is amended— ‘‘(i) the shares, assets, or ownership inter- McHale Sabo (1) by redesignating section 5136A as sec- ests are not acquired or held by a depository tion 5136C; and institution; NOES—11 (2) by inserting after section 5136 (12 U.S.C. ‘‘(ii) such shares, assets, or ownership in- Bachus LaHood Schaffer, Bob 24) the following new section: terests are acquired and held by a securities Dreier McCollum Thune ‘‘SEC. 5136A. FINANCIAL SUBSIDIARIES OF NA- affiliate or an affiliate thereof as part of a Goode Riley Tiahrt TIONAL BANKS. bona fide underwriting or merchant banking Johnson, Sam Scarborough ‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AU- activity, including investment activities en- NOT VOTING—14 THORIZED TO ENGAGE IN FINANCIAL ACTIVI- gaged in for the purpose of appreciation and TIES.— ultimate resale or disposition of the invest- Bateman Gilchrest Kilpatrick Christensen Gonzalez Radanovich ‘‘(1) IN GENERAL.—A subsidiary of a na- ment; Clay Harman Skaggs tional bank may engage in an activity that ‘‘(iii) such shares, assets, or ownership in- Fattah Hefner White is not permissible for a national bank to en- terests, are held only for such a period of Gibbons Hilliard gage in directly, but only if— time as will permit the sale or disposition May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3183 thereof on a reasonable basis consistent with ‘‘(C) WELL CAPITALIZED.—The term ‘well ‘‘(1) IN GENERAL.—If the Comptroller deter- the nature of the activities described in capitalized’ has the same meaning as in sec- mines that a national bank which controls a clause (ii); and tion 38 of the Federal Deposit Insurance Act financial subsidiary, or a depository institu- ‘‘(iv) during the period such shares, assets, and, for purposes of this section, the Comp- tion affiliate of such national bank, does not or ownership interests are held, the financial troller shall have exclusive jurisdiction to continue to meet the requirements of sub- subsidiary does not actively participate in determine whether a national bank is well section (a), the Comptroller shall give notice the day to day management or operation of capitalized. to the bank to that effect, describing the such company or entity, except insofar as ‘‘(D) WELL MANAGED.—The term ‘well man- conditions giving rise to the notice. necessary to achieve the objectives of clause aged’ means— ‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE- (ii). ‘‘(i) in the case of a bank that has been ex- QUIRED.— ‘‘(I) Underwriting, dealing in, or making a amined, unless otherwise determined in writ- ‘‘(A) CONTENT OF AGREEMENT.—Within 45 market in securities. ing by the Comptroller, the achievement of— days of the receipt by a depository institu- ‘‘(J) Engaging in any activity that was, by ‘‘(I) a composite rating of 1 or 2 under the tion of a notice given under paragraph (1) (or regulation or order, permissible for a bank Uniform Financial Institutions Rating Sys- such additional period as the Comptroller holding company pursuant to section 4(c)(8) tem (or an equivalent rating under an equiv- may permit), the depository institution fail- of the Bank Holding Company Act of 1956 (as alent rating system) in connection with the ing to meet the requirements of subsection in effect on the day before the date of enact- most recent examination or subsequent re- (a) shall execute an agreement with the ap- ment of the Financial Services Act of 1998). view of the bank; and propriate Federal banking agency for such ‘‘(K) Engaging, in the United States, in ‘‘(II) at least a rating of 2 for management, institution to correct the conditions de- any activity that— if that rating is given; or scribed in the notice. ‘‘(i) a bank holding company may engage ‘‘(ii) in the case of any national bank that ‘‘(B) COMPTROLLER MAY IMPOSE LIMITA- in outside the United States; and has not been examined, the existence and use TIONS.—Until the conditions giving rise to ‘‘(ii) the Board of Governors of the Federal of managerial resources that the Comptrol- the notice are corrected, the Comptroller Reserve System determined, under regula- ler determines are satisfactory. may impose such limitations on the conduct tions issued pursuant to section 4(c)(13) of ‘‘(6) INSURANCE UNDERWRITING AND DIRECT of the business of the national bank or sub- the Bank Holding Company Act of 1956 (as in INVESTMENT.—Except as provided in title III sidiary of such bank as the Comptroller de- effect on the day before the date of enact- of the Financial Services Act of 1998, no sub- termines to be appropriate under the cir- ment of the Financial Services Act of 1998) sidiary of a national bank (other than a cor- cumstances. to be usual in connection with the trans- poration organized under section 25A of the ‘‘(3) FAILURE TO CORRECT.—If the condi- action of banking or other financial oper- Federal Reserve Act or a corporation operat- tions described in the notice are not cor- ations abroad; ing under section 25 of such Act) may under- rected within 180 days after the bank re- ‘‘(L) Owning shares of a company to the ex- write noncredit-related insurance or engage ceives the notice, the Comptroller may re- tent permissible under section 4(c)(7) of the in real estate investment or development ac- quire, under such terms and conditions as Bank Holding Company Act of 1956 (as in ef- tivities (except to the extent a national bank may be imposed by the Comptroller and sub- fect on the day before the date of enactment is specifically authorized by statute to en- ject to such extensions of time as may be granted in the discretion of the Comptrol- of the Financial Services Act of 1998). gage in any such activity directly). ‘‘(M) Engaging in any activity that the ler— ‘‘(7) LIMITED EXCLUSIONS FROM COMMUNITY Comptroller of the Currency determines by (A) the national bank to divest control of NEEDS REQUIREMENTS FOR NEWLY ACQUIRED regulation or order is the functional equiva- each subsidiary engaged in an activity that DEPOSITORY INSTITUTIONS.—Any depository lent of any activity described in 1 or more of is not permissible for the bank to engage in institution which becomes affiliated with a subparagraphs (A) through (K). directly; or national bank during the 12-month period ‘‘(N) Engaging in any activity that the ‘‘(B) each subsidiary of the national bank preceding the submission of an application Comptroller of the Currency determines by to cease any activity that is not permissible to acquire a financial subsidiary and any de- regulation or order to be financial, or related for the bank to engage in directly.’’. pository institution which becomes so affili- to a financial activity, having taken into ac- (b) CLERICAL AMENDMENT.—The table of ated after the approval of such application count— sections for chapter one of title LXII of the ‘‘(i) the purposes of this title and the Fi- may be excluded for purposes of paragraph Revised Statutes of the United States is nancial Services Act of 1998; (1)(C) during the 12-month period beginning amended— ‘‘(ii) changes or reasonably expected on the date of such acquisition if— (1) by redesignating the item relating to changes in the market in which bank sub- ‘‘(A) the national bank has submitted an section 5136A as section 5136C; and sidiaries compete; affirmative plan to the Comptroller of the (2) by inserting after the item relating to ‘‘(iii) changes or reasonable expected Currency to take such action as may be nec- section 5136 the following new item: changes in the technology delivering finan- essary in order for such institution to ‘‘5136A. Financial subsidiaries of national cial services; and achieve a ‘satisfactory record of meeting banks.’’. community credit needs’, or better, during ‘‘(iv) whether such activity is necessary or SEC. 122. ACTIVITIES OF SUBSIDIARIES OF IN- appropriate to allow a bank and the subsidi- the most next examination of the institu- SURED STATE BANKS. aries of a bank to— tion; and Section 24(d) of the Federal Deposit Insur- ‘‘(I) compete effectively with any company ‘‘(B) the plan has been accepted by the ance Act (12 U.S.C. 1831a(d)) is amended— seeking to provide financial services in the Comptroller. (1) by adding at the end the following new United States; ‘‘(b) CAPITAL DEDUCTION REQUIRED.— paragraphs: ‘‘(II) use any available or emerging techno- ‘‘(1) IN GENERAL.—In determining compli- ‘‘(3) CONDITIONS ON CERTAIN ACTIVITIES.— logical means, including any application ance with applicable capital standards— ‘‘(A) IN GENERAL.—Subject to the approval necessary to protect the security or efficacy ‘‘(A) the amount of a national bank’s eq- of the appropriate Federal banking agency, a of systems for the transmission of data or fi- uity investment in a financial subsidiary subsidiary of a State bank may engage in an nancial transactions, in providing financial shall be deducted from the national bank’s activity in which a subsidiary of a national services; and assets and tangible equity; and bank may engage as principal pursuant to ‘‘(III) offer customers any available or ‘‘(B) the financial subsidiary’s assets and subsection (a)(1) of section 5136A of the Re- emerging technological means for using fi- liabilities shall not be consolidated with vised Statutes of the United States but only nancial services. those of the national bank. if the State bank meets the same require- ‘‘(5) OTHER DEFINITIONS.—For purposes of ‘‘(2) REGULATIONS REQUIRED.—The Comp- ments which are applicable to national this section, the following definitions shall troller shall prescribe regulations imple- banks under subparagraphs (B) and (C) of apply: menting this subsection. such subsection and subsections (b) and (c) of ‘‘(A) FINANCIAL SUBSIDIARY.—The term ‘fi- ‘‘(c) SAFEGUARDS FOR THE BANK.—A na- such section. nancial subsidiary’ means a company tional bank that establishes or maintains a ‘‘(B) APPLICATION OF SECTION 5136A OF RE- which— financial subsidiary shall assure that— VISED STATUTES.—For purposes of applying ‘‘(i) is a subsidiary of a national bank ‘‘(1) the bank’s procedures for identifying section 5136A of the Revised Statutes of the (other than a corporation organized under and managing financial and operational United States with regard to the activities of section 25A of the Federal Reserve Act or a risks within the bank and financial subsidi- a subsidiary of a State bank, all references corporation operating under section 25 of aries of the bank adequately protect the in such section to the Comptroller of the such Act); and bank from such risks; Currency, or regulations and orders of the ‘‘(ii) is engaged in a financial activity pur- ‘‘(2) the bank has, for the protection of the Comptroller, shall be deemed to be ref- suant to paragraph (1) that is not a permis- bank, reasonable policies and procedures to erences to the appropriate Federal banking sible activity for a national bank to engage preserve the separate corporate identity and agency with respect to such State bank, and in directly. limited liability of the bank and subsidiaries regulations and orders of such agency. ‘‘(B) SUBSIDIARY.—The term ‘subsidiary’ of the bank; and ‘‘(4) STATE BANKS WHICH FAIL TO COMPLY has the meaning given to such term in sec- ‘‘(3) the bank complies with this section. WITH PARAGRAPH (3) CONDITIONS.— tion 2 of the Bank Holding Company Act of ‘‘(d) NATIONAL BANKS WHICH DO NOT COM- ‘‘(A) IN GENERAL.—If the appropriate Fed- 1956. PLY WITH REQUIREMENTS OF THIS SECTION.— eral banking agency determines that a State H3184 CONGRESSIONAL RECORD — HOUSE May 13, 1998

bank that controls a subsidiary which is en- ‘‘(A) IN GENERAL.—A transaction between a with the regulations prescribed by a Federal gaged as principal in financial activities pur- financial subsidiary and an affiliate of the fi- banking agency under this section and then suant to paragraph (3) does not meet the re- nancial subsidiary shall not be deemed to be only to the extent of the inconsistency. For quirements of subparagraph (A) of such para- a transaction between a subsidiary of a na- purposes of this paragraph, a State statute, graph, the appropriate Federal banking tional bank and an affiliate of the bank for regulation, order, or interpretation is not in- agency shall give notice to the bank to that purposes of section 23A or section 23B of the consistent with the regulations prescribed by effect, describing the conditions giving rise Federal Reserve Act. a Federal banking agency under this section to the notice. ‘‘(B) CERTAIN AFFILIATES EXCLUDED.—For if the protection such statute, regulation, ‘‘(A) AGREEMENT TO CORRECT CONDITIONS purposes of subparagraph (A) and notwith- order, or interpretation affords any con- REQUIRED.— standing paragraph (4), the term ‘affiliate’ sumer is greater than the protection pro- ‘‘(i) CONTENT OF AGREEMENT.—Within 45 shall not include a bank, or a subsidiary of a vided by the regulations under this section. days of the receipt by a bank of a notice bank, which is engaged exclusively in activi- [4. LIFELINE BANKING] given under paragraph (1) (or such additional ties permissible for a national bank to en- In paragraph (1) of section 6(d) of the Bank period as the appropriate Federal banking gage in directly. Holding Company Act of 1956, as added by agency for such bank may permit), the bank ‘‘(4) EQUITY INVESTMENTS EXCLUDED SUB- section 103(a) of the Amendment in the Na- failing to meet the requirements of para- JECT TO THE APPROVAL OF THE BANKING AGEN- ture of a Substitute, strike ‘‘or (C)’’ and in- graph (3)(A) shall execute an agreement with CY.—Subsection (a)(1) shall not apply so as to sert ‘‘(C), or (D)’’. the appropriate Federal banking agency for limit the equity investment of a bank in a fi- In paragraph (4)(D) of section 6(d) of the such bank to correct the conditions de- nancial subsidiary of such bank, except that Bank Holding Company Act of 1956, as added scribed in the notice. any investment that exceeds the amount of a by section 103(a) of the Amendment in the ‘‘(B) AGENCY MAY IMPOSE LIMITATIONS.— dividend that the bank could pay at the time Nature of a Substitute, strike ‘‘or (C)’’ and Until the conditions giving rise to the notice of the investment without obtaining prior insert ‘‘(C), or (D)’’. are corrected, the appropriate Federal bank- approval of the appropriate Federal banking ing agency for the State bank may impose agency and is in excess of the limitation [5. DEFERENCE] such limitations on the conduct of the busi- which would apply under subsection (a)(1), In section 307(e) of the Amendment in the ness of the bank or a subsidiary of the bank but for this paragraph, may be made only Nature of a Substitute, strike ‘‘, without un- as the agency determines to be appropriate with the approval of the appropriate Federal equal deference’’. under the circumstances. banking agency (as defined in section 3(q) of [6. GAO STUDY—ANTITRUST] ‘‘(C) FAILURE TO CORRECT.—If the condi- the Federal Deposit Insurance Act) with re- After section 145 of the Amendment in the tions described in the notice are not cor- spect to such bank.’’. Nature of a Substitute, insert the following (b) TREATMENT OF FINANCIAL SUBSIDIARIES rected within 180 days after the bank re- new section (and redesignate the subsequent UNDER OTHER PROVISIONS OF LAW.— ceives the notice, the appropriate Federal section and conform the table of contents ac- (1) BANK HOLDING COMPANY ACT AMEND- banking agency for the State may require, cordingly): under such terms and conditions as may be MENTS OF 1970.—Section 106(a) of the Bank imposed by such agency and subject to such Holding Company Act Amendments of 1970 is SEC. 146. ANNUAL GAO REPORT. extensions of time as may be granted in the amended by adding at the end the following (a) IN GENERAL.—By the end of the 1-year discretion of the agency— new sentence: ‘‘For purposes of this section, period beginning on the date of the enact- ‘‘(i) the bank to divest control of each sub- a financial subsidiary (as defined in section ment of this Act and annually thereafter, sidiary engaged in an activity as principal 5136A(a)(5)(A) of the Revised Statutes of the the Comptroller General of the United States that is not permissible for the bank to en- United States or referenced in the 20th un- shall submit a report to the Congress on gage in directly; or designated paragraph of section 9 of the Fed- market concentration in the financial serv- ‘‘(ii) each subsidiary of the bank to cease eral Reserve Act or section 24(d)(3)(A) of the ices industry and its impact on consumers. any activity as principal that is not permis- Federal Deposit Insurance Act) shall be (b) ANALYSIS.—Each report submitted sible for the bank to engage in directly.’’. deemed to be a subsidiary of a bank holding under subsection (a) shall contain an analy- company, and not a subsidiary of a bank.’’; sis of— SEC. 123. RULES APPLICABLE TO FINANCIAL SUB- (1) the positive and negative effects of af- SIDIARIES. and (2) FEDERAL RESERVE ACT.—The 20th un- filiations between various types of financial (a) TRANSACTIONS BETWEEN FINANCIAL SUB- companies, and of acquisitions pursuant to SIDIARIES AND OTHER AFFILIATES.—Section designated paragraph of section 9 of the Fed- eral Reserve Act (12 U.S.C. 335) is amended this Act and the amendments made by this 23A of the Federal Reserve Act (12 U.S.C. Act to other provisions of law, including any 371c) is amended— by adding at the end of the following new sentence: ‘‘To the extent permitted under positive or negative effects on consumers, (1) by redesignating subsection (e) as sub- area markets, and submarkets thereof or on section (f); and State law, a State member bank may acquire or establish and retain a financial subsidiary registered securities brokers and dealers (2) by inserting after subsection (d), the which have been purchased by depository in- following new subsection: (as defined in section 5136A(a)(3)(A) of the Revised Statutes of the United States, ex- stitutions or depository institution holding ‘‘(e) RULES RELATING TO BANKS WITH FI- companies; NANCIAL SUBSIDIARIES.— cept that all references in that section to the Comptroller of the Currency, the Comptrol- (2) the changes in business practices and ‘‘(1) FINANCIAL SUBSIDIARY DEFINED.—For the effects of any such changes on the avail- purposes of this section and section 23B, the ler, or regulations or orders of the Comptrol- ler shall be deemed to be references to the ability of venture capital, consumer credit, term ‘financial subsidiary’ means a company and other financial services or products and which— Board or regulations or orders of the Board.’’. the availability of capital and credit for ‘‘(A) is a subsidiary of a bank (other than small businesses; and [3. CONSUMER PROTECTION] a corporation organized under section 25A of (3) the acquisition patterns among deposi- the Federal Reserve Act or a corporation op- In paragraph (1) of section 45(a) of the Fed- tory institutions, depository institution erating under section 25 of such Act); and eral Deposit Insurance Act, as added by sec- holding companies, securities firms, and in- ‘‘(B) is engaged in a financial activity (as tion 308(a) of the Amendment in the Nature surance companies including acquisitions defined in section 5136A(a)(4)) that is not a of a Substitute, insert ‘‘governing sales prac- among the largest 20 percent of firms and ac- permissible activity for a national bank to tices’’ after ‘‘regulations’’ in the portion of quisitions within regions or other limited engage in directly. such paragraph which precedes subparagraph geographical areas. ‘‘(2) APPLICATION TO TRANSACTIONS BE- (A). [7. PRIVACY STUDY] TWEEN A FINANCIAL SUBSIDIARY OF A BANK AND In paragraph (1) of section 45(d) of the Fed- THE BANK.—For purposes of applying this sec- eral Deposit Insurance Act, as added by sec- After section 108 of the Amendment in the tion and section 23B to a transaction be- tion 308(a) of the Amendment in the Nature Nature of a Substitute, insert the following tween a financial subsidiary of a bank and of a Substitute, strike ‘‘and the making of new section (and amend the table of contents the bank (or between such financial subsidi- loans’’. accordingly): ary and any other subsidiary of the bank Strike paragraph (2) of section 45(g) of the SEC. 110. REPORTS ON ONGOING FTC STUDY OF which is not a financial subsidiary) and not- Federal Deposit Insurance Act, as added by CONSUMER PRIVACY ISSUES. withstanding subsection (b)(2) and section section 308(a) of the Amendment in the Na- With respect to the ongoing multistage 23B(d)(1), the financial subsidiary of the ture of a Substitute, and insert the following study being conducted by the Federal Trade bank— new paragraph: Commission on consumer privacy issues, the ‘‘(A) shall be an affiliate of the bank and ‘‘(2) EFFECT ON OTHER LAWS.—Subject to Commission shall submit an interim report any other subsidiary of the bank which is section 104, regulations prescribed by a Fed- on the findings and conclusions of the Com- not a financial subsidiary; and eral banking agency under this section shall mission, together with such recommenda- ‘‘(B) shall not be treated as a subsidiary of not be construed as superseding, altering, or tions for legislative and administrative ac- the bank. affecting the statutes, regulations, orders, or tion as the Commission determines to be ap- ‘‘(3) APPLICATION TO TRANSACTIONS BE- interpretations in effect in any State, except propriate, to the Committee on Commerce TWEEN FINANCIAL SUBSIDIARY AND NONBANK to the extent that such statutes, regulations, and the Committee on Banking and Finan- AFFILIATES.— orders, or interpretations are inconsistent cial Services of the House of Representatives May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3185 and the Committee on Banking, Housing, should we care? Why should we care Operating subsidiaries are anti-com- and Urban Affairs of the Senate at the con- whether national banks are disadvan- petitive because securities or merchant clusion of each stage of such study and a taged in this bill? Is this just an eso- banking done in operating subsidiaries final report at the conclusion of the study. teric debate about corporate structure? will be able to take advantage of the The CHAIRMAN pro tempore. Pursu- It is not. Federal subsidy to finance their busi- ant to House Resolution 428, the gen- There are sound public policy reasons ness more cheaply than their competi- tleman from New York (Mr. LAFALCE) to value national banks and their abil- tors. Congress is abolishing subsidies. and a Member opposed each will con- ity to offer new financial services We ended farm subsidies in the last trol 20 minutes. through their own subsidiaries. Fun- Congress. Wall Street firms made over Is the gentleman from Virginia (Mr. damentally, adopting this amendment $14 billion last year. They need open BLILEY) opposed to the amendment? will ensure that a significant portion of competition, not subsidies. Mr. BLILEY. I am, Mr. Chairman. America’s financial assets continue to Operating subsidiaries are dangerous The CHAIRMAN pro tempore. The flow through banks. That is good for to taxpayers. If a child takes the fam- gentleman from Virginia (Mr. BLILEY) consumers. That is good for commu- ily car and goes on a joy ride smashing will be recognized for 20 minutes. nities. into a building, who is on the hook? The Chair recognizes the gentleman If we want a law, rather than a one- The parents. Similarly, if operating from New York (Mr. LAFALCE). House bill, we will adopt this amend- subsidiaries get into trouble, who will Mr. LAFALCE. Mr. Chairman, I yield ment and we then will ultimately bring hold the bag? The Federal taxpayers. myself such time as I may consume. with us the support of the administra- That is why Americans For Tax Re- (Mr. LAFALCE asked and was given tion and produce something that can form is opposed to this amendment. permission to revise and extend his re- be enacted into law. If this amendment I believe that operating subsidiaries marks.) goes down, we may or may not get a pose dangers to consumers. Last week Mr. LAFALCE. Mr. Chairman, the one-House bill but we will not get a the SEC brought an enforcement ac- bill in its current form is a frontal at- law. tion against a major bank operating tack on the national bank system. Mr. Chairman, I reserve the balance subsidiary for selling billions of dollars That is why this administration, past of my time. in unsuitable investments to elderly administrations, any future adminis- Mr. BLILEY. Mr. Chairman, I yield people. These people had maturing CDs tration would veto the bill before us. myself 3 minutes. at the bank. Officers of the operating The bill before us promotes the (Mr. BLILEY asked and was given subsidiary called them up and sold movement of assets out of those insti- permission to revise and extend his re- them dangerous strip derivatives tutions covered by the Community Re- marks.) claiming they were treasury securities. investment Act. It undermines the na- Mr. BLILEY. Mr. Chairman, I rise in The OCC could have done something tional bank charter and the authority opposition to the amendment offered about this but the OCC did not. They of the national bank regulator. It by my friends, the gentleman from New waited for the SEC to have to bring an places small and mid-sized banks at an York (Mr. LAFALCE) and the gentleman action to stop this fraud. I believe we enormous competitive disadvantage from Minnesota (Mr. VENTO). I have should not expand powers of operating vis-a-vis the giant conglomerates this three concerns with this amendment. subsidiaries in the face of abuses like bill helps facilitate. It permits dis- One, it puts taxpayer money at risk. this. crimination against banks as providers It does this by expanding the subsidy b of new financial services, and it would provided by Federal deposit insurance 1515 create a serious competitive imbalance and the Federal safety net; two, these Mr. LAFALCE. Mr. Chairman, I yield between nationally and State char- operating subsidies are not truly sepa- 3 minutes to the gentleman from Mas- tered banks and between big banks rate from banks and will confuse cus- sachusetts (Mr. FRANK). which can and small banks which can- tomers; and three, it undoes the careful Mr. FRANK of Massachusetts. Mr. not use a holding company structure. compromise on insurance we have Chairman, I rise in support of the The amendment the gentleman from reached so that disputes over insurance amendment. Minnesota (Mr. VENTO) and I offer, will be treated equally without unfair Our good friend from Virginia made along with a good many others, would deference to one side or the other. me want to call the history police. The correct these problems. It would cor- This amendment represents a radi- misuse of history is one of the rect these problems by permitting na- cally different course in this legisla- downsides of our debate. No, this has tional banks to offer a broad range of tion. It grants new powers for banks in nothing to do with why the savings and new financial services efficiently and operating subsidiaries. These new pow- loans got in trouble. We had tax safely through subsidiaries so that ers include full securities underwriting changes. We had a real estate bubble. these assets remain covered by CRA. It and merchant banking. We had a lot of other reasons. would ensure that banks are not sub- I remember when Congress made the This is a very important amendment. ject to discriminatory restrictions disastrous mistake of expanding the I must say that if this amendment when providing new financial services, powers and the insurance coverage of were to be adopted, I could vote for a and it would maintain for the national savings and loan institutions. The re- bill which I will otherwise feel con- bank regulator the same authority tra- sult of that legislation was that the strained to oppose. The smaller banks ditionally granted all, each and every, taxpayers had to spend billions to bail that I deal with in the State of Massa- Federal regulator to interpret Federal out the S&Ls that had invested in casi- chusetts are banks which have been re- law. nos, strip malls, and other develop- sponsible, which have tried to meet the The treasury secretary has repeat- ments. I resolved that never would we needs of local communities, so oppose edly pointed out there is no safety and do something like that again. the bill without this amendment. That soundness reason whatsoever, none, I believe that expansion of operating is a major cause of opposition because zero, and no competitive reason that subsidiaries powers poses the same what it says to the smaller banks is, would justify a radical shift from the dangers as did the expansion of the none of these new powers are in fact operation of a bank subsidiary to a powers of savings and loans. Alan available to them, and indeed much of wholesale transfer of assets out of the Greenspan, the distinguished chairman what they may have been doing they national bank system, out of the juris- of the Federal Reserve, has testified will have to stop doing. diction of the Comptroller of the Cur- both before the Committee on Banking This greatly disadvantages the small- rency, the Federal bank regulator, into and Financial Services and the Com- er banks, who are then forced either to the hands of the Federal Reserve mittee on Commerce that granting forgo getting into these new activities Board. banks additional authority in operat- or to get out of the ones they are in, The chairman of the FDIC, present ing subsidiaries expands the reach of because they will not be able to set up and past, has concurred in that judg- the taxpayer subsidy. This expansion of the holding companies. The notion that ment. The State bank regulators have Federal subsidy is both anti-competi- if we have a holding company with sib- concurred in that judgment. Now, why tive and dangerous to taxpayers. lings, they do not implicate each other, H3186 CONGRESSIONAL RECORD — HOUSE May 13, 1998 but if we have an operating subsidy, and Bank Holding Company Act bar- this and it is the right policy path that they do, does not seem to me to hold riers against affiliations between we should pursue. water. banks, securities firms, insurance com- We should not be superimposing a The analogies of the gentleman, I panies, and other firms. type of corporate structure on these must say, do not seem to me any more The bankers trade association, the entities unless there is good reason to persuasive than his history. I was sorry ABA, does not want a bill. It never did. do so. The fact is that this amendment to hear about the kid who stole his par- So voting for this amendment is not is good for small- and medium-size ents’ car and had an accident. What it going to buy us peace with the banks. banks that they can participate and ex- has to do with banking it will probably But voting for this bill and voting ercise some of the new powers that are take me till Sunday to figure out, but against the LaFalce amendment is anticipated by virtue of this mod- it certainly does not have anything to going to buy us a bill which is good and ernization policy to exercise powers do with this particular issue. in the public interest, which helps that they do today in the structure Yes, we are talking about the same banks, and which does something else, that serves them. And, this amendment overall entity being in both insured which protects people against the will help our communities through the and noninsured activities. Whether or abuses that the banks committed application of the Community Rein- not they do it through a holding com- which brought about the crash of 1929. vestment Act. pany or operating subsidiaries does not The Fed is right. Listen to Mr. This is an important amendment. In affect the quality of regulation, nor Greenspan. Listen to Chairman Levitt. fact, this amendment goes a long way will it affect the drain on the insured Listen to other former chairmen of the towards resolving and reconciling the deposit. SEC, pointing out the need to have real issue with regard to insurance. We What it will do is weaken the ability separation between banks and between adopt in this amendment the same lan- of small banks and, further, and maybe nonbank subsidiaries. guage with regard to the Illinois case this is partly what some had in mind, Operating subs are permitted to do that is part of this basic text. We obviously not all, it weakens the reach all kinds of interesting things: ac- reached out to try to find compromise of the Community Reinvestment Act counting games, shifting of assets back that is workable. And, of course, trying because the activities conducted in the and forth between the sub and the par- to preserve the National Bank Charter operating subsidiaries will be covered ent company, and opportunities for is immensely important, an entity that by the Community Reinvestment Act. committing all kinds of, quite hon- has been in existence for 135 years and If, in fact, it becomes the holding com- estly, improper and doubtful practices has served our Nation very, very well pany, they will not be. So the effect of which are nonetheless fully legal. in terms of building the economic foun- the bill without this amendment will The simple fact of the matter is that dation of banking in this country, be to diminish some of the reach of the just recently we saw an in-house sub- which is, of course, the envy of the Community Reinvestment Act. sidiary of a bank engaging in gro- world. There is no greater security under a Now, I realize that is not enough for tesquely improper practices, selling to holding company, affiliate-type struc- some people who would like to totally old folks securities which they cast as ture than there is under a subsidiary cut off the arms of the Community Re- being government guaranteed. They corporate structure. That is why the investment Act in a later amendment. were not. And they wound up having to current and past chairpersons of the But I must also say that one surefire pay a $7 million fine. That tells us that Federal Deposit Insurance Corporation, way to guarantee that no legislation bankers are willing to do whatever is which has the principal responsibility goes forward is to cut back on the necessary to make money and to com- to safeguard the public funds the de- Community Reinvestment Act, which pete in a hard world. posit insurance program, I think, that many of us believe to have been a sig- The only way that we can protect in- there is absolutely no safety or sound- vestors against this is to see to it that nificant improvement in our commu- ness reason to oppose having in a sub- the banks are situated in a situation nities which most need it. sidiary version an affiliate or holding So I hope in the interest of getting where they can be fully observed, company corporate form. reasonable legislation through, that where their accounting can be properly The fact is that the same procedures, the amendment is adopted. watched, and where they cannot shift the same laws, the same regulations Mr. BLILEY. Mr. Chairman, I yield 3 assets back and forth, and where the apply, 23(a) and (b) under the Holding minutes to the gentleman from Michi- bank has no incentive to engage in ei- Company Act; 23(a) and (b) a similar gan (Mr. DINGELL), ranking minority ther bad accounting practices, or to type of regulations exercised by the member of the Committee on Com- achieve the permission of the regu- Comptroller of the Currency. And the merce. lators to engage in special accounting FDIC can step in and avert types of ac- (Mr. DINGELL asked and was given practices, which will protect them tion which are improper in any in- permission to revise and extend his re- against the failure or the loss of a sub- stance. marks.) sidiary to the dissatisfaction of the As a matter of fact, as far as the Mr. DINGELL. Mr. Chairman, bank- public at large. bank is concerned and the insurance ers said it this morning, and I want my Remember the abuses that brought funds, the money flows in a one-way di- colleagues to hear what the ABA had about the savings and loan crash? They rection out of a subsidiary to, in fact, to say. They said, ‘‘No amendment or were caused by in-house actions by the support the source of strength with re- combination of amendments will be of- savings and loans. Do not repeat it gards to a bank and thereby protect fered that will make the bill accept- with the banks. the taxpayer to a greater extent. This able.’’ Mr. LAFALCE. Mr. Chairman, I yield is a good amendment for small- and Do not think, Mr. Speaker, that vot- 3 minutes to the gentleman from Min- medium-size banks. While we cannot ing for this amendment is going to buy nesota (Mr. VENTO), coauthor of the win the support of all the bankers, the us any peace or approval from the amendment. fact is it is good for our economy and bankers. I want my colleagues to un- (Mr. VENTO asked and was given it is good in terms of permitting bank derstand that. permission to revise and extend his re- to serve communities. Now, I want to say a word of respect marks.) Now, with regard to allegations here and affection for my good friend, the Mr. VENTO. Mr. Chairman, I rise in regarding functional regulation and gentleman from New York (Mr. LA- strong support of the LaFalce-Vento penalties, as I was pointing out in my FALCE), the author of the amendment. amendment, and I urge my colleagues statement previously, there have been I think that the bill is a good bill. It to support it. nearly $325 million in 1996 of misbegot- helps the banks. It allows them to un- Now, it may be true that in fact the ten funds that have been assessed and derwrite municipal revenue bonds. It banks are not going to support this bill recovered from securities firms, and allows them to engage in all kinds of with the LaFalce-Vento amendment, there were $67 million worth of fines in financial activity as the agent of the but there are a lot of good reasons to 1996 from these securities firms. bank in an operating subsidiary. It support it in spite of that. The fact is So there has been and this is func- knocks down current Glass-Steagall that I think it will be a better bill with tional regulation at its best. And this May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3187 entity, NationsSecurities, was owned the marketplace nor improve consumer serv- take another look at this bill. If it doesn't pass, by NationsBank and the securities ice in many communities across this Nation. the veto recommendation will stand. There is company Dean Witter when the events Contrary to some of the rhetoric we will hear no strong public policy reason that this and violations occurred. This is not a today, this lack of diversity within a bank's amendment should not pass. I urge my col- sound basis upon which to oppose one portfolio does not benefit the deposit insur- leagues to vote for this amendment. corporate form over another. ance funds. The FDIC has opined more than Mr. BLILEY. Mr. Chairman, I yield The LaFalce-Vento amendment will provide once that operating subsidiaries are not more 21⁄2 minutes to the gentleman from a better balance, a more appropriate direction risky to a bank than affiliates in a holding com- Ohio (Mr. OXLEY), chairman of the sub- for a competitive future financial services in- pany. The LaFalce-Vento amendment pro- committee. dustry. vides that only well-capitalized and well-man- (Mr. OXLEY asked and was given As I stated earlier in the general debate, the aged banks could have operating subsidiaries permission to revise and extend his re- underlying bill is fundamentally flawed for na- that are engaged in these expanded financial marks.) tional banks, the national bank regulator, and activities. Because the bank's equity invest- Mr. OXLEY. Mr. Chairman, the La- ultimately, consumers and communities. ment in the subsidiary would be deducted Falce amendment would strike down This amendment makes some technical from the bank's assets and equity capital while any ability of a State to regulate bank changes in Section 104. Left to my druthers, the bank remains well-capitalized, this struc- affiliated insurance agents. I want to I would have preferred the Banking Commit- ture should pose no additional risk to the de- make that very clear. The gentleman tee's version of Section 104, or at the very posit insurance funds. In fact, these operating from Minnesota stated quite the oppo- least, a grandfathering of the Illinois State law subsidiaries should instead provide additional, site, that this amendment would pro- test. These cut and bite amendments, how- positive revenues for banks. The same restric- vide functional regulation. I would ever, are reasonable, and I think are reflected tions on transactions applied to holding com- challenge him on that. For example, if a bank-affiliated in- in some if not all of the changes made by the pany affiliates by the FRB, 23(A) and (B), surance agent commits fraud by rep- Manager's amendment. would apply between banks and financial sub- resenting health care coverage, for ex- The changes to section 308 would ensure sidiaries. ample, the result of this amendment that with regard to consumer protections, the Without our amendment, there is yet an- offered by the gentleman from Min- stronger law, whether State or Federal law, other disadvantage for the communities in nesota and the gentleman from New would apply. That is a bare minimum for con- which banks are located. Without the viable York would mean that we would have sumers across this Nation who will be im- operating subsidiary provided in the LaFalce- virtually no regulatory authority pacted by this legislation. Vento amendment, bank assets will be shifted whatsoever at the State level. Our amendment carries three other provi- away from coverage under the Community Now, if we believe in functional regu- sions that were included in the Manager's Reinvestment Act (CRA) into a bank holding lation and we believe strongly that amendment: the enforcement provisions for company or financial holding company affiliate, State insurance regulators have the lifeline banking, the annual antitrust report, which are not as yet covered by community in- ability to regulate insurance, then we and the privacy study. vestment requirements. The OCC is the only have to oppose this amendment. The Importantly, the LaFalce-Vento amendment bank regulator to count the assets of subsidi- State insurance regulators have indi- would address the deference issue. As written, aries in terms of analyzing CRA capacity of a cated very strongly that they believe H.R. 10 will undermine our Federal banking bank. this amendment would be catastrophic. regulator in the courts by altering the def- Some may assert that operating subsidiaries It would go beyond the fact that we erence standard. If H.R. 10 were to pass as will be renegades that will subvert laws, such would have no discrimination, but it written now, the precedent could be detrimen- as securities laws. On the contrary, op subs would result in no regulation at all. tal to other areas of law as well. will be doubly regulated in the instance of se- Now, those of us who believe in State Last but by no means least, the LaFalce- curities activitiesÐboth by the financial securi- regulation and functional regulation Vento amendment would make a critical cor- ties regulatorsÐthe SEC and the NASDÐand also believe, I think, that the States rection in the bill by allowing for the creation the OCC. While bank subs have had their are the laboratories for democracy. Let of financially viable and safe operating subsidi- problems, as highlighted by the recent Nations us take a real-life look at what hap- ary for national banks. The amendment would Securities fine, they do not have a corner of pened in banking sales of insurance in permit all financial activities within the operat- the market for less than scrupulous practices. the real world. ing subsidiary with the exception of insurance With regard to Nations Securities, the SEC Our committee held hearings on this underwriting, and real estate investment and and the NASD were the primary regulators, bill, and we had the president of the development. not the OCC. Unfortunately, that cannot pre- State Bankers Association from Illi- As written today, H.R. 10 would force banks vent a breaching of suitability and product se- nois and the president of the State In- to move financial innovation out of the bank, lection processes. surance Agents from Illinois testify a loss of diversity that is disadvantageous for As to safety and soundness, let me reiterate about the fact that they had gotten to- many reasons. that the FDIC, the entity responsible for de- gether, worked out a compromise on Structurally, banks would fundamentally be posit insurance, has not found op subs to be State bank sales of insurance, had gone forced to choose a holding company structure more risky than affiliates. As to arguments that to the State legislature in Illinois, not in order to participate in a meaningful way in this will bring on the next S&L crisis, I would an insignificant State, probably rep- the 21st Century financial services landscape. remind my colleagues that diversity is a good resents a great microcosm of this coun- This is essentially a business decision that thing. The thrifts got in trouble for a number of try, and passed that legislation unani- should be made on a business basis, not be- reasons, including a mightmare-ish interest mously and signed by the governor. cause options have been closed down by this rate situation, bad loans and bad investment. We decided in our committee, after a ``modernization'' bill. Among those that survived without cost to the lot of hard work and a lot of head- Small- and medium-sized banks may not taxpayers, were the thrifts associated in the knocking between the parties, to basi- wish to form such a corporate holding com- more diverse unitary thrift holding companies. cally provide that the Illinois statute pany structure, a much more complex and dif- Further, following the S&L crisis, Congress en- become a safe harbor for legislation, so ficult process than creating a subsidiary. For acted two strong laws, FIRREA and FDICIA, if the States had regulation, they example, a bank would need to form the com- that greatly empowered the regulator, specifi- would be able to put it up against what pany through a filing or reorganization, char- cally the FDIC. If the FDIC finds any activity Illinois had done. This was the real tering an interim bank, merger the ``two'' by any banks is too risky, they can stop that world. This was a compromise that was banks, obtain approval by shareholders with activity from happening under section 24 of worked out very effectively. public review, DOJ review and OCC approval, the FDI Act. Before my time runs out, let me tell obtain approval to engage in non-banking ac- As to true competitive parity, without the La- my colleagues the States that would be tivity with public notice requirements. As a Falce-Vento amendment, national banks will deleted from protecting different State subsidiary, the bank only works to obtain OCC not have a subsidiary option that state banks laws. Let me just list the States if I approval with public notice and hearing if ap- have and that banks, regulated by the Federal could, Mr. Chairman. These regulatory plicable (4 steps vs. 1 step). This loss of flexi- Reserve Board, have when operating abroad. functions would be struck down in bility through limiting the powers of the operat- If the LaFalce-Vento amendment were to these States if the LaFalce amendment ing subsidiary will not further competition in pass, the Administration has indicated they will becomes law. H3188 CONGRESSIONAL RECORD — HOUSE May 13, 1998 States of Texas, Virginia, Tennessee, That is why I believe we should sup- deal with it, and then sit down with the Pennsylvania, Michigan, Maine, Lou- port the LaFalce amendment, because administration and find a common so- isiana, Indiana, Connecticut, Colorado, at a very minimum, at a very mini- lution so that we can do what we all Arkansas, Massachusetts, New Hamp- mum, it suggests that these institu- say we want to do, and that is, modern- shire, New Mexico, Rhode Island, West tions, these powerful companies are ize the laws and rules and regulations Virginia, Florida, Georgia, and Ver- not going to be able to serve out to of our financial institutions. mont. All of those State regulatory their affiliates their requirements If we vote for this amendment, we laws would be out the window if the under the Community Reinvestment might as well fold our tent, pull the LaFalce amendment passes. Act to lend back to the communities bill, and close it down for another year, All of my colleagues who represent from which they take their deposit. It another failure. How many times in those States, and everybody else, let us is a minimal standard. It is a very these past 2 decades are we going to go defeat the LaFalce amendment and small crumb to provide to the working down that road? I urge a no vote on preserve the integrity of this regu- families of America. this amendment. latory process. Support the LaFalce amendment. Mr. LAFALCE. Mr. Chairman, I yield Mr. LAFALCE. Mr. Chairman, I yield Stand up for the working people of our 2 minutes to the gentleman from North myself 15 seconds simply to say that country. Carolina (Mr. WATT). the gentleman from Ohio is in error in Mr. BLILEY. Mr. Chairman, I yield 2 Mr. WATT of North Carolina. Mr. his interpretation of our amendment. minutes to the distinguished gen- Chairman, I thank the gentleman for We leave the Illinois law and less re- tleman from California (Mr. FAZIO), the yielding, and I rise in support of the strictive State statutes as a safe har- chairman of the Democratic Caucus. LaFalce-Vento amendment. bor. We keep the language of the bill Mr. FAZIO of California. Mr. Chair- I am a little surprised that people on that. man, I rise to commend the efforts of who typically talk about giving busi- Mr. Chairman, I yield 2 minutes to my colleagues, the gentleman from nesses more flexibility are now on the other side of this issue, saying we want the gentleman from Massachusetts New York (Mr. LAFALCE) and the gen- ENNEDY to remove flexibility from businesses. (Mr. K ). tleman from Minnesota (Mr. VENTO), Mr. KENNEDY of Massachusetts. Mr. Typically, the byword is, let us give but to oppose their amendment. Chairman, this rhetoric that we are Their hard work and dedication is businesses the opportunity to organize hearing on the House floor today real- going to be required if we are going to and operate in a fashion that they be- ly, I think, centers around one issue lieve is most advantageous to them. pass this bill, and sometime down the and one issue only, and that is cutting Yet, here we are, apparently, in this road, see it enacted into law. We hope the cake. It is a determination as to bill, willing to take away that kind of that, in the months ahead, we can find whether or not the Committee on flexibility from banks. the key to bringing this bill into law. Banking and Financial Services is It has a particularly bad impact on But if we agree to the amendment of going to gain greater jurisdiction by small- and medium-sized banks, be- the gentleman from New York (Mr. LA- having more and more of these larger cause they are not going to run out and FALCE) today, it promises to under- institutions under a regulator that the spend the time and money to create mine not only the very intent of H.R. Committee on Banking and Financial these holding companies. It is just not 10, but also the manager’s amendment Services oversees, or whether or not going to happen. Consequently, this we just overwhelmingly adopted. the securities industry is going to be bill is, and the additional powers that It gets us no support from the banks, the winner and, therefore, the Commit- we are giving to them are going to be and it earns us the undying opposition tee on Commerce is going to oversee of less value to them than to the larger of the entire insurance industry. It, the jurisdiction. banks. So for that reason, the in- therefore, is the killer amendment that creased flexibility reason, I support b 1530 will determine whether or not we pass this amendment. That is what this is all about. It is a bill today and move it along in the Another reason that I support the not about whether or not we are going process so that we can confront our dif- amendment is because I think, to the to look after the interests of the tax- ferences and do something about mod- maximum extent we can, we need to payer. It is not about whether we are ernizing this industry that so clearly bring assets into the bank and under going to look out after the interests of needs it, before it becomes a wholly- the bank in such a way that those as- working families. It is not about owned subsidiary of foreign investors. sets are subjected to the Community Instead of igniting reform and com- whether we are going to make sure Reinvestment Act. that the insurance companies are going petition, the amendment of the gen- Our communities need a strong com- to provide insurance policies to all tleman from New York (Mr. LAFALCE) mitment from financial institutions, parts of our country, to people of every gives banking institutions extended and banks in my congressional district race, creed, and color. It is not about privileges I fear they lack the mecha- have made that kind of strong commit- whether or not we are going to make nisms to properly administer; and the ment. I do not think we ought to be certain the banks lend into the com- insured deposits of those entities, giving them any incentives to take as- munities from which they take their means this is a problem for the rest of sets away from that commitment. deposits. It is about one thing. It is us, for the taxpayers. Mr. BLILEY. Parliamentary inquiry, about power. The gentleman from Massachusetts Mr. Chairman. How much time remains All I say is it is fine with me for (Mr. FRANK) has told us it is not an ap- on this side? these institutions to gobble one an- propriate analogy to talk about the The CHAIRMAN pro tempore (Mr. other up, to get stronger, to be able to S&L crisis, but the same underlying DICKEY). The gentleman from Virginia compete internationally, to be able to problem exists. History reminds us of (Mr. BLILEY) has 91⁄2 minutes remain- compete here in the United States. But that bailout. The crisis, that drained ing. The gentleman from New York if we are going to do that, then we darn the savings of millions of Americans, (Mr. LAFALCE) has 6 minutes remain- well ought to make sure that working cost taxpayers billions and embar- ing. families and the poor have every bit of rassed this country and the financial Mr. BLILEY. Further parliamentary right of access to these institutions, to institutions within it on a global basis. inquiry, Mr. Chairman. Who has the the creation of wealth as anybody else. This amendment leads American fi- right to close? That is what is wrong with this bill, nancial institutions to a potentially The CHAIRMAN pro tempore. The because this bill does not provide the similar economic disaster and places gentleman from Virginia (Mr. BLILEY) assurance that makes sure that these the financial burden of risky banking has the right to close. banks and insurance companies and se- activity on the shoulders of the aver- Mr. BLILEY. Mr. Chairman, I yield 1 curities firms cannot discriminate. It age taxpayer. We cannot allow that to minute to the distinguished gentleman does not make certain that they are occur. from Georgia (Mr. KINGSTON). going to lend money back into the I think we need to support this bill, Mr. KINGSTON. Mr. Chairman, I communities from which they suck out hopefully in numbers that will give the thank the gentleman for yielding to their deposits. Senate a message that they need to me. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3189 Mr. Chairman, let me just say there see it? If the marketplace sees a tomb- safeguards that will prevent the operating sub- are three reasons to oppose this well- stone for bond issue offering that are sidiary from impacting their parent bank just intended amendment. Number one, it being underwritten by NationsBank as the holding company structure attempts to does get around the McCarran-Fer- Montgomery Securities, do they see prevent the affiliate from dragging down the guson Act, which says States regulate that as a subsidy, an implicit guaran- holding company and thus the bank. The La- insurance. It would supersede laws in tee that is going from the bank or from Falce/Vento amendment would only permit na- Texas, Georgia, Virginia, Pennsyl- the Federal Government? Even though tional banks that are well-capitalized and well- vania, and Michigan, just to name a that is a holding company and an affili- managed to establish operating subsidiaries. few. This is a time when we are trying ate model, the marketplace is sophisti- The LaFalce/Vento amendment also requires to decentralize power out of Washing- cated enough to understand it. operating subsidiaries to separately capitalize ton. We do not want to usurp it from Let me say also what this bill does. their operations and keep their operations the States. This creates an inequity between the completely separate from the parent bank. Number two, this law will have the national bank charter and the holding And it subjects the operating subsidiary to full unintended consequences of rapid bank company charter. It shifts regulation functional regulation. I believe both of these investment and expansion into non- of the Nation’s banking system away safeguards should ensure that taxpayers are banking activities. Look at the Asian from the elected government, through not at risk with operating subsidiaries any model. Here we are with the Asian the Comptroller of the Currency, to the more than they would be with a holding com- markets right now in absolute disaster, Federal Reserve, an appointed entity. pany/affiliate structure. which the American taxpayers have If we were talking about doing that The LaFalce/Vento amendment would also been asked to contribute $18 billion to with the Securities and Exchange Com- ensure that all of the assets of the bank are help correct and help bail them out. We mission, a number of us, including both subject to the Community Reinvestment Act do not need another S&L-type crisis in the gentlemen from the Committee on (CRA). This is critical when many banks are America. Commerce, would be down here raising restructuring and being merged with other fi- Number three and finally, this is cor- a lot of Cain, as would I. nancial companies. If banks are required to porate welfare. Why should hard-work- The fact is, this is not a safety and establish affiliates, all of their capital and oper- ing, middle-class taxpayers who are soundness issue. This is a parity issue. ations that are directly associated with their af- busting their tail to get to work in the It does affect CRA. And, to assert that filiate are not subject to CRA. This would have morning and making ends meet at the somehow this is tied to the savings and the effect of reducing the amount of assets end of the month, why should they give loan crisis is just factually incorrect. that are subject to CRA and would reduce the a subsidy to an industry that made $14 I urge my colleagues to support the investment that banks are currently making billion in profit last year? American amendment offered by the gentleman into their communities. I am a strong supporter taxpayers do not need more corporate from New York (Mr. LAFALCE) and the of CRA and believe that we must ensure that welfare for folks who are already mak- gentleman from Minnesota (Mr. banks continue to invest in their communities. ing money. VENTO). The LaFalce/Vento amendment corrects the Those are three good reasons to vote Mr. Chairman, I insert the following: inequity in the underlying bill by providing par- against this amendment. Let us vote it Mr. Chairman, I rise in support of the La- ity between national banks and bank holding down. Pass the bill as is. Falce-Vento amendment and ask unanimous companies. To do otherwise would eviscerate Mr. LAFALCE. Mr. Chairman, I yield consent to revise and extend my remarks. the national bank charter and result in a dra- 2 minutes to the gentleman from Texas As currently drafted H.R. 10 allows banks to matic shift in regulatory authority over the (Mr. BENTSEN). engage in securities underwriting through a banking system from the elected to the ap- (Mr. BENTSEN asked and was given holding company structure regulated by the pointed branch of government. If we proposed permission to revise and extend his re- Federal Reserve System, but not through a that with the Securities and Exchange Com- marks.) national bank regulated by the Comptroller of mission, I think many would object. Mr. BENTSEN. Mr. Chairman, the the Currency. Finally, with respect to section 104 and colleague that just spoke before me As a result, this legislation will restrict some bank insurance sales, this would correct the was wrong on at least two of his counts national banks from offering comprehensive fi- provision in the bill that would effectively re- and possibly on three. nancial services for consumers while allowing verse the Chevron precedent set by the Su- But let me start out, I want to quote it for others. The LaFalce-Vento amendment preme Court. I must admit that I am ambiva- Alan Greenspan, because we have heard would also ensure that there is a level playing lent on this issue. him talked a lot about. This quote is field for all types of financial institutions by al- I strongly support a level playing field with from the hearing on May 21, 22, 1997 in lowing banks to make decisions based upon respect to regulation of bank insurance sales. the House Committee on Banking and good business strategy rather than the one- Since McCarran-Ferguson provides for insur- Financial Services, and this is in re- size-fits-all bank holding company structure. ance to be regulated at the state level, banks sponse to a question which I asked I am also convinced that there is no safety should be subject to state regulation so long about safety and soundness with re- and soundness risk associated with operating as such regulation does not have the effect of spect to operating subsidiaries. subsidiaries vs. affiliates. When I questioned discriminating and prohibiting bank insurance He says, ‘‘My concerns are not safety Federal Reserve Chairman Alan Greenspan sales contrary to the Barnett decision. and soundness.’’ So once and for all, about this issue in the House Banking Com- In all honesty, I was prepared to accept sec- this is Alan Greenspan and what he mittee, he agreed there was no safety and tion 104 as written so long as the operating said. With respect to the subsidy, if we soundness problem associated with an operat- subsidiary language was also accepted and in read the rest of the testimony, he says, ing subsidiary structure. Rather, he argued fact Mr. VENTO and I had proposed such an The issue here is that the amount of that a subsidiary structure extends an implicit amendment, but that was not allowed under the subsidization that is employed by taxpayer subsidy to that subsidiary. There is the rule. I believe the only true fix to the bank the holding company in financing a no evidence to back up this claim and in fact insurance sale power question will come as a section 20 securities affiliate is signifi- Mr. Greenspan goes on to admit that affiliates result of practice because compromise among cantly less than it would be were it under a holding company structure also bene- the parties has been impossible. being financed as a subsidiary of a fits from a subsidy. Further, some argue that In the end it is necessary that the House bank. the market will interpret a subsidy in an op- adopt the LaFalce/Vento amendment to H.R. Mr. Greenspan says that while there sub but not an affiliate. Again, there is no evi- 10 to make this bill live up to its name of fi- is no safety and soundness issue with dence to back up this claim. First, when one nancial modernization. respect to operating subsidiaries, there sees Nationsbank Montgomery Securities, do Mr. BLILEY. Mr. Chairman, it gives is a subsidy that occurs in both the they see an implicit subsidy and bank guaran- me great, great pleasure to yield 2 min- holding company model as well as in tee? But that is an affiliate, not an op-sub. utes to the gentleman from Massachu- the operating subsidiary model. Of I also believe that permitting operating sub- setts (Mr. MARKEY). course, he did not provide any evidence sidiaries is good banking practice. If the oper- Mr. MARKEY. Mr. Chairman, again, of that, and no one else has. ating subsidiary is making profits, its profits let us go back. What are we talking Let me ask a question, a question of will flow up to the parent bank. However, the about? Separate subsidiary means we the subsidy: How does the marketplace LaFalce-Bentsen amendment includes proper are putting it over here in a separate H3190 CONGRESSIONAL RECORD — HOUSE May 13, 1998 operation that makes it possible for Mr. LEACH. Mr. Chairman, the gen- But Ricki Helfer, the then-Chairman the SEC, for insurance regulators, to tleman has raised probably the most of the FDIC, as the gentleman will re- know what we are doing. An Op-sub is controversial section of the bill in call, went on to say that in the FDIC’s an operating subsidiary. That is what terms of subtleties of language. I share study of the issue, not only did they they want to call it. That means it will some of his concerns, and I will assure find there was no safety and soundness be right inside the bank, hard for the the gentleman, as we move forward concern with respect to an operating SEC, hard for the insurance regulators there, this language will be carefully subsidiary compared to an affiliate to get inside to know what is going on. reviewed. I cannot guarantee an out- through a holding company structure, Op-sub really stands for ‘‘ordinary peo- come because there are people on all but, furthermore, that they saw no dif- ple subsidizing’’ risky business by sides of this issue, but I do believe that ference in the subsidy whatsoever, if in banks. a careful review is warranted, and I as- fact there is such a subsidy. So the Alan Greenspan, here is what he said sure the gentleman that we will con- gentleman will recall from the hearing, in a letter to the gentleman from tinue to look at that precise language. it was a year ago, but it was very clear Michigan (Mr. DINGELL) on May 4, last b where Mr. Greenspan stood on the issue week, ‘‘Operating subsidiaries also pose 1545 at the time. The chairman of the Fed- serious risks to banks and their deposit Mr. BLILEY. Mr. Chairman, I yield eral Reserve says a lot of things. Some- insurance funds, and potentially the one minute to the distinguished gen- times he is consistent, and, quite taxpayer, and will cause serious con- tleman from Nebraska (Mr. BEREUTER). frankly, sometimes he is not. On this flicts in the ability of functional regu- (Mr. BEREUTER asked and was issue, he has apparently not been very lators to carry out their supervisory given permission to revise and extend consistent. responsibilities.’’ his remarks.) Mr. BLILEY. Mr. Chairman, I yield Chairman Breeden, George Bush’s Mr. BEREUTER. Mr. Chairman, I two minutes to the gentlewoman from chair of the Securities and Exchange rise in opposition to the amendment as New Jersey (Mrs. ROUKEMA). Commission, he says that it will cause a member of the Committee on Bank- Mrs. ROUKEMA. Mr. Chairman, I a ‘‘dulling narcotic effect of those sub- ing and Financial Services. I under- must say that this is a safety and sidies and the related bureaucratic stand the greater flexibility for small soundness issue, and I am rising in op- nannyism will work a prompt and sig- and middle size banks, and that is im- position to this amendment. nificant alteration on the culture of portant. But there is something more I must say also that one of the things Wall Street.’’ important, and I want to remind my that Mr. Greenspan has been quite We can create a level playing field al- colleagues that this Congress listens, careful to enunciate is that there are lowing each of these industries to com- the Americans listen, and the world lis- heightened concerns in these days of pete and to consolidate without having tens to Alan Greenspan when he mega-mergers. We should be giving the inherent bias that is built in, the speaks. much more attention to the implica- conflicts that are built in by having Alan Greenspan has been quoted here tion of the subsidy. the expansion of the Federal safety net several times. Here is what he had to It is a safety and soundness issue, blur over into these operating subsidi- say before the House Committee on and this dictates that new activities aries and causing real dangers to de- Banking and Financial Services on must be an affiliate under a holding positors and taxpayers alike. May 22, and he made a similar state- company. The new activities will not Vote no on the LaFalce amendment ment on July 17 to the Committee on pose a threat to the bank or the de- if we do not want to see a repetition of Commerce: posit insurance fund if they are con- some of the financial shenanigans The Federal Reserve Board is of the view ducted through an affiliate, not a sub- which we have all come to see during that the risks from securities and insurance sidiary. We should not permit operat- our lifetime. underwriting are manageable using the hold- ing subsidiaries to pose this kind of Mr. LAFALCE. Mr. Chairman, how ing company framework as compared to the danger. much time do we have remaining on operating subsidiaries. But there is another I want to say, my friend, the gen- this side? risk, the risk of transference to nonbank af- tleman from Massachusetts (Mr. filiates of the subsidy implicit in the Federal The CHAIRMAN pro tempore. The FRANK) is not here right now, but I do safety net. Deposit insurance, the discount gentleman from New York (Mr. window and access to the payment window want to say this does bring to mind LAFALCE) has 4 minutes remaining. with attendant moral hazard. As the com- ‘‘deja vu all over again’’ to the ghost of Mr. LAFALCE. Mr. Chairman, is mittee knows, the Board believes that the the savings & loan debacle. there a speaker other than the closing subsidiary is more readily transferable to a Make no mistake about that, my col- speaker? subsidiary of the insured deposit institution leagues. This subsidiary proposal se- Mr. BLILEY. Mr. Chairman, we have than to its affiliates, and the holding com- verely violates the functional regu- another speaker. pany structure creates the best framework latory structure that we have at the for limiting this leakage. Mr. LAFALCE. Mr. Chairman, I yield heart of this legislation. 1 minute to the gentleman from Ohio The Federal Reserve Board will op- I want to repeat again, I believe that (Mr. KUCINICH). pose this bill if we approve the LaFalce the gentleman from Nebraska (Mr. BE- Mr. KUCINICH. Mr. Chairman, I rise amendment. REUTER) correctly quoted Mr. Green- for the purpose of entering into a col- Mr. LAFALCE. Mr. Chairman, I yield span in context, stating his opposition loquy with the gentleman from Iowa one minute to the gentleman from to the operating subsidiary, both in (Mr. LEACH). Texas (Mr. BENTSEN). terms of the subsidy, as well as in Mr. Chairman, there is some uncer- Mr. BENTSEN. Mr. Chairman, I want terms of the safety and soundness. tainty about what, and I quote, ‘‘any to respond to my colleague from Ne- In addition to Mr. Greenspan being other provision of Federal law’’ means braska. At that same hearing, Mr. opposed to this, Mr. Levitt, the chair- in section 104(b)(1) of the bill. Some Greenspan again said, ‘‘My concerns man of the Securities and Exchange consumer groups expressed concern are not safety and soundness,’’ and, Commission, is also opposed to it, and that this language might be unneces- again if you read the testimony, he I might say that there is significant sarily broad and might unintentionally does make the argument that there is opposition from my colleagues, and bi- preempt a broad range of consumer an implicit subsidy that goes through partisan opposition, on the Committee laws. an operating subsidiary. on Commerce. Will the gentleman from Iowa work He says the same subsidy exists I stand here ready to alert my col- with me on this matter as this bill through a bank holding company with leagues that this would be really un- moves forward to conference, through an affiliate structure. But then he went dermining the whole purpose of this the Senate to conference, that this lan- on to make an unsubstantiated argu- bill if this amendment were passed, so guage will be reviewed so as not to be ment that somehow the subsidy is less I would urge a no vote. interpreted in an overly broad manner? through a holding company structure Mr. Chairman, I rise today, in opposition to Mr. Chairman, I yield to the gen- than it is through an operating subsidi- this amendment. I support many of the provi- tleman from Iowa (Mr. LEACH). ary. sions in this package of amendments. In fact, May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3191 I asked the Rules Committee to let me offer 3 Secondly, this was the testimony of then control. Instead of making loans insurance amendments which are similar to the State banking regulators. to people, they would simply own some of the insurance provisions in this pack- Third, this was the testimony of the things. Here let me just comment on age. In addition, I support a small bank CRA present chairman and the past chair- common sense. If you are an outsider exemption. However, I continue to have grave man of the Federal Deposit Insurance listening to this debate, the esoterics reservations about the operating subsidiary Commission. This is the not a safety of an operating subsidiary versus affili- and will vote against the package based on and soundness issue. The safety and ate must seem very large. But does any this. soundness can be conducted just as common-sense American think that a The operating subsidiary is a bad idea, and well or better under the operating sub- bank ought to be able to come in and the House should vote it down. sidiary concept as under the separate under its own volition start to own Proponents argue that an operating subsidi- affiliate concept. commercial businesses, rather than ary is necessary to keep the national bank Secondly, with respect to functional simply make loans, in ways that in- charter vital and flexible. Some even say that regulation, there is no difference. We volve potentially the deposit insurance it will promote CRA. would have the same functional regula- system and what could be a subsidy in- The operating subsidiary is not necessary tion under an operating subsidiary by volved thereof? for any of these reasons. On flexibility and vi- the SEC, by the State insurance com- I know the subsidy issue is con- talityÐnational banks will be permitted to en- missioners, et cetera, that we would troversial. The Fed says one thing, the gage in many new opportunities under the bill. have under the separate financial hold- Treasury something else. In my time in They just have to do it over in the holding ing company affiliate. That is a non- public life, I always found the argu- company. issue. ment that a subsidy exists to be valid. The debate here is over where the activities Big banks, they really do not care. Secondly, let me say there is a ques- must be housed. Should the new activities be They are going to the financial services tion of history that has been articu- as affiliates under the holding company or holding company routes. The security lated. That is, the Department of should they be subsidiaries under the national firms, they do not really care. They Treasury has said no Treasury could bank. want a bill to accomplish repeal of support any position the one being This is a safety and soundness issue. And Glass-Stegall and changes the bank taken. The gentleman from New York heightened concern in these days of mega holding company law. has suggested that his is a historical mergers. Safety and soundness dictates that The ones that care are the consumers position of all Treasuries. the new activities take place in an affiliate who will not be subject to the Commu- Well, that, frankly, is not precisely under the holding company. These new activi- nity Reinvestment Act, whose commu- the case. I would like to direct both the ties will not pose a threat to the bank or the nities will not be subject to it, and the Treasury and my good friends to this Federal deposit insurance funds if they are smaller banks, because these smaller statement of the Honorable Donald T. conducted through an affiliate. We should not banks will be forced to either be taken Regan, the Department of the Treasury permit operating subsidiaries to pose a risk to over or to convert to State chartered Secretary under the Reagan Adminis- tration. safety and soundness. This does bring deja institutions. Secretary Regan said, ‘‘The adminis- vous all over again to the savings and loan That is this amendment, and we have tration,’’ meaning the Reagan Admin- the chance of passing a law, rather debacle. This subsidiary proposal severely vio- istration: lates the functional regulatory structure we than a one House bill. Mr. BLILEY. Mr. Chairman, it is a Does not believe that non-depository insti- have as the heart of the legislation. tution activities should be conducted I am not alone in opposing the operating great pleasure for me to yield the bal- through a subsidiary or service corporation subsidiary. The operating subsidiary is op- ance of my time to the gentleman from in which a bank or a thrift has a direct eq- posed by Mr. Greenspan, the Chairman of the Iowa (Mr. LEACH), the distinguished uity investment. The investment would be at Federal Reserve Board. It is also opposed by chairman of the Committee on Bank- risk if the subsidiary’s activities were to fal- Mr. Levitt, the Chairman of the Securities and ing and Financial Services, who has ter and the funds for the investment would Exchange Commission. There is bipartisan op- been so helpful and so cooperative in be raised with Federal assistance not avail- working together on this bill. able to non-depository institution competi- position to the operating subsidiary. I am tors and a cost advantage to the bank or the joined by Mr. BLILEY and Mr. DINGELL as well The CHAIRMAN pro tempore (Mr. thrift. DICKEY). The distinguished chairman of as many other members of the Banking Com- I raise this simply to note, as this the Committee on Banking and Finan- mittee. Much has been made about Secretary testimony reflects, that the Reagan cial Services is recognized for 31⁄2 min- Rubin supporting the operating subsidiary. Administration was in opposition to utes. Many seem to forget that Treasury Secretary this administration’s position on this (Mr. LEACH asked and was given per- Regan during the Reagan Administration op- subject, and in consonance with this mission to revise and extend his re- posed the operating subsidiary. bill and with the position of Mr. Green- marks.) Don't make a safety and soundness mis- span. take. Vote no on the operating subsidiary. Mr. LEACH. Mr. Chairman, with re- Finally, let me just stress that there Mr. LAFALCE. Mr. Chairman, I yield luctance, I stand in opposition to this are articulated differences that relate myself such time as I may consume. amendment. to CRA. The Federal Reserve has a Mr. Chairman, first of all, the pri- Let me say what is in the bill is a very profound letter out on this sub- mary issue is the Community Reinvest- compromise between the Committee on ject, and I commend it to my col- ment Act. If we pass this amendment, Banking and Financial Services and leagues, which shows that the CRA ar- we will permit a structure where you the Committee on Commerce. If this gument has been widely exaggerated, can retain assets under the jurisdiction amendment had gone back to the Com- and that the differences in CRA treat- of the CRA. If we reject this amend- mittee on Banking and Financial Serv- ment of a national bank and a bank ment, we mandate that a good many ices’ position, I probably would have under the supervision of the Federal present activities, and most all future been obligated to support it. But I will Reserve is very, very similar. activities, would go outside of the ju- tell you, it goes further. What it does, This bill expands CRA, it does not risdiction of the Community Reinvest- it adds under the power of a bank, mer- contract it, in significant ways. What ment Act. That is fundamental. chant banking authority. This is au- are the unarticulated differences, or Secondly, with respect to safety and thority that is very, very significant. some of the differences, between the soundness, Chairman Greenspan testi- Merchant banking constitutes direct Treasury and the Fed in which there is fied before the Committee on Banking ownership and control of commercial a major battle underway? and Financial Services on two separate investments. I used to argue in the Mr. Chairman, I would simply inform occasions, this is not a safety and 1980’s that the two dirtiest words in the the membership that the rest of the soundness issue. So sayeth Alan Green- American language were ‘‘direct in- words would have been extraordinarily span before the Committee on Banking vestment,’’ rights which were author- compelling. and Financial Services when he was ized S&L’s in half a dozen states to use Mr. Chairman, truth be told, the CRA argu- not negotiating with legislators for a Federally insured deposits to make in- ment on this bill is proffered to mask the ex- particular bill. vestments in entities that they would traordinary differences between the Treasury H3192 CONGRESSIONAL RECORD — HOUSE May 13, 1998 and the Federal Reserve Board on which insti- Hall (OH) Maloney (CT) Price (NC) Peterson (PA) Sawyer Talent Hastings (FL) Maloney (NY) Ramstad Pickering Saxton Tanner tutions should be the primary federal regulator Hinchey Martinez Roybal-Allard Pickett Scarborough Tauscher of the banking system. Just as the Fed per- Hooley McDermott Rush Pitts Schaefer, Dan Tauzin haps exaggerates a bit the importance of the Hostettler McHale Sabo Pombo Schaffer, Bob Taylor (MS) subsidy that exists with the offering of insured Hoyer McInnis Sanders Pomeroy Scott Taylor (NC) Jackson (IL) McIntosh Sandlin Porter Sensenbrenner Thomas deposits, the Treasury magnifies the CRA ar- Jackson-Lee McKinney Schumer Portman Sessions Thornberry gument. The reason these arguments are so (TX) Meehan Serrano Poshard Shadegg Thune critical to these two institutions is that the Jefferson Meek (FL) Sherman Pryce (OH) Shaw Tiahrt Johnson (WI) Meeks (NY) Slaughter Quinn Shays Towns Treasury believes Congress will tilt to it if a Johnson, E. B. Millender- Smith, Adam Rahall Shimkus Traficant case can be made that Fed supervised institu- Kanjorski McDonald Snyder Rangel Shuster Turner tions have lower CRA obligations, and the Fed Kaptur Miller (CA) Souder Redmond Sisisky Upton believes Congress may tilt to it if it can be Kelly Moakley Stark Regula Skeen Walsh Kennedy (MA) Mollohan Stokes Reyes Skelton Wamp shown that competitive advantages accrue to Kennedy (RI) Moran (VA) Thompson Riggs Smith (MI) Watkins institutions with subsidized federally insured Kind (WI) Myrick Thurman Riley Smith (NJ) Watts (OK) deposits. Kleczka Oberstar Tierney Rivers Smith (OR) Waxman Kucinich Obey Torres Rodriguez Smith (TX) Weldon (FL) Actually, Congress has historically consid- LaFalce Olver Velazquez Roemer Smith, Linda Weldon (PA) ered the Federal Reserve to be the appro- Lampson Ortiz Vento Rogan Snowbarger Weller priate principal regulator for new power ap- Lantos Owens Visclosky Rogers Solomon Wexler proaches for a different set of reasons: (1) It LaTourette Pastor Waters Rohrabacher Spence White Lee Payne Watt (NC) Ros-Lehtinen Spratt Whitfield is the Fed which has the predominance of ex- Lewis (GA) Pelosi Weygand Rothman Stabenow Wicker perience with holding company regulations. (2) Luther Petri Woolsey Roukema Stearns Wise It is the Fed, and only the Fed, which has the Royce Stenholm Wolf NOES—306 Ryun Strickland Wynn resources to act on a moment's notice in a Salmon Stump Yates time of emergency. While the Treasury has no Abercrombie Diaz-Balart Johnson (CT) Sanchez Stupak Young (AK) Ackerman Dickey Johnson, Sam Sanford Sununu Young (FL) treasury, the Fed has the capacity to liquify Aderholt Dicks Jones virtually any problem of any size. (3) With its Andrews Dingell Kasich NOT VOTING—11 functional and precise regulatory approach, Archer Doggett Kennelly Bateman Gonzalez Kilpatrick the bill is designed to resolve issues of regu- Armey Dooley Kildee Christensen Harman Radanovich Bachus Doolittle Kim latory turf in such a way that financial compa- Clay Hefner Skaggs Baker Doyle King (NY) Gilchrest Hilliard nies can't engage in regulatory arbitrage thus Baldacci Duncan Kingston precipitating weaker regulation. (4) While Ballenger Dunn Klink b 1619 Barcia Edwards Klug sometimes controversial in its monetary policy Barr Ehlers Knollenberg Messrs. COBURN, INGLIS of South deliberations, the Fed has a sterling record for Barrett (NE) Ehrlich Kolbe Carolina, PICKETT, STENHOLM, Mrs. being above politics on the regulatory front. Bartlett Emerson LaHood LOWEY, and Messrs. LEVIN, MAS- From the very beginning of development of Barton Engel Largent Bass English Latham CARA, and FORBES changed their this bill I have been impressed with how much Bereuter Ensign Lazio vote from ‘‘aye’’ to ‘‘no.’’ support exists for the general framework of Berry Etheridge Leach Messrs. BISHOP, FARR of California, change but how extraordinary the divisions on Bilbray Everett Levin Bilirakis Ewing Lewis (CA) MOAKLEY, GOODLATTE, GIBBONS, the subtleties are. Blagojevich Fawell Lewis (KY) Ms. ESHOO, and Messrs. OLVER, In the private sector there are natural maxi- Bliley Fazio Linder MCINTOSH, DAVIS of Virginia, and mization of profit motivations; on the public Blunt Foley Lipinski MORAN of Virginia changed their vote side, there are maximization of power con- Boehner Forbes Livingston Bonilla Ford LoBiondo from ‘‘no’’ to ‘‘aye.’’ cerns. Ironically, as we come to the conclusion Bono Fossella Lofgren So the amendment was rejected. of the House consideration process, the rivalry Boucher Fowler Lowey The result of the vote was announced between the Fed and the Treasury has come Boyd Fox Lucas Brady Franks (NJ) Manton as above recorded. more to the fore than rivalries between and Brown (FL) Frelinghuysen Manzullo PERSONAL EXPLANATION within industrial groupings. Brown (OH) Frost Markey Ms. KILPATRICK. Madam Chairman, be- Bryant Furse Mascara One of the most profound observations of cause I was unavoidably detained in the 15th the month was that of a prominent New York Bunning Gallegly Matsui Burr Ganske McCarthy (MO) Congressional District, I missed several roll banker who told me: ``All I want is to get out Burton Gejdenson McCarthy (NY) call votes. Had I been present, I would have of the Fed-Treasury crossfire.'' The bill pro- Buyer Gekas McCollum voted Nay on roll call number 142, Aye on roll vides certitude as well as fairness. Callahan Gephardt McCrery Calvert Gillmor McDade call vote number 143, and Aye on roll call The CHAIRMAN. The question is on Camp Gilman McGovern number 144. the amendment offered by the gen- Campbell Goodling McHugh The CHAIRMAN. It is now in order to tleman from New York (Mr. LAFALCE). Canady Gordon McIntyre Cannon Goss McKeon consider amendment No. 3 printed in The question was taken; and the Chabot Graham McNulty part 2 of House Report 105–531. Chairman pro tempore announced that Chambliss Granger Menendez AMENDMENT NO. 3 OFFERED BY MR. BAKER the noes appeared to have it. Chenoweth Greenwood Metcalf Clement Gutknecht Mica Mr. BAKER. Madam Chairman, I RECORDED VOTE Coble Hall (TX) Miller (FL) offer an amendment under the rule. Mr. LAFALCE. Mr. Chairman, I de- Coburn Hamilton Minge The CHAIRMAN. The Clerk will des- mand a recorded vote. Collins Hansen Mink Combest Hastert Moran (KS) ignate the amendment. A recorded vote was ordered. Condit Hastings (WA) Morella The text of the amendment is as fol- The vote was taken by electronic de- Cook Hayworth Murtha lows: vice, and there were—ayes 115, noes 306, Cooksey Hefley Nadler Costello Herger Neal Part 2, amendment No. 3, printed in House not voting 11, as follows: Cox Hill Nethercutt Report 105–531, offered by Mr. BAKER: [Roll No. 144] Coyne Hilleary Neumann After section 181, insert the following new Cramer Hinojosa Ney AYES—115 sections (and conform the table of contents Crane Hobson Northup accordingly): Allen Brown (CA) Dreier Crapo Hoekstra Norwood Baesler Capps Eshoo Cubin Holden Nussle SEC. 182. CRA AMENDMENT. Barrett (WI) Cardin Evans Cummings Horn Oxley Section 803(2) of the Community Reinvest- Becerra Carson Farr Cunningham Houghton Packard ment Act of 1977 (12 U.S.C. 2902(2)) is amend- Bentsen Castle Fattah Danner Hulshof Pallone ed by inserting ‘‘which has total assets of Berman Clayton Filner Davis (FL) Hunter Pappas more than $100,000,000’’ before the semicolon Bishop Clyburn Frank (MA) Deal Hutchinson Parker at the end. Blumenauer Conyers Gibbons DeGette Hyde Pascrell Boehlert Davis (IL) Goode Delahunt Inglis Paul In section 305 of the Amendment in the Na- Bonior Davis (VA) Goodlatte DeLauro Istook Paxon ture of a Substitute, strike ‘‘If a national Borski DeFazio Green DeLay Jenkins Pease bank’’ and insert ‘‘(a) IN GENERAL.—If a na- Boswell Dixon Gutierrez Deutsch John Peterson (MN) tional bank’’. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3193

In section 305 of the Amendment in the Na- SEC. 121. SUBSIDIARIES OF NATIONAL BANKS AU- ‘‘(D) WELL MANAGED.—The term ‘well man- ture of a Substitute, insert the following new THORIZED TO ENGAGE IN FINAN- aged’ means— subsections after subsection (a) (as so redes- CIAL ACTIVITIES. ‘‘(i) in the case of a bank that has been ex- ignated): (a) FINANCIAL SUBSIDIARIES OF NATIONAL amined, unless otherwise determined in writ- (b) STATE WAIVER.—If, in any community BANKS.—Chapter one of title LXII of the Re- ing by the Comptroller, the achievement of— served by a national bank or a subsidiary of vised Statutes of United States (12 U.S.C. 21 ‘‘(I) a composite rating of 1 or 2 under the a national bank, there is no company li- et seq.) is amended— Uniform Financial Institutions Rating Sys- censed by the appropriate State regulator to (1) by redesignating section 5136A as sec- tem (or an equivalent rating under an equiv- provide insurance as agent which is available tion 5136C; and alent rating system) in connection with the for acquisition, the State insurance regu- (2) by inserting after section 5136 (12 U.S.C. most recent examination or subsequent re- lator may, upon application by the national 24) the following new section: view of the bank; and bank or subsidiary, waive the limitation of ‘‘SEC. 5136A. FINANCIAL SUBSIDIARIES OF NA- ‘‘(II) at least a rating of 2 for management, subsection (a) with respect to the provision TIONAL BANKS. if that rating is given; or of insurance as agent by such bank or sub- ‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AU- ‘‘(ii) in the case of any national bank that sidiary within such community. THORIZED TO ENGAGE IN FINANCIAL ACTIVI- has not been examined, the existence and use (c) SUNSET.—This section shall cease to be TIES.— of managerial resources that the Comptrol- effective at the end of the 3-year period be- ‘‘(1) IN GENERAL.—A subsidiary of a na- ler determines are satisfactory. ginning on the date of the enactment of this tional bank may engage in an activity that ‘‘(6) INSURANCE UNDERWRITING, MERCHANT Act. is not permissible for a national bank to en- BANKING, AND DIRECT INVESTMENT.—Except as In paragraph (1) of section 45(d) of the Fed- provided in title III of the Financial Services eral Deposit Insurance Act, as added by sec- gage in directly, but only if— ‘‘(A) the activity is a financial activity (as Act of 1998, no subsidiary of a national bank tion 308(a) of the Amendment in the Nature (other than a corporation organized under of a Substitute, strike ‘‘and the making of defined in paragraph (4)); ‘‘(B) the national bank is well capitalized, section 25A of the Federal Reserve Act or a loans’’. corporation operating under section 25 of In paragraph (2) of section 45(g) of the Fed- well managed, and achieved a rating of ‘sat- such Act) may underwrite noncredit-related eral Deposit Insurance Act, as added by sec- isfactory record of meeting community cred- insurance, engage in real estate investment tion 308(a) of the Amendment in the Nature it needs’, or better, at the most recent exam- or development activities (except to the ex- of a Substitute, strike ‘‘Regulations pre- ination of the bank; tent a national bank is specifically author- scribed’’ and insert ‘‘Subject to section 104, ‘‘(C) all depository institution affiliates of ized by statute to engage in any such activ- regulations prescribed’’. such national bank are well capitalized, well After section 309 of the Amendment in the managed, and have achieved a rating of ‘sat- ity directly), or engage in merchant banking Nature of a Substitute, add the following isfactory record of meeting community cred- (as described in section 6(c)(3)(H) of the Bank new section (and conform the table of con- it needs’, or better, at the most recent exam- Holding Company Act of 1956). tents accordingly): ination of each such institution; and ‘‘(7) LIMITED EXCLUSIONS FROM COMMUNITY NEEDS REQUIREMENTS FOR NEWLY ACQUIRED SEC. 310. STUDY OF EFFECTIVENESS OF SAFE ‘‘(D) the bank has received the approval of HARBOR. the Comptroller of the Currency. DEPOSITORY INSTITUTIONS.—Any depository (a) STUDY REQUIRED.—3 years after the ‘‘(2) NO EFFECT ON EDGE ACT OR AGREEMENT institution which becomes affiliated with a date of the enactment of this Act, the Comp- CORPORATIONS.—Paragraph (1) shall not national bank during the 12-month period troller of the Currency shall study, in con- apply with respect to any subsidiary which is preceding the submission of an application junction with the National Association of In- a corporation organized under section 25A of to acquire a financial subsidiary and any de- surance Commissioners should such Associa- the Federal Reserve Act or a corporation op- pository institution which becomes so affili- tion choose to participate, the effectiveness erating under section 25 of such Act. ated after the approval of such application of the provisions of section 104(b)(2)(A) in es- ‘‘(3) OTHER SUBSIDIARIES PROHIBITED.—A may be excluded for purposes of paragraph tablishing a safe harbor for the regulation by national bank may not control any subsidi- (1)(C) during the 12-month period beginning States of insurance sales and solicitation ac- ary other than a subsidiary— on the date of such acquisition if— tivity. ‘‘(A) which engages solely in activities ‘‘(A) the national bank has submitted an (b) REPORT.—The Comptroller of the Cur- that are permissible for a national bank to affirmative plan to the Comptroller of the rency, together with the National Associa- engage in directly or are authorized under Currency to take such action as may be nec- tion of Insurance Commissioners should such paragraph (1); or essary in order for such institution to Association choose to participate, shall sub- ‘‘(B) which a national bank may control achieve a ‘satisfactory record of meeting mit a report to the Congress before the end pursuant to section 25 or 25A of the Federal community credit needs’, or better, during of the 6-month period beginning 3 years after Reserve Act, the Bank Service Company Act, the most next examination of the institu- the date of the enactment of this Act on or any other Act that expressly by its terms tion; and findings made and conclusions reached with authorizes national banks to control subsidi- ‘‘(B) the plan has been accepted by the regard to the study required under sub- aries. Comptroller. section (a), together with such recommenda- ‘‘(4) FINANCIAL ACTIVITY DEFINED.—For pur- ‘‘(b) CAPITAL DEDUCTION REQUIRED.— tions for legislative or administrative action poses of this section and subject to para- ‘‘(1) IN GENERAL.—In determining compli- as the Comptroller and the Association de- graphs (5) and (6), the term ‘financial activ- ance with applicable capital standards— termine to be appropriate. ity’ means any activity determined under ‘‘(A) the amount of a national bank’s eq- Paragraph (9) of section 10(c) of the Home section 6(c) of the Bank Holding Company uity investment in a financial subsidiary Owners’ Loan Act, as added by section 401 of Act of 1956 to be financial in nature or inci- shall be deducted from the national bank’s the Amendment in the Nature of a Sub- dental to financial activities. assets and tangible equity; and stitute, is amended by adding at the end the ‘‘(5) OTHER DEFINITIONS.—For purposes of ‘‘(B) the financial subsidiary’s assets and following new subparagraph: this section, the following definitions shall liabilities shall not be consolidated with ‘‘(C) NO ACQUISITION OF GRANDFATHERED apply: those of the national bank. UNITARIES BY UNREGULATED NONFINANCIAL ‘‘(A) FINANCIAL SUBSIDIARY.—The term ‘fi- ‘‘(2) REGULATIONS REQUIRED.—The Comp- COMPANIES.—Notwithstanding subparagraph nancial subsidiary’ means a company troller shall prescribe regulations imple- (B), paragraph (3) shall not apply to any which— menting this subsection. company described in subparagraph (B)(i)(II) ‘‘(i) is a subsidiary of a national bank ‘‘(c) SAFEGUARDS FOR THE BANK.—A na- which is not, at the time of the acquisition (other than a corporation organized under tional bank that establishes or maintains a referred to in such subparagraph, subject to section 25A of the Federal Reserve Act or a financial subsidiary shall assure that— licensing, regulation, or examination by a corporation operating under section 25 of ‘‘(1) the bank’s procedures for identifying Federal banking agency, the Securities and such Act); and and managing financial and operational Exchange Commission, the Commodities Fu- ‘‘(ii) is engaged in a financial activity pur- risks within the bank and financial subsidi- tures Trading Commission, or a State insur- suant to paragraph (1) that is not a permis- aries of the bank adequately protect the ance regulator.’’. sible activity for a national bank to engage bank from such risks; Strike the heading of subtitle C of title I of in directly. ‘‘(2) the bank has, for the protection of the the Amendment in the Nature of a Sub- ‘‘(B) SUBSIDIARY.—The term ‘subsidiary’ bank, reasonable policies and procedures to stitute and insert the following new heading has the meaning given to such term in sec- preserve the separate corporate identity and (and amend the table of contents accord- tion 2 of the Bank Holding Company Act of limited liability of the bank and subsidiaries ingly): 1956. of the bank; and SUBTITLE C—SUBSIDIARIES OF INSURED ‘‘(C) WELL CAPITALIZED.—The term ‘well ‘‘(3) the bank complies with this section. DEPOSITORY INSTITUTIONS capitalized’ has the same meaning as in sec- ‘‘(d) NATIONAL BANKS WHICH DO NOT COM- Strike section 121 of the Amendment in the tion 38 of the Federal Deposit Insurance Act PLY WITH REQUIREMENTS OF THIS SECTION.— Nature of a Substitute and insert the follow- and, for purposes of this section, the Comp- ‘‘(1) IN GENERAL.—If the Comptroller deter- ing new sections (and redesignate subsequent troller shall have exclusive jurisdiction to mines that a national bank which controls a sections and amend the table of contents ac- determine whether a national bank is well financial subsidiary, or a depository institu- cordingly): capitalized. tion affiliate of such national bank, does not H3194 CONGRESSIONAL RECORD — HOUSE May 13, 1998

continue to meet the requirements of sub- United States but only if the State bank ‘‘(2) APPLICATION TO TRANSACTIONS BE- section (a), the Comptroller shall give notice meets the same requirements which are ap- TWEEN A FINANCIAL SUBSIDIARY OF A BANK AND to the bank to that effect, describing the plicable to national banks under subpara- THE BANK.—For purposes of applying this sec- conditions giving rise to the notice. graphs (B) and (C) of such subsection and tion and section 23B to a transaction be- ‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE- subsections (b) and (c) of such section. tween a financial subsidiary of a bank and QUIRED.— ‘‘(B) APPLICATION OF SECTION 5136A OF RE- the bank (or between such financial subsidi- ‘‘(A) CONTENT OF AGREEMENT.—Within 45 VISED STATUTES.—For purposes of applying ary and any other subsidiary of the bank days of the receipt by a depository institu- section 5136A of the Revised Statutes of the which is not a financial subsidiary) and not- tion of a notice given under paragraph (1) (or United States with regard to the activities of withstanding subsection (b)(2) and section such additional period as the Comptroller a subsidiary of a State bank, all references 23B(d)(1), the financial subsidiary of the may permit), the depository institution fail- in such section to the Comptroller of the bank— ing to meet the requirements of subsection Currency, or regulations and orders of the ‘‘(A) shall be an affiliate of the bank and (a) shall execute an agreement with the ap- Comptroller, shall be deemed to be ref- any other subsidiary of the bank which is propriate Federal banking agency for such erences to the appropriate Federal banking not a financial subsidiary; and institution to correct the conditions de- agency with respect to such State bank, and ‘‘(B) shall not be treated as a subsidiary of scribed in the notice. regulations and orders of such agency. the bank. ‘‘(B) COMPTROLLER MAY IMPOSE LIMITA- ‘‘(4) STATE BANKS WHICH FAIL TO COMPLY ‘‘(3) APPLICATION TO TRANSACTIONS BE- TIONS.—Until the conditions giving rise to WITH PARAGRAPH (3) CONDITIONS.— TWEEN FINANCIAL SUBSIDIARY AND NONBANK the notice are corrected, the Comptroller ‘‘(A) IN GENERAL.—If the appropriate Fed- AFFILIATES.— may impose such limitations on the conduct eral banking agency determines that a State ‘‘(A) IN GENERAL.—A transaction between a of the business of the national bank or sub- bank that controls a subsidiary which is en- financial subsidiary and an affiliate of the fi- sidiary of such bank as the Comptroller de- gaged as principal in financial activities pur- nancial subsidiary shall not be deemed to be termines to be appropriate under the cir- suant to paragraph (3) does not meet the re- a transaction between a subsidiary of a na- cumstances. quirements of subparagraph (A) of such para- tional bank and an affiliate of the bank for ‘‘(3) FAILURE TO CORRECT.—If the condi- graph, the appropriate Federal banking purposes of section 23A or section 23B of the tions described in the notice are not cor- agency shall give notice to the bank to that Federal Reserve Act. rected within 180 days after the bank re- effect, describing the conditions giving rise ‘‘(B) CERTAIN AFFILIATES EXCLUDED.—For ceives the notice, the Comptroller may re- to the notice. purposes of subparagraph (A) and notwith- quire, under such terms and conditions as ‘‘(A) AGREEMENT TO CORRECT CONDITIONS standing paragraph (4), the term ‘affiliate’ may be imposed by the Comptroller and sub- REQUIRED.— shall not include a bank, or a subsidiary of a ject to such extensions of time as may be ‘‘(i) CONTENT OF AGREEMENT.—Within 45 bank, which is engaged exclusively in activi- granted in the discretion of the Comptrol- days of the receipt by a bank of a notice ties permissible for a national bank to en- ler— given under paragraph (1) (or such additional gage in directly. period as the appropriate Federal banking (A) the national bank to divest control of ‘‘(4) EQUITY INVESTMENTS EXCLUDED SUB- agency for such bank may permit), the bank each subsidiary engaged in an activity that JECT TO THE APPROVAL OF THE BANKING AGEN- failing to meet the requirements of para- is not permissible for the bank to engage in CY.—Subsection (a)(1) shall not apply so as to graph (3)(A) shall execute an agreement with directly; or limit the equity investment of a bank in a fi- the appropriate Federal banking agency for ‘‘(B) each subsidiary of the national bank nancial subsidiary of such bank, except that such bank to correct the conditions de- to cease any activity that is not permissible any investment that exceeds the amount of a scribed in the notice. for the bank to engage in directly. dividend that the bank could pay at the time ‘‘(B) AGENCY MAY IMPOSE LIMITATIONS.— ‘‘(e) FUNCTIONAL REGULATION.— of the investment without obtaining prior Until the conditions giving rise to the notice ‘‘(1) IN GENERAL.—A financial subsidiary of approval of the appropriate Federal banking are corrected, the appropriate Federal bank- a national bank shall not be treated as a agency and is in excess of the limitation ing agency for the State bank may impose bank for purposes of any definition of bank which would apply under subsection (a)(1), such limitations on the conduct of the busi- in the Federal securities laws. but for this paragraph, may be made only ness of the bank or a subsidiary of the bank ‘‘(2) DEFERENCE TO SEC.—The Comptroller with the approval of the appropriate Federal as the agency determines to be appropriate shall defer to the Securities and Exchange banking agency (as defined in section 3(q) of under the circumstances. Commission with regard to all interpreta- the Federal Deposit Insurance Act) with re- ‘‘(C) FAILURE TO CORRECT.—If the condi- tions of, and the enforcement of, applicable spect to such bank.’’. tions described in the notice are not cor- Federal securities laws relating to the ac- rected within 180 days after the bank re- (b) TREATMENT OF FINANCIAL SUBSIDIARIES tivities, conduct, and operations of reg- ceives the notice, the appropriate Federal UNDER OTHER PROVISIONS OF LAW.— istered brokers, dealers, investment advisers, ANK HOLDING COMPANY ACT AMEND- banking agency for the State may require, (1) B and investment companies. MENTS OF 1970.—Section 106(a) of the Bank under such terms and conditions as may be ‘‘(3) DEFERENCE TO EXAMINATIONS.—In the Holding Company Act Amendments of 1970 is imposed by such agency and subject to such case of a financial subsidiary of a national amended by adding at the end the following extensions of time as may be granted in the bank which is a registered broker or dealer new sentence: ‘‘For purposes of this section, discretion of the agency— or a registered investment adviser, the a financial subsidiary (as defined in section ‘‘(i) the bank to divest control of each sub- Comptroller shall, to the fullest extent pos- 5136A(a)(5)(A) of the Revised Statutes of the sidiary engaged in an activity as principal sible, address the circumstances which might United States or referenced in the 20th un- that is not permissible for the bank to en- otherwise permit or require an examination designated paragraph of section 9 of the Fed- gage in directly; or by the Comptroller by forgoing an examina- eral Reserve Act or section 24(d)(3)(A) of the ‘‘(ii) each subsidiary of the bank to cease tion and instead reviewing the reports of ex- Federal Deposit Insurance Act) shall be any activity as principal that is not permis- amination made of such subsidiary by or on deemed to be a subsidiary of a bank holding sible for the bank to engage in directly.’’. behalf of the Securities and Exchange Com- company, and not a subsidiary of a bank.’’; mission.’’. SEC. 123. RULES APPLICABLE TO FINANCIAL SUB- SIDIARIES. and (b) CLERICAL AMENDMENT.—The table of EDERAL RESERVE ACT (a) TRANSACTIONS BETWEEN FINANCIAL SUB- (2) F .—The 20th undes- sections for chapter one of title LXII of the SIDIARIES AND OTHER AFFILIATES.—Section ignated paragraph of section 9 of the Federal Revised Statutes of the United States is 23A of the Federal Reserve Act (12 U.S.C. Reserve Act (12 U.S.C. 335) is amended by amended— 371c) is amended— adding at the end of the following new sen- (1) by redesignating the item relating to (1) by redesignating subsection (e) as sub- tence: ‘‘To the extent permitted under State section 5136A as section 5136C; and section (f); and law, a State member bank may acquire or es- (2) by inserting after the item relating to (2) by inserting after subsection (d), the tablish and retain a financial subsidiary (as section 5136 the following new item: following new subsection: defined in section 5136A(a)(3)(A) of the Re- ‘‘5136A. Financial subsidiaries of national ‘‘(e) RULES RELATING TO BANKS WITH FI- vised Statutes of the United States, except banks.’’. NANCIAL SUBSIDIARIES.— that all references in that section to the SEC. 122. ACTIVITIES OF SUBSIDIARIES OF IN- ‘‘(1) FINANCIAL SUBSIDIARY DEFINED.—For Comptroller of the Currency, the Comptrol- SURED STATE BANKS. purposes of this section and section 23B, the ler, or regulations or orders of the Comptrol- Section 24(d) of the Federal Deposit Insur- term ‘financial subsidiary’ means a company ler shall be deemed to be references to the ance Act (12 U.S.C. 1831a(d)) is amended— which— Board or regulations or orders of the (1) by adding at the end the following new ‘‘(A) is a subsidiary of a bank (other than Board.’’. paragraphs: a corporation organized under section 25A of The CHAIRMAN. Pursuant to House ‘‘(3) CONDITIONS ON CERTAIN ACTIVITIES.— the Federal Reserve Act or a corporation op- Resolution 428, the gentleman from ‘‘(A) IN GENERAL.—A subsidiary of a State erating under section 25 of such Act); and bank may engage in an activity in which a ‘‘(B) is engaged in a financial activity (as Louisiana (Mr. BAKER) and a Member subsidiary of a national bank may engage as defined in section 5136A(a)(4)) that is not a opposed each will control 20 minutes. principal pursuant to subsection (a)(1) of sec- permissible activity for a national bank to The Chair recognizes the gentleman tion 5136A of the Revised Statutes of the engage in directly. from Louisiana (Mr. BAKER). May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3195

REQUEST FOR MODIFICATION TO AMENDMENT NO. to any company described in subparagraph ‘‘(5) OTHER DEFINITIONS.—For purposes of 3 OFFERED BY MR. BAKER (B)(i)(II) which is not, at the time of the ac- this section, the following definitions shall Mr. BAKER. Madam Chairman, I ask quisition referred to in such subparagraph, apply: unanimous consent to modify the subject to licensing, regulation, or examina- ‘‘(A) FINANCIAL SUBSIDIARY.—The term ‘fi- amendment. tion by a Federal banking agency, the Secu- nancial subsidiary’ means a company rities and Exchange Commission, the Com- which— The CHAIRMAN. The Clerk will re- modities Futures Trading Commission, or a ‘‘(i) is a subsidiary of a national bank port the modification. State insurance regulator.’’. (other than a corporation organized under The Clerk read as follows: ‘‘(ii) SUNSET PROVISION.—This subpara- section 25A of the Federal Reserve Act or a Amendment, as modified, offered by Mr. graph shall cease to be effective at the end of corporation operating under section 25 of BAKER: the 5-year period beginning on the date of such Act); and After section 181, insert the following new the enactment of the Financial Services Act ‘‘(ii) is engaged in a financial activity pur- sections (and conform the table of contents of 1998.’’. suant to paragraph (1) that is not a permis- accordingly): Strike the heading of subtitle C of title I of sible activity for a national bank to engage SEC. 182. CRA AMENDMENT. the Amendment in the Nature of a Sub- in directly. Section 803(2) of the Community Reinvest- stitute and insert the following new heading ‘‘(B) SUBSIDIARY.—The term ‘subsidiary’ ment Act of 1977 (12 U.S.C. 2902(2)) is amend- (and amend the table of contents accord- has the meaning given to such term in sec- ed by inserting ‘‘which has total assets of ingly): tion 2 of the Bank Holding Company Act of 1956. more than $100,000,000’’ before the semicolon SUBTITLE C—SUBSIDIARIES OF INSURED ‘‘(C) WELL CAPITALIZED.—The term ‘well at the end. DEPOSITORY INSTITUTIONS In section 305 of the Amendment in the Na- capitalized’ has the same meaning as in sec- ture of a Substitute, strike ‘‘If a national Strike section 121 of the Amendment in the tion 38 of the Federal Deposit Insurance Act Nature of a Substitute and insert the follow- bank’’ and insert ‘‘(a) IN GENERAL.—If a na- and, for purposes of this section, the Comp- tional bank’’. ing new sections (and redesignate subsequent troller shall have exclusive jurisdiction to In section 305 of the Amendment in the Na- sections and amend the table of contents ac- determine whether a national bank is well ture of a Substitute, insert the following new cordingly): capitalized. subsections after subsection (a) (as so redes- SEC. 121. SUBSIDIARIES OF NATIONAL BANKS AU- ‘‘(D) WELL MANAGED.—The term ‘well man- ignated): THORIZED TO ENGAGE IN FINAN- aged’ means— CIAL ACTIVITIES. (b) STATE WAIVER.—If, in any community ‘‘(i) in the case of a bank that has been ex- served by a national bank or a subsidiary of (a) FINANCIAL SUBSIDIARIES OF NATIONAL amined, unless otherwise determined in writ- a national bank, there is no company li- BANKS.—Chapter one of title LXII of the Re- ing by the Comptroller, the achievement of— censed by the appropriate State regulator to vised Statutes of United States (12 U.S.C. 21 ‘‘(I) a composite rating of 1 or 2 under the provide insurance as agent which is available et seq.) is amended— Uniform Financial Institutions Rating Sys- for acquisition, the State insurance regu- (1) by redesignating section 5136A as sec- tem (or an equivalent rating under an equiv- lator may, upon application by the national tion 5136C; and alent rating system) in connection with the bank or subsidiary, waive the limitation of (2) by inserting after section 5136 (12 U.S.C. most recent examination or subsequent re- subsection (a) with respect to the provision 24) the following new section: view of the bank; and of insurance as agent by such bank or sub- ‘‘SEC. 5136A. FINANCIAL SUBSIDIARIES OF NA- ‘‘(II) at least a rating of 2 for management, sidiary within such community. TIONAL BANKS. if that rating is given; or (c) SUNSET.—This section shall cease to be ‘‘(a) SUBSIDIARIES OF NATIONAL BANKS AU- ‘‘(ii) in the case of any national bank that effective at the end of the 3-year period be- THORIZED TO ENGAGE IN FINANCIAL ACTIVI- has not been examined, the existence and use ginning on the date of the enactment of this TIES.— of managerial resources that the Comptrol- Act. ‘‘(1) IN GENERAL.—A subsidiary of a na- ler determines are satisfactory. In paragraph (1) of section 45(d) of the Fed- tional bank may engage in an activity that ‘‘(6) INSURANCE UNDERWRITING, MERCHANT eral Deposit Insurance Act, as added by sec- is not permissible for a national bank to en- BANKING, AND DIRECT INVESTMENT.—Except as tion 308(a) of the Amendment in the Nature gage in directly, but only if— provided in title III of the Financial Services of a Substitute, strike ‘‘and the making of ‘‘(A) the activity is a financial activity (as Act of 1998, no subsidiary of a national bank loans’’. defined in paragraph (4)); (other than a corporation organized under After section 309 of the Amendment in the ‘‘(B) the national bank is well capitalized, section 25A of the Federal Reserve Act or a Nature of a Substitute, add the following well managed, and achieved a rating of ‘sat- corporation operating under section 25 of new section (and conform the table of con- isfactory record of meeting community cred- such Act) may underwrite noncredit-related tents accordingly): it needs’, or better, at the most recent exam- insurance, engage in real estate investment SEC. 310. STUDY OF EFFECTIVENESS OF SAFE ination of the bank; or development activities (except to the ex- HARBOR. ‘‘(C) all depository institution affiliates of tent a national bank is specifically author- (a) STUDY REQUIRED.—3 years after the such national bank are well capitalized, well ized by statute to engage in any such activ- date of the enactment of this Act, the Comp- managed, and have achieved a rating of ‘sat- ity directly), or engage in merchant banking troller of the Currency shall study, in con- isfactory record of meeting community cred- (as described in section 6(c)(3)(H) of the Bank junction with the National Association of In- it needs’, or better, at the most recent exam- Holding Company Act of 1956). surance Commissioners should such Associa- ination of each such institution; and ‘‘(7) LIMITED EXCLUSIONS FROM COMMUNITY tion choose to participate, the effectiveness ‘‘(D) the bank has received the approval of NEEDS REQUIREMENTS FOR NEWLY ACQUIRED of the provisions of section 104(b)(2)(A) in es- the Comptroller of the Currency. DEPOSITORY INSTITUTIONS.—Any depository tablishing a safe harbor for the regulation by ‘‘(2) NO EFFECT ON EDGE ACT OR AGREEMENT institution which becomes affiliated with a States of insurance sales and solicitation ac- CORPORATIONS.—Paragraph (1) shall not national bank during the 12-month period tivity. apply with respect to any subsidiary which is preceding the submission of an application (b) REPORT.—The Comptroller of the Cur- a corporation organized under section 25A of to acquire a financial subsidiary and any de- rency, together with the National Associa- the Federal Reserve Act or a corporation op- pository institution which becomes so affili- tion of Insurance Commissioners should such erating under section 25 of such Act. ated after the approval of such application Association choose to participate, shall sub- ‘‘(3) OTHER SUBSIDIARIES PROHIBITED.—A may be excluded for purposes of paragraph mit a report to the Congress before the end national bank may not control any subsidi- (1)(C) during the 12-month period beginning of the 6-month period beginning 3 years after ary other than a subsidiary— on the date of such acquisition if— the date of the enactment of this Act on ‘‘(A) which engages solely in activities ‘‘(A) the national bank has submitted an findings made and conclusions reached with that are permissible for a national bank to affirmative plan to the Comptroller of the regard to the study required under sub- engage in directly or are authorized under Currency to take such action as may be nec- section (a), together with such recommenda- paragraph (1); or essary in order for such institution to tions for legislative or administrative action ‘‘(B) which a national bank may control achieve a ‘satisfactory record of meeting as the Comptroller and the Association de- pursuant to section 25 or 25A of the Federal community credit needs’, or better, during termine to be appropriate. Reserve Act, the Bank Service Company Act, the most next examination of the institu- Paragraph (9) of section 10(c) of the Home or any other Act that expressly by its terms tion; and Owners’ Loan Act, as added by section 401 of authorizes national banks to control subsidi- ‘‘(B) the plan has been accepted by the the Amendment in the Nature of a Sub- aries. Comptroller. stitute, is amended by adding at the end the ‘‘(4) FINANCIAL ACTIVITY DEFINED.—For pur- ‘‘(b) CAPITAL DEDUCTION REQUIRED.— following new subparagraph: poses of this section and subject to para- ‘‘(1) IN GENERAL.—In determining compli- ‘‘(C) NO ACQUISITION OF GRANDFATHERED graphs (5) and (6), the term ‘financial activ- ance with applicable capital standards— UNITARIES BY UNREGULATED NONFINANCIAL ity’ means any activity determined under ‘‘(A) the sum of— COMPANIES.— section 6(c) of the Bank Holding Company ‘‘(i) IN GENERAL.—Notwithstanding sub- Act of 1956 to be financial in nature or inci- ‘‘(i) the amount of a national bank’s equity paragraph (B), paragraph (3) shall not apply dental to financial activities. investment in a financial subsidiary; and H3196 CONGRESSIONAL RECORD — HOUSE May 13, 1998 ‘‘(ii) the amount equal to the sum of the granted in the discretion of the Comptrol- given under paragraph (1) (or such additional retained earnings of each financial subsidi- ler— period as the appropriate Federal banking ary, ‘‘(A) the national bank to divest control of agency for such bank may permit), the bank shall be deducted from the national bank’s each subsidiary engaged in an activity that failing to meet the requirements of para- assets and tangible equity; and is not permissible for the bank to engage in graph (3)(A) shall execute an agreement with ‘‘(B) the financial subsidiary’s assets and directly; or the appropriate Federal banking agency for liabilities shall not be consolidated with ‘‘(B) each subsidiary of the national bank such bank to correct the conditions de- those of the national bank. to cease any activity that is not permissible scribed in the notice. ‘‘(2) REGULATIONS REQUIRED.—The Comp- for the bank to engage in directly. ‘‘(B) AGENCY MAY IMPOSE LIMITATIONS.— ‘‘(e) FUNCTIONAL REGULATION.— troller shall prescribe regulations imple- Until the conditions giving rise to the notice ‘‘(1) IN GENERAL.—A financial subsidiary of menting this subsection. are corrected, the appropriate Federal bank- a national bank shall not be treated as a ‘‘(c) SAFEGUARDS FOR THE BANK.— ing agency for the State bank may impose bank for purposes of any definition of bank ‘‘(1) IN GENERAL.—A national bank that es- such limitations on the conduct of the busi- in the Federal securities laws. tablishes or maintains a financial subsidiary ness of the bank or a subsidiary of the bank ‘‘(2) DEFERENCE TO SEC.—The Comptroller shall assure that— as the agency determines to be appropriate shall defer to the Securities and Exchange ‘‘(A) the bank’s procedures for identifying under the circumstances. Commission with regard to all interpreta- and managing financial and operational ‘‘(C) FAILURE TO CORRECT.—If the condi- tions of, and the enforcement of, applicable risks within the bank and financial subsidi- tions described in the notice are not cor- Federal securities laws relating to the ac- rected within 180 days after the bank re- aries of the bank adequately protect the tivities, conduct, and operations of reg- bank from such risks; ceives the notice, the appropriate Federal istered brokers, dealers, investment advisers, banking agency for the State may require, ‘‘(B) the bank has, for the protection of the and investment companies. bank, reasonable policies and procedures to under such terms and conditions as may be ‘‘(3) DEFERENCE TO EXAMINATIONS.—In the preserve the separate corporate identity and imposed by such agency and subject to such case of a financial subsidiary of a national extensions of time as may be granted in the limited liability of the bank and subsidiaries bank which is a registered broker or dealer of the bank; and discretion of the agency— or a registered investment adviser, the ‘‘(i) the bank to divest control of each sub- ‘‘(C) the bank complies with this section. Comptroller shall, to the fullest extent pos- ‘‘(2) PROHIBITION ON PIERCING THE COR- sidiary engaged in an activity as principal sible, address the circumstances which might that is not permissible for the bank to en- PORATE VEIL.—Notwithstanding any other otherwise permit or require an examination gage in directly; or law (including any law relating to insur- by the Comptroller by forgoing an examina- ‘‘(ii) each subsidiary of the bank to cease ance), no obligation of a financial subsidiary tion and instead reviewing the reports of ex- any activity as principal that is not permis- of a national bank arising more than 270 amination made of such subsidiary by or on sible for the bank to engage in directly.’’. days after the date of enactment of the Fi- behalf of the Securities and Exchange Com- nancial Services Act of 1998 may be charged mission.’’. SEC. 123. RULES APPLICABLE TO FINANCIAL SUB- against such bank by reason of any ruling, (b) CLERICAL AMENDMENT.—The table of SIDIARIES. determination, or judgment disregarding the sections for chapter one of title LXII of the (a) TRANSACTIONS BETWEEN FINANCIAL SUB- separate corporate identity or limited liabil- Revised Statutes of the United States is SIDIARIES AND OTHER AFFILIATES.—Section ity of the bank or the financial subsidiary. amended— 23A of the Federal Reserve Act (12 U.S.C. ‘‘(3) MAINTENANCE OF SEPARATE CORPORATE (1) by redesignating the item relating to 371c) is amended— IDENTITY AND SEPARATE LEGAL STATUS— section 5136A as section 5136C; and (1) by redesignating subsection (e) as sub- ‘‘(A) IN GENERAL.—The Comptroller shall (2) by inserting after the item relating to take steps, including conducting the review section 5136 the following new item: section (f); and (2) by inserting after subsection (d), the required by subparagraph (B), to assure that ‘‘5136A. Financial subsidiaries of national following new subsection: each national bank observes the separate banks.’’. corporate identity and separate legal status SEC. 122. ACTIVITIES OF SUBSIDIARIES OF IN- ‘‘(e) RULES RELATING TO BANKS WITH FI- of each of the bank’s financial subsidiaries. SURED STATE BANKS. NANCIAL SUBSIDIARIES.— ‘‘(B) EXAMINATIONS.—The Comptroller, Section 24(d) of the Federal Deposit Insur- ‘‘(1) FINANCIAL SUBSIDIARY DEFINED.—For when examining a national bank, shall re- ance Act (12 U.S.C. 1831a(d)) is amended— purposes of this section and section 23B, the view whether the bank is observing the sepa- (1) by adding at the end the following new term ‘financial subsidiary’ means a company rate corporate identity and separate legal paragraphs: which— status of the bank’s financial subsidiaries. ‘‘(3) CONDITIONS ON CERTAIN ACTIVITIES.— ‘‘(A) is a subsidiary of a bank (other than ‘‘(d) NATIONAL BANKS WHICH DO NOT COM- ‘‘(A) IN GENERAL.—A subsidiary of a State a corporation organized under section 25A of PLY WITH REQUIREMENTS OF THIS SECTION.— bank may engage in an activity in which a the Federal Reserve Act or a corporation op- ‘‘(1) IN GENERAL.—If the Comptroller deter- subsidiary of a national bank may engage as erating under section 25 of such Act); and mines that a national bank which controls a principal pursuant to subsection (a)(1) of sec- ‘‘(B) is engaged in a financial activity (as financial subsidiary, or a depository institu- tion 5136A of the Revised Statutes of the defined in section 5136A(a)(4)) that is not a tion affiliate of such national bank, does not United States but only if the State bank permissible activity for a national bank to continue to meet the requirements of sub- meets the same requirements which are ap- engage in directly. section (a), the Comptroller shall give notice plicable to national banks under subpara- ‘‘(2) APPLICATION TO TRANSACTIONS BE- to the bank to that effect, describing the graphs (B) and (C) of such subsection and TWEEN A FINANCIAL SUBSIDIARY OF A BANK AND conditions giving rise to the notice. subsections (b) and (c) of such section. THE BANK.—For purposes of applying this sec- ‘‘(2) AGREEMENT TO CORRECT CONDITIONS RE- ‘‘(B) APPLICATION OF SECTION 5136A OF RE- tion and section 23B to a transaction be- QUIRED.— VISED STATUTES.—For purposes of applying tween a financial subsidiary of a bank and ‘‘(A) CONTENT OF AGREEMENT.—Within 45 section 5136A of the Revised Statutes of the the bank (or between such financial subsidi- days of the receipt by a depository institu- United States with regard to the activities of ary and any other subsidiary of the bank tion of a notice given under paragraph (1) (or a subsidiary of a State bank, all references which is not a financial subsidiary) and not- such additional period as the Comptroller in such section to the Comptroller of the withstanding subsection (b)(2) and section may permit), the depository institution fail- Currency, or regulations and orders of the 23B(d)(1), the financial subsidiary of the ing to meet the requirements of subsection Comptroller, shall be deemed to be ref- bank— (a) shall execute an agreement with the ap- erences to the appropriate Federal banking ‘‘(A) shall be an affiliate of the bank and propriate Federal banking agency for such agency with respect to such State bank, and any other subsidiary of the bank which is institution to correct the conditions de- regulations and orders of such agency. not a financial subsidiary; and scribed in the notice. ‘‘(4) STATE BANKS WHICH FAIL TO COMPLY ‘‘(B) shall not be treated as a subsidiary of ‘‘(B) COMPTROLLER MAY IMPOSE LIMITA- WITH PARAGRAPH (3) CONDITIONS.— the bank. TIONS.—Until the conditions giving rise to ‘‘(A) IN GENERAL.—If the appropriate Fed- ‘‘(3) APPLICATION TO TRANSACTIONS BE- the notice are corrected, the Comptroller eral banking agency determines that a State TWEEN FINANCIAL SUBSIDIARY AND NONBANK may impose such limitations on the conduct bank that controls a subsidiary which is en- AFFILIATES.— of the business of the national bank or sub- gaged as principal in financial activities pur- ‘‘(A) IN GENERAL.—A transaction between a sidiary of such bank as the Comptroller de- suant to paragraph (3) does not meet the re- financial subsidiary and an affiliate of the fi- termines to be appropriate under the cir- quirements of subparagraph (A) of such para- nancial subsidiary shall not be deemed to be cumstances. graph, the appropriate Federal banking a transaction between a subsidiary of a na- ‘‘(3) FAILURE TO CORRECT.—If the condi- agency shall give notice to the bank to that tional bank and an affiliate of the bank for tions described in the notice are not cor- effect, describing the conditions giving rise purposes of section 23A or section 23B of the rected within 180 days after the bank re- to the notice. Federal Reserve Act. ceives the notice, the Comptroller may re- ‘‘(A) AGREEMENT TO CORRECT CONDITIONS ‘‘(B) CERTAIN AFFILIATES EXCLUDED.—For quire, under such terms and conditions as REQUIRED.— purposes of subparagraph (A) and notwith- may be imposed by the Comptroller and sub- ‘‘(i) CONTENT OF AGREEMENT.—Within 45 standing paragraph (4), the term ‘affiliate’ ject to such extensions of time as may be days of the receipt by a bank of a notice shall not include a bank, or a subsidiary of a May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3197 bank, which is engaged exclusively in activi- Madam Chairman, I would like to re- and finance, and the giant corporations ties permissible for a national bank to en- spond just briefly to the intent to mod- gobbling up small town banks. We now gage in directly. ify, so that the distinguished individ- have in law what is known as a unitary ‘‘(4) EQUITY INVESTMENTS EXCLUDED SUB- ual can understand our intent. thrift, a unique financial creature JECT TO THE APPROVAL OF THE BANKING AGEN- Madam Chairman, under the provi- CY.—Subsection (a)(1) shall not apply so as to which combines the resources of com- limit the equity investment of a bank in a fi- sions of the consolidated amendment, mercial enterprises with financial re- nancial subsidiary of such bank, except that there is one small element of the insur- sources. any investment that exceeds the amount of a ance provisions—— This amendment would prohibit the dividend that the bank could pay at the time PARLIAMENTARY INQUIRY future sale of those enterprises to the of the investment without obtaining prior Mr. SOLOMON. Parliamentary in- Microsofts, the General Electrics, the approval of the appropriate Federal banking quiry, Madam Chairman. Are we under General Motors. It is, in fact, a protec- agency and is in excess of the limitation regular order? Is time being consumed tion against the further breach of which would apply under subsection (a)(1), but for this paragraph, may be made only on the 40 minutes now? Because that is banking and commerce. with the approval of the appropriate Federal regular order. This is an extraordinarily important banking agency (as defined in section 3(q) of The CHAIRMAN. That is correct. amendment, and I would suggest that the Federal Deposit Insurance Act) with re- Mr. BAKER. Madam Chairman, I unless the amendment is adopted, it is spect to such bank.’’. would like to respond to the gentle- highly unlikely that many of the (b) TREATMENT OF FINANCIAL SUBSIDIARIES man’s inquiry. Under the provisions of hometown bankers now calling Mem- UNDER OTHER PROVISIONS OF LAW.— the insurance portions of the amend- bers’ offices and complaining about the (1) BANK HOLDING COMPANY ACT AMEND- ment, there was a technical reference consideration of this bill will find an MENTS OF 1970.—Section 106(a) of the Bank Holding Company Act Amendments of 1970 is to section 104 being cross-referenced ability to tolerate the provisions of amended by adding at the end the following with section 308; stated in other words, H.R. 10, without the inclusion of this new sentence: ‘‘For purposes of this section, consumer protection standards for the amendment. a financial subsidiary (as defined in section sales of insurance by banks. Madam Chairman, I reserve the bal- 5136A(a)(5)(A) of the Revised Statutes of the Given the fact that some in the in- ance of my time. United States or referenced in the 20th un- surance community had expressed con- Mr. BLILEY. Madam Chairman, I designated paragraph of section 9 of the Fed- cerns about the consequences of those claim the time in opposition. eral Reserve Act or section 24(d)(3)(A) of the provisions, I simply chose to remove The CHAIRMAN. The gentleman Federal Deposit Insurance Act) shall be deemed to be a subsidiary of a bank holding that section from the consideration from Virginia (Mr. BLILEY) is recog- company, and not a subsidiary of a bank.’’; from the House, thinking that that nized for 20 minutes. and would be moving in the gentleman’s di- PARLIAMENTARY INQUIRY (2) FEDERAL RESERVE ACT.—The 20th un- rection in the consideration of this Mr. LAFALCE. Parliamentary in- designated paragraph of section 9 of the Fed- amendment. I regret that he was un- quiry, Madam Chairman. eral Reserve Act (12 U.S.C. 335) is amended able to allow that modification to be The CHAIRMAN. The gentleman will by adding at the end of the following new considered. state it. sentence: ‘‘To the extent permitted under Madam Chairman, the amendment Mr. LAFALCE. Madam Chairman, State law, a State member bank may acquire before us is substantive and quite or establish and retain a financial subsidiary should the time in opposition be given (as defined in section 5136A(a)(3)(A) of the broad-based. Simply stated, it is an to a member of the same party in oppo- Revised Statutes of the United States, ex- amendment which addresses many of sition, or to a member of the opposi- cept that all references in that section to the the community banks’ concerns who, tion party in opposition? Comptroller of the Currency, the Comptrol- in the process of financial moderniza- The CHAIRMAN. The time in opposi- ler, or regulations or orders of the Comptrol- tion, have felt, frankly, not only left tion has been given to the manager of ler shall be deemed to be references to the out, but all too often stepped on. the bill. Board or regulations or orders of the Just last month this House passed Board.’’. Mr. BLILEY. Madam Chairman, I H.R. 1151, which gave credit unions the yield myself 11⁄2 minutes. Mr. BAKER (during the reading). unfettered right to continue to provide Madam Chairman, I will see that the Madam Chairman, I ask unanimous services to their consumers. Unfortu- gentleman from New York (Mr. LA- consent that the amendment, as modi- nately for most small banks in this FALCE) gets time. fied, be considered as read and printed country, they are feeling increased Madam Chairman, this amendment is in the RECORD. competitive pressures from the merg- The CHAIRMAN. Is there objection similar to the amendment offered by ers and consolidations, increased regu- the gentleman from New York (Mr. LA- to the request of the gentleman from latory oversight, and little ability to Louisiana? FALCE) and the gentleman from Min- offer new products to their shrinking nesota (Mr. VENTO) in that it expands PARLIAMENTARY INQUIRY consumer base. the powers of operating subsidiaries. It Mr. DINGELL. Point of parliamen- Madam Chairman, reemphasizing the undoes the insurance compromise we tary inquiry, Madam Chairman. point, there is little in this bill, as it Are we reading the amendment, or have crafted to end deference to the now stands, that is attractive to the OCC. It also restricts other provisions. discussing the amendment which is au- community banker who is struggling thorized by the rule, or something dif- Like Alan Greenspan, like Americans to survive with high end regulatory for Tax Reform, like Ronald Reagan’s ferent? costs. The CHAIRMAN. The reading of the Treasury, I am opposed to expanding This amendment makes four simple modification was just dispensed with. the powers in operating subsidiaries. changes. It exempts community banks Is there objection to modifying the b under $100 million in asset size from 1630 amendment offered by Mr. BAKER? Mr. DINGELL. Reserving the right to compliance with CRA; it amends the The reason I am opposed is that these object, Madam Chairman, we have not insurance provisions to allow enhanced are not free; they increase risk to tax- had a chance to review this or what it flexibility for the marketing of insur- payers. Americans for Tax Reform say means. The Committee on Rules has ance products; it provides an operating that operating subsidiaries pose just spoken rather clearly on it, and with subsidiary structure reported out by that danger. I do not think it is worth great respect and affection for the dis- the Committee on Banking and Finan- the risk. tinguished gentleman from Louisiana cial Services months ago, which does H.R. 10 gives bank affiliates full secu- (Mr. BAKER), I have to object. I do ob- not allow for merchant banking, under- rities, insurance and merchant banking ject. writing of insurance, or direct invest- powers. It does it in an affiliate struc- The CHAIRMAN. Objection is heard. ment in real estate; it provides for a ture that protects taxpayers. No one, The Chair recognizes the gentleman prohibition on the sale of unitary other than the bureaucrats at the OCC, from Louisiana (Mr. BAKER). thrifts to commercial enterprises. care about operating subsidiaries. Pro- Mr. BAKER. Madam Chairman, I Many of my colleagues on the other tecting taxpayers is more important yield myself such time as I may con- side of this issue are very much con- than protecting them. I urge Members sume. cerned about the merger of commerce to oppose this amendment. H3198 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Please note that even if this Baker long, and successfully, engaged in these I had offered an amendment to exempt amendment passes, the community financial services in a subsidiary, in- the community banks of CRA up to banks will not support this bill. cluding underwriting and brokering se- $250 million, but this House is not Madam Chairman, I reserve the bal- curities, which is what we are pushing going to get to address that. ance of my time. now. However, in this amendment, there is Mr. BAKER. Madam Chairman, I A survey of bank failures in the a provision which will exempt the yield 4 minutes to the gentleman from United States over the last 20 years small banks up to $100 million in assets New York (Mr. LAZIO). demonstrates that the cause of failures from CRA. Let me tell my colleagues, Mr. LAZIO of New York. Madam is typically due to deterioration in the this is not a revolutionary idea. In Chairman, I thank the gentleman for quality of the traditional assets that fact, the gentleman from Pennsylvania his hard work and for his effort to try they hold, not to involvement in non- (Mr. KANJORSKI), Democratic Member and improve this bill, at least as it af- banking activities. of this body, offered and the Sub- fects banks. These op-sub provisions were con- committee on Financial Institutions Let me explain the operating subsidi- tained in the amendment that I filed and Consumer Credit of the Committee ary provisions in the amendment be- with the Committee on Rules along on Banking and Financial Services fore the House. First, these provisions with the gentleman from Louisiana passed a provision which exempted are similar to the operating subsidiary (Mr. BAKER), the gentleman from Dela- banks up to $150 million and rural provisions adopted by the Committee ware (Mr. CASTLE) and the gentleman banks up to $250 million in 1991. We on Banking and Financial Services. from Iowa (Mr. LEACH). They represent continue to back-pedal on this issue. Second, the powers of a bank op-sub a reasonable, rational, safe and sound In the Senate, 12 Democratic Sen- are limited to those powers granted to approach to expanding an op-sub’s abil- ators have endorsed the idea of a two- a bank holding company under the bill. ity to engage in new powers and are re- tier approach to CRA. Forty-one Demo- Third, op-subs are not authorized to flective of our need and desire to mod- crats have joined in the House, saying engage in insurance underwriting, mer- ernize our financial services in this that we need to have a two-tier ap- chant banking and real estate. In that country. proach. But first of all, we are not sense, fourth, they push out the most Mr. BLILEY. Madam Chairman, I ask going to get to vote on that in a clear risky business. unanimous consent to yield 10 minutes shot. I wish we all did. Fifth, the safeguards of section 23A to the gentleman from New York (Mr. I wish that the Committee on Rules had seen in their wisdom to let us take and 23B of the Federal Reserve Act LAFALCE) and that he may be per- apply. Section 23A limits how many mitted to control the time, and that a stand on this issue. All we will get to transactions a bank can have within the balance of my time be under the do today is vote on this provision, and one of the things it has in it that I its op-sub. Section 23B says every one control of the gentleman from Ohio strongly support is an exemption for of those transactions must be con- (Mr. GILLMOR). ducted at arm’s length. The Federal The CHAIRMAN. Is there objection banks up to $100 million in assets. And Reserve writes the rules for op-subs. to the request of the gentleman from who are these banks? Seventy-five per- cent of them are in communities of Sixth, the bank must be well man- Virginia? aged, well capitalized and meet com- There was no objection. 10,000 people and less; 45 percent of them, the majority of their loans are munity credit needs before it can have Mr. LAFALCE. Madam Chairman, I an operating subsidiary. yield myself 1 minute. I thank the dis- agricultural loans to small farmers. Seventh and most importantly, any tinguished chairman of the Committee These banks are simply being driven bank investment in the op-sub must be on Commerce for his generosity. out of the market by the cost of com- deducted from the bank’s regulatory I have tremendous respect for the pliance. It is open season on the small capital, so a bank can lose its entire gentleman from Louisiana (Mr. banks. H.R. 10 is going to continue to put stake in the subsidiary and it will be BAKER). We attempted to work out an them at a disadvantage and put them protected and remain well capitalized. amendment together. I wish that we out of business, but at least this These provisions further reinforce could have done it, because right now I amendment gives them a little bit of that securities activities will be regu- think the Committee on Rules has di- relief, not as much as the Democratic lated by the SEC, and it empowers vided us and maybe, by dividing us, House of Representatives in 1991 gave State securities officials to regulate hoped to conquer. If the gentleman them, because we obviously love regu- these activities. could have joined with me, I think we lation today more than we did then, There are even more safety provi- would have done much better. not as much as this entire House did sions. If the bank is not well capital- The difficulty I have in joining with when it passed the provisions a few ized or well managed, regulators have him is his provision that repeals the re- years ago. authority to impose additional terms quirements of CRA for banks $100 mil- We are back-pedalling, making the and conditions. Failure to comply with lion or less. That is a poison pill for exemption smaller, giving less relief, these conditions may result in divesti- Democrats. We simply cannot support but good gosh, can we not at least do ture. it. this? Then FDIC Chairwoman Ricki Helfer So prescinding from the relative mer- Mr. GILLMOR. Madam Chairman, I submitted testimony to the House its or demerits of the rest of his yield 2 minutes to the distinguished Committee on Banking and Financial amendment, so long as it contains this gentlewoman from New Jersey (Mrs. Services on March 5, 1997. She said, provision, a repeal of CRA for banks ROUKEMA). ‘‘With appropriate safeguards, having with $100 million or less, we are con- Mrs. ROUKEMA. Madam Chairman, I earnings from new activities in bank strained to oppose it. thank the gentleman for yielding time subsidiaries lowers the probability of Madam Chairman, I reserve the bal- to me. failure and thus provides greater pro- ance of my time. I rise today in opposition to this tection for the insurance fund than Mr. BAKER. Madam Chairman, I amendment. I do so reluctantly be- having the earnings from new activi- yield 2 minutes to the gentleman from cause there are parts of this package ties in bank holding company affili- Alabama (Mr. BACHUS), another distin- that I really supported. For example, ates.’’ This from one of our top regu- guished member of Committee on the insurance amendments, where I lators. Banking and Financial Services. wanted amendments of my own on the Two experts, Gerard Lynch and Peter Mr. BACHUS. Madam Chairman, I insurance question. But they were not Strauss, state further in the October would like to say that the gentleman permitted in the rule. And also I think 1997 issue of the Columbia Law Review from New York said something that I the small bank CRA exemption has that banks should not be denied the agree with. That is, that we are mixing merit. use of operating subsidiaries. For years a lot of things in this amendment. And However, I want my colleagues to un- U.S. banks operating overseas have had I wish that the Committee on Rules derstand this, and it is interesting that separate op-subs with these powers. had given us an opportunity to address it follows on the Vento-LaFalce operat- Banks in most G–10 countries have CRA reform in a separate amendment. ing subsidiary question that we just May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3199 voted on. Make no mistake about it, This person himself does not believe small businesses. I was pleased at the the core of this package, the essence of that he is the intended recipient of time that the data was included, and I this amendment is the operating sub- CRA assistance. The problem is not believe it encouraged banks to make sidiary provision. This is the core with the financial institution who loans to small businesses, which we of- issue, none other. granted this discounted loan; the prob- tentimes celebrate here as the engine So I must repeat again what I said in lem is with the Federal law that forces of economic growth. the prior debate, that particularly in banks to make such loans just in order Now, I know the economy today is this time of megamergers, we have to to receive high CRA ratings. not in the same state that it was in in be very concerned about how the oper- This is especially true with small, 1991. The banks are reporting record ating subsidiary relates to the safety community-based financial institu- profits. And I do not think anybody and soundness issue. As far as I am tions that probably have a personal re- here would argue that there still exists concerned, this actually just goes to lationship with their loan applicants. a credit crunch. But who in this cham- the heart and violates the very heart of In reality, small institutions are deep- ber knows how long that is going to the bill we have before us. ly engaged with the communities they last? The reason I am for this mixture of serve. If they were not, they would We should reject the Baker amend- modernization of financial institutions simply be out of business. CRA obliga- ment, stick with the CRA require- is because I am sure that we have a tions are onerous burdens that tie the ments, and retrieve this information in sound regulatory structure, but this hands of small institutions, cause an a timely manner so that we can make amendment, if adopted with the oper- increase in bank fees, and make car, better decisions. ating subsidiary, will really violate the home and business loans out of reach Mr. BAKER. Madam Chairman, I essence of the functional regulation for many Americans. yield 3 minutes to the gentleman from and the bank holding company struc- For these reasons, I urge my col- California (Mr. DREIER), a distin- ture that we have in this bill. So I leagues to support the Baker amend- guished member of the Committee on must again oppose the amendment, and ment. Rules and former member of the Com- again, I guess I have got to repeat, be- Mr. LAFALCE. Mr. Chairman, I yield mittee on Banking and Financial Serv- cause there are an awful lot of us 2 minutes to the gentleman from Mas- ices. around who either were here or tax- sachusetts (Mr. NEAL). Mr. DREIER. Madam Chairman, I payers at home, when we remember the Mr. NEAL of Massachusetts. Madam thank my friend from Baton Rouge for savings and loan debacle and how that Chairman, sometimes in this Chamber yielding me this time, and I would like came about at the end of the 1980s, it we act as though we have a collective to begin by congratulating him for his built up through the 1980s, came there sense of amnesia. excellent work as chairman of the Sub- at the end of the 1980s, and we are still I want to stand in opposition to the committee on Capital Markets, Securi- living with the cost to the taxpayer of Baker amendment today, an issue that ties and Government Sponsored Enter- that issue. the gentleman from Louisiana (Mr. prises of the Committee on Banking I do not want to make, even have a BAKER) and I engaged in some years and Financial Services, where he has potential opening for that kind of mis- ago, as well, and with great regard for been the driving force for this whole take again. I must reluctantly oppose the gentleman’s abilities. But I would issue of the three-way street affili- this package because of the operating like to point out that oftentimes we ations, which are very important, so sub provision. forget what has occurred here. that we can continue our quest to meet Mr. BAKER. Madam Chairman, I In 1991, I offered this amendment on the consumer demand. yield 2 minutes to the gentleman from the House floor that would call for the I rise in very strong support of his Utah (Mr. COOK). opportunity for lending institutions to amendment for a number of reasons. I Mr. COOK. Madam Chairman, I rise do a better job of keeping track of the think one of the most important is, in today in support of the amendment of- loans that they made to small business fact, to counter the argument that was fered by my good friend, the gentleman and to small farms. At that time, I had just provided by my friend, the gen- from Louisiana (Mr. BAKER). the support of Andy Ireland, who was tleman from Springfield, Massachu- Although the Baker amendment has the ranking member on the Committee setts (Mr. NEAL). I believe the provi- several components, I would like to on Small Business, but in the end we sions that were initially put forward by focus on one section that is particu- were able to come to an agreement our friend, the gentleman from Ala- larly important to the health of small that allowed the call report to be bama (Mr. BACHUS), are very important banks across our Nation. The Baker amended so that we could do a better to deal with that tremendous regu- amendment would remove Community job of tracking this information as it latory burden which has been placed Reinvestment Act obligations from applied again to small business and to onto the shoulders of those small banks with less than $100 million in as- small farms. banks that are trying to deliver finan- sets. cial services to people in small commu- b 1645 I respect very much the views of my nities. friends on the other side of the aisle Now, the FIDICIA act of 1991, in the I think that we have a tremendous who believe the CRA is important for midst of the magic words that some of chance with this amendment to greatly helping underserved communities, us also might remember here, the cred- improve what I think is a flawed meas- rural and urban alike, but CRA, as it it crunch, where we had regulators ar- ure. And so I think that as we look at was intended, does not work efficiently guing that there was no credit crunch, the work that has been done by the in practice, particularly with small what the real argument was about was gentleman from Louisiana (Mr. BAKER) banks. Let me take a moment to share they were unable to secure the nec- and others in this effort, that this a bit of anecdotal evidence. essary data that accompanied that in- amendment deserves our very, very se- An acquaintance of mine recently re- formation so that we could have done a rious consideration and support. And I ceived a CRA loan for a home purchase. better job beyond anecdotal evidence, urge my colleagues to join in doing The loan was well below the going in- as highlighted by the previous speaker. just that. terest rate with no points or origina- We need to be in a position where we Mr. GILLMOR. Madam Chairman, I tion fees. This person makes a good in- can secure this information so that we yield 2 minutes to the gentleman from come, has no family to support and can act accordingly. New York (Mr. SOLOMON), chairman of could easily handle an identical mort- Now, let me talk, if I can about that the Committee on Rules. gage at standard rates, but this person FIDICIA markup. At that time my Mr. SOLOMON. Madam Chairman, I makes just under the median income of amendment was included in the final spoke from this side of the well earlier, 57,000 in the area where he is from. The package, and to this day we are able to almost on the same subject. I am going loan recipient told me that his experi- go and retrieve that information in a to switch and talk to my Republican ence is an example of how CRA has timely manner. I offered that amend- colleagues in particular over here. good intentions, but does not really ment at the time to collect evidence What I asked earlier of my good work in practice. that small banks were not lending to friends on the Democratic side of the H3200 CONGRESSIONAL RECORD — HOUSE May 13, 1998 aisle was did they remember what hap- the Fed already provides operating sub- Now, a large number of my other col- pened in the early 1980s. Do we remem- sidiaries in U.S. banks that operate leagues voted for the LaFalce amend- ber? The gentleman from New York abroad, and this tries to give them ment because they said it kept intact (Mr. LAFALCE) and others were here some of the same powers. But the fact the community reinvestment require- back in 1980 when this Congress is that in giving powers to an operating ments that are in the CRA. That was a brought an innocuous bill to the floor subsidiary, we give it to them so that valid reason for my colleagues to vote which caused the S&L crisis. they can serve the communities. So that way, although I do not think that What we did at that time was that we this amendment gives with one hand was controlling in that particular mat- raised the guaranty on simple deposits but then it takes back with the other. ter. I would observe, however, if that by our constituents from $25,000 up to If I remember correctly, about 80 per- was the reason for my colleagues vot- $100,000. Then we said they could place cent of the banks would not be subject ing that way on that amendment, they $100,000 in 50 banks across the country, to CRA. And what is CRA, after all? It should vote ‘‘no’’ on this amendment if they wanted to, and the Federal Gov- is a successful law that assures that fi- because this amendment removes the ernment is going to guaranty every nancial institutions are actually par- requirements of the CRA from commu- nickel of it. ticipating in providing creditworthy nity banks, small banks, it is said. But So what happened is, people like me, activity within the communities that the number of the banks that are ab- who had sold their businesses, had a they serve. Where they are taking de- solved of those responsibilities are little bit of money, we said, sure, we posits, they make loans. Where they 6,500. Sixty-five hundred banks no can invest in these new banks that are are taking deposits, they finance busi- longer have to meet that requirement starting up, and let them go into the nesses and farms and make home loans. if this amendment is adopted. high risk knowing that we are going to That is what Community Reinvest- Now, this also violates the com- get our money back if it fails. And lo ment Act has provided. It is workable. promise which was achieved with the and behold they did fail. They failed by The new program that has been put to- insurance agents and brokers. I would the dozens all over this country. Not in gether with the lead of the Comptroller assume that if Members voted against my neck of the woods, up in the Adi- of the Currency, incidentally, working the provisions of the LaFalce amend- rondacks, in the Hudson Valley. They with the Fed and working with the ment, or if Members voted for it be- are prudent, cautious, conservative Federal Deposit Insurance Corporation, cause they were concerned about CRA, bankers, and none of them failed, but has, in fact, put a CRA program in they would vote against this amend- they failed in other places. And yet we, place that emphasizes performance, not ment in the firm knowledge that they our investors, our depositors and our paperwork. It is working. have every reason to so do. taxpayers, had to bail out these others. There are many examples. I said jok- Now, there is one other point to be My colleagues, we have not seen any- ingly before that not many will get up made. A lot of my colleagues are still thing yet. We let this legislation go and say I love my bank, as my col- troubled about the concerns of the down the drain, and if this amendment league did with regard to other finan- banks, and very truthfully I am, too, passes, regardless of its merits, and I cial institutions. But the fact is that because banks are important to this have great respect for the sponsor, he many small and medium-sized banks country and to the economy. But I is one of the most respected Members within my community in Minnesota would observe for my colleagues, clear- and the most knowledgeable Member are, in fact, performing tremendous ly, that the banks have made it plain in this House on these issues, but if we service in the community, both as vol- that the adoption of this or any other let this legislation fail, we are going to unteers but, most importantly, fulfill- amendment is not going to make this see 4 or 5 years from now that we are ing that important work. bill acceptable to them. going to be bailing out much larger, In fact, what we are finding with Mr. LAFALCE. Madam Chairman, mega, mega bailouts than we have in CRA is that a lot of loans are being how much time do I have remaining? the past, and it will be all our tax- made that before were not recognized The CHAIRMAN. The gentleman payers that are doing it. as being creditworthy. CRA works and from New York (Mr. LAFALCE) has 5 That is why we need this legislation we ought to keep it in place. minutes remaining. today. Defeat this amendment. Let us Mr. GILLMOR. Madam Chairman, I Mr. LAFALCE. Madam Chairman, I go to the Senate and then let us work yield 2 minutes to the gentleman from yield 2 minutes to the gentleman from as a team with the administration to- Michigan (Mr. DINGELL), the ranking Massachusetts (Mr. KENNEDY). gether to try to fashion a bill that will member of the Committee on Com- Mr. KENNEDY of Massachusetts. protect the consumers, protect the in- merce. Madam Chairman, I think that it is in- vestors, the depositors and, above all (Mr. DINGELL asked and was given teresting that the way this bill is now else, protect the taxpayers. Please de- permission to revise and extend his re- being debated is whether or not we can feat the amendment. marks.) use the excuse to merge and acquire Mr. BAKER. May I inquire of the Mr. DINGELL. Madam Chairman, I more and more banks, more insurance Chair how much time is remaining? would like to commend and com- companies, more securities firms to ac- The CHAIRMAN. The gentleman pliment my colleagues. This has been tually undercut and drop back the bar from Louisiana (Mr. BAKER) has 71⁄2 one of the most constructive and, I be- on our investments to the poorest com- minutes remaining, the gentleman lieve, gentlemanly debates I have seen munities in this country. That is what from Ohio (Mr. GILLMOR) has 41⁄2 min- in my career in this Congress. we have come to in the Congress of the utes remaining, and the gentleman And I particularly want to pay trib- United States. from New York (Mr. LAFALCE) has 7 ute to my friend from New York (Mr. It seems if we are really serious minutes remaining. LAFALCE), and my colleagues on the about looking at the effects of CRA, let Mr. LAFALCE. Madam Chairman, I other side, the gentleman from Vir- us take a look at the fact that since yield 2 minutes to the gentleman from ginia (Mr. BLILEY) and the gentleman 1977 the regulators have indicated that Minnesota (Mr. VENTO). from Louisiana (Mr. BAKER), and the over $400 billion have been invested in Mr. VENTO. Madam Chair, I rise in other Members of the Congress who the poorer communities of this coun- opposition to the amendment. Fun- have participated. try. Not communities where banks lose damentally, I am concerned. This I would like to speak about the money, but rather communities where amendment, I think, is a grudging rec- amendment, and I would like to point banks have invested, the communities ognition of the importance of the oper- out several things. First of all, if my have grown and prospered, and we see ating subsidiary which has been turned colleagues voted against the LaFalce home ownership rates rising among down in the previous amendment. amendment earlier, because it allowed blacks and Hispanics and Asians, as I will not reiterate the arguments for for operating subsidiaries inside the well as poor whites. an operating subsidiary. This is a more banks to engage in nonbank activities, We see communities that have been limited operating subsidiary. It is set they should oppose this because this neglected for years and years, despite forth, in fact, with the permission of amendment does exactly the same the fact that they put deposits in the Federal Reserve Board. So I guess thing. banks. Banks sucked up those deposits May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3201 and then turned around and lent the CRA works. The Community Rein- firmative action. We ought to all be money someplace else. All CRA says is vestment Act has been an extremely supporting CRA rather than trying to put the money back into the commu- hard-fought reform of our banking sec- abolish it. nities from which the deposits are tor that has brought over $400 billion in I think we ought to oppose this taken. resources to poor and minority commu- amendment even though there are Why would anybody try to undercut nities. This has meant the availability some other aspects to it that might be that basic fundamental premise? Why of critically needed lending for commu- valuable. would we say that they should not do nity, small business, and housing de- Mr. BAKER. Madam Chairman, I that? Why should we say that small velopments. yield myself such time as I may con- banks have less of an obligation to do That is why the friend of my col- sume. that than big banks, when if we look at league got some money. He lives in a Madam Chairman, in 1950, the aver- the data, the fact of the matter is that community that had not been getting age American family had 50 percent of small banks have worse records in the money, and now he has got it. It their assets in a bank. Today, that per- terms of lending to minorities, lending has nothing to do with affirmative ac- centage is 17 percent. And in the cor- to people of color, lending into the tion. So we have a successful law. It porate arena, it is even worse. poorer communities than the bigger should not be dismantled. Vote against For many years, the banks were the banks. this amendment. only place in town where moderate- to Sixty-five percent of all the banks in The CHAIRMAN. The Committee will large-size businesses could get credit to the United States would be exempted rise informally. grow or expand. And from perhaps 80 by virtue of the amendment that we The SPEAKER pro tempore (Mr. percent of corporate lending, we now are currently debating. Sixty-five per- NETHERCUTT) assumed the Chair. find that banks provide less than 20. cent. We are going to turn around and f And it is not only just that markets say to 65 percent of the banks in the are changing. New products are being United States that they can go ahead MESSAGE FROM THE PRESIDENT created. and buy each other up, they can merge A message in writing from the Presi- In 1980, there were 266 mutual funds and acquire one another, they can go dent of the United States was commu- in this country. Today there are over into the insurance industry, go into nicated to the House by Mr. Sherman 2,600. As the stock market continues to the securities industry, but, boy, they Williams, one of his secretaries. surge ahead to unparalleled record really do not have to go back to Main The SPEAKER pro tempore. The highs, investors are not worried about Street; they do not have to go back and Committee will resume its sitting. deposit insurance; they are worried if lend money into the communities from f they are going to miss out on the next which they take their deposits. 25 percent rate of return. FINANCIAL SERVICES It is a crime for us to be suggesting The creation of money market funds, COMPETITION ACT OF 1997 that we want to allow that kind of a nonbank product, allowing people to pullback on our commitment to the The CHAIRMAN. The Committee will put their money in a perceived safe lo- poorest people in this country as a pro- resume its sitting. cation and earn interest on their vision in order to allow the bigger Mr. LAFALCE. Madam Chairman, I checking accounts, again, more banks to get even bigger. 1 yield 1 ⁄2 minutes to the gentleman disintermediation, more money flowing Mr. LAFALCE. Madam Chairman, I from North Carolina (Mr. WATT). out of the banks into nontraditional yield 11⁄2 minutes to the gentlewoman Mr. WATT of North Carolina. Madam sources. from California (Ms. WATERS). Chairman, it surprises a number of my So many banks in the marketplace Ms. WATERS. Madam Chairman, I colleagues on the Committee on Bank- are surging ahead with these new rise to voice my strong opposition to ing and Financial Services that the the Baker amendment. If passed, the mergers because this gives them a way gentleman from Louisiana (Mr. BAKER) Baker amendment would exempt more to keep the profitability up as they and I are quite often on the same side than 60 percent of all banks from the spread fixed operating cost over larger of financial services issues. But I have requirements of the Community Rein- and larger and larger customer bases. got to jump ship on him today when he vestment Act. This amendment is a It makes good sense for the large insti- starts trying to do away with CRA for frontal attack on the Community Rein- tutions. It is reported that the small banks. Sixty-four percent of the vestment Act and has absolutely no NationsBank merger, for that institu- banks in this country, in fact, would be place in this bill. tion alone, will result in annual sav- The fact of the matter is the Baker exempted under this amendment. I can- ings in excess of $2 billion. Phenomenal amendment tries to solve a problem not go there with him. savings are occurring through these ef- that does not exist. The new CRA regu- The CRA requirements for small ficiencies in the marketplace. lations have already streamlined the banks, those under $250 million in as- Now, the question becomes, how does exam process for small banks. Under sets, were already streamlined in 1995. the typical $47 million bank in Amer- the new rule, banks with assets of less I am not sure what it is we are respond- ica, the 6600 subject of the CRA amend- than $250 million are no longer re- ing to with this proposed amendment, ment, see any benefit from any of this? quired to collect, report or disclose any because in February of 1996, the Amer- Is there any provision that we can data. Instead, examiners look at a ican Banker headlines said, ‘‘Small point to in this bill that we can go small bank’s loan-to-deposit ratio and banks give thumbs up to streamlined back to hometown XYZ in our State distribution of loans across geography CRA exams.’’ and say, this is going to help make us and income levels. They are not complaining. Who is it more profitable, it is going to relieve that we are trying to protect? This is us of regulatory burden, it is going to b 1700 an amendment in search of a problem give us an opportunity to grow and Even though the new rule went into to solve. And I am not sure why we are prosper? effect in January of 1996, the effect is trying to solve a problem in the midst Sure, if they are a billion-dollar in- already being felt. According to the Of- of this bill that has a bunch of prob- stitution with branches in multiple fice of the Comptroller of the Cur- lems in it for people who do not even States, maybe who has even acquired a rency, over 80 percent of all banks cov- perceive that they have a problem. recent insurance company in spite of ered by CRA qualify for the stream- CRA has served a very important Federal prohibitions to the contrary, lined performance standards for small purpose in our communities. The gen- they might see tremendous potential in banks and thrifts. They also report tleman from Utah (Mr. COOK) is abso- diversification and opportunities, par- that the actual time spent in commu- lutely wrong in his assessment that the ticularly if H.R. 10, as currently con- nity banks on CRA examinations have purpose of CRA is for community peo- stituted, is passed. been reduced by 30 percent. To argue ple. It is not an affirmative action pro- But for the average consumer who that small banks are still suffering gram. It is for small businesses, small goes home today and uses their ATM under unfair burdens is absolutely pre- farmers, people who live in the commu- machine, if they have them in their posterous. nities. It has got nothing to do with af- community, who is complaining about H3202 CONGRESSIONAL RECORD — HOUSE May 13, 1998 those fee increases, who bitterly hates those sales. It would keep the pressed his position exceptionally the new charges for all the service the Microsofts from buying unitary thrifts. forcefully and well to this body. banks are providing, those banks are This amendment is a lot more than Frankly, I have some empathy for his desperate. They are looking for ways to just CRA operating subsidiaries and position, particularly on some CRA re- get new revenue streams. Because it is closing down thrifts. It is an amend- lief versus small banks. But I really do a historical fact, interest on loans is in ment that does important insurance re- have major concerns with how this par- decline and the real growth market is form. If they want to get into the in- ticular amendment treats insurance in the fee business and trying to find surance business in this bill, as a bank, sales in banks. As I had indicated ear- new products. they have to buy an existing insurance lier during the debate on the LaFalce Again, that is not a significant prob- agency that has been in business for 2 amendment, this issue, the bank sales lem to a competent management team years. of insurance, has bedeviled this Con- who has diverse interests. But to the What if they are in a town that does gress for a long, long time. It has basi- hometown bank, walk in a hometown not have an existing insurance agency cally kept this modernization legisla- bank, the the president and vice presi- that has been in business for 2 years? tion from passing Congress now for the dent are not only the loan officer, not This amendment allows them to peti- last 20 years. only the fellow who locks the door, tion the State insurance commissioner We finally in our committee, after a there are probably two tellers at the to certify there is no competition in lot of hard work and a lot of gnashing window, they are the CRA compliance the community and allows them then of teeth and a lot of long nights and ne- department. They are the OCC compli- to enter into the insurance business, a gotiations between the parties, came to ance department. They put up with the small-town, small-bank provision. an agreement on how we would best audit from the FDIC or the Federal Re- Sure, I know financial modernization deal with banks selling insurance; and serve. They are doing it all. is an absolute necessity and frankly we basically came to that conclusion Make no mistake, this amendment is will proceed whether this Congress or that indeed, based on court decisions, a great deal more than just limiting the regulators notwithstanding choose the Barnett decisions and decisions by the load of CRA and its financial obli- to take a position that moves the mar- the OCC that indeed banks would be in gations on small town institutions. It ketplace forward. Bright people are a position to sell insurance. is, in fact, the product of the Commit- going to find a way to get around the So the next question is how do we tee on Banking and Financial Services law, the Congress notwithstanding. But best protect the consumer and at the on restructuring how a bank can sell we can facilitate it. We can make it same time allow that kind of activity new products. less expensive. to take place. So we got the players to- There is nothing insidious about the For the past 50 years, this Congress gether, the president of the insurance words ‘‘operating subsidiary.’’ It is a has taken the pasture of financial serv- agents, the representatives of the in- way of doing business. And quite to the ices and fenced it off; and what we de- surance agents, representatives of the contrary opinion of the Federal Re- cide is some people get 10 acres, some banks, or some banks at least, the ones serve, the Secretary of the Treasury, I people get 30, some people get the real- that were participating in our effort, am told, will urge a veto of this legisla- ly pretty waterfront property in the particularly Bank One and tion because we do not allow operating fertile valley, others get the rocks. NationsBank, who were real leaders in subsidiaries to be engaged, in the base Now, whether they have 10 acres in trying to come to a conclusion. And text of H.R. 10, as envisioned by the ad- the rocks or 30 acres on the waterfront after a lot of negotiations and after ministration. has depended on how successful their having testimony from the Illinois rep- I would also point out, for those who lobbying effort is. That ought not to be resentatives of the agents and the are scared of the new world of com- the case. We ought to take down the banks telling us how they worked so merce and finance, of all the fence lines. We ought to let them roam hard to get a bill passed in the Illinois megamergers and the banks gobbling wherever they choose and eat as much legislature unanimously and signed by one another and perhaps the giant of grass as they want. But if they get the governor that became essentially all, Microsoft, one day finding a way to sick, do not come back to us. the template for what we tried to do in enter the financial marketplace, guess This proposal does not allow for that this piece of legislation. what? The unitary thrift is alive and innovation. This proposal makes it dif- b 1715 well if this bill passes. And even worse, ficult for small banks to be innovative, it is bigger than ever if this bill fails. to sell new products, to use that dread- It is not perfect. In many cases, all of And there is no restraint, no other ed operating subsidiary, to reach out to us would have written this differently amendment, no limiting factor. There their consumers and provide them com- depending on where we are coming are approximately 800 unitaries that petitive products at competitive prices from. But the fact is it was forged in have been in the marketplace quite in small towns across this country. the caldron of compromise in a major successfully. They own over 62 percent This amendment speaks to that point. State and signed off on by the major of all thrift assets in the country. They I understand the differences that players. That is really what we use the are enormously successful. Look down some Members may have with the phi- basis for our provision on insurance in the application line. losophy of this amendment. I under- our committee. It has survived on to Why, even in Louisiana, we have got stand that the Federal Reserve and the the floor. my Farm Bureau and 26 more who are OCC fight each other for regulatory Unfortunately, the amendment of the joining together on March 9 to apply turf. I understand there are a lot of gentleman from Louisiana (Mr. BAKER) for a unitary thrift charter. Do my col- reasons for people to be opposed to this would rend asunder our ability to make leagues think they just want to make amendment. But I can honestly tell my those kind of changes that we basically farm loans? I think they have got other colleagues, the sole motivation for see- have the major players sign off on. It plans. ing it included in H.R. 10 is to give removes, in my estimation, a critical Now, all of these applications, unless hope back to the small community consumer protection preventing im- there is something just basically defi- banks across this great Nation. plicit coercion; that is tying of insur- cient with the applicant, will be ap- Mr. GILLMOR. Madam Chairman, I ance sales to loans. I think we do have proved. It could be 1,500, it could be yield 21⁄2 minutes to the gentleman to provide the kind of protection for 2,000 of these new commercial enter- from Ohio (Mr. OXLEY). the consumer that is absolutely nec- prises that own thrifts. Under the bill, (Mr. OXLEY asked and was given essary. there is no prohibition about selling permission to revise and extend his re- Another concern I have is that the these entities to Microsoft or to Gen- marks.) Baker amendment contains a mis- eral Motors or any of the other horror Mr. OXLEY. Madam Chairman, let chievous provision requesting the OCC, stories we have heard time after time me first of all say that it has been an the Federal bank regulator, to report after time as we concern ourselves excellent debate. I have great respect to Congress on the effectiveness of about where our financial markets are for the gentleman from Louisiana, as State insurance laws. That, in my esti- going. This amendment would prohibit he well knows, and he certainly has ex- mation, is already predetermined how May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3203 that would come out. I ask you to de- the Community Reinvestment Act provides Fossella Luther Roybal-Allard Fowler Maloney (CT) Royce feat the Baker amendment, as well-in- benefits to all citizens of the United States, Frank (MA) Maloney (NY) Rush tentioned as it may be and support the giving us all equal access to the ``economic Franks (NJ) Manton Sabo underlying bill. wells'' that make our country great. Frelinghuysen Manzullo Salmon Ms. JACKSON-LEE of Texas. Madam The CHAIRMAN. The question is on Frost Markey Sanchez Chairman, I rise to speak in opposition to the the amendment offered by the gen- Furse Martinez Sanders Ganske Mascara Sandlin Baker Amendment. tleman from Louisiana (Mr. BAKER). Gejdenson Matsui Sanford This amendment's aim and consequence is The question was taken; and the Gekas McCarthy (MO) Sawyer to eviscerate the Community Reinvestment Chairman announced that the noes ap- Gephardt McCarthy (NY) Saxton Act. That Act was created in order to encour- peared to have it. Gibbons McDade Schaefer, Dan Gillmor McDermott Schumer age banks to meet the credit needs of the RECORDED VOTE Gilman McGovern Scott communities in which they were located. Mr. BAKER. Madam Chairman, I de- Goodling McHale Serrano That Act is the child of a successful grass- mand a recorded vote. Gordon McHugh Shaw roots movement that is over 20 years old: the Greenwood McIntyre Shays A recorded vote was ordered. Gutierrez McKinney Sherman ``anti-redlining'' campaign. The vote was taken by electronic de- In the late 60s, the ``anti-redliners'' took it Hall (OH) McNulty Shimkus vice, and there were—ayes 140, noes 281, Hamilton Meehan Shuster upon themselves to investigate just how well answered ‘‘present’’ 1, not voting 10, as Hastert Meek (FL) Sisisky banks were treating the customers from the follows: Hastings (FL) Meeks (NY) Skeen communities in which they were located. Their Hastings (WA) Menendez Skelton [Roll No. 145] discoveries were shocking. Many banks were Herger Metcalf Slaughter AYES—140 Hinchey Mica Smith (NJ) using their financial leverage to siphon the Hinojosa Millender- Smith (OR) savings of middle and lower income neighbor- Aderholt Everett Myrick Hobson McDonald Smith, Adam hoods, only to turn around and invest those Archer Ewing Nethercutt Holden Miller (CA) Smith, Linda Armey Fawell Neumann Hooley Minge Snyder same funds in upper-class neighborhoods. Bachus Foley Norwood Houghton Mink Solomon Although not alone, the Community Rein- Baker Fox Nussle Hoyer Moakley Spence vestment Act remedied much of this problem. Barrett (NE) Gallegly Paul Hyde Mollohan Spratt It gave many deserving Americans access to Bartlett Gilchrest Pease Jackson (IL) Morella Stabenow Barton Goode Peterson (MN) credit and capital for the first time. And it did Jackson-Lee Murtha Stark Bereuter Goodlatte Peterson (PA) (TX) Nadler Stokes so, and continues to do so by simply telling Bilbray Goss Petri Jefferson Neal Strickland banks that they must make better efforts to Bilirakis Graham Pickering John Ney Stupak Boehlert Granger Pombo Johnson (CT) Northup Tanner serve each and every person that comes be- Boehner Gutknecht Portman fore them. Johnson (WI) Oberstar Tauscher Bonilla Hansen Pryce (OH) Johnson, E. B. Obey Thomas Respected Colleagues, this Act did what it Bono Hayworth Ramstad Kanjorski Olver Thompson was advertised to do, something I wish I could Boucher Hefley Redmond Kaptur Ortiz Thurman say about much of what we produce. It has re- Brady Hill Regula Kasich Owens Tierney sulted in over $200 billion dollars worth of in- Bryant Hilleary Riley Kennedy (MA) Oxley Torres Bunning Hoekstra Rogers Kennedy (RI) Packard Towns vestments in low-income and minority areas. Buyer Horn Rohrabacher Kennelly Pallone Traficant Under the Baker Amendment, any bank Callahan Hostettler Ryun Kildee Pappas Turner worth less than $140 million dollars would be Camp Hulshof Scarborough Kilpatrick Parker Upton exempt from the requirements of the Commu- Canady Hunter Schaffer, Bob Kind (WI) Pascrell Velazquez Cannon Hutchinson Sensenbrenner nity Reinvestment Act. Ladies and gentlemen, Kingston Pastor Vento Castle Inglis Sessions Kleczka Payne Visclosky that exemption would capture 80% of all of our Chambliss Istook Shadegg Klink Pelosi Walsh banks and thrifts! Chenoweth Jenkins Smith (MI) Knollenberg Pickett Waters Under the current law, most of these banks Coble Johnson, Sam Smith (TX) Kolbe Pitts Watt (NC) already operate under a relaxed version of the Coburn Jones Snowbarger Kucinich Pomeroy Waxman Collins Kelly Souder LaFalce Porter Weldon (PA) Community Reinvestment Act standards. Combest Kim Stearns LaHood Poshard Weller These ``streamlined'' rules are more than sat- Cook King (NY) Stenholm Lampson Price (NC) Wexler isfactory to banks. There is no reason to fix Cooksey Klug Stump Lantos Quinn Weygand Cox Largent Sununu Leach Rahall White something that is not broken. Cramer Latham Talent This amendment is a profound step back- Lee Rangel Whitfield Crapo LaTourette Tauzin Levin Reyes Wise wards for urban communities and minorities. Davis (VA) Lazio Taylor (MS) Lewis (CA) Riggs Wolf Not only do I not want to face constituent-en- Deal Linder Taylor (NC) Lewis (GA) Rivers Woolsey DeLay Lucas Thornberry Lewis (KY) Rodriguez Wynn trepreneurs who can no longer obtain loans Dickey McCollum Thune for their small businesses, I also do not want Lipinski Roemer Yates Doolittle McCrery Tiahrt Livingston Rogan Young (AK) to hear the outcries from the neighborhoods Dreier McInnis Wamp LoBiondo Ros-Lehtinen Young (FL) that are being deprived of the essential serv- Duncan McIntosh Watkins Lofgren Rothman Ehrlich McKeon Watts (OK) Lowey Roukema ices which only come to them in the form of Emerson Miller (FL) Weldon (FL) locally-owned, family businesses. English Moran (KS) Wicker ANSWERED ‘‘PRESENT’’—1 I also realize that the Community Reinvest- Ensign Moran (VA) Hall (TX) ment Act if often the only means that urban NOES—281 development groups can reach agreements NOT VOTING—10 Abercrombie Brown (FL) DeFazio with banks. If this Congress wants to continue Ackerman Brown (OH) DeGette Bateman Harman Radanovich to look for private solutions for social prob- Allen Burr Delahunt Christensen Hefner Skaggs lemsÐwhy do we want to take away the most Andrews Burton DeLauro Gonzalez Hilliard Green Paxon effective tool for getting private institutions and Baesler Calvert Deutsch Baldacci Campbell Diaz-Balart local communities to sit down at the same Ballenger Capps Dicks b 1737 table? It just makes no sense. Barcia Cardin Dingell What does make sense? The Community Barr Carson Dixon Ms. FURSE and Mr. MCHUGH Reinvestment Act has been instrumental in Barrett (WI) Chabot Doggett changed their vote from ‘‘aye’’ to ‘‘no.’’ Bass Clay Dooley over 300 different community renewal projects Becerra Clayton Doyle Messrs. DOOLITTLE, CANNON, in over 70 different metropolitan and rural Bentsen Clement Dunn DICKEY and REDMOND changed their communities. Berman Clyburn Edwards vote from ‘‘no’’ to ‘‘aye.’’ Furthermore, this amendment allows the Berry Condit Ehlers So the amendment was rejected. banking industry to measure its own perform- Bishop Conyers Engel Blagojevich Costello Eshoo The result of the vote was announced ance in providing minority access to lending Bliley Coyne Etheridge as above recorded. against other banking institutions. Even more Blumenauer Crane Evans importantly, it removes the proverbial leash Blunt Cubin Farr PERSONAL EXPLANATION from banks, allowing them to revert to their Bonior Cummings Fattah Mr. GREEN. Madam Chairman, I Borski Cunningham Fazio missed rollcall vote 145 because I was discriminatory lending practices of the past. Boswell Danner Filner I ask my fellow colleagues not only to vote Boyd Davis (FL) Forbes unavoidably detained. Had I been here, against this amendment, but also realize that Brown (CA) Davis (IL) Ford I would have voted no. H3204 CONGRESSIONAL RECORD — HOUSE May 13, 1998 The CHAIRMAN. The Chair has been by a foreign bank from activities engaged in, soundness supervision and examina- advised that Amendment No. 4 has or companies the shares of which such for- tions by Federal and State regulators. been withdrawn. eign bank owns or controls, in the United Sections 23(a) and 23(b) of the Federal It is now in order to consider Amend- States under this subsection to exceed the 10 Reserve Act impose a significant limi- ment No. 5 printed in part 2 of House percent limitation contained in such para- graph so long as— tation on transactions with affiliates, Report 105–531. ‘‘(A) such aggregate annual gross revenues and the Federal safety net, the deposit AMENDMENT NO. 5 OFFERED BY MRS. ROUKEMA do not exceed 15 percent of the consolidated insurance funds and the Federal pay- Mrs. ROUKEMA. Madam Chairman, I annual gross revenues of the foreign bank or ment systems, are more than ade- offer an amendment. company in the United States derived from quately protected by the limits in this The CHAIRMAN. The Clerk will des- any branch, agency, commercial lending bill. ignate the amendment. company, or depository institution con- b 1745 The text of the amendment is as fol- trolled by the foreign bank or company and lows: any subsidiary engaged in the United States I want to assure people of that. The in activities permissible under section 4 or 6; Amendment No. 5 offered by Mrs. ROU- commercial basket would accommo- and date normal growth of income from KEMA: ‘‘(B) the foreign bank does not commence Strike subparagraph (A) of section 6(f)(1) of any new activity, or acquire ownership or commercial activities. I do not have the Bank Holding Company Act of 1956, as control of shares of a company, under this time to go into the business cycle ef- added by section 103(a) of the Amendment in subsection after the date on which such ag- fects, but I think that really indicates, the Nature of a Substitute, and insert the gregate annual gross revenues first exceed it is really an indication of a lot of following new subparagraph: the 10 percent limitation contained in para- ‘‘(A) the aggregate annual gross revenues common sense about that. It gives the graph (2).’’. derived from all such activities and all such elasticity to accommodate the banks, Strike subsection (g) of section 6 of the the securities firms and the insurance companies does not exceed 10 percent of the Bank Holding Company Act of 1956, as added consolidated annual gross revenues of the fi- by section 103(a) of the Amendment in the industry. nancial holding company;’’. Nature of a Substitute (and redesignate the If financial services holding compa- Strike paragraph (2) of section 6(f) of the subsequent subsection and amend any cross nies can invest in commercial activi- Bank Holding Company Act of 1956, as added reference to any such subsection accord- ties, as under this bill, as under this by section 103(a) of the Amendment in the ingly). amendment, there will be a new poten- Nature of a Substitute. Strike paragraph (3) of section 6(f) of the The CHAIRMAN. Pursuant to House tial source of capital for small and Bank Holding Company Act of 1956, as added Resolution 428, the gentlewoman from midsized companies. I know I have by section 103(a) of the Amendment in the New Jersey (Mrs. ROUKEMA) and a heard that question raised by numbers Nature of a Substitute, and insert the follow- Member opposed each will control 15 of constituents, and I think we can go ing new paragraph: minutes. back to our small and midsized compa- ‘‘(2) FOREIGN BANKS.—In lieu of the limita- The Chair recognizes the gentle- nies, which all of us know are really an tion contained in paragraph (1)(A) in the woman from New Jersey (Mrs. ROU- engine of growth in our communities, case of a foreign bank or a company that KEMA). owns or controls a foreign bank which en- and we know what trouble they have Mrs. ROUKEMA. Madam Chairman, I attracting capital. I believe that this 10 gages in any activity or acquires or retains yield myself such time as I may con- ownership or control of shares of any com- percent basket will be very helpful to pany pursuant to paragraph (1), the aggre- sume. them. gate annual gross revenues derived from all Madam Chairman, this amendment is Madam Chairman, every day I think such activities and all such companies in the a straightforward one. All financial that we know that there are new prod- United States shall not exceed 10 percent of holding companies, under this amend- ucts and services and we can certainly the consolidated annual gross revenues of ment, will be entitled to derive 10 per- understand how this 10 percent basket the foreign bank or company in the United cent of their gross annual revenue from would help in creating those new inno- States derived from any branch, agency, nonfinancial activities and invest- commercial lending company, or depository vations for variable annuities, money ments. market deposit accounts and sweep ac- institution controlled by the foreign bank or Once a financial holding company counts, and it would be a help to those. company and any subsidiary engaged in the hits the 10 percent commercial basket, United States in activities permissible under Now, I want to stress to all of our they would not be permitted to make section 4 or 6.’’. Members that this is probably a sub- new investments. They would be per- Strike paragraph (4) of section 6(f) of the ject that is not well understood by mitted to have a 10 percent commercial Bank Holding Company Act of 1956, as added many Members, but I have to tell my by section 103(a) of the Amendment in the basket with a cap. They would not be colleagues that the Committee on Nature of a Substitute and insert the follow- permitted to make new investments in Banking and Financial Services, in ing new paragraph: commercial entities or activities once ‘‘(3) FINANCIAL HOLDING COMPANY GROWTH they reach that cap. The Federal Re- committee, adopted an even larger bas- BEYOND CAP.—Notwithstanding paragraph (1), serve, and this is very important, could ket, a 15 percent basket, with a 2-to-1 the Board may, on a case by case basis, allow approve on a case-by-case basis a finan- margin. After studying this for months the aggregate annual gross revenues derived and months and months, our commit- by a financial holding company from activi- cial holding company application for an additional 5 percent, but it would tee voted 35-to-19 to allow a 15 percent ties engaged in, or companies the shares of basket. which such holding company owns or con- only be at the discretion of the Fed, trols, under this subsection to exceed the 10 with very strict parameters. Madam Chairman, my amendment is percent limitation contained in subpara- There are several good reasons, in my more modest. It takes a more modest, graph (A) of such paragraph so long as— opinion, for increasing the commercial smaller step towards this innovation. ‘‘(A) such aggregate annual gross revenues basket to 10 percent. In the first place, But I also must say that all 5 sub- do not exceed 15 percent of the consolidated I believe we need that famous, or infa- committee chairmen of the Committee annual gross revenues of the financial hold- mous, two-way street for all market on Banking and Financial Services sup- ing company; and participants. It should be understood port this amendment, and I note with ‘‘(B) the financial holding company does great pride and appreciation the fact not commence any new activity, or acquire by my colleagues that banks, security ownership or control of shares of a company, firms and insurance companies need to that we have bipartisan support with under this subsection after the date on which be able to affiliate on an equal basis as the ranking member of the full com- such gross revenues first exceed 10 percent of in a holding company. mittee, the gentleman from New York the consolidated annual gross revenues.’’. The 10 percent commercial basket is (Mr. LAFALCE), and the gentleman After paragraph (3) (as so redesignated) of especially important for those who are from Minnesota (Mr. VENTO), my rank- section 6(f) of the Bank Holding Company concerned about their banks. It would ing member on the Subcommittee on Act of 1956, as added by section 103(a) of the establish parity among banks, securi- Financial Services. We all give strong Amendment in the Nature of a Substitute in- support to this amendment. sert the following new paragraph: ties firms and insurance companies by ‘‘(4) DOMESTIC GROWTH OF FOREIGN BANK BE- establishing a single limit that applies The securities industry and the in- YOND CAP.—Notwithstanding paragraph (2), to all participants. surance industry strongly support the the Board may, on a case by case basis, allow The basket is only modest. As I have amendment, and I must repeat that the aggregate annual gross revenues derived said, it would have strict safety and this is particularly important to the May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3205 bankers because the amendment does or fall depending on general economic condi- gentlewoman has outlined a very give parity, a parity arrangement for tions. Insurance company revenues can be af- thoughtful perspective on a very trou- banks in this new financial services fected by natural disasters. Banks revenues bling area of law. I happen to believe world. are significantly affected by interest rate this is perhaps the most profound BACKGROUNDÐWHAT THE AMENDMENT DOES changes. amendment, if not profound approach, My amendment is straightforward. All finan- The basket will be large enough to account that applies to the financial landscape cial holding companies would be entitled to for normal fluctuations in the holding compa- in the United States that can be ex- derive 10% of their gross annual revenue from ny's financial business. pressed or will be addressed by this nonfinancial activities and investments. Once ECONOMIC GROWTH body, and I will have a substitute a financial holding company hits the 10 per- A commercial basket will encourage eco- amendment at the appropriate time cent commercial revenue cap, they would not nomic growth. that will be designed, in effect, to ne- be permitted to make new investments in If financial services holding companies can gate the effects of this particular commercial entities or activities. The Federal invest in commercial entities there will be a amendment. I would simply suggest to my col- Reserve could approve, on a case by case new potential source of capital for small and leagues that if one believes that what basis, financial holding company application to midsized companies. this country needs is more conglomera- receive up to an additional 5 percent in earn- Small and midsized companiesÐwhich are tion, greater integration of financial ings from existing commercial activities. the engine of most growth in the United institutions with other parts of com- The bill as currently drafted would limit the StatesÐfrequently have problems attracting merce, then this amendment is a very amount of revenue to 5 percent of annual equity financing. sensible way to go. If, on the other gross domestic revenues. My amendment The 10 percent commercial basket may help hand, one believes that the engine of would expand that limit to 10 percent of an- these new and innovative companies. dynamism in this country are smaller nual gross domestic revenues. The 10 percent commercial basket may also enterprises, more discreet enterprises, There are several good reasons for increas- promote community reinvestment. Holding enterprises that are hallmarked by ing the size of the commercial basket to 10 companies could make investments in their competition, enterprises that are percent. community's businesses and contribute to vi- hallmarked by nonintertwined capital- THE TWO WAY STREET brant, growing local economy. ism, then I think one will want to give We need a two way street for all market ENHANCE COMPETITION serious thought to alternatives, or the participants. The 10 percent commercial basket will en- alternative that I will be presenting. Banks, securities firms and insurance com- hance competition between all participants in Madam Chairman, at this time I panies need to be able to affiliate on an equal the financial services industry. would allow the gentlewoman and the basis in a holding company. This bill is supposed to level the playing advocates of her approach to make as Insurance companies and securities firms field between the banking, securities and in- strong a case as they can marshal, and are not prohibited from affiliating with commer- surance industries. I reserve the balance of my time. cial entities. They derive significant revenue The insurance and securities firms have Mrs. ROUKEMA. Madam Chairman, I from these nonfinancial activities. never been prohibited from affiliating with yield 3 minutes to the gentleman from Insurance companies and securities firms commercial firms. Minnesota (Mr. VENTO), the ranking need a commercial basket so they can be fi- The 10 percent basket would permit a member of the subcommittee. nancial services holding companies. Without a ``modest'' level of commercial affiliation and (Mr. VENTO asked and was given basket they will have to curtail existing com- would enhance competition. permission to revise and extend his re- mercial activities. NEW PRODUCTS AND SERVICES marks.) Mr. VENTO. Madam Chairman, I rise The bill would grandfather existing commer- Innovation is the United States. in strong support of the Roukema- cial activities of securities and insurance Every day there are new products and serv- Vento-LaFalce, and Baker amendment. firmsÐup to 15 percent of annual gross reve- ices. This is a good amendment. This I think nues. Examples include: variable annuities, money is an amendment which provides parity Bank holding companies would be limited to market deposit accounts, and sweep ac- for both the banking, the securities, 5% of annual gross domestic revenues. counts. and the insurance industries. My 10 percent commercial basket would es- A basket which is too small would result in tablish parity among banks, securities firms As we seek to modernize financial in- statutory and regulatory barriers which the leg- stitutions, Madam Chairman, in the and insurance companies, by establishing a islation is supposed to eliminate. single limit that applies to all participants. past, the Committee on Banking and We need to have a basket large enough to Financial Services has guided into en- SAFETY AND SOUNDNESS accommodate the new products and services actment, working with the Senate and The basket is modestÐonly 10 percent of which the financial services industry creates in the administration, the Branching and annual gross revenues. the coming years. Interstate Banking Act, which in es- Strict supervisiion and examination by the This amendment has significant support. sence, vertically integrated and pro- State and Federal regulators. The Banking Committee adopted a larger 15 vided an opportunity for banks to work Sections 23A and 23B of the Federal percent basket by a vote of 35±19. A 2 to 1 across State lines and eliminate some Resrve Act imposes significant limitations on margin. of the geographic barriers. transactions with affiliates. All 5 Banking Subcommittee Chairmen sup- What is occurring here and what has The federal safety netÐthe deposit insur- ported this amendment. been said by the regulators is, of ance funds and the federal payment sys- The amendment enjoyed strong bipartisan course, the recognition that financial temsÐare adequately protected by the limits support in committee. entities, insurance, banking, and secu- in the bill. I note that Mr. LAFALCE, the ranking minority rities, have instruments that look very 10 PERCENT ACCOMMDATES BUSINESS FLUCTUATIONS member of the full committee, and Mr. VENTO, much alike. What we want is a 2-way The 10 percent commercial basket would the ranking member on my financial institu- street regards their ability to do busi- accommodate normal growth of income from tions subcommittee, support this amendment. ness. We want the securities and insur- commercial activities. Other members of the committee will be ance industry, which has historically It is the hope of every businessman that speaking in support of this amendment. involved an equity ownership that is their businesses will grow. The 10 percent The securities industry and the insurance in- commerce, to, in fact, be able to par- commercial basket will permit enough flexibility dustry strongly support this amendment. And ticipate and not to have to change the to accommodate reasonable increases in in- this amendment, to repeat, will give parity entire nature of the way that they op- come from commercial activities. (pg.2) to the Banks. erate in a limited extent, and of course The 10 percent commercial basket would Madam Chairman, I reserve the bal- operating at a 10 percent equity owner- also help accommodate any seasonal de- ance of my time. ship position would facilitate that. crease in the amount of revenue derived from Mr. LEACH. Madam Chairman, I rise Now, on the banking side, we have ``financial'' activities. in opposition to the amendment. had any number of intrusions in terms The business cycle affects all industries. For I do not want to speak at length at of commerce. In fact, this bill personi- instance a securities firm's revenues may rise this time; I simply would say that the fies some of those intrusions, such as H3206 CONGRESSIONAL RECORD — HOUSE May 13, 1998 the non-bank bank provisions of this a clear and reasonable framework for the link- I have had an opportunity to watch up bill; such as the provisions in this bill ing. Without a basket, there is no ``two way close, first as a member of the author- that permit nearly 100 unitary thrifts street'' which is modernization speak for an izing subcommittee for the IMF legis- to continue to have a commerce role, opportunity for securities and insurance com- lation or the activities of the IMF, and 100 of them, without any limitation as panies to affiliate with bank. That is why even then from the Asia and Pacific Sub- to a percent of revenue or assets. There the Leach ZERO basket approach allows the committees to see what is happening in is no 10 percent limitation in this ex- very thing he and his supporters will preach Japan and Korea and Thailand in re- ample. againstÐa 15 percent basket for up to 15 cent months. Then, of course, we have banks that years. I want to speak in the strongest pos- are owned by commercial companies in If Congress were acting in a void, the cre- sible terms of my opposition to the this Nation. There are 4 or 5 of them. ation of a financial system that creates an ab- Roukema-Vento amendment and for And we have, of course, looking beyond solute and total separation of banking and the Leach-Campbell–Bereuter sub- that, looking at our U.S. banks that commerce might be achievable. In fact, how- stitute. operate abroad, they all have a com- ever, we are not working in a void. What we have seen over the last few merce role in those market places There is a long tradition of equity ownership years is a Japanese banking system where they are not limited. They own with investment banking and insurance indus- where the assets have grown tremen- commercial interests abroad and exer- tries. The regulators have been playing around dously because Japanese banks have cise, I might say, many other powers the edges with regard to operating subsidiary been able to take equity positions or out of a holding company or even sub- powers and on Section 20 affiliates. The uni- ownership in businesses. So as the sidiary going back to a past argument tary thrift holding company provides a clear economy was good in Japan, the assets and are regulated by the Federal Re- opportunity for commerce and banking and of those banks also moved upward dra- serve, curiously, who doesn’t object to that over 100 unitaries are using today. We matically with the progress of those in- such relationship. have non-bank banks, grandfathered banks, dustries. So Japan had most of the So there is a mixture of commerce and grandfathered activities. What we don't largest 20 or 25 banks in the world. But and banking. That already is an estab- have is a level and open playing field that rec- what happens with their mixing of lished fact. I have just given my col- ognizes the reality of today's marketplace. We banking and commerce is that it also leagues 4 or 5 instances of commerce need a rational overall structure that estab- exaggerates trends downward. So at a banking ownership by banks. The ques- lishes the same firewalls, the same rules and time when the Japanese need a strong tion is, are we going to rationalize and same competitive opportunities for everyone banking system, they do not have that regulate this in a consistent and fair within the U.S. financial services industries. strong banking system to help them manner? That is what we are trying to This amendment, really a take off from leg- spin out of their economic difficulties. do with this amendment. islation Mrs. ROUKEMA and I introduced early In fact, if we take a look at the own- We recognize that to completely shut last session, provides that overarching struc- ership of a Japanese bank today and off commerce in banking, we would be ture and a two-way street. Total restrictions on their assets, we will find that they can shutting down this particular bill in banking and commerce need to be lifted so take 5 percent ownership in this busi- terms of what securities firms or insur- that financial services entities can diversify: ness, 5 percent in this business, 5 per- ance firms may be able to do, and to spreading risk and increasing profitability. The cent in this business, and so on, and as deny that the Federal Reserve Board, EQUAL 10 percent basket, with the ability for those businesses had trouble, then, in through some artifice that they sug- the Federal Reserve Board to move to 15 per- fact, the asset base of the banks also gest: Well, the bank does not have con- cent in strict circumstances, will provide run- has deteriorated. trolling interest, they only have this ning room to allow for ups and downs in the We have also had, there and in Korea, investment in this area; they only have business cycle and will assure that the major- an incestuous relationship between a participation in this particular area. ity of financial services companies will not im- banks and businesses. So we have the Well, that is an artifice. That is an ar- mediately bump up against the top of the bas- disaster in the Republic of Korea today tificial distinction, and we should rec- ket. with the chaebols, those huge conglom- ognize that and adopt an amendment I urge my colleagues to support this amend- erates, when banks gave loans to such that gives parity to both banks and the ment and to oppose the Leach amendment businesses without considering the real other institutions such as the Rou- that follows. This basket parity amendment is risk, but only on the basis of those in- kema-Vento amendment, and I urge one small step in the direction of the banking cestuous business relationships. And my colleagues to adopt it. industry. This parity amendment will keep the the same sort of thing happened in I rise in support of the Roukema-Vento law relevant to the current and future market Japan and Thailand. I can tell my col- amendment that will provide a parity basketÐ conditions of all players. While this bill remains leagues that the burden of proof should that is an equal 10 percent basket for all finan- flawed for banks, passage of this amendment be on those people in Congress and not cial holding companiesÐas opposed to the will alleviate one of the unfair aspects of H.R. American society that want to change unequal 5 percent for banks and 15 percent 10Ðwhile the Leach amendment will only Glass-Steagall—those who want to for everyone else basket. make it worse. eliminate the separation between com- As my colleague stated, the amendment Mr. LEACH. Madam Chairman, I merce and banking. would provide a 10 percent of annual gross yield 4 minutes to the distinguished What did Paul Volcker tell the Com- revenues basket for commercial activities. This gentleman from Nebraska (Mr. BEREU- mittee on Banking and Financial Serv- limited basket is further narrowed because af- TER), who has such a thoughtful per- ices? I want to quote from his state- filiations would be prevented between the larg- spective on this issue, and who is also ment to us. He said, ‘‘The American fi- est 1,000 U.S., companies. A further safe- the chairman of the Subcommittee on nancial system is the most vigorous, guard is the prohibition on transactions with Asia and the Pacific, and I think might flexible, innovative, quickest-to- affiliates engaged in non-financial activities. want to address that perspective. change, most efficient in allocating This amendment is a responsible approach (Mr. BEREUTER asked and was capital, and it has been done by main- that recognizes the reality of our financial mar- given permission to revise and extend taining the separation. So the burden ketplace and works within that framework. It his remarks.) of proof seems to me to be on those would reduce the disparity between Mr. BEREUTER. Madam Chairman, I who want to end this separation. We bankholding companies that would be frozen am a 17-, 18-year member of the Com- are doing fine without it, and without at 5 percent, and the new financial holding mittee on Banking and Financial Serv- exception those countries that have companies formed by securities or insurance ices. I do chair the Subcommittee on more connections between banking and companies that would have a 15 percent bas- Asia and the Pacific of the House Com- commerce are noted for having inflexi- ket. There is no rationale for the difference. mittee on International Relations, and ble systems.’’ What is important to recognize is that com- I think, frankly, that is a more rel- The burden of proof, my colleagues, merce and banking are already in the market- evant set of experience right now for is on those people who want to estab- place on an ``ad hoc'' and ``exception to the this legislation than service on the lish this so-called ‘‘basket,’’ and cer- rule'' basis. What the bill does and the Rou- Committee on Banking and Financial tainly, it is on those people who want kema-Vento amendment does better is make Services. Because of that combination, to accentuate the size of it. Once we May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3207 cross that line, once we eliminate the work where financial services can Let us look at Germany. Their finan- separation between commerce and thrive. cial institutions have been discussed. banking, we know what is going to Our nation’s markets are the envy of The German economy is stagnant. happen. The beneficiaries of this the world, and New York is the capital They are exporting jobs because they change are going to be in here every of the world’s economy. Any legisla- cannot start them up at home. year asking for an increase. That is not tion that is reported must ensure that Look at Asia, and look what is hap- in the best interests of the United our financial structure retains its abil- pening. Over there, a bank can do any- States. ity to adapt to the changing needs of thing it wants. They own property, Madam Chairman, I want to suggest the public. they own real estate, they own busi- to my colleagues that the burden of To this end, I believe that financial nesses, they own stock. When values proof indeed should be on those people modernization legislation must allow start going down on those kinds of as- that want to break down the barriers banks, securities, and insurance firms sets, the bank is in serious trouble. It between commerce and banking, on with commercial interests to invest happened in Thailand, it happened in those who want to disturb the status some percentage of its domestic gross Korea, it has happened in Japan, and quo. We have the strongest banking revenues in nonfinancial services. Fi- all three economies are stagnant, in system in the world, and we have loans nancial modernization legislation good part because of this. being made on the basis of risk, not on should reflect the current market, and Listen to what Chairman Greenspan the basis of incestuous relationships permit some form of commercial affili- says: between banks and business. ation. A 10 percent commercial basket The current turmoil in some Asian econo- I would like to ask my colleagues to is a reasonable first step toward inte- mies highlights the risk that can arise from take a look at a ‘‘Dear Colleague’’ let- grating commerce and banking. the interrelationships between banks and ter that the gentleman from Iowa (Mr. Legislation on this matter must be nonbank corporate entities. First, if the LEACH), the chairman of the commit- flexible enough to ensure that financial interrelationships are too close, the banks’ tee, and the gentleman from California service providers can continue to decisions with respect to lending might be evolve. We cannot push back progress. based, not on the underlying creditworthi- (Mr. CAMPBELL) and I have circulated ness or other relevant characteristics of the to show my colleagues the breadth of Without a basket, many firms would be borrowers, but rather on such factors as im- the opposition to any changes in Glass- forced to choose between their current plicit or explicit subsidies, personal and Steagall. It is extraordinary. It spans commercial activities and newly au- business relationships, and common man- the ideological-business-political-labor thorized banking powers. In addition, agers. spectrum. This elimination of the many firms would have difficulty com- That is exactly what has happened in Glass-Steagall barrier is a step we do peting in the global economy without Japan, Thailand and Korea. not want to take. Vote ‘‘no,’’ vote ‘‘no’’ having some ability to invest in foreign Listen further: emphatically on the Roukema-Vento entities. Second, the interrelationships can become amendment, and support the status While we are pleased that a 5 percent so complex and nontransparent that inves- quo, which keeps the barrier between basket was included in the bill, a 10 tors and counterparties cannot properly un- banking and commerce. percent basket provides the proper derstand or assess the banks’ financial Mrs. ROUKEMA. Madam Chairman, I cushion to accommodate both the nor- soundness. yield myself such time as I may con- mal growth of a commercial enterprise Again, this is happening in Korea, in sume to observe my colleague’s argu- and the potential decrease of financial Japan, and Thailand, and in the Asian ments against my amendment. I will activity revenues. economies which are in trouble. This reserve most of them for the debate on To this end, I strongly urge my col- amendment would authorize a replica- the Leach proposal, but I would say leagues to vote for the 10 percent bas- tion of that unfortunate situation. that there is no comparison, none ket amendment. Financial providers Continuing, whatsoever, between what the Japa- must have the ability and the flexibil- Both of those risks are important elements nese, the south Koreans or the Indo- ity needed to move forward as we ap- in the problems now facing some Asian bank- nesians do in terms of regulatory con- proach the 21st century. As the gentle- ing systems and are the reasons why banking trols and the accounting practices and woman correctly pointed out, a 15 per- and commerce have historically been sepa- the forcing of conflicts of interest cent basket would even make more rated in the United States. under their system. So the compari- sense, but this is a scaled-back bill, a If Members want a more clear warn- sons with Southeast Asia are not valid. moderate bill, a bill trying to make ing on the dangers of this amendment, progress, and a bill trying to get a ma- check with Chairman Greenspan. b 1800 jority of the votes. Madam Chairman, the Chairman goes To tell Members the truth, some of We cannot put our heads in the sand. on to say this: the strongest banking financial sys- We cannot be blinded. We cannot pre- Thus, it is critical that H.R. 10 retain its tems in the world are in Europe, par- tend that progress does not march on. ongoing $500 million cap. Such a cap allows ticularly in great Britain, Germany, To pretend that this is the same finan- the controlled experimentation of the mix- and other European countries. Vir- cial economy as that of 50 or 60 years ing of banking and commerce, without lock- tually every one of those countries ago just does not make sense. I urge ing policymakers into one particular ap- have at least a 10 percent commercial my colleagues to vote for this very, proach that, as noted, may be impossible to entity, and in many cases, many more, very modest amendment, which moves reverse and that could do more harm than good. . . . If the fundamental and longstand- and have had them for a long period of us in the right direction. ing structural separation of banking and time. Mr. LEACH. Madam Chairman, I commerce in this country is to be changed, Madam Chairman, I yield 2 minutes yield 3 minutes to the gentleman from the Board strongly believes that any modi- to our colleague, the gentleman from Michigan (Mr. DINGELL). fication should proceed at a deliberate pace, New York (Mr. ENGEL). Mr. DINGELL. Madam Chairman, I in order to test the response of market and Mr. ENGEL. Madam Chairman, I want to express affection and respect technological innovations as well as the su- thank the gentlewoman from New Jer- for the authors of this amendment, but pervisory regimes to the altered rules. sey for yielding time to me. I want to differ with them strongly on I urge my colleagues to heed the Madam Chairman, I rise in strong its need. I talked to the distinguished warning that is present in these words. support of the 10 percent basket chairman of the Federal Reserve Do not replicate the follies of Korean, amendment, the Roukema-Vento- Board. He opposes this amendment, Japanese, Thai banking. Let us use re- Baker-LaFalce amendment. and he says this in his May 4 letter to sponsibility. The strength of this coun- This amendment is similar to an me: ‘‘There is every reason to move try has been that, although our banks amendment I offered during the mark- with caution in this area. The combin- have not been as big as they would like up of this bill in the Committee on ing of banking and commerce is clearly to be, they have been strong. Commerce. As a New Yorker, I fully irreversible. Once permitted, the Con- I have heard the banks complain con- understand the importance and signifi- gress is unlikely to impose the costs stantly about the size of Japanese and cance of providing the proper frame- and disruption of disentanglement.’’ Korean banks and their ability to do H3208 CONGRESSIONAL RECORD — HOUSE May 13, 1998 all manner of things. It turns out that Thus, it has been over the last 300 Metallgesellschaft. This particular this ability to do all manner of things years in the Anglo-American tradition. metal company entered into some very has created a disaster for these coun- Now we are told, since the 1980s, that sophisticated derivatives trading. tries. We are being asked to bail them we should mirror the Japanese model A study at the Chicago Federal Re- out. What are we going to do when our of Keiretsu, where bankers and indus- serve Bank has indicated that they be- replication of their banking system trialists work very closely together. In lieve that the risk environment in- creates the same abuses, the same haz- fact, we were told in the 1980s here in volved, the lack of supervision, because ards, and the same economic collapse Congress that if we did not model our- it was associated with a commercial for our constituents? selves upon the Japanese economic sys- bank, caused substantial losses; by I beg the Members, reject this tem, that we would become an eco- ‘‘substantial’’, $6 billion. amendment. nomic power of the past. The Chicago Federal Reserve then ex- Mrs. ROUKEMA. Madam Chairman, I Now, in the 1990s, what do we see? amined an American company not as- yield 3 minutes to the gentleman from Keiretsu in Japan means bankers and sociated with the bank, a major Amer- New York (Mr. LAFALCE), the ranking industrialists apologizing to the Japa- ican company called Enron. Enron en- member of the full committee. nese people for destroying their econ- tered into the same kinds of derivative Mr. LAFALCE. I thank the gentle- omy over the last 15 years. The Amer- transactions on the same metals at the woman for yielding time to me, Madam ican system continues on with its en- same time. It made a mistake or two, Chairman. trepreneurial, Darwinian, Adam Smith, but because of the discipline of the Surely the whole question of banking ruthless set of decisions, with bankers United States stock market, Enron run and commerce is one of the most dif- deciding, venture capitalists deciding, survived quite nicely, and it is prosper- ficult for the committee to come to which one of the American companies ing today. Metallgesellschaft caused grips with. An attempt was made with- deserves more capital, not because it is enormous losses to a particular finan- in the Committee on Banking and Fi- tied to it, not because it is married to cial institution. nancial Services to put responsible it. b 1815 limitations on that combination. That What happens as a result of the Japa- was 15 percent across the board. But nese system? Something called Asian Now, if we think about what it is then the bill was changed when the Re- flu. That comes from having bankers that is at stake in all of this that one publican leadership brought it forth, too closely tied to industrialists, hav- relates to, is there a difference between and it is 15 percent for these new finan- ing too deep of an investment in them financial prowess and management of cial services’ holding companies, and 5 and anyone who gets close to them. enterprise prowess? What we have de- percent for bank holding companies. What is recommended here by the Rou- veloped in this country today are the So we have to understand that what kema amendment? That we should, as most sophisticated capital markets, the amendment that the gentlewoman well, engage in Keiretsu. but also capacities of people that know from New Jersey would do is not to in- Our system is working. It has worked how to manage money to take over lots crease it from the existing bill, it is to for 300 years. We do not have to aban- of enterprises, enterprises that they level it. It is to bring the 15 percent don it and emulate the Japanese. The may not be very good at managing. down to 10, the 5 percent to 10; to have correct vote here tonight is no on Rou- I happen to think that there is a huge a leveling of the field between these fi- kema, no on the Japanese system. It distinction between management and nancial services holding companies, has failed, and failed badly. Vote yes financial prowess. And what this ap- and the banks. on the Leach amendment. The Leach proach before us has in mind is the idea It is also my understanding that sub- amendment will keep the continuation that because one is a good money man- sequent to this amendment, the chair- of the Anglo-American system. ager, one then can become a manager man of the committee, the gentleman Mr. DINGELL. Madam Chairman, of manufacturing, a manager of retail from Iowa (Mr. LEACH) will be offering will the gentleman yield? sales, and the end result is very simple. an amendment with a zero basket but Mr. MARKEY. I yield to the gen- It is a concentration of ownership. with a grandfather provision that tleman from Michigan. This country has long had an antip- would allow up to 15 percent. So even Mr. DINGELL. Madam Chairman, it athy to concentration of ownership. in this zero basket, as I understand it, is also no on the Korean system and Here we are going to be looking at the grandfathered institutions would the Thai system. combining financial and commercial have a higher basket than the Rou- Mr. LEACH. Madam Chairman, I ownership in ways that I think, if one kema amendment would provide. yield myself such time as I may con- takes a step back and looks at it, one This is a difficult issue, but if we are sume. should have grave doubts about. I to allow the mixing of banking and Madam Chairman, let me make sev- know, frankly, some very smart indi- commerce, I think a 10 percent across- eral points. There has been a lot of talk viduals have brought this approach to the-board basket would be more appro- on the floor today about the bill in the Congress that are Members; smart priate. general. This amendment comes to people on the outside have suggested it In fashioning my motion to recom- summarize several aspects of it. would be the way to go. But every time mit, however, stripping the bill of the For example, there has been talk I try to describe it neutrally to people controversial national bank charter about consumer issues, protecting the in my district and I ask the local Ro- provisions, so we simply would not deal public. I do not know a bigger con- tary if they think the local bank ought with it, so that we would simply deal sumer issue or a bigger public protec- to own the local department store, if with the Glass-Steagall and the bank tion issue than the question of do we they think it would be smart for a na- holding company changes, it is my in- allow the safety net of financial insti- tional auto company to be intertwined tent to follow the disposition of the tutions to be spread to commercial ac- with a national bank, I get people say- House on this issue. If the House wants tivities of banking institutions. This is ing, you have got to be crazy. to go for 15, 5, or 10, or a zero basket what has cost lots of countries in the That is what this amendment not with a 15 percent for the grandfathered world lots of money. only endorses, but leads to. institutions, that is what I would in- Asian countries, European countries, I personally think we ought to just corporate in my motion to recommit. a French bank, a Spanish bank, Ger- take a step back, think it through and Mr. LEACH. Madam Chairman, I man institutions have cost substantial suggest that mixing commerce and yield 2 minutes to the gentleman from funds either to their institutions or to banking, which is an abstract concept, Massachusetts (Mr. MARKEY). their public deposit safety nets, if they just simply does not fit the United Mr. MARKEY. Madam Chairman, in exist. States of America. I urge serious con- 1694 the British parliament ruled that Let me give an example in Germany, sideration of the amendment that I banking should not mix with com- because we have focused so much time will shortly be offering to this particu- merce. In 1791, Alexander Hamilton, in in the Far East. In Germany a few lar approach. the United States, decided that bank- years back there was a metals firm Mrs. ROUKEMA. Madam Chairman, I ing should not mix with commerce. that went under called yield such time as he may consume to May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3209 the gentleman from Delaware (Mr. Company Act of 1956, as added by section traditional role of banks and impartial CASTLE). 103(a) of the amendment in the nature of a providers of credit, while exposing the (Mr. CASTLE asked and was given substitute, insert ‘‘(excluding revenues de- taxpayer to liabilities on a scale far ex- permission to revise and extend his re- rived from subsidiary depository institu- ceeding the savings and loan bailout. tions)’’ before the period at the end. marks.) In paragraph (5) of subsection (f) (as so re- At issue with financial services mod- Mr. CASTLE. Madam Chairman, I designated) of section 6 of the Bank Holding ernization is increased competition. At rise in strong support of the Roukema Company Act of 1956, as added by section issue with mixing commerce and bank- amendment. 103(a) of the amendment in the nature of a ing is economic conglomeration, the Mrs. ROUKEMA. Madam Chairman, I substitute, strike ‘‘, subsection (f),’’. concentration of ownership of cor- yield myself the balance of my time. In paragraph (6) of subsection (f) (as so re- porate America. I would simply like to say there have designated) of section 6 of the Bank Holding Recognizing this, warnings about been a lot of dramatics here and a lot Company Act of 1956, as added by section mixing commerce and banking have of quotes here and a lot of economic 103(a) of the amendment in the nature of a substitute, strike ‘‘, subsection (f),’’. been issued by the Federal Reserve analysis, and I do not know that there After paragraph (6) of subsection (f) (as so Board, by Paul Volcker, and by con- has been substantiation of any of it. I redesignated) of section 6 of the Bank Hold- sumer activist Ralph Nader. It is op- do know that when Mr. Greenspan ing Company Act of 1956, as added by section posed by groups representing consum- came before our committee, he indi- 103(a) of the amendment in the nature of a ers, labor organizations, community cated, no, he did not want to hold open substitute, insert the following new para- bankers, farmers, travel agents, real- the commercial basket, but he did say graph: tors, pharmacists, building contractors that we had to take a step in this di- ‘‘(7) SUNSET OF GRANDFATHER.—A financial holding company engaged in any activity, or and the self-employed. In other words, rection. It was inevitable with tech- retaining direct or indirect ownership or the concept is opposed by the millions nology and the global markets with control of shares of a company, pursuant to of workers, small businessmen and which we are dealing. It was out there; this subsection, shall terminate such activ- women who are the generators of eco- we had to deal with it in some way or ity and divest ownership or control of the nomic prosperity in the United States. other. shares of such company before the end of the Proponents of a commercial basket We are not opening it up, as has been 10-year period beginning on the date of the argue that U.S. financial holding com- implied here, to unlimited commercial enactment of the Financial Services Act of panies need a commercial basket to be activity. We are saying that 10 percent 1998. The Board may, upon application by a able to compete with foreign competi- gives the legitimate two-way street financial holding company, extend such 10- year period by not to exceed an additional 5 tors, and that virtually all European and the parity and the kind of mixture years if such extension would not be det- countries permit banks to make direct that we are having between banks, in- rimental to the public interest. investments in commercial activities. surance and securities. And that is all. Strike paragraph (1) of section 10(c) of the However, this overlooks a couple of Forget the drama. It is not keiretzu. Bank Holding Company Act of 1956, as added simple facts. When we get to the Leach amendment, by section 131(a) of the amendment in the First, in testimony before our com- I will give a little more of my own nature of a substitute (and redesignate sub- mittee, Chairman Volcker noted that analysis of why we are not talking sequent paragraphs and any cross reference the mixing of commerce and banking to any such paragraph accordingly). about Asian flu. In subparagraph (A) of paragraph (1) (as so in Germany, France, Spain, Japan and The CHAIRMAN. It is now in order to redesignated) of section 10(c) of the Bank elsewhere has led to massive financial consider substitute amendment No. 6 Holding Company Act of 1956, as added by losses for both banks and taxpayers in printed in part 2 of House Report 105– section 131(a) of the amendment in the na- these countries. There is plenty of re- 531. ture of a substitute, strike ‘‘paragraph (1)(A) cent experience in other parts of the AMENDMENT NO. 6 OFFERED BY MR. LEACH AS A and’’. world to suggest that potential prob- SUBSTITUTE FOR AMENDMENT NO. 5 OFFERED In subparagraph (C) of paragraph (1) (as so lems with banking-commerce links are BY MRS. ROUKEMA redesignated) of section 10(c) of the Bank not just theoretical, Paul Volcker Mr. LEACH. Madam Chairman, I Holding Company Act of 1956, as added by section 131(a) of the amendment in the na- noted. offer an amendment as a substitute for ture of a substitute, strike ‘‘or (g)’’. Second, a recent New York Times ar- the amendment that would eliminate In subparagraph (B) of paragraph (2) (as so ticle indicated that the European uni- the commercial basket for financial redesignated) of section 10(c) of the Bank versal banks have a lower return on eq- services holding companies. Holding Company Act of 1956, as added by uity than U.S. banks, such as Citicorp, The CHAIRMAN. The Clerk will des- section 131(a) of the amendment in the na- which does not have a commercial bas- ignate the amendment. ture of a substitute, strike ‘‘Notwithstand- ket. So why would we encourage our The text of the amendment is as fol- ing paragraph (1)(A)(i), the’’ and insert banks to go in that direction? lows: ‘‘The’’. In subparagraph (A) of paragraph (3) (as so Third, the U.S. financial system has Part 2 amendment No. 6 printed in House redesignated) of section 10(c) of the Bank much more depth and credit in equity Report 105–531 offered by Mr. LEACH as a sub- Holding Company Act of 1956, as added by markets. That is one of the strengths stitute for amendment No. 5 offered by Mrs. section 131(a) of the amendment in the na- of the United States system. It thus ROUKEMA: ture of a substitute, strike ‘‘, (2), or (3)’’ and could not be more ironic that powerful Strike subsection (f) of section 6 of the insert ‘‘or (2)’’. groups in Washington are today sug- Bank Holding Company Act of 1956, as added by section 103(a) of the amendment in the The CHAIRMAN. Pursuant to House gesting that Congress redesign Ameri- nature of a substitute (and redesignate sub- Resolution 428, the gentleman from ca’s financial landscape to make it sequent subsections and any cross reference Iowa (Mr. LEACH) and a Member op- more like that of Japan and Germany, to any such subsection accordingly). posed, each will control 15 minutes. France and Spain and the 1980s United In paragraph (1) of subsection (f) (as so re- The Chair recognizes the gentleman States S&L industry. designated) of section 6 of the Bank Holding from Iowa (Mr. LEACH). Mixing commerce and banking only Company Act of 1956, as added by section Mr. LEACH. Madam Chairman, I benefits large banks and large corpora- 103(a) of the amendment in the nature of a yield myself such time as I may con- tions at the expense of small banks and substitute, strike ‘‘subsection (f)(1) and’’. In paragraph (2) of subsection (f) (as so re- sume. small business. For decades small busi- designated) of section 6 of the Bank Holding The movement to go beyond the inte- ness has been the engine of job creation Company Act of 1956, as added by section gration of financial services and elimi- in the United States, and mixing bank- 103(a) of the amendment in the nature of a nate the traditional legal barriers be- ing and commerce places American job substitute— tween commerce and banking is simply growth in jeopardy. (1) strike ‘‘, as of the day before the com- a bridge we should not cross. It is a For instance, would an individual pany becomes a financial holding com- course fraught with risk and devoid of hoping to open a restaurant in a town pany,’’; and benefit and one for which there is no where the only bank was owned by (2) insert ‘‘(excluding revenues derived from subsidiary depository institutions)’’ be- justification. McDonald’s be able to obtain a loan, or fore ‘‘, on a consolidated basis’’. Such a step would open the door to a would the bank disregard its role as an In paragraph (4) of subsection (f) (as so re- vast restructuring of the American impartial provider of credit? Would a designated) of section 6 of the Bank Holding economy and an abandonment of the bank owned by a real estate developer H3210 CONGRESSIONAL RECORD — HOUSE May 13, 1998 provide comparably priced credit to the bloody flag of the S&L crisis waved cause we know that in the bill itself competing developers? Given these back and forth. It has been suggested and in the amendment from our col- troubling possibilities, it is no surprise that somehow our culture and free en- league, the gentlewoman from New that the nonpartisan General Account- terprise system and free people are Jersey (Mrs. ROUKEMA), there is a set of ing Office issued a report demonstrat- going to accept the type of government fire walls to make sure that the bank ing that there is no compelling eco- and type of control that exists in Asia, does not offer a loan to the very com- nomic argument for mixing commerce in Japan or Korea or Germany. I do not mercial enterprise in which it has an and banking and a lot of socioeconomic think so. equity stake. and political jeopardy in doing so. I think that our free enterprise sys- But there is no fire wall against pro- In this time of crisis in Asian econo- tem is strong enough and mature viding a loan to the customers of that mies, the lessons of the chaebols of enough to recognize what actually is commercial enterprise or to the suppli- Korea, the keiretzus of Japan and car- taking place. What happens when ers of that commercial enterprise. And tels of Indonesia should not be lost in banks permit the financing for mergers so a bank might own some stock in the United States. Those who advocate and acquisitions? What happens when General Motors, and General Motors financial modernization legislation banks make these tremendous loans cannot get its new fleet out on time be- which mixes commerce and banking and end up collecting these companies cause Firestone has a little trouble might want to take a hard look at the as collateral? They become, in a sense, providing the tires, due to cash flow. conflicts of interest endemic to sys- investors. They end up picking up that Will the bank not be tempted to give a tems that have allowed such mixing. collateral and having that control. And little bit of leniency on any loan to In East Asia, bank ownership of in- there are many, many exceptions. In Firestone? It would not break any fire dustrial firms led to crony capitalist fact one of the largest corporations in wall to do so because the fire wall only relationships with the government. my State, 3M owns a bank. It has not applies as to the extension of credit to The virtue of America’s decentralized, undercut 3M yet. They are still going General Motors, if, by hypothesis, the stock-market-oriented financial sys- to the private market. bank has an equity stake in General tem is that credit and investment deci- I oppose this amendment. Motors. sions are made based on economic fun- Madam Chairman, I reserve the bal- The point is simple, there is no way damentals, not entangled relationships ance of my time. that the imagination of humankind or corporate favoritism. Mr. LEACH. Madam Chairman, I can prevent the temptation from aris- America is a country which has tra- yield 3 minutes to the gentleman from ing. If a bank has an equity stake in an ditionally opposed concentrations of California (Mr. CAMPBELL). enterprise, that enterprise will have a power, both political and economic. It Mr. CAMPBELL. Madam Chairman, claim on the bank’s lending policy. is the country of Jeffersonian individ- it is a compliment to the side of the ar- Lastly, why do we care so much? Be- ualism, Jacksonian bank skepticism gument presented by the chairman of cause it is not the companies’ money. I and Teddy Roosevelt trust busting. The the committee that those opposing his have no problem with the company re- contemplated mixture of commerce amendment would say that it allows 15 taining earnings and using it for its and banking goes beyond the lessons percent commercial investment to con- own intended investment—splendid, that we have learned and the values tinue, as though they realize what dan- but not with the taxpayers’ money. that we hold. ger it is to allow such mixture of com- What we are dealing with here tonight Madam Chairman, I reserve the bal- merce and banking. is Bank Insurance Fund money which, ance of my time. Let me at the start put to rest this if the Bank Insurance Fund is stressed, Mr. VENTO. Madam Chairman, I rise argument. The 15 percent that would will, as in the case of the savings and in opposition to the Leach amendment. be allowed to continue for the bank loan crisis, and will, in this context The CHAIRMAN. The gentleman holding company during the period of a again, be a tax upon the taxpayers. ENTO) is recog- wind-down is in order to allow a rea- from Minnesota (Mr. V b nized for 15 minutes. sonable phaseout of the mixture of 1830 Mr. VENTO. Madam Chairman, I banking and commerce that is already Mr. VENTO. Madam Chairman, I yield myself 2 minutes. in existing law. yield 2 minutes to the gentleman from Madam Chairman, I rise in opposi- The fundamental debate here tonight Texas (Mr. PAUL), a member of the tion to this amendment. This amend- is between those who wish to go to zero committee. ment, what it actually says, and I re- mixing of commerce and banking and (Mr. PAUL asked and was given per- spect the chairman and his staunch op- those who would permit it, those who mission to revise and extend his re- position to commerce and banking; he believe that 5 percent mixture is not marks.) has been consistent in that particular enough and, in the Roukema amend- Mr. PAUL. Madam Chairman, I rise view. But what this amendment does is ment, that it be 10, or as we heard in in opposition to the Chairman’s amend- it says, they rise in opposition to the the debate earlier, that some would ment and in strong support of the Roukema amendment which provides a even go to 15. amendment of the gentlewoman from 10 percent basket even for securities, I think the real debate thus is, shall New Jersey. insurance or banking firms, but this we have a mixture of commerce and There are two positions that one one says, 10 percent is too much, but 15 banking? Admittedly, the Leach could take on this. We could have zero percent is just about right. amendment, of which I am proud to be integration, which this amendment That is what this amendment does. a cosponsor, has a phaseout provision. would do; or we could think about the This provides 15 percent commerce That is appropriate for now. Eventu- market. The market would just allow ownership within a securities or insur- ally, however, under the Leach amend- it to exist. ance firm for 15 years. ment there will be no mixture of com- Earlier, somebody quoted Hamilton Here we are in an environment in merce and banking, as there should be as being opposed to an integration of which economic events within a short no mixture of commerce and banking. commerce in banking. Well, of course, period of time, in days, maybe months, Under the Roukema amendment, it at that particular time in history we certainly years, in 15 years we could will be 10 percent today, probably 15 had the Jeffersonians, and they were see dramatic changes in terms of what percent or 20 in years to come. strongly in support of the market and happens in the economy. We are say- What is the objection to the mixture? even against central banking. ing, we are providing a level playing I think it has been adequately ex- So I think, considering all things, field, taking the most important finan- plained by my colleagues in regard to that I cannot get my 100 percent, and cial entities in our country, banks, and the risk that comes from a commercial we certainly do not want zero. We need treating them in a disparate way. Of investment made by someone that to move in a direction, so I would say course, I mentioned the many, many ought to be a neutral provider of cap- this very modest request is very justi- exceptions. ital. I would rather address one point fied. Now, in order to sell this particular that has not been made, and that is I think this FDIC insurance is some- proposal to the Members, we have had whether the fire walls are adequate, be- thing we should be concerned about, May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3211 but that is a different issue for the mo- what the gentleman from New York Committee on Banking and Financial ment. I object to that, but I do not be- (Mr. ENGEL) said. He said this 10 per- Services, and I think he has thought lieve this will solve the FDIC problem. cent basket is a reasonable first step as long and hard about this, but we have We have to think about how we got a basket. And that is the point this to consider a few things. here. In the 1920s, the Federal Reserve gentleman was trying to make some First of all, the chairman talked created a lot of credit. They created a time ago; that there is, in fact, no end really about two types of commercial boom and a booming stock market and to this process for a larger basket all baskets. I think he talked about what good times. Then the Federal Reserve the time once we break the barrier this amendment or the Roukema raised the interest rates and there was down between commerce and banking. amendment was about, and then he a stock market crash and a depression. We are going to be back here with such talked about what he thinks may come And out of the depression came the de- amendments year after year. in the idea of a reverse basket where sire to regulate banking and com- Mr. VENTO. Madam Chairman, will McDonald’s owns banking entities merce. That caused the depression, the gentleman yield? around the country. which was erroneous, because the cause Mr. BEREUTER. I yield to the gen- Of course, we already have a system of the depression was excessive credit tleman from Minnesota. in place where we have the small town and then a deflated bubble, which Mr. VENTO. I wanted to suggest that banker that owns the bank and the car should be all laid at the doorstep of the I did not agree with the gentleman dealership and the feed store and ev- Federal Reserve. from New York (Mr. ENGEL) on the erything else, and that is allowed This is the size of the Glass-Steagall first step. under current law. But I think we also Act, a few pages, in order to solve a Mr. BEREUTER. I thank the gen- have to remember we have a much problem that did not exist. But we tleman for that clarification. more dynamic marketplace. have been living with this for all these I watch with awe and wonder the gen- And that leads into my second point. years. And now, over these several tleman from New York (Mr. LAFALCE), It is not really fair to compare the years, we have been trying to solve the who speaks to us in such a soothing United States’ economy to that of Asia problem. Now, this is the size of the so- voice, about how the changes that are or even Europe. Our market is much lution. This is H.R. 10, this is the ver- being made here are actually reducing more sophisticated. It is much more di- sion of the Committee on Commerce as it from 15 percent basket to 10 percent versified. Our capital and credit mar- well as the version of the Committee basket. And, well, that is accurate. But kets are much more diversified, much on Banking and Financial Services in reality, of course, the status quo is more efficient, much larger. So, yes, that went to the Committee on Rules. a zero basket. And that is what we are there may well be risk, but I think it is We need to look at the fundamental supportive of the Leach amendment a very unfair comparison to make. cause of our problems and not jump off think is a crucial and proper level. It is I think that the gentleman uses the a cliff and do the wrong thing. I strong- crucial that we maintain this barrier example of the German company and ly support the Roukema amendment. against mixing banking and commerce. Enron, which happens to be based in Mr. LEACH. Madam Chairman, I I think it provides us a much higher my home city of Houston, and how effi- yield 3 minutes to the gentleman from likelihood of the impartial provision of cient the U.S. market, the stock mar- Nebraska (Mr. BEREUTER), my distin- credit by bankers to people and to busi- ket treats it, and I think that is true guished friend and coauthor of the nesses that deserve to receive credit. It with respect to banks. amendment. avoids a concentration of economic We could turn this over to Mr. Green- (Mr. BEREUTER asked and was power. span and let him write the entire bill given permission to revise and extend Earlier, too, we heard references and just rubber stamp it when it gets his remarks.) about a bloody flag being waived in the back over here and let him go on with Mr. BEREUTER. Madam Chairman, I debate on S&Ls. But I think that is ap- his business. I think that would be in- thank the gentleman for yielding this propriate for we have to learn from our appropriate. But what I think Mr. time to me. experience. And it boggles my mind, it Greenspan and the former chairman, The gentleman from Texas has just boggles foreign legislators’ minds that Mr. Volcker, said, when they testified spoken to us about letting the market we in America would be recreating, the before the committee, is getting back work. The problem with the mixing of kind of unhealthy banking situations to the real crux of the issue, which is, commerce and banking is that market that we find in Asian countries. well, we are opening the door a little decisions are not made. Credit deci- And as the gentlewoman from New bit and it is going to get broader. sions are made on the basis of equity Jersey (Mrs. ROUKEMA) ask earlier, But herein lies the problem. Because, that a bank has in a business. We are well, what about Europe? Well, in fact, as the chairman knows, we are going to more likely to have the market work- the problems resulting from the mix of find, and we are finding it now, that ing properly when we have this division commerce and banking exists in Eu- where banks, as they become stronger, between banking and commerce as we rope, too. And, in fact, in France and are going to get into areas which are have had since the 1930s, even tracing Spain the public treasuries were raided not financial in nature, whether it is far back beyond that, as the gentleman to make insolvent large banks more data processing or others, that have to from Massachusetts (Mr. MARKEY) ear- solvent after they made imprudent be part of their function to be competi- lier said, tracing back in some form to commercial investments. And that is tive. And we are going to have to ad- a period even before the founding of the what we would have to have. dress this problem. If we do not address Republic. Do not trade the separate American it tonight, we will be addressing it I just cannot help but think of what banking and commercial systems for down the road very shortly, I believe. happened in the home State of the gen- the failures of Asia or Europe. So I think the chairman has thought tleman from Texas (Mr. PAUL) when we Mr. VENTO. Madam Chairman, I a lot about his amendment, I appre- had under S&L law in Texas, in that yield 3 minutes to the gentleman from ciate what he has to say about it, but State and some other States, an oppor- Texas (Mr. BENTSEN). I think we ought to defeat it and sup- tunity under their legislation to use Mr. BENTSEN. Madam Chairman, I port the amendment of the gentle- federally insured deposits to make in- thank the gentleman for yielding me woman from New Jersey. vestments in their own name instead of this time. Mr. LEACH. Madam Chairman, I loans to residents of their community. This is, no question, a very difficult yield 1 minute to the distinguished And I recall something like 50 percent issue. I can come down almost on ei- gentleman from California (Mr. CAMP- of the total losses in the S&L debacle ther side. But if we do not deal with it BELL), who is also a coauthor of the were in the gentleman’s home State of tonight, and my bet is we probably are amendment. Texas. not going to deal with it tonight, we Mr. CAMPBELL. Madam Chairman, I The gentleman from Minnesota (Mr. are going to have to deal with it at asked for the additional time just to VENTO) suggests that this 10 percent some point in the future. stand in defense of the free market. basket is a modest step. Well, I think Again, I have nothing but the great- Our good friend and colleague the gen- we are more likely to pay attention to est respect for the chairman of the tleman from Texas (Mr. PAUL) spoke on H3212 CONGRESSIONAL RECORD — HOUSE May 13, 1998 behalf of the free market, and it is hard foreign countries. Banks in the United thorizes the mixing of banking and to beat him when he speaks on behalf States are generally examined annu- commerce, one can see a concentration of the free market, but I am not weak ally, and we have the generally accept- of ownership grow in this country and in my own right in terms of defending ed accounting principles and stricter one can see a geographic concentration the free market—on this floor, and in requirements. The foreign banks do not of that ownership come to be of rather our Committee on Banking and Finan- have this. telling dimensions. cial Services. I could go on and on. In fact, I will, So I would simply urge this Congress I say people should do whatever they in one more respect. U.S. bank trans- to note that, other than some very want with their own money. If they actions with affiliates are subject to large interest groups, I know of no one want to have a commercial enterprise the protections, and under this bill that advocates this approach. I have and a bank and an insurance company would continue to be subject to the never in my time in public life gotten and a real estate company, may God protections of 23(a) and 23(b) of the a letter that has said, ‘‘What ails bless them. May they succeed and pros- Federal Reserve Act. And this is very America is that Chase Manhattan and per in America, the greatest economy important because it is specific to how General Motors are not combined.’’ I in the world, but on their own dime. you cannot make these gross compari- have never gotten a letter that says, But, if they have access to the Federal sons that are being made. The restric- ‘‘What we need are larger enterprises, tax dollar through the FDIC, its suc- tions on the amount of loans a bank not from growth within but from con- cessor, the Bank Insurance Fund, then can make to their affiliates, and re- glomeration.’’ And I just suspect that no, sir, no, ma’am. I want to make sure quires fair deal for all, not giving bet- if the American public thought this they are restricted with what they do ter deals to any one particular affili- through, there is not only lack of ma- when taxpayers’ funds are at risk. I ate. There are all kinds of distinctions jority support, there is lack of any sup- want to make sure they are careful. in this bill. port other than a very, very few very, And do not tell me it will not happen. We are making a modest step forward very wealthy people. I came to this Congress in 1989. I joined and one that I believe any objective ob- So I would urge restraint. the Committee on Banking and Finan- server would say get with the program, Mr. BEREUTER. Madam Chairman, cial Services, and the thrift crisis hap- figure out a regulatory structure that will the gentleman yield? pened. I hope no one suggests causality would accommodate so that we can Mr. LEACH. I yield to the gentleman in that order of events. But let me say compete with virtually every other of from Nebraska. to my colleagues there were people the successful European countries with Mr. BEREUTER. The Chairman is ex- telling me I should not worry; that the whom we are competing. actly right about the small number of thrifts were safe; savings and loans Mr. LEACH. Madam Chair, I yield entities, if any, that are supportive of could not be better. And we ended up, myself such time as I may consume. it. There are a handful of firms and First, let me talk about competition. we the taxpayers, paying for it. banks. But on the other side, perhaps it In case no one has noticed, over the I’m for the free market—on their own is good to reiterate the people that are last 2 decades the United States of dime, but not on the taxpayers. in favor of the Leach amendment, Mr. VENTO. Madam Chairman, I America has outstripped competitively maintaining the status quo of the zero virtually every Western European yield 21⁄2 minutes to the gentlewoman basket. The chairman has mentioned a country. We organize differently than from New Jersey (Mrs. ROUKEMA). few of them before. Mrs. ROUKEMA. Madam Chair, I Europe. We decentralize. Mr. VENTO. Madam Chairman, I In case nobody has noticed, the last 7 thank my colleague for yielding me yield myself 11⁄2 minutes. this time. years Japan has averaged about 1 per- I wanted to point out that the Leach I do not know where to begin here. cent growth. The United States 2 to 4 proposal has a 15 percent basket for se- There have been so many strawmen times the rate of growth in each of curities and insurance firms. And what and exceptions to prove the rule these years in Japan. We organize dif- I presume that means, the way it oper- thrown out here that it is really a lit- ferently. ates, is that until the year 2013, for 15 In terms of speed, in very short tle difficult to answer. But I do want to years, they could have that 15 percent order, very large things can occur. We say to my colleagues, let us be very basket of equity position. They then have just witnessed announcement in sure. This is not the time of Jefferson could go, under this Glass-Steagall pro- the last 4 or 5 weeks of the largest fi- or Hamilton. It is not even the time of vision, and buy banks, buy insurance nancial combination in American his- Teddy Roosevelt. We are in modern firms, and maintain 15 percent equity tory. Reports after the fact indicate times with technological changes that ownership. So it boggles the mind. that the leadership of the two institu- are so fast pace we can hardly absorb I understand that we are against tions involved, Travelers and Citicorp, them, and in global market places. And commerce and banking, except that reached a decision in a 6 to 7 week time that is the reality of what we are try- this particular configuration until the frame. year 2013 would prevail. In my judg- ing to do here. As financial institutions grow, these Now, I secondly want to point out ment, it is an untenable position in percentage restraints grow with them. that, with all due respect to my good terms of what is going on. As I listen to So we have a circumstance that the friend and colleague, the chairman of the debate here, I wonder if really we larger financial institutions become, the committee, and my other good are prepared, or the proponents of this the larger the commercial enterprises friend and colleague, the gentleman amendment are prepared, to really re- they can intertwine with. In very, very from Nebraska (Mr. BEREUTER), my peal the Glass-Steagall amendment. short order the American commercial colleague on the committee, we have Because they seem to have learned no landscape as well as financial land- worked long and hard on lots of dif- lessons or recognized no difference be- scape can change if this kind of ap- ferent issues, but with all due respect tween the fact that we are not able to proach is adopted. we cannot be making these parallels Finally, let me just note that in addi- distinguish some of the instruments of between Southeast Asia and what we tion to concentration of ownership these financial entities; that in fact are proposing here with a 10 percent that can occur, we are likely to get a the banks write two-thirds of the de- commercial basket with the kinds of concentration of geographic control. rivatives, that the types of loan pro- regulatory reforms and fire walls and grams that they are involved in, I structures that we have in place in this b 1845 think very often look like investments. bill. It simply is a fact that most large en- The inconsistency of this in this par- This is not Japan, South Korea or In- terprises are not located in rural areas. ticular bill, in the marketplace, it donesia. It is not unlimited invest- It simply is a fact that people in what seems that they are in a state of de- ment, as those countries have. It is a 10 are called money center areas are more nial, quite frankly. percent basket. Also, we do not have a mobile with large sums of capital than I am just amazed at the vehemence situation where banks lend to only cer- people who are not. in terms of this particular position. tain companies. We also do not have And so, in very short order, if one And then to compare us to Germany the family connection things of those goes ahead with an approach that au- and Japan and other countries where May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3213 they do not have a regulatory system, cent limit in there. There could be a (Mr. LEACH) as a substitute for the a culture, and a free enterprise system 100 percent. amendment offered by the gentle- as we have. I must state again, this is Mr. BAKER. That is correct. The woman from New Jersey (Mrs. ROU- not my first step. This is just a rec- gentleman makes the point that there KEMA). ognition to get out there and regulate is no revenue limit at all with regard The question was taken; and the it. to the unitaries that can be sold to Chairman announced that the ayes ap- Madam Chairman, I yield 1 minute to commercial enterprises, so that a Gen- peared to have it. the gentleman from Nebraska (Mr. BE- eral Motors can get into the thrift Mr. VENTO. Madam Chairman, on REUTER). business by accessing that charter. that I demand a recorded vote, and Mr. BEREUTER. Madam Chairman, I This amendment does not address that pending that I make the point of order just wanted to point out to the gen- question. that a quorum is not present. tleman from Minnesota (Mr. VENTO) re- And so what we have left at the end The CHAIRMAN. Pursuant to House garding the grandfathering arrange- of consideration if this amendment Resolution 428, further proceedings on ment, it is a 10-year period. It could be were to prevail is a very unbalanced the substitute amendment offered by extended for five years. But this is marketplace where a few authorized the gentleman from Iowa (Mr. LEACH) dealing with an anomalous situation. actors have the right to have very di- will be postponed. It is a condition created by regulators verse incomes, while we are taking The point of no quorum is considered because the Congress did not act ear- banks and financial enterprises down withdrawn. lier. These anomalous conditions are to zero level and requiring them to di- It is now in order to consider amend- not a good situation, but the grand- vest themselves of currently legally ment No. 7 printed in part 2 of House father clause is a valuable way to rem- authorized activities. Report 105–531. edy these anomalous situations. When we look at those currently au- AMENDMENT NO. 7 OFFERED BY MR. KINGSTON Mr. VENTO. Reclaiming my time, I thorized institutions that have signifi- Mr. KINGSTON. Madam Chairman, I understand. I think the gentlemen are cant activity, American Express, for being very fair. Except it just becomes offer an amendment. example, enjoys 9 to 14 percent of reve- The CHAIRMAN. The Clerk will des- very inconsistent in terms of what the nue annually coming from nonfinancial effect is. It just becomes unworkable ignate the amendment. related activities. We see A.G. Ed- The text of the amendment is as fol- and it is untenable to present a bill wards, Charles Schwab, Lehman Broth- like this where we have such an unlevel lows: ers, we can go down the list and look at Amendment No. 7 offered by Mr. KINGSTON: playing field; and to criticize 10 per- what is going on in the market today cent at the same time they are provid- After section 108 of the Amendment in the and realize the consequences of this Nature of a Substitute, insert the following ing 15 percent here just boggles the amendment are not minor. new section (and conform the table of con- mind. Now, I certainly understand the pro- tents accordingly): Madam Chairman, I yield 3 minutes ponents’ perspective that we should SEC. 109. GAO STUDY OF ECONOMIC IMPACT ON to the gentleman from Louisiana (Mr. not allow commercial and financial in- COMMUNITY BANKS AND OTHER BAKER), a distinguished member of the SMALL FINANCIAL INSTITUTIONS. terests to intermingle. But I have to Committee on Banking and Financial (a) STUDY REQUIRED.—The Comptroller tell my colleagues, smart people are Services. General of the United States shall conduct a Mr. BAKER. Madam Chairman, I figuring out ways to do that no matter study of the projected economic impact that thank the gentleman for yielding the what the Congress might attempt to the enactment of this Act will have on finan- time. limit. cial institutions which have total assets of I certainly want to acknowledge the This is a very serious amendment. It $100,000,000 or less. (b) REPORT TO THE CONGRESS.—The Comp- hard work that the gentleman from is a very thoughtful amendment. It is a very important amendment. But it is a troller General of the United States shall Iowa (Mr. LEACH) has given in the dif- submit a report to the Congress before the ficult management of H.R. 10 through- disaster for the existing financial mar- end of the 6-month period beginning on the out not just this session, but many ketplace of this country if it were to be date of the date of the enactment of this Act years. adopted. containing the findings and conclusions of However, this is one issue where the Mr. TOWNS. Madam Chairman, I rise in op- the Comptroller General with regard to the chairman and I have had significant position to the amendment offered by the gen- study required under subsection (a) and such differences of legitimate opinion as to tleman from Iowa. recommendations for legislative or adminis- the appropriateness of diversified fi- The five percent commercial basket con- trative action as the Comptroller General may determine to be appropriate. nancial structures. If we were to adopt tained in H.R. 10 recognizes that the securi- the zero parity amendment that is pro- ties industry has a long, troublefree history or The CHAIRMAN. Pursuant to House posed by this amendment, we would affiliation with commercial companies. In fact, Resolution 428, the gentleman from find significant dislocations in the cur- there are instances in which securities firms Georgia (Mr. KINGSTON) and a Member rent marketplace. There would be cor- have benefitted greatly from the capital a com- opposed each will control 5 minutes. porations and entities legally engaged mercial affiliate has contributed. Additionally, The Chair recognizes the gentleman in businesses which they have engaged allowing financial holding companies (F.H.C.s) from Georgia (Mr. KINGSTON). in for many years which would, of ne- to invest a percentage of their domestic gross Mr. KINGSTON. Madam Chairman, I cessity, have to divest those revenue revenues in non-financial activities will provide yield myself such time as I may con- streams from their corporate struc- companies with a source of capital and will sume. ture. Stated another way, people law- help F.H.C.s. This amendment is a very simple fully engaged in business that does no The Commerce Committee reported out this one. It simply says that after 6 months harm would now, by action of this Con- with a 5% commercial basket. The Banking of enactment of this legislation that a gress, be told they can do that no Committee passed a 15% commercial basket study will be done on institutions with more. amendment by a 35 to 19 vote. At no point did $100 million or less in assets to see how That, to me, seems to be a bit unrea- either committee say that there should be no House Resolution 10 impacts them, and sonable, especially when we realize commercial basket. Modernization legislation it requires the Comptroller of the Cur- that one of the important elements can not continue the status quo. This bill must rency to conduct that study and just to this amendment does not address is the reflect the current market and permit some be sure that our smaller financial insti- structure of the unitary thrift, which form of commercial affiliation. Therefore, I tutions, usually community banks, see will continue to exist and proliferate, would urge my colleagues to oppose this if they are negatively impacted by it. which may be resold without limit in amendment and to support the gentlelady's It is not second-guessing the bill as which one cannot only have non- from New Jersey's amendment to increase the much as it is saying the bill may not financial income, they can own a ply- commercial basket to 10%. be perfect, there may be some unin- wood plant, a hotel, a restaurant, and a The CHAIRMAN. All time has ex- tended consequences that affect the thrift. pired. bill if it is passed without this amend- Mr. VENTO. Madam Chairman, if the The question is on the amendment ment. So all we are trying to do is say, gentleman will yield, there is no 10 per- offered by the gentleman from Iowa let us take a look at it, let us make H3214 CONGRESSIONAL RECORD — HOUSE May 13, 1998 sure that things are working as they and consolidations since the effective date of certain regions of the country. The are intended to work, and let us get the Riegle-Neal Interstate Banking and FDIC would be required to address how that report back to Congress. Branching Efficiency Act of 1994; and the funds might be merged and how Mr. BLILEY. Madam Chairman, will (B) the affiliation of insured depository in- long such a merger would be taken into stitutions with other financial institutions the gentleman yield? pursuant to this Act and the amendments effect and how such a merger would be Mr. KINGSTON. I yield to the gen- made by this Act. paid for if there were extenuating costs tleman from Virginia. (2) The concentration levels of the funds, circumstances. The FDIC would be re- Mr. BLILEY. Madam Chairman, we taking into account the number of members quired to file a written report with the have looked at the amendment. We of each fund and the geographic distribution Congress within 9 months after enact- think it is a good amendment, and we of such members, and the extent to which ei- ment. are prepared to accept it. ther fund is exposed to higher risks due to a I think, Mr. Chairman, those of us Mr. LEACH. Madam Chairman, will regional concentration of members or an in- that have been working on this issue sufficient membership base relative to the the gentleman yield? over the years have understood that Mr. KINGSTON. I yield to the gen- size of member institutions. (3) Issues relating to the planned merger of originally there was a central element tleman from Iowa. the funds, including the cost of merging the of the bill that was going to require in- Mr. LEACH. Madam Chairman, in my funds and the manner in which such costs tegration of the funds, of the deposit view, it is a very thoughtful amend- will be distributed among the members of insurance funds, and we dropped that ment. We are very appreciative that the respective funds. because we felt that we did not quite the gentleman has offered it, and I (b) REPORT REQUIRED.— know enough about the costs and how hope it will be adopted. (1) IN GENERAL.—Before the end of the 9- they would be allocated and whether or month period beginning on the date of the Mr. KINGSTON. Reclaiming my not indeed there would be enough cap- time, I appreciate that. enactment of this Act, the Board of Direc- tors of the Federal Deposit Insurance Cor- ital in those deposits. Mr. LAFALCE. Madam Chairman, poration shall submit a report to the Con- b 1900 will the gentleman yield? gress on the study conducted pursuant to Mr. KINGSTON. I yield to the gen- subsection (a). So I think that this is the better part tleman from New York. (2) CONTENTS OF REPORT.—The report shall of valor so that we cannot abandon the Mr. LAFALCE. Madam Chairman, I include— complications of the BIF SAIF impli- concur in the judgments of the gen- (A) detailed findings of the Board of Direc- cations as we have known them, but I tleman from Virginia (Mr. BLILEY) and tors with regard to the issues described in think it gives us an intelligent useful the gentleman from Iowa (Mr. LEACH). subsection (a); way to take our time, go about it, and Mr. KINGSTON. Madam Chairman, I (B) a description of the plans developed by know the complexities of it, not only appreciate that, and I yield back the the Board of Directors for merging the Bank Insurance Fund and the Savings Association nationwide, but on a regional basis. I balance of my time. Insurance Fund, including an estimate of the think this will serve us well. The CHAIRMAN pro tempore (Mr. amount of the cost of such merger which Mr. BLILEY. Mr. Chairman, will the NUSSLE). The question is on the amend- would be borne by Savings Association In- gentlewoman yield? ment offered by the gentleman from surance Fund members; and Mrs. ROUKEMA. I am happy to yield Georgia (Mr. KINGSTON). (C) such recommendations for legislative to the gentleman from Virginia. The question was taken; and the and administrative action as the Board of Mr. BLILEY. Mr. Chairman, we have Chairman pro tempore announced that Directors determines to be necessary or ap- read the amendment. We think it is a propriate to preserve the safety and sound- the ayes appeared to have it. good amendment, and we would sup- Mr. KINGSTON. Mr. Chairman, on ness of the deposit insurance funds, reduce the risks to such funds, provide for an effi- port the amendment. that I demand a recorded vote, and cient merger of such funds, and for other Mr. LEACH. Mr. Chairman, will the pending that, I make the point of order purposes. gentlewoman yield? that a quorum is not present. (c) DEFINITIONS.—For purposes of this sec- Mrs. ROUKEMA. I yield to the gen- The CHAIRMAN pro tempore (Mr. tion, the following definitions shall apply: tleman from Iowa, the chairman of the NUSSLE). Pursuant to House Resolution (1) INSURED DEPOSITORY INSTITUTION.—The Committee on Banking and Financial 428, further proceedings on the amend- term ‘‘insured depository institution’’ has Services. ment offered by the gentleman from the meaning given to such term in section 3(c) of the Federal Deposit Insurance Act. Mr. LEACH. Mr. Chairman, again, I Georgia (Mr. KINGSTON) will be post- think this is a very thoughtful amend- poned. (2) BIF AND SAIF MEMBERS.—The terms ‘‘Bank Insurance Fund member’’ and ‘‘Sav- ment, and I am delighted the gentle- It is now in order to consider Amend- ings Association Insurance Fund member’’ woman has brought it to the attention ment No. 8 printed in part 2 of House have the meaning given to such terms in sec- of the House and urge its adoption. Report 105–531. tion 7(l) of the Federal Deposit Insurance Mr. LAFALCE. Mr. Chairman, will AMENDMENT NO. 8 OFFERED BY MRS. ROUKEMA Act. the gentlewoman yield? Mrs. ROUKEMA. Mr. Chairman, I The CHAIRMAN pro tempore. Pursu- Mrs. ROUKEMA. I yield to the gen- offer an amendment. ant to House Resolution 428, the gen- tleman from New York. The CHAIRMAN pro tempore. The tlewoman from New Jersey (Mrs. ROU- Mr. LAFALCE. Mr. Chairman, I Clerk will designate the amendment. KEMA) and a Member opposed each will would concur in the judgments of the The text of the amendment is as fol- control 5 minutes. gentleman from Virginia (Mr. BLILEY) lows: The Chair recognizes the gentle- and the gentleman from Iowa (Mr. Amendment No. 8 offered by Mrs. ROU- woman from New Jersey (Mrs. ROU- LEACH). KEMA: KEMA). Mr. Chairman, this amendment would re- After subtitle H of title I, insert the fol- Mrs. ROUKEMA. Mr. Chairman, I lowing new subtitle (and redesignate the sub- quire the FDIC to produce a study on the BIF sequent subtitle and conform the table of will not take the 5 minutes. and SAIF Funds within 9 months of the date contents accordingly): This is a very direct and straight- of enactment. Subtitle I—Deposit Insurance Funds forward amendment, and I believe that The Study would focus on concentration in it can easily be understood. It simply SEC. 186. STUDY OF SAFETY AND SOUNDNESS OF the two funds. The FDIC would look at the FUNDS. asks for a study to be done. It requires number of banks or savings associations in (a) STUDY REQUIRED.—The Board of Direc- that the FDIC conduct a study regard- the particular fund. They would tell us if con- tors of the Federal Deposit Insurance Cor- ing the two deposit insurance funds, centration in terms of the percentage of de- poration shall conduct a study of the follow- the Bank Insurance Fund and the Sav- posits, number of institutions or regional con- ing issues with regard to the Bank Insurance ings Association Insurance Fund, the centration pose any Safety and Soundness Fund and the Savings Association Insurance SAIF. Concerns. Fund: The FDIC, under this study amend- (1) The safety and soundness of the funds The FDIC would also report on how it will and the adequacy of the reserve require- ment, would look at the number of in- merge the two funds, how long it will take, the ments applicable to the funds in light of— stitutions in each fund and the risk expected cost and how the costs would be di- (A) the size of the insured depository insti- posed by the concentration of deposits vided among the members of the Deposit In- tutions which are resulting from mergers in those individual institutions or in surance Funds. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3215 Mr. Chairman, many of the members of the The Clerk will redesignate the Bentsen Hefley Porter Bilbray Hill Price (NC) Banking Committee are worried about the de- amendment. Blumenauer Hilliard Rahall posit insurance funds. With respect to the The Clerk redesignated the amend- Boehner Hoekstra Ramstad SAIFÐwhich insures savings associationsÐ ment. Bono Holden Rangel the largest savings association in the United Boucher Hooley Riggs RECORDED VOTE Brown (CA) Hunter Roemer StatesÐWashington MutualÐaccounts for The CHAIRMAN pro tempore. A re- Brown (FL) Jackson-Lee Rogan over 11% of the deposit which are insured by corded vote has been demanded. Brown (OH) (TX) Rohrabacher the SAIF. They are based primarily on the Bryant Jefferson Roukema A recorded vote was ordered. Bunning Johnson, E. B. Royce West Coast of the United States. We are par- The vote was taken by electronic de- Burr Johnson, Sam Ryun ticularly concerned about the concentration of Burton Jones Salmon savings association deposits on the West vice, and there were—ayes 229, noes 193, Buyer Kelly Sanchez Coast. not voting 10, as follows: Callahan Kennelly Sawyer [Roll No 146] Capps Kilpatrick Schaffer, Bob With respect to the bank insurance fund, the Carson Kind (WI) Schumer recent merger of NationsBank and AYES—229 Castle King (NY) Scott Clay Klink Sensenbrenner BankAmerica raises a smaller, but similar, Abercrombie Gejdenson Nadler Clayton Knollenberg Serrano Aderholt Gephardt Nethercutt issue. The combined bank will hold roughly Clyburn LaFalce Sessions Andrews Gibbons Northup 8.6% of the deposits which are insured by the Cook LaHood Shays Archer Gilchrest Norwood Coyne Lampson Sherman BIF. We are not quite as concerned about re- Bachus Gillmor Nussle Cunningham Lantos Shuster gional concentration with respect to the BIF as Baesler Gilman Oberstar Davis (FL) Largent Smith (MI) Baldacci Goode Obey we are with the SAIF. Davis (IL) LaTourette Smith, Adam Ballenger Goodling Olver The FDIC has said in recent testimony be- DeGette Lazio Snowbarger Barr Goss Ortiz DeLauro Lee Solomon fore the House Banking Committee that they Barrett (NE) Graham Oxley DeLay Levin Spratt would like to have the insurance funds Barrett (WI) Gutierrez Packard Deutsch Lewis (GA) Stabenow Barton Gutknecht Pallone merged. Several members, including Mr. Dickey Lewis (KY) Stark Bass Hamilton Pappas C OLLUM Dingell Linder Stearns M C and myself, are very concerned Becerra Hansen Parker Doggett Livingston Stenholm about concentration also, and would like to Bereuter Hastings (WA) Pease Dooley Lowey Stokes Berman Herger Pelosi see the funds merged. Doyle Maloney (CT) Strickland Berry Hilleary Peterson (MN) I believe we should not prejudge the situa- Dreier Manton Stump Bilirakis Hinchey Peterson (PA) Dunn Mascara Stupak tion but request a report which will form the Bishop Hinojosa Petri Ehrlich McCarthy (NY) Talent basis for further Congressional Action. Blagojevich Hobson Pickering Engel McCollum Tanner The CHAIRMAN pro tempore (Mr. Bliley Horn Pickett English McGovern Tauscher Blunt Hostettler Pombo NUSSLE). Is there a Member who rises Eshoo McHale Tauzin Boehlert Houghton Pomeroy Etheridge McKinney Taylor (MS) in opposition to the amendment from Bonilla Hoyer Portman Everett McNulty Thompson the gentlewoman from New Jersey? Bonior Hulshof Poshard Farr Meehan Thornberry Borski Hutchinson Pryce (OH) Seeing none, the question is on the Fattah Meek (FL) Thurman Boswell Hyde Quinn amendment offered by the gentle- Fazio Meeks (NY) Tiahrt Boyd Inglis Redmond Foley Mink Towns woman from New Jersey (Mrs. ROU- Brady Istook Regula Ford Moakley Turner KEMA). Calvert Jackson (IL) Reyes Fossella Mollohan Velazquez Camp Jenkins Riley The question was taken; and the Frank (MA) Moran (VA) Vento Campbell John Rivers Chairman pro tempore announced that Frost Morella Visclosky Canady Johnson (CT) Rodriguez Furse Murtha Walsh the ayes appeared to have it. Cannon Johnson (WI) Rogers Gekas Myrick Watt (NC) Mrs. ROUKEMA. Mr. Chairman, I de- Cardin Kanjorski Ros-Lehtinen Goodlatte Neal Watts (OK) Chabot Kaptur Rothman mand a recorded vote. Gordon Neumann Weldon (FL) Chambliss Kasich Roybal-Allard The CHAIRMAN. Pursuant to House Granger Ney Weldon (PA) Chenoweth Kennedy (MA) Rush Green Owens Wexler Resolution 428, further proceedings on Clement Kennedy (RI) Sabo Greenwood Pascrell Weygand the amendment offered by the gentle- Coble Kildee Sanders Hall (OH) Pastor White Coburn Kim Sandlin woman from New Jersey (Mrs. ROU- Hall (TX) Paul Wise Collins Kingston Sanford Hastert Paxon Wynn KEMA) will be postponed. Combest Kleczka Saxton Hastings (FL) Payne Young (AK) SEQUENTIAL VOTES POSTPONED IN COMMITTEE Condit Klug Scarborough Hayworth Pitts OF THE WHOLE Conyers Kolbe Schaefer, Dan The CHAIRMAN pro tempore. Pursu- Cooksey Kucinich Shadegg NOT VOTING—10 Costello Latham Shaw ant to House Resolution 428, proceed- Cox Leach Shimkus Bateman Harman Spence ings will now resume on those amend- Cramer Lewis (CA) Sisisky Christensen Hefner Yates Crane Lipinski Skeen Forbes Radanovich ments on which further proceedings Gonzalez Skaggs were postponed in the following order: Crapo LoBiondo Skelton Cubin Lofgren Slaughter b 1924 Substitute amendment No. 6 offered by Cummings Lucas Smith (NJ) the gentleman from Iowa (Mr. LEACH), Danner Luther Smith (OR) Messrs. LIVINGSTON, HEFLEY, amendment No. 5 offered by the gentle- Davis (VA) Maloney (NY) Smith (TX) ROGAN, WALSH, DOGGETT, GEKAS, Deal Manzullo Smith, Linda woman from New Jersey (Mrs. ROU- DeFazio Markey Snyder JONES, and BRYANT changed their KEMA), amendment No. 7 offered by the Delahunt Martinez Souder vote from ‘‘aye’’ to ‘‘no.’’ gentleman from Georgia (Mr. KING- Diaz-Balart Matsui Sununu Messrs. OXLEY, KIM, DICKS, Dicks McCarthy (MO) Taylor (NC) GANSKE, KENNEDY of Massachusetts, STON), and amendment No. 8 offered by Dixon McCrery Thomas the gentlewoman from New Jersey Doolittle McDade Thune WAXMAN, MCKEON, MCINTOSH, (Mrs. ROUKEMA). Duncan McDermott Tierney ISTOOK, MCDERMOTT, MILLER of The Chair will reduce to 5 minutes Edwards McHugh Torres California, ADERHOLT, BASS, Ehlers McInnis Traficant the time for any electronic vote after Emerson McIntosh Upton DELAHUNT, POMEROY, MICA, DOO- the first vote in this series. Ensign McIntyre Wamp LITTLE, GOODLING, and SHIMKUS, AMENDMENT NO. 6 OFFERED BY MR. LEACH Evans McKeon Waters Ms. RIVERS, and Ms. LOFGREN Ewing Menendez Watkins changed their vote from ‘‘no’’ to ‘‘aye.’’ The CHAIRMAN pro tempore. The Fawell Metcalf Waxman pending business is the demand for a Filner Mica Weller So the amendment was agreed to. recorded vote on amendment No. 6 of- Fowler Millender- Whitfield The result of the vote was announced fered by the gentleman from Iowa (Mr. Fox McDonald Wicker as above recorded. Franks (NJ) Miller (CA) Wolf LEACH) as a substitute for amendment Frelinghuysen Miller (FL) Woolsey ANNOUNCEMENT BY THE CHAIRMAN No. 5 offered by the gentlewoman from Gallegly Minge Young (FL) The CHAIRMAN. Pursuant to House New Jersey (Mrs. ROUKEMA) on which Ganske Moran (KS) Resolution 428, the Chair announces further proceedings were postponed and NOES—193 that she will reduce to a minimum of 5 on which the ayes prevailed by voice Ackerman Armey Barcia minutes the period of time within vote. Allen Baker Bartlett which a vote by electronic device will H3216 CONGRESSIONAL RECORD — HOUSE May 13, 1998 be taken on each amendment on which Hansen McCarthy (MO) Rodriguez Serrano Stenholm Velazquez Hastings (WA) McCrery Rogers Sessions Stokes Vento the Chair has postponed further pro- Herger McDade Ros-Lehtinen Shays Strickland Visclosky ceedings. Hilleary McDermott Rothman Sherman Stump Walsh PARLIAMENTARY INQUIRY Hinchey McHugh Roybal-Allard Shimkus Stupak Watt (NC) Hinojosa McInnis Sabo Shuster Talent Watts (OK) Mrs. ROUKEMA. Madam Chairman, I Hobson McIntosh Sanders Slaughter Tanner Weldon (FL) have a parliamentary inquiry. Horn McIntyre Sandlin Smith (MI) Tauscher Weldon (PA) The CHAIRMAN. The gentlewoman Hostettler McKeon Sanford Smith (OR) Tauzin Wexler Houghton Menendez Saxton Smith, Adam Thompson Weygand will state it. Hoyer Metcalf Scarborough Snowbarger Thornberry White Mrs. ROUKEMA. Madam Chairman, I Hulshof Mica Schaefer, Dan Solomon Thurman Wise have had many, many questions in the Hunter Miller (CA) Shadegg Spratt Tiahrt Wynn last few minutes, that Members were Hutchinson Miller (FL) Shaw Stabenow Towns Young (AK) Inglis Minge Sisisky Stearns Turner rather confused on what they were vot- Istook Moran (KS) Skeen ing on. Will the Chair please explain Jackson (IL) Murtha Skelton NOT VOTING—10 what this second vote will be, with pre- Jenkins Nethercutt Smith (NJ) Bateman Hefner Spence cision? Johnson (CT) Northup Smith (TX) Christensen Kaptur Yates Johnson (WI) Norwood Smith, Linda Gonzalez Radanovich The CHAIRMAN. The Chair is about Jones Nussle Snyder Harman Skaggs to put the question on the Roukema Kanjorski Oberstar Souder amendment, as amended by the sub- Kasich Obey Stark b 1937 Kennedy (MA) Olver Sununu stitute by the gentleman from Iowa Kennedy (RI) Ortiz Taylor (MS) Messrs. SPRATT, JOHN, RUSH, and (Mr. LEACH), on which the committee Kildee Oxley Taylor (NC) EDWARDS changed their vote from just voted. Kingston Pallone Thomas ‘‘aye’’ to ‘‘no.’’ Kleczka Parker Thune Mrs. ROUKEMA. I think Members Klug Pease Tierney Ms. WATERS and Mr. HUNTER have to understand that would mean Kolbe Pelosi Torres changed their vote from ‘‘no’’ to ‘‘aye.’’ that it would change the bill to include Kucinich Peterson (MN) Traficant So the amendment was agreed to. no commercial basket. Lampson Peterson (PA) Upton The result of the vote was announced Latham Petri Wamp The CHAIRMAN. The Chair cannot Leach Pickering Waters as above recorded. interpret the amendment. Lipinski Pickett Watkins AMENDMENT NO. 7 OFFERED BY MR. KINGSTON Mrs. ROUKEMA. Who can then? Who Lofgren Pomeroy Waxman Lucas Portman Weller The CHAIRMAN. The pending busi- can? Luther Poshard Whitfield ness is the demand for a recorded vote AMENDMENT NO. 5 OFFERED BY MRS. ROUKEMA, Maloney (NY) Redmond Wicker on the amendment No. 7 offered by the Manzullo Regula Wolf AS AMENDED gentleman from Georgia (Mr. KING- Markey Reyes Woolsey The CHAIRMAN. The Clerk will re- Martinez Riley Young (FL) STON) on which further proceedings designate the amendment. Matsui Rivers were postponed and on which the ayes The Clerk redesignated the amend- prevailed by voice vote. ment. NOES—204 The Clerk will redesignate the The CHAIRMAN. The question is on Ackerman Fazio Mascara amendment. Amendment No. 5 offered by the gen- Allen Forbes McCarthy (NY) Armey Ford McCollum The Clerk redesignated the amend- tlewoman from New Jersey (Mrs. ROU- Baker Fossella McGovern ment. KEMA), as amended. Barcia Frank (MA) McHale PARLIAMENTARY INQUIRY The question was taken; and the Bartlett Frost McKinney Bilbray Furse McNulty Mr. SABO. Madam Chairman, I have Chairman announced that the ayes ap- Blagojevich Goodlatte Meehan a parliamentary inquiry. peared to have it. Blumenauer Gordon Meek (FL) The CHAIRMAN. The gentleman will RECORDED VOTE Boehner Granger Meeks (NY) Bonilla Green Millender- state it. Mrs. ROUKEMA. Madam Chairman, I Boucher Greenwood McDonald Mr. SABO. Madam Chairman, is this demand a recorded vote. Brown (CA) Hall (TX) Mink a request for a rollcall vote on an A recorded vote was ordered. Brown (FL) Hastert Moakley amendment which passed without dis- Brown (OH) Hastings (FL) Mollohan The CHAIRMAN. This will be a 5 Bryant Hayworth Moran (VA) sent? minute vote. Bunning Hefley Morella The CHAIRMAN. A recorded vote was The vote was taken by electronic de- Burr Hill Myrick requested. vice, and there were—ayes 218, noes 204, Callahan Hilliard Nadler Cannon Hoekstra Neal Mr. SABO. Madam Chairman, the not voting 10, as follows: Capps Holden Neumann amendment was accepted by all the [Roll No. 147] Carson Hooley Ney managers of the bill without dissent? Castle Hyde Owens The CHAIRMAN. The Chair shortly AYES—218 Clay Jackson-Lee Packard Abercrombie Buyer Dunn Clayton (TX) Pappas will ask those in support of a recorded Aderholt Calvert Ehlers Clyburn Jefferson Pascrell vote to rise. The Chair did not happen Andrews Camp Emerson Conyers John Pastor to be presiding at the time that that Archer Campbell Ensign Cook Johnson, E.B. Paul Bachus Canady Evans Coyne Johnson, Sam Paxon vote took place. Baesler Cardin Ewing Cubin Kelly Payne Mr. SABO. Maybe we should vote Baldacci Chabot Fawell Cummings Kennelly Pitts ‘‘no.’’ Ballenger Chambliss Filner Cunningham Kilpatrick Pombo Barr Chenoweth Foley Davis (FL) Kim Porter RECORDED VOTE Barrett (NE) Clement Fowler Davis (IL) Kind (WI) Price (NC) The CHAIRMAN. A recorded vote has Barrett (WI) Coble Fox Davis (VA) King (NY) Pryce (OH) been demanded. Barton Coburn Franks (NJ) DeGette Klink Quinn Bass Collins Frelinghuysen DeLauro Knollenberg Rahall A recorded vote was ordered. Becerra Combest Gallegly DeLay LaFalce Ramstad The CHAIRMAN. This will be a 5- Bentsen Condit Ganske Deutsch LaHood Rangel minute vote. Bereuter Cooksey Gejdenson Dickey Lantos Riggs The vote was taken by electronic de- Berman Costello Gekas Dingell Largent Roemer Berry Cox Gephardt Doggett LaTourette Rogan vice, and there were—ayes 404, noes 18, Bilirakis Cramer Gibbons Dooley Lazio Rohrabacher answered ‘‘present’’ 1, not voting 9, as Bishop Crane Gilchrest Doyle Lee Roukema follows: Bliley Crapo Gillmor Dreier Levin Royce Blunt Danner Gilman Edwards Lewis (CA) Rush [Roll No. 148] Boehlert Deal Goode Ehrlich Lewis (GA) Ryun AYES—404 Bonior DeFazio Goodling Engel Lewis (KY) Salmon Ackerman Bachus Barr Bono Delahunt Goss English Linder Sanchez Aderholt Baesler Barrett (NE) Borski Diaz-Balart Graham Eshoo Livingston Sawyer Allen Baker Barrett (WI) Boswell Dicks Gutierrez Etheridge LoBiondo Schaffer, Bob Andrews Baldacci Bartlett Boyd Dixon Gutknecht Everett Lowey Schumer Archer Ballenger Barton Brady Doolittle Hall (OH) Farr Maloney (CT) Scott Armey Barcia Bass Burton Duncan Hamilton Fattah Manton Sensenbrenner May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3217 Becerra Foley Linder Rohrabacher Slaughter Thurman Burton Granger McIntosh Bentsen Forbes Lipinski Ros-Lehtinen Smith (MI) Tiahrt Buyer Green McIntyre Bereuter Ford Livingston Rothman Smith (NJ) Tierney Callahan Greenwood McKeon Berman Fossella LoBiondo Roukema Smith (OR) Towns Calvert Gutierrez McKinney Berry Fowler Lofgren Roybal-Allard Smith (TX) Traficant Camp Gutknecht McNulty Bilbray Fox Lowey Royce Smith, Adam Turner Campbell Hall (OH) Meehan Bilirakis Franks (NJ) Lucas Rush Smith, Linda Upton Canady Hall (TX) Meek (FL) Bishop Frelinghuysen Luther Ryun Snowbarger Visclosky Cannon Hamilton Meeks (NY) Blagojevich Frost Maloney (CT) Salmon Snyder Walsh Capps Hansen Menendez Bliley Furse Maloney (NY) Sanders Solomon Wamp Cardin Hastert Metcalf Blunt Gallegly Manton Sandlin Souder Waters Carson Hastings (FL) Mica Boehlert Ganske Manzullo Sanford Spence Watkins Castle Hastings (WA) Millender- Boehner Gejdenson Markey Sawyer Spratt Watt (NC) Chabot Hayworth McDonald Bonilla Gekas Martinez Saxton Stabenow Watts (OK) Chambliss Herger Miller (CA) Bono Gephardt Mascara Scarborough Stearns Waxman Chenoweth Hill Miller (FL) Borski Gibbons Matsui Schaefer, Dan Stenholm Weldon (FL) Christensen Hilleary Minge Boswell Gilchrest McCarthy (MO) Schaffer, Bob Stokes Weldon (PA) Clay Hilliard Mink Boucher Gillmor McCarthy (NY) Schumer Strickland Weller Clayton Hinchey Moakley Boyd Gilman McCollum Scott Stump Wexler Clement Hinojosa Mollohan Brady Goode McCrery Sensenbrenner Stupak Weygand Clyburn Hobson Moran (KS) Brown (CA) Goodlatte McDade Serrano Sununu White Coble Hoekstra Moran (VA) Brown (FL) Goodling McDermott Sessions Talent Whitfield Coburn Holden Morella Brown (OH) Gordon McGovern Shadegg Tanner Wicker Collins Hooley Murtha Bryant Goss McHale Shaw Tauscher Wise Combest Horn Myrick Bunning Graham McHugh Shays Tauzin Wolf Condit Houghton Nadler Burr Granger McInnis Sherman Taylor (MS) Woolsey Cook Hoyer Neal Burton Green McIntosh Shimkus Taylor (NC) Wynn Cooksey Hulshof Neumann Buyer Greenwood McIntyre Shuster Thomas Young (AK) Costello Hunter Ney Callahan Gutierrez McKeon Sisisky Thompson Young (FL) Cox Hutchinson Northup Calvert Gutknecht McKinney Skeen Thornberry Coyne Hyde Norwood Camp Hall (OH) McNulty Skelton Thune Cramer Inglis Nussle Crane Istook Obey Campbell Hall (TX) Meehan NOES—18 Cubin Jackson (IL) Olver Canady Hamilton Meek (FL) Cummings Jackson-Lee Ortiz Cannon Hansen Meeks (NY) Abercrombie Kanjorski Sabo Cunningham (TX) Owens Capps Hastings (FL) Menendez Blumenauer Kind (WI) Sanchez Danner Jefferson Oxley Cardin Hastings (WA) Metcalf Bonior LaHood Stark Davis (FL) Jenkins Packard Carson Hayworth Mica Conyers Mink Torres Davis (IL) John Pallone Castle Hefley Millender- Dooley Oberstar Velazquez Davis (VA) Johnson (CT) Pappas Chabot Herger McDonald Fazio Parker Vento Deal Johnson (WI) Pascrell Chambliss Hill Miller (CA) ANSWERED ‘‘PRESENT’’—1 DeFazio Johnson, E. B. Pastor Chenoweth Hilleary Miller (FL) DeGette Johnson, Sam Paul Minge DeFazio Christensen Hilliard Delahunt Jones Paxon Clay Hinchey Moakley NOT VOTING—9 DeLauro Kaptur Payne Clayton Hinojosa Mollohan Bateman Harman Radanovich DeLay Kasich Pease Clement Hobson Moran (KS) Deutsch Kelly Pelosi Clyburn Hoekstra Moran (VA) Frank (MA) Hastert Skaggs Gonzalez Hefner Yates Diaz-Balart Kennedy (MA) Peterson (PA) Coble Holden Morella Dicks Kennedy (RI) Petri Coburn Hooley Murtha b Dingell Kennelly Pickering Collins Horn Myrick 1947 Dixon Kildee Pickett Combest Hostettler Nadler So the amendment was agreed to. Doggett Kilpatrick Pitts Condit Houghton Neal Dooley Kim Pomeroy Cook Hoyer Nethercutt The result of the vote was announced Doolittle Kind (WI) Porter Cooksey Hulshof Neumann as above recorded. Doyle King (NY) Portman Costello Hunter Ney AMENDMENT NO. 8 OFFERED BY MRS. ROUKEMA Dreier Kingston Poshard Cox Hutchinson Northup Duncan Kleczka Price (NC) Coyne Hyde Norwood The CHAIRMAN. The pending busi- Dunn Klink Pryce (OH) Cramer Inglis Nussle ness is the demand for a recorded vote Edwards Klug Quinn Crane Istook Obey on amendment No. 8 offered by the gen- Ehlers Knollenberg Rahall Crapo Jackson (IL) Olver Ehrlich Kolbe Ramstad Cubin Jackson-Lee Ortiz tlewoman from New Jersey (Mrs. ROU- Emerson Kucinich Rangel Cummings (TX) Owens KEMA) on which further proceedings Engel LaFalce Redmond Cunningham Jefferson Oxley were postponed and on which the ayes English Lampson Regula Danner Jenkins Packard prevailed by voice vote. Ensign Lantos Reyes Davis (FL) John Pallone Eshoo Largent Riggs Davis (IL) Johnson (CT) Pappas The Clerk will redesignate amend- Etheridge Latham Riley Davis (VA) Johnson (WI) Pascrell ment. Evans LaTourette Rivers Deal Johnson, E. B. Pastor The Clerk redesignated the amend- Everett Lazio Rodriguez DeGette Johnson, Sam Paul Ewing Leach Roemer Delahunt Jones Paxon ment. Farr Lee Rogan DeLauro Kaptur Payne RECORDED VOTE Fattah Levin Rogers DeLay Kasich Pease The CHAIRMAN. A recorded vote has Fawell Lewis (GA) Rohrabacher Deutsch Kelly Pelosi Fazio Lewis (KY) Ros-Lehtinen Diaz-Balart Kennedy (MA) Peterson (MN) been demanded. Filner Linder Rothman Dickey Kennedy (RI) Peterson (PA) A recorded vote was ordered. Foley Lipinski Roukema Dicks Kennelly Petri The CHAIRMAN. This is a 5-minute Forbes Livingston Roybal-Allard Dingell Kildee Pickering Ford LoBiondo Royce Dixon Kilpatrick Pickett vote. Fossella Lofgren Rush Doggett Kim Pitts The vote was taken by electronic de- Fowler Lowey Ryun Doolittle King (NY) Pombo vice, and there were—ayes 406, noes 13, Fox Lucas Salmon Doyle Kingston Pomeroy not voting 13, as follows: Franks (NJ) Luther Sanchez Dreier Kleczka Porter Frelinghuysen Maloney (CT) Sanders Duncan Klink Portman [Roll No. 149] Frost Maloney (NY) Sandlin Dunn Klug Poshard AYES—406 Furse Manton Sanford Edwards Knollenberg Price (NC) Gallegly Manzullo Sawyer Ehlers Kolbe Pryce (OH) Abercrombie Bartlett Boehner Ganske Markey Saxton Ehrlich Kucinich Quinn Ackerman Barton Bonilla Gejdenson Martinez Scarborough Emerson LaFalce Rahall Aderholt Becerra Bonior Gekas Mascara Schaefer, Dan Engel Lampson Ramstad Allen Bentsen Bono Gephardt Matsui Schaffer, Bob English Lantos Rangel Andrews Bereuter Borski Gibbons McCarthy (MO) Schumer Ensign Largent Redmond Archer Berman Boswell Gilchrest McCarthy (NY) Scott Eshoo Latham Regula Bachus Berry Boucher Gillmor McCollum Sensenbrenner Etheridge LaTourette Reyes Baesler Bilbray Boyd Gilman McCrery Serrano Evans Lazio Riggs Baker Bilirakis Brady Goode McDade Sessions Everett Leach Riley Baldacci Bishop Brown (CA) Goodlatte McDermott Shadegg Ewing Lee Rivers Ballenger Blagojevich Brown (FL) Goodling McGovern Shaw Farr Levin Rodriguez Barcia Bliley Brown (OH) Gordon McHale Shays Fattah Lewis (CA) Roemer Barr Blumenauer Bryant Goss McHugh Sherman Fawell Lewis (GA) Rogan Barrett (NE) Blunt Bunning Graham McInnis Shimkus Filner Lewis (KY) Rogers Barrett (WI) Boehlert Burr H3218 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Shuster Stupak Visclosky to pass to establish uniform limits on ings given to such terms in section 3 of the Sisisky Sununu Walsh Federal Deposit Insurance Act.’’. Skeen Talent Wamp commissions and other fees charged to Skelton Tanner Waters consumers who purchase stocks, bonds, The CHAIRMAN. Pursuant to House Slaughter Tauscher Watkins insurance, and other financial prod- Resolution 428, the gentleman from Smith (MI) Tauzin Watt (NC) ucts. Washington (Mr. METCALF) and the Smith (NJ) Taylor (MS) Watts (OK) gentleman from Texas (Mr. BENTSEN) Smith (OR) Taylor (NC) Waxman b 2000 Smith (TX) Thomas Weldon (FL) each will control 5 minutes. Smith, Adam Thompson Weldon (PA) This amendment would require a re- The Chair recognizes the gentleman Smith, Linda Thornberry Weller port to be submitted to Congress con- from Washington (Mr. METCALF). Snowbarger Thune Wexler cerning the results of the study within (Mr. METCALF asked and was given Snyder Thurman Weygand Solomon Tiahrt White 1 year of enactment of this bill. That is permission to revise and extend his re- Souder Tierney Whitfield the short version of my speech. marks.) Spence Torres Wicker Mr. BLILEY. Madam Chairman, will Mr. METCALF. Madam Chairman, I Spratt Towns Wise yield myself such time as I may con- Stabenow Traficant Wolf the gentleman yield? Stark Turner Woolsey Mr. SANDERS. I yield to the gen- sume. Stearns Upton Wynn tleman from Virginia. It is my understanding that the mi- Stokes Velazquez Young (AK) Mr. BLILEY. Madam Chairman, we nority does not oppose what I consider Strickland Vento Young (FL) have looked at the amendment. We to be just clearly a technical amend- NOES—13 think it is helpful, and we will accept ment. I would like to thank the gen- Conyers LaHood Sabo it. tleman from Iowa (Mr. LEACH), the Dickey Oberstar Stenholm Mr. LEACH. Madam Chairman, will gentleman from Virginia (Mr. BLILEY) Hefley Parker Stump Hostettler Peterson (MN) the gentleman yield? and, of course, the gentleman from Kanjorski Pombo Mr. SANDERS. I yield to the gen- New York (Mr. SOLOMON) and the con- sideration of my ranking members, the NOT VOTING—13 tleman from Iowa. Mr. LEACH. Madam Chairman, like- gentleman from New York (Mr. LA- Armey Gonzalez Radanovich Bass Harman Skaggs wise, it is a very thoughtful amend- FALCE) and the gentleman from Michi- Bateman Hefner Yates ment from a very thoughtful Member. I gan (Mr. DINGELL) for allowing me to Crapo Lewis (CA) urge its consideration. bring this technical amendment that Frank (MA) Nethercutt Mr. SANDERS. Madam Chairman, I would assist over 500 financial institu- b 1956 yield back the balance of my time. tions across the country. This amendment would simply So the amendment was agreed to. The CHAIRMAN. If there is no Mem- change the law to allow federally char- The result of the vote was announced ber in opposition, the question is on tered financial institutions that have as above recorded. the amendment offered by the gen- The CHAIRMAN. It is now in order to tleman from Vermont (Mr. SANDERS). the word ‘‘Federal’’ in their name or in consider amendment No. 9 printed in The amendment was agreed to. their title to opt for a State banking part 2 of House Report 105–531. The CHAIRMAN. The Chair has been charter if they so choose. advised that amendment No. 10 to have Last year, when this issue came up in AMENDMENT NO. 9 OFFERED BY MR. SANDERS been offered by the gentleman from the Committee on Banking and Finan- Mr. SANDERS. Madam Chairman, I Massachusetts (Mr. MARKEY) has been cial Services during markup of H.R. 10, offer an amendment. withdrawn. this same amendment passed unani- The CHAIRMAN. The Clerk will des- It is now in order to consider amend- mously. ignate the amendment. ment No. 11 printed in part 2 of House Over 500 financial institutions across The text of the amendment is as fol- Report 105–531. the country are hamstrung because lows: they have the word ‘‘Federal’’ in their AMENDMENT NO. 11 OFFERED BY MR. METCALF. Amendment No. 9 offered by Mr. SANDERS: name. Some of these banks and thrifts Mr. METCALF. Madam Chairman, I After section 241 of the Amendment in the may be over 100 years old and would offer an amendment. Nature of a Substitute, insert the following like to benefit from the dual banking The CHAIRMAN. The Clerk will des- new section (and conform the table of con- system and would simply like to tents accordingly): ignate the amendment. change from a national charter to a SEC. 242. STUDY OF LIMITATION ON FEES ASSO- The text of the amendment is as fol- State charter without having to CIATED WITH ACQUIRING FINAN- lows: CIAL PRODUCTS. change their name. Before the end of the 1-year period begin- Part 2 Amendment No. 11, offered by Mr. I urge my colleagues to support this ning on the date of the enactment of this METCALF: amendment to bring parity and fair- After section 401 of the Amendment in the Act, the Comptroller General of the United ness for all financial institutions. Like States shall submit a report to the Congress Nature of a Substitute, insert the following new section (and conform the table of con- financial modernization, let us bring regarding the efficacy and benefits of uni- forth a level playing field for all finan- formly limiting any commissions, fees, tents accordingly): markups, or other costs incurred by cus- SEC. 402. RETENTION OF ‘‘FEDERAL’’ IN NAME OF cial institutions to have flexibility not tomers in the acquisition of financial prod- CONVERTED FEDERAL SAVINGS AS- only in the marketplace but also in the SOCIATION. ucts. ability to change from a national to Section 2 of the Act entitled ‘‘An Act to The CHAIRMAN. Pursuant to House State charter. enable national banking associations to in- Mr. BLILEY. Madam Chairman, will Resolution 428, the gentleman from crease their capital stock and to change the gentleman yield? Vermont (Mr. SANDERS) and a Member their names or locations.’’ and approved May Mr. METCALF. I yield to the gen- 1, 1886 (12 U.S.C. 30) is amended by adding at opposed each will control 5 minutes. tleman from Virginia. The Chair recognizes the gentleman the end the following new subsection: ‘‘(d) RETENTION OF ‘FEDERAL’ IN NAME OF Mr. BLILEY. Madam Chairman, we from Vermont (Mr. SANDERS). have looked at the amendment. We Mr. SANDERS. Madam Chairman, I CONVERTED FEDERAL SAVINGS ASSOCIATION.— ‘‘(1) IN GENERAL.—Notwithstanding sub- think it is a good amendment, and we yield myself such time as I may con- section (a) or any other provision of law, any are prepared to support it. sume. depository institution the charter of which Mr. LEACH. Madam Chairman, will Madam Chairman, my understanding is converted from that of a Federal savings the gentleman yield? is that this amendment has the support association to a national bank or a State Mr. METCALF. I yield to the gen- of both the majority and the minority, bank after the date of the enactment of the tleman from Iowa. and therefore, I will be very, very brief. Financial Services Act of 1998 may retain the Mr. LEACH. Madam Chairman, I also Madam Chairman, this amendment term ‘Federal’ in the name of such institu- believe that what the gentleman is simply requires the Controller General tion so long as such depository institution remains an insured depository institution. doing makes sense. of the United States to conduct a study ‘‘(2) DEFINITIONS.—For purposes of this sub- I would only also stress what an on whether it would be beneficial, in section, the terms ‘depository institution’, enormous contribution he has made to light of the expected consolidation of ‘insured depository institution’, ‘national the committee this year. I think this is the financial industry, if H.R. 10 were bank’, and ‘State bank’ have the same mean- a worthy amendment. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3219 Mr. METCALF. I appreciate those nancial Services, but I think this raises Federal Reserve, carry Federal deposit comments. a lot of questions with respect to prop- insurance and must still pay Federal Madam Chairman, I reserve the bal- er disclosure. And I think that you taxes. I think this is legitimate, to not ance of my time. have the problem that a depositor force them to change the name that (Mr. BENTSEN asked and was given comes into a bank and they think it is many of them have had for 100 years. I permission to revise and extend his re- a federally chartered bank, maybe they think that that is unfortunate if they marks.) think it is still regulated by the Comp- want to change to a State charter. Mr. BENTSEN. Madam Chairman, I troller of the Currency, but it has Mr. BENTSEN. Madam Chairman, I yield myself such time as I may con- shifted to a State-chartered bank. yield myself the balance of my time. sume. They may feel that they have more I have nothing but great respect for If I might, I would like to engage the protections because the name Federal my colleague from Washington State. I gentleman from Washington in a col- is in there than what they might have think his amendment is well-inten- loquy if I could ask him a question under a State charter. I appreciate tioned but problematic. He mentions about his amendment. what the gentleman is doing, but I that State-chartered banks are still If I understand this correctly, if you have to oppose the amendment. regulated by the Federal Reserve, but have a bank or savings bank or thrift Madam Chairman, I reserve the bal- we also have State-chartered banks which is currently federally chartered ance of my time. that are nonmember banks which are and has the name ‘‘Federal’’ in it and Mr. METCALF. Madam Chairman, I not members of the Federal Deposit In- then, as of this bill, that thrift or that yield myself such time as I may con- surance Corporation, which means that bank decides to recharter as a State sume. you could switch your charter and cre- thrift or State bank, even though they I would answer in this way, that the ate a bank, and there are still some in will be a State institution, they can important factor is that State-char- Texas, I believe, that are State-char- keep the name ‘‘Federal’’ or keep the tered institutions are still regulated by tered banks that are not protected by word ‘‘Federal’’ in their name; is that the Federal Reserve. They must carry the FDIC. But if you retain ‘‘Federal,’’ correct? Federal deposit insurance and they retain the Dime Box Federal Bank, Mr. METCALF. Madam Chairman, must still pay Federal taxes. In that someone might go in and think that will the gentleman yield? regard, I think that the amendment is they are still an FDIC bank. Mr. BENTSEN. I yield to the gen- legitimate. I am sure that when everybody walks tleman from Washington. Mr. LAFALCE. Madam Chairman, into the bank, they look on the glass Mr. METCALF. If my amendment will the gentleman yield? door there to make sure it says FDIC goes through, that is correct. Many of Mr. METCALF. I yield to the gen- protection, they read all the language them have had the name for a long tleman from New York. that is in there so they know. But I time and would like to transfer to a Mr. LAFALCE. Madam Chairman, just think with all of our concern that State charter without having to initially I had a conversation with the has been raised today, whether it is the change their name. distinguished author of the amendment consumer protections which I support, Mr. BENTSEN. Madam Chairman, as in which I said I would probably defer or this issue of whether or not there is we understand, current law does not to the judgment of the chairman of the an implicit subsidy that occurs allow for any institution which switch- Committee on Banking and Financial through operating subsidiaries or even es a charter from Federal to State or Services on this issue. But I regret to as the chairman of the Federal Re- State to Federal to retain the previous inform him that now that I have re- serve, Mr. Greenspan says, with affili- name of origin, if you will, in their flected upon it, I feel compelled to op- ates through holding companies, that name, that they were a State bank or pose his amendment. this gives the wrong appearance. Federal bank. I simply think it is misleading and it Quite frankly, I would just close by Mr. METCALF. Madam Chairman, if would also assist in the tendency that saying, this is one amendment where I the gentleman will continue to yield, I this bill will promote having national cannot quote the chairman of the Fed- know that one cannot, if they have the banks convert to a State charter. That eral Reserve and apparently no one else name ‘‘Federal’’, cannot switch to a is the effect, I think, of the governing can. It is surprising, because we have State charter today. structures that we have created in the heard his comments on every other Mr. BENTSEN. I thank the gen- bill. amendment that we have addressed, tleman. Now, the gentleman’s amendment, I but my feeling is probably, and I do not If you have a State and you go to a think, would make it a bit easier be- want to speak for the Fed chairman, Federal, could you retain State in your cause they would be able to convert to but my feeling is probably if you push name under this amendment? the State charter, but still retain the the Fed on this, they probably would Mr. METCALF. Madam Chairman, I word ‘‘Federal.’’ So it is with deep re- not think this is a particularly good do not think that my amendment luctance, but after reflection and con- idea as well. Certainly anybody who is touches that. sideration, hearing the gentleman from involved in disclosure would probably Mr. BENTSEN. I thank the gen- Texas (Mr. BENTSEN), I feel constrained think this is not a good idea. tleman. to oppose the gentleman’s amendment. My only concern with this, and I Mr. BENTSEN. Madam Chairman, I think the gentleman is very well in- think all of us are concerned with this how much time remains on both sides? tentioned in what he is trying to do. I legislation in terms of consumer pro- The CHAIRMAN. The gentleman do support the dual banking system, tection and disclosure and appearances from Washington (Mr. METCALF) has 30 but I am not sure that we want to do of whether or not there is some sort of seconds remaining, and the gentleman this. Therefore, I would ask my col- taxpayer-backed guarantee to other fi- from Texas (Mr. BENTSEN) has 2 min- leagues to oppose the amendment. nancial activities that banks or thrifts utes remaining. The CHAIRMAN. The question is on are getting into. The problem I have Mr. BENTSEN. Madam Chairman, the amendment offered by the gen- with this particular amendment is that who has the right to close? tleman from Washington (Mr. we are going to take the moniker of The CHAIRMAN. The gentleman METCALF). Federal and allow it to be used for non- from Texas (Mr. BENTSEN) has the right The question was taken; and the federally chartered institutions. I am to close. Chairman announced that the ayes ap- not an expert on banking law, but I Mr. BENTSEN. Madam Chairman, I peared to have it. would imagine this is highly unprece- reserve the balance of my time. Mr. KLECZKA. Madam Chairman, I dented. Mr. METCALF. Madam Chairman, I demand a recorded vote. I appreciate what the gentleman is yield myself such time as I may con- The CHAIRMAN. Pursuant to House trying to do. I am a strong supporter of sume. Resolution 428, further proceedings on the dual banking system, as the gen- I would just reiterate that the impor- the amendment offered by the gen- tleman knows from our work together tant factor is that State-chartered in- tleman from Washington (Mr. on the Committee on Banking and Fi- stitutions still are regulated by the METCALF) will be postponed. H3220 CONGRESSIONAL RECORD — HOUSE May 13, 1998 It is now in order to consider amend- was in the bill. So the gentleman has colleagues for expanding the battlefield ment No. 12 printed in part 2 of House made a great improvement in the bill. upon which this amendment might be report 105–531. Unfortunately, it still has restric- considered, but again let me just say AMENDMENT NO. 12 OFFERED BY MR. MORAN OF tions for towns of 5,000 for the sale of that without this amendment the bill VIRGINIA insurance for banks. It still has restric- would have created a situation where Mr. MORAN of Virginia. Madam tions that treat national banks in a some banks can continue to sell insur- Chairman, I offer an amendment. different way than they treat State ance under current Federal and State The CHAIRMAN. The Clerk will des- banks for the purpose of insurance. It guidelines while other banks would be ignate the amendment. still has in the bill restrictions in forced to buy an insurance agency first The text of the amendment is as fol- terms of the sale of title insurance, in before they can sell the very same in- lows: terms of national banks. surance products. Part 2, amendment No. 12, offered by Mr. b 2015 I appreciate the support that it has. MORAN of Virginia: At the end of section 305 The CHAIRMAN. Does the gentleman So on and on it goes with this dispar- of the Amendment in the Nature of a Sub- from Virginia (Mr. BLILEY) wish to con- stitute insert the following new sentence: ate treatment. And this is one more sume the balance of the time? ‘‘This section shall cease to have effect 5 reason, I am afraid, that this bill Mr. BLILEY. Madam Chairman, I years after the date of the enactment of this should not be passed. yield back the balance of the time. Act.’’. And I commend the gentleman for The CHAIRMAN. The question is on The CHAIRMAN. Pursuant to House trying to improve it, it just does not the amendment offered by the gen- improve it enough. I think we needed a Resolution 428, the gentleman from tleman from Virginia (Mr. MORAN). Virginia (Mr. MORAN) and the gen- lot more than what is in this one The amendment was agreed to. amendment that they permitted the tleman from Virginia (Mr. BLILEY), AMENDMENT NO. 11 OFFERED BY MR. METCALF each will control 5 minutes. gentleman to offer. Mr. OXLEY. Madam Chairman, will The CHAIRMAN. The pending busi- Does the gentleman from Virginia ness is the demand for a recorded vote (Mr. BLILEY) oppose the amendment? the gentleman yield? Mr. MORAN of Virginia. I yield to on the amendment offered by the gen- Mr. BLILEY. Madam Chairman, we tleman from Washington (Mr. are prepared to accept the amendment. the gentleman from Ohio. Mr. OXLEY. Madam Chairman, I METCALF) on which further proceedings The CHAIRMAN. Is there a Member thank my friend from Virginia, and let were postponed, and on which the ayes in opposition to the amendment? me commend him on his amendment. I prevailed by voice vote. Mr. DINGELL. Madam Chairman, we was at the Committee on Rules when The Clerk will redesignate the are happy to accept the amendment he offered the amendment. amendment. over here. To correct my friend from Min- The Clerk redesignated the amend- The CHAIRMAN. Without objection, nesota, this was the product of a very ment. the gentleman from Virginia (Mr. BLI- carefully balanced compromise be- The CHAIRMAN. A recorded vote has LEY) will be recognized for 5 minutes. tween warring parties that have been been demanded. There was no objection. at this for at least 20 years. We finally A recorded vote was refused. Mr. MORAN of Virginia. Madam got an agreement with many of the On a division (demanded by Mr. Chairman, I yield myself such time as banks and with the insurance industry KLECZKA) there were ayes 14, noes 7. I may consume. and the agents to finally put this issue So the amendment was agreed to. I know when I am ahead and I will behind us. That was the essence of The CHAIRMAN. The question is on keep this brief, but just simply explain what this compromise is all about. the amendment in the nature of a sub- that this amendment would sunset, Did it give the banks everything they stitute, as amended. that is, repeal after 5 years the require- wanted? Of course, not. And the gen- The amendment in the nature of a ment that any bank that is not cur- tleman from Minnesota seems to think substitute, as amended, was agreed to. rently selling insurance products would that that is the way it ought to be. I The CHAIRMAN. Under the rule, the not have to purchase an insurance would suggest to the gentleman that Committee rises. agency that has been regulated within this was a product of a reasonable com- Accordingly, the Committee rose; their State for at least 2 years. That promise. That is what this bill is all and the Speaker pro tempore (Mr. BAR- reduces the competition, and this is ob- about. The gentleman’s amendment RETT of Nebraska) having assumed the viously a compromise amendment that will provide, I think, a meaningful chair, Mrs. EMERSON, Chairman of the will at least take this prohibition away amendment. Committee of the Whole House on the and produce greater competition in the Let me just say, in closing, I com- State of the Union, reported that that marketplace. It was a fairly restrictive mend the gentleman on his amendment Committee, having had under consider- amendment. By providing 5 years be- but simply say that the gentleman ation the bill (H.R. 10) to enhance com- fore the sunset, I do not think any of from Minnesota wants it all and that is petition in the financial services indus- the industries are going to take par- not the way the process works around try by providing a prudential frame- ticular exception to it. here. work for the affiliation of banks, secu- I appreciate the fact that there is no Mr. VENTO. Madam Chairman, will rities firms, and other financial service opposition to it. the gentleman yield? providers, and for other purposes, pur- Madam Chairman, I yield to the gen- Mr. MORAN of Virginia. I yield to suant to House Resolution 428, she re- tleman from Minnesota (Mr. VENTO). the gentleman from Minnesota. ported the bill back to the House with Mr. VENTO. Madam Chairman, I Mr. VENTO. The gentleman from an amendment adopted by the Commit- commend the gentleman for his amend- Minnesota does not want it all, but he tee of the Whole. ment. I recommend it to my col- wants a level playing field to permit The SPEAKER pro tempore. Under leagues, but I think this just points out banks that are national to have the the rule, the previous question is or- one of the major problems with this same rights of banks that are State. dered. bill in that, throughout this bill, this And this bill does not do it. And it is Is a separate vote demanded on any measure has treated national banks in intentional. amendment to the amendment in the a disparate manner. It is suggested I understand it was a tough negotia- nature of a substitute adopted by the that for only 5 years you cannot go tion. I commend the gentleman. But Committee of the Whole? into a State, under modernization and the only thing balanced about this is Mr. KLECZKA. Mr. Speaker, I de- deregulation, mind you, you cannot go the deal that is being offered to the mand a separate recorded vote on into a State and start de novo, that is, House. I do not think it is good enough. amendment No. 11, the so-called start from scratch, an insurance busi- I commend the gentleman for trying to Metcalf amendment. ness under this deregulation bill for improve it but it does not go far The SPEAKER pro tempore. The only 5 years. And then after that 5 enough. Clerk will report the amendment on years, now, with this amendment, of Mr. MORAN of Virginia. Madam which a separate vote has been de- course, it was forever based on what Chairman, I thank my two friends and manded. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3221 The Clerk read as follows: Gallegly LoBiondo Roukema Moran (VA) Roemer Strickland Amendment: Ganske Lofgren Rush Murtha Rothman Tanner After section 401 of the Amendment in the Gekas Lucas Ryun Nadler Roybal-Allard Tauscher Gibbons Manton Salmon Neal Royce Taylor (MS) Nature of a Substitute, insert the following Gilchrest Manzullo Sanders Oberstar Sabo Thompson new section (and conform the table of con- Gilman McCarthy (NY) Sanford Obey Sanchez Thurman tents accordingly): Goode McCollum Sawyer Olver Sandlin Tierney SEC. 402. RETENTION OF ‘‘FEDERAL’’ IN NAME OF Goodlatte McCrery Saxton Ortiz Schumer Torres CONVERTED FEDERAL SAVINGS AS- Goodling McDade Scarborough Owens Serrano Towns SOCIATION. Goss McDermott Schaefer, Dan Pascrell Shays Velazquez Section 2 of the Act entitled ‘‘an Act to en- Graham McGovern Schaffer, Bob Pastor Sherman Vento Granger McHugh Scott Payne Shimkus Waters able national banking associations to in- Greenwood McInnis Sensenbrenner Pelosi Skelton Watt (NC) crease their capital stock and to change Gutierrez McIntosh Sessions Pickett Slaughter Waxman their names or locations.’’ and approved May Gutknecht McIntyre Shadegg Pomeroy Snyder Wexler 1, 1886 (12 U.S.C. 30) is amended by adding at Hall (OH) McKeon Shaw Poshard Spratt Weygand the end the following new subsection: Hall (TX) Metcalf Shuster Price (NC) Stark Wise ‘‘(d) RETENTION OF ‘FEDERAL’ IN NAME OF Hansen Mica Sisisky Reyes Stearns Hastert Millender- Skeen Rodriguez Stokes CONVERTED FEDERAL SAVINGS ASSOCIATION— Hastings (WA) McDonald Smith (MI) ‘‘(1) IN GENERAL.—Notwithstanding sub- Hayworth Miller (FL) Smith (NJ) NOT VOTING—10 section (a) or any other provision of law, any Hefley Moran (KS) Smith (OR) Bateman Gonzalez Skaggs depository institution the charter of which Herger Morella Smith (TX) Cox Harman Yates is converted from that of a Federal savings Hill Myrick Smith, Adam Doolittle Hefner association to a national bank or a State Hilleary Nethercutt Smith, Linda Frank (MA) Radanovich bank after the date of the enactment of the Hobson Neumann Snowbarger Solomon b Financial Services Act of 1998 may retain the Hoekstra Ney 2048 Hooley Northup Souder term ‘Federal’ in the name of such institu- Horn Norwood Spence Mrs. LOWEY, Mr. ABERCROMBIE tion so long as such depository institution Hostettler Nussle Stabenow and Mr. MINGE changed their vote remains an insured depository institution. Houghton Oxley Stenholm from ‘‘yea’’ to ‘‘nay.’’ Stump ‘‘(2) DEFINITIONS.—For purposes of this sub- Hulshof Packard Ms. WOOLSEY and Messrs. RUSH, section, the terms ‘depository institution’, Hunter Pallone Stupak ‘insured depository institution’, ‘national Hutchinson Pappas Sununu DEUTSCH, DIAZ-BALART, and Talent bank’, and ‘State bank’ have the same mean- Hyde Parker HULSHOF changed their vote from Inglis Paul Tauzin ‘‘nay’’ to ‘‘yea.’’ ings given to such terms in section 3 of the Istook Paxon Taylor (NC) Federal Deposit Insurance Act.’’. Jackson-Lee Pease Thomas So the amendment was agreed to. Mrs. ROUKEMA (during the reading). (TX) Peterson (MN) Thornberry The result of the vote was announced Jenkins Peterson (PA) Thune as above recorded. Mr. Speaker, I ask unanimous consent John Petri Tiahrt that the amendment be considered as Johnson, Sam Pickering Traficant The SPEAKER pro tempore (Mr. read and printed in the RECORD. Jones Pitts Turner BARRETT of Nebraska). The question is The SPEAKER pro tempore. Is there Kasich Pombo Upton on the amendment in the nature of a Kelly Porter Visclosky substitute, as amended. objection to the request of the gentle- Kilpatrick Portman Walsh woman from New Jersey? Kim Pryce (OH) Wamp The amendment in the nature of a There was no objection. King (NY) Quinn Watkins substitute, as amended, was agreed to. Kingston Rahall Watts (OK) The SPEAKER pro tempore. The The SPEAKER pro tempore. The Klug Ramstad Weldon (FL) question is on the amendment. Knollenberg Rangel Weldon (PA) question is on the engrossment and The question was taken; and the Largent Redmond Weller third reading of the bill. Speaker pro tempore announced that Latham Regula White The bill was ordered to be engrossed LaTourette Riggs Whitfield and read a third time, and was read the the noes appeared to have it. Lazio Riley Wicker Mr. METCALF. Mr. Speaker, I object Leach Rivers Wolf third time. to the vote on the ground that a Lewis (CA) Rogan Woolsey The SPEAKER pro tempore. The Lewis (KY) Rogers Wynn question is on the passage of the bill. quorum is not present and make the Linder Rohrabacher Young (AK) point of order that a quorum is not Livingston Ros-Lehtinen Young (FL) The question was taken; and the present. Speaker pro tempore announced that The SPEAKER pro tempore. Evi- NAYS—166 the ayes appeared to have it. dently a quorum is not present. Abercrombie DeFazio Kennedy (RI) RECORDED VOTE The Sergeant at Arms will notify ab- Ackerman Delahunt Kennelly Mr. LAFALCE. Mr. Speaker, I de- Allen DeLauro Kildee sent Members. Andrews Dixon Kind (WI) mand a recorded vote. The vote was taken by electronic de- Baesler Doggett Kleczka A recorded vote was ordered. vice, and there were—yeas 256, nays Baldacci Dooley Klink The vote was taken by electronic de- Barrett (WI) Doyle Kolbe 166, not voting 10, as follows: Becerra Edwards Kucinich vice, and there were—ayes 214, noes 213, [Roll No. 150] Bentsen Engel LaFalce not voting 6, as follows: Bereuter Eshoo LaHood [Roll No. 151] YEAS—256 Berman Evans Lampson Aderholt Burton DeLay Berry Farr Lantos AYES—214 Archer Buyer Deutsch Bishop Fattah Lee Ackerman Calvert Dooley Armey Callahan Diaz-Balart Blagojevich Fazio Levin Andrews Castle Doolittle Bachus Calvert Dickey Blumenauer Filner Lewis (GA) Archer Chabot Doyle Baker Camp Dicks Blunt Ford Lipinski Armey Coble Dunn Ballenger Campbell Dingell Bonior Furse Lowey Baker Collins Ehlers Barcia Canady Dreier Borski Gejdenson Luther Ballenger Condit Ehrlich Barr Cannon Duncan Boyd Gephardt Maloney (CT) Barcia Cook Emerson Barrett (NE) Capps Dunn Brown (CA) Gillmor Maloney (NY) Barr Cooksey Engel Bartlett Castle Ehlers Brown (FL) Gordon Markey Bartlett Cox English Barton Chabot Ehrlich Cardin Green Martinez Bass Coyne Ensign Bass Chambliss Emerson Carson Hamilton Mascara Bilbray Cramer Fawell Bilbray Chenoweth English Clay Hastings (FL) Matsui Bilirakis Crane Fazio Bilirakis Christensen Ensign Clayton Hilliard McCarthy (MO) Bishop Crapo Forbes Bliley Coble Etheridge Clement Hinchey McHale Blagojevich Cubin Ford Boehlert Coburn Everett Clyburn Hinojosa McKinney Bliley Cunningham Fossella Boehner Collins Ewing Condit Holden McNulty Boehlert Deal Fox Bonilla Combest Fawell Conyers Hoyer Meehan Boehner DeGette Franks (NJ) Bono Cooksey Foley Cook Jackson (IL) Meek (FL) Bono Delahunt Frelinghuysen Boswell Crane Forbes Costello Jefferson Meeks (NY) Boyd DeLauro Frost Boucher Crapo Fossella Coyne Johnson (CT) Menendez Brown (OH) DeLay Gallegly Brady Cubin Fowler Cramer Johnson (WI) Miller (CA) Bryant Deutsch Ganske Brown (OH) Cunningham Fox Cummings Johnson, E. B. Minge Bunning Diaz-Balart Gejdenson Bryant Davis (VA) Franks (NJ) Danner Kanjorski Mink Burton Dicks Gekas Bunning Deal Frelinghuysen Davis (FL) Kaptur Moakley Buyer Dingell Gibbons Burr DeGette Frost Davis (IL) Kennedy (MA) Mollohan H3222 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Gilchrest Markey Roukema Pastor Sabo Thompson U.S. claimants. As of March 31, 1998, Gillmor McCarthy (NY) Royce Paul Sanchez Thornberry Gilman McCrery Salmon Payne Sanders Thune the value of awards to successful U.S. Gingrich McDade Sanford Pelosi Sandlin Thurman claimants paid from the Security Ac- Goodlatte McGovern Sawyer Peterson (MN) Scarborough Tiahrt count held by the NV Settlement Bank Goodling McIntosh Saxton Peterson (PA) Schaffer, Bob Tierney was $2,480,897,381.53. Gordon McKeon Schaefer, Dan Petri Scott Torres Goss McNulty Schumer Pickering Serrano Traficant Since my last report, Iran has failed Greenwood Meeks (NY) Sensenbrenner Pickett Sessions Turner to replenish the Security Account es- Hall (OH) Metcalf Shadegg Pombo Sherman Velazquez tablished by the Algiers Accords to en- Hansen Mica Shaw Poshard Shuster Vento sure payment of awards to successful Hastert Miller (FL) Shays Ramstad Sisisky Visclosky Hastings (WA) Mollohan Shimkus Redmond Skeen Waters U.S. claimants. Thus, since November Hayworth Moran (VA) Smith (MI) Reyes Skelton Watkins 5, 1992, the Security Account has con- Herger Morella Smith (NJ) Riley Slaughter Watt (NC) tinuously remained below the $500 mil- Hill Murtha Smith, Adam Rivers Smith (OR) Watts (OK) Hobson Myrick Smith, Linda Rodriguez Smith (TX) Waxman lion balance required by the Algiers Hoekstra Nadler Solomon Roemer Snowbarger Weygand Accords. As of March 31, 1998, the total Holden Neal Souder Rogers Snyder Wicker amount in the Security Account was Horn Nethercutt Spence Rothman Stark Woolsey $125,888,588.35, and the total amount in Hostettler Neumann Spratt Roybal-Allard Stenholm Wynn Houghton Ney Stabenow Rush Stokes Young (AK) the Interest Account was $21,716,836.85. Hyde Northup Stearns Ryun Taylor (MS) Therefore, the United States continues Inglis Norwood Strickland NOT VOTING—6 to pursue Case No. A/28, filed in Sep- John Nussle Stump tember 1993, to require Iran to meet its Johnson (CT) Oxley Stupak Bateman Harman Skaggs Johnson, E. B. Packard Sununu Gonzalez Hefner Yates obligation under the Algiers Accords to Talent Kasich Pallone b replenish the Security Account. Kelly Pappas Tanner 2112 The United States also continues to Kennelly Parker Tauscher Mr. EWING and Mr. MALONEY of Kim Pascrell Tauzin pursue Case No. A/29 to require Iran to King (NY) Paxon Taylor (NC) Connecticut changed their vote from meet its obligation of timely payment Kingston Pease Thomas ‘‘aye’’ to ‘‘no.’’ of its equal share of advances for Tri- Klug Pitts Towns Messrs. ARCHER, MILLER of Florida bunal expenses when directed to do so Knollenberg Pomeroy Upton Kolbe Porter Walsh and STEARNS changed their vote from by the Tribunal. Iran filed its Rejoin- Latham Portman Wamp ‘‘no’’ to ‘‘aye.’’ der in this case on February 9, 1998. LaTourette Price (NC) Weldon (FL) So the bill was passed. 3. The Department of State continues Lazio Pryce (OH) Weldon (PA) The result of the vote was announced Leach Quinn Weller to respond to claims brought against Levin Radanovich Wexler as above recorded. the United States by Iran, in coordina- Lewis (CA) Rahall White A motion to reconsider was laid on tion with concerned government agen- Linder Rangel Whitfield the table. cies. Livingston Regula Wise LoBiondo Riggs Wolf f On January 16, 1998, the United States filed a major submission in Case Lowey Rogan Young (FL) REPORT CONCERNING NATIONAL Maloney (NY) Rohrabacher No. B/1, a case in which Iran seeks re- EMERGENCY WITH RESPECT TO Manton Ros-Lehtinen payment for alleged wrongful charges IRAN—MESSAGE FROM THE to Iran over the life of its Foreign Mili- NOES—213 PRESIDENT OF THE UNITED tary Sales (FMS) program, including Abercrombie DeFazio Kaptur STATES (H. DOC. NO. 105–252) Aderholt Dickey Kennedy (MA) the costs of terminating the program. Allen Dixon Kennedy (RI) The SPEAKER pro tempore (Mr. The January filing primarily addressed Bachus Doggett Kildee BARRETT of Nebraska) laid before the Iran’s allegation that its FMS Trust Baesler Dreier Kilpatrick House the following message from the Fund should have earned interest. Baldacci Duncan Kind (WI) Barrett (NE) Edwards Kleczka President of the United States; which Under the February 22, 1996, settle- Barrett (WI) Eshoo Klink was read and, without objection, re- ment agreement related to the Iran Air Barton Etheridge Kucinich ferred to the Committee on Inter- case before the International Court of Becerra Evans LaFalce national Relations and ordered to be Bentsen Everett LaHood Justice and Iran’s bank-related claims Bereuter Ewing Lampson printed. against the United States before the Berman Farr Lantos To the Congress of the United States: Tribunal (see report of May 16, 1996), Berry Fattah Largent I hereby report to the Congress on the Department of State has been proc- Blumenauer Filner Lee Blunt Foley Lewis (GA) developments since the last Presi- essing payments. As of March 31, 1998, Bonilla Fowler Lewis (KY) dential report of November 25, 1997, the Department of State has author- Bonior Frank (MA) Lipinski concerning the national emergency ized payment to U.S. nationals totaling Borski Furse Lofgren with respect to Iran that was declared Boswell Gephardt Lucas $13,901,776.86 for 49 claims against Ira- Boucher Goode Luther in Executive Order 12170 of November nian banks. The Department of State Brady Graham Maloney (CT) 14, 1979. This report is submitted pursu- has also authorized payments to sur- Brown (CA) Granger Manzullo ant to section 204(c) of the Inter- viving family members of 220 Iranian Brown (FL) Green Martinez Burr Gutierrez Mascara national Emergency Economic Powers victims of the aerial incident, totaling Callahan Gutknecht Matsui Act (IEEPA), 50 U.S.C. 1703(c). This re- $54,300,000. Camp Hall (TX) McCarthy (MO) port covers events through March 31, During this reporting period, the full Campbell Hamilton McCollum 1998. My last report, dated November Tribunal held a hearing in Case No. A/ Canady Hastings (FL) McDermott Cannon Hefley McHale 25, 1997, covers events through Septem- 11 from February 16, through 18. Case Capps Hilleary McHugh ber 30, 1997. No. A/11 concerns Iran’s allegations Cardin Hilliard McInnis 1. There have been no amendments to that the United States violated its ob- Carson Hinchey McIntyre Chambliss Hinojosa McKinney the Iranian Assets Control Regula- ligations under Point IV of the Algiers Chenoweth Hooley Meehan tions, 31 CFR Part 535 (the ‘‘IACR’’), Accords by failing to freeze and gather Christensen Hoyer Meek (FL) since my last report. information about property and assets Clay Hulshof Menendez 2. The Iran-United States Claims Tri- purportedly located in the United Clayton Hunter Millender- Clement Hutchinson McDonald bunal (the ‘‘Tribunal’’), established at States and belonging to the estate of Clyburn Istook Miller (CA) The Hague pursuant to the Algiers Ac- the late Shah of Iran or his close rel- Coburn Jackson (IL) Minge cords, continues to make progress in atives. Combest Jackson-Lee Mink Conyers (TX) Moakley arbitrating the claims before it. Since 4. U.S. nationals continue to pursue Costello Jefferson Moran (KS) the period covered in my last report, claims against Iran at the Tribunal. Cummings Jenkins Oberstar the Tribunal has rendered one award. Since my last report, the Tribunal has Danner Johnson (WI) Obey This brings the total number of awards issued an award in one private claim. Davis (FL) Johnson, Sam Olver Davis (IL) Jones Ortiz rendered by the Tribunal to 585, the On March 5, 1998, Chamber One issued Davis (VA) Kanjorski Owens majority of which have been in favor of an award in George E. Davidson v. Iran, May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3223 AWD No. 585–457–1, ordering Iran to pay funded Mandate Reform Act since Jan- CBO estimate of an unfunded mandate the claimant $227,556 plus interest for uary of 1996. It is the opinion of the in the underlying legislation. Iran’s interference with the claimant’s Committee on Rules that this statute In fact, in several prominent in- property rights in three buildings in has served the House well and we are stances, such as the immigration re- Tehran. The Tribunal dismissed the prepared to recommend a modest im- form bill, the committee waived all claimant’s claims with regard to other provement on it today, one that affects points of order except those arising property for lack of proof. The claim- not only the public sector, and that under the unfunded mandate statute. ant received $20,000 in arbitration means towns and villages and cities Mr. Chairman, the Committee on costs. and counties and States, but now it af- Rules has an excellent track record of 5. The situation reviewed above con- fects the private sector. adherence to the principles of the un- tinues to implicate important diplo- A report from the Congressional funded mandates law in this 105th Con- matic, financial, and legal interests of Budget Office last year found, not sur- gress as well. The experience of the the United States and its nationals and prisingly, that the Republican-con- House with the Nuclear Waste Policy presents an unusual challenge to the trolled Congress has not passed un- Act is illustrative of the fact that the national security and foreign policy of funded mandates on State and local Committee on Rules prefers not to the United States. The Iranian Assets governments on the private sector. waive the mandates point of order, but Control Regulations issued pursuant to CBO has found in the last 2 years only rather prefers to force the committees Executive Order 12170 continue to play 11 percent of the bills and amendments of jurisdiction to defend their work an important role in structuring our they analyzed contained intergovern- product on the floor of this House and relationship with Iran and in enabling mental mandates, and just 2 percent then let the House work its will. the United States to implement prop- contained costs exceeding the $50 mil- With 2 years of positive experience erly the Algiers Accords. I shall con- lion threshold into the law. with the unfunded mandates procedure tinue to exercise the powers at my dis- On the private sector side, CBO has in the public sector as our foundation, posal to deal with these problems and found that only 13 percent of the bills the Committee on Rules is compelled will continue to report periodically to and amendments contained private sec- to recommend H.R. 3534 to the House as the Congress on significant develop- tor mandates and a scant 5 percent an improvement to our proceedings. ments. contained costs exceeding the $100 mil- Under current law, CBO is only re- WILLIAM J. CLINTON. lion threshold. quired to estimate the direct costs of THE WHITE HOUSE, May 13, 1998. CBO appeared before the Committee all Federal private sector mandates f on Rules’ oversight hearings on the op- that exceed $100 million, and the eration of the law, and they testified amount of Federal financial assistance, b 2115 that the goals of the law providing reli- if any, provided by the legislation to MANDATES INFORMATION ACT OF able information for Members and the assist with the compliance costs. 1998 public, as well as congressional ac- The bill before the House amends the The SPEAKER pro tempore (Mr. countability for passing a mandate, Unfunded Mandates Reform Act to re- quire committee reports on bills or BARRETT of Nebraska). Pursuant to have largely been met. In other words, House Resolution 426 and rule XXIII, we succeeded in doing what we set out joint resolutions to include a state- the Chair declares the House in the to do. ment from CBO estimating the impact Committee of the Whole House on the Under that law, CBO has prepared of private sector mandates on consum- State of the Union for the consider- these estimates for committee reports, ers, on workers, on small businesses, ation of the bill, H.R. 3534. and the information on public and pri- including any disproportionate impact vate sector mandates has been avail- in particular regions or on particular b 2116 able for Members when they come to industries within those regions. It IN THE COMMITTEE OF THE WHOLE this floor to vote so that they know would subject such legislation to a Accordingly, the House resolved what the long-range ramifications of point of order if it is not feasible for itself into the Committee of the Whole casting that vote will be. the CBO to prepare such an estimate, House on the State of the Union for the In the opinion of the Committee on as well. consideration of the bill (H.R. 3534) to Rules, the underlying law has served as Current law only allows a point of improve congressional deliberation on an effective deterrent for Congress to order against consideration of a bill, proposed Federal private sector man- mandate, because of the point of order joint resolution or amendment, motion dates, and for other purposes, with Mr. available on the House floor. or conference report if it exceeds $50 SESSIONS in the chair. There have been instances in the million in direct costs in Federal man- The Clerk read the title of the bill. Committee on Rules’s experience dates on intergovernmental (State and The CHAIRMAN. Pursuant to the where a mandate on the public or pri- local governments), unless that man- rule, the bill is considered as having vate sector was discovered and the of- date is paid for with new Federal finan- been read the first time. fending language was deleted or altered cial assistance. This bill would prohibit Under the rule, the gentleman from in a rule in an effort to address the the consideration of the legislation New York (Mr. SOLOMON) and the gen- concerns, rather than face an auto- containing private sector mandates tleman from Massachusetts (Mr. MOAK- matic debate on the vote on the floor. whose direct costs exceed $100 million LEY) each will control 30 minutes. In other words, Congress has paid at- and thereby expand the available The Chair recognizes the gentleman tention and they have not brought points of order under the landmark from New York (Mr. SOLOMON). these unfunded mandates to the floor law. Mr. SOLOMON. Mr. Chairman, I yield knowing they are going to have to face The bill further constrains the Chair myself such time as I may consume. this test. from recognizing more than one point Mr. Chairman, I rise in a bit of The law has worked in a manner im- of order with respect to private sector ecstacy, not only for the passage of the possible to quantify in these instances, mandates for any one bill, joint resolu- last bill, but to bring to this floor an- Mr. Chairman. tion, amendment, motion or conference other very important bill on behalf of At the close of the 104th Congress, report. It is anticipated that one point business and industry and all Ameri- the Committee on Rules was pleased to of order, one 20-minute debate, and one cans, and that is H.R. 3534, the Man- report to the House in its activity re- vote is sufficient to encapsulate the de- dates Information Act of 1998. Today, port that in the first year of existence bate on the private sector mandates the House will build on the important of the unfunded mandate law, it could contained in any one legislative meas- work that the 104th Congress began in find no single instance in which it had ure. the area of unfunded intergovern- waived the unfunded mandates point of The bill also contains a provision mental mandates and private sector order, not once. There were several in- during the markup of the Committee mandates. stances in which the committee waived on Rules as an amendment by our Mr. Chairman, the House has oper- all points of order, but in those cases friend, the vice chairman of the com- ated under the strictures of the Un- the committee was not aware of any mittee, the gentleman from California H3224 CONGRESSIONAL RECORD — HOUSE May 13, 1998

(Mr. DREIER) which excludes from the what he is voting for on this floor and Mr. Chairman, I reserve the balance private sector mandates point of order how it affects that small business back of my time. any legislation which results in a net in one’s district before one casts that Mr. DREIER. Mr. Chairman, I am tax cut. vote. That is how important this legis- happy to yield 3 minutes to my good For purposes of illustration, if the lation is. friend, the gentleman from Sugarland, Committee on Ways and Means re- So I would urge support for the bill. Texas (Mr. DELAY), the distinguished ported a bill which resulted in a net Mr. Chairman, I reserve the balance Republican Whip. tax cut as scored by CBO and the Joint of my time. Mr. DELAY. Mr. Chairman, I appre- Committee on Taxation, a private sec- Mr. Chairman, I ask unanimous con- ciate the gentleman yielding time to tor mandates point of order would not sent that the gentleman from Califor- me, and I appreciate all his hard work apply because the net tax would be a nia (Mr. DREIER) be permitted to take on this very important legislation. I decrease as opposed to an increase. over the management of this legisla- rise today in support of it, and I really However, if the Committee on Ways tion. urge my colleagues it take a look at and Means reported a bill which in- The CHAIRMAN. Is there objection this legislation, and I hope they will creased mandatory spending and, in to the request of the gentleman from vote for it. turn, provided a revenue offset which New York? This is a small but yet a very signifi- resulted in a private sector mandate There was no objection. cant step for small business. Basically, Mr. MOAKLEY. Mr. Chairman, I over $100 million, a private sector man- it says if we are going to put mandates yield myself such time as I may con- date point of order would then clearly on the private sector, we need to let sume. the American people know that we are be in order. Mr. Chairman, I want to make some- The bill further amends clause 5 of doing it. That is all it is. This is the thing very, very clear. I am opposed to House rule XXIII to always make in same principle that we have used for unfunded Federal mandates. I rep- order motions to strike an unfunded the last 3 years for the mandates we resent 23 cities and towns in the Com- mandate on the intergovernmental and put on State and local government. If monwealth of Massachusetts that are private sector side unless specifically we are going to make the businessmen paying for the biggest Federal mandate waived by a rule from the Committee and women of America pay for our this government has ever imposed: the on Rules. good ideas, we should make certain cleanup of Boston Harbor. In the end, Mr. Chairman, it is important for that we have a debate on the floor the Boston Harbor cleanup cost well small businesses across the country to about the merits of those ideas. over $3 billion; only 19 percent of that know that Congress is fully aware of This bill allows Members to raise a $3 billion was paid for by the Federal the consequences when it mandates on point of order against any bill that the Government. The rest of the costs had the private sector. This bill will help us Congressional Budget Office deter- to be borne by the citizens of those 43 improve our own deliberations in this mines would cost the private sector cities and towns in the Commonwealth, House while maintaining important in- more than $100 million a year. If after families and businesses, and believe stitutional prerogatives. 20 minutes of debate the House decides The bill before us is strongly sup- me, it was not easy. I know how hard it can be for com- that such a mandate is necessary, we ported by, and let me just read some of munities to shoulder the cost of com- can vote to consider the rest of the bill. these organizations: the American Den- I just think this is a commonsense plying with governmental edicts, and I tal Association; the American Farm piece of legislation, because it makes firmly belief we should keep those Bureau, which is very, very important Members of Congress think about what costs in mind when passing any kind of in my district; the American Rental they are voting for before they vote. It legislation. Before we pass a bill, we Association; the American Subcontrac- makes them think about the costs to should know what the costs would be tors Association; the Associated Build- the private sector. It makes them for businesses. We should know what ers and Contractors; Citizens For a think about the potential job loss. It the costs would be for individuals, as Sound Economy; the National Associa- makes them think about the role of well as for the State and local govern- tion of Self-Employed, small busi- government in our society. It brings ments. But, Mr. Chairman, this bill is nesses; the National Association of much needed transparency to our gov- not the way to do it. This bill contains Manufacturers; the National Associa- ernment. language that will further gut the well- tion of Wholesale Distributors; the Na- This is a very important piece of leg- intentioned, unfunded mandates bill. tional Federation of Independent Busi- islation that forces the House to under- ness, which is the largest organization b 2130 stand what they are doing to the real of small businesses in this entire coun- It further erodes the idea that any people in the real world. I urge my col- try; the National Restaurant Associa- mandate could be harmful by accepting leagues to support this pro-small busi- tion; the National Retail Federation, bills that raise taxes, as long as the ness piece of legislation. and it goes on and on and on, ending up money raised is used to lower taxes Mr. MOAKLEY. Mr. Chairman, I with the United States Chamber of somewhere else. yield myself such time as I may con- Commerce in strong support of this Contrary to what some of my col- sume. bill. leagues may think, all government Mr. Chairman, I agree with the gen- Mr. Chairman, I do not have to tell spending is not necessarily bad, and all tleman who just left the microphone. If my colleagues that years ago, before I tax breaks are not necessarily good. this were the same bill that we had in came to this Congress, I was a small Under this bill, if a tax on coal reve- the Committee on Rules just before the businessman and I started out from nues is coupled with a tax break on Dreier amendment was put in, I would scratch. I had 5 children, and we did ethanol, it is okay. If it spends the buy it. But this, what it says, in effect, not have any money really, but we money on miners’ health benefits, is that if you get money in the high- went into business and we started that someone can raise a point of order and way bill, you cannot spend it on roads, business, and I had to work sometimes someone can call attention to it. you cannot spend it on safety if it is 2 or 3 different businesses, and the Mr. Chairman, I do not believe we over and above, but if you give a tax banks did not want to lend any money should decide in advance which types break back to the very rich, then the because we did not have established of mandates are good and should be ig- point of order does not apply. credit, and yet whatever available cash nored and which are bad and should be That is the part that I do not like, it we had was tied up in all of these dupli- exposed to a point of order. Either we is what we do when it is an unfunded cative regulations that are piled on should request all of them, or we mandate, what we do with the money. local businesses throughout this coun- should examine none of them. The proceeds from the tobacco bill can- try, and it was almost impossible to I urge my colleagues to defeat the not be used to educate children to stop get started. bill in the present form, if the Dreier smoking, but if we want to give it back This legislation is meant to prevent language is not removed. It just takes to the tobacco companies and people that. It is meant to educate every a worthwhile idea and pollutes it with who invest in tobacco as a tax break, Member of Congress to know exactly political assumptions. that is fine. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3225 If that is fair, Mr. Chairman, if that accountable for the mandates we place ward with the legislation, notwith- is equitable, then I have missed some- on the private sector; that we cannot standing those costs. thing along the line. say, we voted for that, and we voted for We are taking that next important Mr. Chairman, I yield such time as he that with full information, that we step tonight. We did not do it last may consume to my good friend, the knew what the cost was going to be, time, frankly, because this was a pret- gentleman from California (Mr. then we are going to have a difficult ty controversial idea. It was precedent- CONDIT). time doing any kind of reforms in this setting. It turns out it worked, and (Mr. CONDIT asked and was given House, Mr. Chairman. now we are doing what I think is the permission to revise and extend his re- Mr. DREIER. Mr. Chairman, I yield 6 next logical thing, which is to move to marks.) minutes to my friend and hallmate, the the private sector side. Mr. CONDIT. Mr. Chairman, I rise to- gentleman from Cincinnati, Ohio (Mr. It is not going to stop all mandates, night obviously in support of H.R. 3534, PORTMAN), the lead author of this just as our public sector bill in 1995 did the Mandate Information Act of 1998. measure who has worked long and hard not stop all public sector mandates. It This is not a new idea, it is an old idea on not only this issue, but the un- has curtailed them. Incidentally, it has with a little different twist. It still re- funded mandates that were imposed on not curtailed them just because we quires accountability and openness. State and local governments. have had these debates on the floor. It The chairman of the Committee on Mr. PORTMAN. Mr. Chairman, I has been done in a very responsible Rules explained the bill very well, thank the gentleman from California way, at the committee level, because talked about the $100 million thresh- (Mr. DREIER) for yielding time to me, the committees have been forced to old, the fact that if you reach a $100 un- and for all his help in getting us to this work with State and local government funded mandate that there is a point of point. I also want to commend the gen- to come up with new ways to get things order process. That is basically what tleman from California (Mr. GARY through this Congress that in fact do this bill does, it allows us to have a de- CONDIT), who has been my partner on represent the will of this Congress, but bate. this and also on the private sector to not send an unfunded requirement As we hear discussion about this to- mandates fight. down on our State and local govern- night and tomorrow, Members are Mr. Chairman, this is really legisla- ments. That is what this would do also, going to hear that this unfunded man- tion that builds on what we did 3 years this legislation, if we can get it passed date bill will set us back, that it will ago, in 1995 in the public sector side. tonight and get it enacted into law. destroy some of the things that we Let me try to put it in some context. There are a lot of debates that are have done, say in the workplace, safety The gentleman from New York (Chair- going to take place over the next cou- in the workplace, et cetera. man SOLOMON) has already mentioned ple of hours tonight and then tomorrow That is not true. This bill does not this. on various amendments and on various turn anything back. It simply requires Three years ago we said we were interpretations of the bill. My good us to be accountable and responsible going to stop public sector mandates. friend, the gentleman from Massachu- for the unfunded mandates we place on We passed legislation which required setts (Mr. MOAKLEY) a little while ago the private sector. That is what this that three things be done: number one, made the statement, and I tried to bill does. It requires us to have an open there be a cost analysis done of every write it down as he said it, I may have debate. We cannot take away the man- new public sector mandate; number gotten it wrong, correct me, he said date with that debate. We still have a two, there be a debate on the floor that that proceeds from the tobacco bill vote after we call the point of order. any Member of Congress could insist on cannot be used to help children if this What this simply does, it is a very by a process called a point of order; and passes. simple idea, it just gives us more infor- number three, there would be a vote, Of course, that is not true. Proceeds mation that Members can make an in- an actual vote by a majority of this from the tobacco bill, if we do a to- formed decision about a mandate on House. bacco bill, if it has a tobacco tax in it, the private sector. By a simple majority we could decide can certainly be used for whatever pur- With that, Mr. Chairman, I want to to go ahead with the legislation, not- pose this Congress thinks they should thank the gentleman from Ohio (Mr. withstanding the mandate. But at least be used for. By a simple majority vote PORTMAN), who is the cosponsor and we would then have a clear understand- this Congress will decide whether in has been the lead person on the other ing of what the costs were, all the in- fact a new mandate, if it is a tobacco side of the aisle in this area for un- formation that we did not have pre- tax, it is a new mandate, whether that funded mandates, not only in the pri- viously. In the end we would come up should indeed be something we want to vate sector but for State and local gov- with better legislation. do. What is wrong with that? What is ernment. I want to thank him for all It has actually worked to curtail wrong with a little openness and ac- the work that he has done. these public sector mandates. I think countability around here? I want to also say tonight we will 394 Members of this Congress voted for So I know we are going to have a lot hear two proposals, two amendments that bill, after a lot of controversial of debates. The gentleman from Massa- to this bill. I support those amend- amendments were offered. In the end I chusetts (Mr. MOAKLEY) is going to ments. The gentleman from Virginia think we convinced most people, and make some very legitimate points (Mr. MORAN) and the gentleman from they were right, it has worked. This about the impact of this legislation on Virginia (Mr. DAVIS) will have an simply builds on that. This says, now various areas of our government, par- amendment, and the gentleman from let us shift to the private sector. ticularly labor, environment, and so Ohio (Mr. TRAFICANT) will have an In the last legislation, again, the 1995 on. His particular concern, I think, is amendment. I encourage us to accept legislation, we were able to get into going to be on the so-called Dreier those amendments. I think they im- the legislation that the Congressional amendment, which was accepted in the prove the bill. Budget Office, which does the analysis Committee on Rules. This bill is about information, about on the public sector side, would also I want to be very clear about this. the Members getting more informa- analyze the private sector mandates, if All it says is that we have a debate on tion. It is about openness, about fair- they exceeded a threshold which was it. If in the end, because there is a to- ness and accountability, and Members twice the public sector threshold, $100 bacco tax that is not offset by tax cuts should not let anyone tell them any million rather than $50 million. somewhere else or tax relief somewhere different. We ought to look at the What we were not able to get in the else, therefore, this legislation goes amendments that are going to come last legislation 3 years ago was the into effect, all we are saying is we are up. They may improve the bill. We ability to come to this floor and to going to have a debate on the merits of ought not to be fearful to support those raise that point of order, to actually this and then vote. amendments if they improve the bill. put some teeth in that analysis, and to The point is a very simple one. All we But this is a simple idea. If we can- enable Members of Congress to take a are saying is that we want the oppor- not pass this simple idea to hold our- careful look at those costs and then de- tunity, just as we have in the public selves accountable, to hold ourselves cide whether they wanted to move for- sector, to begin to legislate with better H3226 CONGRESSIONAL RECORD — HOUSE May 13, 1998 information, and therefore, to legislate Mr. PORTMAN. If the gentleman will date, that you come up with the actual more wisely in this place. continue to yield, Mr. Chairman, the cost that is being passed on to States With regard to the tobacco example, single point of order which is able to be and localities and the private sector. I will just say, if this Congress in fact raised under this legislation, which is The gentleman from California (Mr. looks at the tobacco bill that has a tax the consolidation of whatever private CONDIT) went further and required a increase, it is considered a mandate, sector mandates are there, would not point of order, which is ultimately one Member of Congress can raise his be able to be raised in a case where what got legislated. or her hand, force a point of order on there was not a tax increase, because There is one other aspect, though, of it, and then by a simple majority we there is not a tax increase. So that is the unfunded mandates issue which can determine whether that is the ap- the one exception to this bill, where it pertains to a public sector mandate, propriate thing to do. That does not would be raised. and that affects particularly the Med- stop it, that simply forces us to be In the gentleman’s case, I would say icaid program. We will address that more accountable. to the gentleman from Massachusetts when the Davis-Moran amendment is I want to thank the gentleman from (Mr. MOAKLEY) that this will in every raised, and I know that that will have California (Mr. GARY CONDIT) again, I other case apply, this legislation. In the full support of this body as well. want to thank the Committee on Rules the case that the gentleman has Again, this is a bill that will correct for working with us, the gentleman brought forward, which is the case what was unfinished the last time we from Massachusetts (Mr. MOAKLEY), where that tax increase would be used had unfunded mandates legislation, the gentleman from Massachusetts to fund government programs, there and I think that the rule and the bill (Chairman SOLOMON), the gentleman would be a point of order to be raised. will undoubtedly get passed over- from California (Mr. DAVID DREIER), to whelmingly. b 2145 perfect this legislation over the last I thank the gentleman for yielding few months. But it would simply be a simple ma- me the time. It is very important legislation. That jority. If the Dreier legislation were Mr. DREIER. Mr. Chairman, I yield 2 is why it is supported by so many not part of this legislation, the same minutes to the gentlewoman from Con- groups around the country. It will help thing would happen. In other words, all necticut (Mrs. JOHNSON), a very able consumers, it will help particularly the Dreier amendment does is it takes member of the Committee on Ways and small businesses, and it will help to the cases where there is no tax increase Means. create more jobs in this country. I and says, we shall not apply this point Mrs. JOHNSON of Connecticut. Mr. want to thank again the Committee on of order which can be overridden by Chairman, I rise in support of this bill Rules for allowing us to get this to the simple majority vote. but particularly to converse with my floor, because they have a lot on their I do not now how the Dreier amend- colleague, the gentleman from Massa- agenda. ment affects your example one way or chusetts (Mr. MOAKLEY), on the issue of Mr. MOAKLEY. Mr. Chairman, I the other. In any case, there would be his concern about tax reductions. yield myself such time as I may con- a point of order on the scenario that The goal of this bill is to put in place sume. you have laid out. a far more accountable process in re- Mr. Chairman, I want to commend Mr. MOAKLEY. We can debate this gard to government’s mandating of ex- the gentleman for his outstanding ex- when my amendment comes up. I penses on other levels of government, planation. He is completely right, thank the gentleman for his expla- which we did in the past, and now in there would be a point of order raised nation. the private sector. It comes from very on that tax bill. But if they allocated Mr. Chairman, I yield 3 minutes to deep bipartisan concern with govern- that money to a tax break, there would the gentleman from Virginia (Mr. ment’s rather casual attitude toward not be a point of order. It is only if MORAN). the costs of the legislation that it is they wanted to spend it to educate the Mr. MORAN of Virginia. Mr. Chair- passing and the way those costs tend to smokers, or if they wanted to spend it man, in 1992–1993, I introduced un- be borne by others than themselves in on stopping kids from smoking, that is funded mandates legislation. This was society. when the mandate would kick in. But during the time when the Democratic When we cut taxes, on the other if somebody allocated that money as a Party was in the majority. I could not hand, when we give a tax break, we are tax break, there would be no point of get it out of the Government Oper- essentially talking about how we use order the against the mandate. ations Committee. My friend and col- our own resources, so we are mandat- Mr. PORTMAN. Mr. Chairman, will league from California, I am sure, re- ing a cost on ourselves and we are pay- the gentleman yield? calls that he also had unfunded man- ing for it by foregoing revenues that we Mr. MOAKLEY. I yield to the gen- dates legislation which suffered the would otherwise collect. So I do not tleman from Ohio. same fate. Then when the Republican think that the issue is the same when Mr. PORTMAN. Mr. Chairman, majority took over the Congress, it, of we forgo revenue through a tax break maybe we should back up a second to course, became the first legislation to as the underlying issue that this man- explain what the amendment is. The be enacted. dates bill seeks to address. gentleman from California (Mr. At that time, when that bill was de- If we choose to spend our revenues by DREIER) is here, who is going to explain bated, I had an amendment. That collecting them and then appropriating it later, I am sure. But in this legisla- amendment was designed to correct an them, that is one thing. If we choose to tion there is one provision that came oversight which was that it did not in- spend our revenues by, in a sense, out of the Committee on Rules which clude private sector mandates. It only granting a tax exemption, that is also says that in the case of tax legislation applied to public sector mandates. It our right. But that is a separate issue that is on the floor of the House, where did not get included because the House from the issue that this bill addresses, there is a net tax decrease, in other leadership did not give its stamp of ap- which is making us accountable and words, where there is tax relief, that proval at that time, and it was not part making visible the costs that will fol- the point of order would not apply. of the Republican contract on America. low from the responsibilities that we Why? One, taxes are different than So it did not get the votes necessary are imposing on our society. requirements. for adoption. Mr. MOAKLEY. Mr. Chairman, will Mr. MOAKLEY. Mr. Chairman, if the The legislation that we are consider- the gentlewoman yield? gentleman would stop right there, that ing today does just what that amend- Mrs. JOHNSON of Connecticut. I is what I am talking about. If there ment was designed to do. It is the same yield to the gentleman from Massachu- was some money there and they de- amendment. That is why I support this setts. cided, the majority party decided to rule and this bill because it does cor- Mr. MOAKLEY. Mr. Chairman, say give that back in a tax break, rather rect something that was left unfinished for instance the gentlewoman is a cor- than educate smokers, there would be when we passed the original unfunded poration. She gets taxed. Then some- no violation of the unfunded mandate. mandates legislation. one raises a point of order and someone I would ask the gentleman, am I cor- My original legislation actually only says, well, we will give it back as a tax rect? required that if it is an unfunded man- relief. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3227 The CHAIRMAN. The time of the Congress passed the Unfunded Man- cally a hidden tax or an unfunded man- gentlewoman from Connecticut (Mrs. date Reform Act in 1995, because Con- date on these businesses. JOHNSON) has expired. gress for too long prior to that had I am proud to be here tonight and Mr. MOAKLEY. Mr. Chairman, I been passing the bills and then passing support my friend in this legislation yield myself such time as I may con- the buck on to the localities who would and hope the House will act favorably sume. then have to either raise local taxes. on it. I will address my amendment So we say, well, instead of putting it And generally these were property during the amendment period. into the company, we are going to give taxes, sales taxes, much more regres- Mr. DREIER. Mr. Chairman, may I a tax break to other people. The com- sive taxes than the Federal income tax, inquire of the Chair how much time re- pany still pays that tax. It is a way of or, in some cases, if they were finan- mains for general debate on each side? taxing people. cially strapped, these unfunded man- The CHAIRMAN. The gentleman Mrs. JOHNSON of Connecticut. Mr. dates, in driving up the cost of local from California (Mr. DREIER) has 9 min- Chairman, will the gentleman yield? government, they would have to sub- utes remaining, and the gentleman Mr. MOAKLEY. I yield to the gentle- stitute Washington’s priorities for from Massachusetts (Mr. MOAKLEY) has woman from Connecticut. 171⁄2 minutes remaining. Mrs. JOHNSON of Connecticut. Mr. their own priorities. We felt that was wrong and, as a Con- Mr. DREIER. Mr. Chairman, I yield 5 Chairman, the company does not have gress, by overwhelming majorities 2 minutes to the gentleman from Iowa the right to give a tax break. The com- years ago, 3 years ago were able to pass (Mr. GANSKE). pany must pay the taxes that we re- unfunded mandates reform. And only 5 Mr. GANSKE. Mr. Chairman, I thank quire them to pay. the gentleman for yielding me the Mr. MOAKLEY. Mr. Chairman, the times in the last Congress, 5 times time. mandate is the same, whether they get were objections, points of order even I only wish that a number of Mem- taxed to build roads or they give it raised on the House floor. At least in bers and colleagues were watching this back as a tax break, that company we two of those cases, we proceeded, after debate. I think this is an important are trying to protect is still getting the voting to overrule the point, not to bill. By definition, points of order stifle same tax. sustain the point of order. Mrs. JOHNSON of Connecticut. Mr. This bill takes unfunded mandate re- debate. The reason a Member raises a Chairman, if the gentleman will con- form to the next level, as the gen- point of order is to short-circuit debate tinue to yield, they are still getting tleman from Virginia (Mr. MORAN) just on a bill or amendment. That is why I taxed exactly the same. The goal of talked about, something we would have oppose this bill. No one ever raises a this bill is to make evident the costs liked to have done 3 years ago, but point of order to extend debate. we are imposing on the society, wheth- some Members thought it was too am- Yes, the point of order created by er it is on another level of government bitious or even too radical. Now that H.R. 3534 would prompt 20 minutes of or a private sector entity or an individ- we have had some experience dealing debate, 10 on each side. But the reason ual, the costs that we are imposing on with State and local governments, I for the point of order is to prevent the them to carry out a public benefit. And think we are more comfortable. Un- much greater debate that would other- I think all the vote on the House floor funded mandates, though, to America’s wise occur. does, when the point of order is raised, businesses often lead to higher prices Let us take the example of the is to make clear that I agree that this for American consumers, and they will Saxton-Boehlert substitute to the level of cost for a small businesses is now be subject to points of order if the Clean Water Act. A point of order worth it for our society to achieve a cost to American businesses are over against the amendment would have certain common goal. That is account- $100 million. granted 20 minutes of debate, but with- ability. Remember, American businesses are out that point of order, we had a day Mr. MOAKLEY. The small now engaged in a global economy. We and a half of debate, a full debate that businessperson still gets taxed. are competing against Japanese com- would not be able to occur under this Mrs. JOHNSON of Connecticut. Abso- panies, German companies, Mexican bill. lutely. companies, Chinese companies. If Con- There are lots of other examples. Mr. MOAKLEY. But the reason for gress wants to add additional mandates Proponents argue in effect that a point this mandate is to stop this spending on American businesses, often these of order would not limit debate if it to take place, stop penalizing small mandates will not apply to these for- were defeated. But surely proponents companies. But if we say, we are going eign businesses as they manufacture are not working for this bill on the as- to tax them and then someone says, goods. That has the effect of raising sumption that points of order would well, a point of order, and then some- America’s businesses’ costs, of making never prevail. What the bill does is one says, we will give it back as a tax them less competitive, leading to job skew the discussion by requiring an of- break, that company is still paying the losses or, in many cases, driving jobs ficial objective estimate of costs but no tax even though that is going back as offshore. That has the net effect of un- similar information on benefits. If a tax break rather than going into the funded mandates on American busi- Members truly believe that benefits industry it is supposed to police. ness. can never be quantified, then it is curi- Mr. DREIER. Mr. Chairman, I yield 3 There may be times and there may be ous that Congress would have spent so minutes to the gentleman from Fair- circumstances and there may be prior- much time pushing for cost-benefit fax, Virginia (Mr. DAVIS), author of a ities where we as a Congress decide it analysis. very important amendment which we is important to do this because of what However, my main objection to H.R. intend to accept. we are trying to accomplish. But this 3534 is the point of order, not the addi- Mr. DAVIS of Virginia. Mr. Chair- at least allows Members to not only tional cost analysis called for in the man, I will address my amendment a recognize what those costs are, but to bill. It is just that the way the bill dis- little later. Let me say, taxes are pret- have an affirmative vote ongoing and misses benefits is a sign that it is de- ty straight forward, put a tax on busi- moving forward with this cost. This is signed to help only one side in the de- ness or people, and unfunded mandates an important step for America’s busi- bate, not to provide balance. are hidden taxes. nesses, something that has been ad- Can anyone think of a bill that has The purpose of this is to let the pub- dressed widely by a number of business gone through Congress in which the lic know and Members recognize when organizations and, I might also add, by costs on the private sector were not de- they are putting these mandates, un- State and local government organiza- bated? funded mandates, that have the effect tions. The impact of H.R. 3534, whatever its of being hidden taxes on companies Finally, let me just note, Congress sponsors’ intent, is not to ensure that just as we have done on local govern- does not lose any flexibility to enact industry’s view is heard but, rather, ments. Unfunded mandates over the any of these mandates, but we will that it has a greater chance of prevail- last decade drove up the cost of local have the information before us. We will ing. Even more importantly, however, governments by the tens of billions of have to act in an affirmative manner, the primary threat of 3534 is not the dollars. recognizing that we are imposing basi- point of order once the bill reaches the H3228 CONGRESSIONAL RECORD — HOUSE May 13, 1998 floor. The problem is that the avail- legislation from being fully debated. Massachusetts has just agreed, was ac- ability of a point of order will make it And that is why I have to oppose this tually disagreeing with the whole harder to affect the bills before they amendment or this bill. thrust of the legislation. come to the floor because committees Mr. PORTMAN. Mr. Chairman, if the Mr. MOAKLEY. Mr. Chairman, I will want to avoid points of order. This gentleman will continue to yield, let yield myself such time as I may con- will prevent many amendments from me just make the point that what we sume to respond that I believe the gen- getting a full hearing. do here, I guess the gentleman and I tleman said that the other side of the If proponents believe that general de- have a different view of this place. The aisle does not give enough time, and I bate allows enough time for any Mem- gentleman’s sense, as I have tried to agree with him. Twenty minutes is not ber disagreeing with industry to get his write down what he said, is there has enough time on this. point across, why is that not true for never been legislation around here Mr. CONDIT. Mr. Chairman, I rise today in industry’s proponents as well? Why where the costs have not been fully de- support of H.R. 3534, the Mandates Informa- does industry need a point of order to bated. I do not know that there is any tion Act of 1998. I want to thank the Rules bolster its side in an argument? Think legislation, including the banking bill Committee Chairman and Vice-Chairman for of the existing laws that H.R. 3534 we just passed, where we ever under- bringing this bill to the floor under an open would have made more difficult to ne- stand what the full costs are, whether rule and for their commitment to pass this leg- gotiate and to pass, including the it is to the public sector or the private islation. Clean Water Act and the Clean Air Act. sector. This bill is a new version of an old idea, Think of the pending legislation before Maybe the gentleman’s staff reads all which will yield the same resultsÐaccountabil- Congress this year. I am talking about the legislation and gives him a cost ity and openness. This bill is similar to H.R. tobacco. I am talking about a patient breakdown, but mine certainly does 1010, the Mandates Information Act of 1997, Bill of Rights. This bill will place road- not, and I do not know that that is true which I introduced on March 11, 1997. These blocks in front of that legislation. of any other Member. What we need is bills were introduced as a follow-up to the suc- b 2200 to have some debate on the cost, be- cesses we have had with the Unfunded Man- cause the rest of the debate is always date Reform Act. I do not believe that Congress should about the benefits. As you are aware, the Unfunded Mandate pass mandates on industry without full Mr. DREIER. Mr. Chairman, I yield 1 Relief Act required the Congressional Budget discussion. I do not object to Congress minute to the gentleman from Ohio Office to estimate the cost of unfunded man- having full and fair information, like (Mr. PORTMAN). dates a bill would place on both local govern- the CBO scoring of private mandates Mr. PORTMAN. Mr. Chairman, when ments and the private sector. These cost esti- already required by current law. I do legislation is debated on the floor of mates are required to be included in the com- object to a bill whose only possible im- the House, the legislation is debated mittee's report which accompanies a bill re- pact is to shortcircuit any debate on because someone has a good idea. It is ported to the House. any bill or amendment that industry a great sounding idea. The law also established a point of order might oppose. We talk a lot about the benefits, and procedure for bills imposing a mandate on Mr. PORTMAN. Mr. Chairman, will we do it continually. What we do not local governments in excess of $50 million. the gentleman yield? talk about is the cost to the private The Mandates Information Act of 1998 will es- Mr. GANSKE. I yield to the gen- sector and to the public sector. This tablish a similar point of order procedure for tleman from Ohio. simply permits the Congress to focus bills containing an unfunded mandate on the Mr. PORTMAN. Mr. Chairman, there on that issue and then determine in its private sector in excess of $100 million. are a number of things the gentleman will by a simple majority vote whether The Mandates Information Act of 1998 has said that seem inconsistent to me. The to proceed with the legislation or not. been modified to address the concerns raised gentleman just said a moment ago that So this is good government. It is ac- by the House Rules committee that the point he was happy to support something countability that will get at exactly of order procedure would be used as a delay- that forces us to understand what the what the gentleman earlier stated was ing tactic and could impede the legislative costs are to new legislation on the pri- his objective, which was to be fully in- process. The new version of the Mandates In- vate sector, and then the gentleman formed about the cost of the legisla- formation Act would allow Members of Con- said but he would not want a point of tion. gress to raise a single point of order against order. Mr. GANSKE. Mr. Chairman, will the a bill or amendment containing a mandate in Let me be clear. This point of order gentleman yield? excess of $100 million. It is important to note is not the kind of point of order that Mr. PORTMAN. I yield to the gen- that this bill would not affect a Member's abil- we would normally have where we sim- tleman from Iowa. ity to raise a separate point of order if the ply come to the floor, raise a point of Mr. GANSKE. I appreciate the intent Congressional Budget Office failed to ade- order, and that stops the legislation if of this legislation, but I think the ef- quately estimate the impacts of a private sec- it is approved. This permits a debate fect, because of the time limits on a tor mandate. Nor does H.R. 3534 prevent precisely for the reason the gentleman point of order, would be to limit debate Members from raising multiple points of order stated earlier. We get 10 minutes on on a lot of bills. against a bill containing intergovernmental each side to be able to debate the ques- Mr. MOAKLEY. Mr. Chairman, I mandates. tion as to whether we should proceed yield myself such time as I may con- Tonight we will hear arguments that this bill on the legislation. The precise question sume to congratulate the prior speaker is an assault on the environment, health and the gentleman is raising. on his analysis and I agree with him. I worker safety. Mr. Chairman, nothing could be The argument that some Members think he did a wonderful job. further from the truth. H.R. 3534 cannot be will make, which might include the Mr. DREIER. Mr. Chairman, I yield used to block important environmental health gentleman on environmental legisla- myself such time as I may consume to and safety regulations. H.R. 3534 is simply a tion, from the way I am hearing what say that I thought that my friend way to guarantee an accurate and informed he is saying, would be we need a full agreed with the bill, with the exception debate on the costs of proposed mandates. debate on this question. of the Dreier amendment that was in Mr. Chairman, I urge my colleagues to sup- Mr. GANSKE. Reclaiming my time, here. port information and accountability by support- Mr. Chairman, the point is this: That a Mr. MOAKLEY. Mr. Chairman, I ing the Mandates Act of 1998. point of order brought on this would yield myself such time as I may con- Mr. CANNON. Mr. Chairman, I am pleased allow only 20 minutes of debate, 10 sume to suggest to the gentleman from to rise today in support of H.R. 3534. minutes per side, on a complicated California if he would just take the Just as this great body voted in 1995 to re- issue that really should not be limited Dreier amendment out, we can wrap it lease state and local governments from the by that time limit. up tonight. stranglehold of unfunded federal mandates, I am fine with the analysis. I have Mr. DREIER. Mr. Chairman, I yield we must vote today to free our private sector voted for that in the past. It is the myself such time as I may consume to as well. point of order that I think tilts the point out that the gentleman from Our booming economy thrives on the ability side too much to one side to prevent Iowa, with whom the gentleman from of our private sector to continue flourishing. May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3229 We must ensure that government does not im- (1) ESTIMATES.—Section 424(b)(2) of the amended by inserting ‘‘, except that not pede this development. Congressional Budget Act of 1974 (2 U.S.C. more than one point of order shall be recog- I have received letters in support of this leg- 658c(b)(2)) is amended— nized by the Chair under section 425(a)(1) or (A) in subparagraph (A) by striking ‘‘and’’ islation from all groups involved in our growing (a)(2)’’ before the period. after the semicolon; and (7) APPLICATION RELATING TO CONGRES- economy: consumers, taxpayers, farmers, and (B) by redesignating subparagraph (B) as SIONAL BUDGET OFFICE.—Section 427 of the small businesses. subparagraph (C), and inserting after sub- Congressional Budget Act of 1974 (2 U.S.C. I would like to emphasize that this latter paragraph (A) the following: 658f) is amended by striking ‘‘intergovern- group, in particular, succeeds or suffers in di- ‘‘(B) when applicable, the impact (includ- mental’’. rect proportion to the increased government ing any disproportionate impact in particu- (b) RULES OF THE HOUSE OF REPRESENTA- mandates placed on it. Federal mandates dis- lar regions or industries) on consumers, TIVES.—Clause 5(c) of rule XXIII of the Rules courage development of small businesses and workers, and small businesses, of the Federal of the House of Representatives is amended private sector mandates in the bill or joint start-ups, the most valuable, yet most vulner- by striking ‘‘intergovernmental’’ and by resolution, including— striking ‘‘section 424(a)(1)’’ and inserting able engine furthering growth and job creation ‘‘(i) an analysis of the effect of the Federal ‘‘section 424 (a)(1) or (b)(1)’’. in our economy. private sector mandates in the bill or joint (c) EXERCISE OF RULEMAKING POWERS.— We have voted time and time again over resolution on consumer prices and on the ac- This section is enacted by Congress— these past few years to lessen the govern- tual supply of goods and services in con- (1) as an exercise of the rulemaking power ment burdens on this sector. sumer markets; of the Senate and the House of Representa- This legislation represents the next logical ‘‘(ii) an analysis of the effect of the Federal tives, respectively, and as such it shall be private sector mandates in the bill or joint considered as part of the rules of such House, step in making this body more cognizant of resolution on worker wages, worker benefits, the impact of our actions on our developing respectively, and shall supersede other rules and employment opportunities; and only to the extent that they are inconsistent economy. ‘‘(iii) an analysis of the effect of the Fed- therewith; and Mr. MOAKLEY. Mr. Chairman, I eral private sector mandates in the bill or (2) with full recognition of the constitu- yield back the balance of my time. joint resolution on the hiring practices, ex- tional right of either House to change such Mr. DREIER. Mr. Chairman, I yield pansion, and profitability of businesses with rules (so far as relating to such House) at back the balance of my time. 100 or fewer employees; and’’. any time, in the same manner, and to the The CHAIRMAN. All time for general (2) POINT OF ORDER.—Section 424(b)(3) of same extent as in the case of any other rule debate has expired. the Congressional Budget Act of 1974 (2 of each House. U.S.C. 658c(b)(3)) is amended by adding after Pursuant to the rule, the amendment the period ‘‘If such determination is made by The CHAIRMAN. During consider- printed in the bill is adopted and the the Director, a point of order under this part ation of the bill for amendment, the bill, as amended, is considered as an shall lie only under section 425(a)(1) and as if Chair may accord priority in recogni- original bill for further amendment the requirement of section 425(a)(1) had not tion to a Member offering an amend- and is considered read. been met.’’. ment that he has printed in the des- The text of H.R. 3534, as amended by (3) THRESHOLD AMOUNTS.—Section 425(a) of ignated place in the CONGRESSIONAL the Congressional Budget Act of 1974 (2 the amendment recommended by the RECORD. Those amendments will be Committee on Rules, is as follows: U.S.C. 658d(a)) is amended by— (A) striking ‘‘and’’ after the semicolon at considered read. H.R. 3534 the end of paragraph (1) and redesignating The chairman of the Committee of Be it enacted by the Senate and House of Rep- paragraph (2) as paragraph (3); and the Whole may postpone a demand for resentatives of the United States of America in (B) inserting after paragraph (1) the follow- a recorded vote on any amendment and Congress assembled, ing new paragraph: may reduce to a minimum of 5 minutes SECTION 1. SHORT TITLE. ‘‘(2) any bill, joint resolution, amendment, the time for voting on any postponed This Act may be cited as the ‘‘Mandates motion, or conference report that would in- question that immediately follows an- Information Act of 1998’’. crease the direct costs of Federal private other vote, provided that the time for SEC. 2. FINDINGS. sector mandates (excluding any direct costs that are attributable to revenue resulting from voting on the first question shall be a The Congress finds the following: tax or tariff provisions of any such measure if it minimum of 15 minutes. (1) Before acting on proposed private sector does not raise net tax and tariff revenues over Are there any amendments to the mandates, the Congress should carefully con- the 5-fiscal-year period beginning with the first bill? sider the effects on consumers, workers, and fiscal year such measure affects such revenues) small businesses. AMENDMENT NO. 1 OFFERED BY MR. DAVIS OF by an amount that causes the thresholds (2) The Congress has often acted without VIRGINIA specified in section 424(b)(1) to be exceeded; adequate information concerning the costs of Mr. DAVIS of Virginia. Mr. Chair- and’’. private sector mandates, instead focusing man, I offer an amendment. (4) APPLICATION RELATING TO APPROPRIA- only on the benefits. TIONS COMMITTEES.—(A) Section 425(c)(1)(A) The CHAIRMAN. The Clerk will des- (3) The costs of private sector mandates of the Congressional Budget Act of 1974 (2 ignate the amendment. are often borne in part by consumers, in the U.S.C. 658d(c)(1)(A)) is amended by striking The text of the amendment is as fol- form of higher prices and reduced availabil- ‘‘except’’. lows: ity of goods and services. (B) Section 425(c)(1)(B) of the Congres- Amendment No. 1 offered by the gentleman (4) The costs of private sector mandates sional Budget Act of 1974 (2 U.S.C. are often borne in part by workers, in the from Virginia (Mr. DAVIS): 658d(c)(1)(B)) is amended— Page 8, after line 11, add the following new form of lower wages, reduced benefits, and (i) in clause (i) by striking ‘‘intergovern- fewer job opportunities. section: mental’’; SEC. 5. FEDERAL INTERGOVERNMENTAL MAN- (5) The costs of private sector mandates (ii) in clause (ii) by striking ‘‘intergovern- are often borne in part by small businesses, DATE. mental’’; Section 421(5)(B) of the Congressional in the form of hiring disincentives and stunt- (iii) in clause (iii) by striking ‘‘intergov- ed growth. Budget and Impoundment Control Act of 1974 ernmental’’; and (2 U.S.C. 658(5)(B)) is amended— SEC. 3. PURPOSES. (iv) in clause (iv) by striking ‘‘intergovern- (1) by striking ‘‘the provision’’ after ‘‘if’’; The purposes of this Act are the following: mental’’. (2) in clause (i)(I) by inserting ‘‘the provi- (1) To improve the quality of the Congress’ (5) THRESHOLD BURDEN.—(A) Section sion’’ before ‘‘would’’; deliberation with respect to proposed man- 426(b)(2) of the Congressional Budget Act of (3) in clause (i)(II) by inserting ‘‘the provi- dates on the private sector, by— 1974 (2 U.S.C. 658e(b)(2)) is amended by insert- sion’’ before ‘‘would’’; and (A) providing the Congress with more com- ing ‘‘legislative’’ before ‘‘language’’. (4) in clause (ii)— plete information about the effects of such (B) Section 426(b)(2) of the Congressional (A) by inserting ‘‘that legislation, statute, mandates; and Budget Act of 1974 (2 U.S.C. 658e(b)(2)) is or regulation does not provide’’ before ‘‘the (B) ensuring that the Congress acts on such amended by striking ‘‘section 425 or sub- State’’; and mandates only after focused deliberation on section (a) of this section’’ and inserting (B) by striking ‘‘lack’’ and inserting ‘‘new the effects. ‘‘part B’’. or expanded’’. (2) To enhance the ability of the Congress (6) QUESTION OF CONSIDERATION.—(A) Sec- to distinguish between private sector man- Mr. DAVIS of Virginia. Mr. Chair- tion 426(b)(3) of the Congressional Budget man, I rise to offer an amendment to dates that harm consumers, workers, and Act of 1974 (2 U.S.C. 658e(b)(3)) is amended by small businesses, and mandates that help striking ‘‘section 425 or subsection (a) of this H.R. 3534, the Unfunded Mandates In- those groups. section’’ and inserting ‘‘part B’’. formation Act of 1998. SEC. 4. FEDERAL PRIVATE SECTOR MANDATES. (B) Section 426(b)(3) of the Congressional Mr. Chairman, my amendment would (a) IN GENERAL.— Budget Act of 1974 (2 U.S.C. 658e(b)(3)) is simply serve as a clarification of the H3230 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Unfunded Mandates Reform Act, of eryone to support the Davis-Moran urge all my colleagues to support it, which I was a primary sponsor in the amendment. and, again, I am honored to be able to 104th Congress. This amendment is nec- Mr. DAVIS of Virginia. Mr. Chair- offer it in coordination with my friend essary due to the Congressional Budget man, will the gentleman yield? and colleague, the gentleman from Vir- Office’s interpretation of an important Mr. MORAN of Virginia. I yield to ginia (Mr. DAVIS). provision of the Unfunded Mandates the gentleman from Virginia. I will conclude at this point, Mr. Reform Act in a way that is inconsist- Mr. DAVIS of Virginia. Mr. Chair- Chairman, feeling as though I have ent with the intent of Congress. The man, I think this has the best of all given my cosponsor more than suffi- CBO interpretation has a significant worlds, according to the gentleman cient recognition. impact on the States. from Virginia. This has the Moran in- Mr. DREIER. Mr. Chairman, I move The definition of ‘‘Federal Intergov- tellect and the Davis name, and when to strike the last word, and I rise in ernmental Mandate’’ as drafted under we put the two together, from what I support of the amendment, as long as the Unfunded Mandates Reform Act hear the gentleman saying, it is a it does not lead the gentleman from was specifically intended to include ‘‘can’t lose’’ amendment. Massachusetts (Mr. MOAKLEY) to come Medicaid and other large entitlement Mr. MORAN of Virginia. Reclaiming out in opposition of the amendment. programs and efforts to impose new my time, Mr. Chairman, that was not So I am going to proceed, and I will Medicaid mandates without new flexi- exactly the point I was trying to make, assure the gentleman from Virginia bility. but I am certainly willing to let that (Mr. MORAN) and the gentleman from However, when asked to review the stand in the record if my friend and Virginia (Mr. DAVIS) that I will with- President’s proposal for a cap on the colleague wants to suggest that. draw my name and I will, in fact, not Federal share of Medicaid spending per The gentleman from Virginia (Mr. support the amendment if it in any beneficiary, CBO determined that the DAVIS) is known not only by his name way jeopardizes the support of the gen- proposal did not contain a mandate as but by his intellect, and I am more tleman from Massachusetts (Mr. MOAK- defined by UMRA, the Unfunded Man- than happy to join him in this amend- LEY). dates Reform Act. According to CBO, ment. I was actually referring in a Mr. MOAKLEY. Mr. Chairman, will this was because States currently have more general way. I was not suggesting the gentleman yield? the flexibility to amend their own fi- that the only way we could get our Mr. DREIER. I yield to the gen- nancial and programmatic responsibil- amendment passed was if it had the tleman from Massachusetts. ities by reducing some optional serv- gentleman’s name on it. The gen- Mr. MOAKLEY. Mr. Chairman, if the ices or by choosing not to serve some tleman has worked very hard on this, gentleman would just go a little fur- local optional beneficiaries. but I will now amplify some of the ther and remove the amendment that This interpretation is at odds with points that the gentleman made. has his name on it, I would be very congressional intent. In passing The reason why the amendment is happy to support everything. UMRA, Congress intended that the necessary is because the Congressional Mr. DAVIS of Virginia. Mr. Chair- flexibility required under clause (ii) be Budget Office determined that any new man, will the gentleman yield? new flexibility, concomitant with the Federal mandates in the area of enti- Mr. DREIER. I yield to the gen- mandate-imposing legislation, for tlement programs are not subject to tleman from Fairfax, Virginia. States to amend their responsibilities the Unfunded Mandates Reform Act’s Mr. DAVIS of Virginia. We could call to provide ‘‘required services’’, not op- point of order procedure if there is suf- it the Moran-Davis, Davis-Moran, tional services. However, because the ficient flexibility in the affected enti- Dreier-Moakley unity bipartisan Unfunded Mandates Reform Act, as tlement program to offset the new amendment. passed, does not say new flexibility State and local costs. Mr. DREIER. Mr. Chairman, reclaim- specifically, CBO believes its interpre- The best example of this is on June ing my time, I thank my friends for tation is consistent with the law as 10th, 1996, when CBO ruled that a point their contribution. It seems to me that written. of order would not exist for a proposed we have bipartisan agreement on the My amendment is supported by Ohio cap on Federal Medicaid expenditures measure and I strongly support it. Governor George Voinovich, the Na- and any other mandatory Federal aid The brief statement that I would like tional Governors’ Association, the programs except food stamps. The ef- to provide here, Mr. Chairman, states Council of State Governments, the Na- fect of this interpretation is to exempt that under section 421(5)(B) of the Con- tional Conference of State Legisla- more than two-thirds of all granted gressional Budget Act, Federal entitle- tures, the National Association of aid. In other words, all the mandatory ment programs such as Medicaid, child Counties, and the National League of entitlement programs from coverage nutrition, and foster care are consid- Cities. under the Unfunded Mandates Reform ered unfunded intergovernmental man- As a former chairman of the Fairfax Act. dates if Congress imposes new condi- County Board of Supervisors, I recog- What may appear to be an optional tions, places caps on funding, or cuts nize the incredible burdens placed on Federal mandate program from CBO’s funding without giving the States the States and localities by unfunded man- perspective, such as, for example, ex- authority to adjust those changes. Al- dates, of which I just spoke during the panded Medicaid coverage to pregnant though this was the clear intent of the general debate, and I would urge my women and children, is not an optional Unfunded Mandates Reform Act, the colleagues to support this common program from the State’s perspective. I Congressional Budget Office has used a sense amendment. do not know of any State willing to re- different interpretation which under- Mr. MORAN of Virginia. Mr. Chair- duce Medicaid coverage to pregnant mines the act. Specifically, CBO con- man I move to strike the last word. women and children in order to help tends that UNRA’s language does not Mr. Chairman, in addition to having offset the cost of new Federal man- specify new authority and that States an opportunity to pass an amendment dates. already have sufficient authority or op- that I thought should have been passed Our amendment would correct this tions to adjust to any cut or cap to an back in January of 1995, that I had of- implementation problem by adding a entitlement program except for the fered then, I think probably it helps in few simple words to the Unfunded Man- food stamp program. a Republican Congress to have a Re- dates Reform Act to clarify that any The Davis-Moran amendment clari- publican offeree, and I trust that this cut or cap of safety net programs con- fies that any funding cut or cap is con- bill will pass, although I suspect that stitutes an intergovernmental mandate sidered a new mandate unless the there will be more opposition to it than unless State and local governments are States are given new or additional is present here tonight. given new or additional flexibility and flexibility to adjust their pro- This is also an opportunity to correct the authority to offset the cut or the grammatic or financial responsibilities a technical problem that we have en- cap. in order to offset the additional man- countered with the Congressional This amendment has been endorsed date costs. Budget Office’s scoring of State and by the five major State and local orga- I believe it is a very important local mandates. That is why I urge ev- nizations. It ought to be supported. I amendment, and I will clearly support May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3231 it and urge my colleagues to join in may have 5 legislative days within Monitoring in our government. And doing the same. which to revise and extend their re- that man who is in charge of that of- Mr. CONDIT. Chairman, I move to marks and provide extraneous material fice will then recommend, in his own strike the last word to speak in favor on H.R. 3534. infinite wisdom, to the Secretary of of the amendment. The SPEAKER pro tempore. Is there State whether persecution is taking I want to rise and show my support objection to the request of the gen- place throughout the world. for the amendment, and I would like to tleman from California? There are various categories involved commend the gentleman from Virginia There was no objection. here. I will not go into the specifics, (Mr. DAVIS) and the gentleman from but the important thing is that if a f Virginia (Mr. MORAN) for being on their country has been decided to be in- toes and being on guard for State gov- SPECIAL ORDERS volved in religious persecution in any ernment. way, whether this is tribal or whether The SPEAKER pro tempore (Mr. SES- This is an amendment that is needed this is two religions, whether the coun- SIONS). Under the Speaker’s announced for the State governments, and I just try has no control over it whatsoever, policy of January 7, 1997, and under a commend them and congratulate them that country will then have a denial of previous order of the House, the follow- for doing this. United States foreign assistance, it ing Members will be recognized for 5 will be subject to various trade sanc- b 2215 minutes each. tions, denial of visas, prohibition of ex- Mr. PORTMAN. Mr. Chairman, I f ports, U.S. support for multilateral move to strike the requisite number of The SPEAKER pro tempore. Under a bank assistance, and a whole variety of words just briefly again to commend previous order of the House, the gen- different things. I think that is the sponsors of this amendment. tleman from Pennsylvania (Mr. FOX) is wrong way of going about it. We did work with the gentleman recognized for 5 minutes. We all in our own way and our own from Virginia (Mr. MORAN) last time (Mr. FOX of Pennsylvania addressed sense have a feeling of religion inside around and were not able to do what the House. His remarks will appear us, and we do not want to see anybody really should have been done, it turned hereafter in the Extensions of Re- persecute it. The question is, really, out. This is a needed technical correc- marks.) who are the beneficiaries of this? I tion really to the 1995 legislation, be- f have talked to members of the Russian cause it clarifies the intent of the Orthodox Church. I have talked to the The SPEAKER pro tempore. Under a original act to make it clear that State people who are in charge of the reli- previous order of the House, the gen- and local government could be given gious expression of a variety of dif- tleman from Colorado (Mr. MCINNIS) is newer, expanded authority to meet ferent sects in Sudan. I have been to their programmatic responsibilities if recognized for 5 minutes. India. I have been to Zimbabwe. I have additional costs were imposed on them (Mr. McINNIS addressed the House. talked really recently to the National through entitlement reform. His remarks will appear hereafter in So I want to thank the authors of the Council of Churches. the Extensions of Remarks.) And whether it was in the Middle amendment and also echo what the f East or whether it was somebody who gentleman from California (Mr. The SPEAKER pro tempore. Under a represented 27 million Muslims in Indo- CONDIT) has said and issue my strong nesia, I asked the question, ‘‘Who support. previous order of the House, the gentle- Mr. DREIER. Mr. Chairman, will the woman from North Carolina (Mrs. wants this?’’ The letters that we see gentleman yield? CLAYTON) is recognized for 5 minutes. supporting this particular act all come Mr. PORTMAN. I yield to the gen- (Mrs. CLAYTON addressed the House. out of New York or Washington. None tleman from California. Her remarks will appear hereafter in come from abroad. ‘‘Who wants this?’’ Mr. DREIER. Mr. Chairman, I thank the Extensions of Remarks.) And there was not a single affirmative my friend for yielding. f answer in that whole group. I would just like to offer an adden- So what we were doing, therefore, dum to the very thoughtful list of sup- FREEDOM FROM RELIGIOUS was literally imposing sort of a post- porters that was provided by the gen- PERSECUTION ACT OF 1998 colonial Western sense of what is right tleman from Virginia (Mr. DAVIS), and The SPEAKER pro tempore. Under a and what is wrong on the peoples of this world. And in many cases, the gov- say that I suspect not many Members previous order of the House, the gen- ernments have absolutely no control are aware of the fact that the Inter- tleman from New York (Mr. HOUGHTON) over what the religious persecution is. national City-County Management As- is recognized for 5 minutes. I know this is true in terms of Sudan. sociation, which is headed by Gary Mr. HOUGHTON. Mr. Speaker, I I know it is true in terms of a variety Gwinn, also strongly supports the would like to talk for a minute about a of other countries. And by the United Davis-Moran amendment. bill that we will be voting on tomor- States imposing its will upon those The CHAIRMAN. The question is on row, and that is called the Freedom countries, those areas, which they real- the amendment offered by the gen- From Religious Persecution Act of ly know very little about, they are tleman from Virginia (Mr. DAVIS). 1998. The number is H.R. 2431. going to be hurting more people than The amendment was agreed to. This has gone through the Commit- Mr. DREIER. Mr. Chairman, I move they are going to be helping. tee on International Relations. I was that the Committee do now rise. So the question is, who are the in- The motion was agreed to. on that committee. I voted against it, tended beneficiaries? Not many. Billy Accordingly, the Committee rose; and it has gone to the Committee on Graham does not think this is a good and the Speaker pro tempore (Mr. Ways and Means for a particular issue idea. The Dalai Lama does not think PORTMAN) having assumed the chair, of a sequential referral. this is a good idea. The Council of Mr. SESSIONS, Chairman of the Com- I understand why people are con- Churches does not think this is a good mittee of the Whole House on the State cerned with persecution of individuals idea. A variety of organizations, such of the Union, reported that that Com- and various religions throughout this as the American Farm Bureau, does mittee, having had under consideration world, and many times it is out of a not think it is a good idea. the bill (H.R. 3534) to improve congres- sense of compassion for these people. Why are we doing this? I think we sional deliberation on proposed Federal And yet at the same time, I think that are doing this out of a sense of compas- private sector mandates, and for other there are ways of handling this which I sion, but misdirected compassion. purposes, had come to no resolution do not think are being recognized here. It is wrong for us to set ourselves up thereon. What this bill will do, and I know as the arbiter of what goes on in a f things have been changing rather rap- country. As much as we have a feeling idly in terms of the terminology, is, it for this thing, we must be very, very GENERAL LEAVE will establish an Office of Religious careful not to superimpose our own Mr. DREIER. Mr. Speaker, I ask Persecution Monitoring. Think of it, standards on the rest of the world, par- unanimous consent that all Members an Office of Religious Persecution ticularly when it involves something so H3232 CONGRESSIONAL RECORD — HOUSE May 13, 1998 very, very personal such as your reli- lights what police officers go through communities in northern Michigan, gious feelings. day in and day out in their job. They and we may have peace returned to our f never know the dangers they face. northern Michigan communities as we The individual who murdered Ser- have known before, and that the good RESOLUTION PROVIDING FOR CON- geant Finch was well-known by police Lord may take away our pain and bless SIDERATION OF H.R. 2431, FREE- officers. They had a number of inci- this family that has suffered so much DOM FROM RELIGIOUS PERSECU- dents with the individual, and he was for this country and for Traverse City TION ACT described by neighbors as a disturbed in northern Michigan communities. Mr. DREIER, from the Committee on man who believed the Mafia was after f Rules, submitted a privileged report him. And in fact, yesterday, Tuesday, DEMOCRATS DENY GRANTING OF (Rept. No. 105–534) on the resolution he was actually seen with a gun IMMUNITY (H.Res. 430), providing for consider- strapped to his hip, a pistol if you will, ation of the bill (H.R. 2431) to establish and it was described as a large handgun The SPEAKER pro tempore. Under a an Office of Religious Persecution strapped in a holster; and he came up previous order of the House, the gen- Monitoring, to provide for the imposi- to people and he was talking to people tleman from Georgia (Mr. BARR) is rec- tion of sanctions against countries en- about the Mafia and that the Mafia was ognized for 5 minutes. gaged in a pattern of religious persecu- giving him a hard time. Mr. BARR of Georgia. Mr. Speaker, tion, and for other purposes, which was It made people nervous. And as often before I get into my remarks, I would referred to the House Calendar and or- happens, they called police officers to like to thank the previous speaker, the dered to be printed. investigate. And according to the news- gentleman from Michigan (Mr. STUPAK) f paper articles, the assailant here was for his remarks as we look to celebrate convinced that the Traverse City Po- Law Enforcement Officers Day. I ex- TRIBUTE TO OFFICER DENNIS tend my condolences and sympathies lice Department, that the cops are the FINCH to the people in his district and par- Mafia, and as he told some people, ticularly to the family of the slain offi- The SPEAKER pro tempore. Under a ‘‘Don’t make any mistake about that.’’ previous order of the House, the gen- cer. b tleman from Michigan (Mr. STUPAK) is 2230 Mr. Speaker, I think it was Winston recognized for 5 minutes. Unfortunately, in our line of work, Churchill who speculated that, every Mr. STUPAK. Mr. Speaker, yesterday people unfortunately do die, and we now and then, mankind trips over the we were on the floor, as it is National should not make any mistake about truth; but inevitably, he speculated Law Enforcement Officers Memorial that. I find it ironic that as we were de- and observed, mankind picks itself up, Week, and we were talking about law bating those bills that try to help all dusts itself off, and keeps right on enforcement and a number of bills we police officers, we had one in our dis- going. were trying to put forth and pass in trict, at least in northern Michigan, Unfortunately, Mr. Speaker, by ac- this Congress, as we normally do dur- lose his life. That is a very rare thing tion of the Democrats unanimously ing National Law Enforcement Officers that happens in northern Michigan. today in the Committee on Govern- ment Reform and Oversight, we were Memorial Week. Seldom do we have that kind of vio- not even afforded the opportunity to As founder and cochair of the Law lence, but it surrounds us at all times. trip over the truth. The Democrats Enforcement Caucus, I spend a lot of As we go through National Law En- have erected yet another stonewall de- time on law enforcement issues. In forcement Memorial Week, I hope we signed to prevent us from getting at fact, tomorrow at 3:30 in the Long- will keep Sergeant Finch in mind in the truth. worth Building, the Law Enforcement some of the legislation we work on for I speak, Mr. Speaker, of the unani- Caucus will be meeting to talk about law enforcement officers. Those of us mous vote by the Democrats on the pending legislation we have on body who are past law enforcement officers, Committee on Government Reform and armor and the educational school bene- we try to work with this Congress to Oversight to deny what would be an fits for those dependents of law en- bring some degree of kindness and hu- important tool and what always has forcement officers who were killed in manity to a very difficult occupation. been an important tool for either law the line of duty, the police officers’ bill On Friday, it is usually my role as enforcement or investigative work of of rights, a number of other issues that chair of the Law Enforcement Caucus the Congress to get at the truth; and the Members would like to bring up to to join in on Police Memorial Day, that is the granting of immunity. discuss with the Law Enforcement Cau- which is always on May 15, and that Granting of immunity is a mecha- cus. will be this Friday. This Friday I had nism of long-standing and important Actually, yesterday as we were de- planned on actually being in Traverse history in our country, both here in the bating the Visclosky bill, the Bullet- City, part of my district. I will be leav- Congress and its investigative work as proof Vest Partnership Grant Act, H.R. ing Thursday night and had planned on well, as in the work of law enforcement 2829, which overwhelmingly passed this taking part in a ceremony they hold in which I engaged as a United States House; we talked a lot about what hap- every year in Traverse City on May 15 attorney in the Northern District of pens with police officers, and I men- for fallen law enforcement officers. Georgia. tioned a case which happened back in This year’s ceremony, unfortunately, Granting immunity to witnesses is 1974 when I was a police officer. will have a much deeper meaning for frequently the only way that law en- Unfortunately, at that time, we did those of us who represent Traverse forcement has of uncovering evidence not know and the statistic was put City and who knew Sergeant Finch. I sufficient to successfully prosecute im- forth that about every 2 days we lose a will be in my district in Traverse City portant cases or for the Congress to police officer. Up in my northern Friday and, hopefully, will get a elicit important testimony and evi- Michigan rural community, we lost a chance to express the outrage and re- dence from recalcitrant witnesses. police officer in Traverse City yester- gret that this Congress feels when any Normally, when the Department of day. I regret to inform the Nation that police officer has fallen in the line of Justice, as it did in the case of the four Sergeant Dennis Finch of the Traverse duty. proposed witnesses today, tells the City Police Department was murdered Our sympathies and deepest regrets Congress it has no objection to the as he went to check on an individual at go to his wife and his daughters and granting of immunity for the wit- a residence in Traverse City. Sergeant the rest of his family, his friends and nesses, it is a pro forma, routine vote Dennis Finch is survived by his wife fellow officers. This thing ended, after by whatever committee of the Congress Agnes and their two daughters, who are Sergeant Finch was shot, probably it is that is seeking to elicit the testi- 30 and 23 years old. some 8, 9 hours later in a standoff be- mony from those immunized or to-be- It is a rather unusual report that we fore the assailant was finally appre- immunized witnesses to seek a grant of have been picking up in the news media hended. immunity. This is provided for in the about what happened to Sergeant We just ask that the good Lord may United States statute, Title 18 of the Finch, but I think it certainly high- give strength to the family and to our U.S. Code, Section 6005(b)(2). May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3233 Unfortunately, the mechanism pro- Suharto dictatorship in Indonesia. I est person in the world, and it is esti- vided in that statute has been abused will be sending a letter to the Presi- mated that his family is worth between by the Democrat minority in its abso- dent tomorrow with a number of signa- $30 billion and $40 billion. This wealth lute effort to protect this administra- tures from my colleagues to urge him has been accumulated in a country tion from accountability. That particu- to help us do that. where the average income is less than lar statute requires a two-thirds vote History has taught us that it is not $20 a week and where child labor is by the committee, whichever commit- in the best interest of this country or widespread. tee it is of the House seeking to immu- for the people of affected countries The Suharto family owns much of In- nize witnesses. that the United States back corrupt, donesia’s wealth, and they have strong There are only two committees in authoritarian regimes whose leaders control over the economy there. It is the House that have that ratio such as are opposed by the vast majority of widely acknowledged the Suharto fam- guarantees the search for the truth. their people. ily makes huge sums of money by run- Unfortunately, the Committee on Gov- It was wrong for us to have supported ning cartels and receiving bribes and ernment Reform and Oversight is not the Mobuto government in Zaire, the kickbacks in perhaps the outstanding among them. Saddam Hussein government in Iraq, international example of crony capital- On two occasions now the Democrats the Noriega government in Panama, ism. have steadfastly denied both the com- and many other dictatorships that we mittee and this great body, as well as have backed over the years. It is wrong Every day, more and more Indo- the American people, the opportunity for us to support the Suharto govern- nesians are showing extraordinary to search for the truth and elicit truth- ment today. courage and are putting their lives on ful testimony from witnesses. That was As a result of our support for these the line by standing up to the Suharto what happened today. corrupt and detested governments, our dictatorship. Not only have tens of I have therefore, Mr. Speaker, intro- credibility in the world community thousands of Indonesian students duced legislation today to amend 18 suffers and our commitment to free- taken to the streets, but even retired U.S.C. 6005(b)(2) to require a simple ma- dom and human rights is rightfully generals and former cabinet ministers jority vote by a committee or sub- challenged. are now calling for General Suharto’s committee of the House in order to As you know, Mr. Speaker, General ouster. Mr. Amien Rais, a prominent seek immunity for witnesses. This is Suharto is currently in his seventh 5- Muslim leader, recently said, ‘‘I urge consistent with the other provision of year term at the helm of the Govern- the government of President Suharto 18 U.S.C. 6005(b)(1) which provides that, ment in Indonesia, which, according to to step down, as the people demand.’’ If for the House itself to grant immunity, the most recent U.S. State Department the brave people of Indonesia are pre- it only requires a majority vote. report on human rights, ‘‘remains pared to risk their lives to demand What is appropriate and proper for strongly authoritarian.’’ That is from that General Suharto step aside, how the House should apply, particularly in the U.S. State Department. can we ignore their cries for freedom? light of recent events whereby the pro- This same report states that in 1997 It is important that we act soon. If visions of the Code have been abused by the Suharto government ‘‘continued to General Suharto understands that we the Democratic minority and have pre- commit serious human rights abuses’’ no longer support him, and inter- vented the American people from and ‘‘demonstrated that it would not national support for his regime is fad- knowing the truth. I believe that it is tolerate challenges to the fundamental ing, it is far more likely that he will important to bring these two provi- elements of the political system by ar- give up power soon, avoiding unneces- sions of the United States Code to be resting and placing on trial some of its sary bloodshed. In other words, the consistent with each other, and there- critics.’’ sooner that the United States tells fore, I have introduced this legislation. The State Department report docu- Suharto that we will not support him, I commend it to this body. ments Suharto’s failure to allow free the more likely it is that he will per- Hopefully, once it is enacted, we will and fair elections in Indonesia in the haps flee his country and prevent the once again be able to do what I would most recent elections, just as he has widespread bloodshed that might oth- have hoped all of us in this body would done in the previous five held since erwise happen. want to do and would work towards 1971. Today, the leader of the free trade In my view, the President must uti- achieving, and that is a search for the lize all diplomatic tools available to truth and accountability by our top union movement in Indonesia, Muchtar Pahpahan, remains in jail because of expedite the replacement of the elected leaders in this country. Suharto dictatorship with a democrat- f his radical belief that workers in this country have the right of freedom of ically elected government. Such steps The SPEAKER pro tempore. Under a association. should include but not be limited to previous order of the House, the gentle- Further, General Suharto is widely immediate contact by Secretary of De- woman from New York (Mrs. MALONEY) acknowledged to be a dictator with an fense Cohen with the Indonesian mili- is recognized for 5 minutes. enormous amount of blood on his tary, urging them not to use their guns (Mrs. MALONEY addressed the hands. In 1965, when he toppled General against their own people. House. Her remarks will appear here- Sukarno as leader of Indonesia, it is es- The immediate freeze on all US weapons, after in the Extensions of Remarks.) timated that some half million Indo- spare parts and ammunition sales to Indo- f nesians were killed. Half a million, one nesia, including the financing of dual-use tech- The SPEAKER pro tempore. Under a of the great slaughters in modern his- nologies through the Export-Import Bank. previous order of the House, the gentle- tory. In conjunction with the United Nations, dis- woman from Texas (Ms. JACKSON-LEE) In East Timor, it is believed General patch an emergency relief group composed of is recognized for 5 minutes. Suharto’s decisions have led to the non-governmental representatives, including (Ms. JACKSON-LEE addressed the deaths of 200,000 people or one-third, human rights and famine-relief groups, to House. Her remarks will appear here- one-third of East Timor’s population. monitor the military and provide relief to fam- after in the Extensions of Remarks.) Just yesterday, six unarmed students ine stricken areas of East Timor and Indo- f were shot down in cold blood by the nesia. Suharto military for protesting against END U.S. SUPPORT FOR SUHARTO the dictatorship. Recent testimony be- Suspend further IMF loans to Indonesia until DICTATORSHIP IN INDONESIA fore Congress shows that Suharto’s fundamental human rights are established The SPEAKER pro tempore. Under a government is currently disappearing under a new government. previous order of the House, the gen- and torturing hundreds of its oppo- Mr. Speaker, you have the opportunity to tleman from Vermont (Mr. SANDERS) is nents. send a message to the Indonesian people and recognized for 5 minutes. General Suharto is known, not only the entire world that the United States will not Mr. SANDERS. Mr. Speaker, the for his brutality, but for his corruption support dictators who deny their people basic time is now to end U.S. support for the and his greed. He is the sixth wealthi- human rights. The time to act is now. H3234 CONGRESSIONAL RECORD — HOUSE May 13, 1998 DEMOCRATS ON CHAIRMAN BUR- PRESERVING THE INTEGRITY OF all across America in just the last few TON’S COMMITTEE JUSTIFIED IN THE BILL OF RIGHTS years. REFUSING TO VOTE FOR IMMU- The SPEAKER pro tempore (Mr. SES- Mr. Speaker, I enclose for the ECORD NITY SIONS). Under the Speaker’s announced R the article from Time Maga- zine of April 27 record entitled ‘‘Spirit- The SPEAKER pro tempore. Under a policy of January 7, 1997, the gen- ing Prayer into School.’’ tleman from Texas (Mr. EDWARDS) is previous order of the House, the gen- Mr. Speaker, let me take several ex- recognized for 37 minutes as the des- tleman from Michigan (Mr. CONYERS) is cerpts from this Time Magazine arti- ignee of the minority leader. recognized for 5 minutes. cle. ‘‘Politicians may bicker about Mr. CONYERS. Mr. Speaker, several Mr. EDWARDS. Mr. Speaker, in three weeks the gentleman from Okla- bringing back prayer, but in fact it is hours ago, the House Committee on already a major presence, thanks to homa (Mr. ISTOOK) will try to amend Government Reform and Oversight the many after-school prayer clubs.’’ the U.S. Bill of Rights, the sacred doc- gave a vote of no confidence to the The article goes on to say that ‘‘avail- ument that has served America for well campaign finance investigation being able statistics are approximate, but headed by my friend, the gentleman over 200 years. Perhaps the greatest contribution of they suggest that there are clubs in as from Indiana (Mr. BURTON). The com- many as one out of every four public mittee declined to immunize four wit- the American experiment in democracy is our Nation’s religious freedom. Be- schools in the country. In some areas, nesses and haul them before his com- the tally is much higher.’’ cause of our Bill of Rights, America is mittee. As a past chairman of that Later the article says this: ‘‘The re- not torn by religious wars. committee, I can tell you that what sulting Equal Access Act of 1984 re- In contrast to the religious strife in the committee did today was the only quired any federally-funded secondary Northern Ireland and in the Middle course of action they could take. school to permit religious meetings if East, Americans are at peace. In con- the schools allowed other clubs not re- trast to Islamic fundamentalist states b 2245 lated to curriculum, such as public- that use government to force religion My Democratic colleagues were not service Key Clubs. The crucial rule was upon its citizens, America’s Founding asking for much. They simply wanted that the prayer clubs had to be vol- Fathers had the wisdom to write a Bill procedures for subpoenas that would untary, student-run, and not convene of Rights that separated the power of give them a chance to object and force during class time.’’ government from the freedom of reli- a committee vote before such subpoe- The article goes on to point out the gion. Supreme Court in 1990 sustained this nas could be issued. They were willing These and others are powerful rea- to negotiate, but Chairman BURTON law by a vote of 8 to 1. sons why the Bill of Rights has never Let me read additional excerpts from was not. been amended in our Nation’s 207 I am sorry to say this, but Chairman the Time Magazine article. years; never, never has been amended ‘‘Evangelicals had already seized the BURTON’S recent actions have discred- since the Bill of Rights was adopted 207 ited the Committee on House Oversight moment. Within a year of the 1990 years ago. court decision, prayer clubs bloomed of the Congress, which is supposed to Yet Mr. ISTOOK not only wants to set the example for fair investigative spontaneously on a thousand high tamper with the Bill of Rights, he school campuses. Fast on their heals procedure. Never in my tenure as wants to rewrite the first 16 words of chairman of that committee, not once, came adult organizations dedicated to the First Amendment of the Bill of encouraging more. Proffitt’s, Ten- did the minority complain that a major Rights, those words that say ‘‘Congress investigation was unfair or conducted nessee-based organization, First Prior- shall make no laws respecting an es- ity, founded in 1995, coordinates inter- without their full involvement. tablishment of religion or prohibiting Consider the causes for our embar- church groups in 162 cities, working the free exercise thereof.’’ with clubs in 3,000 schools. The San rassment. More than 600 subpoenas Now, Mr. ISTOOK calls his bill the re- have been unilaterally issued, without Diego-based National Network of ligious freedom amendment. I would Youth Ministries has launched what is one of them ever having a committee suggest that James Madison and our called Challenge 2000, which pledges to vote or the involvement of members of Founding Fathers beat Mr. ISTOOK to bring the Christian gospel to ’every kid the committee; a stubborn and con- the punch by just over 200 years. The on every secondary campus in every tinuing refusal to subpoena any wit- real religious freedom amendment is community in our Nation by the year nesses requested by the Democratic called the First Amendment of our 2000.’ It also promotes a phenomenon members of the committee; a tasteless Constitution. I believe Mr. ISTOOK’S called ’See You at the Pole,’ encourag- decision to release the private con- bill should frankly be called the reli- ing Christian students country-wide to versations between Mr. Hubbell and his gious freedom destruction act. gather around their school flagpoles on wife, that had no connection to the It is amazing that some of the same the third Wednesday of each Septem- subject matter that the committee was people who do not entrust the Federal ber; last year, 3 million students par- investigating; the misleading editing of Government to deliver our mail want ticipated.’’ the tape transcripts, which should have government involved in something as Mr. Speaker, I would suggest that never been released in the first place, sacred as our children’s and grand- this article points out very clearly that forcing a public rebuke by the Speaker children’s prayers. To change the Bill Mr. ISTOOK’s allegation that somehow himself for the embarrassment caused of Rights for any reason is a grave un- we simply do not have prayer at our to the House of Representatives; and, dertaking. To change it for reasons public schools does not bear out with finally, growing evidence that the com- that simply do not exist is wrong. today’s facts. mittee may be improperly and perhaps Mr. ISTOOK bases his amendment on The Time article also says, ‘‘Says illegally coordinating its investigation several myths. His arguments are a Doug Clark,’’ quoting him, ‘‘field direc- with that of Independent Counsel Ken- temple built on a false foundation. tor of the National Network of Youth neth Starr, which, by Federal law, is Myth number one: Mr. ISTOOK alleges Ministries, ‘Our energy is being poured supposed to remain secret. that students cannot pray in public into what kids can do voluntarily and So the failure of the committee’s in- schools. Nothing could be further from on their own. That seems to us to be vestigation carries an important lesson the truth. The law of this land allows where God is working.’ ’’ for all of us in Congress: The concerns students to pray before, after, and even They then go on in the article finally of every member of a committee, espe- during school. What the law prohibits, to say, ‘‘For now, the prospects for cially an investigative committee, can- as it should, as intended by our Found- prayer clubs seem unlimited. not be ignored or shunted aside by pro- ing Fathers, is that government-spon- The doom of Mr. ISTOOK’s predictions cedural maneuvers. sored prayers should be prohibited. simply is not there. I am hopeful that my colleagues will Time Magazine on April 27, 1998, and Mr. Speaker, the fact is that students keep these lessons in mind as we move CNN have recently reported there are can pray silently in the classroom, or forward from the ashes of the BURTON thousands of prayer and Bible groups out loud over the lunch table. For any- investigation. that have been formed in public schools one to suggest that prayer is not alive May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3235 and well in schools is not facing re- believe that Istook would harm reli- proportions, stemming from its words ality. For anyone to suggest that gious freedom in America, not defend that we cannot ‘‘Deny equal access to somehow God has been taken out of it. benefit on account of religion.’’ Who our schools, underestimates the God These groups would be disappointed knows how many decades of court deci- that I and my family worship. No per- to know that Mr. ISTOOK has referred sions it might take and divisiveness in son, no law, has the power to take an to opponents of his amendment as our country to interpret that particu- all-powerful God from anyplace in this ‘‘demagogues,’’ and if opposing Istook lar language. But certainly, on the sur- world, much less a school classroom. and defending the words of James face, it could appear that this language Myth number two, used by Mr. Madison and our Bill of Rights, make of the gentleman from Oklahoma (Mr. ISTOOK to push his amendment of the me a demagogue, Mr. Speaker, then I ISTOOK) could basically have required Bill of Rights: Mr. ISTOOK suggests that am in good company. Let me just list the Federal Government to fund David liberal Federal courts have misinter- some of that company that oppose the Koresh and the Branch Davidians in preted our Founding Fathers. Istook amendment. my hometown of Waco, Texas for a That is simply not the case. To begin The American Association of School child care program or a child care cen- with, the majority of these so-called Administrators; the American Associa- ter because other groups, nonreligious liberal Federal courts have been ap- tion of University Women; the Amer- groups, were given Federal funding for pointed by Republican presidents, Ger- ican Baptist Churches, USA; the Amer- child care centers, despite the fact that ald Ford, George Bush, and that well- ican Jewish Committee; the American before his death, Mr. Koresh said that, known liberal president, Ronald Jewish Congress; the Antidefamation in his religious beliefs, that God had Reagan. League; the Baptist Joint Committee encouraged him to have sex with girls I would also point out that Thomas on Public Affairs; the Episcopal as young as 10 years old. Jefferson could not have been more Church; the Lutheran Office for Gov- I am offended by the possibility that clear in his interpretation of the First ernmental Affairs; the Evangelical Lu- America’s taxpayers’ dollars could go Amendment of the Bill of Rights inas- theran Church in America; the Na- to fund such religious groups and pro- much as it deals with religious free- tional Association of Elementary grams. dom. This is what Mr. Jefferson, Thom- School Principals; the National Edu- Fifth, the Istook amendment could as Jefferson, our third president, the cation Association; the Southern lead to majoritarian prayers in many author of our Declaration of Independ- Christian Leadership Conference; the of our public schools, and there are ence, said in his letter to the Danbury United Church of Christ, Office for many others. But let me just read from Baptists. Church and Society. a statement prepared by the Coalition ‘‘Religion is a matter which lives I join in good company, Mr. Speaker, to Preserve Religious Liberty. They solely between man and his God that along with our Founding Fathers, such said this: he owes account to none other for his as Jefferson and Madison and others, in The following are a few examples of activi- faith or worship, that the legislative defending the Bill of Rights, not ties that would be permitted under the powers of government reach actions amending it; not changing it, not un- amendment: only, and not opinions, I contemplate dermining it. A tax could be levied for support of sectar- with sovereign reference that act of the I agree with Brent Walker, the Gen- ian schools. whole American people which declared Crosses, stars of David, or statues of the eral Counsel of the Baptist Joint Com- goddess Gaia could be erected in public that their legislatures should ‘‘make mittee, who said this: ‘‘The Istook places such as courthouses, public schools no law respecting an establishment of amendment is unnecessary, unwise, and military bases to represent religious her- religion or prohibiting the free exercise and unfaithful to our heritage of reli- itage or belief. thereof,’’ thus, building a wall of sepa- gious freedom and separation of church New testament readings and specific pray- ration between church and state.’’ and State.’’ ers could be prescribed for all meetings of The fact is that modern day Federal The fact is that, in my words, Mr. government employees (except public schools) as long as no one was required to judges, including the majority of Speaker, the Istook amendment is a judges that have been appointed in our participate. house built on sand. Devotional Bible readings or meditations Federal courts by Mr. Bush and Mr. b 2300 from the Quran could be required in public Reagan and Mr. Ford, have interpreted schools as long as no one was required to today’s law exactly to be consistent Its foundation is flawed, unfounded, participate. with the intention of Thomas Jefferson and false. In the days ahead, I will also Upon a student’s suggestion, a teacher and our Founding Fathers; not to de- take time to point out the numerous could lead prayers for his or her kinder- mean religion by separating it from possible harmful consequences of the garten classes, as long as the prayers were government, but to respect religion Istook amendment. not prescribed by the government and par- To name just a few this evening, the ticipation was not required. and to defend religious liberty by the Bibles, Books of Mormon or Qurans could very act of building a wall of separa- Istook amendment could first, allow be printed or distributed to all public school tion to protect religion from the intru- Satanic prayers and even animal sac- students or public employees as a way of rec- sion of government. rifices as part of prayer rituals in first ognizing the people’s heritage. Myth number three Mr. ISTOOK has and second and third grade public Public schools could be required to teach gone so far as to call opponents of this school classrooms across America. creation science along with evolution as a bill ‘‘demagogues.’’ He has suggested Second, it could lead to censorship of way of recognizing the beliefs and heritage of prayers. the people. that those opposed to his amendment Tax money could be used to fund mission are somehow committed to keeping Third, it could allow outside reli- programs sponsored by Baptists, Buddhists children from praying in schools. gious groups to proselytize young stu- or Branch Davidians, Methodists, Mormons He has also suggested, or others have dents on public school grounds so that or Mennonites. suggested, I should say, other support- our children will be going to public A judge or juror could lead the courtroom ers of Mr. ISTOOK, that opponents of schools learning reading, writing and in prayer and limit such prayers to the ma- Istook are somehow anti-religion. arithmetic and perhaps will be pros- jority faith of the surrounding community. The implication that somehow Istook elytized by some religious group such Mr. Speaker, I am afraid it will take supporters are pro-prayer and pro-reli- as those we see at our Nation’s airports far longer than one hour to point out gion and opponents of Mr. ISTOOK’s across America. I am not sure Ameri- why so many religious groups and peo- amendment of the Bill of Rights are ca’s parents sending their children to ple of deep religious faith are opposing anti-prayer and anti-religion could public schools want to have to worry the Istook amendment. For that rea- well be a surprise to the numerous reli- about religious groups, or possibly even son, I would like to focus on some of gious groups strongly opposing the cults, proselytizing their children the cases of ‘‘Religious persecution’’ Istook amendment. Let me mention while they should be learning on the that Istook supporters use to justify just a few of the religious and edu- school grounds. their taking such drastic action as cational groups opposing the Istook Fourth, the Istook amendment could amending our Bill of Rights for the amendment, for the very reason they be an unfunded mandate of Biblical first time in our Nation’s history. H3236 CONGRESSIONAL RECORD — HOUSE May 13, 1998 I would refer to a recent publication told by school officials that ‘‘She could tion and the Bill of Rights, than they by the People For The American Way not read the Bible on the school bus.’’ had in reviewing the Branch Davidian Action Fund, and, Mr. Speaker, I would This is the response, according to this situation in my hometown of Waco. like to submit this statement for the report: ‘‘Within days, Audrey was back In less than 3 weeks Members must RECORD following my remarks. This is reading her Bible on the bus after only choose between America’s proud 200- what they say in the report: a few phone calls to the principal’s of- year history of religious freedom ver- The true facts behind the Christian Coali- fice in 1989.’’ sus the world’s history of religious in- tion’s ‘‘religious persecution’’ claims. Mr. Speaker, it is amazing to me that tolerance caused by the commingling As part of its May 22, 1977 Religious Free- Members of this House and supporters of government and religion. dom Celebration on Capitol Hill, the Chris- of the Istook amendment would use a How ironic and sad it would be for tian Coalition is presenting 4 claims of what case from 1989, a problem that was re- America, which is a beacon of religious it calls ‘‘religious persecution’’ which pur- portedly justify a constitutional amendment solved within a few hours with a hand- freedom to the world, to take the first concerning religion. In fact, these claims are ful of phone calls, knowing that that step down the path of Islamic fun- nothing of the sort. Instead, they are in- problem had been corrected because of damentalist states to prove how reli- stances where officials properly applied the misinterpretation of the law, to use gious freedom is imperiled when the school or job rules without improper reli- that case to justify massacring the wall of separation between church and gious discrimination, or, in one instance, First Amendment of the Bill of Rights state is dismantled. where school officials made a mistake and is unbelievable. The choice is clear, in my opinion. promptly corrected it. In the case of the The final case of religious persecu- Madison and Jefferson were right, and school-related examples that the Christian my colleague, the gentleman from Coalition is using, all 3 incidents are at least tion used to undermine our constitu- 5 years old. Religious freedom should be cele- tional protections of religious freedom Oklahoma (Mr. EARNEST ISTOOK), no brated in our country with the true facts goes to the story of Brad Hicks, a disrespect intended, is wrong. I believe about the First Amendment which fully pro- North Carolina police officer who was the Bill of Rights should be protected, tects religious liberty for all people. ‘‘Reprimanded by his police depart- not dismantled. The People For The American Way ment for offering a religious tract to a The materials referred to earlier are Action Fund statement then goes on to woman whom he had pulled over for as follows: mention these purported claims by the speeding and was later fired for refus- [Prepared by People for the American Way Christian Coalition of religious perse- ing a police department request to re- Action Fund] cution. Brittany Settle Gossett, ‘‘Re- frain from speaking about religion THE TRUE FACTS BEHIND THE CHRISTIAN ceived an ‘‘F’’ on a research paper sim- whenever in a police uniform.’’ The re- COALITION’S ‘RELIGIOUS PERSECUTION’ CLAIMS ply because her topic was Jesus sponse is this: ‘‘According to the police As part of its May 22, 1977 Religious Free- Christ.’’ The Christian Coalition letter, chief, Hicks was dismissed not for dom Celebration on Capitol Hill, the Chris- May 8, 1997. The true facts behind the speaking about religion, but because he tian Coalition is presenting four claims of what it calls ‘‘religious persecution’’ which claim, according to this report, are refused to stop proselytizing to citizens these: ‘‘As both a Federal trial and ap- purportedly justify a constitutional amend- while on duty. As Hicks admitted, for 7 ment concerning religion. In fact, these peals court found, Ms. Gossett grade on months, ‘‘Whenever I would pull some- claims are nothing of the sort. Instead, they this 1991 assignment was based not on one over to come into contact with are instances where officials properly applied religious discrimination, but on her them on some kind of call, while on school or job rules without improper reli- ‘‘refusal to comply with the require- duty and on police business, he sought gious discrimination or, in one instance, ments’’ of the teacher, including to proselytize and witness.’’ where school officials made a mistake and changing her paper topic, without per- promptly corrected it. In the case of the b 2310 mission, and choosing a topic with school-related examples that the Christian which she was already familiar.’’ The chief explained that, ‘‘You can- Coalition is using, all three incidents are at not stop someone on the road as a po- least 5 years old. Religious freedom should ‘‘As one judge explained, ‘‘The stu- be celebrated in our country with the true dent has no constitutional right to do lice officer and proceed to give them a facts about the First Amendment, which something other than that assignment church sermon.’’ fully protects religious liberty for all people. and receive credit for it. The First Mr. Speaker, I would agree with the The Christian Coalition claim: Amendment already protects a stu- judicial decision, that a police officer Brittany Settle Gossett ‘‘received an F on dent’s right to address religious topics in uniform should not be allowed to use a research paper simply because her topic in homework if relevant and otherwise the power and threatening nature, at was Jesus Christ.’’ (Christian Coalition let- times, of his government position to ter May 8, 1997) compliant with the assignment.’’ The true facts behind the claim: The second purported claim of reli- proselytize his personal religious views As both a federal trial and appeals court gious persecution that is being used to upon the citizens of this land. found, Ms. Gossett’s grade on this 1991 as- justify amending the Bill of Rights In 3 weeks, Mr. Speaker, Members of signment was based not on religious dis- goes to the case of Kelly DeNooyer who this House must make a choice. They crimination, but on her ‘‘refusal to comply ‘‘Was told by her school principal that must choose between defending our Bill with the requirements’’ of the teacher, in- she could not show a videotape of her- of Rights or dismantling it. Members cluding changing her paper topic without self performing a religious song in must choose between the wisdom of our permission and choosing a topic with which Founding Fathers, such as James she was already familiar. 1995 Lexis Fed. church for her part in the VIP of the App. 141, 4–5. As one judge explained, ‘‘the week program in her school classroom Madison and Thomas Jefferson, and the student has no constitutional right to do ‘‘because it had Christian things in it.’’ latest and often-amended version of the something other than that assignment and The response of the facts according Istook amendment. receive credit for it.’’ Id. at 20. The First to this report is this: ‘‘As a Federal We must choose in this House be- Amendment already protects a student’s right Court of Appeals found, the school’s de- tween the cautious, careful consider- to address religious topics in homework if cision in 1990 was upheld based not on ation of our Founding Fathers as they relevant and otherwise compliant with the the content of the video, but because drafted that cherished document we assignment. The Christian Coalition claim: the purpose of the program was to in- know as the Bill of Rights, versus a Kelly DeNooyer ‘‘was told by her school crease ‘‘students’ communication skills constitutional amendment by the gen- principal that she could not show’’ a video- by requiring a live classroom presen- tleman from Oklahoma (Mr. ISTOOK) tape of herself performing a religious song in tation by the student,’’ and that pur- that received 1 day of hearings, 1 day of church for her part of the VIP of the Week pose ‘‘would be frustrated if every stu- hearings in 1998. program in her school classroom ‘‘because it dent were permitted to show a video- Mr. Speaker, it is amazing to me that had Christian things in it.’’ (Rutherford Inst. tape instead.’’ the leadership of this House would even Rep. Oct. 1992) Example number 3 used by the sup- allow a measure to come to this floor The true facts behind the claim: As a federal court of appeals found, the porters of the Istook amendment to attempting to amend the first 16 words school’s decision in 1990 was upheld based not say why Mr. Madison and Mr. Jeffer- of the First Amendment of our Bill of on the content of the video, but because the son’s first amendment is somehow in- Rights, after having less days of hear- purpose of the program was to increase ‘‘stu- adequate today. Audrey Pearson was ings on it, on amending the Constitu- dents’’ communication skills by requiring a May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3237 ‘live’ classroom presentation by the stu- in public schools. After that, any worship on Evangelicals had already seized the mo- dent,’’ and that purpose ‘‘would be frustrated school premises, let alone a prayer club, was ment. Within a year of the 1990 court deci- if every student were permitted to show a widely understood as forbidden. But for the sion, prayer clubs bloomed spontaneously on videotape’’ instead. 1993 U.S. App. Lexis at 4. past few years, thanks to a subsequent court a thousand high school campuses. Fast on case, such groups not only have been legal their heels came adult organizations dedi- STATEMENT PREPARED BY THE COALITION TO but have become legion. cated to encouraging more. Proffitt’s Ten- PRESERVE RELIGIOUS LIBERTY The club’s explosive spread coincides with nessee-based organization, First Priority, a more radical but so far less successful The following are a few examples of activi- founded in 1995, coordinates interchurch movement for a complete overturn of the ties that would be permitted under the groups in 162 cities working with clubs in 1963 ruling. On the federal level is the Reli- amendment: 3,000 schools. The San Diego-based National gious Freedom amendment, a constitutional Network of Youth Ministries has launched A tax could be levied for support of sectar- revision proposed by House Republican Er- ian schools. ‘‘Challenge 2000,’’ which pledges to bring the nest Istook of Oklahoma, which would rein- Christian gospel ‘‘to every kid on every sec- Crosses, stars of David or statues of the state full-scale school prayer. It passed the goddess Gaia could be erected in public ondary campus in every community in our Judiciary Committee 16 to 11, last month but nation by the year 2000.’’ It also promotes a places such as courthouses, public schools will probably fare less well when the full and military bases to represent religious her- phenomenon called ‘‘See You at the Pole,’’ House votes in May. One of many local bat- encouraging Christian students countrywide itage or belief. tlefields is Alabama, where last week the New Testament readings and specific pray- to gather around their school flagpoles on state senate passed a bill mandating a daily the third Wednesday of each September; last ers could be prescribed for all meetings of moment of silence—a response to a 1997 fed- year, 3 million students participated. Adult government employees (except public eral ruling voiding an earlier state pro- groups provide club handbooks, workshops schools) as long as no one was required to school prayer law. Governor Fob James is for student leaders and ongoing advice. Net- participate. expected to sign the bill into law, triggering work of Youth Ministries leader Paul Devotional Bible readings or meditations the inevitable church state court challenge. Fleischmann stresses that the resulting from the Quran could be required in public But members of prayer clubs like the one clubs are ‘‘adult supported,’’ not adult-run, schools as long as no one was required to at Patrick Henry High aren’t waiting for the ‘‘If we went away,’’ he says, ‘‘they’d still do participate. conclusion of such epic struggles. They have it.’’ Upon a student’s suggestion, a teacher already, brought worship back to public The club at Patrick Henry High certainly could lead prayers for his or her kinder- school campuses, although with some state- would. The group was founded two years ago garten classes, as long as the prayers were imposed limitations. Available statistics are with encouragement but no specific stage approximate, but they suggest that there are not prescribed by the government and par- managing by local youth pastors. This after- clubs in as many as 1 out of every 4 public ticipation was not required. noon its faculty adviser, a math teacher and schools in the country. In some areas the Bibles, Books of Mormon or Qurans could Evangelical Free Church member named tally is much higher, evengelicals in Min- be printed and distributed to all public Sara Van Der Werf, sits silently for most of neapolis-St. Paul claim that the vast major- school students or public employees as a way the meeting, although she takes part in the ity of high schools in the Twin Cities region of recognizing the people’s heritage. final embrace. The club serves as an emo- have a Christian group. Says Benny Proffitt, Public schools could be required to teach tional bulwark for members dealing with life creation science along with evolution as a a Southern Baptist youth-club planter: ‘‘We at a school where two students died last year way of recognizing the beliefs and heritage of had no idea in the early ‘90s that the re- in off-campus gunfire. Today a club member the people. sponse would be so great. We believe that if requests prayer for ‘‘those people who got in Tax money could be used to fund mission we are to see America’s young people come that big fight [this morning].’’ Another asks programs sponsored by Baptists, Buddhists to Christ and America turn around, it’s the Lord to ‘‘bless the racial-reconciliation or Branch Davidians; Methodists, Mormons going to happen through our schools, not our stuff.’’ (Patrick Henry is multiethnic; the or Mennonites. churches.’’ Once a religious scorched-earth prayer club is overwhelmingly white.) Just A judge or juror could lead the courtroom zone, the schoolyard is suddenly fertile before Easter the group experienced its First in prayer and limit such prayers to the ma- ground for both Vine and Branches. Amendment conflict: whether it could hang The turnabout culminates a quarter-cen- jority faith of the surrounding community. posters on all school walls like other non- tury of legislative and legal maneuvering. school-sponsored clubs. Patrick Henry prin- [From the Time—April 27, 1998] The 1963 Supreme Court decision and its broad-brush enforcement by school adminis- cipal Paul McMahan eventually decreed that SPIRITING PRAYER INTO SCHOOL trators infuriated conservative Christians, putting up posters is off limits to everyone, POLITICIANS MAY BICKER ABOUT BRINGING BACK who gradually developed enough clout to leading to some resentment against the PRAYER, BUT IN FACT IT’S ALREADY A MAJOR force Congress to make a change. The result- Christians. Nonetheless, McMahan lauds PRESENCE—THANK TO THE MANY AFTER- ing Equal Access Act of 1984 required any them for ‘‘understanding the boundaries’’ be- SCHOOL PRAYER CLUBS federally funded secondary school to permit tween church and state. In Alabama, the new school-prayer bill at- (By David Van Biema) religious meetings if the schools allowed other clubs not related to curriculum, such tempts to skirt those boundaries. The legis- On a overcast afternoon, in a modest room as public-service Key Clubs. The crucial rule lation requires ‘‘a brief period of quiet reflec- in Minneapolis, 23 teenagers are in earnest was that the prayer clubs had to be vol- tion for not more than 60 seconds with the conversation with one another—and with the untary student-run and not convened during participation of each pupil in the class- Lord. ‘‘Would you pray for my brother so class time. room.’’ Although the courts have upheld that he can raise money to go [on a preach- Early drafts of the act were specifically some moment-of-silence policies, civil lib- ing trip] to Mexico?’’ asks a young woman. pro-Christian. Ultimately, however, its argu- ertarians say they have struck down laws ‘‘Out church group is visiting juvenile-deten- ment was stated in pure civil-libertarian featuring pro-prayer supporting language of tion centers, and some are scared to go,’’ ex- terms: prayers that would be coercive if re- the sort they discern in Alabama’s bill. In plains a boy. ‘‘Pray that God will lay a bur- quired of all students during class are pro- the eyes of many church-club planters, such den on people’s hearts for this.’’ tected free speech if they are just one more fracases amount to wasted effort. Says Doug ‘‘Pray for the food drive,’’ says someone. after-school activity. Nevertheless, recalls Clark, field director of the National Network ‘‘There’s one teacher goin’ psycho because Marc Stern, a staff lawyer with the Amer- of Youth Ministries: ‘‘Our energy is being kids are not turning in their homework and ican Jewish Congress, ‘‘there was great fear poured into what kids can do voluntarily and stuff. She’s thinking of quitting, and she’s a that this would serve as the base for very in- on their own. That seems to us to be where real good teacher.’’ trusive and aggressive proselytizing.’’ Ac- God is working.’’ ‘‘We need to pray for all the teachers in cordingly, Stern’s group and other organiza- Reaction to the prayer clubs may depend the school who aren’t Christians.’’ comes a tions challenged the law—only to see it sus- on which besieged minority one feels part of. voice from the back. tained, 8 to 1, by the Supreme Court in 1990. In the many areas where Conservative Chris- And they do, Clad in wristbands that read Bill Clinton apparently agreed with the tians feel looked down on, they welcome the w.w.j.d. (‘‘What Would Jesus Do?’’) and T court. The President remains opposed to emotional support for their children’s faith. shirts that declare upon this rock I will build compulsory school prayer. But in a July 1995 Similarly, non-Christians in the Bible Belt my church, the kids sing Christian songs, speech he announced that ‘‘nothing in the may be put off by the clubs’ evangelical fer- discuss Scripture and work to memorize the First Amendment converts our public vor; members of the chess society, after all, week’s Bible verse, John 15:5 (‘‘I am the vine schools into religion-free zones or requires do not inform peers that they must push and you are the branches’’) Hours pass. As all religious expression to be left at the pawns or risk eternal damnation. Not every- night falls, the group enjoys one last mass schoolhouse door.’’ A month later Clinton one shares the enthusiasm Proffitt recently hug and finally leave its makeshift chapel— had the Department of Education issue a expressed at a youth rally in Niagara Falls, room 133 of Patrick Henry High School. Yes, memo to public school superintendents that N.Y.: ‘‘When an awakening takes place, we a public high school. If you are between ages appeared to expand Equal Access Act protec- see 50, 100, 1,000, 10,000 come to Christ. Can 25 and 45, your school days were not like tions to include public-address announce- you imagine 100, or 300, come to Christ in this. In 1963 the Supreme Court issued a ments of religious gatherings and meetings your school? We want to see our campuses landmark ruling banning compulsory prayer at lunchtime and recess. come to Christ.’’ Watchdog organizations H3238 CONGRESSIONAL RECORD — HOUSE May 13, 1998 like Americans United for the Separation of Mr. Speaker, this scandal involves them to build their submarines in a Church and State report cases in which such potential treason, and if in fact the quiet manner that makes it extremely zeal has approached harassment of students facts are true as they have been out- difficult and in some cases impossible and teachers, student prayer leaders have lined in media reports, which we are for our U.S. intelligence sources to seemed mere puppets for adult evangelists, and activists have tried to establish prayer currently trying to investigate, I think monitor these submarines as they trav- clubs in elementary schools, where the de- will require articles of impeachment. el across the oceans of the world. This scription ‘‘student-run’’ seems disingenuous. Mr. Speaker, there was a story that is a very egregious violation of trans- Nevertheless, the Jewish committee’s ran in the New York Times in the early ferring technology that directly Stern concedes that ‘‘there’s been much less part of April that outlined a tech- threatens the U.S. and our people, as controversy than one might have expected nology transfer involving American well as our allies. from the hysterical predictions we made.’’ companies and institutions in China in- But in addition, Mr. Speaker, the Americans United director Barry Lynn notes volving the Long March space launch American people need to understand that ‘‘in most school districts, students are spontaneously forming clubs and acting upon vehicle. In February of 1996 the Long something else about the Loral Cor- their own and not outsiders’ religious agen- March space launch vehicle exploded, poration. First of all, the CEO of the das.’’ A.C.L.U. lobbyist Terri Schroeder also blew up, and destroyed a $200 million Loral Corporation, Mr. Schwartz, was supports the Equal Access Act, pointing out satellite built by the Loral Company the largest contributor to the Demo- that the First Amendment’s Free exercise that it was supposed to place into cratic National Committee in the year clause protecting religious expression is as orbit. during which this entire process oc- vital as its Establishment Clause, which pro- What happened after that explosion, curred. That in itself raises some con- hibits government from promoting a creed. Mr. Speaker, is the subject of intense cerns. The civil libertarians’ acceptance of the investigation right now, but there are clubs owes something to their use as a de- The questions that need to be an- fense against what they consider a truly bad some facts that we do know. What we swered are, did the CEO of Loral Cor- idea: Istooks’s school-prayer amendment. do know is that there was some degree poration’s involvement in contributing Says Lynn: ‘‘Most reasonable people say, ‘If of cooperation between one and per- hundreds of thousands of dollars of per- so many kids are praying legally in the pub- haps two American companies and the sonal wealth to one political party af- lic schools now, why would you possibly Chinese government and their military fect the President’s decision to waive a want to amend the Constitution?’ ’’ and space agencies that allowed for a requirement that basically undermined For now, the prospects for prayer clubs technology transfer to assist the Chi- a judicial investigation, a criminal ju- seem unlimited. In fact, the tragic shooting nese in not just their commercial space of eight prayer-club members last December dicial investigation of this incident? in West Paducah, Ky., by 14-year-old Michael launch program, but, more impor- We are attempting to find that out Carneal provided the cause with martyrs and tantly, their ability to place long range right now, Mr. Speaker. produced a hero in prayer-club president Bob missiles into the upper atmosphere and The American people and our col- Strong, who persuaded Carneal to lay down have a capability of deploying multiple leagues in this institution need to his gun. Strong recalls that the club’s daily warheads, posing an extremely signifi- know whether or not this administra- meetings used to draw only 35 to 60 students cant threat to the U.S. and our allies. tion basically allowed a technology to out of Heath High School’s 600. ‘‘People The military significance of the tech- be transferred to China that was up didn’t really look down on us, but I don’t nology transfer that took place follow- until that point in time prohibited, and know if it was cool to be a Christian,’’ he ing this explosion was of such gravity says. Now 100 to 150 teens attend. Strong has that appears not only is that in itself since toured three states extolling the value that a criminal investigation was an outrageous act; but then on top of of Christian clubs. ‘‘It woke a lot of kids opened by the U.S. Justice Depart- that, did the influence of the CEO of up,’’ he says. ‘‘That’s true everywhere I’ve ment, and a grand jury was empaneled. that corporation, and the fact that spoken. This is a national thing.’’ The grand jury was empaneled to con- that corporation hired one of the most f sider whether indictments were war- well-connected lobbyists in the city, ranted in this cooperative technology TRANSFER OF TECHNOLOGY whose brother in fact had been working transfer with the Chinese. at the White House, did that connec- COULD REPRESENT MAJOR SE- However, before any formal charges CURITY BREACH tion have an impact on the President’s were filed, the criminal inquiry was decision? If it did, in my opinion, Mr. The SPEAKER pro tempore (Mr. SES- dealt a very serious blow two months Speaker, that is treason. SIONS). Under the Speaker’s announced ago, in fact, this would have been in b policy of January 7, 1997, the gen- February or March of this year, when 2320 tleman from Pennsylvania (Mr. President Clinton quietly authorized Mr. Speaker, the whole issue of this WELDON) is recognized for the remain- the export to China of similar tech- technology transfer itself is a scandal. ing time until midnight as the designee nology by one of the companies under Newspapers across this city and across of the majority leader. investigation, the Loral Corporation. this country, through bits and pieces, Mr. WELDON of Pennsylvania. Mr. So in effect, the President’s quiet au- have picked up the story and have at- Speaker, I do not rise to speak in the thorization of this technology transfer, tempted to piece it together. well to talk about scandals in this city. which up until this time was not al- The Speaker of the House, leadership Many of my colleagues do, and many of lowed under U.S. law, basically took on both sides of the national security our colleagues talk about the latest the entire foundation away from the effort in this body are concerned about scandal of the day, whether it is in the Justice Department investigation. In the technology transfer itself as well as White House or from other parts of our fact, Mr. Speaker, we know the Justice whether or not there was an impact of society. I do not like to do that, and in Department opposed that decision by this CEO’s involvement with one politi- fact, I have not done that. the White House, arguing that it would cal party and convincing the President Mr. Speaker, I rise tonight to talk be much more difficult to prosecute to waive the requirement that would about, first of all, an issue that I usu- the companies if the government gave have allowed the criminal prosecution ally speak about on the floor when I its blessing to the deal that had oc- of Loral and possibly Hughes to move get the opportunity. That is our na- curred. In fact, it is probably now im- forward. tional security, and our relationship possible to have any indictments We need to know the answers, and we with those countries who have been our against Loral and Hughes because of need to have that information provided adversary, or who may be our adver- the President’s actions. to us. To me it is an absolute outrage sary in the future. Why is this a scandal, Mr. Speaker? that this occurred even without the Tonight, unfortunately, Mr. Speaker, First of all, and I am going to get into connection of the dollars from the CEO I rise to talk about both of those this in great detail, this, perhaps, will of Loral and his contributions to the issues, our national security and a do as much harm to our security as Democratic National Committee. scandal that is currently unfolding that situation that occurred years ago But, Mr. Speaker, I think even of that I think will dwarf every scandal when the Russians were able to get our more significance to us for the long- that we have seen talked about on this quieting technology that they basi- term security of our country is the fact floor in the past 6 years. cally illegally acquired, that allowed that this is a continuing pattern that May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3239 we have seen over the past six years of People’s Liberation Army both times I supercomputers which is required by this administration, advocating an ag- went. I gave the first lecture at Fudan U.S. law. Facts have shown that com- gressive arms control policy but in fact University in the Lincoln lecture se- merce officials for this government at doing the complete opposite when it ries, and I will go back to China this our embassy in Beijing were denied comes to violations of arms control year where I will deliver lectures at permission by the Chinese government agreements or the transfer of sensitive two other Chinese universities where to inspect the university where these technology. they will name me an honorary mem- supercomputers were headed prior to Mr. Speaker, there are those who are ber of their faculty. the export of these digital high per- sitting in their offices tonight or those I mention these facts, Mr. Speaker, formance computers. around the country who would say, because I want our colleagues and I In fact, according to a December 19, here is another Republican just railing want the American people to under- 1997 letter to Lee Yu Hu, director gen- about this administration or railing stand that it is not my intent to sensa- eral for science and technology at Chi- about issues involving security, some- tionalize the problems that I am going na’s ministry of foreign trade and eco- one who wants to use China and per- to outline here or to think that I am nomic cooperation or MFTEC, cosigned haps Russia as a scapegoat for larger always critical of this administration by Commerce Department officials, defense budgets. when it comes to our relationship with Amanda Bus, assistant secretary for Let me state at the outset, Mr. other countries throughout the world. export enforcement, and Roger Speaker, that I have supported this ad- But, Mr. Speaker, this administration Mayjack, assistant secretary for export ministration in many instances on this has a major problem in the arms con- administration, and I quote, We were floor on security issues. In fact, just trol area. And this country needs to disappointed at MFTEC’s decision not several months ago, I traveled to Mos- understand it, needs to think through to allow an on-site end-use check and cow very quietly to make the case to the effect that this policy is having on refusal to permit an embassy rep- members of the Russian State Duma us in the short-term and, more impor- resentative to travel to the stated uni- that they should understand the reason tantly, needs to understand the under- versity at the university’s invitation. why President Clinton was about to mining this policy is going to have on Because we were unable to work take on Saddam Hussein if he, in fact, future stability in the world in the 21st through MFTEC, we gathered informa- did not allow the U.N. inspectors to century. tion on the end user through other complete their investigations through- I have given you one specific pro- sources and have approved the license out Iraq. I did that in support of this liferation case, an egregious case that through those means. President because I felt that Russia occurred this year that involves the po- A case where the administration did should understand why Americans were tential for the largest scandal I think not even abide by the laws on the concerned and why Democrats and Re- that this administration will have en- books of this country to secure a com- publicans were supportive of our Presi- countered since it took office 6 years plete understanding of where these dent in this very difficult decision to ago. But I want to go through some supercomputers were headed. Why is stand down Saddam Hussein when he other instances, Mr. Speaker, because that so important? basically ignored the requirements of unfortunately we see a pattern, a pat- the United Nations. tern that I think is causing us a more b 2330 In addition, Mr. Speaker, I take great destabilized relationship with the pride in working in a very bipartisan major powers of the world, with the It is so important because this body way with the Members of our Commit- emerging powers of the world and with and the other body passed a new law in tee on National Security. In fact, just rogue nations. 1997 requiring that we know where this last week we reported our bill out of This is extremely important because administration is allowing super- committee with a vote of 51 to 1, a we are reading the headlines, Mr. computers to be sold. strong bipartisan measure that had Speaker, every day, most recently of Well, why would we pass a law like Democrat and Republican active in- India conducting underground nuclear that, Mr. Speaker? We passed a law volvement. And next week we will have tests. We were assured by this adminis- like that because in 1995 this adminis- that bill on the floor. Again, it will be tration that arms control agreements tration allowed the export of high- a strong bipartisan effort. would prevent countries like India speed supercomputers to Russia. Now, In terms of Russia and China, Mr. from further proliferating nuclear these supercomputers going to Russia, Speaker, I take great pride in leading weapons by conducting underground Mr. Speaker, were supposedly intended this body in our interactive effort with tests. Right before these underground for a project involving wetlands analy- Russia. In fact, next week, again, I will tests by India, in fact about a month sis. When the actual determination was be hosting senior leaders of the Rus- earlier, the same newspapers reported made as to where these supercomputers sian State Duma from all nine major on their front pages Pakistan testing a ended up, we found that these super- factions as we begin again the ongoing medium range missile, which perhaps computers ended up in nuclear weapons interactive dialogue that I helped start led to India’s underground nuclear laboratories in Russia, a clear viola- on a formal basis between the Russian tests. The question then becomes, how tion of the intent of the transfer and, State Duma and our Congress 2 years and why are India and Pakistan becom- obviously, a concern to Members’ on ago. Having traveled to Moscow and ing involved in what I think is one of both sides of the aisle in this institu- Russia some 14 times and having led the world’s newest and potentially tion and in the other body. delegations there to discuss a broad most devastating arms races? Because of that transfer and the fact range of issues, including helping en- One only has to look at the arms con- that this administration allowed these courage more investment in Russia, trol record of this administration to supercomputers that were supposed to stabilizing the economy, helping create see a pattern that unfortunately has go for Russia for an environmental a middle class, I take great pride in occurred over the past 6 years. project to end up going to a nuclear proactively engaging the Russian peo- The same pattern exists not just with weapons laboratory, we passed a law. ple and their leaders. technology involving missiles and That law was violated, Mr. Speaker, Likewise, Mr. Speaker, in the case of weapons of mass destruction but in- earlier this year when the President China, I support the policy of the volves supercomputers. Let me cite, did not, in fact, require the Chinese President in engaging China. I think an Mr. Speaker, another example. Docu- government to allow us to see the end isolationist approach advocated by ments that have been made public, location of where these most recent some of my conservative colleagues is again by the news media show, that the supercomputers were going in China. the wrong approach. And to that ex- Clinton administration approved the Mr. Speaker, this administration has tent, last year I led two delegations of export of U.S. built supercomputers to maintained throughout the past 6 our colleagues to Beijing and Shang- Communist China in late December years that our security relationships hai. In fact, while in Beijing, I was the 1997, even though the Chinese officials around the world are based on arms first U.S. policymaker to address the were unwilling to allow on-site inspec- control agreements. In fact, in many National Defense University of the tions of the delivery venue of those cases this administration has said that H3240 CONGRESSIONAL RECORD — HOUSE May 13, 1998 we do not need defensive military sys- September 1995. Calutron electro- July-December 1996. The same direc- tems because arms control negotia- magnetic isotope separation system for tor reports key supplies for technology tions and deterrence and control of uranium enrichment to Iran. Again, for for large nuclear projects in Iran. Vio- technology through these documents a nuclear weapons program. Violation: lations: NPT, Iran-Iraq Arms Non- will provide the stability in the world Nuclear Nonproliferation Treaty, Nu- proliferation Act, Nuclear Prolifera- and, therefore, we do not need defen- clear Proliferation Prevention Act, Ex- tion Prevention Act. Export-Import sive systems. port-Import Bank Act, Arms Export Bank Act, Arms Export Administra- So not only has this administration Control Act. Response by this adminis- tion Act. Response by the administra- opposed defensive systems, and not tration: Nothing. No sanctions. tion: Nothing. No sanctions. 1995 and 1997. C–802 anti-ship cruise only have they tried to impose limita- b 2340 tions on the Congress’ ability to deploy missiles and C–801 air launch cruise these systems, but even more egre- missiles, again to Iran. Violation: Iran- Again in July and December of 1996. giously, Mr. Speaker, this administra- Iraq Arms Nonproliferation Act. Re- The same Director of Central Intel- tion, which claims to base its security sponse by the administration: Nothing. ligence reports, considerable chemical arrangements on arms control agree- No sanctions. weapons-related transfers for produc- ments, has failed to enforce sanctions February 1996. Dual-use chemical tion equipment and technology to Iran. time and time again when prolifera- precursors and equipment to aid Iran’s Violations: Iran-Iraq Arms Non- tions occur; when companies and insti- chemical weapons program. Violation: proliferation Act, Arms Export Control tutes in China and in Russia are caught Arms Export Control Act, Export Ad- Act, Export Administration Act. Re- transferring technology illegally to ministration Act. Result: Sanctions sponse by the Administration: Nothing. other nations. were imposed. The one time in 21. No sanctions. Now, to back up my claim, Mr. Sanctions were imposed May 21, 1997. January of 1997. Dual use biological Speaker, I would like to insert in the Summer 1996. 400 tons of chemicals items to Iran. Violation: The BWC, the record for all of our colleagues and the transferred to Iran. Violation: Iran- Iran-Iraq Arms Nonproliferation Act, American people to see several docu- Iraq Arms Nonproliferation Act, Arms the Arms Export Control Act, the Ex- ments. The first involves a chronology Export Control Act, Export Adminis- port Administration Act. Response by compiled not by some Republican tration Act. Administration response: the Administration: Nothing. No sanc- think tank but rather by the Congres- Nothing. No sanctions. tions. August 1996. A plant to manufacture sional Research Service, an independ- 1997 again. Chemical precursors, pro- M–11 missiles or missile components in ent nonpartisan arm of the Congress, duction equipment, and production Pakistan. Violation: MTCR, Arms Ex- supported, I might add, by Democrats technology for Iran’s chemical weapons port Control Act, Export Administra- and Republicans. A chronology of Chi- program including a plant for making tion Act. Response by the administra- glass-lined equipment. Violations nese weapons-related transfers since tion: Nothing. No sanctions. 1992. again of the Iran-Iraq Arms Non- August 1996. Gyroscopes, proliferation Act, the Arms Export Over the past 6 years our intelligence accelerometers and test equipment for community caught China transferring Control Act, the Export Administra- missile guidance systems, again to tion Act. Response by the Administra- technology illegally 271 times. This ad- Iran. Violation: MTCR, Iran-Iraq Arms ministration imposed sanctions once. tion: Nothing. No sanctions. Nonproliferation Act, Arms Export September–December of 1997. The Twenty-one times China transferred Control Act, Export Administration China Great Wall Industry Corporation technology. Act. Response by the administration: provided telemetry equipment used in November 1992. M–11 missiles trans- Nothing. No sanctions. ferred to Pakistan. Violations: Missile September 1996. Special industrial flight tests to Iran for its development Technology Control Regime, Arms furnace and high-tech diagnostic equip- of the Shahab III and Shahab IV me- Control Export Act, Export Adminis- ment to unsafe guarded nuclear facili- dium-range ballistic missiles. Viola- tration Act. This time administration ties in Pakistan. Violation: NPT, Nu- tion: MTCR, Iran-Iraq Arms Non- sanctions were imposed and then they clear Proliferation Prevention Act, Ex- proliferation Act, Arms Export Control were waived on November 1 of 1994. port-Import Bank Act, Arms Export Act, Export Administration Act. Re- In 1994–95. Dozens and possibly hun- Control Act. Response by the adminis- sponse by the Administration: Nothing. dreds of missile guidance systems and tration: Nothing. No sanctions im- No sanctions. computerized machine tools trans- posed. And finally, November 1997 through ferred by China to Iran. Violations of July to December of 1996. The Direc- April of 1998. We now find they may the MTCR, the Iran-Iraq Arms Non- tor of Central Intelligence reports, and have transferred technology for Paki- proliferation Act, the Arms Export I quote, tremendous variety, end quote, stan’s Ghauri medium-range ballistic Control Act, the Export Administra- of technology and assistance for Paki- missile that was flight-tested on April tion Act. The administration’s re- stan’s ballistic missile program. Viola- 6, 1998, violating the MTCR, the Arms sponse: Nothing. No sanctions. tions of the MTCR, the Arms Export Export Control Act, the Export Admin- Second quarter of 1995. Parts for the Control Act, the Export Administra- istration Act. No sanctions. No action M–11 missile to Pakistan. Violations: tion Act. Response by the administra- taken by the administration. MTCR, Arms Export Control Act, Ex- tion: Nothing. No sanctions. Mr. Speaker, this is the record that port Administration Act. The adminis- July-December of 1996. The same Di- is causing us to see a scenario unfold- tration’s response: Nothing. No sanc- rector of Central Intelligence reports, ing that will place this country and the tions. and I quote, a tremendous variety, end world at the greatest possible risk of December 1994 to mid 1995. 5,000 ring quote, of assistance for Iran’s ballistic confrontation. We see the administra- magnets to be used for nuclear enrich- missile program. Violations: MTCR, tion daily railing about Iran’s capabil- ment programs for nuclear weapons in Iran-Iraq Arms Nonproliferation Act, ity, Iraq’s capability. We see them rail- Pakistan. Violations: The Non- Arms Export Control Act, Export Ad- ing about India doing underground nu- proliferation Treaty, the Export-Im- ministration Act. Response by the ad- clear tests, Pakistan testing medium- port Bank Act, the Nuclear Prolifera- ministration: Nothing. No sanctions. range missiles. When here we have 21 tion Prevention Act, the Arms Export July-December 1996 again. Again this specific cases, all documented, where Control Act. The administration’s re- Director of Central Intelligence re- this administration, which purports to sponse: They considered the sanctions ports, principal supplies of nuclear base its arms control treaty relation- but they never imposed them. equipment, material and technology ships, as the basis for stopping pro- July 1995. More than 30 M–11 missiles for Pakistan’s nuclear weapons pro- liferation in a situation where they do stored in Sargodha Air Force Base in gram. Violations: NPT, Nuclear Pro- not enforce any of them except in one Pakistan. Violation: MTCR, Arms Ex- liferation Prevention Act, Export-Im- case. port Control Act, Export Administra- port Bank Act, Arms Export Adminis- And yet they wonder why, they won- tion Act. This administration’s re- tration Act. Response by the adminis- der why India and Pakistan are now in sponse: Nothing. No sanctions. tration: Nothing. No sanctions. a major arms control race. And they May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3241 wonder why Iran and Iraq continue to transfers to India, violating the MTCR, the Foreign Operations Appropriations develop threatening capabilities that the Arms Export Control Act, the Ex- Act. The administration’s response, no threaten to destroy Israel, all of our al- port Administration Act. Sanctions sanctions. lies in that region, all of our Arab were imposed on June of 1993, but they November of 1996. Israel reported friends, as well as our troops in that re- were waived until July. No publicly Russian assistance to Syria to build a gion. known follow-up on those sanctions. chemical weapons plant. Violating the Mr. Speaker, I argue on the floor to- 1995 to the present, Mr. Speaker. Con- Arms Export Control Act, the Export night, it is this administration that is struction of a 1,000 megawatt nuclear Administration Act, and the Foreign causing the problem we currently see reactor at Bushehr in Iran. And by the Assistance Act. in India, in Pakistan, Iraq, and Iran. It way, there was a side deal that the b 2350 is this administration that bases its se- Ministry of Atomic Industry in Russia curity relationships on arms control initially had that even Boris Yeltsin No publicly known sanctions. 1996 agreements but never enforces those was not aware of on this nuclear power and 1997, Russia delivered 3 kilowatt very agreements when they are in fact plant deal that only because inside of diesel electric submarines to Iran, vio- violated. Russia it was exposed was that sepa- lations of the Iran-Iraq Arms Non- Let us talk about Russia, Mr. Speak- rate effort actually canceled, but the proliferation Act, the Foreign Assist- er. We have documented here for the construction of the Bushehr nuclear ance Act. No sanctions imposed. RECORD 16 specific violations since 1990 power plant continued. Violations of January to February of 1997, Russia and 1991 by the Russians of various the Iran-Iraq Arms Nonproliferation transferred detailed instructions to treaties, and only for two of those 16 Act, the Foreign Operations Appropria- Iran on the production of the SS–4 mis- did the administration impose sanc- tions Act, the Nuclear Proliferation sile, which now, within a year, will tions. Prevention Act, and the Foreign As- threaten all of Israel and all of our Early in the 1990s, we do not know sistance Act. The response by the ad- friends and our troops in that theater, the exact year, Russians sold drawings. ministration: They refused to renew violating the MTCR, the Missile Tech- Now listen to this, Mr. Speaker. The some civilian nuclear cooperation nology Control Regime, the Arms Ex- Russians sold drawings of a sarin plant agreements. They waived sanctions on port Control Act, the Export Adminis- manufacturing procedures and toxic aid. Waived sanctions, Mr. Speaker. tration Act, the Foreign Assistance agents to a Japanese terrorist group. August of 1995. Russian assistance to Act, the Iran-Iraq Arms Nonprolifera- The Russians sold these drawings to a Iran to develop biological weapons. tion Act, and the Foreign Operations Japanese terrorist group. Violations of the Biological Weapons Appropriations Act. No sanctions im- And we all know, several years ago in Convention, the Arms Export Control posed, Mr. Speaker. Japan in a subway we had a sarin weap- Act, the Export Administration Act, April of 1997, Russia sold S–300 anti- ons attack in a subway that killed Jap- the Iran-Iraq Arms Nonproliferation aircraft, antimissile missile systems to anese citizens. Violations, Mr. Speaker, Act, the Foreign Assistance Act. No Iran to protect the nuclear plant that of the Arms Export Control Act, sec- they were building, again in violation tion 81, and the Export Administration known sanctions. November 1995. Russian citizens of treaties. These violations were of Act, section 11(c). No publicly known transferred to unnamed country tech- the Iran-Iraq Arms Nonproliferation sanctions were administered by this nology for making chemical weapons, Act and the Foreign Assistance Act. No administration. known sanctions. In 1991, Mr. Speaker, Russia trans- violating the Arms Export Control Act, the Export Administration Act. The Finally, in October of 1997, Israeli in- ferred to China, Russian entities, 3 RD– telligence reported Russian technology 120 rocket engines and electronic sanctions were imposed in this case on transfers for Iranian missiles developed equipment to improve the accuracy of a Russian citizen on November 17, 1995. with ranges between 1,300 and 10,000 ballistic missiles, a violation of the December of 1995. Russian gyroscopes kilometers. The transfers included en- MTCR; the Arms Export Control Act, from submarine launched ballistic mis- gines and guidance systems, violating Section 73; the Export Administration siles smuggled to Iraq through middle- the MTCR, the Arms Export Control Act, section 11(b). No sanctions im- men. We caught them red-handed, Mr. Act, the Export Administration Act, posed by the Administration. Speaker, red-handed, violating the From 1991 and 1995, Russian entities United Nations sanctions, the Missile the Iran-Iraq Arms Nonproliferation transferred cryogenic liquid oxygen Technology Control Regime, the Arms Act, and the Foreign Operations Appro- hydrorocket engines and technology to Export Control Act, the Export Admin- priations Act. No known sanctions. India, Mr. Speaker. Now China is sup- istration Act, the Iran-Iraq Arms Non- Mr. Speaker, I know I sound repeti- plying Pakistan. Russia is supplying proliferation Act, and the Foreign As- tious in going through all of those vio- India. Violations: MTCR; the Arms Ex- sistance Act. No sanctions were ever lations, but I think it is about time, port Control Act, section 73; the Export imposed. Mr. Speaker, that we lay the cards on Administration Act, section 11(b). In fact, Mr. Speaker, we were told the table. This administration has no Sanctions against Russia and India when I wrote to the President on this foreign policy. This administration under both of those cases were imposed particular transfer that we would pur- maintains that arms control agree- on May 6 for 2 years and then they ex- sue this aggressively, and we did not ments are the basis of our security re- pired after 2 years. But they were im- impose sanctions, the Administration lationships. posed in that one instance. said, because Russia was pursuing a I have just cited on the RECORD, with From 1992 to 1995, Russian transfers criminal investigation. documentation involving China and to Brazil of carbon fiber technology for We now know that last fall Russia Russia, which I ask all of our col- rocket motor cases for a space launch ended the criminal investigation. No leagues and the American people to re- program. Violating the MTCR, the criminal levies were brought against view, 40 separate occasions where vio- Arms Export Control Act, and the Ex- any Russian citizen or company, and in lations of agreements have taken place port Administration Act. Sanctions fact, no sanctions were ever imposed. and where on only three occasions has were reportedly secretly imposed and The transfer took place. In fact, we this administration imposed sanctions. then waived, although we never knew now know there were 120 sets of these We wonder why the President says that because it was all done in secret. guidance systems that went to Iraq Iran and Iraq have this capability. We From 1992 to 1996, Russian armed from Russia three different times. wonder why Russian entities continue forces delivered 24 Scud-B missiles and July–December of 1996. The Director to sell technology to Iraq and to Iran. eight launchers to Armenia, violating of Central Intelligence reported Russia We wonder why India is doing under- the MTCR, the Arms Export Control transferred to Iran a variety of items ground nuclear tests. We wonder why Act, the Export Administration Act. related to ballistic missiles. Violating Pakistan is testing medium-range mis- Sanctions again were never introduced the MTCR, the Arms Export Control siles, all of which are destabilizing or implemented by this administration. Act, the Export Administration Act, world security. June of 1993. Additional Russian en- the Foreign Assistance Act, the Iran- Why are all these things happening? terprise involved in missile technology Iraq Arms Nonproliferation Act, and Because everyone in the world knows H3242 CONGRESSIONAL RECORD — HOUSE May 13, 1998 this administration does not enforce went through all of the efforts being TECHNOLOGY SCANDAL WITH RISKY PORTENT the laws that we place on the books, taken to assist Russia in controlling [From the Washington Times, Apr. 7, 1998] that we ask every nation that is a sig- proliferation. When he finished his dis- (By Frank Gaffney, Jr.) natory to abide by. cussion, I said, Mr. Vice President, I The front page of Saturday’s New York Mr. Speaker, time is running out. In agree, you are making efforts, and you Times featured an article that should alarm the 12 years that I have been in this in- are getting some results, but you have every American. It reported that two of stitution, I have never seen a greater not totally stopped the proliferation. America’s leading aerospace companies— lack of confidence in any administra- He said, I know. You are right. We Loral Space and Communications and tion by this body and the other body in have not totally cut it off. He said, but Hughes Electronics—are suspected of having enforcing arms control agreements. please do not pass that bill in the Sen- provided ‘‘space expertise that significantly Last November, after this body found ate. advanced Beijing’s ballistic missile pro- out, primarily by the actions of the That bill is pending right now for a gram.’’ vote in the Senate. If it is brought up, It will be recalled that the PRC’s ballistic leaders of Israel, Mr. Netanyahu and missile program includes missiles capable of the Israeli intelligence community, my prediction is it will pass. Mr. Speaker, we have got a problem. delivering nuclear weapons against cities in after we found out from them that Rus- the United States. This is hardly an abstract sia had signed deals, the Russian space This Congress has lost confidence in threat. agency with the Iranians, to build this this administration’s ability to stop Not so long ago, a top Chinese official inti- missile that is going to threaten Israel proliferation. Why is that important, mated to the longtime No. 2 man at the U.S. a year from now, the Congress was out- Mr. Speaker? Because every day we Embassy in Beijing that such an attack raged. pick up the newspaper, we are reading against Los Angeles would be in prospect if A bipartisan Iran sanctions bill was more horror stories that shake this the United States interfered in China’s cam- paign of intimidation against Taiwan. introduced by the gentleman from New world that are eventually going to lead to a confrontation, a confrontation Although this is not the first time Amer- York (Mr. GILMAN), co-endorsed by the ican firms are alleged to have supplied for- gentlewoman from California (Ms. perhaps between India and Pakistan, and the tensions are flaring there rap- eign governments with militarily relevant HARMAN), and supported by Democrats equipment and know-how that could wind up and Republicans. idly; a confrontation between North being used to harm the United States, its Vice President GORE, who I have the Korea and perhaps Japan or South citizens or interests, it is a particularly egre- highest respect for, called a group of us Korea; a confrontation between Iran gious example of the syndrome. down to the White House. This was in and Israel or Iraq and Israel or some According to the New York Times, the two November of last year. There were 12 or other nation, all of which have bene- American concerns were called in to help the Chinese determine why their Long March 13 of us in the room, the Vice Presi- fited from these technology transfers that this administration has ignored space-launch vehicle blew up in February dent’s meeting room, along with some 1996, destroying a $200 million satellite built of his security people. for 6 straight years, all the time saying we do not need defensive systems be- by Loral that it was supposed to place on- We met for an hour. There were Sen- orbit. The article states that ‘‘Those ex- ators, Democratic, Republican Sen- cause our arms control negotiations changes, officials believe, may have gone be- ators, and there were Democratic, Re- are the security blanket we need to yond the sharing of information that the publican House Members, chairmen of provide stability in the world. companies had been permitted, giving the On top of all of this, Mr. Speaker, we committees, and key people involved in Chinese crucial assistance in improving the read of a situation, front page in the guidance systems of their rockets. The tech- international and defense issues. New York Times, that one of our com- nology needed to put a commercial satellite The Vice President personally plead- panies assisted the Chinese illegally, in orbit is similar to that which guides a ed with us. He said, my friends, please were under a criminal investigation long-range nuclear missile to its target.’’ do not let this Iran sanctions bill pass with the grand jury when the President In fact, the military significance of this the House, because if it passes, it will of the United States very quietly technology transfer was of sufficient gravity send the wrong signal. It will send the that a criminal investigation was opened and issued an executive order waiving, signal that the Congress has no con- a grand jury empaneled to consider indict- waiving the actual prohibition so that ments in the matter. Before formal charges fidence in this administration’s ability the entire criminal investigation of to control proliferation. were filed, however, ‘‘the criminal inquiry Loral Corporation was undermined by was dealt a serious blow two months ago When he finished, every one of us in the action of the President. when President Clinton quietly authorized the room, Democrats and Republicans, Then we find out that the CEO of the export to China of similar technology by Senators and House Members, said, Mr. that corporation is, in one year, the one of the companies under investigation’’— Vice President, it is too late. The Con- single largest contributor politically to namely, Loral. gress has lost confidence. the President’s campaign and the The chilling effect Mr. Clinton’s action That same week, Mr. Speaker, the Democratic National Committee, over would have was clearly understood at the RECORD speaks for itself, the Iran mis- time it was taken. In the words of the New $300,000 by one person, the CEO of that York times: ‘‘The decision was opposed by sile sanctions bill came up on the same company that was able to get House floor, and almost 400 Members of Justice Department officials, who argued itself out of what was an aggressive that it would be much more difficult to pros- this body voted in favor of that bill in criminal investigation. ecute the companies if the government gave spite of the Vice President lobbying Mr. Speaker, we are going to get to its blessing to the deal.’’ In fact, as a prac- personally against it. Liberals, con- the bottom of this. Not because this is tical matter, it will probably be impossible servatives, southerners, northeastern- a scandal that would embarrass the to prosecute the case against Loral and ers, big city representatives, and rural President, not because this is some Hughes. areas all came together and said, we kind of a campaign fund-raising issue, This is a scandal on three levels. have got to send a signal that this pol- but because this threatens the security First, the Clinton administration’s indif- ference to the arming of communist China is icy of the past 6 years is failing. It is of this Nation. destabilizing the world. The bill passed simply stupefying. Even the most If the facts are as they have been re- pollyannish of experts in the field recognize the House. ported in the New York Times and the that there is a chance that the massive mod- Then a month and a half ago, I got a other major national media, this, in ernization program upon which the People’s call from the White House to come fact, Mr. Speaker, in my mind, is an Liberation Army (PLA) has embarked may back down because the Vice President act of treason, and this, in my mind, produce a ‘‘peer competitor’’ to the United again wanted to meet with a group of would result in a call for impeachment States in the next century. More realistic us. So I went back down to the White proceedings against this President. observers judge the PLA’s doctrine and pro- House. Again, I was with the Vice Mr. Speaker, I thank the staff of the curement programs as dispositive evidence President. On one side of him was a House for staying through this ordeal, of a determined effort to attain such a sta- tus. Member of the National Security Coun- and I thank you, Mr. Speaker, for re- The Clinton team has nonetheless ap- cil. On the other side was one of his maining here during this time so that proved among other technology transfers to key staffers. I could present this special order. China: The sale of machine tools used to The Vice President met with the 13 Mr. Speaker, I include for the manufacture advanced military aircraft; jet or 14 of us again for 90 minutes. He RECORD the documents I referred to: engines suitable for use in fighter aircraft May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3243 and cruise missiles; sophisticated tele- China and Russia, operations trying to buy the weapons fielded by enemies of Israel and communications equipment; and 46 super- into and ultimately to dominate the com- other American friends. computers that have wound up in the Chi- mercial launch market. In helping its friends Finally, it must be asked: Could the fact nese military-industrial complex, including in Beijing and the Kremlin to undercut an that Loral’s CEO Bernard Schwartz, was the its nuclear weapons program. Now, the ad- already-struggling U.S. space launch indus- largest personal contributor to the Demo- ministration has endorsed the sale of equip- try, however, the Clinton administration is cratic National Committee last year have ment and know-how that will assist Beijing further jeopardizing the United States’ abil- anything to do with the president’s decision in delivering its nuclear arms to American ity to assure its access to space. This is a effectively to vitiate legal proceedings targets. This is all the more appalling given critical national security, as well as com- against his company? Or was this simply yet Clinton-Gore’s determination to deny the mercial capability. another instance in which a federal case in- American people near-term, effective de- volving Chinese interests was sabotaged by fenses against ballistic missile attack. Regrettably, Mr. Clinton does little more Second, even if the Chinese space-launch than pay lip service to the need for this and members of the Clinton team? (in 1996, some- program were not an inherently dual-use af- other means necessary for the United States one—probably at the State Department— fair (that is, a program that has both mili- to exercise the dominance of outer space ne- blew a sting operation as it was about to net tary and civilian dimensions, with tech- cessitated by both military and private sec- a PRC ‘‘princeling’’ implicated in running nology flows between the two unavoidable), tor requirements. Instead, he compounds the thousands of AK–47s to U.S. agents who were the administration’s policy of abetting Chi- damage done by his line-item vetoes last fall posing as purchasers for drug lords and na’s space activities would still be contrary of critical U.S. space control technologies street gangs.) to long-term U.S. interests. with initiatives that reward Russia and Any way you slice it, the administration’s To be sure, some U.S. companies (notably, China with dual-use missile technology for handling of the China account is a scandal. Loral and Hughes) are anxious to find inex- merely reaffirming their commitment to Will it be held accountable for the damage it pensive launch services for their satellites. non-proliferation—even as they continue to is thus doing to the nation’s security, to They tend to be delighted with Mr. Clinton’s engage in it. In fact, it is a safe bet, that at long-term U.S. commercial interests and, easing of restraints on American use of mas- least some of the missile technology sold to perhaps ultimately, even to the physical sively subsidized space-launch operations in China by Loral and others will wind up in safety of individual Americans?

Date of transfer or report Reported transfer by China Possible violation Administration’s response

Nov. 1992 ...... M–11 missiles or related equipment to Pakistan (The MTCR: Arms Export Control Act, Export Administration Sanctions imposed on Aug. 24, 1993, for transfers of Administration did no officially confirm reports that Act. M–11 related equipment (not missiles); waived on M–11 missiles are in Pakistan.). Nov. 1, 1994. Mid-1994 to mid-1995 ...... Dozens or hundreds of missile guidance systems and MTCR: Iran-Iraq Arms Nonproliferation Act, Arms Ex- No sanctions. computerized machine tools to Iran. port Control Act, Export Administration Act. 2nd quarter of 1995 ...... Parts for the M–11 missile to Pakistan ...... MTCR: Arms Export Control Act, Export Administration No sanctions. Act. Dec. 1994 to mid-1995 ...... 5,000 ring magnets for an unsafeguarded nuclear en- NPT: Export-Import Bank Act, Nuclear Proliferation Considered sanctions under the Export-Import Bank richment program in Pakistan. Prevention Act, Arms Export Control Act. Act; but announced on May 10, 1996, that no sanctions would be imposed. July 1995 ...... More than 30 M–11 missiles stored in crates at MTCR: Arms Export Control Act, Export Administration No sanctions. Sargodha Air Force Base in Pakistan. Sept. 1995 ...... Calutron (electromagnetic isotope separation system) NPT: Nuclear Proliferation Prevention Act, Export-Im- No sanctions. for uranium enrichment to Iran). port Bank Act, Arms Export Control Act. 1995–1997 ...... C–802 anti-ship cruise missiles and C–801 air- Iran-Iraq Arms Nonproliferation Act ...... No sanctions. launched cruise missiles to Iran. Before Feb. 1996 ...... Dual-use chemical precursors and equipment to Iran’s Arms Export Control Act, Export Administration Act ..... Sanctions imposed on May 21, 1997. chemical weapon program. Summer 1996 ...... 400 tons of chemicals to Iran ...... Iran-Iraq Arms Nonproliferation Act,1 Arms Export No sanctions. Control Act, Export Administration Act. Aug. 1996 ...... Plant to manufacture M–11 missiles or missile com- MTCR: Arms Export Control Act, Export Administration No sanctions. ponents in Pakistan. Act. Aug. 1996 ...... Gyroscopes, accelerometers, and test equipment for MTCR: Iran-Iraq Arms Nonproliferation Act, Arms Ex- No sanctions. missile guidance to Iran. port Control Act, Export Administration Act. Sept. 1996 ...... Special industrial furnace and high-tech diagnostic NPT: Nuclear Proliferation Prevention Act, Export-Im- No. sanctions. equipment to unsafeguarded nuclear facilities in port Bank Act, Arms Export Control Act. Pakistan. July–Dec. 1996 ...... Director of Central Intelligence (DCI) reported ‘‘tre- MTCR: Arms Export Control Act, Export Administration No sanctions. mendous variety’’ of technology and assistance for Act. Pakistan’s ballistic missile program. July–Dec. 1996 ...... DCI reported ‘‘tremendous variety’’ of assistance for MTCR: Iran-Iraq Arms Nonproliferation Act, Arms Ex- No sanctions. Iran’s ballistic missile program. port Control Act, Export Administration Act. July–Dec. 1996 ...... DCI reported principal supplies of nuclear equipment, NPT: Nuclear Proliferation Prevention Act, Export-Im- No sanctions. material, and technology for Pakistan’s nuclear port Bank Act, Arms Export Administration Act. weapon program. July–Dec. 1996 ...... DCI reported key supplies of technology for large nu- NPT: Iran-Iraq Arms Nonproliferation Act, Nuclear Pro- No sanctions. clear projects in Iran. liferation Prevention Act, Export-Import Bank Act, Arms Export Administration Act. July–Dec. 1996 ...... DCI reported ‘‘considerable’’ chemical weapon-related Iran-Iraq Arms Nonproliferation Act, Arms Export Con- No sanctions. transfers of production equipment and technology trol Act, Export Administration Act. to Iran. Jan. 1997 ...... Dual-use biological items to Iran ...... BWC: Iran-Iraq Arms Nonproliferation Act, Arms Export No sanctions. Control Act, Export Administration Act. 1997 ...... Chemical precursors, production equipment, and pro- Iran-Iraq Arms Nonproliferation Act, Arms Export Con- No sanctions. duction technology for Iran’s chemical weapon pro- trol Act, Export Administration Act. gram, including a plant for making glass-lined equipment. Sept. to Dec. 1997 ...... China Great Wall Industry Corp. provided telemetry MTCR: Iran-Iraq Arms Nonproliferation Act, Arms Ex- No sanctions. equipment used in flight-tests to Iran for its devel- port Control Act, Export Administration Act. opment of the Shahab-3 and Shahab-4 medium range ballistic missiles. Nov. 1997/April 1998 ...... May have transferred technology for Pakistan’s Ghauri MTCR: Arms Export Control Act, Export Administration No sanctions. medium-range ballistic missile that was flight- Act. tested on April 6, 1998. 1 Additional provisions on chemical, biological, or nuclear weapons were not enacted until February 10, 1996. BWC: Biological Weapons Convention. MTCR: Missile Technology Control Regime. NPT: Nuclear Nonproliferation Treaty.

Reported Russian transfers that may have violated a Date of transfer or report regime or law Possibly applicable treaties, regimes, and/or U.S. laws Administration’s response

Early 1990s ...... Russians sold drawings of a sarin plant, manufactur- AECA sec. 81, EAA sec. 11C ...... No publicly known sanction. ing procedures, and toxic agents to a Japanese ter- rorist group. 1991 ...... Transferred to China three RD–120 rocket engines MTCR: AECA sec. 73, EAA sec. 11B ...... No publicly known sanction. and electronic equipment to improve accuracy of ballistic missiles. 1991–1995 ...... Transferred Cryogenic liquid oxygen/hydrogen rocket MTCR: AECA sec. 73 EAA sec. 11B ...... Sanctions against Russia and India under AECA and engines and technology to India. EAA imposed on May 6, 1992; expired after 2 years. 1992–1995 ...... Russian transfers to Brazil of carbon-fiber technology MTCR: AECA sec. 73, EAA sec. 11B ...... Sanctions reportedly secretly imposed and waived. for rocket motor cases for space launch program. 1992–1996 ...... Russian armed forces delivered 24 Scud-B missiles MTCR: AECA sec. 73, EAA sec. 11B ...... No publicly known sanction. and 8 launchers to Armenia. June 1993 ...... Additional Russian enterprises involved in missile MTCR: AECA sec. 73, EAA sec. 11B ...... Sanctions imposed on June 16, 1993 and waived until technology transfer to India. July 15, 1993; no publicly known follow-up sanc- tion. H3244 CONGRESSIONAL RECORD — HOUSE May 13, 1998

Reported Russian transfers that may have violated a Date of transfer or report regime or law Possibly applicable treaties, regimes, and/or U.S. laws Administration’s response

1995-present ...... Construction of 1,000 megawatt nuclear reactor at IIANPA sec. 1604 and 1605, FOAA, NPPA sec. 821, Refused to renew some civilian nuclear cooperation Bushehr in Iran. FAA sec. 620G. agreements; waived sanctions on aid. Aug. 1995 ...... Russian assistance to Iran to develop biological BWC, AECA sec. 81, EAA sec. 11C, IIANPA sec. 1604 No publicly known sanction. weapons. and 1605, FAA sec. 620G and 620H. Nov. 1995 ...... Russian citizen transferred to unnamed country tech- AECA sec. 81, EAA sec. 11C ...... Sanctions imposed on Nov. 17, 1995. nology for making chemical weapons. Dec. 1995 ...... Russian gyroscopes from submarine launched ballistic United Nations Sanctions, MTCR, AECA sec. 73, EAA No publicly known sanction. missiles smuggled to Iraq through middlemen. sec. 11B, IIANPA sec. 1604 and 1605, FAA sec. 620G and 620H. July–Dec. 1996 ...... DCI reported Russia transferred to Iran ‘‘a varity’’ of MTCR AECA sec. 73, EAA sec. 11B, FAA sec. 620G No publicly known sanction. items related to ballistic missiles. and 620H, IIANPA sec. 1604 and 1605, FOAA. Nov. 1996 ...... Israel reported Russian assistance to Syria to build a AECA sec. 81, EAA sec. 11C, FAA sec. 620G and 620H No publicly known sanction. chemical weapon plant. 1996–1997 ...... Delivered 3 Kilo diesel-electric submarines to Iran ...... IIANPA sec. 1604 and 1605, FAA sec. 620G and 620H No publicly known sanction. Jan.–Feb. 1997 ...... Russia transferred detailed instructions to Iran on MTCR: AECA sec. 73, EAA sec. 11B, IIANPA sec. 1604 No publicly known sanction. production of the SS–4 medium-range missile and and 1605, FOAA. related parts. April 1997 ...... Sale of S–300 anti-aircraft/anti-missile missile sys- IIANPA sec. 1604 and 1605 FAA sec. 620G and 620H No publicly known sanction. tem to Iran to protect nuclear reactors at Bushehr and other strategic sites. Oct. 1997 ...... Israeli intelligence reported Russian technology trans- MTCR: AECA sec. 73, EAA sec. 11B, IIANPA sec. 1604 No publicly known sanction. fers for Iranian missiles developed with ranges be- and 1605, FAA sec. 620G and 620H FOAA. tween 1,300 and 10,000 km. Transfers include en- gines and guidance systems. Regimes: BWC: Biological Weapons Convention. MTCR: Missile Technology Control Regime. U.S. Laws: AECA: Arms Export Control Act. EAA: Export Administration Act. FAA: Foreign Assistance Act. FOAA: Foreign Operations Appropriations Act, IIANPA: Iran-Iraq Arms Non—Proliferation Act. NPPA: Nuclear Proliferation Prevention Act.

LEAVE OF ABSENCE Ms. LEE of California. The motion was agreed to; accord- By unanimous consent, leave of ab- Mr. HINCHEY. ingly (at 11 o’clock and 59 minutes sence was granted to: Mr. OLVER. p.m.), the House adjourned until to- Mr. SABO. Mr. YATES (at the request of Mr. GEP- morrow, May 14, 1998, at 10 a.m. Ms. KILPATRICK. HARDT) for today, after 6:30 p.m., on ac- f Mr. CONYERS. count of physical reasons. (The following Members (at the re- f EXECUTIVE COMMUNICATIONS, quest of Mr. DREIER) and to include ex- ETC. SPECIAL ORDERS GRANTED traneous matter:) Mr. CAMPBELL. Under clause 2 of rule XXIV, execu- By unanimous consent, permission to Mr. GOODLING. tive communications were taken from address the House, following the legis- Mr. KINGSTON. the Speaker’s table and referred as fol- lative program and any special orders Mr. CANNON. lows: heretofore entered, was granted to: Mr. RADANOVICH. 9112. A letter from the Congressional Re- (The following Members (at the re- Mr. CASTLE. view Coordinator, Animal and Plant Health quest of Mr. SANDERS) to revise and ex- Mr. HASTERT. Inspection Service, transmitting the Serv- tend their remarks and include extra- Mrs. SMITH of Washington. ice’s final rule— Mediterranean Fruit Fly; Addition to the Quarantined Area [Docket neous material: Mr. THORNBERRY. Mr. CONYERS, for 5 minutes, today. No. 97–056–11] received May 12, 1998, pursuant Mr. SMITH of Michigan. to 5 U.S.C. 801(a)(1)(A); to the Committee on Mr. EDWARDS, for 5 minutes, today. Mr. KNOLLENBERG. Agriculture. Mrs. CLAYTON, for 5 minutes, today. Mr. CUNNINGHAM. 9113. A letter from the Director, Office of Mr. STUPAK, for 5 minutes, today. Mr. SOLOMON. Regulatory Management and Information, Mrs. MALONEY of New York, for 5 Mr. MICA. Environmental Protection Agency, transmit- minutes, today. Mr. GIBBONS. ting the Agency’s final rule—Diflubenzuron; Ms. JACKSON-LEE, FOR 5 MINUTES, Mr. COLLINS. Temporary Pesticide Tolerance [OPP–300660; TODAY. (The following Members (at the re- FRL–5790–5] (RIN: 2070–AB78) received May 8, Mr. SANDERS, for 5 minutes, today. quest of Mr. WELDON of Pennsylvania) 1998, pursuant to 5 U.S.C. 801(a)(1)(A); to the The following Members (at the re- and to include extraneous matter:) Committee on Agriculture. 9114. A letter from the Director, Office of Mr. GILLMOR. quest of Mr. DREIER) to revise and ex- Regulatory Management and Information, tend their remarks and include extra- Mr. CLYBURN. Environmental Protection Agency, transmit- neous material: Mr. GINGRICH. ting the Agency’s final rule Tebufenozide; Mr. HOUGHTON, for 5 minutes, today. Mr. JOHNSON of Wisconsin. Pesticide Tolerances for Emergency Exemp- Mr. BARR, for 5 minutes, today. Mr. OWENS. tions [OPP–300640; FRL–5784–7] (RIN: 2070– Mr. WELDON of Pennsylvania, for 5 Mr. DEFAZIO. AB78) received May 8, 1998, pursuant to 5 minutes, today. Mr. UPTON. U.S.C. 801(a)(1)(A); to the Committee on Ag- Mr. RAMSTAD. riculture. f Mr. CARDIN. 9115. A letter from the Director, Office of EXTENSION OF REMARKS Mr. MCINNIS. Regulatory Management and Information, Mrs. NORTHUP. Environmental Protection Agency, transmit- By unanimous consent, permission to ting the Agency’s final rule—N-(4- f revise and extend remarks was granted fluorophenyl)-N- (1-methylethyl)-2 [[5- to: SENATE CONCURRENT (trifluoromethyl)— 1,3,4-thiadiazol-2-yl]o (The following Members (at the re- RESOLUTION REFERRED ]acetamide; Time-Limited Pesticide Toler- ance, Correction [OPP–300636A; FRL–5787–6] quest of Mr. SANDERS) and to include A concurrent resolution of the Sen- extraneous matter:) (RIN: 2070–AB78) received May 7, 1998, pursu- ate of the following title was taken ant to 5 U.S.C. 801(a)(1)(A); to the Committee Mr. HAMILTON. from the Speaker’s table and, under on Agriculture. Mr. TOWNS. the rule, referred as follows: 9116. A letter from the Administrator, Mr. KUCINICH. S. Con. Res. 75. Concurrent resolution hon- Farm Service Agency, transmitting the Mr. KIND. oring the sesquicentennial of Wisconsin Agency’s final rule—Special Combinations Mr. STARK. statehood; to the Committee on Government for Tobacco Allotments and Quotas (RIN: Mr. KLECZKA. Reform and Oversight. 0560–AF14) received May 12, 1998, pursuant to Mr. DEUTSCH. 5 U.S.C. 801(a)(1)(A); to the Committee on f Agriculture. Mr. DAVIS of Illinois. ADJOURNMENT 9117. A communication from the President Mr. BERRY. of the United States, transmitting requests Mr. SCHUMER. Mr. WELDON of Pennsylvania. Mr. to make available emergency appropriations Mr. FARR of California. Speaker, I move that the House do now for the Departments of Agriculture, Defense, Mr. LANTOS. adjourn. the Interior, and Transportation; the Corps May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3245 of Engineers; the Federal Emergency Man- cense for the export of defense articles or de- ment 39–10509; AD 98–09–28] (RIN: 2120–AA64) agement Agency; the United States Informa- fense services sold under a contract to Japan received May 7, 1998, pursuant to 5 U.S.C. tion Agency; and International Security As- (Transmittal No. DTC–22–98), pursuant to 22 801(a)(1)(A); to the Committee on Transpor- sistance, pursuant to Public Law 105—174; (H. U.S.C. 2776(c); to the Committee on Inter- tation and Infrastructure. Doc. No. 105—251); to the Committee on Ap- national Relations. 9139. A letter from the General Counsel, propriations and ordered to be printed. 9128. A letter from the Assistant Secretary Department of Transportation, transmitting 9118. A letter from the Director, Defense for Legislative Affairs, Department of State, the Department’s final rule—Commercial Procurement, Department of Defense, trans- transmitting certification of a proposed li- Passenger-Carrying Operations in Single-En- mitting the Department’s final rule—Defense cense for the export of defense articles or de- gine Aircraft under Instrument Flight Rules Federal Acquisition Regulation Supplement; fense services sold under a contract to Tur- [Docket No. 28743; Amendment Nos. 43, 73] Electronic Funds Transfer [DFARS Case 98– key (Transmittal No. DTC–18–98), pursuant (RIN: 2120–AG55) received May 7, 1998, pursu- D012] received May 12, 1998, pursuant to 5 to 22 U.S.C. 2776(d); to the Committee on ant to 5 U.S.C. 801(a)(1)(A); to the Committee U.S.C. 801(a)(1)(A); to the Committee on Na- International Relations. on Transportation and Infrastructure. tional Security. 9129. A letter from the Assistant Secretary 9140. A letter from the General Counsel, 9119. A letter from the Director, Office of for Legislative Affairs, Department of State, Department of Transportation, transmitting Management and Budget, transmitting a re- transmitting certification of a proposed li- the Department’s final rule—Establishment port on direct spending or receipts legisla- cense for the export of defense articles or de- of Class E Airspace; Borrego Springs, CA tion within seven days of enactment, pursu- fense services sold under a contract to [Airspace Docket 96–AWP–4] (RIN: 2120– ant to Public Law 101—508; to the Committee Brunei (Transmittal No. DTC–4–98), pursuant AA66) received May 7, 1998, pursuant to 5 on the Budget. to 22 U.S.C. 2776(c); to the Committee on U.S.C. 801(a)(1)(A); to the Committee on 9120. A letter from the Deputy Executive International Relations. Transportation and Infrastructure. Director and Chief Operating Officer, Pen- 9130. A letter from the Chief Financial Offi- 9141. A letter from the General Counsel, sion Benefit Guaranty Corporation, trans- cer, Export-Import Bank of the United Department of Transportation, transmitting mitting the Corporation’s final rule—Alloca- States, transmitting the Bank’s manage- the Department’s final rule—Modification of tion of Assets in Single-Employer Plans; In- ment report for the fiscal year ending Sep- Class D Airspace; Mountain View, CA [98– terest Assumptions for Valuing Benefits [29 tember 30, 1997 and a copy of the 1997 Annual AWP–9] (RIN: 2120–AA66) received May 7, CFR Part 4044] received May 11, 1998, pursu- Report, pursuant to 12 U.S.C. 635g(a); to the 1998, pursuant to 5 U.S.C. 801(a)(1)(A); to the ant to 5 U.S.C. 801(a)(1)(A); to the Committee Committee on Government Reform and Committee on Transportation and Infra- on Education and the Workforce. Oversight. structure. 9121. A letter from the General Counsel, 9131. A letter from the President, Federal 9142. A letter from the General Counsel, Department of Transportation, transmitting Financing Bank, transmitting the Bank’s Department of Transportation, transmitting the Department’s final rule—Determination Annual Management Report for Fiscal Year the Department’s final rule—Airworthiness of Functional Equivalency on Harmonization 1997, pursuant to 31 U.S.C. 9106; to the Com- Directives; General Electric Company Model [NHTSA–98–3815] (RIN: 2127–AG62) received mittee on Government Reform and Over- GE90–76B Turbofan Engines [Docket No. 97– May 7, 1998, pursuant to 5 U.S.C. 801(a)(1)(A); sight. ANE–28–AD; Amendment 39–10496; AD 98–09– to the Committee on Commerce. 9132. A letter from the Chairman, Federal 15] (RIN: 2120–AA64) received May 7, 1998, 9122. A letter from the Director, Office of Maritime Commission, transmitting the pursuant to 5 U.S.C. 801(a)(1)(A); to the Com- Regulatory Management and Information, semiannual report on the activities of the mittee on Transportation and Infrastruc- Environmental Protection Agency, transmit- Office of Inspector General, pursuant to 5 ture. ting the Agency’s final rule—Finding of Fail- U.S.C. app. (Insp. Gen. Act) section 5(b); to 9143. A letter from the General Counsel, ure to Submit Required State Implementa- the Committee on Government Reform and Department of Transportation, transmitting tion Plans for Carbon Monoxide; Arizona; Oversight. the Department’s final rule—Establishment Phoenix Carbon Monoxide Nonattainment 9133. A letter from the Deputy Associate of Class E Airspace; Osceola, AR [Airspace Area [OAQPS # AZ–007–FON; FRL 6010–3] re- Director for Royalty Management, Depart- Docket No. 92–ASW–35] received May 7, 1998, ceived May 11, 1998, pursuant to 5 U.S.C. ment of the Interior, transmitting notifica- pursuant to 5 U.S.C. 801(a)(1)(A); to the Com- 801(a)(1)(A); to the Committee on Commerce. tion of proposed refunds of excess royalty mittee on Transportation and Infrastruc- 9123. A letter from the AMD-Performance payments in OCS areas, pursuant to 43 U.S.C. ture. Evaluation and Records Management, Fed- 1339(b); to the Committee on Resources. 9144. A letter from the General Counsel, eral Communications Commission, transmit- 9134. A letter from the Director, Fish and Department of Transportation, transmitting ting the Commission’s final rule— Proce- Wildlife Service, transmitting the Service’s the Department’s final rule—Airworthiness dures for Reviewing Requests for Relief final rule—Endangered and Threatened Wild- Directives; Airbus Model A330–301 Series Air- From State and Local Regulations Pursuant life and Plants: Final Rule to List the planes [Docket No. 97–NM–300–AD; Amend- to Section 332(c)(7)(B)(v) of the Communica- Preble’s Meadow Jumping Mouse as a ment 39–10511; AD 98–09–30] (RIN: 2120–AA64) tions Act of 1934 [WT Docket No. 97–192, ET Threatened Species (RIN: 1018–AE06) received received May 7, 1998, pursuant to 5 U.S.C. Docket No. 93–62, RM–8577] received May 11, May 12, 1998, pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on Transpor- 1998, pursuant to 5 U.S.C. 801(a)(1)(A); to the 801(a)(1)(A); to the Committee on Resources. tation and Infrastructure. Committee on Commerce. 9135. A letter from the General Counsel, 9145. A letter from the General Counsel, 9124. A letter from the AMD-Performance Department of Transportation, transmitting Department of Transportation, transmitting Evaluation and Records Management, Fed- the Department’s final rule—SPECIAL the Department’s final rule—Airworthiness eral Communications Commission, transmit- LOCAL REGULATIONS; El Nuevo Dia Off- Directives Boeing Model 747–400 Series Air- ting the Commission’s final rule— Amend- shore Cup, Bahia De Mayaguez, Puerto Rico planes [Docket No. 97–NM–138–AD; Amend- ment of the Commission’s Rules to Relocate [CCGD07 98–012] (RIN: 2115–AE46) received ment 39–10510; AD 98–09–29] (RIN: 2120–AA64) the Digital Electronic Message Service From May 7, 1998, pursuant to 5 U.S.C. 801(a)(1)(A); received May 7, 1998, pursuant to 5 U.S.C. the 18 GHz Band to the 24 GHz Band and to to the Committee on Transportation and In- 801(a)(1)(A); to the Committee on Transpor- Allocate the 24 GHz Band For Fixed Service frastructure. tation and Infrastructure. [ET Docket No. 97–99] received May 12, 1998, 9136. A letter from the General Counsel, 9146. A letter from the General Counsel, pursuant to 5 U.S.C. 801(a)(1)(A); to the Com- Department of Transportation, transmitting Department of Transportation, transmitting mittee on Commerce. the Department’s final rule—Amendment of the Department’s final rule—Airworthiness 9125. A letter from the Director, Regula- Class D Airspace; Twin Falls, ID [Airspace Directives; Bombardier Model CL–215–1A10 tions Policy and Management Staff, Food Docket No. 97–ANM–24] received May 7, 1998, and CL–215–6B11 Series Airplanes; Correction and Drug Administration, transmitting the pursuant to 5 U.S.C. 801(a)(1)(A); to the Com- [Docket No. 98–NM–05–AD; Amendment 39– Administration’s final rule— Natural Rub- mittee on Transportation and Infrastruc- 10458] (RIN: 2120–AA64) received May 7, 1998, ber-Containing Medical Devices; User Label- ture. pursuant to 5 U.S.C. 801(a)(1)(A); to the Com- ing [Docket No. 96N–0119] received May 12, 9137. A letter from the General Counsel, mittee on Transportation and Infrastruc- 1998, pursuant to 5 U.S.C. 801(a)(1)(A); to the Department of Transportation, transmitting ture. Committee on Commerce. the Department’s final rule—SAFETY 9147. A letter from the General Counsel, 9126. A letter from the Acting Director, De- ZONES, SECURITY ZONES, AND SPECIAL Department of Transportation, transmitting fense Security Assistance Agency, transmit- LOCAL REGULATIONS [USCG–1998–3772] re- the Department’s final rule—Airworthiness ting notification concerning the Department ceived May 7, 1998, pursuant to 5 U.S.C. Directives; McDonnell Douglas Model MD–11 of the Air Forces’s Proposed Letter(s) of 801(a)(1)(A); to the Committee on Transpor- Series Airplanes [Docket No. 98–NM–131–AD; Offer and Acceptance (LOA) to the Republic tation and Infrastructure. Amendment 39–10512; AD 98–10–01] (RIN: 2120– of Korea for defense articles and services 9138. A letter from the General Counsel, AA64) received May 7, 1998, pursuant to 5 (Transmittal No. 98–40), pursuant to 22 U.S.C. Department of Transportation, transmitting U.S.C. 801(a)(1)(A); to the Committee on 2776(b); to the Committee on International the Department’s final rule—Airworthiness Transportation and Infrastructure. Relations. Directives; Short Brothers Model SD3–30 and 9148. A letter from the General Counsel, 9127. A letter from the Assistant Secretary SD3–60 Series Airplanes Equipped with Fire Department of Transportation, transmitting for Legislative Affairs, Department of State, Fighting Enterprises (U.K.) Ltd. Fire Extin- the Department’s final rule—Airworthiness transmitting certification of a proposed li- guishers [Docket No. 96–NM–175–AD; Amend- Directives; British Aerospace (Jetstream) H3246 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Model 4101 Airplanes [Docket No. 97–NM–199– TIME LIMITATION OF REFERRED H.R. 3857. A bill to amend the Internal Rev- AD; Amendment 39–10513; AD 98–10–02] (RIN: BILL enue Code of 1986 to allow the research credit 2120–AA64) received May 7, 1998, pursuant to for expenses attributable to certain collabo- 5 U.S.C. 801(a)(1)(A); to the Committee on Pursuant to clause 5 of rule X the fol- rative research consortia; to the Committee Transportation and Infrastructure. lowing action was taken by the Speak- on Ways and Means. 9149. A letter from the General Counsel, er: By Mr. HUNTER (for himself, Mr. Department of Transportation, transmitting H.R. 1704. Referral to the Committees on BILBRAY, Mr. PACKARD, Mr. REYES, the Department’s final rule—Airworthiness Government Reform and Oversight and and Mr. CUNNINGHAM): Directives; Eurocopter Deutschland GmbH House Oversight extended for a period ending H.R. 3858. A bill to assure drug-free borders (ECD) (Eurocopter Deutschland) Model MBB- not later than May 22, 1998. by increasing penalties for certain drug-re- BK 117 A–1, A–3, A–4, B–1, B–2, and C–1 Heli- f lated offenses, to enhance law enforcement copters [Docket No. 97–SW–45–AD; Amend- efforts for counterdrug activities, and for ment 39–10246; AD 97–26–03] (RIN: 2120–AA64) PUBLIC BILLS AND RESOLUTIONS other purposes; to the Committee on the Ju- received May 7, 1998, pursuant to 5 U.S.C. Under clause 5 of Rule X and clause 4 diciary. 801(a)(1)(A); to the Committee on Transpor- of Rule XXII, public bills and resolu- By Mr. SCARBOROUGH: H.R. 3859. A bill to amend the Internal Rev- tation and Infrastructure. tions were introduced and severally re- 9150. A letter from the General Counsel, enue Code of 1986 to repeal the estate and Department of Transportation, transmitting ferred, as follows: gift tax; to the Committee on Ways and the Department’s final rule—Airworthiness By Mr. DELAY: Means. Directives; Raytheon Aircraft Company 90, H.R. 3850. A bill to provide reporting re- By Mr. SCARBOROUGH: 100, 200, and 300 Series Airplanes (formerly quirements for the assertion of executive H.R. 3860. A bill to amend the Internal Rev- known as Beech Aircraft Corporation 90, 100, privilege, and for other purposes; to the enue Code of 1986 to eliminate taxes on cap- 200, and 300 series airplanes) [Docket No. 97– Committee on the Judiciary. ital gains after December 31, 2001; to the CE–05–AD; Amendment 39–10207; AD 97–23–17] By Mr. OBEY: Committee on Ways and Means. (RIN: 2120–AA64) received May 7, 1998, pursu- H.R. 3851. A bill to amend the Federal Elec- By Mrs. LINDA SMITH of Washington ant to 5 U.S.C. 801(a)(1)(A); to the Committee tion Campaign Act of 1971 to provide for ex- (for herself and Mr. HUNTER): on Transportation and Infrastructure. penditure limitations and public financing H.R. 3861. A bill to amend the Internal Rev- 9151. A letter from the Chief, Regulations for House of Representatives general elec- enue Code of 1986 to provide, for purposes of Unit, Internal Revenue Service, transmitting tions, and for other purposes; to the Commit- computing the exclusion of gain on sale of a the Service’s final rule—Credit for Producing tee on House Oversight, and in addition to principal residence, that a member of the Fuel From a Nonconventional Source, 29 In- the Committees on Ways and Means, and Armed Forces of the United States shall be flation Adjustment Factor, and 29 Reference Rules, for a period to be subsequently deter- treated as using property as a principal resi- Price [Notice 98–28, 1998–19 I.R.B.] received mined by the Speaker, in each case for con- dence while away from home on extended ac- May 11, 1998, pursuant to 5 U.S.C. sideration of such provisions as fall within tive duty; to the Committee on Ways and 801(a)(1)(A); to the Committee on Ways and the jurisdiction of the committee concerned. Means. Means. By Mr. OBEY: By Mr. UPTON (for himself and Mr. H.R. 3852. A bill to amend the Federal Elec- 9152. A letter from the Chief, Regulations TOWNS): tion Campaign Act of 1971 to provide for pub- Unit, Internal Revenue Service, transmitting H.R. 3862. A bill to provide assistance for lic financing for House of Representatives the Service’s final rule—Last-in, First-out poison prevention and to stabilize the fund- general elections for candidates who volun- Inventories [Revenue Ruling 98–26] received ing of regional poison control centers; to the tarily limit expenditures, and for other pur- May 11, 1998, pursuant to 5 U.S.C. Committee on Commerce. poses; to the Committee on House Oversight, 801(a)(1)(A); to the Committee on Ways and By Mr. WATTS of Oklahoma (for him- and in addition to the Committees on Ways Means. self, Mr. TAYLOR of Mississippi, Mr. and Means, and Rules, for a period to be sub- 9153. A letter from the Chief, Regulations HEFLEY, Mr. RYUN, Mr. BILBRAY, Mr. sequently determined by the Speaker, in Unit, Internal Revenue Service, transmitting BOYD, Ms. EDDIE BERNICE JOHNSON of each case for consideration of such provi- the Service’s final rule—Valuation of Cer- Texas, and Mr. FILNER): sions as fall within the jurisdiction of the tain Farm, Etc., Real Property [Revenue H.R. 3863. A bill to provide for a special committee concerned. Ruling 98–22] received May 11, 1998, pursuant Medicare part B enrollment period, a reduc- By Mr. PORTMAN (for himself, Mr. to 5 U.S.C. 801(a)(1)(A); to the Committee on tion or elimination in the part B late enroll- BISHOP, and Mr. SOUDER): Ways and Means. ment penalty, and a special medigap open H.R. 3853. A bill to promote drug-free enrollment period for certain military retir- workplace programs; to the Committee on ees and dependents; to the Committee on f Small Business. Commerce, and in addition to the Committee By Mr. BARR of Georgia (for himself, on Ways and Means, for a period to be subse- REPORTS OF COMMITTEES ON Mr. SOLOMON, Mr. MICA, Mr. GRAHAM, quently determined by the Speaker, in each PUBLIC BILLS AND RESOLUTIONS Mr. BURTON of Indiana, Mr. case for consideration of such provisions as LATOURETTE, Mr. MCINTOSH, and Mr. fall within the jurisdiction of the committee Under clause 2 of rule XIII, reports of SESSIONS): concerned. committees were delivered to the Clerk H.R. 3854. A bill to amend title 18, United By Mr. WHITFIELD (for himself and States Code, to modify immunity provisions for printing and reference to the proper Mr. ROGERS): calendar, as follows: in certain cases involving Congressional in- H.R. 3864. A bill to designate the post office vestigations; to the Committee on the Judi- located at 203 West Paige Street, in Mr. SHUSTER: Committee on Transpor- ciary. Tompkinsville, Kentucky, as the ‘‘Tim Lee tation and Infrastructure. H.R. 3504. A bill to By Mr. BROWN of Ohio (for himself, Carter Post Office Building‘‘; to the Commit- amend the John F. Kennedy Center Act to Mrs. JOHNSON of Connecticut, and Mr. tee on Government Reform and Oversight. authorize appropriations for the John F. GREENWOOD): By Mr. SAXTON: Kennedy Center for the Performing Arts and H.R. 3855. A bill to provide for payments to H. Con. Res. 276. Concurrent resolution ex- to further define the criteria for capital re- children’s hospitals that operate graduate pressing the sense of the Congress that pair and operation and maintenance; with an medical education programs; to the Commit- United States foreign policy with respect to amendment (Rept. 105–533). Referred to the tee on Commerce, and in addition to the the Middle East peace process should not in- Committee of the Whole House on the State Committee on Ways and Means, for a period clude an attempt to require Israel to make of the Union. to be subsequently determined by the Speak- concessions which Israel does not believe to Mr. DIAZ-BALART: Committee on Rules. er, in each case for consideration of such pro- be in its self-interest, including concessions House Resolution 430. Resolution providing visions as fall within the jurisdiction of the which would jeopardize the security of for consideration of the bill (H.R. 2431) to es- committee concerned. Israel; to the Committee on International tablish an Office of Religious Persecution By Mr. EWING (for himself and Mr. Relations. Monitoring, to provide for the imposition of WELLER): By Mr. DREIER: sanctions against countries engaged in a pat- H.R. 3856. A bill to provide for the convey- H. Res. 429. A resolution designating ma- tern of religious persecution, and for other ance of the vacant Army Reserve Center in jority membership on certain standing com- purposes (Rept. 105–534). Referred to the Kankakee, Illinois; to the Committee on Na- mittees of the House; considered and agreed House Calendar. tional Security. to. By Mr. HOUGHTON (for himself, Mr. DISCHARGE OF COMMITTEE f Pursuant to clause 5 of rule X the LEVIN, Mr. WELLER, Mr. ENGLISH of Pennsylvania, Mr. RAMSTAD, Mr. ADDITIONAL SPONSORS Committee on Commerce discharged CAMP, Mr. METCALF, Mr. TRAFICANT, from further consideration. H.R. 1023 Mr. FROST, Ms. STABENOW, Ms. Under clause 4 of rule XXII, sponsors referred to the Committee of the Whole LOFGREN, Mr. MCDERMOTT, and Mr. were added to public bills and resolu- House on the State of the Union. KLECZKA): tions as follows: May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3247

H.R. 22: Mr. WALSH. H.R. 3185: Mr. PITTS, Mrs. MYRICK, Mr. PE- H.R. 3820: Mr. SKAGGS and Mr. BONIOR. H.R. 371; Mr. HUTCHINSON. TERSON of Minnesota, Ms. DUNN of Washing- H.R. 3829: Mr. CASTLE, Mr. BEREUTER, and H.R. 678: Mr. RAMSTAD, Mr. SMITH of Or- ton, Mr. CRAMER, and Mr. BARR of Georgia. Mr. SHUSTER. egon, Mr. BARRETT of Wisconsin, Mr. DOOLEY H.R. 3270: Mr. WYNN and Ms. SANCHEZ. H.R. 3841: Mr. TIERNEY. of California, Ms. JACKSON-LEE, Mr. HINCHEY, H.R. 3274: Mr. WYNN and Ms. SANCHEZ. H. Con. Res. 112: Mr. LEWIS of Georgia. Mr. KANJORSKI, Mr. TORRES, Mr. MOAKLEY, H.R. 3304: Mr. FRANKS of New Jersey. H. Con. Res. 125: Mr. ETHERIDGE. Mr. KENNEDY of Massachusetts, Mr. KENNEDY H.R. 3331: Mrs. BONO. H. Con. Res. 188: Mr. PASCRELL. of Rhode Island, Mr. HEFLEY, Mrs. NORTHUP, H.R. 3351: Mr. POMEROY. H. Con. Res. 210: Mr. BALDACCI. Mr. BROWN of California, Mr. BONILLA, Mr. H.R. 3379: Ms. PELOSI, Ms. LOFGREN, and H. Con. Res. 241: Mr. YATES, Mr. FROST, Mr. GALLEGLY, Mr. JONES, Mr. KIM, Mr. PACK- Mr. SABO. GUTIERREZ, and Mr. CLEMENT. ARD, and Mr. PORTER. H.R. 3396: Mr. GRAHAM, Mr. CAMPBELL, Mr. H. Con. Res. 264: Mr. PETERSON of Pennsyl- H.R. 716: Mr. WAMP. MASCARA, Ms. PELOSI, Ms. KAPTUR, Ms. vania, Mr. MORAN of Kansas, Ms. WOOLSEY, H.R. 746: Mrs. MYRICK and Mr. FARR of DELAURO, Mr. PETERSON of Pennsylvania, Mr. SAM JOHNSON, and Mr. MALONEY of Con- California. Mr. WATKINS, Mr. EHLERS, Mr. BUYER, Mr. necticut. H.R. 754: Mr. NEAL of Massachusetts and LIVINGSTON, Mr. JEFFERSON, Mr. SCAR- H. Con. Res. 270: Mr. BROWN of Ohio. Ms. FURSE. BOROUGH, and Mr. GOSS. H. Con. Res. 271: Mr. ROGAN and Mr. FIL- H.R. 815: Ms. NORTON. H.R. 3435: Mr. HASTINGS of Washington. NER. H.R. 864: Mr. BISHOP, Mr. TORRES, Mr. ROE- H.R. 3494: Mr. TALENT. H. Res. 144: Mr. BARR of Georgia, Mr. DEAL MER, Mr. DINGELL, and Mr. GILLMOR. H.R. 3506: Mr. BUYER, Ms. KAPTUR, Mr. of Georgia, Mr. PETERSON of Pennsylvania, H.R. 872: Mr. FARR of California, Mr. BONIOR, Mr. TAYLOR of North Carolina, Mr. Mr. SESSIONS, Mr. LEACH, Mr. CHAMBLISS, SAXTON, and Mr. STEARNS. PARKER, Mr. HULSHOF, and Mr. BOYD. Mr. SMITH of Michigan, Mr. CAMP, Mr. H.R. 922: Mr. KIM. H.R. 3514: Mr. FARR of California. SUNUNU, Mrs. NORTHUP, Mr. GUTKNECHT, Mr. H.R. 953: Ms. DANNER and Mr. DEUTSCH. H.R. 3526: Mr. HOUGHTON. WICKER, Mr. PICKERING, and Mr. WELDON of H.R. 3539: Mr. CANNON and Mr. MCINNIS. H.R. 979: Mr. SAWYER, Mr. ORTIZ, Mr. Florida. H.R. 3553: Ms. NORTON, Mr. FILNER, and COOKSEY, Mr. TOWNS, and Mr. HASTINGS of H. Res. 399: Mr. MCKEON and Mr. SPRATT. Mrs. MORELLA. Washington. H. Res. 418: Mr. WALSH, Ms. KAPTUR, Mr. H.R. 3566: Mr. GEKAS. H.R. 1038: Mr. ROHRABACHER. RAMSTAD, Mrs. THURMAN, Mr. GILLMOR, Mr. H.R. 3567: Mr. HOEKSTRA. H.R. 1126: Mr. UPTON, Mr. CLEMENT, Mr. KIND of Wisconsin, Mr. LUTHER, Mr. VENTO, H.R. 3596: Ms. JACKSON-LEE, Ms. KIL- KIND of Wisconsin, and Mr. SOLOMON. Mr. SABO, and Mr. BARCIA of Michigan. PATRICK, Ms. CARSON, Mr. DAVIS of Illinois, H.R. 1320: Mr. MCGOVERN and Mr. AN- H. Res. 421: Mr. ARCHER and Mr. KENNEDY Mr. WYNN, Mr. HASTINGS of Florida, Ms. NOR- DREWS. of Massachusetts. TON, Mr. MEEKS of New York, Mr. OWENS, Ms. H.R. 1401: Mr. NEAL of Massachusetts and LEE, Ms. BROWN of Florida, Ms. ROS- f Mrs. KENNELLY of Connecticut. LEHTINEN, Mr. HILLIARD, and Mr. FRANK of H.R. 1450: Mr. SABO. AMENDMENTS Massachusetts. H.R. 1560: Mr. GREENWOOD, Mr. EVERETT, H.R. 3613: Mr. LUCAS of Oklahoma. Under clause 6 of rule XXIII, pro- Mr. CALVERT, Mr. MCINNIS, Mr. CALLAHAN, H.R. 3624: Ms. PELOSI, Mr. ROMERO- posed amendments were submitted as Mr. LEACH, Ms. PRYCE of Ohio, Mr. HANSEN, BARCELO´ , Mr. COSTELLO, Mr. EVANS, Mr. HIN- Mr. CHAMBLISS, Mrs. MYRICK, Mr. HASTINGS follows: CHEY, Mr. MCGOVERN, Mr. UNDERWOOD, and of Washington, Mr. SHADEGG, Mr. JONES, Mr. H.R. 3721 Mr. COYNE. GILLMOR, Mr. CAMP, Mrs. NORTHUP, Mr. GUT- H.R. 3634: Mr. FOX of Pennsylvania, Mr. OFFERED BY: MR. BASS KNECHT, Mr. SUNUNU, Mr. LEWIS of Kentucky, BONILLA, Mr. MCHUGH, Mr. METCALF, Mr. (Amendment in the Nature of a Substitute to Mr. EHLERS, Mr. COX of California, Mr. WICKER, Mr. MCINNIS, Mr. PETERSON of Penn- H.R. 2183) FOSSELLA, Mrs. FOWLER, Mr. BARR of Geor- sylvania, Mr. HUTCHINSON, Mr. BAKER, Mr. AMENDMENT NO. 1: Strike all after the en- gia, Mr. DEAL of Georgia, Mr. MANZULLO, Mr. LEWIS of California, Mr. LUCAS of Oklahoma, acting clause and insert the following: EHRLICH, Mr. REDMOND, Mr. COOKSEY, Mr. Mr. WATKINS, Mr. BROWN of California, and FORBES, Mr. RILEY, Mr. SMITH of Texas, Mrs. SECTION 1. SHORT TITLE; TABLE OF CONTENTS. Mr. STEARNS. KELLY, Mr. DELAY, Mr. WELDON of Florida, (a) SHORT TITLE.—This Act may be cited as H.R. 3644: Mr. RANGEL. the ‘‘Real Campaign Reform Act of 1998’’. Mr. MCCOLLUM, Mr. SESSIONS, Mr. WICKER, H.R. 3648: Mr. BOEHNER, Mr. COLLINS, and Mr. SNOWBARGER, Mr. UPTON, Mr. GRAHAM, (b) TABLE OF CONTENTS.—The table of con- Mr. SAM JOHNSON. tents of this Act is as follows: Mr. MCKEON, Mr. PETERSON of Pennsylvania, H.R. 3659: Mr. ADERHOLT, Mr. DOOLITTLE, Mr. HAYWORTH, Mr. PACKARD, Mr. ROGERS, Mr. PITTS, Mr. STUMP, Mr. LAFALCE, and Mr. Sec. 1. Short title; table of contents. Mr. PICKERING, Mr. WATTS of Oklahoma, Mr. PAUL. TITLE I—REDUCTION OF SPECIAL HOSTETTLER, Mr. CHABOT, Mr. NEUMANN, Mr. H.R. 3681: Mr. NETHERCUTT. INTEREST INFLUENCE ARMEY, Mr. BOEHLERT, Mr. LAHOOD, Mr. H.R. 3682: Mr. FOSSELLA and Mr. COX of Sec. 101. Soft money of political parties. MCINTOSH, Mr. HASTERT, and Mr. LEWIS of California. Sec. 102. Increased contribution limits for California. H.R. 3690: Mr. CHABOT. State committees of political H.R. 1571: Mr. JEFFERSON, Mr. MATSUI, and H.R. 3700: Mr. THOMPSON, Ms. EDDIE BER- parties and aggregate contribu- Mr. SCHUMER. NICE JOHNSON of Texas, and Ms. MILLENDER- tion limit for individuals. H.R. 1619: Mr. PAUL. MCDONALD. Sec. 103. Reporting requirements. H.R. 2202: Ms. CARSON, Mr. BROWN of Ohio, H.R. 3701: Mr. THOMPSON, Ms. EDDIE BER- TITLE II—INDEPENDENT AND Mr. LANTOS, Ms. LEE, and Mr. MCGOVERN. NICE JOHNSON of Texas, and Ms. MILLENDER- COORDINATED EXPENDITURES H.R. 2222: Ms. NORTON. MCDONALD. H.R. 2250: Mr. HOSTETTLER. H.R. 3710: Mr. CALVERT, Mr. REDMOND, Mr. Sec. 201. Definitions. H.R. 2523: Mr. KUCINICH. METCALF, Mr. KENNEDY of Rhode Island, Mr. Sec. 202. Civil penalty. H.R. 2568: Mr. HUTCHINSON. WAMP, Mr. UNDERWOOD, Mr. PEASE, Mr. Sec. 203. Reporting requirements for certain H.R. 2612: Mr. HOBSON. BONIOR, Mr. PORTER, Ms. RIVERS, Mr. independent expenditures. H.R. 2675: Mr. BOUCHER, Mr. PETERSON of GEJDENSON, Mr. TOWNS, Ms. ESHOO, Mr. BUR- Sec. 204. Independent versus coordinated ex- Minnesota, Mr. MANTON, Mr. FAWELL, Ms. TON of Indiana, and Mr. MILLER of Florida. penditures by party. LEE, and Mr. WATT of North Carolina. H.R. 3726: Mr. MARTINEZ, Mr. MENENDEZ, Sec. 205. Coordination with candidates. H.R. 2699: Mr. DIXON. Mr. ORTIZ, Mr. ROMERO-BARCELO, Mr. UNDER- TITLE III—DISCLOSURE H.R. 2844: Mr. HERGER. WOOD, Mr. PASTOR, Mr. REYES, Mr. HINOJOSA, Sec. 301. Filing of reports using computers H.R. 2888: Mr. HOLDEN and Mr. DOOLITTLE. Ms. SANCHEZ, Ms. VELAZQUEZ, Mr. TORRES, and facsimile machines. H.R. 2908: Mr. MASCARA, Mrs. JOHNSON of Mr. BECERRA, Mr. RODRIGUEZ, and Ms. ROY- Sec. 302. Prohibition of deposit of contribu- Connecticut, and Mr. HULSHOF. BAL-ALLARD. tions with incomplete contribu- H.R. 2938: Mr. GRAHAM. H.R. 3733: Mr. MORAN of Kansas, Mr. tor information. H.R. 2939: Mr. BENTSEN. SNOWBARGER, Mr. TIAHRT, Mr. ENGLISH of Sec. 303. Audits. H.R. 3014: Mr. COX of California. Pennsylvania, and Mr. KUCINICH. Sec. 304. Reporting requirements for con- H.R. 3053: Mr. HINOJOSA, Mr. STOKES, Mr. H.R. 3744: Mr. MCHUGH, Mr. MORAN of Vir- tributions of $50 or more. BLUMENAUER, Ms. PELOSI, and Ms. EDDIE ginia, and Mr. JOHN. Sec. 305. Use of candidates’ names. BERNICE JOHNSON of Texas. H.R. 3749: Mr. BALDACCI. Sec. 306. Prohibition of false representation H.R. 3126: Ms. PELOSI. H.R. 3774: Mr. ENGLISH of Pennsylvania, to solicit contributions. H.R. 3134: Mr. ABERCROMBIE, Mr. GUTIER- Mr. FROST, Mr. MATSUI, Mr. MARTINEZ, and Sec. 307. Soft money of persons other than REZ, Mr. GEJDENSON, Ms. STABENOW, Ms. Mr. OBERSTAR. political parties. DELAURO, and Mr. EDWARDS. H.R. 3775: Mr. ETHERIDGE. Sec. 308. Campaign advertising. H.R. 3140: Mr. STENHOLM, Mr. PETERSON of H.R. 3807: Mr. BARRETT of Nebraska, Mr. Pennsylvania, and Mr. SPENCE. CANADY of Florida, Ms. DANNER, Mr. DOYLE, TITLE IV—PERSONAL WEALTH OPTION H.R. 3156: Mr. DINGELL, Mr. REGULA, Mr. Mr. HOEKSTRA, Mr. NEY, Mr. SMITH of Michi- Sec. 401. Voluntary personal funds expendi- DOYLE, Mr. WISE, and Mr. BOYD. gan, and Mr. UPTON. ture limit. H3248 CONGRESSIONAL RECORD — HOUSE May 13, 1998 Sec. 402. Political party committee coordi- ‘‘(iii) a communication that refers to a ceipt of funds is permitted under State law nated expenditures. clearly identified candidate for Federal of- for any activity other than a Federal elec- TITLE V—MISCELLANEOUS fice (regardless of whether a candidate for tion activity. State or local office is also mentioned or ‘‘(3) FUNDRAISING EVENTS.—Paragraph (1) Sec. 501. Prohibiting involuntary use of identified) and is made for the purpose of in- does not apply in the case of a candidate who funds of employees of corpora- fluencing a Federal election (regardless of attends, speaks, or is a featured guest at a tions and other employers and whether the communication is express advo- fundraising event sponsored by a State, dis- members of unions and organi- cacy). trict, or local committee of a political zations for political activities. ‘‘(B) EXCLUDED ACTIVITY.—The term ‘Fed- party.’’. Sec. 502. Use of contributed amounts for cer- eral election activity’ does not include an tain purposes. SEC. 102. INCREASED CONTRIBUTION LIMITS FOR amount expended or disbursed by a State, STATE COMMITTEES OF POLITICAL Sec. 503. Limit on congressional use of the district, or local committee of a political PARTIES AND AGGREGATE CON- franking privilege. party for— TRIBUTION LIMIT FOR INDIVIDUALS. Sec. 504. Prohibition of fundraising on Fed- ‘‘(i) campaign activity conducted solely on (a) CONTRIBUTION LIMIT FOR STATE COMMIT- eral property. behalf of a clearly identified candidate for TEES OF POLITICAL PARTIES.—Section Sec. 505. Penalties for knowing and willful State or local office, provided the campaign 315(a)(1) of the Federal Election Campaign violations. activity is not a Federal election activity de- Act of 1971 (2 U.S.C. 441a(a)(1)) is amended— Sec. 506. Strengthening foreign money ban. (1) in subparagraph (B), by striking ‘‘or’’ at Sec. 507. Prohibition of contributions by mi- scribed in subparagraph (A); ‘‘(ii) a contribution to a candidate for the end; nors. State or local office, provided the contribu- (2) in subparagraph (C)— Sec. 508. Expedited procedures. tion is not designated or used to pay for a (A) by inserting ‘‘(other than a committee Sec. 509. Initiation of enforcement proceed- Federal election activity described in sub- described in subparagraph (D))’’ after ‘‘com- ing. paragraph (A); mittee’’; and TITLE VI—SEVERABILITY; CONSTITU- ‘‘(iii) the costs of a State, district, or local (B) by striking the period at the end and TIONALITY; EFFECTIVE DATE; REGU- political convention; inserting ‘‘; or’’; and LATIONS ‘‘(iv) the costs of grassroots campaign ma- (3) by adding at the end the following: Sec. 601. Severability. terials, including buttons, bumper stickers, ‘‘(D) to a political committee established Sec. 602. Review of constitutional issues. and yard signs, that name or depict only a and maintained by a State committee of a Sec. 603. Effective date. candidate for State or local office; political party in any calendar year that, in Sec. 604. Regulations. ‘‘(v) the non-Federal share of a State, dis- the aggregate, exceed $10,000’’. (b) AGGREGATE CONTRIBUTION LIMIT FOR IN- TITLE I—REDUCTION OF SPECIAL trict, or local party committee’s administra- DIVIDUAL.—Section 315(a)(3) of the Federal INTEREST INFLUENCE tive and overhead expenses (but not includ- ing the compensation in any month of an in- Election Campaign Act of 1971 (2 U.S.C. SEC. 101. SOFT MONEY OF POLITICAL PARTIES. dividual who spends more than 20 percent of 441a(a)(3)) is amended by striking ‘‘$25,000’’ Title III of the Federal Election Campaign the individual’s time on Federal election ac- and inserting ‘‘$30,000’’. Act of 1971 (2 U.S.C. 431 et seq.) is amended tivity) as determined by a regulation pro- SEC. 103. REPORTING REQUIREMENTS. by adding at the end the following: mulgated by the Commission to determine (a) REPORTING REQUIREMENTS.—Section 304 ‘‘SEC. 323. SOFT MONEY OF POLITICAL PARTIES. the non-Federal share of a State, district, or of the Federal Election Campaign Act of 1971 ‘‘(a) NATIONAL COMMITTEES.— local party committee’s administrative and (2 U.S.C. 434) (as amended by section 203) is ‘‘(1) IN GENERAL.—A national committee of overhead expenses; and amended by inserting after subsection (d) the a political party (including a national con- ‘‘(vi) the cost of constructing or purchas- following: gressional campaign committee of a political ing an office facility or equipment for a ‘‘(e) POLITICAL COMMITTEES.— party) and any officers or agents of such State, district or local committee. ‘‘(1) NATIONAL AND CONGRESSIONAL POLITI- party committees, shall not solicit, receive, ‘‘(c) FUNDRAISING COSTS.—An amount spent CAL COMMITTEES.—The national committee of or direct to another person a contribution, by a national, State, district, or local com- a political party, any national congressional donation, or transfer of funds, or spend any mittee of a political party, by an entity that campaign committee of a political party, funds, that are not subject to the limita- is established, financed, maintained, or con- and any subordinate committee of either, tions, prohibitions, and reporting require- trolled by a national, State, district, or local shall report all receipts and disbursements ments of this Act. committee of a political party, or by an during the reporting period. ‘‘(2) APPLICABILITY.—This subsection shall agent or officer of any such committee or en- ‘‘(2) OTHER POLITICAL COMMITTEES TO WHICH apply to an entity that is directly or indi- tity, to raise funds that are used, in whole or SECTION 323 APPLIES.—A political committee rectly established, financed, maintained, or in part, to pay the costs of a Federal election (not described in paragraph (1)) to which sec- controlled by a national committee of a po- activity shall be made from funds subject to tion 323(b)(1) applies shall report all receipts litical party (including a national congres- the limitations, prohibitions, and reporting and disbursements made for activities de- sional campaign committee of a political requirements of this Act. scribed in subparagraphs (A) and (B)(v) of party), or an entity acting on behalf of a na- ‘‘(d) TAX-EXEMPT ORGANIZATIONS.—A na- section 323(b)(2). tional committee, and an officer or agent tional, State, district, or local committee of ‘‘(3) ITEMIZATION.—If a political committee acting on behalf of any such committee or a political party (including a national con- has receipts or disbursements to which this entity. gressional campaign committee of a political subsection applies from any person aggregat- ‘‘(b) STATE, DISTRICT, AND LOCAL COMMIT- party, an entity that is directly or indirectly ing in excess of $200 for any calendar year, TEES.— established, financed, maintained, or con- the political committee shall separately ‘‘(1) IN GENERAL.—An amount that is ex- trolled by any such national, State, district, itemize its reporting for such person in the pended or disbursed by a State, district, or or local committee or its agent, an agent same manner as required in paragraphs local committee of a political party (includ- acting on behalf of any such party commit- (3)(A), (5), and (6) of subsection (b). ing an entity that is directly or indirectly tee, and an officer or agent acting on behalf ‘‘(4) REPORTING PERIODS.—Reports required established, financed, maintained, or con- of any such party committee or entity), shall to be filed under this subsection shall be trolled by a State, district, or local commit- not solicit any funds for, or make or direct filed for the same time periods required for tee of a political party and an officer or any donations to, an organization that is de- political committees under subsection (a).’’. (b) BUILDING FUND EXCEPTION TO THE DEFI- agent acting on behalf of such committee or scribed in section 501(c) of the Internal Reve- NITION OF CONTRIBUTION.—Section 301(8)(B) of entity) for Federal election activity shall be nue Code of 1986 and exempt from taxation the Federal Election Campaign Act of 1971 (2 made from funds subject to the limitations, under section 501(a) of such Code (or has sub- U.S.C. 431(8)(B)) is amended— prohibitions, and reporting requirements of mitted an application to the Secretary of the this Act. (1) by striking clause (viii); and Internal Revenue Service for determination (2) by redesignating clauses (ix) through ‘‘(2) FEDERAL ELECTION ACTIVITY.— of tax-exemption under such section). (xiv) as clauses (viii) through (xiii), respec- ‘‘(A) IN GENERAL.—The term ‘Federal elec- ‘‘(e) CANDIDATES.— tively. tion activity’ means— ‘‘(1) IN GENERAL.—A candidate, individual ‘‘(i) voter registration activity during the holding Federal office, or agent of a can- TITLE II—INDEPENDENT AND period that begins on the date that is 120 didate or individual holding Federal office COORDINATED EXPENDITURES days before the date a regularly scheduled shall not solicit, receive, direct, transfer, or SEC. 201. DEFINITIONS. Federal election is held and ends on the date spend funds for a Federal election activity (a) DEFINITION OF INDEPENDENT EXPENDI- of the election; on behalf of such candidate, individual, TURE.—Section 301 of the Federal Election ‘‘(ii) voter identification, get-out-the-vote agent or any other person, unless the funds Campaign Act of 1971 (2 U.S.C. 431) is amend- activity, or generic campaign activity con- are subject to the limitation, prohibitions, ed by striking paragraph (17) and inserting ducted in connection with an election in and reporting requirements of this Act. the following: which a candidate for Federal office appears ‘‘(2) STATE LAW.—Paragraph (1) does not ‘‘(17) INDEPENDENT EXPENDITURE.— on the ballot (regardless of whether a can- apply to the solicitation or receipt of funds ‘‘(A) IN GENERAL.—The term ‘independent didate for State or local office also appears by an individual who is a candidate for a expenditure’ means an expenditure by a per- on the ballot); and State or local office if the solicitation or re- son— May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3249

‘‘(i) for a communication that is express (ii) by adding at the end the following: ‘‘(A) IN GENERAL.—On or after the date on advocacy; and (iii) If the Commission determines by an which a political party nominates a can- ‘‘(ii) that is not provided in coordination affirmative vote of 4 of its members that didate, a committee of the political party with a candidate or a candidate’s agent or a there is probable cause to believe that a per- shall not make both expenditures under this person who is coordinating with a candidate son has made a knowing and willful violation subsection and independent expenditures (as or a candidate’s agent.’’. of section 304(c), the Commission shall not defined in section 301(17)) with respect to the (b) DEFINITION OF EXPRESS ADVOCACY.— enter into a conciliation agreement under candidate during the election cycle. Section 301 of the Federal Election Cam- this paragraph and may institute a civil ac- ‘‘(B) CERTIFICATION.—Before making a co- paign Act of 1971 (2 U.S.C. 431) is amended by tion for relief under paragraph (6)(A).’’; and ordinated expenditure under this subsection adding at the end the following: ‘‘(B) in paragraph (6)(B), by inserting ‘‘(ex- with respect to a candidate, a committee of ‘‘(20) EXPRESS ADVOCACY.— cept an action instituted in connection with a political party shall file with the Commis- ‘‘(A) IN GENERAL.—The term ‘express advo- a knowing and willful violation of section sion a certificate, signed by the treasurer of cacy’ means a communication that advo- 304(c))’’ after ‘‘subparagraph (A)’’; and (2) in the committee, that the committee has not cates the election or defeat of a candidate subsection (d)(1)— and shall not make any independent expendi- by— (A) in subparagraph (A), by striking ‘‘Any ture with respect to the candidate during the ‘‘(i) containing a phrase such as ‘vote for’, person’’ and inserting ‘‘Except as provided in same election cycle. ‘re-elect’, ‘support’, ‘cast your ballot for’, subparagraph (D), any person’’; and ‘‘(C) APPLICATION.—For the purposes of ‘(name of candidate) for Congress’, ‘(name of (B) by adding at the end the following: this paragraph, all political committees es- candidate) in 1997’, ‘vote against’, ‘defeat’, ‘‘(D) In the case of a knowing and willful tablished and maintained by a national po- ‘reject’, or a campaign slogan or words that violation of section 304(c) that involves the litical party (including all congressional in context can have no reasonable meaning reporting of an independent expenditure, the campaign committees) and all political com- mittees established and maintained by a other than to advocate the election or defeat violation shall not be subject to this sub- State political party (including any subordi- of 1 or more clearly identified candidates; section.’’. nate committee of a State committee) shall ‘‘(ii) referring to 1 or more clearly identi- SEC. 203. REPORTING REQUIREMENTS FOR CER- be considered to be a single political com- fied candidates in a paid advertisement that TAIN INDEPENDENT EXPENDITURES. mittee. is broadcast by a radio broadcast station or Section 304 of the Federal Election Cam- ‘‘(D) TRANSFERS.—A committee of a politi- a television broadcast station within 60 cal- paign Act of 1971 (2 U.S.C. 434) is amended— cal party that submits a certification under endar days preceding the date of an election (1) in subsection (c)(2), by striking the un- subparagraph (B) with respect to a candidate of the candidate and that appears in the designated matter after subparagraph (C); shall not, during an election cycle, transfer State in which the election is occurring, ex- (2) by redesignating paragraph (3) of sub- any funds to, assign authority to make co- cept that with respect to a candidate for the section (c) as subsection (f); and ordinated expenditures under this subsection office of Vice President or President, the (3) by inserting after subsection (c)(2) (as to, or receive a transfer of funds from, a time period is within 60 calendar days pre- amended by paragraph (1)) the following: committee of the political party that has ceding the date of a general election; or ‘‘(d) TIME FOR REPORTING CERTAIN EXPEND- made or intends to make an independent ex- ‘‘(iii) expressing unmistakable and unam- ITURES.— penditure with respect to the candidate.’’. biguous support for or opposition to 1 or ‘‘(1) EXPENDITURES AGGREGATING $1,000.— SEC. 205. COORDINATION WITH CANDIDATES. more clearly identified candidates when ‘‘(A) INITIAL REPORT.—A person (including (a) DEFINITION OF COORDINATION WITH CAN- taken as a hole and with limited reference to a political committee) that makes or con- DIDATES.— external events, such as proximity to an tracts to make independent expenditures ag- (1) SECTION 301(8).—Section 301(8) of the election. gregating $1,000 or more after the 20th day, Federal Election Campaign Act of 1971 (2 ‘‘(B) VOTING RECORD AND VOTING GUIDE EX- but more than 24 hours, before the date of an U.S.C. 431(8)) is amended— CEPTION.—The term ‘express advocacy’ does election shall file a report describing the ex- (A) in subparagraph (A)— not include a printed communication that— penditures within 24 hours after that amount (i) by striking ‘‘or’’ at the end of clause (i); ‘‘(i) presents information in an educational of independent expenditures has been made. (ii) by striking the period at the end of manner solely about the voting record or po- ‘‘(B) ADDITIONAL REPORTS.—After a person clause (ii) and inserting ‘‘; or’’; and sition on a campaign issue of 2 or more can- files a report under subparagraph (A), the (iii) by adding at the end the following: didates; person shall file an additional report within ‘‘(iii) anything of value provided by a per- ‘‘(ii) that is not made in coordination with 24 hours after each time the person makes or son in coordination with a candidate for the a candidate, political party, or agent of the contracts to make independent expenditures purpose of influencing a Federal election, re- candidate or party; or a candidate’s agent or aggregating an additional $1,000 with respect gardless of whether the value being provided a person who is coordinating with a can- to the same election as that to which the ini- is a communication that is express advocacy, didate or a candidate’s agent; tial report relates. in which such candidate seeks nomination or ‘‘(iii) does not contain a phrase such as ‘‘(2) EXPENDITURES AGGREGATING $10,000.— election to Federal office.’’; and (B) by adding at the end the following: ‘vote for’, ‘re-elect’, ‘support‘, ‘cast your bal- ‘‘(A) INITIAL REPORT.—A person (including ‘‘(C) The term ‘provided in coordination lot for’, ‘(name of candidate) for Congress’, a political committee) that makes or con- ‘(name of candidate) in 1997’, ‘vote against’, with a candidate’ includes— tracts to make independent expenditures ag- ‘‘(i) a payment made by a person in co- ‘defeat’, or ‘reject’, or a campaign slogan or gregating $10,000 or more at any time up to operation, consultation, or concern with, at words that in context can have no reasonable and including the 20th day before the date of the request or suggestion of, or pursuant to meaning other than to urge the election or an election shall file a report describing the any general or particular understanding with defeat of 1 or more clearly identified can- expenditures within 48 hours after that a candidate, the candidate’s authorized com- didates.’’. amount of independent expenditures has mittee, or an agent acting on behalf of a can- (c) DEFINTIION OF EXPENDITURE.—Section been made. didate or authorized committee; 301(9)(A) of the Federal Election Campaign ‘‘(B) ADDITIONAL REPORTS.—After a person ‘‘(ii) a payment made by a person for the Act of 1971 (2 U.S.C. 431(9)(A)) is amended— files a report under subparagraph (A), the production, dissemination, distribution, or (1) in clause (i), by striking ‘‘and’’ at the person shall file an additional report within republication, in whole or in part, of any end; 48 hours after each time the person makes or broadcast or any written, graphic, or other (2) in clause (ii), by striking the period at contracts to make independent expenditures form of campaign material prepared by a the end and inserting ‘‘; and’’; and aggregating an additional $10,000 with re- candidate, a candidate’s authorized commit- (3) by adding at the end the following: spect to the same election as that to which tee, or an agent of a candidate or authorized ‘‘(iii) a payment for a communication that the initial report relates. committee (not including a communication is express advocacy; and ‘‘(3) PLACE OF FILING; CONTENTS.—A report described in paragraph (9)(B)(i) or a commu- ‘‘(iv) a payment made by a person for a under this subsection— nication that expressly advocates the can- communication that— ‘‘(A) shall be filed with the Commission; didate’s defeat); ‘‘(I) refers to a clearly identified candidate; and ‘‘(iii) a payment made by a person based on ‘‘(II) is provided in coordination with the ‘‘(B) shall contain the information required information about a candidate’s plans, candidate, the candidate’s agent, or the po- by subsection (b)(6)(B)(iii), including the projects, or needs provided to the person litical party of the candidate; and name of each candidate whom an expendi- making the payment by the candidate or the ‘‘(III) is for the purpose of influencing a ture is intended to support or oppose.’’. candidate’s agent who provides the informa- Federal election (regardless of whether the SEC. 204. INDEPENDENT VERSUS COORDINATED tion with the intent that the payment be communication is express advocacy).’’. EXPENDITURES BY PARTY. made; SEC. 202. CIVIL PENALTY. Section 315(d) of the Federal Election Cam- ‘‘(iv) a payment made by a person if, in the Section 309 of the Federal Election Cam- paign Act (2 U.S.C. 441a(d)) is amended— same election cycle in which the payment is paign Act of 1971 (2 U.S.C. 437g) is amended— (1) in paragraph (1), by striking ‘‘and (3)’’ made, the person making the payment is (1) in subsection (a)— and inserting ‘‘, (3), and (4)’’; and serving or has served as a member, em- (A) in paragraph (4)(A)— (2) by adding at the end the following: ployee, fundraiser, or agent of the can- (i) in clause (i), by striking ‘‘clause (ii)’’ ‘‘(4) INDEPENDENT VERSUS COORDINATED EX- didate’s authorized committee in an execu- and inserting ‘‘clauses (ii) and (iii)’’; and PENDITURES BY PARTY.— tive or policymaking position; H3250 CONGRESSIONAL RECORD — HOUSE May 13, 1998 ‘‘(v) a payment made by a person if the to file a designation, statement, or report (2) by striking the semicolon and inserting person making the payment has served in under this Act— ‘‘, except that in the case of a person who any formal policy making or advisory posi- ‘‘(i) is required to maintain and file a des- makes contributions aggregating at least $50 tion with the candidate’s campaign or has ignation, statement, or report for any cal- but not more than $200 during the calendar participated in formal strategic or formal endar year in electronic form accessible by year, the identification need include only policymaking discussions with the can- computers if the person has, or has reason to the name and address of the person;’’. didate’s campaign relating to the candidate’s expect to have, aggregate contributions or SEC. 305. USE OF CANDIDATES’ NAMES. pursuit of nomination for election, or elec- expenditures in excess of a threshold amount Section 302(e) of the Federal Election Cam- tion, to Federal office, in the same election determined by the Commission; and paign Act of 1971 (2 U.S.C. 432(e)) is amended cycle as the election cycle in which the pay- ‘‘(ii) may maintain and file a designation, by striking paragraph (4) and inserting the ment is made; statement, or report in electronic form or an following: ‘‘(vi) a payment made by a person if, in the alternative form, including the use of a fac- ‘‘(4)(A) The name of each authorized com- same election cycle, the person making the simile machine, if not required to do so mittee shall include the name of the can- payment retains the professional services of under the regulation promulgated under didate who authorized the committee under any person that has provided or is providing clause (i). paragraph (1). campaign-related services in the same elec- ‘‘(B) The Commission shall make a des- ‘‘(B) A political committee that is not an tion cycle to a candidate in connection with ignation, statement, report, or notification authorized committee shall not— the candidate’s pursuit of nomination for that is filed electronically with the Commis- ‘‘(i) include the name of any candidate in election, or election, to Federal office, in- sion accessible to the public on the Internet its name; or cluding services relating to the candidate’s not later than 24 hours after the designation, ‘‘(ii) except in the case of a national, State, decision to seek Federal office, and the per- statement, report, or notification is received or local party committee, use the name of son retained is retained to work on activities by the Commission. any candidate in any activity on behalf of relating to that candidate’s campaign; ‘‘(C) In promulgating a regulation under the committee in such a context as to sug- ‘‘(vii) a payment made by a person who has this paragraph, the Commission shall pro- gest that the committee is an authorized engaged in a coordinated activity with a can- vide methods (other than requiring a signa- committee of the candidate or that the use didate described in clauses (i) through (vi) ture on the document being filed) for verify- of the candidate’s name has been authorized for a communication that clearly refers to ing designations, statements, and reports by the candidate.’’. the candidate and is for the purpose of influ- covered by the regulation. Any document encing an election (regardless of whether the SEC. 306. PROHIBITION OF FALSE REPRESENTA- verified under any of the methods shall be TION TO SOLICIT CONTRIBUTIONS. communication is express advocacy); treated for all purposes (including penalties Section 322 of the Federal Election Cam- ‘‘(viii) direct participation by a person in for perjury) in the same manner as a docu- paign Act of 1971 (2 U.S.C. 441h) is amended— fundraising activities with the candidate or ment verified by signature.’’. (1) by inserting after ‘‘SEC. 322.’’ the fol- in the solicitation or receipt of contributions SEC. 302. PROHIBITION OF DEPOSIT OF CON- lowing: ‘‘(a) IN GENERAL.—’’; and on behalf of the candidate; TRIBUTIONS WITH INCOMPLETE (2) by adding at the end the following: ‘‘(ix) communication by a person with the CONTRIBUTOR INFORMATION. ‘‘(b) SOLICITATION OF CONTRIBUTIONS.—No candidate or an agent of the candidate, oc- Section 302 of Federal Election Campaign curring after the declaration of candidacy person shall solicit contributions by falsely Act of 1971 (2. U.S.C. 432) is amended by add- representing himself or herself as a can- (including a pollster, media consultant, ven- ing at the end the following: dor, advisors, or staff member), acting on be- didate or as a representative of a candidate, ‘‘(j) DEPOSIT OF CONTRIBUTIONS.—The treas- a political committee, or a political party.’’. half of the candidate, about advertising mes- urer of a candidate’s authorized committee sage, allocation of resources, fundraising, or SEC. 307. SOFT MONEY OF PERSONS OTHER THAN shall not deposit, except in an escrow ac- POLITICAL PARTIES. other campaign matters related to the can- count, or otherwise negotiate a contribution (a) IN GENERAL.—Section 304 of the Federal didate’s campaign, including campaign oper- from a person who makes an aggregate ations, staffing, tactics, or strategy; or Election Campaign Act of 1971 (2 U.S.C. 434) amount of contributions in excess of $200 (as amended by section 103(c) and section 203) ‘‘(x) the provision of in-kind professional during a calendar year unless the treasurer services or polling data to the candidate or is amended by adding at the end the follow- verifies that the information required by ing: candidate’s agent. this section with respect to the contributor ‘‘(D) For purposes of subparagraph (C), the ‘‘(g) DISBURSEMENTS OF PERSONS OTHER is complete.’’. term ‘professional services’ includes services THAN POLITICAL PARTIES.— in support of a candidate’s pursuit of nomi- SEC. 303. AUDITS. ‘‘(1) IN GENERAL.—A person, other than a nation for election, or election, to Federal (a) RANDOM AUDITS.—Section 311(b) of the political committee or a person described in office such as polling, media advice, direct Federal Election Campaign Act of 1971 (2 section 501(d) of the Internal Revenue Code mail, fundraising, or campaign research. U.S.C. 438(b)) is amended— of 1986, that makes an aggregate amount of ‘‘(E) For purposes of subparagraph (C), all (1) by inserting ‘‘(1) IN GENERAL.—’’ before disbursements in excess of $50,000 during a political committees established and main- ‘‘The Commission’’; and calendar year for activities described in tained by a national political party (includ- (2) by adding at the end the following: paragraph (2) shall file a statement with the ing all congressional campaign committees) ‘‘(2) RANDOM AUDITS.— Commission— and all political committees established and ‘‘(A) IN GENERAL.—Notwithstanding para- ‘‘(A) on a monthly basis as described in maintained by a State political party (in- graph (1), the Commission may conduct ran- subsection (a)(4)(B); or cluding any subordinate committee of a dom audits and investigations to ensure vol- ‘‘(B) in the case of disbursements that are State committee) shall be considered to be a untary compliance with this Act. The selec- made within 20 days of an election, within 24 single political committee.’’. tion of any candidate for a random audit or hours after the disbursements are made. (2) SECTION 315(a)(7).—Section 315(a)(7) (2 investigation shall be based on criteria ‘‘(2) ACTIVITY.—The activity described in U.S.C. 441a(a)(7)) is amended by striking sub- adopted by a vote of at least 4 members of this paragraph is— paragraph (B) and inserting the following: the Commission. ‘‘(A) Federal election activity; ‘‘(B) a thing of value provided in coordina- ‘‘(B) LIMITATION.—The Commission shall ‘‘(B) an activity described in section tion with a candidate, as described in section not conduct an audit or investigation of a 316(b)(2)(A) that expresses support for or op- 301(8)(A)(iii), shall be considered to be a con- candidate’s authorized committee under sub- position to a candidate for Federal office or tribution to the candidate, and in the case of paragraph (A) until the candidate is no a political party; and a limitation on expenditures, shall be treat- longer a candidate for the office sought by ‘‘(C) an activity described in subparagraph ed as an expenditure by the candidate. the candidate in an election cycle. (C) of section 316(b)(2). (b) MEANING OF CONTRIBUTION OR EXPENDI- ‘‘(C) APPLICABILITY.—This paragraph does ‘‘(3) APPLICABILITY.—This subsection does TURE FOR THE PURPOSES OF SECTION 316.—Sec- not apply to an authorized committee of a not apply to— tion 316(b)(2) of the Federal Election Cam- candidate for President or Vice President ‘‘(A) a candidate or a candidate’s author- paign Act of 1971 (2 U.S.C. 441b(b)) is amend- subject to audit under section 9007 or 9038 of ized committees; or ed by striking ‘‘shall include’’ and inserting the Internal Revenue Code of 1986.’’. ‘‘(B) an independent expenditure. ‘‘includes a contribution or expenditure, as (b) EXTENSION OF PERIOD DURING WHICH ‘‘(4) CONTENTS.—A statement under this those terms are defined in section 301, and CAMPAIGN AUDITS MAY BE BEGUN.—Section section shall contain such information about also includes’’. 311(b) of the Federal Election Campaign Act the disbursements made during the reporting TITLE III—DISCLOSURE of 1971 (2 U.S.C. 438(b)) is amended by strik- period as the Commission shall prescribe, in- SEC. 301. FILING OF REPORTS USING COMPUT- ing ‘‘6 months’’ and inserting ‘‘12 months’’. cluding— ERS AND FACSIMILE MACHINES. SEC. 304. REPORTING REQUIREMENTS FOR CON- ‘‘(A) the aggregate amount of disburse- Section 302(a) of the Federal Election Cam- TRIBUTIONS OF $50 OR MORE. ments made; paign Act of 1971 (2 U.S.C. 434(a)) is amended Section 304(b)(3)(A) of the Federal Election ‘‘(B) the name and address of the person or by striking paragraph (11) and inserting the Campaign Act at 1971 (2 U.S.C. 434(b)(3)(A) is entity to whom a disbursement is made in an following: amended— aggregate amount in excess of $200; ‘‘(11)(A) The Commission shall promulgate (1) by striking ‘‘$200’’ and inserting ‘‘$50’’; ‘‘(C) the date made, amount, and purpose a regulation under which a person required and of the disbursement; and May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3251 ‘‘(D) if applicable, whether the disburse- by section 101) is amended by adding at the ‘‘(1) the Commission shall notify the can- ment was in support of, or in opposition to, end the following: didate of the revocation; and a candidate or a political party, and the ‘‘SEC. 324. VOLUNTARY PERSONAL FUNDS EX- ‘‘(2) the candidate and a candidate’s au- name of the candidate or the political PENDITURE LIMITS. thorized committees shall pay to the Com- party.’’. ‘‘(a) ELIGIBLE HOUSE CANDIDATE.— mission an amount equal to the amount of (b) DEFINITION OF GENERIC CAMPAIGN AC- ‘‘(1) PRIMARY ELECTION.— expenditures made by a national committee TIVITY.—Section 301 of the Federal Election ‘‘(A) DECLARATION.—A candidate is an eli- of a political party or a State committee of Campaign Act of 1971 (2 U.S.C. 431 et seq.) (as gible primary election House candidate if the a political party in connection with the gen- amended by section 201(b)) is further amend- candidate files with the Commission a dec- eral election campaign of the candidate ed by adding at the end the following: laration that the candidate and the can- under section 315(d).’’. ‘‘(21) GENERIC CAMPAIGN ACTIVITY.—The didate’s authorized committees will not SEC. 402. POLITICAL PARTY COMMITTEE COORDI- term ‘generic campaign activity’ means an make expenditures in excess of the personal NATED EXPENDITURES activity that promotes a political party and funds expenditure limit. Section 315(d) of the Federal Election Cam- does not promote a candidate or non-Federal ‘‘(B) TIME TO FILE.—The declaration under paign Act of 1971 (2 U.S.C. 441a(d)) (as amend- candidate.’’. subparagraph (A) shall be field not later than ed by section 204) is amended by adding at the date on which the candidate files with SEC. 308. CAMPAIGN ADVERTISING. the end the following: the appropriate State officer as a candidate Section 318 of the Federal Election Cam- ‘‘(5) This subsection does not apply to ex- for the primary election. paign Act of 1971 (2 U.S.C. 441d) is amended— penditures made in connection with the gen- ‘‘(2) GENERAL ELECTION.— (1) in subsection (a)— eral election campaign of a candidate for the (a) DECLARATION.—A candidate is an eligi- (A) in the matter preceding paragraph (1)— House of Representatives who is not an eligi- ble general election House candidate if the (i) by striking ‘‘Whenever’’ and inserting ble House candidate (as defined in section candidate files with the Commission— 324(a)).’’. ‘‘Whenever a political committee makes a ‘‘(i) a declaration under penalty of perjury, disbursement for the purpose of financing with supporting documentation as required TITLE V—MISCELLANEOUS any communication through any broadcast- by the Commission, that the candidate and SEC. 501. PROHIBITING INVOLUNTARY USE OF ing station, newspaper, magazine, outdoor the candidate’s authorized committees did FUNDS OF EMPLOYEES OF COR- advertising facility, mailing, or any other not exceed the personal funds expenditure PORATIONS AND OTHER EMPLOY- ERS AND MEMBERS OF UNIONS AND type of general public political advertising, limit in connection with the primary elec- or whenever’’; ORGANIZATIONS FOR POLITICAL AC- tion; and TIVITIES. (ii) by striking ‘‘an expenditure’’ and in- ‘‘(ii) a declaration that the candidate and serting ‘‘a disbursement’’; and (a) IN GENERAL.—Section 316 of the Federal the candidate’s authorized committees will Election Campaign Act of 1971 (2 U.S.C. 441b) (iii) by striking ‘‘direct’’; and not make expenditures in excess of the per- (B) in paragraph (3), by inserting ‘‘and per- is amended by adding at the end the follow- sonal funds expenditure limit. ing new subsection: manent street address’’ after ‘‘name’’; and ‘‘(B) TIME TO FILE.—The declaration under (2) by adding at the end the following: ‘‘(c)(1)(A) Except with the separate, prior, subparagraph (A) shall be filed not later than written, voluntary authorization of the indi- ‘‘(c) Any printed communication described 7 days after the earlier of— in subsection (a) shall— vidual involved, it shall be unlawful— ‘‘(i) the date on which the candidate quali- ‘‘(i) for any national bank or corporation ‘‘(1) be of sufficient type size to be clearly fies for the general election ballot under described in this section to collect from or readable by the recipient of the communica- State law; or assess a stockholder or employee any portion tion; ‘‘(ii) if under State law, a primary or run- ‘‘(2) be contained in a printed box set apart off election to qualify for the general elec- of any dues, initiation fee, or other payment from the other contents of the communica- tion ballot occurs after September 1, the made as a condition of employment which tion; and date on which the candidate wins the pri- will be used for political activity in which ‘‘(3) be printed with a reasonable degree of mary or runoff election. the national bank or corporation is engaged; color contrast between the background and ‘‘(b) PERSONAL FUNDS EXPENDITURE and ‘‘(ii) for any labor organization described the printed statement. LIMIT.— ‘‘(d)(1) Any broadcast or cablecast commu- ‘‘(1) IN GENERAL.—The aggregate amount of in this section to collect from or assess a nication described in paragraphs (1) or (2) of expenditures that may be made in connec- member or non-member any portion of any subsection (a) shall include, in addition to tion with an election by an eligible House dues, initiation fee, or other payment which the requirements of that paragraph, an audio candidate or the candidate’s authorized com- will be used for political activity in which statement by the candidate that identifies mittees from the sources described in para- the labor organization is engaged. the candidate and states that the candidate graph (2) shall not exceed $50,000. ‘‘(B) An authorization described in sub- has approved the communication. ‘‘(2) SOURCES.—A source is described in this paragraph (A) shall remain in effect until re- ‘‘(2) If a broadcast or cablecast commu- paragraph if the source is— voked and may be revoked at any time. Each nication described in paragraph (1) is broad- ‘‘(A) personal funds of the candidate and entity collecting from or assessing amounts cast or cablecast by means of television, the members of the candidate’s immediate fam- from an individual with an authorization in communication shall include, in addition to ily; or effect under such subparagraph shall provide the audio statement under paragraph (1), a ‘‘(B) proceeds of indebtedness incurred by the individual with a statement that the in- written statement that— the candidate or a member of the candidate’s dividual may at any time revoke the author- ‘‘(A) appears at the end of the communica- immediate family. ization. tion in a clearly readable manner with a rea- ‘‘(c) CERTIFICATION BY THE COMMISSION.— ‘‘(2)(A) Prior to the beginning of any 12- sonable degree of color contrast between the ‘‘(1) IN GENERAL.—The Commission shall month period (as determined by the corpora- background and the printed statement, for a determine whether a candidate has met the tion), each corporation described in this sec- period of at least 4 seconds; and requirements of this section and, based on tion shall provide each of its shareholders (B) is accompanied by a clearly identifiable the determination, issue a certification stat- with a notice containing the following: photographic or similar image of the can- ing whether the candidate is an eligible ‘‘(i) The proposed aggregate amount for didate. House candidate. disbursements for political activities by the ‘‘(e) Any broadcast or cablecast commu- ‘‘(2) TIME FOR CERTIFICATION.—Not later corporation for the period. nication described in paragraph (3) of sub- than 7 business days after a candidate files a ‘‘(ii) The individual’s applicable percentage section (a) shall include, in addition to the declaration under paragraph (1) or (2) of sub- and applicable pro rata amount for the pe- requirements of that paragraph, in a clearly section (a), the Commission shall certify riod. spoken manner, the following statement: whether the candidate is an eligible House ‘‘(iii) A form that the individual may com- ‘llllll is responsible for the content of candidate. plete and return to the corporation to indi- ‘‘(3) REVOCATION.—The Commission shall this advertisement.’ (with the blank to be cate the individual’s objection to the dis- revoke a certification under paragraph (1), filed in with the name of the political com- bursement of amounts for political activities based on information submitted in such form mittee or other person paying for the com- during the period. and manner as the Commission may require ‘‘(B) It shall be unlawful for a corporation munication and the name of any connected or on information that comes to the Com- to which subparagraph (A) applies to make organization of the payor). If broadcast or mission by other means, if the Commission disbursements for political activities during cablecast by means of television, the state- determines that a candidate violates the per- the 12-month period described in such sub- ment shall also appear in a clearly readable sonal funds expenditure limit. paragraph in an amount greater than—— manner with a reasonable degree of color ‘‘(4) DETERMINATIONS BY COMMISSION.—A ‘‘(i) the proposed aggregate amount for contrast between the background and the determination made by the Commission such disbursements for the period, as speci- printed statement, for a period of at least 4 under this subsection shall be final, except fied in the notice provided under subpara- seconds.’’. to the extent that the determination is sub- graph (A); reduced by TITLE IV—PERSONAL WEALTH OPTION ject to examination and audit by the Com- ‘‘(ii) the sum of the applicable pro rata SEC. 401. VOLUNTARY PERSONAL FUNDS EX- mission and to judicial review. amounts for such period of all shareholders PENDITURE LIMIT. ‘‘(d) PENALTY.—If the Commission revokes who return the form described in subpara- Title III of the Federal Election Campaign the certification of an eligible House can- graph (A)(iii) to the corporation prior to the Act of 1971 (2 U.S.C. 431 et seq.) (as amended didate— beginning of the period. H3252 CONGRESSIONAL RECORD — HOUSE May 13, 1998

‘‘(C) In this paragraph, the following defi- SEC. 503. LIMIT ON CONGRESSIONAL USE OF THE ‘‘(B) FILING AN EXCEPTION.— nitions shall apply FRANKING PRIVILEGE. ‘‘(i) TIME TO FILE.—A political committee ‘‘(i) The term ‘applicable percentage’ Section 3210(a)(6) of title 39, United States shall have 30 days after the imposition of a means, with respect to a shareholder of a Code, is amended by striking subparagraph penalty or filing requirement by the Com- corporation, the amount (expressed as a per- (A) and inserting the following: mission under this paragraph in which to file centage) equal to the number of shares of the ‘‘(A) A Member of Congress shall not mail an exception with the Commission. corporation (within a particular class or any mass mailing as franked mail during a ‘‘(ii) TIME FOR COMMISSION TO RULE.—With- type of stock) owned by the shareholder at year in which there will be an election for in 30 days after receiving an exception, the the time the notice described in subpara- the seat held by the Member during the pe- Commission shall make a determination graph (A) is provided, divided by the aggre- riod between January 1 of that year and the that is a final agency action subject to ex- gate number of such shares owned by all date of the general election for that Office, clusive review by the United States Court of shareholders of the corporation at such time. unless the Member has made a public an- Appeals for the District of Columbia Circuit ‘‘(ii) The term ‘applicable pro rata amount’ nouncement that the Member will not be a under section 706 of title 5, United States means, with respect to a shareholder for a 12- candidate for reelection to that year or for Code, upon petition filed in that court by the month period, the product of the sharehold- election to any other Federal office.’’. political committee or treasurer that is the er’s applicable percentage for the period and SEC. 504. PROHIBITION OF FUNDRAISING ON subject of the agency action, if the petition the proposed aggregate amount for disburse- FEDERAL PROPERTY. is filed within 30 days after the date of the ments for political activities by the corpora- Section 607 of title 18, United States Code, Commission action for which review is tion for the period, as specified in the notice is amended— sought.’’; provided under subparagraph (A). (1) by striking subsection (a) and inserting (2) in paragraph (5)(D)— ‘‘(3) For purposes of this subsection, the the following: (A) by inserting after the first sentence the term ‘political activity’ means any activity ‘‘(a) PROHIBITION.— following: ‘‘In any case in which a penalty or carried out for the purpose of influencing (in ‘‘(1) IN GENERAL.—It shall be unlawful for filing requirement imposed on a political whole or in part) any election for Federal of- any person to solicit or receive a donation of committee or treasurer under paragraph (13) fice, influencing the consideration or out- money or other thing of value of a political has not been satisfied, the Commission may come of any Federal legislation or the committee or a candidate for Federal, State institute a civil action for enforcement issuance or outcome of any Federal regula- or local office from a person who is located under paragraph (6)(A).’’; and tions, or educating individuals about can- in a room or building occupied in the dis- (B) by inserting before the period at the didates for election for Federal office or any charge of official duties by an officer or em- end of the last sentence the following: ‘‘or Federal legislation, law, or regulations.’’. ployee of the United States. An individual has failed to pay a penalty or meet a filing (b) EFFECTIVE DATE.—The amendment who is an officer or employee of the Federal requirement imposed under paragraph (13)’’; made by subsection (a) shall apply to Government, including the President, Vice and amounts collected or assessed on or after the President, and Members of Congress, shall (3) in paragraph (6)(A), by striking ‘‘para- date of the enactment of this Act. not solicit a donation of money or other graph (4)(A)’’ and inserting ‘‘paragraph (4)(A) SEC. 502. USE OF CONTRIBUTED AMOUNTS FOR thing of value for a political committee or or (13)’’. CERTAIN PURPOSES. candidate for Federal, State or local office, SEC. 506. STRENGTHENING FOREIGN MONEY Title III of the Federal Election Campaign while in any room or building occupied in BAN. Act of 1971 (2 U.S.C. 431 et seq.) is amended the discharge of official duties by an officer Section 319 of the Federal Election Cam- by striking section 313 and inserting the fol- or employee of the United States, from any paign Act of 1971 (2 U.S.C. 441e) is amended— lowing: person. (1) by striking the heading and inserting ‘‘SEC. 313. USE OF CONTRIBUTED AMOUNTS FOR ‘‘(2) PENALTY.—A person who violates this the following: ‘‘CONTRIBUTIONS AND DONA- CERTAIN PURPOSES. section shall be fined not more than $5,000, TIONS BY FOREIGN NATIONALS’’; and ‘‘(a) PERMITTED USES.—A contribution ac- imprisoned more than 3 years, or both.’’; and (2) by striking subsection (a) and inserting cepted by a candidate, and any other amount (2) by inserting in subsection (b) after the following: received by an individual as support for ac- ‘‘Congress’’ ‘‘or Executive Office of the ‘‘(a) PROHIBITION.—It shall be unlawful tivities of the individual as a holder of Fed- President’’. for— ‘‘(1) a foreign national, directly or indi- eral office, may be used by the candidate or SEC. 505. PENALTIES FOR KNOWING AND WILL- rectly, to make— individual— FUL VIOLATIONS. ‘‘(A) a donation of money or other thing of ‘‘(1) for expenditures in connection with (a) INCREASED PENALTIES.—Section 309(a) value, or to promise expressly or impliedly the campaign for Federal office of the can- of the Federal Election Campaign Act of 1971 to make a donation, in connection with a didate or individual; (2 U.S.C. 437g(a)) is amended— Federal, State, or local election to a politi- ‘‘(2) for ordinary and necessary expenses (1) in paragraphs (5)(A), (6)(A), and (6)(B), cal committee or a candidate for Federal of- incurred in connection with duties of the in- by striking ‘‘$5,000’’ and inserting ‘‘$10,000’’; fice; or dividual as a holder of Federal office; and ‘‘(ii) a contribution or donation to a com- ‘‘(3) for contributions to an organization (2) in paragraphs (b)(B) and (6)(C), by strik- mittee of a political party; or described in section 170(e) of the Internal ing ‘‘$10,000 or an amount equal to 200 per- ‘‘(B) for a person to solicit, accept, or re- Revenue Code of 1986; or cent’’ and inserting ‘‘$20,000 or an amount ceive such contribution or donation from a ‘‘(4) for transfers to a national, State, or equal to 300 percent’’. foreign national.’’. local committee of a political party. (b) EQUITABLE REMEDIES.—Section SEC. 507. PROHIBITION OF CONTRIBUTIONS BY ‘‘(b) PROHIBITED USE.— 309(a)(5)(A) of the Federal Election Campaign MINORS. ‘‘(1) IN GENERAL.—A contribution or Act of 1971 (2 U.S.C. 437g(a)(5)) is amended by amount described in subsection (a) shall not striking the period at the end and inserting Title III of the Federal Election Campaign be converted by any person to personal use. ‘‘, and may include equitable remedies or Act of 1971 (2 U.S.C. 431 et seq.) (as amended by sections 101 and 401) is amended by adding ‘‘(2) CONVERSION.—For the purposes of penalties, including disgorgement of funds to paragraph (1), a contribution or amount the Treasury or community service require- at the end the following: shall be considered to be converted to per- ments (including requirements to participate ‘‘SEC. 325. PROHIBITION OF CONTRIBUTIONS BY sonal use if the contribution or amount is in public education programs).’’. MINORS. used to fulfill any commitment, obligation, (c) AUTOMATIC PENALTY FOR LATE FILING.— An individual who is 17 years old or young- or expense of a person that would exist irre- Section 309(a) of the Federal Election Cam- er shall not make a contribution to a can- spective of the candidate’s election cam- paign Act of 1971 (2 U.S.C. 437g(a)) is amend- didate or a contribution or donation to a paign or individual’s duties as a holder of ed— committee of a political party.’’. Federal officeholder, including— (1) by adding at the end the following: SEC. 508. EXPEDITED PROCEDURES. ‘‘(A) a home mortgage, rent, or utility pay- ‘‘(13) LTY FOR LATE FILING.— (a) IN GENERAL.—Section 309(a) of the Fed- ment; ‘‘(A) IN GENERAL.— eral Election Campaign Act of 1971 (2 U.S.C. ‘‘(B) a clothing purchase; ‘‘(i) MONETARY PENALTIES.—The Commis- 437g(a)) (as amended by section 505(c)) is ‘‘(C) a noncampaign-related automobile ex- sion shall establish a schedule of mandatory amended by adding at the end the following: pense; monetary penalties that shall be imposed by ‘‘(14)(A) If the complaint in a proceeding ‘‘(D) a country club membership; the Commission for failure to meet a time was filed within 60 days preceding the date of ‘‘(E) a vacation or other noncampaign-re- requirement for filing under section 304. a general election, the Commission may take lated trip; ‘‘(ii) REQUIRED FILING.—In addition to im- action described in this subparagraph. ‘‘(F) a household food item; posing a penalty, the Commission may re- ‘‘(B) If the Commission determines, on the ‘‘(G) a tuition payment; quire a report that has not been filed within basis of facts alleged in the complaint and ‘‘(H) admission to a sporting event, con- the time requirements of section 304 to be other facts available to the Commission, cert, theater, or other form of entertainment filed by a specific date. that there is clear and convincing evidence not associated with an election campaign; ‘‘(iii) PROCEDURE.—A penalty or filing re- that a violation of this Act has occurred, is and quirement imposed under this paragraph occurring, or is about to occur, the Commis- ‘‘(I) dues, fees, and other payments to a shall not be subject to paragraph (1), (2), (3), sion may order expedited proceedings, short- health club or recreational facility.’’. (4), (5), or (12). ening the time periods for proceedings under May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3253 paragraphs (1), (2), (3), and (4) as necessary to is amended by striking ‘‘in the aggregate, ex- ‘‘(iii) A form that the individual may com- allow the matter to be resolved in sufficient ceed $1,000;’’ and inserting the following: ‘‘in plete and return to the corporation to indi- time before the election to avoid harm or the aggregate— cate the individual’s objection to or approval prejudice to the interests of the parties. ‘‘(i) in the case of contributions made to a of the disbursement of amounts for political ‘‘(C) If the Commission determines, on the candidate for election for Senator or for Rep- activities during the period. basis of facts alleged in the complaint and resentative in or Delegate or Resident Com- ‘‘(B) It shall be unlawful for a corporation other facts available to the Commission, missioner to the Congress by an individual to which subparagraph (A) applies to make that the complaint is clearly without merit, who is not eligible to vote in the State or disbursements for political activities during the Commission may— Congressional district involved (as the case the 12-month period described in such sub- ‘‘(i) order expedited proceedings, shorten- may be) at the time the contribution is made paragraph in an amount greater than the ing the time periods for proceedings under (other than an individual who would be eligi- sum of the applicable pro rata amounts for paragraphs (1), (2), (3), and (4) as necessary to ble to vote at such time but for the failure of such period of all shareholders who return allow the matter to be resolved in sufficient the individual to register to vote), exceed the form described in subparagraph (A)(iii) time before the election to avoid harm or $100; or to the corporation prior to the beginning of prejudice to the interests of the parties; or ‘‘(ii) in the case of any other contributions, the period and indicate their approval of ‘‘(ii) if the Commission determines that exceed $1,000;’’. such disbursements. there is insufficient time to conduct proceed- SEC. 102. BAN ON ACCEPTANCE OF CONTRIBU- ‘‘(C) In this paragraph, the following defi- ings before the election, summarily dismiss TIONS MADE BY NONPARTY POLITI- nitions shall apply: the complaint.’’. CAL ACTION COMMITTEES. ‘‘(i) The term ‘applicable percentage’ (b) REFERRAL TO ATTORNEY GENERAL.—Sec- Section 315 of the Federal Election Cam- means, with respect to a shareholder of a tion 309(a)(5) of the Federal Election Cam- paign Act of 1971 (2 U.S.C. 441a) is amended corporation, the amount (expressed as a per- paign Act of 1971 (2 U.S.C. 437g(a)(5)) is by adding at the end the following new sub- centage) equal to the number of shares of the amended by striking subparagraph (C) and section: corporation (within a particular class or inserting the following: ‘‘(i)(1) Notwithstanding any other provi- type of stock) owned by the shareholder at ‘‘(C) The Commission may at any time, by sion of this Act, no candidate for election for the time the notice described in subpara- an affirmative vote of at least 4 of its mem- Federal office may accept any contribution graph (A) is provided, divided by the aggre- bers, refer a possible violation of this Act or from a political action committee. gate number of such shares owned by all chapter 95 or 96 of the Internal Revenue Code ‘‘(2) In this subsection, the term ‘political shareholders of the corporation at such time. of 1986, to the Attorney General of the action committee’ means any political com- ‘‘(ii) The term ‘applicable pro rata amount’ United States, without regard to any limita- mittee which is not— means, with respect to a shareholder for a 12- tion set forth in this section.’’. ‘‘(A) the principal campaign committee of month period, the product of the sharehold- a candidate; or SEC. 509. INITIATION OF ENFORCEMENT PRO- er’s applicable percentage for the period and CEEDING. ‘‘(B) a national, State, local, or district the proposed aggregate amount for disburse- Section 309(a)(2) of the Federal Election committee of a political party, including any ments for political activities by the corpora- Campaign Act of 1971 (2 U.S.C. 437g(a)(2)) is subordinate committee thereof.’’. tion for the period, as specified in the notice amended by striking ‘‘reason to believe TITLE II—ENSURING VOLUNTARINESS provided under subparagraph (A). that’’ and inserting ‘‘reason to investigate OF CONTRIBUTIONS OF CORPORA- ‘‘(3) For purposes of this subsection, the whether’’. TIONS, UNIONS, AND OTHER MEMBER- term ‘political activity’ means any activity TITLE VI—SEVERABILITY; CONSTITU- SHIP ORGANIZATIONS carried out for the purpose of influencing (in TIONALITY; EFFECTIVE DATE; REGU- SEC. 201. PROHIBITING INVOLUNTARY USE OF whole or in part) any election for Federal of- LATIONS FUNDS OF EMPLOYEES OF COR- fice, influencing the consideration or out- PORATIONS AND OTHER EMPLOY- come of any Federal legislation or the SEC. 601. SEVERABILITY. ERS AND MEMBERS OF UNIONS AND issuance or outcome of any Federal regula- If any provision of this Act or amendment ORGANIZATIONS FOR POLITICAL AC- tions, or educating individuals about can- made by this Act, or the application of a pro- TIVITIES. didates for election for Federal office or any vision or amendment to any person or cir- (a) IN GENERAL.—Section 316 of the Federal Federal legislation, law, or regulations.’’. cumstance, is held to be unconstitutional, Election Campaign Act of 1971 (2 U.S.C. 441b) (b) EFFECTIVE DATE.—The amendment the remainder of this Act and amendments is amended by adding at the end the follow- made by subsection (a) shall apply to made by this Act, and the application of the ing new subsection: amounts collected or assessed on or after the ‘‘(c)(1)(A) Except with the separate, prior, provisions and amendment to any person or date of the enactment of this Act. circumstance, shall not be affected by the written, voluntary authorization of the indi- vidual involved, it shall be unlawful— TITLE III—RESTRICTIONS ON SOFT holding. MONEY SEC. 602. REVIEW OF CONSTITUTIONAL ISSUES. ‘‘(i) for any national bank or corporation described in this section (other than a cor- SEC. 301. BAN ON SOFT MONEY OF NATIONAL PO- An appeal may be taken directly to the Su- LITICAL PARTIES AND CANDIDATES; preme Court of the United States from any poration exempt from Federal taxation under section 501(c) of the Internal Revenue BAN ON USE OF SOFT MONEY BY final judgment, decree, or order issued by STATE POLITICAL PARTIES FOR any court ruling on the constitutionality of Code of 1986) to collect from or assess a FEDERAL ELECTION ACTIVITY. any provision of this Act or amendment stockholder or employee any portion of any Title III of the Federal Election Campaign made by this Act. dues, initiation fee, or other payment made Act of 1971 (2 U.S.C. 431 et seq.) is amended as a condition of employment which will be SEC. 603. EFFECTIVE DATE. by adding at the end the following new sec- Except as otherwise provided in this Act, used for political activity in which the na- tion: tional bank or corporation is engaged; and this Act and the amendments made by this ‘‘RESTRICTIONS ON USE OF SOFT MONEY BY ‘‘(ii) for any labor organization described Act take effect January 1, 1999. POLITICAL PARTIES AND CANDIDATES in this section to collect from or assess a SEC. 604. REGULATIONS. member or nonmember any portion of any ‘‘SEC. 323. (a) BAN ON USE BY NATIONAL The Federal Election Commission shall dues, initiation fee, or other payment which PARTIES.— prescribe any regulations required to carry will be used for political activity in which ‘‘(1) IN GENERAL.—No political committee out this Act and the amendments made by the labor organization is engaged. of a national political party may solicit, re- this Act not later than 270 days after the ef- ‘‘(B) An authorization described in sub- ceive, or direct any contributions, donations, fective date of this Act. paragraph (A) shall remain in effect until re- or transfers of funds, or spend any funds, H.R. 3721 voked and may be revoked at any time. Each which are not subject to the limitations, pro- OFFERED BY MR. CAMPBELL entity collecting from or assessing amounts hibitions, and reporting requirements of this Act. (Amendment in the Nature of a Substitute to from an individual with an authorization in ‘‘(2) APPLICABILITY.—Paragraph (1) shall H.R. 2183) effect under such subparagraph shall provide the individual with a statement that the in- apply to any entity which is established, fi- AMENDMENT NO. 2: Strike all after the en- dividual may at any time revoke the author- nanced, maintained, or controlled (directly acting clause and insert the following: ization. or indirectly) by, or which acts on behalf of, SECTION 1. SHORT TITLE. ‘‘(2)(A) Prior to the beginning of any 12- a political committee of a national political This Act may be cited as the ‘‘Can’t Vote, month period (as determined by the corpora- party, including any national congressional Can’t Contribute Campaign Reform Act of tion), each corporation to which paragraph campaign committee of such a party and any 1998’’. (1) applies shall provide each of its share- officer or agent of such an entity or commit- TITLE I—LIMITATIONS ON holders with a notice containing the follow- tee. CONTRIBUTIONS ing: ‘‘(b) CANDIDATES.— SEC. 101. LIMITATION ON AMOUNT OF CONTRIBU- ‘‘(i) The proposed aggregate amount for ‘‘(1) IN GENERAL.—No candidate for Federal TIONS TO CANDIDATES BY INDIVID- disbursements for political activities by the office, individual holding Federal office, or UALS NOT ELIGIBLE TO VOTE IN corporation for the period. any agent of such a candidate or officeholder STATE OR DISTRICT INVOLVED. ‘‘(ii) The individual’s applicable percentage may solicit, receive, or direct— Section 315(a)(1)(A) of the Federal Election and applicable pro rata amount for the pe- ‘‘(A) any funds in connection with any Fed- Campaign Act of 1971 (2 U.S.C. 441a(a)(1)(A)) riod. eral election unless the funds are subject to H3254 CONGRESSIONAL RECORD — HOUSE May 13, 1998 the limitations, prohibitions and reporting the public’s faith in the Nation’s system of didates of the third party or for all independ- requirements of this Act; governance. ent candidates (as the case may be) bears to ‘‘(B) any funds that are to be expended in TITLE I—EXPENDITURE LIMITATIONS the total popular vote for all candidates in connection with any election for other than AND PUBLIC FINANCING FOR HOUSE OF the 5 preceding general elections; or a Federal office unless the funds are not in REPRESENTATIVES GENERAL ELEC- ‘‘(2) in the case of a candidate in a district excess of the applicable amounts permitted TIONS in which no third party or independent can- with respect to contributions to candidates didates (as the case may be) received votes SEC. 101. NEW TITLE OF FEDERAL ELECTION and political committees under paragraphs CAMPAIGN ACT OF 1971. in the 5 preceding general elections, the (1) and (2) of section 315(a), and are not from The Federal Election Campaign Act of 1971 amount corresponding to the number of sig- sources prohibited from making contribu- (2 U.S.C. 431 et seq.) is amended by adding at natures presented to and verified by the tions by this Act with respect to elections the end the following new title: Commission according to the following for Federal office; or table: ‘‘TITLE V—EXPENDITURE LIMITATIONS ‘‘(C) any funds on behalf of any person ‘‘20,000 signatures ..... $75,000 which are not subject to the limitations, pro- AND PUBLIC FINANCING FOR HOUSE OF REPRESENTATIVES GENERAL ELEC- 30,000 signatures ...... 100,000 hibitions, and reporting requirements of this 40,000 signatures ...... 150,000 TIONS Act if such funds are for the purpose of fi- 50,000 signatures ...... 200,000 nancing any activity on behalf of a candidate SEC. 501. LIMITATION ON EXPENDITURES IN SEC. 505. GRASSROOTS GOOD CITIZENSHIP FUND. HOUSE OF REPRESENTATIVES GEN- for election for Federal office or any commu- ‘‘(a) CREATION OF FUND.—There is estab- nication which refers to a clearly identified ERAL ELECTIONS. ‘‘A candidate in a House of Representatives lished in the Treasury a trust fund to be candidate for election for Federal office. known as the ‘Grassroots Good Citizenship ‘‘(2) EXCEPTION FOR CERTAIN ACTIVITIES.— general election may not make expenditures other than as provided in this title. Fund’, consisting of such amounts as may be Paragraph (1) shall not apply to— credited to such fund as provided in this sec- ‘‘(A) the solicitation, receipt, or direction SEC. 502. SOURCES OF AMOUNTS FOR EXPENDI- TURES BY CANDIDATES IN HOUSE tion. of funds by an individual who is a candidate ‘‘(b) DISTRICT ACCOUNTS.—There shall be for a non-Federal office if such activity is OF REPRESENTATIVES GENERAL ELECTIONS. established within the Grassroots Good Citi- permitted under State law for such individ- ‘‘The only sources of amounts for expendi- zenship Fund an account for each congres- ual’s non-Federal campaign committee; or tures by candidates in House of Representa- sional district. The accounts so established ‘‘(B) the attendance by an individual who tives general elections shall be— shall be administered by the Commission for holds Federal office at a fundraising event ‘‘(1) the Grassroots Good Citizenship Fund, the purpose of distributing amounts under for a State or local committee of a political under section 505; and this title. party of the State which the individual rep- ‘‘(2) additional amounts from State and na- ‘‘(c) PAYMENTS TO CANDIDATES.—Subject to resents as a Federal officeholder, if the event tional party committees under section 506. subsection (d), the Commission shall pay to is held in such State. each candidate from the Grassroots Good ‘‘(c) STATE PARTIES.— SEC. 503. DISTRICT LIMITATION ON EXPENDI- TURES BY MAJOR PARTY CAN- Citizenship Fund the maximum amount cal- ‘‘(1) IN GENERAL.—Any payment by a State DIDATES. culated for such candidate under section 503 committee of a political party for a mixed ‘‘(a) IN GENERAL.—Except as provided in or 504. political activity— section 506, the maximum amounts of ex- ‘‘(d) INSUFFICIENT AMOUNTS.—If, as deter- ‘‘(A) shall be subject to limitation and re- penditures by major party candidates in mined by the Commission, there are insuffi- porting under this Act as if such payment House of Representatives general elections cient amounts in the Grassroots Good Citi- were an expenditure; and shall be based on the median household in- zenship Fund for payments under subsection ‘‘(B) may be paid only from an account come of the districts involved, as provided (c), the Commission may reduce payments to that is subject to the requirements of this for in subsections (b) and (c). candidates so that each candidate receives a Act. ‘‘(b) MAXIMUM FOR WEALTHIEST DISTRICT.— pro rata portion of the amounts that are ‘‘(2) MIXED POLITICAL ACTIVITY DEFINED.— In the congressional district with the high- available. As used in this section, the term ‘mixed po- est median household income, maximum ‘‘(e) TRANSFERS TO FUND.—There are here- litical activity’ means, with respect to a combined expenditures for all major party by credited to the Grassroots Good Citizen- payment by a State committee of a political candidates with respect to a House of Rep- ship Fund amounts equivalent to the party, an activity (such as a voter registra- resentatives general election shall be a total amounts designated under section 6097 of the tion program, a get-out-the-vote drive, or of $1,000,000. Internal Revenue Code of 1986. general political advertising) that is both for ‘‘(c) MAXIMUM FOR OTHER DISTRICTS.—In ‘‘(f) EXPENDITURES.—Amounts in the Grass- the purpose of influencing an election for each congressional district, other than the roots Good Citizenship Fund shall be avail- Federal office and for any purpose unrelated district referred to in subsection (b), the able for the purpose of providing amounts for to influencing an election for Federal office. maximum combined expenditures for all expenditure by candidates in House of Rep- ‘‘(d) PROHIBITING TRANSFERS OF NON-FED- major party candidates with respect to a resentatives general elections in accordance ERAL FUNDS BETWEEN STATE PARTIES.—A House of Representatives general election with this title. State committee of a political party may shall be an amount equal to— SEC. 506. ADDITIONAL AMOUNTS FROM STATE not transfer any funds to a State committee ‘‘(1) the maximum amount referred to in AND NATIONAL PARTY COMMIT- of a political party of another State unless subsection (b), less TEES. the funds are subject to the limitations, pro- ‘‘(2) the amount equal to— ‘‘(a) CONTRIBUTIONS.—In addition to hibitions, and reporting requirements of this ‘‘(A) 2⁄3 of the percentage difference be- amounts made available under section 503 or Act. tween the median household income of the 504, in the case of a candidate in a House of ‘‘(e) APPLICABILITY TO FUNDS FROM ALL district involved and the median household Representatives general election who is the SOURCES.—This section shall apply with re- income of the district referred to in sub- candidate of a political party, the State and spect to funds of any individual, corporation, section (b), times national committees of that political party labor organization, or other person.’’. ‘‘(B) the maximum amount referred to in may make contributions to the candidate to- TITLE IV—EFFECTIVE DATE subsection (b). taling not more than 5 percent of the maxi- SEC. 401. EFFECTIVE DATE. ‘‘(d) ALLOCATION.—The maximum expendi- mum expenditure applicable to the candidate Except as otherwise provided, the amend- ture for a major party candidate in a con- under section 503 or section 504. ments made by this Act shall apply with re- gressional district shall be 50 percent of the ‘‘(b) EXPENDITURES.—A House of Represent- spect to elections occurring after January maximum amount under subsection (b) or atives candidate who is the candidate of a 1999. (c), as applicable. political party may make expenditures of the amounts received under subsection (a). OFFERED BY MR. OBEY SEC. 504. DISTRICT LIMITATION ON EXPENDI- SEC. 507. PUBLIC SERVICE ANNOUNCEMENTS. Amendment in the Nature of a Substitute to TURES BY THIRD PARTY AND INDE- PENDENT CANDIDATES. ‘‘(a) IN GENERAL.—Beginning on January H.R. 2183 ‘‘(a) IN GENERAL.—Except as provided in 15, and continuing through April 15 of each AMENDMENT NO. 3: Strike all after the en- section 506, the maximum amounts of ex- year, the Commission shall carry out a pro- acting clause and insert the following: penditures by third party and independent gram, utilizing broadcast announcements SECTION 1. SHORT TITLE; FINDING. candidates in House of Representatives gen- and other appropriate means, to inform the (a) SHORT TITLE.—This Act may be cited as eral elections shall be the amount allocated public of the existence and purpose of the the ‘‘Let the Public Decide Campaign Fi- under subsection (b). Grassroots Good Citizenship Fund and the nance Reform Act’’. ‘‘(b) ALLOCATION.—The maximum expendi- role that individual citizens can play in the (b) FINDING.—The Congress finds that the ture for a third party or independent can- election process by voluntarily contributing existing system of private political contribu- didate in a congressional district shall be— to the fund. The announcements shall be tions has become a fundamental threat to ‘‘(1) the amount that bears the same ratio broadcast during prime time viewing hours the integrity of the national election process to the maximum amount under subsection in 30-second advertising segments equivalent and that the provisions contained in this Act (b) or (c) of section 503, as applicable, as the to 200 gross rating points per network per are necessary to prevent the corruption of total popular vote in the district for can- week. The Commission shall ensure that the May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3255 maximum number of taxpayers shall be ex- ‘‘(2) any contribution which the taxpayer ‘‘(17) The term ‘independent expenditure’ posed to these announcements. Television includes with such return, means an expenditure for a communication networks, as defined by the Federal Commu- shall be paid over to the Grassroots Good (other than a communication which is de- nications Commission, shall provide the Citizenship Fund under section 505 of the scribed in clause (i) or clause (iii) of para- broadcast time under this section as part of Federal Election Campaign Act of 1971. graph (9)(B) or which would be described in their obligations in the public interest under ‘‘(b) MANNER AND TIME OF DESIGNATION.—A such clause if the communication were oth- the Communications Act of 1934. The Federal designation under subsection (a) may be erwise treated as an expenditure under this Election Commission shall encourage broad- made with respect to any taxable year only title)— cast outlets other than the above mentioned at the time of filing the return of tax im- ‘‘(A) which is made during the 90-day pe- television networks including radio to pro- posed by chapter 1 for such taxable year. riod ending on the date of a general election vide similar announcements. Such designation shall be made on the 1st for Federal office and which identifies a can- ‘‘(b) GROSS RATING POINT.—The term ‘gross page of the return. didate for election for such office by name, rating point’ is a measure of the total gross ‘‘(c) OVERPAYMENTS TREATED AS RE- image, or likeness; or weight delivered. It is the sum of the ratings FUNDED.—For purposes of this title, any por- ‘‘(B) which contains express advocacy and for individual programs. Since a household tion of an overpayment of tax designated is made without the participation or co- rating period is 1 percent of the coverage under subsection (a) shall be treated as being operation of, or consultation with, a can- base, 200 gross rating points means 2 mes- refunded to the taxpayer as of the last date didate or a candidate’s representative. sages a week per average household. prescribed for filing the return of tax im- ‘‘(18) The term ‘express advocacy’ means, ‘‘SEC. 508. DEFINITIONS. posed by chapter 1 (determined without re- when a communication is taken as a whole ‘‘As used in this title— gard to extensions) or, if later, the date the and with limited reference to external ‘‘(1) the term ‘House of Representatives return is filed.’’ events, an expression of support for or oppo- candidate’ means a candidate for the office (b) CLERICAL AMENDMENT.—The table of sition to a specific candidate, to a specific of Representative in, or Delegate or Resident parts for such subchapter A is amended by group of candidates, or to candidates of a Commissioner to, the Congress; adding at the end thereof the following new particular political party, or a suggestion to ‘‘(2) the term ‘median household income’ item: take action with respect to an election, such means, with respect to a congressional dis- as to vote for or against, make contributions trict, the median household income of that ‘‘Part IX. Designation of overpayments and con- tributions for certain purposes relating to House to, or participate in campaign activity, or an district, as determined by the Commission, of Representatives elections.’’ expression which would reasonably be con- using the most current data from the Bureau (c) EFFECTIVE DATE.—The amendments strued as intending to influence the outcome of the Census; made by this section shall apply to taxable of an election.’’. ‘‘(3) the term ‘major party’ means, with re- years beginning after December 31, 1998. (2) CONTRIBUTION DEFINITION AMENDMENT.— spect to a House of Representatives general Section 301(8)(A) of such Act (2 U.S.C. election, a political party whose candidate SEC. 202. INCREASE IN CORPORATE INCOME TAX ON TAXABLE INCOME ABOVE 431(8)(A)) is amended— for the office of Representative in, or Dele- $10,000,000. (A) in clause (i), by striking ‘‘or’’ after the gate or Resident Commissioner to, the Con- (a) IN GENERAL.—Paragraph (4) of sub- semicolon at the end; gress in the preceding general election re- section (b) of section 11 of the Internal Reve- (B) in clause (ii), by striking the period at ceived, as the candidate of such party, 25 per- nue Code of 1986 is amended by striking ‘‘35 the end and inserting ‘‘; or’’; and cent or more of the total number of popular percent’’ and inserting ‘‘35.1 percent’’. (C) by adding at the end the following new votes received by all candidates for such of- (b) EFFECTIVE DATE.—The amendment clause: fice; made by subsection (a) shall apply to taxable ‘‘(iii) any payment or other transaction re- ‘‘(4) the term ‘third party’ means with re- years beginning after the date of the enact- ferred to in paragraph (17)(A) that does not spect to a House of Representatives general ment of this Act. qualify as an independent expenditure under election, a political party whose candidate (c) USE OF AMOUNTS RECEIVED.—Amounts paragraph (17)(B).’’. for the office of Representative in, or Dele- received by reason of the amendment made gate or Resident Commissioner to, the Con- SEC. 402. BAN ON USE OF SOFT MONEY FOR CER- by subsection (a) shall be paid over to the TAIN EXPENDITURES. gress in the preceding general election re- Grassroots Good Citizenship Fund under sec- ceived, as the candidate of such party, less tion 505 of the Federal Election Campaign Title III of the Federal Election Campaign than 25 percent of the total number of popu- Act of 1971. Act of 1971 (2 U.S.C. 431 et seq.), as amended by section 301, is further amended by adding lar votes received by all candidates for such TITLE III—BAN ON USE OF SOFT MONEY BY office; HOUSE CANDIDATES at the end the following new section: ‘‘(5) the term ‘independent candidate’ SEC. 301. BAN ON USE OF SOFT MONEY BY HOUSE ‘‘BAN ON USE OF NON-FEDERAL FUNDS FOR means, with respect to a House of Represent- CANDIDATES. CERTAIN EXPENDITURES atives general election, a candidate for the Title III of the Federal Election Campaign Act of 1971 (2 U.S.C. 431 et seq.) is amended ‘‘SEC. 324. (a) IN GENERAL.—No person may office of Representative in, or Delegate or disburse any funds for any expenditure de- Resident Commissioner to, the Congress who by adding at the end the following new sec- tion: scribed in subsection (b) unless the funds are is not the candidate of a major party or a subject to the limitations, prohibitions, and ‘‘BAN ON USE OF NON-REGULATED FUNDS BY third party; and reporting requirements of this Act. ‘‘(6) the term ‘House of Representatives HOUSE CANDIDATES ‘‘(b) EXPENDITURES DESCRIBED.—The ex- general election’ means a general election ‘‘SEC. 323. (a) IN GENERAL.—No funds may penditures described in this subsection are as for the office of Representative in, or Dele- be solicited, disbursed, or otherwise used follows: gate or Resident Commissioner to, the Con- with respect to any House of Representatives ‘‘(1) An expenditure made by an authorized gress.’’. election unless the funds are subject to the committee of a candidate for Federal office TITLE II—AMENDMENTS TO INTERNAL REVENUE limitations and prohibitions of this Act. or a political committee of a political party. CODE OF 1986 ‘‘(b) HOUSE OF REPRESENTATIVES ELECTION ‘‘(2) An expenditure made by a person who, SEC. 201. DESIGNATION OF OVERPAYMENTS AND DEFINED.—In this section, the term ‘House of during the election cycle, has made a con- CONTRIBUTIONS FOR GRASSROOTS Representatives election’ means any election GOOD CITIZENSHIP FUND. tribution to a candidate, where the expendi- for the office of Representative in, or Dele- (a) IN GENERAL.—Subchapter A of chapter ture is in support of that candidate or in op- gate or Resident Commissioner to, the Con- 61 of the Internal Revenue Code of 1986 (re- position to another candidate for the same gress.’’. lating to returns and records) is amended by office. adding at the end the following: TITLE IV—INDEPENDENT EXPENDITURES SEC. 401. BAN ON INDEPENDENT EXPENDITURES ‘‘(3) An expenditure made by a person, or a ‘‘PART IX—DESIGNATION OF OVERPAY- IN HOUSE OF REPRESENTATIVES political committee established, maintained MENTS AND CONTRIBUTIONS FOR ELECTIONS. or controlled by such person, who is required GRASSROOTS GOOD CITIZENSHIP FUND (a) IN GENERAL.—Section 315 of the Federal to register, under section 308 of the Federal ‘‘Sec. 6097. Designation of overpayments for Election Campaign Act of 1971 (2 U.S.C. 441a) Regulation of Lobbying Act (2 U.S.C. 267) or Grassroots Good Citizenship Fund. is amended by adding at the end the follow- the Foreign Agents Registration Act (22 SEC. 6097. DESIGNATION OF OVERPAYMENTS FOR ing new subsection; U.S.C. 611) or any successor Federal law re- GRASSROOTS GOOD CITIZENSHIP ‘‘(i) No person may make any independent quiring a person who is a lobbyist or foreign FUND. expenditure with respect to an election for agent to register. ‘‘(a) IN GENERAL.—With respect to each the office of Representative in, or Delegate ‘‘(4) An expenditure made by a person who, taxpayer’s return for the taxable year of the or Resident Commissioner to, the Con- during the election cycle, has communicated tax imposed by chapter 1, such taxpayer may gress.’’. with or received information from a can- designate that— (b) CLARIFICATION OF DEFINITIONS RELATING didate or a representative of that candidate ‘‘(1) a specified portion (not less than $1 or TO INDEPENDENT EXPENDITURES.— regarding activities that have the purpose of more than $10,000, and not less than $1 or (1) IN GENERAL.—Section 301 of such Act (2 influencing that candidate’s election to Fed- more than $20,000 in the case of a joint re- U.S.C. 431) is amended by striking para- eral office, where the expenditure is in sup- turn) of any overpayment of tax for such graphs (17) and (18) and inserting the follow- port of that candidate or in opposition to an- taxable year, and ing new paragraphs: other candidate for that office. H3256 CONGRESSIONAL RECORD — HOUSE May 13, 1998 ‘‘(5) An expenditure if, in the same election (2) Any reference to the date on which the of any amounts found to be paid erroneously cycle, the person making the expenditure is President transmits a report shall be deemed to the candidate under this title. or has been— a reference to the date on which the Su- ‘‘(4) Such other information and assur- ‘‘(A) authorized to raise or expend funds on preme Court finds a provision of this Act or ances as the Commission may require. behalf of the candidate or the candidate’s au- an amendment made by this Act unconstitu- ‘‘(b) AUTHORITY OF COMMISSION TO REJECT thorized committees; or tional. OR REVOKE CERTIFICATION.—The Commission ‘‘(B) serving as a member, employee, or SEC. 602. CONSTITUTIONAL AMENDMENT DE- may reject a candidate’s application for agent of the candidate’s authorized commit- SCRIBED. treatment as a certified House candidate or tees in an executive or policymaking posi- For purposes of section 601, a joint resolu- revoke a candidate’s status as a certified tion.’’. tion described in this section is a joint reso- House candidate if the candidate knowingly TITLE V—PROVISIONS RELATING TO lution proposing the following text as an and willfully violates or has violated any of HOUSE OF REPRESENTATIVES PRI- amendment to the Constitution of the the applicable requirements of this title with MARY ELECTIONS United States: respect to the election involved or any pre- SEC. 501. LIMITATION ON EXPENDITURES IN ‘‘ARTICLE — vious election. HOUSE OF REPRESENTATIVES ELEC- ‘‘SECTION 1. Congress may provide for rea- ‘‘Subtitle B—Limitations on Expenditures by TIONS OTHER THAN GENERAL ELEC- sonable restrictions on contributions and ex- Certified House Candidates TIONS. penditures in campaigns for election for Fed- ‘‘SEC. 511. LIMITATION ON EXPENDITURES. Section 315 of the Federal Election Cam- eral office as necessary to protect the integ- ‘‘A certified House candidate in a House of paign Act of 1971 (2 U.S.C. 441a), as amended rity of the electoral process. by section 401, is further amended by adding Representatives general election may not ‘‘SEC. 2. Congress shall have power to en- make expenditures other than as provided in at the end the following new subsection: force this article by appropriate legislation. ‘‘(j)(1) The maximum expenditures for a this subtitle. No legislation enacted to enforce this article candidate for the office of Representative in, ‘‘SEC. 512. SOURCES OF AMOUNTS FOR EXPENDI- shall apply with respect to any election held or Delegate or Resident Commissioner to, TURES BY CERTIFIED HOUSE CAN- after the last day of the year of the third the Congress in any election other than a DIDATES. Presidential election held after the date of ‘‘The only sources of amounts for expendi- general election may not exceed 1⁄3 of the maximum applicable to the candidate in a the enactment of the legislation, unless the tures by certified House candidates in House general election under title V. period in which such legislation is in effect of Representatives general elections shall ‘‘(2) For purposes of limitations under this is extended by an Act of Congress which is be— Act, any expenditure by a candidate referred signed into law by the President.’’. ‘‘(1) the Grassroots Good Citizenship Fund, to in paragraph (1), including an expenditure H.R. 3721 under section 521; and for the preparation, production, or presen- OFFERED BY: MR. OBEY OF WISCONSIN ‘‘(2) additional amounts from State and na- tional party committees under section 522. tation of communications through electronic Amendment in the Nature of a Substitute to media or in written form, shall, regardless of H.R. 2183 ‘‘SEC. 513. DISTRICT LIMITATION ON EXPENDI- when the expenditure is made, be attributed TURES BY MAJOR PARTY CAN- AMENDMENT NO. 4: Strike all after the en- to the appropriate general election, unless DIDATES. acting clause and insert the following: such expenditure is made solely for an elec- ‘‘(a) IN GENERAL.—Except as provided in tion other than a general election.’’. SECTION 1. SHORT TITLE; FINDING. section 515 and section 522, the maximum SEC. 502. LIMITATION ON ACCEPTANCE OF (a) SHORT TITLE.—This Act may be cited as amounts of expenditures by certified House LARGE DONOR MULTICANDIDATE the ‘‘Let the Public Decide Campaign Fi- candidates in House of Representatives gen- POLITICAL COMMITTEE CONTRIBU- nance Reform Act’’. eral elections who are major party can- TIONS BY HOUSE OF REPRESENTA- (b) FINDING.—The Congress finds that the didates shall be based on the median house- TIVES CANDIDATES. existing system of private political contribu- hold income of the districts involved, as pro- Section 315 of the Federal Election Cam- tions has become a fundamental threat to vided for in subsections (b) and (c). paign Act of 1971 (2 U.S.C. 441a), as amended the integrity of the national election process ‘‘(b) MAXIMUM FOR WEALTHIEST DISTRICT.— by sections 401 and 501, is further amended and that the provisions contained in this Act In the congressional district with the high- by adding at the end the following new sub- are necessary to prevent the corruption of est median household income, maximum section: the public’s faith in the Nation’s system of combined expenditures for all certified ‘‘(k)(1) A candidate for the office of Rep- governance. House candidates who are major party can- resentative in, or Delegate or Resident Com- TITLE I—VOLUNTARY EXPENDITURE didates with respect to a House of Represent- missioner to, the Congress, and the author- LIMITATIONS AND PUBLIC FINANCING atives general election shall be a total of ized political committees of such candidate, FOR HOUSE OF REPRESENTATIVES $1,000,000. may not, with respect to an election other GENERAL ELECTIONS ‘‘(c) MAXIMUM FOR OTHER DISTRICTS.—In than a general election, accept contributions each congressional district, other than the from large donor multicandidate political SEC. 101. NEW TITLE OF FEDERAL ELECTION district referred to in subsection (b), the committees in excess of 20 percent of the CAMPAIGN ACT OF 1971. maximum combined expenditures for all cer- maximum amount which the candidate may The Federal Election Campaign Act of 1971 tified House candidates who are major party expend with respect to the election under (2 U.S.C. 431 et seq.) is amended by adding at candidates with respect to a House of Rep- subsection (j). the end the following new title: ‘‘(2) In paragraph (1), the term ‘large donor ‘‘TITLE V—VOLUNTARY EXPENDITURE resentatives general election shall be an multicandidate political committee’ means a LIMITATIONS AND PUBLIC FINANCING amount equal to— multicandidate political committee that ac- FOR HOUSE OF REPRESENTATIVES ‘‘(1) the maximum amount referred to in cepts contributions totaling more than $200 GENERAL ELECTIONS subsection (b), less ‘‘(2) the amount equal to— from any single source in a calendar year.’’. ‘‘Subtitle A—Public Financing for Certified ‘‘(A) 2⁄3 of the percentage difference be- TITLE VI—CONSIDERATION OF CONSTITUTIONAL House Candidates AMENDMENT tween the median household income of the SEC. 601. EXPEDITED CONSIDERATION OF CON- ‘‘SEC. 501. PUBLIC FINANCING FOR CERTIFIED district involved and the median household STITUTIONAL AMENDMENT. HOUSE CANDIDATES. income of the district referred to in sub- (a) IN GENERAL.—If any provision of this ‘‘A certified House candidate in a House of section (b), times Act or any amendment made by this Act is Representatives general election shall be en- ‘‘(B) the maximum amount referred to in found unconstitutional by the Supreme titled to payments from the Grassroots Good subsection (b). Court, the provisions of section 2908 (other Citizenship Fund under section 521. ‘‘(d) ALLOCATION.—The maximum expendi- than subsection (a)) of the Defense Base Clo- ‘‘SEC. 502. PROCEDURES FOR CERTIFICATION. ture for a certified House candidate who is a sure and Realignment Act of 1990 shall apply ‘‘(a) IN GENERAL.—The Commission shall major party candidate in a congressional dis- to the consideration of a joint resolution de- certify that a candidate initially meets the trict shall be 50 percent of the maximum scribed in section 602 in the same manner as requirements for a certified House candidate amount under subsection (b) or (c), as appli- such provisions apply to a joint resolution under if the candidate submits to the Com- cable. described in section 2908(a) of such Act. mission in writing a statement with the fol- ‘‘SEC. 514. DISTRICT LIMITATION ON EXPENDI- (b) SPECIAL RULES.—For purposes of apply- lowing information and assurances: TURES BY THIRD PARTY AND INDE- ing subsection (a) with respect to such provi- ‘‘(1) An agreement to obtain and furnish to PENDENT CANDIDATES. sions, the following rules shall apply: the Commission such evidence as it may re- ‘‘(a) IN GENERAL.—Except as provided in (1) Any reference to the Committee on quest to ensure that the candidate meets the section 515 and section 522, the maximum Armed Services of the House of Representa- requirements relating to limitations on ex- amounts of expenditures by certified House tives shall be deemed a reference to the Com- penditures under subtitle B. candidates who are third party and independ- mittee on the Judiciary of the House of Rep- ‘‘(2) An agreement to keep and furnish to ent candidates in House of Representatives resentatives and any reference to the Com- the Commission such records, books, and general elections shall be the amount allo- mittee on Armed Services of the Senate other information as it may request. cated under subsection (b). shall be deemed a reference to the Commit- ‘‘(3) An agreement to audit and examina- ‘‘(b) ALLOCATION.—The maximum expendi- tee on the Judiciary of the Senate. tion by the Commission and to the payment ture for a certified House candidate who is a May 13, 1998 CONGRESSIONAL RECORD — HOUSE H3257

third party or independent candidate in a ‘‘(b) EXPENDITURES.—A certified House TITLE II—AMENDMENTS TO INTERNAL congressional district shall be— candidate who is the candidate of a political REVENUE CODE OF 1986 ‘‘(1) the amount that bears the same ratio party may make expenditures of the SEC. 201. DESIGNATION OF OVERPAYMENTS AND to the maximum amount under subsection amounts received under subsection (a). CONTRIBUTIONS FOR GRASSROOTS (b) or (c) of section 503, as applicable, as the GOOD CITIZENSHIP FUND. ‘‘Subtitle D—Miscellaneous Provisions total popular vote in the district for can- (a) IN GENERAL.—Subchapter A of chapter didates of the third party or for all independ- ‘‘SEC. 531. PUBLIC SERVICE ANNOUNCEMENTS. 61 of the Internal Revenue Code of 1986 (re- lating to returns and records) is amended by ent candidates (as the case may be) bears to ‘‘(a) IN GENERAL.—Beginning on January adding at the end the following: the total popular vote for all candidates in 15, and continuing through April 15 of each the 5 preceding general elections; or year, the Commission shall carry out a pro- ‘‘PART IX—DESIGNATION OF OVERPAY- ‘‘(2) in the case of a candidate in a district gram, utilizing broadcast announcements MENTS AND CONTRIBUTIONS FOR in which no third party or independent can- and other appropriate means, to inform the GRASSROOTS GOOD CITIZENSHIP FUND didates (as the case may be) received votes public of the existence and purpose of the ‘‘Sec. 6097. Designation of overpayments for in the 5 preceding general elections, the Grassroots Good Citizenship Fund and the Grassroots Good Citizenship amount corresponding to the number of sig- role that individual citizens can play in the Fund. natures presented to and verified by the election process by voluntarily contributing ‘‘SEC. 6097. DESIGNATION OF OVERPAYMENTS Commission according to the following to the fund. The announcements shall be FOR GRASSROOTS GOOD CITIZEN- table: broadcast during prime time viewing hours SHIP FUND. ‘‘(a) IN GENERAL.—With respect to each ‘‘20,000 signatures ..... $75,000 in 30-second advertising segments equivalent taxpayer’s return for the taxable year of the 30,000 signatures ...... 100,000 to 200 gross rating points per network per tax imposed by chapter 1, such taxpayer may 40,000 signatures ...... 150,000 week. The Commission shall ensure that the 50,000 signatures ...... 200,000 designate that— maximum number of taxpayers shall be ex- ‘‘(1) a specified portion (not less than $1 or ‘‘SEC. 515. INCREASE IN AMOUNT FOR CAN- posed to these announcements. Television DIDATES WITH NONPARTICIPATING more than $10,000, and not less than $1 or networks, as defined by the Federal Commu- OPPONENT. more than $20,000 in the case of a joint re- nications Commission, shall provide the ‘‘In the case of a certified House candidate turn) of any overpayment of tax for such broadcast time under this section as part of in a House of Representatives general elec- taxable year, and their obligations in the public interest under tion with an opponent who is a major party ‘‘(2) any contribution which the taxpayer the Communications Act of 1934. The Federal candidate who is not a certified House can- includes with such return, Election Commission shall encourage broad- didate, the amount otherwise provided in shall be paid over to the Grassroots Good section 513 or section 514 (as the case may cast outlets other than the above mentioned television networks including radio to pro- Citizenship Fund under section 521 of the be) shall be increased by 100 percent. Federal Election Campaign Act of 1971. vide similar announcements. ‘‘Subtitle C—Payments to Certified House ‘‘(b) MANNER AND TIME OF DESIGNATION.—A Candidates ‘‘(b) GROSS RATING POINT.—The term ‘gross designation under subsection (a) may be rating point’ is a measure of the total gross ‘‘SEC. 521. GRASSROOTS GOOD CITIZENSHIP made with respect to any taxable year only FUND. weight delivered. It is the sum of the ratings at the time of filing the return of tax im- ‘‘(a) CREATION OF FUND.—There is estab- for individual programs. Since a household posed by chapter 1 for such taxable year. lished in the Treasury a trust fund to be rating period is 1 percent of the coverage Such designation shall be made on the 1st known as the ‘Grassroots Good Citizenship base, 200 gross rating points means 2 mes- page of the return. Fund’, consisting of such amounts as may be sages a week per average household. ‘‘(c) OVERPAYMENTS TREATED AS RE- FUNDED.—For purposes of this title, any por- credited to such fund as provided in this sec- ‘‘SEC. 532. DEFINITIONS. tion of an overpayment of tax designated tion. ‘‘As used in this title— ‘‘(b) DISTRICT ACCOUNTS.—There shall be under subsection (a) shall be treated as being ‘‘(1) the term ‘certified House candidate’ established within the Grassroots Good Citi- refunded to the taxpayer as of the last date means, with respect to a House of Represent- zenship Fund an account for each congres- prescribed for filing the return of tax im- atives general election, a candidate in such sional district. The accounts so established posed by chapter 1 (determined without re- election who is certified by the Commission shall be administered by the Commission for gard to extensions) or, if later, the date the under subtitle A as meeting the require- return is filed.’’ the purpose of distributing amounts under ments for receiving public financing under (b) CLERICAL AMENDMENT.—The table of this title. this title; parts for such subchapter A is amended by ‘‘(c) PAYMENTS TO CANDIDATES.—Subject to adding at the end thereof the following new subsection (d), the Commission shall pay to ‘‘(2) the term ‘median household income’ item: each certified House candidate from the means, with respect to a congressional dis- Grassroots Good Citizenship Fund the maxi- trict, the median household income of that ‘‘Part IX. Designation of overpayments and mum amount calculated for such candidate district, as determined by the Commission, contributions for certain pur- under section 513 or 514. using the most current data from the Bureau poses relating to House of Rep- ‘‘(d) INSUFFICIENT AMOUNTS.—If, as deter- of the Census; resentatives elections.’’ mined by the Commission, there are insuffi- ‘‘(3) the term ‘major party’ means, with re- (c) EFFECTIVE DATE.—The amendments cient amounts in the Grassroots Good Citi- spect to a House of Representatives general made by this section shall apply to taxable zenship Fund for payments under subsection election, a political party whose candidate years beginning after December 31, 1998. (c), the Commission may reduce payments to for the office of Representative in, or Dele- SEC. 202. INCREASE IN CORPORATE INCOME TAX certified House candidates so that each can- gate or Resident Commissioner to, the Con- ON TAXABLE INCOME ABOVE didate receives a pro rata portion of the gress in the preceding general election re- $10,000,000. amounts that are available. ceived, as the candidate of such party, 25 per- (a) IN GENERAL.—Paragraph (4) of sub- ‘‘(e) TRANSFERS TO FUND.—There are here- cent or more of the total number of popular section (b) of section 11 of the Internal Reve- by credited to the Grassroots Good Citizen- votes received by all candidates for such of- nue Code of 1986 is amended by striking ‘‘35 ship Fund amounts equivalent to the fice; percent’’ and inserting ‘‘35.1 percent’’. amounts designated under section 6097 of the ‘‘(4) the term ‘third party’ means with re- (b) EFFECTIVE DATE.—The amendment Internal Revenue Code of 1986. spect to a House of Representatives general made by subsection (a) shall apply to taxable ‘‘(f) EXPENDITURES.—Amounts in the Grass- election, a political party whose candidate years beginning after the date of the enact- roots Good Citizenship Fund shall be avail- for the office of Representative in, or Dele- ment of this Act. (c) USE OF AMOUNTS RECEIVED.—Amounts able for the purpose of providing amounts for gate or Resident Commissioner to, the Con- received by reason of the amendment made expenditure by certified House candidates in gress in the preceding general election re- by subsection (a) shall be paid over to the House of Representatives general elections ceived, as the candidate of such party, less Grassroots Good Citizenship Fund under sec- in accordance with this title. than 25 percent of the total number of popu- lar votes received by all candidates for such tion 521 of the Federal Election Campaign ‘‘SEC. 522. ADDITIONAL AMOUNTS FROM STATE Act of 1971. AND NATIONAL PARTY COMMIT- office; TEES. ‘‘(5) the term ‘independent candidate’ TITLE III—BAN ON USE OF SOFT MONEY ‘‘(a) CONTRIBUTIONS.—In addition to means, with respect to a House of Represent- BY HOUSE CANDIDATES amounts made available under section 521, in atives general election, a candidate for the SEC. 301. BAN ON USE OF SOFT MONEY BY HOUSE the case of a certified House candidate in a office of Representative in, or Delegate or CANDIDATES. House of Representatives general election Resident Commissioner to, the Congress who Title III of the Federal Election Campaign who is the candidate of a political party, the is not the candidate of a major party or a Act of 1971 (2 U.S.C. 431 et seq.) is amended State and national committees of that polit- third party; and by adding at the end the following new sec- ical party may make contributions to the ‘‘(6) the term ‘House of Representatives tion: candidate totaling not more than 5 percent general election’ means a general election ‘‘BAN ON USE OF NON-REGULATED FUNDS BY of the maximum expenditure applicable to for the office of Representative in, or Dele- HOUSE CANDIDATES the candidate under section 513 or section gate or Resident Commissioner to, the Con- ‘‘SEC. 323. (a) IN GENERAL.—No funds may 514. gress.’’. be solicited, disbursed, or otherwise used H3258 CONGRESSIONAL RECORD — HOUSE May 13, 1998 with respect to any House of Representatives SEC. 402. BAN ON USE OF SOFT MONEY FOR CER- political committees in excess of 20 percent election unless the funds are subject to the TAIN EXPENDITURES. of the maximum amount which a certified limitations and prohibitions of this Act. Title III of the Federal Election Campaign House candidate may expend with respect to Act of 1971 (2 U.S.C. 431 et seq.), as amended ‘‘(b) HOUSE OF REPRESENTATIVES ELECTION the general election under title V. by section 301, is further amended by adding DEFINED.—In this section, the term ‘House of ‘‘(2) In paragraph (1), the term ‘large donor Representatives election’ means any election at the end the following new section: multicandidate political committee’ means a for the office of Representative in, or Dele- ‘‘BAN ON USE OF NON-FEDERAL FUNDS FOR multicandidate political committee that ac- gate or Resident Commissioner to, the Con- CERTAIN EXPENDITURES cepts contributions totaling more than $200 gress.’’. ‘‘SEC. 324. (a) IN GENERAL.—No person may from any single source in a calendar year.’’. disburse any funds for any expenditure de- TITLE VI—CONSIDERATION OF TITLE IV—INDEPENDENT scribed in subsection (b) unless the funds are CONSTITUTIONAL AMENDMENT EXPENDITURES subject to the limitations, prohibitions, and SEC. 601. EXPEDITED CONSIDERATION OF CON- SEC. 401. BAN ON INDEPENDENT EXPENDITURES reporting requirements of this Act. STITUTIONAL AMENDMENT. IN HOUSE OF REPRESENTATIVES ‘‘(b) EXPENDITURES DESCRIBED.—The ex- (a) IN GENERAL.—If any provision of this ELECTIONS. penditures described in this subsection are as Act or any amendment made by this Act is (a) IN GENERAL.—Section 315 of the Federal follows: found unconstitutional by the Supreme Election Campaign Act of 1971 (2 U.S.C. 441a) ‘‘(1) An expenditure made by an authorized Court, the provisions of section 2908 (other is amended by adding at the end the follow- committee of a candidate for Federal office than subsection (a)) of the Defense Base Clo- ing new subsection; or a political committee of a political party. sure and Realignment Act of 1990 shall apply ‘‘(i) No person may make any independent ‘‘(2) An expenditure made by a person who, to the consideration of a joint resolution de- expenditure with respect to an election for during the election cycle, has made a con- scribed in section 602 in the same manner as the office of Representative in, or Delegate tribution to a candidate, where the expendi- such provisions apply to a joint resolution or Resident Commissioner to, the Con- ture is in support of that candidate or in op- described in section 2908(a) of such Act. gress.’’. position to another candidate for the same (b) SPECIAL RULES.—For purposes of apply- office. (b) CLARIFICATION OF DEFINITIONS RELATING ing subsection (a) with respect to such provi- ‘‘(3) An expenditure made by a person, or a TO INDEPENDENT EXPENDITURES.— sions, the following rules shall apply: political committee established, maintained (1) IN GENERAL.—Section 301 of such Act (2 (1) Any reference to the Committee on or controlled by such person, who is required U.S.C. 431) is amended by striking para- Armed Services of the House of Representa- to register, under section 308 of the Federal graphs (17) and (18) and inserting the follow- tives shall be deemed a reference to the Com- Regulation of Lobbying Act (2 U.S.C. 267) or ing new paragraphs: mittee on the Judiciary of the House of Rep- the Foreign Agents Registration Act (22 ‘‘(17) The term ‘independent expenditure’ resentatives and any reference to the Com- U.S.C. 611) or any successor Federal law re- mittee on Armed Services of the Senate means an expenditure for a communication quiring a person who is a lobbyist or foreign (other than a communication which is de- shall be deemed a reference to the Commit- agent to register. tee on the Judiciary of the Senate. scribed in clause (i) or clause (iii) of para- ‘‘(4) An expenditure made by a person who, graph (9)(B) or which would be described in (2) Any reference to the date on which the during the election cycle, has communicated President transmits a report shall be deemed such clause if the communication were oth- with or received information from a can- erwise treated as an expenditure under this a reference to the date on which the Su- didate or a representative of that candidate preme Court finds a provision of this Act or title)— regarding activities that have the purpose of ‘‘(A) which is made during the 90-day pe- an amendment made by this Act unconstitu- influencing that candidate’s election to Fed- tional. riod ending on the date of a general election eral office, where the expenditure is in sup- for Federal office and which identifies a can- SEC. 602. CONSTITUTIONAL AMENDMENT DE- port of that candidate or in opposition to an- SCRIBED. didate for election for such office by name, other candidate for that office. For purposes of section 601, a joint resolu- image, or likeness; or ‘‘(5) An expenditure if, in the same election tion described in this section is a joint reso- ‘‘(B) which contains express advocacy and cycle, the person making the expenditure is lution proposing the following text as an is made without the participation or co- or has been— amendment to the Constitution of the operation of, or consultation with, a can- ‘‘(A) authorized to raise or expend funds on United States: didate or a candidate’s representative. behalf of the candidate or the candidate’s au- ‘‘(18) The term ‘express advocacy’ means, thorized committees; or ‘‘ARTICLE— when a communication is taken as a whole ‘‘(B) serving as a member, employee, or ‘‘SECTION 1. In campaigns for election for and with limited reference to external agent of the candidate’s authorized commit- Federal office, as necessary to protect the in- events, an expression of support for or oppo- tees in an executive or policymaking posi- tegrity of the electoral process, Congress sition to a specific candidate, to a specific tion.’’. may provide for reasonable restrictions on group of candidates, or to candidates of a TITLE V—LIMITATIONS ON ACCEPTANCE the making of independent expenditures for particular political party, or a suggestion to OF LARGE DONOR PAC CONTRIBUTIONS public communications made during the 90- take action with respect to an election, such IN HOUSE OF REPRESENTATIVES PRI- day period ending on the date of a general as to vote for or against, make contributions MARY ELECTIONS election and on the making of expenditures to, or participate in campaign activity, or an for public communications which contain ex- SEC. 501. LIMITATION ON ACCEPTANCE OF expression which would reasonably be con- LARGE DONOR MULTICANDIDATE press advocacy. strued as intending to influence the outcome POLITICAL COMMITTEE CONTRIBU- ‘‘SEC. 2. Nothing in clause 1 may be con- of an election.’’. TIONS BY HOUSE OF REPRESENTA- strued to affect the validity of any restric- (2) CONTRIBUTION DEFINITION AMENDMENT.— TIVES CANDIDATES. tions on expenditures in campaigns for elec- Section 301(8)(A) of such Act (2 U.S.C. Section 315 of the Federal Election Cam- tion for Federal office which are in effect 431(8)(A)) is amended— paign Act of 1971 (2 U.S.C. 441a), as amended prior to the adoption of this article. (A) in clause (i), by striking ‘‘or’’ after the by section 401, is further amended by adding ‘‘SEC. 3. Congress shall have power to en- semicolon at the end; at the end the following new subsection: force this article by appropriate legislation. (B) in clause (ii), by striking the period at ‘‘(j)(1) A candidate for the office of Rep- No legislation enacted to enforce this article the end and inserting ‘‘; or’’; and resentative in, or Delegate or Resident Com- shall apply with respect to any election held (C) by adding at the end the following new missioner to, the Congress who is not a cer- after the last day of the year of the third clause: tified House candidate under title V (and the Presidential election held after the date of ‘‘(iii) any payment or other transaction re- authorized political committees of such can- the enactment of the legislation, unless the ferred to in paragraph (17)(A) that does not didate) may not, with respect to an election period in which such legislation is in effect qualify as an independent expenditure under other than a general election, accept con- is extended by an Act of Congress which is paragraph (17)(B).’’. tributions from large donor multicandidate signed into law by the President.’’.