Congressional Record: Proceedings and Debates of the 106th Congress, First Session, Volume 145, Part 20 Page: 28,319
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November 4, 1999
CONGRESSIONAL RECORD-SENATE
talk about the conflicting interests of
bankers, insurance companies, and bro-
kers. There has been a lot of talk about
the jurisdictional battles between the
Federal Reserve and the Office of the
Comptroller of the Currency, the OCC.
But there has been precious little dis-
cussion in this debate of the public in-
terest.
What about the interests of ordinary
consumers? An earlier version of this
legislation contained a provision to en-
sure that people with lower incomes
have access to basic banking services.
The problem is that banking services
are increasingly beyond the reach of
millions of Americans. According to
U.S. PIRG, the average cost of a check-
ing account is $217 per year, a major
obstacle for opening up a bank account
for lower-income families. These fami-
lies have to rely, instead, on usurious
check cashing operations and money
order services. Nevertheless, this
"basic banking" provision was stripped
out of the bill.
I don't see very much protection for
consumers in S. 900, either. Banks that
have always offered safe, federally in-
sured deposits will have every incen-
tive to lure their customers into
riskier investments. Last year, for ex-
ample, NationsBank paid $7 million to
settle charges that it misled bank cus-
tomers into investing in risky bonds
through a securities affiliate that it set
up with Morgan Stanley Dean Witter.
S. 900 makes nominal attempts to ad-
dress these problems, but in the end I
am afraid this legislation is an invita-
tion to fraud and abuse.
One of the most objectionable aspects
of S. 900 is the absence of protection for
consumer privacy. The conference re-
port will allow the various affiliates of
a financial conglomerate to share sen-
sitive confidential information about
their customers.
William Safire writes:
As for financial privacy, [S. 900] makes
your bank account everyone's business.
Without your consent, the private informa-
tion you write on your mortgage application,
with your tax return attached, goes to your
insurance company, which already has your
health information, and its snoops can also
see your investment behavior and what you
have been buying with your credit card.
Under [S. 900], giant financial conglom-
erates, using other surveillance to protect
against fraud, will know more about your
money, your habits, your assets, your dis-
ease, and your genetic makeup than your
spouse does, and probably more than you do.
I will tell you something. It is a little
disconcerting to read columns such as
this about the real potential for abuse
and serious invasion of citizens' pri-
vacy. We need to have much, much
more discussion about the implications
of this bill for citizens' privacy in Min-
nesota and all across the country.
I am going to repeat the last part of
this quote:
Under S. 900, giant financial conglom-
erates, using other surveillance to protectagainst fraud, will know more about your
money, your habits, your assets, your dis-
eases, and your genetic makeup than your
spouse does, and probably more than you do.
Law Professor Joel Reidenberg of
Fordham University concludes:
This is an astounding loss of privacy for
the American citizens.
I want to shout from the floor of the
Senate that this is an astounding loss
of privacy for American citizens.
The impact of S. 900 on the Commu-
nity Reinvestment Act, CRA, is an-
other cause for real concern. When the
Senate considered S. 900 earlier this
year, I argued that if we were serious
about modernizing the financial sector
of our country, we should be serious
about modernizing CRA along with it.
There have been few financial tools
available to families and communities
that have been as effective and have
had as great an impact-positive im-
pact-as CRA. An estimated $1 trillion
has been reinvested in our towns and
cities, thanks to this CRA legislation.
Under the S. 900 conference report,
communities, consumers, and public
interest organizations will see their op-
portunities for public comment lim-
ited. They will not have a chance to
comment on mergers when banks that
have received a satisfactory CRA rat-
ing are applying to become financial
holding companies. To me, this looks
more like a rollback than it does mod-
ernization.
Finally, under the S. 900 conference
report, smaller banks that receive a
satisfactory CRA rating will be re-
viewed every 4 years instead of every 2.
Smaller banks that receive an excel-
lent CRA rating will be reviewed every
5 years. Since an estimated 97 percent
of all small banks currently receive a
satisfactory or better CRA rating, S.
900 will essentially remove the major-
ity of banks from the regular CRA re-
view process. There are a number of
reasons why banks must be reviewed
by regulators, but it is only with re-
gard to CRA that we are cutting back
on the requirements for review.
In reality, S. 900 reflects the same
priority of interests as financial con-
solidation itself. It offers a little some-
thing for everybody in the financial
services industry. It is a Santa's wish
list for the big banks. It gives enough
to securities firms and the insurance
industry to keep them on board. But it
basically has nothing to offer for low-
income families, nothing for rural and
minority communities, and very little
for consumers.
This should not be surprising. I don't
think it is a mere coincidence that fi-
nance, insurance, and real estate spend
more than any other industries on con-
gressional campaigns and lobbying on
Capitol Hill. This is a reformer's dream
issue. There is no one-to-one correla-
tion, of course; their influence is felt at
a systemic level. And I have congratu-
lated some of my colleagues on theirpolitical skill. But I do not think it is
a coincidence that the finance, insur-
ance, and real estate interests spend
more than any other industries on con-
gressional campaigns and on lobbying
Capitol Hill. Last year, they shelled
out more than $200 million on lobbying
activities, according to the Center for
Responsive Politics, and they have
made more than $150 million in cam-
paign contributions since 1996.
As William Safire wrote on November
1:
Generous financial lobbies have persuaded
our leaders that in enormous size there is
strength.
Generous lobbies have been making
the same case in other industries as
well, with equal success. Similar con-
solidation is occurring in agriculture,
the media, entertainment, health care,
airlines, telecommunications, you
name it. Teddy Roosevelt, where are
you when we need you? Who is going to
take on these monopolies?
Who is going to call for some serious
antitrust action? When are we going to
be on the side of people and consumers?
In fact, we are witnessing the biggest
wave of mergers and economic con-
centration since the late 1800s.
There were 4,728 reportable mergers
in 1998, compared to 3,087 in 1993, 1,521
in 1991, and a mere 804 in 1980.
As Joel Klein, head of the Justice De-
partment's Antitrust Division, pointed
out, the value of last year's mergers
equals the combined value of all merg-
ers from 1999 to 1996-put together.
What is in store for us if we allow
this trend to continue? Pretty soon we
are going to have three financial serv-
ice firms in this country, four airlines,
two media conglomerates, and five en-
ergy giants.
Huge financial conglomerates the
size of Citigroup will truly be "too big
to fail." Government officials and
Members of the Congress will be prone
to confuse Citigroup's interests with
the public interest, if they don't al-
ready.
What happens, for example, when one
of these colossal conglomerates decides
it might like to turn a profit by
privatizing Social Security? Who is
going to stand in their way? That is a
trick question, of course, because we
already face that dilemma today. But I
contend that the economic concentra-
tion resulting from the passage of S.
900 would only make that problem
worse.
The bigger these financial conglom-
erates get, the more influence they
have over public policy choices. The
bigger they get, the more money they
will have to spend on political cam-
paigns. The bigger they get, the more
lobbyists they will be able to amass on
Capitol Hill. And the bigger they get,
the more weight they will carry in the
media.
I am going to repeat that.
The bigger these financial conglom-
erates get, the more influence they are28319
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United States. Congress. Congressional Record: Proceedings and Debates of the 106th Congress, First Session, Volume 145, Part 20, book, November 1999; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc30919/m1/4/?q=%221999-11%22: accessed July 16, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.