Date: 1984-09-24
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. in an effort to prevent a wholesale circumvention of the Bank Holding Company Act and to plug loopholes in related statutes. the Banking. Finance and Urban Affairs Committee reported H.R. 6916 on a 32to16 vote on July We felt that it was important that these loopholesthrough which banks. securities firms. retail conglomerates. and insurance companies were establishing a crazyquilt banking networkbe closed so that the Congress could carefully consider. in a sane atmosphere. the longrange financial needs of all segments of the economy. The Senate. while recognizing our initiative in closing the nonbank loophole. on September 13 adopted what can only be accurately described as a Christmas tree festooned with brightly colored ornaments of all shapes and sizescredit union amendments. export trading company provisions. a basket of new powers for bank holding companies including new securities activities. consumer leasing amendments. new rules for brokered deposits. preemption of State usury laws. greenmail. golden parachutes provisions amending securities statutes. regional banking compacts which raise significant constitutional questions. new powers for savings and loan asso. clationsthe list goes on and on. The implications of these provisions wont be known for months. and. in some cases. years. The legislation is so far ranging and so broadly drafted that at least three House committees have jurisdictionBanking. Energy and Commerce. and Judiciary. None of us on the House Banking Committee would feel comfortable in standing up on this floor in the remaining few days of this Congress urging our colleagues to accept any part of this conglomeration on which neither we nor the Energy and Commerce nor Judiciary Committees have had hearings or markup and on which we all know there is a wide divergence of opinion. It would be a shot in the dark which we and the Nation might regret for years to come. The Senate has acted in its wisdom. The pressures to give the banks and others in the financial community more powers are great in that body. I congratulate Chairman GARN and his colleagues who I know worked long and hard to push the package of new powers through the Senate. Many of us in the House had hoped that the Senate would limit its efforts to what we felt were the critical needs of the momentthe closing of nonbank bank and related loopholes. In hopes to avoid the kind of situation we now face. I have communicated. on a number of occasions. to the Senate the very real problems that any big package of new powers would face in the House as part of some last minute banking conference. The problems are largein fact. insurmountable. When I became convinced last spring that we needed a bill to close the more damaging loopholes. I consulted at length with my colleagues on the Banking Committee. I consulted with the minority as well as the members on the majority and there emerged a strong sentiment to close the loopholes. But in a series of caucuses. one point stood out above all othersthere was a solid consensus against any move being made in the late hours to accept packages of new powers and new provisions that were not considered and voted on in the committee. The message was clear. "Freddie. we dont mind taking the hard knocks. the bruises required to close the loopholes. but we dont want this to be converted into a new powers bill in a lastminute conference"-a fair paraphrasing of the overall sentiment in those caucuses. Since the passage of the Senate bill. I have rechecked the sentiment. not only among committee members but across the House.*There is no question in my mind that the Senate packageor even a diluted conference versionwould fail overwhelmingly in the House. We have problems not only on the substance. but major procedural difficulties as well. None of this is particularly startling news to anyone. Every Member of the House. I am sure. quickly perceives the difficulties of asking for consideration of. a massive rewriting of key statutes covering banking. securities. and interstate commerce when there have been few hearings. votes or debate. In fact. in most cases. absolutely none. Completely aside from the political realities in the House. we must look at the fact that we are talking about a monumental change in banking and its relationship to the rest of the economy. A fundamental shift that may well determine how credit is delivered. financial services dispensed. and the entire economy structured for decades to come. This is not the stuff of quickie midnight conferences in the closing hours of the session. Not only is there a major concern about what these new powers may mean to the economic future of the Nation. but also to the safety and soundness of the banking industry. itself. The Banking Committee is now In the midst of a top to bottom look at the collapse of the $44 billion Continental Illinois National Bank of Chicago. The Federal Government. through its bank supervisory system. has decided that it is responsible for everything at Continental. Billions of dollars of funds have poured from Washington to that institution to keep it afloat. If indeed this is aprecedent and the assets of big banks and bank holding companies are a contingent liability of the Federal Treasury then we must look anew at how these institutions operate and urder what control. Under the Continentalstyle bailout. the new powers to be grabbed up would increase the exposure for the insurance fund. the discount window. the Federal Treasury and the American taxpayer. The same regulatory mechanism that appeared so inadequate in the Continental collapseand earlier bank failureswould now take on the assignment of examining the expanded activities as proposed in the Senate bill. After listening to hours of testimony on Continental from the regulators over the past 2 days. I do not think it would be prudent or good public policy to give them any kind of new responsibility. Judging from Continental. theyre struggling and running far behind in keeping up with even their most mundane supervisory functions. None of this is said to suggest that the Banking Committee or the House is closing out the idea that change must be considered in banking and regulation. All we are saying is that such critical changes must be accomplished with full hearings. debate and votes at all levels of the process. Such consideration must place the needs of the economy first. Lets not structure the financial industryaccording to its wishesand then turn around and tell everyone else in the economy to adjust. Above all. we must make certain that we have a better and stronger regulatory system in place before we pass out new powers unless we want to really create some banking disasters. The Banking Committee will be considering these issues in the next session. I regret that it is not possible to move the loophole closing legislation this session. but it is obvious that the Senate will not consider it unless we buy off on new powers. Again. something that I know would be a futile effort in the House at this moment. Many. I know. are concerned thatthe Comptroller of the Currencys moratorium on nonbank banks expires at the close of this Congress. I trust that the industry groups. who may be &eptember 24. 1984 anxious to leap in when the moratorium expires. will understand that both the House and Senate bills contain almost the same cutoff dates on nonbanksJune 30. 1983 in the House. July 1. 1983 in the Senate. Senator GARN. during the debate in the Senate. clearly stated that he would hold to that date whenever the legislation was resolved and thus put the industry on notice. I concur. Any industry group that rushes forth and goes through the expense of creating a nonbank is now forwarned that the operation will be dissolved by statute. The Comptroller. too. should be on notice. The proper thing for the Comptroller would be an extension of the moratorium until Congress picks up the issue in the next session. He has enough problems to deal withContinental and a few othersand he doesnt need a makework program of nonbank bank applications.e