Date: 1983-05-19
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. the American people are particularly adept at coining terms to describe new phenomena. attiLudes. and objects when existing language does not fully portray those phenomena. attitudes and objects. Abundant examples can be found by reading the CoNGRESsIONAL REcoRD or the daily newspaper. We have "bytes." "bits." "ARMs." "Atari Democrats." "boll weevils." and "gypsy moths." All of these words and phrases are used to describe things which are often on the cutting edge of change in society. Turning to what many view as an esoteric areathe world of financepractitioners are coining phrases to describe institutions which provide financial services for consumers and businesses. We hear a lot today about "nonbank banks." "nondepository fi. nancial institutions." "nonbank bank bank holding comppnles." and other equally confusing and at times questionable terms. These terms reflect the growing number and variety of corporate entities engaging in the business of provid ing new or differently packaged finan cial service products to a wide variety of customers. Examples include: Gulf & Western which has a major stake In the financial services industry through Its finance subsidiary which acquired a "consumer" bank in Call fornia. Dreyfus. a securities firm. which ac quired "consumer" banks. American Express with its travel and entertain. ment card. travelers checks and bro. kerage operation which is attempting to acquire a savings and loan. Merrill Lynch which recently offered to purchase a savings and loan. Countless banks which have ac. quired or established discount broker. age operations. Savings and loan service corporation subsidiaries which established full service brokerage operations. These combinations are made possi. ble by a number of developments in the financial services Industry overthe last several years. Technological changes thathave an impact on the delivery of Information. legislative changes at the Federal and State levels. regulatory actions at the Federal and State levels. Increased consumer sophistication and demands. and creative thinking on the part of industry lawyers have all led to the breaking down of trAditional barriers among financial industry segments. Ultimately. they have thrown Into doubt the basic terminology used to describe those who provide financial services. Into this breach and confusion come those who want to slow down or stop the process of change by imposing a moratorium on the creationof these new entitles until the basic definitions used in statutes regulating the financial services industry can be changed. The Federal Reserve. in particular. wants to impose a legislative moratorium by defining the term "bank" in the Bank Holding Company Act to include any Institution which offers an Insured deposit. This would preclude. for example. securities firms or nonfinanclal frims from acquiring a "bank" until the moratorium expired. However. the legal staff at the Federal Reserve is discovering the simple issue of redefining one term in the Bank Holding Comapny Acteven for a moratoriumit is not as simple as it seems. Their draft legislation &.ts longer by the day as thev look behind the phriuses used !n Lihp statutes to the real world of firms competing for market share in the financial services sector of the economy. The Federal Reserve staff and anyone else interested in establishing a moratorium must answer a number of questions before signing off on proposed legislation. One. Should States be allowed to pass statutes providing their State chartered banks the authority o engage in activities which would 1e Impermissible for national banks or banks regulated by the Federal Reserve? Two. Should States be allowed to continue to authorize interstate bankIng operations involving financial institutions within their boundaries. authorizations which the large money center banks and savings and loans are beginning to use? Three. If acquisitions of nonbanks by securities firms and nonfinancial firms should be halted. should bank and savings and loan acquisitions or establishment of securities operations be halted? Four. Should the Federal Reserve authorization of discount brokerage under the nonbanking activity section of the Bank Holding Company Act or the more expansive Federal Deposit Insurance Corporation outline for securities activities of State chartered nonmember banks be restricted or prohibited? Maiy 19. 1983