[Extensions of Remarks]
[Pages E2343-E2344]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

CONFERENCE REPORT ON S. 900, GRAMM-LEACH-BLILEY ACT

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speech of

HON. EDWARD R. ROYCE

of california

in the house of representatives

Thursday, November 4, 1999

Mr. ROYCE. Madam Speaker, the historic legislation that we are
considering today, is a win for the consumer, a win for the U.S.
economy and a win for America's international competitive position
abroad.
American consumers will benefit from increased access, better
services, greater convenience and lower costs. They will be offered

[[Page E2344]]

the convenience of handling their banking, insurance and securities
activities at one location. More importantly, with the efficiencies
that could be realized from increased competition among banks,
insurance, and securities providers under this proposal, consumers
could ultimately save an estimated $18 billion annually.
Federal Reserve Chairman Alan Greenspan has stated that ``Consumers
of financial services are denied the lower prices, increased access and
higher quality services that would accompany the increased competition
associated with permitting banking companies to expand their
activities.''
This reduction in the cost of financial services, is in turn, a big
win for the U.S. economy. Finally, this legislation is a win for
America's international competitive position, as it will allow U.S.
companies to compete more effectively with foreign firms for business
around the world.
As the Federal Reserve Chairman stated, ``We cannot afford to be
complacent regarding the future of the U.S. banking industry. The
issues are too important for the future growth of our economy and the
welfare of our citizens.''
This legislation is thirty years overdue Mr. Speaker, and I urge my
colleagues not to delay its passage a day longer.
At this time, I would like to make a few clarifying remarks.
Included in Title VI of the bill before us are complex changes in the
structure of the Federal Home Loan Bank (FHLBank) System. I believe
these changes will enhance the ability of the System to help member
institutions serve their communities, though there is enormous work yet
to be done to implement these initiatives. Consequently, at the risk of
redundancy, it is important to reiterate the view expressed in the
Conference regarding related regulatory actions.
As noted in the Committee Report, the Conferees acknowledged and
supported withdrawal of the Financial Management and Mission
Achievement (FMMA) rule proposed earlier this year by the Federal
Housing Finance Board (FHFB), the FHLBank System regulator. The FMMA
would have made dramatic changes in such areas as mission, investments,
liquidity, capital, access to advances and director/senior officer
responsibilities. Because of serious concerns over the FMMA's impact on
FHLBank earnings, its effect on safety and soundness and its legal
basis, the proposal has been intensely controversial among the
FHLBanks' membership, with over 20 national and state bank and thrift
trade associations calling for a legislated delay on FMMA.
Many Conferees not only shared these concerns but also felt strongly
that the FMMA should not be pursued while the FHLBank System is
responding to the statutory changes in this bill. There was great
sympathy for a moratorium blocking the FMMA, but prior to the matter
coming to a vote, Chairman Morrison of the FHFB sent a letter to
Chairmen Gramm and Leach agreeing to withdraw the proposal, which I
want to make sure is part of the Record. He also promised to consult
with the Banking Committees regarding the content of the capital rules
and any rules dealing with investments or advances. The FHFB's
commitment not to act precipitously in promulgating regulations in
these areas creates the proper framework for effective and timely
implementation of the reforms that Congress is seeking to put in place.
The regulatory standstill to which the FHFB has committed should
apply to any final rules or policies applicable to investments, and the
FHFB should maintain the current $9 billion ceiling on member mortgage
asset pilot programs or similar activities. In the context of dramatic
impending changes in the capital structure of the FHLBanks, I believe
it is necessary for the FHFB to refrain from any effort otherwise to
rearrange the FHLBanks' investment framework, liquidity structure and
balance sheets.
Finally, Mr. Speaker I would like to note that it is my understanding
that credit enhancement done through the underwriting and reinsurance
of mortgage guaranty insurance after a loan has been closed are
secondary market transactions included in the exemption for secondary
market transactions in section 502(e)(1)(C) of the S. 900 Conference
Report.

Federal Housing Finance Board,

Washington, DC, October 18, 1999.
Hon. Phil Gramm,
Chairman, Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
Hon. Jim Leach,
Chairman, Committee on Banking and Financial Services,
Washington, DC.
Dear Senator Gramm and Congressman Leach: As you proceed to
consider legislation to modernize the Federal Home Loan Bank
System as part of the S. 900/H.R. 10 conference, I am aware
that there is substantial concern regarding our proposed
Financial Management and Mission Achievement regulation
(FMMA). Unfortunately, this legitimate concern regarding a
far-reaching regulatory initiative has resulted in a proposal
for a statutory moratorium on our regulatory authority.
Despite the best efforts of well-meaning advocates, such
statutory language can only lead to serious ambiguity and
potential litigation over the independent regulatory
authority of the Finance Board.
Therefore, this letter is intended to give you and your
colleagues on the Committee of Conference solid assurances
about our intentions upon final enactment of the statute
being drafted in conference. Upon such enactment, the Finance
Board will: 1. Withdraw, forthwith, its proposed FMMA. 2.
Proceed in accordance with the statutory instructions
regarding regulations governing a risk-based capital system
and a minimum leverage requirement for the Federal Home Loan
Banks. 3. Take no action to promulgate proposed or final
regulations limiting assets or advances beyond those
currently in effect (except to the extent necessary to
protect the safety and soundness of the Federal Home Loan
Banks) until such time as the regulations described in number
2 have become final and the statutory period for submission
of capital plans by the Banks has expired. 4. Consult with
each of you and your colleagues on the Banking Committees of
the House and the Senate, regarding the content of both the
capital regulations and any regulations on the subjects
described in number 3, prior to issuing them in proposed
form.
I believe that these commitments cover the areas of concern
which have lead to a proposal for moratorium legislation. You
can rely on this commitment to achieve those legitimate ends
sought by moratorium proponents without clouding the
necessary regulatory authority of the Finance Board which
could result from statutory language.
Thank you for your consideration.
Sincerely,
Bruce A. Morrison.

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