House Banking Committee Votes to Modernize Banking Laws, Approves H.R. 10

Washington, DC, March 30, 1999 - The House Banking and Financial Services Committee recently approved H.R. 10, the "Financial Services Act of 1999," by a vote of 51-8. The House committee action came just one week after Senate Banking Committee approval of a similar financial modernization bill. H.R. 10 now proceeds to the House Commerce Committee, which shares jurisdiction over the measure. The Commerce Committee has been granted a 45-day review period, and must act on the bill by May 14. The committee has indicated it will hold hearings on the bill during April and Mike Oxley (R-OH), Chairman of the Commerce Subcommittee on Finance and Hazardous Materials, has said a subcommittee vote on H.R. 10 is scheduled for the week of May 10.

In the Senate, Majority Leader Trent Lott (R-MS) recently announced that financial modernization legislation is a high priority for this Congress and that he plans to begin full Senate action on the issue during the week of either May 3 or May 10.

H.R. 10 would modernize the nation's financial services regulatory structure by repealing the Glass-Steagall Act's provisions that restrict bank and securities firm affiliations within a bank holding company system. It also allows companies to engage in any financial activities, including mutual fund and insurance agency and underwriting activities. The Institute supported H.R. 10 in testimony before the House Banking Committee in early February.

The bill approved by the full committee is similar to H.R. 10 as introduced, with regard to provisions that would affect the investment company industry. However, the committee approved some important changes. Among these are several new provisions regarding financial privacy. The first would require financial holding company depository institutions to clearly disclose to their customers the holding company's policy concerning disclosure of customers' information to third parties for marketing purposes. Financial holding companies would also be required to disclose to their customers that they have the right to not have their information shared among affiliates.

In addition, the bill now incorporates H.R. 30, the "Financial Information Privacy Act," which would prohibit identity theft by making it a federal crime for any company or individual to fraudulently obtain personal financial information. The bill also includes a provision requiring a study of how well current privacy laws protect the privacy rights of customers of insured depository institutions.

The Community Reinvestment Act (CRA) provisions of H.R. 10, which have received bipartisan endorsement, differ significantly from those in the Senate Banking Committee bill. The Administration has issued a warning that it would veto the legislation unless these issues are resolved.