SEC. SUMMERS: Let me welcome you all here today for the signing of this historic legislation. With this bill, the American financial system takes a major step forward towards the 21st century, one that will benefit American consumers, business, and the national economy for many years to come. This is the culmination of years of effort by many, many people, reflects the work of presidents, Treasury officials, members of Congress, those in the private sector, from both parties, and dedicated professionals, both inside and outside the government. With their help, I believe we have all found the right framework for America's future financial system.
I want especially to thank the members of Congress who played so crucial a role in passing this legislation, thank the key regulators and the agencies they represent -- Chairman Greenspan and the Federal Reserve, Chairman Levitt and the SEC, Comptroller Hawke and the OCC, Ms. Seidman (sp) and the OTS -- for all that they have contributed to bringing us to this point. And I want to thank especially my predecessor, Bob Rubin, who cared deeply that we get this bill right, and finally, my many
Treasury colleagues -- Deputy Secretary Eizenstat, Gary Gansler (sp), Greg Bear (sp), Rick Carnell, Linda Robertson (sp), Marty Levine (sp), and Michael Bar (sp) for everything that they have done; Gene Sperling and Sarah Rosen and their colleagues at the National Economic Council for everything that they have done in bringing us to this point. Today we will hear first from the four members of Congress whose leadership was so central to the passage of this bill, in this speaking order: Chairman Gramm, Chairman Leach, Ranking Member LaFalce, and Ranking Member Sarbanes. Let me pass the podium first to Senator Gramm. (Applause.)
SEN. GRAMM: Thank you very much, Larry. Thank you, Mr. President. The world changes, and Congress and the laws have to change with it. Lincoln used to like to use the analogy that old and outmoded laws needed to be changed because it made about as much sense to continue to impose them on people as it did to ask a man to wear the same clothes he did when he was a child.
In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets. We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth, and we promote stability, by having competition and freedom. I am proud to be here because this is an important bill. It is a deregulatory bill. I believe that that is the wave of the future. And I am awfully proud to have been part of making it a reality. (Applause.)
REP. JIM LEACH (R-IA): Mr. President, Secretary Summers, colleagues in the House; let me just say, this is a bill that's bipartisan, bicameral, "bi" -- in fact, tri-institutional, with officials of the legislative, executive, as well as the independent regulatory branches of government working well together. Seminally, it has four key components from my perspective: One, this bill has the strongest privacy provisions ever enacted into statute. Secondly, it is competitive. It advances competition at home. And it increases our competitive ability to compete abroad in our financial services industry. Thirdly, it forestalls the mixing of commerce and banking -- in fact, plugs the loophole that allows some commerce and banking in this country. And finally, it tilts towards rural areas and small banks by allowing much greater liquidity to be provided small-business and agricultural lending.
Finally, let me just say that bills are about substance; they are also about chemistry. And the chemistry that brought this together was rather extraordinary. And I want to thank the executive branch, particularly Secretary Summers, Gary Gensler and Chairman Greenspan, Chairman Levitt; my colleague, the very strong chairman of the Senate Banking Committee, Phil Gramm, as well as Paul Sarbanes; and most of all, my great friend John LaFalce. And I'm sorry Tom Bliley can't be with us. The Commerce Committee played an extraordinary role in this, and I see Mike Oxley is here representing them. Thank you all. (Applause.)
REP. LAFALCE: Oliver Wendell Holmes once said, "All men are an omnibus in which their ancestors reside." This is an omnibus banking bill in which many ancestors reside. (Laughter.) It has many fathers and mothers. And many of the fathers and mothers are in this room. Many of the fathers and mothers are not in this room -- the Doug Barnards (sp), the Steve Neals (sp), the Al D'Amatos, et cetera. Some of the mothers are -- Jean Rislonovich (sp) and Tricia Haste (sp), in particular. I want to point them out. Donna Tanoy (sp) and Ricky Helfer (sp), et cetera. I think this is a very good bill. We can view the same bill from different perspectives. I view this bill as a great codification and regulation of the existing financial services system and the future dynamic financial services system, a financial services system that has been brought about primarily through the unbelievable breakthroughs in technology and the marketplace. But I view this primarily as a consumer protection bill, a bill that puts into federal law consumer safeguards and protections that never existed before. I view this as the first bill, an extremely important bill on the federal level that protects consumers' privacy. It will not be the last bill. We do much. We have much yet to do. And I look forward to working with the administration and the ladies and gentlemen on this platform and in this room in order to bring that about. Thank you very much. (Applause.)
SEN. SARBANES: Well, one hardly need point out that the financial services industry has been undergoing rapid change. We've had these affiliations between banks, securities firms and insurance companies already occurring in the marketplace. This legislation seeks to provide a statutory framework. It wasn't a question whether these affiliations were going to happen; they were taking place. But we needed to have an over-arching framework, a responsible statutory We've given them sufficient authority. There's a big challenge in this bill for the regulators, and I see many of them in this room. So we're passing the baton over, as it were, to you, as we move ahead now and make the changes in our financial services industry. My colleague Senator Dodd, who's here with us today, keeps likening this task to Sisyphus trying to move the stone up to the top of the mountain, and it constantly rolling back on him. And he kept using that reference over and over again, and we finally got it up to the top, and at least that particular stone won't roll down on us. Others may roll down on us, I have no doubt. (Laughter.)
I very much want to thank the president. Early on he laid out very important guidelines with respect to this legislation, the standards that would have to be met: protecting the safety and soundness of the system, providing a choice for the financial institutions as to how they organize themself, strengthening the separation between banking and commerce, protecting the consumer, and preserving the relevance of the Community Reinvestment Act. I believe that these basic standards have been met by this legislation. At times, to put it mildly, it was a difficult process in getting to the point we're at today, but in the end I think we achieved a product that could command broad support and which the president will sign very shortly.
I want to thank the president, Secretary Summers, former Secretary Rubin for their strong support throughout this process; Chairman Greenspan and his associates at the Federal Reserve, and Chairman Levitt and his colleagues at the SEC. All of their help was critical to achieving the final result. I want to thank Chairman Leach, who served as such an able chairman of the conference committee and kept us at the table on a -- when, on occasion, it looked like maybe people would walk away from the negotiating table. He shepherded the process through, I think, in an exemplary way. And I want to thank Congressman LaFalce.
STATEMENT BY PRESIDENT BILL CLINTON AT THE SIGNING OF THE FINANCIAL SERVICES MODERNIZATION ACT ALSO PRESENT: LAWRENCE SUMMERS, SECRETARY OF THE TREASURY SENATOR PHIL GRAMM (R-TX), CHAIRMAN OF THE SENATE BANKING, HOUSING, AND URBAN AFFAIRS COMMITTEE SENATOR PAUL SARBANES (D-MD) REPRESENTATIVE JIM LEACH (R-IA), CHAIRMAN, HOUSE BANKING AND FINANCIAL SERVICES COMMITTEE REPRESENTATIVE JOHN LAFALCE (D-NY) ROOM 450 OF THE DWIGHT DAVID EISENHOWER EXECUTIVE OFFICE BUILDING WASHINGTON, D.C. 1:24 P.M. EST FRIDAY, NOVEMBER 12, 1999
And of course, I want to congratulate Chairman Gramm for the accommodation that was reached in the end that could command broad support and gave us this legislation. And I want to thank all of my colleagues in the Congress, both House and Senate side, who -- from the very beginning we set out to get a result, and in the end we got a result. We're very pleased with that outcome. (Applause.)
SEC. SUMMERS: In introducing the president, I just want to say a word about the national economic strategy of which this bill is a part. Since 1993 President Clinton and Vice President Gore have led our country in putting in place a new national economic strategy based on the recognition of the power of our nation's economy, the crucial role of markets, and the crucial role also of government in building a foundation for enduring prosperity framework within which the regulators could operate.
By turning a budget deficit that was threatening to exceed half a trillion dollars, ultimately, into a budget surplus, their steps and the steps taken by the Congress have freed up literally trillions of dollars of capital that otherwise would have gone into the sterile asset of government paper to be invested in American plant and equipment and in homes for American workers. But as important as assuring a large quantity of capital is assuring that capital is allocated efficiently and competitively throughout our economy. And that, of course, is the task of the financial system and is a task that the financial system will carry on more efficiently and more effectively to the benefit of Americans as a consequence of this legislation.
President Clinton laid down four principles as necessary for financial modernization: the preservation of the vitality of the Community Reinvestment Act, effective consumer protections, business choice, and continued separation of banking and commerce. With his strong and determined leadership, the bill we will sign today meets all of these principles and takes a major step towards preparing our financial system for the future.
But I'm sure that all of us in this room can agree that, as important as this legislation is, it is not the end of the work we need to do with respect to our financial system. We will need in the next months to ensure that this bill is implemented in a way that strengthens and does not diminish community investment. We will need to take further steps to assure basic privacy protections for American consumers. And we must maintain vigilance to assure more generally that consumers interests are protected in the new financial environment that we are creating.
Now it gives me great pleasure to introduce a man who has done more than any other individual to pave the way for the remarkable prosperity that the United States is enjoying, the president of the United States, William Jefferson Clinton.
PRESIDENT CLINTON: (Applause.) Thank you very much. Thank you. Thank you. Thank you, and good afternoon. I thank you all for coming to the formal ratification of a truly historic event. Senator Gramm and Senator Sarbanes have actually agreed on an important issue. (Laughter.) I -- MR. PODESTA (?): But I'm sitting in between them. (Laughter.)
PRESIDENT CLINTON: Stay right there, John! (Laughs.) I asked Phil on the way out how bad it was going to hurt him in Texas to be walking out the door with me. (Laughter.) We decided it was all right today. Like all those before me, I want to express my gratitude to those principally responsible for the success of this legislation. I thank Secretary Summers and the entire team at Treasury, but especially Undersecretary Gensler for their work, and Assistant Secretary Linda Robertson. And I thank you, Chairman Greenspan, for your constant advocacy of the modernization of our financial system. I thank you, Chairman Levitt, for your continuing concern for investor protections and I thank the other regulators who are here. I thank Senator Gramm and Senator Sarbanes, Chairman Leach and Congressman LaFalce and all the members of Congress who are here. Senator Dodd told me the Sisyphus story, too, over and over again, but I've rolled so many rocks up so many hills, I had a hard time fully appreciating the sgnificance of it. (Laughter.)
But I do want to thank all the members here and all those who aren't here and I'd like to thank two New Yorkers who aren't here who have been mentioned -- former Secretary of the Treasury Bob Rubin, who worked very hard on this, and former chairman, Senator Al D'Amato, who talked to me about this often. So this is a day we can celebrate as an American day. To try to give some meaning to the comments that the previous speakers have made about how we are making a fundamental and historic change in the way we operate our financial institutions, I think it might be worth pointing out that this morning we got some new evidence on the role of new technologies in our economy which showed that over the past four years productivity has increased by a truly remarkable 2.6 percent. That's about twice the rate of productivity growth the United State experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent. Over the past four years, productivity has increased by a truly remarkable 2.6 percent. x x x percent.
That's about twice the rate of productivity growth the United States experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent. This is not just soom aloof statistic that matters only to the Federal Reserve, the Treasury and Wall Street economists. It is the key to rising paychecks and greater security and opportunity for ordinary Americans. And the combination of rising productivitiy, more open borders and trade, working to keep down inflation, the dramatic reduction of the deficit and the accumulation of the surplus and the continued commitment to the investment in the Aemrican people, research and development and new productivy () technologies has given us the most sustained real wage growth in more than two decades with the lowest inflation in more than three decades.
I can tell you that back in December of 1992, when we were sitting around the table at the governor's mansion trying to decide what had to be in this economic program, the economists that I had there, who normally are thought to be -- you know, you say, "Well, they're Democrats, they'll be more optimistic" -- none of them believed that we could grow the economy for this long with an unemployment rate this low and an inflation rate this low. And it's a real tribute to the American people. So what you see here, I think, is the most important recent example of our efforts here in Washington to maximize the possibilities of the new information-age global economy, while preserving our responsibilities to protect ordinary citizens and to build one nation here. And there will always be competing interests.
You heard Senator Gramm characterize this bill as a victory for freedom and free markets. And Congressman LaFalce characterized this bill as a victory for consumer protection. And both of them are right. And I have always believed that one required the other. It is true that the Glass-Steagall () law is no longer appropriate for the economy in which we live. It worked pretty well for the industrial economy, which was highly localized, much more of the general challenge that will face lawmakers of both parties, that will face liberals and conservatives, that will face all Americans as we try to make sure that the 21st century economy really works for our country and words for the people who live in it. That's about twice the rate of productivity growth the United States experienced in the 1970s and the 1980s. In the last quarter alone, productivity grew at 4.2 percent.
This is not just some aloof statistic that matters only to the Federal Reserve, the Treasury and Wall Street economists. It is the key to rising paychecks and greater security and opportunity for ordinary Americans. And the combination of rising productivity, more open borders and trade, working to keep down inflation, the dramatic reduction of the deficit and the accumulation of the surplus and the continued commitment to the investment in the American people, research and development and new productivity inducing technologies has given us the most sustained real wage growth in more than two decades with the lowest inflation in more than three decades.
I can tell you that back in December of 1992, when we were sitting around the table at the governor's mansion trying to decide wat had to be in this economic program, the economists that I had there, who normally are thought to be -- you know, you say, "Well, they're Democrats, they'll be more optimistic" -- none of them believed that we could grow the economy for this long with an unemployment rate this low and an inflation rate this low. And it's a real tribute to the American people. So what you see here, I think, is the most important recent example of our efforts here in Washington to maximize the possibilities of the new information-age global economy while preserving our responsibilities to protect ordinary citizens and to build one nation here. And there will always be competing interests. You heard Senator Gramm characterize this bill as a victory for freedom and free markets. And Congressman LaFalce characterized this bill as a victory for consumer protection. And both of them are right. And I have always believed that one required the other.
It is true that the Glass-Steagall law is no longer appropriate for the economy in which we live. It worked pretty well for the industrial economy, which was highly (organized ?), much more centralized and much more nationalized than the one in which we operate today. But the world is very different. Now we have to figure out, well, what are still the individual and family and business equities that are still involved that need some protections? And the long and often tortured story of this law can been seen as a very stunning specific example of the general challenge that will face awmakers of both parties, that will face liberals and conservatives, that will face all Americans as we try to make sure that the 21st century economy really works for our country and works for the people who live in it. So I think you should all be exceedingly proud of yourselves, including being proud of your differences and how you tried to reconcile them. Over the -- (past ?) -- seven years, we have tried to modernize the economy. And today what we are doing is modernizing the financial services industry, tearing down these antiquated laws and granting banks significant new authority. This will, first of all, save consumers billions of dollars a year through enhanced competition. It will also protect the rights of consumers.
It will guarantee that our financial system will continue to meet the needs of underserved communities, something that the vice president and I have tried to do through the empowerment zones, the enterprise communities, the community-development financial institutions, but something which has been largely done through the private sector in honoring the Community Reinvestment Act. The legislation I sign today establishes the principles that, as we expand the powers of banks, we will expand the reach of that act. In order to take advantage of the new opportunities created by the law, we must first show a satisfactory record of meeting the needs of all the communities a financial institution serves. I want to thank Senator Sarbanes and Congressman LaFalce for their leadership on the CRA issue. I want to applaud the, literally, hundreds of dedicated community groups all around our country, that work so hard to make sure the CRA brings more hope and capital to hard-pressed areas.
The bill I sign today also does, as Congressman Leach says, take significant steps to protect the privacy of our financial transactions. It will give consumers for the very first time, the right to know if their financial institution intends to share their financial data, and the right to stop private information from being shared with outside institutions. Like the new medical privacy protections I announced two weeks ago, these financial privacy protections have teeth. We granted regulators full enforcement authority and created new penalties to punish abusive practices. But as others have said here, I do not believe that the privacy protections go far enough. I am pleased the act actually instructs the Treasury to study privacy practices in the financial services industry and to recommend further legislative steps. Today I am directing the National Economic Council to work with Treasury and OMB to complete that study and give us a legislative proposal which the Congress can consider next year.
Without restraining the economic potential of new business arrangements, I want to make sure every family has meaningful choices about how their personal information will be shared within corporate conglomerates. We can't allow new opportunities to erode old and fundamental rights. Despite this concern, I want to say again, this legislation is truly historic, and it indicates what can happen when Republicans and Democrats work together in a spirit of genuine cooperation; when we understand we may not be able to agree on everything, but we can reconcile our differences once we know what the larger issue is: how to maximize the opportunities of the American people in a global information age and still preserve our sense of community and protection for individual rights.
In that same spirit, I hope we will soon complete work on the budget. I hope we will complete work on the Work Incentives Improvement Act to allow disabled people to go to work, and I know Senator Gramm has been working with Senator Roth and Senator Jeffords and Senator Moynihan and Senator Kennedy on that. There are lot of things we can do once we recognize we're dealing with a big issue over which we ought to have some disagreements, but where we can come together in constructive and honorable compromise to keep pushing our country into the possibilities of the future.
This is a very good day for the United States. Again, I thank all of you for making sure that we have done right by the American people and that we have increased the chances of making the next century an American century. I hope we can continue to focus on the economy and the big questions we will have to deal with revolving around that. I hope we will continue to pay down our debt. I still believe, in a global economy, we will maximize the opportunities created by this law if the government is reducing its debt and its claim on available capital. So I hope very much that that will be part of our strategy in the future. But today we proved that we could deal with a large issue facing our country and every other advanced economy in the world. If we keep dealing with it in other contexts, the future of our children will be very bright, indeed.
Thank you very much. I'd like to ask all the members of Congress to come up here while we sign the bill. Thank you.