to comment at least on every bill that has been introduced so far, if not on others.

I am very concerned about the press release of February 6th, 1997, the so-called procedural plan for consideration of this financial modernization legislation. There is no rule of the House which allows six Members of the committee, all of the Majority party, to determine unilaterally how the committee should or will conduct its business.

In one meeting, the legislative jurisdiction of the Financial Institutions Subcommittee was taken away from it. It was stripped of its legislative jurisdiction on the most important issue it was to consider. Not one single Democrat was involved in either the deliberations or the decisionmaking on this. I personally find this quite offensive.

The plan subverts normal subcommittee and committee processes. It renders subcommittee membership and participation largely meaningless. We will apparently be holding general hearings on broad issues when we also need to be deliberating on spe

cific bills.

No legislation will be considered at the subcommittee level. At the subcommittee level, we will not have the ability to offer amendments. We will not have that gestation period that is so necessary for thoughtful legislation, and we will not have the opportunity for the type of involvement that can only come through a subcommittee process.

One of the charges in this last Congress was that certain individuals played things too close to the vest. The response at that time was it is the exigency of the moment, it is the timeliness of it, and so forth. Now on February 6th we are announcing a procedure, once again, on the issue of timeliness. It is difficult for me to understand, because, in all candor, understanding financial modernization legislation and, despite the good intent, I think it will probably become the final product of all the land some time toward the end of 1998 rather than the beginning of 1997.

Our subcommittee should be more than a forum for suggestions to be tossed into a suggestion box. I am fearful that the decision that has been made by the chairman and the subcommittee chairs makes our subcommittee simply a suggestion box.

I thank the Chairwoman.

[The prepared statement of Hon. John J. LaFalce can be found on page 181 in the appendix.]

Chairwoman ROUKEMA. I would point out, again, you will have every opportunity for full amendment process at the full committee. We are not going to spend, I don't intend to spend more time debating this while our panelists are waiting to discuss the substantive issues before us.

Dr. Paul, I believe was the next in attendance. We are going in order of arrival.

Mr. Ryun, we welcome you as a new Member of the committee. Mr. RYUN. Thank you very much. It is a pleasure to be here. I am looking forward to the progress; and, according to your wishes, I would like to speed the process and give our panelists an opportunity to speak. We would like to see that process sped up. Chairwoman ROUKEMA. Thank you. I appreciate that.

I believe Congresswoman Kelly was the next to arrive.

Mrs. KELLY OF NEW YORK. I would like permission to insert a prepared statement just in the record of the hearing in the interest of keeping this time short so we can hear from our witnesses. Chairwoman ROUKEMA. So moved. So moved.

[The prepared statement of Hon. Sue W. Kelly can be found on page 180 in the appendix.]

Chairwoman ROUKEMA. Congressman Barr.

Mr. BARR. No prepared statement.

Chairwoman ROUKEMA. All right. Yes, we should alternate. I apologize.

Congresswoman Maloney.

Mrs. MALONEY. Thank you. Thank you, Madam Chairwoman.

I would like to begin by thanking Chairman Leach. In the opening weeks of this Congress, he publicly joined the distinguished Ranking Member, Mr. Gonzalez, and myself in opposing the Federal Reserve's ill-conceived proposal to extend the permissible hold on local bank checks from 2 to 3 days. That was a great bipartisan beginning for the work of this committee. When we work together, we can get things done.

But that is why I am deeply, deeply disappointed with the press release of yesterday declaring unilaterally that there will be no subcommittee markups on modernization, the most important issue before this subcommittee, and that decisions about the substance of this bill that will come before the full committee for markup may be made by a select few. Each member of this subcommittee, Democrat and Republican alike, is willing to work hard to make this process work; but, in return, the subcommittee deserves a real substantive say in the final product in the form of a markup.

The press release of yesterday says that that will not happen. We will not have that say. That is disappointing, because I think it is more important than ever that any modernization bill be subjected to the fullest possible review. I had been on record from the beginning about my discomfort with mixing institutions, holding federally-insured funds with those that engage in potentially riskier activities.

However, I also know without Congressional action the regulators are crafting an ad hoc structure that serves no one's optimum interests. We have a world where most non-commercial potential affiliations are already taking place, but without a rational regulatory model, a world without streamlined institutional models, so that affiliations that are currently happening produce level competition, the fullest possible customer benefits and maximum cost savings. A world without consumer protections tailored specifically to these new realities.

The OCC's recently-revised opinion on its Part 5 rule is an important case-in-point. First, it is not clear if, or how far, banks will now be able to use an operating subsidiary to engage in new securities and insurance underwriting activities. There is no list of activities except the unseen list in the mind of the controller. The result is confusion and guesswork where there should be clarity and certainty.

Second, such an extension pushes the limits of a regulatory structure created at a time when no one envisioned a bank-operat

ing subsidiary engaging in these activities. The result is regulators overseeing product lines with which they have limited or inadequate experience in that setting.

Third, under these circumstances, banks might understandably favor the operating subsidiary model, but not because of any input Congress has given to the relative merits of the different institutional models, but only because the OCC has used its jurisdiction to make the operating subsidiary the most attractive option for the new activities expansion.

This is not to say that the operating subsidiary is not a good place if there is going to be expansion into new activities, but that it is something for Congress to decide, not the OCC. Congress should make the limits clear, not murky. As long as regulators make the policy, our financial services industry will be subject to court battles and changing Administrations.

The Alliance bill we looked at today at the very least makes an honest effort to confront these issues without penalizing firms that currently use existing models. For instance, in creating its new financial service holding company model, the bill enumerates specifically its list of activities deemed to be financial and sets up a welldefined committee process that includes representatives from the Treasury and all the involved industry regulators to evaluate new activities. A set list and a defined process is far preferable to our current method of having no list and competing regulators.

Of course, we all know that the devil is in the details and functional regulation can mean one thing to one group and something entirely different to another and there are questions that need to be answered about cross-marketing, competing institutional models, consumer safeguards, commercial ownership and adequate firewalls. If a legislative proposal emerges that can change the irrational development affiliations, of affiliations taking place today into a more definable structure that addresses the points I raise, I certainly will be open to it.

I commend the Chairwoman and particularly the Ranking Member, Mr. Vento, the industry representatives here today for their hard work to meet this goal; and I thank all of you for coming.

Chairwoman ROUKEMA. I thank you, and I apologize for not having gone back and forth in regular order here. But I believe Mr. Bentsen is in order of arrival the next to be recognized.

Congressman Bentsen.

Mr. BENTSEN. No prepared statement.
Chairwoman ROUKEMA. Thank you.

Ms. Kilpatrick.

Ms. KILPATRICK. Good morning and thank you, Madam Chairwoman. I, too, like my freshman colleague, am sitting here with bated breath to hear the testimony.

Chairwoman ROUKEMA. Yes, you are getting your initiation, Ms. Kilpatrick, into the ways of Congress. Thank you. We welcome you into the subcommittee.

Ms. Roybal-Allard.

Ms. ROYBAL-ALLARD. Thank you, Madam Chairwoman.

I would like to thank Chairwoman Roukema for calling these series of hearings on the important issue of financial modernization and specifically on H.R. 268.

Over the last decade, the financial services industry has experienced tremendous changes. Although banking regulators have begun to address these changes, Congress lags behind because it has been unable to agree on how to change our laws to reflect the realities of the modern financial services industry. What is clear, however, is that, as we move toward modernization, Congress must be sure to balance the goal of increasing the efficiency and competitiveness of our financial services industry with the equally important goals of protecting consumers, such as the depositors and taxpayers, by ensuring the safety and soundness of Federal Deposit Insurance system and making sure that low-income and minority communities are able to share in the benefits of any reform proposal.

In the 4 years that I have served on this committee, we have been trying to address the issue of financial modernization and reform of Glass-Steagall. It was my hope that these hearings would be a step toward accomplishing the goal in a bipartisan way.

Unfortunately, I, too, am dismayed by Chairman Leach's announcement to bypass the subcommittee process and refer all bills on financial modernization directly to the full committee for markup. After last year's attempt to circumvent the committee's process resulted in failure, I would have hoped the Majority would have adhered closely to the committee process. I urge the committee Members to reconsider this strategy and allow us to work together to successfully produce much-needed financial modernization legislation.

Thank you, Madam Chairwoman.

[The prepared statement of Hon. Lucille Roybal-Allard can be found on page 183 in the appendix.]

Chairwoman ROUKEMA. I thank you.
And Mr. Watt.

Mr. WATT. I pass.

Chairwoman ROUKEMA. I thank you.

Now, panel, I think we are ready for you with one more point of business here on procedure. I would ask unanimous consent that the testimony of the witnesses be included in the record. This is procedural. Are there any objections? No objection.

Mr. VENTO. I ask that all opening prepared statements in their entirety by the Members be made part of the record if they want to submit them later or if they didn't read them altogether. Chairwoman ROUKEMA. So moved.

Mr. VENTO. Without objection, so ordered.

Chairwoman ROUKEMA. Thank you. Now we welcome all members of the panel. Thank you for being here today, and I will introduce you in the order in which you are seated.

William T. McConnell is testifying here today. We welcome you, Mr. McConnell. You are here on behalf of the American Bankers Association; and you now, I understand, are President-elect of that national association. You also are Chairman and CEO of Park National Corporation, a holding company headquartered in Newark, Ohio, not New Jersey, Ohio. Welcome.

Weller Meyer is here representing America's Community Bankers, and Mr. Meyer is also CEO of a Federal savings bank, Acacia, in Northern Virginia.

Craig Kelly is here today as Senior Vice President of Banc One Corporation and is testifying on behalf of Consumer Bankers Association. I think many of us know that the Columbus, Ohio, banking organization is establishing itself with increasing presence in the United States, and so we welcome you here today.

Dr. Alfred Pollard is the Senior Director for Legislative Affairs for the Bankers Roundtable, certainly a well-known group of the largest bank holding companies; and Dr. Pollard is well known in these areas and is also well known throughout the United States for his book on banking law in the United States. We will benefit from your academic, as well as practical, knowledge.

Mr. Jeffrey Tassey, did I pronounce that correctly? Mr. Tassey is before us today for the America Financial Services Association, where Mr. Tassey is Vice President, or Senior Vice President for Government and Legal Affairs; and certainly we welcome our former colleague here.

Last, but certainly not least, Dr. Joseph Bracewell. We are particularly appreciative of Dr. Bracewell being here on behalf of the Independent Bankers Association. He is CEO of Century National Bank right here in the District of Columbia. But our particular appreciation because he has filled in at the last minute for Anthony Abbate, who is the CEO of First Interchange Bank in New Jersey; and Mr. Abbate is also one of my constituents. Mr. Abbate is down with the flu, as I understand it; so Dr. Bracewell is coming for him. Mr. BENTSEN. Madam Chairwoman, would you yield for just a second?

Chairwoman ROUKEMA. I would be happy to yield.

Mr. BENTSEN. Dr. Bracewell, though a resident of Washington, I think at one time was a resident of Texas, which I would say is a good exchange for New Jersey; and his father, I believe, was a long-time leader of the Bracewell & Patterson law firm in Houston, which also had a long bank practice as well.

Chairwoman ROUKEMA. So Texans have some redeeming value. All right, fine. Thank you very much.

Without further introduction then

Mr. VENTO. Let me make a parliamentary inquiry just for the purpose, I understand that all the witnesses today have gone through, jumped through, the regulatory hoops of the committee and filed under Rule 11, Clause 2(g), the disclosure requirement which I think probably will provide nothing useful to the Members of the committee. I think it is one more impediment to testifying around here.

I noticed that someone actually did receive some money from the Federal Government here in terms of grants and carrying out some responsibilities, but I did want to point that out that I hope that this form is what is used and it receives the same consideration. This, as I understand, is available for staff who want to look at this. If anyone wants to look at it in order to guide their consideration of the testimony today, I wouldn't want this moment to pass without this observation.

Chairwoman ROUKEMA. I am glad for the observation, and I am glad there is no objection here to the questions raised. Although I will state that one of the witnesses and I believe it was because of the fact that there was a last-minute substitute for the witness,