3 will broaden the secondary mortgage market and increase the liquidity of MBSs, while lowering mortgage interest rates for homebuyers. In light of recent Congressional activity in this area, MBA respectfully urges Congress to continue its support for housing and the secondary mortgage marketplace by enacting legislation that would allow bank holding company affiliates to underwrite and deal in MBSs. We would be pleased to furnish any additional needed information to you and Members of the Committee. Thank you for your courtesy in this matter. LEGISLATIVE PROPOSALS TO RESTRUCTURE OUR FINANCIAL SYSTEM THURSDAY, DECEMBER 3, 1987 U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. The committee met at 10 a.m., in room SD-538, Dirksen Senate Office Building, Senator William Proxmire (chairman of the committee) presiding. Present: Senators Proxmire, Riegle, Dixon, Graham, Garn, D'Amato, Hecht, and Bond. OPENING STATEMENT OF CHAIRMAN PROXMIRE The CHAIRMAN. This morning we continue our hearings on financial restructuring. Today we will hear testimony from three witnesses who will give us the regulators' perspective on the three proposals before the committee. We will go alphabetically starting with Mr. Clarke, the Comptroller of the Currency; and then Mr. Ruder, Chairman of the Securities and Exchange Commission; and finally Mr. Seidman, who is the head of the Federal Deposit Insurance Corporation. We have before the committee three serious legislative proposals, S. 1886, introduced by Senator Garn and myself; S. 1891, introduced by Senators Graham and Wirth; and S. 1905, introduced by Senators Cranston and D'Amato. I would hope that the witnesses would give thorough consideration to the strengths and weaknesses of each of these proposals in their testimony today. Having three concrete proposals before the committee is tangible evidence of the serious efforts that members and their staffs are putting forth to meet our responsibility of enacting legislation before the expiration of the moratorium in March 1988. Legislation to modernize our financial structure is long overdue. Glass-Steagall provisions separating commercial banks from investment banks are inhibiting competition that would drive down the cost of capital for American business, and capital formation is vital to the health and well-being of our economy. We no longer live in a world dominated by American business. enterprise. Competition from other countries in the industrial world and from developing countries pose a great challenge to American business. We must do everything we can to help to keep their costs down. In essence, maintaining entry barriers in the un derwriting business just to protect the investment banking industry is a luxury our economy can no longer afford. Senator Dixon. OPENING REMARKS OF SENATOR DIXON Senator DIXON. Mr. Chairman, I'm going to put most of my statement in the record, but I think for the record I'd just like to read the last two paragraphs which I think capsulize the views of this Senator regarding what we're trying to do here. I am confident the Banking Committee can produce a good bill by next March 1. I think it's vital, however, that we craft legislation that has a real chance to be enacted. There are some signs that the attitude in the House may not be as hostile to reform as it has been in the past. I think there's a real chance to enact a bill that takes a major step in updating our banking laws if we don't try to over-reach what's achievable. I think we should press the House hard. At the same time, we should not try to overwhelm the other body with a bill that they would feel they would not have the time to adequately consider in the time available to them next year. I look forward to working with my colleagues on the committee in crafting legislation that will make it completely through the legislative bodies. Thank you, Mr. Chairman. I would like to put my whole statement in the record. The CHAIRMAN. Well, it's a great statement. Senator DIXON. Well, I'd be glad to read it all if you're so overwhelmed. The CHAIRMAN. No, I just want you to read the part you read again. [Laughter.] I also have statements of Senators D'Amato and Karnes that without objection will be inserted in the record. DECEMBER 3, 1987 STATEMENT OF SENATOR ALAN DIXON SENATE BANKING COMMITTEE HEARING ON BANKING INDUSTRY REFORM LEGISLATION MR. CHAIRMAN, I AM PLEASED TO BE HERE THIS MORNING AS THE BANKING COMMITTEE CONTINUES ITS HEARINGS ON THE MAJOR BANKING REFORM LEGISLATIVE PROPOSALS NOW Before us. THE BANKING COMMITTEE HAS ACTED TO EXPAND THE ASSET POWERS AVAILABLE TO BANKING ORGANIZATIONS AT LEAST THREE TIMES IN THE LAST 20 YEARS. MOST RECENTLY, IN 1984, THE COMMITTEE REPORTED LEGISLATION GIVING BANKING ORGANIZATIONS REVENUE BOND, MORTGAGE BOND, AND COMMERCIAL PAPER UNDERWRITING AUTHORITY. THE FULL SENATE PASSED THIS LEGISLATION BY A HUGE 89 TO 5 VOTE. Page 2 BANK HOLDING COMPANIES, HOWEVER, STILL DO NOT HAVE THIS AUTHORITY. IT IS IMPORTANT TO KEEP THIS HISTORY IN MIND AS THE COMMITTEE WORKS TO REPORT REFORM LEGISLATION BEFORE THE MARCH 1, 1988 EXPIRATION OF THE MORATORIUM. THE HOUSE OF REPRESENTATIVES HAS NOT BEEN VERY FERTILE GROUND FOR BANKING INDUSTRY REFORM LEGISLATION IN THE LAST 20 YEARS. IT KILLED THE SENATE-PASSED INITIATIVES EACH TIME. I AM CONFIDENT THAT THE BANKING COMMITTEE CAN PRODUCE A GOOD BILL BY NEXT MARCH 1ST. I THINK IT IS VITAL, HOWEVER, THAT WE CRAFT LEGISLATION THAT HAS A REAL CHANCE TO BE ENACTED. THERE ARE SOME SIGNS THAT THE ATTITUDE IN THE HOUSE MAY NOT BE AS HOSTILE TO REFORM AS IT HAS BEEN IN THE PAST. I THINK THERE IS A REAL CHANCE TO ENACT A BILL THAT TAKES A MAJOR STEP IN UPDATING OUR BANKING LAWS IF WE DO NOT TRY TO OVERREACH WHAT IS ACHIEVABLE. I THINK WE SHOULD PRESS THE HOUSE HARD. AT THE SAME TIME, WE SHOULD NOT TRY TO OVERWHELM THE OTHER BODY WITH A BILL THAT THEY WOULD FEEL THEY WOULD NOT HAVE THE TIME TO ADEQUATELY CONSIDER IN |