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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 MAZE.

STATEMENT OF SENATOR ALFONSE M. D'AMATO

DECEMBER 3, 1987

THIS MORNING WE CONTINUE THE TASK OF REVIEWING THE VARIOUS LEGISLATIVE

PROPOSALS THAT MUST PROVIDE THE VEHICLES FOR TRULY COMPREHENSIVE REFORM OF

OUR FINANCIAL SERVICES INDUSTRY. TO SUCCEED IN THE REFORMATION OR RESTRUCTURING OF THE FINANCIAL SERVICES INDUSTRY, WE MUST BE CAREFUL THAT WE DO NOT ENACT LEGISLATION THAT PROVIDES BUILT-IN COMPETITIVE ADVANTAGES FOR

ONE PARTICIPANT IN THIS INDUSTRY OVER THE OTHERS.

SENATOR CRANSTON AND I INTRODUCED THE DEPOSITORY INSTITUTION

AFFILIATION ACT BECAUSE WE BELIEVE THAT IT REPRESENTS TRUE FINANCIAL REFORM

BECAUSE IT ALLOWS ALL THOSE WISHING TO ENTER THE FINANCIAL SERVICES INDUSTRY

TO COMPETE WITH EXISTING PARTICIPANTS ON AN EQUAL FOOTING.

IN THE PAST, FEDERAL BANKING REGULATORS, ESPECIALLY COMPTROLLER CLARKE HAVE WARNED US THAT: "CHANGES IN FINANCIAL MARKETS HAVE ERODED THE

DISTINCTIONS AMONG FINANCIAL INSTITUTIONS AND INTRODUCED NEW RISKS AND UNCERTAINTY INTO THE FINANCIAL SYSTEM." THESE CHANGES PROMPTED SENATOR CRANSTON AND I TO INTRODUCE LEGISLATION THAT RECOGNIZES THE NEED FOR A TOTAL REEVALUATION OF THE STATUTORY FRAMEWORK.

THE DEPOSITORY INSTITUTION AFFILIATION ACT CREATES A STATUTORY

FRAMEWORK THAT PROVIDES EXISTING AND POTENTIAL PARTICIPANTS IN THE FINANCIAL SERVICES INDUSTRY THE OPPORTUNITY TO EVOLVE WITH MARKET CONDITIONS AND COMPETE IN TODAY'S ECONOMIC ENVIRONMENT AND, AT THE SAME TIME, ENHANCE THE SAFETY AND SOUNDNESS OF THE FINANCIAL SYSTEM. IF WE DO NOT ENACT A TRULY

COMPREHENSIVE REFORM PACKAGE SUCH AS THE DEPOSITORY INSTITUTION AFFILIATION

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ACT, THIS COMMITTEE SHOULD EXPECT TO BE CONFRONTED WITH THE SAME DILEMMA IN SEVERAL YEARS THAT IT CURRENTLY FACES TODAY. IN AN EFFORT TO RIGHT THE

COMPETITIVE INEQUITIES BETWEEN PLAYERS IN THE FINANCIAL SERVICES INDUSTRY CREATED BY THE COMPETITIVE EQUALITY BANKING ACT AND LEGISLATION WHICH GRANTS BANKS A FEW SECURITIES POWERS, LOOPHOLE LAWYERS IN THE PUBLIC AND PRIVATE SECTORS WILL BEGIN TO LOOK FOR WAYS TO BLUR THE LINES BETWEEN COMMERCE AND BANKING. RATHER THAN LEAVE SUCH DECISIONS TO THE WHIM AND FANCY OF THE FEDERAL REGULATORS, THE CONGRESS SHOULD PROVIDE A COMPLETE AND WORKABLE

FRAMEWORK.

IN A FEW YEARS WE'LL BE HEARING THAT THE BANKING AND SECURITIES

INDUSTRIES NEED ADDITIONAL AND NEW SOURCES OF CAPITAL. GRANTING BANKS A FEW

NEW POWERS WILL NOT RESULT IN OPENING UP THE FLOODGATES OF CAPITAL THAT HAVE

BEEN DAMMED UP BEHIND THE GLASS-STEAGALL WALL FOR 54 YEARS. THE GRANT OF A

FEW SECURITIES POWERS TO BANKS WILL ONLY INCREASE THE NUMBER OF PLAYERS IN

THOSE MARKETS. IT WILL NOT INCREASE THE SIZE OF THOSE MARKETS.

THEREFORE,

THE ADDITIONAL SOURCES OF CAPITAL AND REVENUE PROVIDED BY A FEW NEW POWERS

WILL BE QUITE LIMITED IF NOT TOTALLY ILLUSORY.

FINALLY, IN OUR EFFORTS TO REFORM THE FINANCIAL SERVICES INDUSTRY, WE

SHOULD EXAMINE THE STATUTORY FRAMEWORK THAT MIGHT EXIST IF THE PROVISIONS OF

THE FINANCIAL MODERNIZATION ACT (FMA) ARE COMBINED WITH THE NON-BANK BANK PROVISIONS OF THE COMPETITIVE EQUALITY BANKING ACT (CEBA). WITH THE

EXCEPTIONS OF THE SAFEGUARDS PROVIDED BY THE FEDERAL RESERVE ACT AND THE

FEDERAL SECURITIES LAWS, THE COMBINATION OF CEBA WITH FMA WILL LEAVE THE

STATUTORY FRAMEWORK SOMEWHAT SIMILAR TO THAT WHICH EXISTED BEFORE 1933.

RATHER THAN UNDERTAKE A NOSTALGIC LOOK BACKWARD TO PRE-DEPRESSION AMERICA, I

BELIEVE THAT WE SHOULD LOOK FORWARD TO THE 21ST CENTURY WHICH WILL SOON BE

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UPON US. I COMMEND FDIC CHAIRMAN SEIDMAN FOR THE FORWARD LOOKING PROPOSALS

CONTAINED IN THE FDIC'S STUDY ENTITLED: MANDATE FOR CHANGE.

FINALLY, I AGREE WITH MUCH OF SEC CHAIRMAN RUDER'S TESTIMONY REGARDING

THE SAFEGUARDS THAT MUST BE MAINTAINED AND PERHAPS ENHANCED AS WE MOVE

TOWARD A COMPREHENSIVE REFORM OF OUR FINANCIAL SERVICES INDUSTRY.

AS CHAIRMAN RUDER NOTES THESE POLICIES ARE ACCOMPLISHED BY A REGULATORY

SCHEME THAT INCLUDES:

(1) FULL AND FAIR DISCLOSURE IN THE PURCHASE AND SALE OF SECURITIES; REGISTRATION AND REGULATION OF ALL BROKER-DEALER ACTIVITY; AND

(2)

(3)

PROTECTION AGAINST CONFLICTS OF INTEREST AND DISHONEST PRACTICES

IN THE SALE AND MANAGEMENT OF PROFESSIONALLY MANAGED POOLS OF

CAPITAL.

THE DEPOSITORY INSTITUTION AFFILIATION ACT HOPEFULLY SATISFIES CHAIRMAN

RUDER'S CONCERNS.

I LOOK FORWARD TO THE TESTIMONY OF THIS MORNING'S WITNESSES AND WORKING

WITH THEM TO ACHIEVE A TRULY COMPREHENSIVE AND MODERN REGULATORY FRAMEWORK.

OPENING STATEMENT:

SENATOR DAVID KARNES

DECEMBER 3, 1987 HEARING ON S. 1886 AND S. 1891

MR. CHAIRMAN. I WANT TO TAKE THIS OPPORTUNITY TO COMPLIMENT YOU ON YOUR EFFORTS TO KEEP THE DIALOGUE MOVING ON THE WHOLE ISSUE OF FINANCIAL REFORM. I ALSO WANT TO THANK THE DISTINGUISHED PANEL ASSEMBLED TO TESTIFY ON THIS VERY IMPORTANT ISSUE.

THE ACTIVE INVOLVEMENT OF CHAIRMAN SEIDMAN AND COMPTROLLER
CLARKE, THE TWO LARGEST REGULATORS OF OUR FINANCIAL INSTITUTIONS,
IS PARTICULARLY IMPRESSIVE. THEIR THOUGHTFUL ARGUMENT ON THE

NEED FOR FINANCIAL REFORM AND EXPANDED POWERS LENDS PARTICULAR
CREDIBILITY TO THE ENTIRE ISSUE.
PARTICIPATION IN THE PROCESS AND LOOK FORWARD TO CONTINUING TO
I APPRECIATE THEIR
WORK WITH ALL OF THE DISTINGUISHED PANEL MEMBERS AS WE PROCEED.
THANK YOU.

Daniel K. Kannes