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,

the IBAA did not submit their information, their disclosure form, until this morning. But it is the opinion of the Chairwoman, having gone over this through staff, that all witnesses have complied with the rules of the committee. Whether we, some of us may or may not think it is an added paper burden, I don't know, but it is the rules of the committee; and it is the opinion, my opinion, that all witnesses today, for the information of everyone on the subcommittee, have complied with the

Mr. VENTO. If the Chairwoman would yield.

Chairwoman ROUKEMA. -With the requirement.

Mr. VENTO. The procedure is that the timeliness of this that great latitude will be given in terms of timeliness of documents being given today.

Chairwoman ROUKEMA. There are some extenuating circumstances from time to time; and it will be my responsibility and yours, too, to determine with staff if the disclosure is in compliance with the intention of the rules; and, in my opinion, this has certainly been the case today.

Mr. VENTO. I intend to be very liberal

Chairwoman ROUKEMA. You liberal? We are almost an hour late now, an hour beyond our starting time.

Yes, Mr. LaFalce.

Mr. LAFALCE. Madam Chairwoman, I will not do this again in subcommittee; but since this is the first hearing, I just want to point out how many of us think that this rule for the disclosure of the contracts you may or may not have had with the Federal Government is offensive to the concept of freedom of speech. It is just a regulatory burden.

The fact of the matter is that a procedure has been devised where we will not be provided the material in the ordinary course so it will, for the most part, collect dust. Some staffers may or may not look at it. I don't think any evaluation is going to be made about the credibility of the witnesses on the basis of it. This is a punitive measure brought about by the Majority in order to get at certain types of witnesses. It is offensive. I think most Republicans feel the same way but are constrained to go along with the wishes of the Speaker and their House leadership.

Chairwoman ROUKEMA. I think we must get on with this hearing, but I just want everyone in the audience to know that this is in compliance with the Rules of the House, and it has been complied with, and the staff of the Minority was provided with this information under the Rules of the House as of last night. The information, both on the Majority and the Minority side, should be available to every individual Member who wants it.

But it was in your staff's, Minority staff's, possession as of last evening, with the exception of the one that was mentioned because of the change in the substitution of the witness. So I think, with that understanding, that everything is copacetic, as they used to say.

We will begin with our hearing.

Chairwoman ROUKEMA. Mr. McConnell and all panel members, I believe you know the rules. We will try to limit the prepared statements to 5 minutes; but I will be understanding, realizing that

each you have important prepared statements to make on this extremely critical question.

Mr. McConnell.

STATEMENT OF WILLIAM T. McCONNELL, CHAIRMAN AND CEO, PARK NATIONAL CORPORATION, AND PRESIDENTELECT OF THE AMERICAN BANKERS ASSOCIATION

Mr. MCCONNELL. Thank you, Madam Chairwoman. I am pleased to be here today to present the views of the American Bankers Association on modernizing the structure of our financial system. This is a critical issue for bankers and indeed for all financial service providers.

I would like to thank you, Madam Chairwoman, for your continued leadership in this area and for introducing House Bill 268 as a vehicle for discussion. Your efforts over the past several years have been very important in keeping the process moving. Representative Vento has also been a leader in this area, and this bipartisan approach is very encouraging.

I would also like to thank Chairman Leach for his dedication and hard work last year in trying to build a consensus for modernization legislation. While the bill did not pass, the process toward reform was moved forward considerably.

Until recently, there were deep divisions on some key issues among the many financial service participants. The result, understandably, was gridlock. In this Congress, the atmosphere is much more positive. For the first time, virtually all sectors of the financial services industry are in agreement on a general outline for financial reform. This is indeed a huge step forward. There will certainly be differences among us as we work through the details, some of which will be difficult to resolve, but we are confident that our remaining problems can be worked out.

Revolutionary improvements in technology and escalating competition have fundamentally redefined financial services. At the same time, it is clear that these forces are in the process of overwhelming the out-of-date legal and regulatory structure. Financial modernization will take place. The only question is how it will do

So.

In such dynamic markets the ability to quickly and efficiently respond to changing customer needs is critical. Successful firms must be flexible, innovative and able to offer a competitive range of financial services. This means organizational flexibility is a key consideration. Tomorrow's customers will demand a range of financial products, combining banking, securities and insurance delivered in ways that may not even exist today. The more organizational flexibility a firm has, the more flexible and innovative it can be in meeting customers needs.

Therefore, our bank Members strongly support giving banks the option to undertake new activities in an operating subsidiary. This issue is critical to us. H.R. 268 would maintain current law and thus leave open the option of conducting new activities with the exception of securities underwriting in a bank operating subsidiary. At the beginning of this Congress, Chairman Leach introduced H.R. 10, which also incorporates the option of an operating subsidiary for many activities. This is a very important improvement and

moves in the right direction. We urge the subcommittee and the full committee to fully incorporate the idea of the subsidiary, of an operating subsidiary option, in any final legislation.

A second critical area is functional regulation. There is broad agreement on the concept of functional regulation. Drafting the actual language, especially in the area of insurance, will be difficult. We pledge to continue to work toward these problems.

Another key question is holding company regulation. ABA does not have a specific position at this point, but I would like to make several comments on this issue.

First, regulation at the holding company level should be minimized; and redundant regulation by the holding company regulator and the regulator of the individual subsidiary should be avoided. Second, H.R. 268 contains a holding company regulatory structure based on a risk assessment model currently used in the securities industry. We believe this model is worthy of active consideration, and other options or refinements to this model should also be considered.

Your letter of invitation raised another issue on which there is not a consensus the degree to which commercial firms should be allowed to affiliate with or even own banking institutions. The American Bankers Association wants to maintain flexibility to work with policymakers on this difficult issue, but let me give you our current thinking.

Until the last Congress, we had never supported any significant intermingling of banking and commerce. However, in the last Congress, ABA amended its position to indicate receptivity to the idea of a basket approach. We have not yet defined the appropriate parameters of such a basket, but the general approach taken in H.R. 268 seems to us to make sense.

In conclusion, Madam Chairwoman, we applaud you for your leadership; and we are ready to work with you, Mr. Vento, your subcommittee and indeed the full House Banking committee to resolve the remaining issues and to complete this historic effort to modernize our financial system.

Thank you.

Chairwoman ROUKEMA. Thank you very much. Appreciate that. [The prepared statement of Mr. William T. McConnell can be found on page 190 in the appendix.]

Chairwoman ROUKEMA. Mr. Meyer.

STATEMENT OF WELLER MEYER, PRESIDENT AND CEO, ACACIA FEDERAL SAVINGS BANK, ON BEHALF OF AMERICA'S COMMUNITY BANKERS

Mr. MEYER. Madam Chairwoman, my name is Weller Meyer. I am President and CEO of Acacia Federal Savings Bank in Falls Church, Virginia.

Today I am representing America's Community Bankers. ACB appreciates this opportunity to testify on financial and charter modernization. We believe that this Congress has a unique opportunity to enact progressive legislation.

I would like to emphasize the importance of merging the FDIC's two deposit insurance funds, BIF and SAIF. It is a key ingredient in financial modernization. A merged fund would be stronger than

either one alone and is the most efficacious way to insure deposits and protect taxpayers.

Merging the funds has been and remains a top priority for ACB and its members. Merging the funds is imperative, regardless of actions that Congress might take on charter issues.

ACB remains committed to working with Congress on financial and charter modernization, but we believe that modernization legislation must pass this test: Will it provide consumers and businesses with better financial services without needlessly disrupting current businesses? Modernization is not merely a technical exercise of combining separate statutes. Real people, customers, employees, stockholders and managers, as well as the communities where they live and work, stand to gain, or to lose, depending on your decisions.

For example, H.R. 268 and Chairman Leach's H.R. 10 would require savings associations to divest their real estate development activities. That means that an Illinois savings association, Financial Federal of Orland Park, would have to cease a business that renews middle-income housing in mature midwestern communities. That renewal has strengthened the tax base, assisted local law enforcement, revitalized the homebuilding sector and given new hope to those who aspire to own their own homes.

We believe that forward-looking legislation could make these important contributions to the Nation's economy:

A stronger banking sector will be better able to provide credit and other financial services.

Consumers will gain convenience. My company, the Acacia Group, is developing the concept of full-service customer delivery by combining lending, insurance and investment services.

Community banks' traditional role as financial advisors will be enhanced because they will be permitted to offer a full range of

services.

Both small and large businesses and their customers will benefit from increased competition. Financial services will be offered more efficiently.

ACB believes that the savings association charter, especially with the changes passed at the end of the 104th Congress, is itself a modern charter. It should be a model from which to design a modern financial system. Savings institutions already enjoy broad affiliation authority being sought by others. Hundreds of other savings institutions use service corporation authority to offer retail insurance products and participate in real estate development.

ACB recently surveyed its members on the use of their real estate and other activities. Preliminary results show that over 32 percent of survey respondents engage in these activities. We would request that we be permitted to submit a summary of the results for the record when they are available.

Reducing or eliminating these business opportunities would not constitute financial modernization. Instead, Congress should look to the proven benefits of the saving association charter as it develops its legislation.

We believe the last Congress completed much of the groundwork toward financial and charter modernization. By rejecting an attempt to eliminate the unitary holding company power and voting