which I hope will reconstruct financial institutions and replace the outdated Glass-Steagall Law of the 1930's.

Glass-Steagall did its job in its day to protect safety and soundness, control economic concentration of power and, in a principled way, to protect the consumers and businesses and the taxpayers of this Nation. No, we do not want another savings and loan debacle. No, we don't want another Depression where the savings of the people were gambled away either by ignorant or unscrupulous financiers. But we must have a financial system that is able to compete in the modern world, and that is what I hope these initial hearings will be all about.

As we proceed with these hearings, our common goal must be to provide for a defined and principled piece of legislation for enactment which will benefit the consumer by increasing competition in the financial sector service of the economy and preserving the safety and soundness of our financial system. All relevant issues will be explored; assumptions will be challenged; and all parties will be heard, big and complex as it is; but we will succeed by passing landmark legislation this year.

Technology and market forces have broken down the barriers between banking, securities and insurance. Our current statutory framework has remained stuck in the 1930's because of Congress' reluctance to act. This has led to an inability of our financial institutions to compete in a market that can only be defined as global. In the absence of Congressional action, Federal agencies and the industry have been forced to find loopholes and novel interpretations to allow financial institutions to adapt to an ever-changing marketplace. An all-too-real recent example is the Office of the Controller of the Currency when he authorized national bank subsidiaries to engage in activities that previously were prohibited. Furthermore, the Federal Reserve has proposed to eliminate the firewalls it applies to its Section 20 affiliates.

Unfortunately, this has resulted in piecemeal regulatory reform that may not be in the best interests of the system as a whole. We haven't fully realized the potential here.

As elected representatives of Congress, it is our duty to make the important policy decisions, giving statutory authority regarding the structure of these markets. It is not in the best interest of the system to continue to let the financial regulators make these decisions in a piecemeal and arbitrary fashion. For Congress not to act would be a serious abdication of our responsibility; and for those of us who serve on the Banking Committee, we are painfully aware of how controversial the issues surrounding the financial services industry can be, to say the least.

Various sectors of the industry have differed in different and often conflicting views on how to go about this job.

Over 2 years ago, a coalition known as the Alliance for Financial Modernization was formed to build a common framework for financial modernization. Participants in the Alliance group are well known; and we will include in the record all of them, including the American Bankers Association Securities Group, America's Community Bankers, and so forth.

I won't go through all of them. They will be included in the record. But they represent a wide spectrum of financial interests;

and through a great deal of good-faith negotiation and compromise, the Alliance developed a comprehensive approach that addresses affiliation issues, Glass-Steagall reform, functional regulation, insurance and thrift charter conversion.

While each of the members of the Alliance for Financial Modernization has participated in drafting the legislation, each does not necessarily endorse all of the provisions that are in the current product.

But I believe, and therefore I have introduced this legislation because I believe it to be the best legislative vehicle to bring everybody to the table. Now that is stretching it, I understand; but this is the beginning of bringing everybody to the table.

I have introduced this Alliance proposal, H.R. 268, for that reason and to force us to focus and re-examine the traditional approach to financial services reform.

I won't go into all the details of the Alliance bill; but I personally would note there is one case, for example, that I support holding company regulation; but the Alliance bill, as an example, has forced me to consider how it should be modified and can be modified and approved so it is less cumbersome while still maintaining and not compromising the safety and soundness of our insured institutions.

Similarly, conventional wisdom suggests that mixing banking and commerce would be detrimental to the overall vitality of a system because of a possible conflict of interest and a potential concentration of economic power. I won't go into the full details of this at this point in time, but we all know in this room, or certainly should know and will know by the time these hearings are over, that this is an essential question that is controversial in various forms. But I believe that the Alliance's incremental approach to banking and commerce is worth further consideration as compared with other proposals that have an open door for introduction of commerce and banking.

Clearly, it is time to reform the Glass-Steagall. The Alliance bill repeals Section 20 and incorporates a functional regulation which will ensure that all who participate are playing on the same level playing field. This is an important document, H.R. 268, because it includes many compromises between the various financial services industry. Clearly, to use the vernacular, it is a "work in progress.' They will require more detailed analysis and development.

However, I believe that the proposal will definitely move the debate forward toward modernization and set the action for precise legislation and reform in this Congress; and it will reform the financial institutions in the interest of businesses, consumers and the taxpayers and, very importantly, bring us into the 21st Century, the Millennium, and beyond, and make us more competitive in the global financial marketplace.

But, to use an overused analogy, that building that bridge, most of all, while we are building the bridge, we must build it on a sound foundation, a sound financial foundation, so we can get to the next century.

Now, I am not going to go into all the details, although I would ask unanimous consent that in my opening remarks we include an outline of the major portions of the legislation and the headings,

and then we will continue through our hearing today to proceed to have these witnesses kick off this very important effort which I fully expect will lead to landmark reform legislation in the very near future.

[The prepared statement of Hon. Marge Roukema can be found on page 176 in the appendix.]

With that, I will turn to my colleague, the Ranking Member, Congressman Bruce F. Vento.

Mr. VENTO. Thank you, Madam Chairwoman, for holding the first of a series of hearings on H.R. 268, the Depository Institutions Affiliation and Thrift Charter Conversion Act. I was pleased to join you last fall and again this year as a cosponsor of this important legislation.

Although I do not support each and every provision and section of the bill, it was introduced as a marker of our intention to move forward this year in a bipartisan manner on legislation that we are hopeful will translate into meaningful financial services modernization. H.R. 268 is a product that resulted from a great deal of compromise between significant actors in the financial services industry who are referred to as a coalition, as the Alliance.

Our current system of financial laws and policy are lagging behind actual marketplace conditions. We need to rewrite and, in essence, modernize the legal framework of our financial services system for the sake of the players, for the markets and consumers who, a priori, should be well served by strong and competitive U.S. financial industries.

In general, as we move forward with modernization legislation, we should look to do no harm. Rather, we should seek to improve the opportunity for everyone involved or actively engaged in the financial services equation, whether consumer or enterprise.

My prepared statement of objective to do no harm means simply that we are restructuring. The restructuring of our financial services system must ensure continued safety and soundness in the banking financial systems, community access to a broad range of financial services, intact fundamental consumer protections and enhanced international competitiveness for U.S. institutions.

Most importantly, modernization must better protect the U.S. taxpayer from exposures to losses from bank, stock or underwriting systems that are more complex and potentially more susceptible to slips, missteps or inappropriate actions that would translate into costs borne by the taxpayers.

This is, of course, the moral hazard inherent with the deposit insurance funds. To do no harm is no small task, but it demands a positive answer in the work product of this subcommittee and committee.

Of course, there are risks in any system. As we look to appropriately expand our powers and alter charters, we must be vigilant in our attention to those risks and in our crafting of structures and safeguards that will mitigate and neutralize such risks. We will look broadly today and in the future at regulatory structures, affiliates versus subsidiaries, firewalls, conflicts of interest issues, internal controls, regulatory powers under the existing laws by FÍRREA and FDICIA, the most recent changes, and, of course, market forces and community and consumer services.

The Alliance bill we have before us is not completely supported by every organization in the Alliance, nor members with the organization, nor, as you have heard, by the sponsors in Congress. It does, however, demonstrate that groups can come to the table and work constructively toward together for modernization. I am hopeful that we will build upon this strong base a still broader coalition and act to modernize our laws in today's complex financial marketplace.

Madam Chairwoman, as this broad legislation moves forward, I am able to envision a number of improvements as policy questions are asked and resolved. I have reservations about several aspects of the Alliance bill. I want to assure myself that tough firewalls are intact and that a proper focus regarding service and responsibility to consumers and communities remains as we modernize our laws. The overall approach of this measure, H.R. 268, reflects a compromise. It is a bill that has tried to bring some harmony to the debate for the purpose of focusing and shaping the policy for the future. It is a sound framework, a base, not necessarily the final product or policy.

In view of that, Madam Chairwoman, the fact that we have significant work to do on this measure, much less other measures such as H.R. 10 and measures that are pending, still pending, introduction as we sit here on February 11th, I am interested in the reported procedures apparently reached on the Republican side to defer markup of financial services modernization legislation of the full committee following subcommittee hearings.

I would just like your attention, Madam Chairwoman, because this deals with the reported agreement that you and Chairman Leach and other subcommittee Members made with regards to the procedure and to defer any markup in subcommittee; and I assume all relevant financial modernizations would be heard, including H.R. 10, in subcommittee. I must wonder aloud, though, if the consensus document will look very much like any of the measures that are being considered or will possibly be introduced in the near future.

Whatever the decision regarding markup vehicles, I am compelled to note that I offered an amendment last week that empowered our subcommittees to return to regular order simply because of financial modernization legislation. As an example, there is more than one pass by Members of this committee. Unfortunately, my amendment in the committee and to the committee rules failed; and the Majority has unilaterally agreed to a peculiar and unusual process. To address the hearing process separately on numerous modernization proposals, then to empower the Chairman to synthesize a consensus markup vehicle, is to deem the subcommittees less relevant.

The consensus bill that is heard by no subcommittee and will not have the benefit of subcommittee markup jettisons regular order for no apparent reason. I must ask, does this prevent the chairperson from chairing, do our rules prevent the chairperson from chairing a subcommittee. Does that mean they are the chairperson of all subcommittees under this procedure?

I am very concerned about this agreement; but, nonetheless, I understand and I hope that we can continue to work together to

reach some bipartisan consensus. This isn't a partisan issue; but, obviously, I think that the regular procedure of this committee, if we are going to be in the best possible position to deal with the issues, we have thorough hearings on all aspects of it. There has to be a good understanding.

Because I think when people and individual groups are not aware of what is in measures, there have not been hearings and debate within committee and subcommittee thoroughly, that puts us in a weaker position on the floor; and this committee has had big challenges in terms of bringing forth measures to the floor and holding them intact. So we need to be together as we leave this subcommittee.

The procedure that has been established begins to raise concerns with me whether or not that is going to be possible in that particular format. I hope that that is not the case, but I must at this time state my concern regarding that particular procedure.

Thank you.

[The prepared statement of Hon. Bruce F. Vento can be found on page 185 in the appendix.]

Chairwoman ROUKEMA. I certainly hear your concerns. I am not sure that I am not sure why you raise them now, having been given the vote which established a modification of regular order which, in my opinion, gave me as a subcommittee chairwoman a little more power than under the previous Congress. It certainly, well, under the previous rules. This is not the place to go over that debate again. Let me just assure you that I, as a subcommittee chairwoman, and all of our Members will have definite input as to what that consensus document is.

The complexity of three pieces of legislation dealing with very difficult and, by the way, the overlapping jurisdiction with another subcommittee does make this a little more complex than we might have thought at first blush. So this is a compromise. It does not preclude myself or any other member of the subcommittee not making the strongest argument in the development of the consensus document based on the hearings, by the way.

As we go through this hearing process, it will permit us to reconsider the procedure that led us up to that consensus document. But again, excuse me. Excuse me. Let me finish my prepared statement.

Then, as we go through, there is nothing that precludes that there will not be a full and complete amendment process in the full committee, but we can reconsider this as we go through the process. But, again, I don't want to have the debate over the amendment that you proposed on the regular order. This is consistent with the rules as they were adopted.

Mr. VENTO. I don't

Chairwoman ROUKEMA. I yield.

Mr. VENTO. I think Congressman LaFalce wants to suggest something.

I don't intend to go through a process debate with our witnesses waiting today to testify. I just want to say that I think, while certainly it is consistent with the rules to cede to the Chairman the power to put together a consensus document, I disagree. I think we are better served by the subcommittee.