PRESS CONFERENCE WITH SENATOR PAUL SARBANES (D-MD)
RE: HIS UPCOMING CHAIRMANSHIP OF THE SENATE BANKING COMMITTEE
538 DIRKSEN SENATE OFFICE BUILDING
3:30 P.M. EDT THURSDAY, MAY 24, 2001



     (NOTE: AUDIO FEED BEGINS IN PROGRESS.)

     SEN. SARBANES: -- questions about how we would see the agenda of the committee with this mark than, on the part of some of us, very welcome change in circumstances that is about to transpire in the Senate. So I thought probably the best way to address that would be to gather everyone together. And I'll make a few comments at the outset and then I'll be happy to take your questions.

     First of all, let me just say, as a preliminary, that we've had a very collegiate working relationship with Senator Gramm as chairman of the committee. Actually, that was true in the last Congress as well, if you put to one side the somewhat contentious issue over the Community Reinvestment Act which, in the end, was worked out, of course, as part of the financial services modernization legislation. And we've worked cooperatively in this Congress. The committee has reported out three bills almost unanimous, and -- well, unanimously in two instances and almost so in the third instance. And I talked with Senator Gramm earlier in the day and we're looking forward, and we're hopeful of maintaining a continuing close working relationship.

     There are four areas I think that I'd like to break out the committee's agenda in terms of where we would seek to focus our attention. One is the oversight of the condition of the financial system. I do think that oversight, as a general proposition, ought to be a more important dimension of the committee's work. In other words, I don't think every time we hold a hearing it ought to be to pass a particular piece of legislation. We have some very important responsibilities. We have a member of regulatory agencies who, in effect, report to the committee, and I think we should be hearing from them and examining the agencies under our jurisdiction. And so we would plan to invite them to testify, to ascertain what their needs are and the conditions of the industries they regulate.

     And, having gone through that kind of process, out of that we would evolve whatever we thought was the appropriate legislative response.

     Secondly, I for some time have thought that we don't give enough attention to the urban affairs dimension of the committee's jurisdiction. I mean, this is the Banking, Housing and Urban Affairs Committee, and I think there's a challenge ahead of us with respect to the urban affairs dimension. I think we should give it more attention. The census figures already, although they're not yet fully complete, they indicate that there have been enormous changes in the economic and social makeup of metropolitan areas; that what were once considered solely urban problems -- affordable housing, adequate transportation, growth and congestion -- are now impacting the suburbs and even having consequences in the rural areas of the country.

     So we want to take a look at what role the federal policy has played with respect to what's reflected in the 2000 census and what role it could play in the future in addressing some of these challenges.

     Thirdly, I think as many of you would have anticipated, we want to look at consumer and investor protections. I've always regarded that as an important part of the jurisdiction of the committee. That would include such matters as predatory lending, which I think is crying out for examination and for remedy; privacy, which is, as we know, a complicated issue but one in which I think the American public is very interested. I mean, every survey that has been taken places that at or close to the top of the list of people's concerns. Access to capital and credit for all Americans. Such things as household debt, credit card abuses. And we would hope to develop a series of hearings that would examine these issues and would then see what would be reasonable and appropriate steps to take in order to deal with them.

     I'm also very much interested -- and I'm pleased that Congressman LaFalce, the ranking member on the House committee, is here with us today, because I know this is an interest of his, as well -- and that is to promote financial education and literacy opportunities for all Americans. Chairman Greenspan recommended that in a speech on April 6th, about six weeks ago, and former Treasury Secretary Larry Summers had also made it a priority within the Treasury Department.

     I think most people, if they stop and think about it, I think would agree that we need to figure out ways to enhance the financial literacy of our public. Many of the things we looked at in which we see abuses are where you have some irresponsible people trying to take advantage.

     And we think we ought to deal with that and preclude it. But at the same time if the people of whom they are taking advantage were better educated in financial terms, they could resist these entreaties in their own way.

     The committee has a very important domestic and international economic policy dimension. We will hold hearings, of course, on the Federal Reserve semiannual monetary policy report, the Treasury report on international economic and exchange rate policy, the annual report of the Trade Promotion Coordinating Committee -- that was a concept put into place by this committee a few years back, and we think it's served a very beneficial purpose in encouraging and enhancing the American export effort. And we wish to build on that. Both the secretary of Commerce and the head of the Exim Bank of the new administration have indicated a very strong interest in that. And we intend, of course, to carry through on that.

     We also want to look at money laundering, which a number of people have indicated they regard as a significant problem. We want to hear from the law enforcement side on that issue, and then, of course, from the financial people in terms of steps we might take to address it.

     We have two major reauthorizations of legislation that are before us that will expire this year. One is the renewal of the Export- Import Bank, whose authorization expires on September 30th, and the other is the renewal of the Defense Production Act, whose authorization expires on October the 12th. We have on the floor, as you know, the Export Administration Act. Senator Gramm and I have worked together on that, and that's now pending on the floor. And after consultation with the leadership we'll see how we may be able to move that forward.

     We also intend to move on nominations as received by the committee. My own view is that the committee has a -- or, let me put it this way: the Congress, the legislative branch, has a responsibility to, in effect, seek to help a new administration place its people into offices so they can begin the job of governing the country, the people in the various departments who hold the various positions, and we'll try to act on that.

     That's not to say that we won't, when the occasion warrants it, take the extra time that we need to carefully examine a nominee and to assure ourselves about their credentials and their credibility in holding the responsibility, but we've been working hard to move these nominations forward in the Senate thus far, and I think we've done a very good job. We've pretty well cleaned the deck of all the nominees that have come to the committee and are pending for action.

     We've not yet acted on the nomination of Roger Ferguson, who was nominated, re-nominated, to be a member of the board of governors of the Federal Reserve, and I think that we ought to move ahead on that, too, in the period when we come back from the recess. That nomination came up last year and was pending. It was resubmitted by the new administration and the papers have been here now for about three weeks, two weeks -- two to three weeks, and we hope to move ahead on Mr. -- who has been serving, of course, on the Federal Reserve.

     I'm looking forward to an active and productive period for the committee. We have been and intend, of course, to continue to consult closely with our colleagues on the committee on both sides of the aisle. As I indicated, Senator Gramm and I have been doing that in the past and we look forward to continuing to do it in the future. We think both sides have developed, you know, highly able and effective staffs and they're working together in a cooperative relationship as well, and we hope to be able to move forward and carry through a good agenda for the committee.

     I think we had a very credible agenda in the last Congress. I think the committee will have a very credible agenda in this Congress. And with that, I'd be happy to take your questions.

     Yes.

     Q Senator, do you think there will be any chance for the second tax cut bill that a lot of people talked about? And do you think this will affect the tax cut bill that you're working on now?

     SEN. SARBANES: Well, that's not a committee question, though let me just take it very quickly. I would expect there are going to be very sharp divisions over a second tax bill. There are sharp divisions over a first tax bill, in terms of its amount, which many think is excessive. And a second tax bill, of course, would only add to the excess, so I don't know whether another one will be coming along or not.

     Yes.

     Q You didn't mention the legislation to regulate the government-sponsored enterprises. There's a bill pending in Richard Baker's subcommittee to do that. What's your position on it?

     SEN. SARBANES: Well, what I did mention was oversight of the condition of the financial system and all the agencies under the jurisdiction of the committee, which of course includes HUD and OFHEO. So that embraces within those terms, of course, the GSEs.

     They have made -- or, they were hopeful that the recommendation for a regulation which is now pending at OMB with respect to the GSEs would be able to be cleared and put out there so we can finally examine that.

     OFHEO has finally brought that to culmination after a long period of time. And my own view is that that is what we ought to focus on at this moment. We ought to try to see if we can't move that regulation through to final completion in a form that is generally acceptable. And that's what we intend to be paying attention to. And I don't really want to move off in any other direction that would upset carrying through on that process and completing it. That's been a long time working, and if we get into other issues, we're liable to lose the momentum that we have in order to complete that.

     Q So after the OFHEO rule goes into effect, would you support or oppose a regulation like Baker is proposing?

     SEN. SARBANES: Which is what? I don't know what that regulation is.

     Q Which is putting a consolidating regulation over Fannie Mae and Freddie Mac and putting this new regulator within the Federal Reserve.

     SEN. SARBANES: Well, I mean, we'd have to look at that carefully. At the moment, I want OFHEO to complete the regulation -- they've been working on it a long time and we'd like to get that in place -- and then see what that looks like and see what the regulatory landscape looks like. And in a sense, I want to do one thing at a time and get that done. If we can get that done and if it's acceptable, it may well have an impact, it ought to have an impact on people's perceptions of how to deal with the issue.

     Q You've talked a lot about oversight. Do you think that this is an area that the Congress sort of generally has maybe neglected in recent years, or that there is a special responsibility, with a Democratic Senate and a Republican administration, as there might be vice-versa, to being sort of a watchdog role on the agencies?

     SEN. SARBANES: No, I think the former. I think that as a general proposition, the Congress has tended to neglect oversight, that there's been a general view that you're only doing something when you actually are passing a piece of legislation. Obviously, you're doing something when you do that, but I also think you can perform a very important service if you exercise a careful oversight over the government departments and agencies and over the economic sectors for which they're responsible. That, amongst other things, of course, would enable you to pick up early-warning signals. I think it would lead to better regulatory activity. And of course, it gives all interest groups an opportunity to, in effect, have their say before the committee and for us to get the benefit of their thinking.

     Q Could you talk about the impact of your chairmanship and Senator Mikulski's Appropriation (subcommittee ?) chairmanship on the State of Maryland, on housing and urban issues and on the nomination of Peter Keitzler (sp)?

     SEN. SARBANES: Well, Keitzler (sp) is a separate issue from this. I mean, we've indicated our position on that. On the committee jurisdiction and the matters we're addressing here, by fortuitous circumstance, perhaps, but Senator Mikulski and I are lined up as authorizers and appropriators on many of the subject matter that's under the jurisdiction of this committee, including, of course, the Housing and the Community Development Block Grants and the Economic Development Initiative Fund, many of the things that are within HUD, and some of the things that are within the Commerce Department.

     And we think, obviously, this gives us an opportunity to advance that agenda both nationally and as it impacts upon our state. We always carry the state very much in our memory, of course, as we proceed with these matters.

     Yes?

     Q Senator Sarbanes, you once supported a bill that banned ATM fees. Do you see that coming up again?

     SEN. SARBANES: Well, we'll have to look at that. You know, we held hearings. We wouldn't do anything, I don't think, without holding some hearings on that and seeing what the nature of what is taking place is out across the country.

     I must say, if you ask me what new areas I would put in importance, I think the predatory lending and the privacy issues are ones that call out for more immediate attention, especially this predatory lending.

     Q With regard to predatory lending -- on the two areas, could you elaborate on what you might be looking at? What kind of legislation, like usury fees -- banning usury fees over 15 percent?

     SEN. SARBANES: Well, there are certain restrictions now in the law, but there's a deep concern but they're not adequate in terms of the practices that are taking place. Now, Congressman LaFalce and I have worked together very closely on this issue. I think it's becoming more and more clear that this is a growing problem across the country. And many of my colleagues on the committee have indicated that it is a problem in their states, and that this is one of the issues they want to examine carefully.

     Now, we have to do it carefully because, you know, there is a legitimate role for the sub-prime lending market, and many of the people who work in that field are responsible actors and, you know, they're performing an important economic service and, indeed, an important service to the society in terms of making reasonable credit available to people who otherwise wouldn't be able to attain it.

     But there are people who have moved in, into that area, and are engaged in some absolutely outrageous practices, and we have to address those. Now, it's been done at the state level in a couple of places but, you know -- actually, we've got the regulators now interested in this, including the Fed and the other regulators, and they, themselves, now, of their own initiative and under existing authorities, are trying to move against some of these practices. And, of course, one of the things we would review is how adequate those authorities are and what they need in addition, as well as looking at the existing or additional statutory standards that might be established.

     Yes?

     Q Do you plan to hold any hearings on pending legislation to increase federal deposit insurance coverage? And with relation to the FDIC, do you have a time frame on a nomination hearing for Don Powell?

     SEN. SARBANES: Well, we don't have his papers yet, so obviously you can't institute any sort of hearing till that happens. As I said, we intend -- it would be my intention to move nominations in an orderly fashion, and unless there's some reason not to move ahead, we would want to try to move ahead and get people on the job.

     On the substantive question, again, if we do this oversight hearing of the financial agencies, obviously one of the agencies that we would have in before us would be the FDIC. They've just done a report, and presumably their presentation to us would involve their report and we'd have to examine that and then, of course, we'd have to hear from others about the desirability or the undesirability of addressing the FDIC. Those are some complicated issues, as you well know: both the amounts, the risk-based premiums, how you rebate, the fixed ratio and so forth and so on. But we would first, I think, want to hear from the FDIC with respect to their report and hear them out, take a reading, then, of where we go from there.

     Yes?

     Q Can you expand on what you might want to do in the area of financial privacy?

     SEN. SARBANES: Well, I think that the -- my own personal view is that we need to have more -- we have to address this opt-in/opt-out situation. And of course, as you know, it's very complicated, because it's then, is what is the circle of the dissemination of information of which you apply the opt-in or apply the opt-out. But I think people, generally speaking, think that that information is their information, not the company to which they've given it to, and that the company to which they've given it to ought to be limited in how it in turn can disseminate the information.

     Now, we had a limited provision in the financial services modernization bill that we passed last year. That's now just going into effect, and we'll look at how that's working. But a number of my colleagues have proposals in. I think it's an important issue. Many of our financial institutions that are working in the EU, in the European Union, are complying with European Union directives that are more protective of the individual's privacy than what exists in this country. And yet, on occasion they say, well, we can't handle this. So we need to explore why that's the case as well.

     Q How might this affect pending bankruptcy legislation in the conference?

     SEN. SARBANES: Well, I don't have an easy answer. I mean, the bankruptcy legislation, of course, is in the jurisdiction of the Judiciary Committee. So --

     Q Do you think the conference might move forward now that the Democrats are in the majority in the Senate?

     SEN. SARBANES: I don't have an answer to that question.

     Yes?

     Q Senator, you didn't mention anything that would be affecting the securities industry. First, would you be taking up Senator Gramm's hopes to look at reforming the security laws? And in particular -- or secondly, the SEC fees bill, as you know, the Senate adopted --

     SEN. SARBANES: It's in the House. It's passed the Senate.

     Q Right. But it's now stalled in the House. Should that pass, do you have any concerns about when it comes to conference committee what you'd like to see ultimately before it goes to the White House?

     SEN. SARBANES: Well, we'll have to see what the House does with it. But presumably, it won't -- if they pass something, it won't be a major item in conference, although I'll have to wait and see on that. I mean, it's tough enough trying to figure out what the Senate is going to do without figuring out what the House is going to do. (Laughter.)

     On the SEC, yeah, I think that would be a good issue to put to the new nominee to be the chairman of the SEC, who is, of course, very knowledgeable in securities law. And we'd like to draw him out on his own views about a major rewrite of the securities legislation. I mean, that's certainly as the chairman has done, a fair issue to raise, but I think we need to get a response from the other side of the witness table on what they think might or might not be necessary.

     Q I think you just answered my question. I was going to ask you about your views toward the nominee for the SEC, whether it's somebody that you support.

     SEN. SARBANES: Well, we haven't had -- I haven't had a chance yet to carefully examine his record and everything. But I do know, from what I've read and what I've heard, that he's very knowledgeable in this field. I know some questions have been raised because he's been working in this field on the private sector; now would come in to the public sector. And so, obviously, we would assure ourselves that all of that could be dropped off as he picked up his public responsibilities. But in areas that are highly technical and highly complex and very legal, you don't find the expertise that you need if the person hasn't been working in the field, I mean, I recognize that. Obviously, we take that into account.

     Yes?

     Q Another subject. Do you plan on looking at the possibility of establishing a federal insurance charter? That's something you haven't mentioned.

     SEN. SARBANES: Well, there's a provision in the Financial Services Modernization Bill that addresses the insurance issue. That's not yet been worked out, although I gather progress is being made in terms of establishing a federal register, and more and more states are participating in that. We'd like to see how that develops.

     The notion is a pretty far-reaching change from past practice and, you know, it would require, I think, very careful examination. I am prepared to make substantial change, but I don't usually like to do it if it's not based on a very thorough and comprehensive examination of the issue which assures you as best you can that there aren't going to be unintended consequences and which considers all the ramifications of what's being considered, now particularly when it's a marked departure from past precedent and practice, which, of course, this would be.

     And so, you know, we just have to hear people out on it. But I'd like to see what transpires in terms of the provisions that were in the bill that we enacted in the last Congress.

     Q Speaking of unintended consequences, in regards to FDIC reform, bankers are complaining that securities brokerage firms can go ahead and charter six or seven different banks and offer insured deposit coverage accounts up to $700,000, while community banks and other banks can only offer insured accounts up to $100,000, and they believe that's an unintended consequence out of (Graham/Gramm ?)- Leach-Bliley. Is that something you're familiar with or plan to address?

     SEN. SARBANES: Well, the first way I'd like to address it is to hear from the FDIC people, when they come before us, their view on that issue. Of course, there will be a new chairman of the FDIC, and just as the new chairman of the SEC. We'll have actually a chance there to examine some of these issues in a nomination hearing and then possibly to revisit them in a straight, standard oversight hearing. So we'll have a chance to explore those matters.

     Yes?

     Q Do you plan to examine the proposed rule by the Fed to allow banks to get involved in real estate business?

     SEN. SARBANES: Well, they're still evolving that rule. And let's see who they play it out. They may evolve it in such a way that it doesn't require examination and that everyone sort of looks and, even if they're not happy with it, they're content to accept it and we can move ahead. That's a skillful use of the regulatory power, and I'd like to see it happen.

     Q Thank you.

     SEN. SARBANES: Thank you all very much.

END.

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