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
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
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
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
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.
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.
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
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
Q Which is putting a consolidating regulation over Fannie Mae
and Freddie Mac and putting this new regulator within the Federal
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
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
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
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.
Q Can you expand on what you might want to do in the area of
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
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.
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
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
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.
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.
Q Another subject. Do you plan on looking at the possibility
of establishing a federal insurance charter? That's something you
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
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.
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.
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