Financial Reform

President Clinton signed the financial reform bill Nov. 12. The House-Senate conference committee approved it Nov. 2. Two days later, the Senate approved it on a 90-to-8 vote; the House vote was 362 to 57.The 416-page law repeals the Glass-Steagall Act of 1933 that separated commercial and investment banking and amends the Bank Holding Company Act of 1956 so holding companies may underwrite insurance. Mergers among banks, securities firms, and insurers will be allowed 120 days after enactment to give regulators time to write implementing rules. The Federal Reserve Board will oversee the resulting diversified financial holding companies but their subsidiaries will be overseen by functional regulators.

The law imposes Community Reinvestment Act requirements on banks that merge with insurance or securities firms, creates consumer privacy protections, and prevents unitary thrift holding companies from being sold to nonfinancial entities.

President Clinton said Congress should go further on privacy, and Sen. Richard C. Shelby, R-Ala., and Rep. Edward J. Markey, D-Mass., have introduced legislation that would require customer permission, or "opt in," before a financial institution could share confidential data with affiliates or third parties.

Bankruptcy Reform

Congress adjourned Nov. 19 before a Senate vote on legislation to revamp the bankruptcy code. The earliest it could be revived is late January, when lawmakers return. Some progress was made, however. A bipartisan amendment was adopted that would require credit card companies to warn customers about the cost of making minimum monthly payments and to provide a standard illustrative example. Consumers could call a toll-free number to find out how long it would take to pay off their balances on the basis of the minimum monthly payment. Democratic amendments to disallow the bankruptcy claims of predatory lenders and to prohibit consumers under age 21 from acquiring a credit card without an adult co-signer or proof of creditworthiness failed.Introduced by Sen. Charles E. Grassley, the Senate bill was approved by the Judiciary Committee in April. It would let bankruptcy judges force debtors who could afford to pay $15,000 or 25% of unsecured credit over five years to file under Chapter 13 of the bankruptcy code. Creditors could also ask judges to force a consumer into Chapter 13 reorganization, rather than eliminating their debts in Chapter 7. The House passed a stricter version in May on a vote of 313 to 108. President Clinton has threatened a veto.

Electronic Signatures

The Senate on Nov. 19 approved legislation that would establish the validity of electronic signatures and contracts.The House on Nov. 9 voted 356 to 66 for legislation - sponsored by House Commerce Committee Chairman Thomas J. Bliley Jr. - that would do the same. But unlike the Senate bill, it also would permit financial services companies to make mortgage and other disclosures required by consumer protection laws electronically, instead of on paper.

The Clinton administration opposed the House bill - favored by the financial services industry - as anticonsumer and instead endorsed the scaled-down Senate bill offered by Sen. Spencer Abraham, R-Mich.

The House did adopt an amendment that would require the consent request for electronic disclosures and records to be "conspicuous and visually separate" so customers know what they are signing. And customers would be able to review, retain, and print records. Sen. Abraham said he would work with the House to send a compromise to President Clinton early next year.


Money Laundering

Two bills, one by the Clinton administration and another by Sens. Carl Levin, D-Mich., and Arlen Specter, R-Pa., were unveiled Nov. 11 that would help U.S. prosecutors crack down on foreign money launderers. Each would make it illegal for U.S. banks or foreign banks with U.S. operations to knowingly handle money traceable to corruption or bribery in a foreign government, and each would empower federal judges to subpoena documents and testimony from foreign banks that maintain a U.S. account and are suspected of laundering criminal proceeds. Sen. Levin's bill would also make it a crime for a bank to fake the identity of a customer.In September, House Banking Committee Chairman Jim Leach and Sen. Charles E. Schumer, D-N.Y., offered companion bills that would prohibit a U.S. bank from opening or maintaining an account for a foreign person or company unless the bank identified and kept a record of the account's true owners. Some of the provisions in these bills overlap with the bills introduced in November.

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