The Treasury Department has been ordered to study how well the nation's financial system meets the needs of its users and report back to Congress by Dec. 29.

A commission appointed by President Clinton to advise the Treasury met for the first time this week. The Advisory Commission on Financial Services was asked a series of questions by Treasury Secretary Robert E. Rubin. What follows are excerpts from his remarks.

We have a distinguished group of individuals with varied backgrounds and areas of expertise serving on the advisory commission, and to each of you I want to say thank you for your time and service. Your contributions to this study should prove exceedingly valuable in helping provide a framework for developing policy for the financial marketplace of the 21st century.

It is critical to the health of our financial services industry and its users that we think strategically about what the financial services system will look like in a decade. And it is enormously important that we examine what role government should play - where government perhaps should get out of the way, and where it should function.

At the turn of the last century, bookkeeping was a pen-and-ink affair in ledger books, not accomplished on computer spreadsheets. Transactions then were conducted at a far more leisurely pace, not at the push of a button. There were bank deposits, stocks, bonds, and commodities, and not much else. No one anticipated the advent of credit cards, debit cards, or smart cards, not to mention cellular telephones, computer modems, and fax machines, or options and swaps.

Throughout the history of our financial services system, policy change has generally been in response to crisis, or in response to efforts to go around what had been put in place in response to crisis. We have an important opportunity in this study to step back and take the long view and ask critical questions in a non-crisis environment.

This study allows us the opportunity for a broad examination of the American financial system, its strengths and weaknesses, the likely or possible changes in the financial system, and the impact and import of that change not just on the industry but on the users - from the multinationals in our financial centers to the family saving for a home in rural America.

We must take our minds to the edge of the envelope as we think about financial services in the 21st century. To give you an example of what I mean, I'd like to raise a number of hypotheticals.

First, how will financial institutions themselves evolve? Will we eventually have several dozen national banking concerns, or for that matter, national full-line financial institutions?

Will there still be locally owned banks? Will smaller banks contract with larger financial institutions for various services and products and become one-stop financial shopping centers for smaller towns? What are the implications of having more concentrated financial power? What impact will the mergers of banks have on lending practices to small businesses, to consumers, or to agriculture?

What would the effects of capital flowing ever more freely across national borders be on American suppliers and users of capital? Will that help compensate for our low savings rate or, if higher rates of return exist abroad, will our savings be drawn away? Will financial service activities tend to gravitate to areas of less regulation? Will a more tightly knit global market reduce the flexibility of monetary policy?

What are the potentials for systemic shocks in global financial markets? What are the implications of 24-hour trading and computer trading? What role will exchanges play in the markets of the future?

What is the future of electronic cash? Will we all carry smart cards with preset values in them? Will we revert back to the United States of the mid-19th century with many private-sector issuers of de facto currency? What are the implications of that, and what are the fraud and counterfeiting issues that might surround an electronic form of currency?

What will the state of technology be in 10 years or 20 years? If I'm in Miami, will I just walk up to a computer terminal in a shopping mall kiosk, type in a few commands and then find that the transactions I ordered are being handled in India on mainframes running indigenous software?

What would the consequences be of a merger of a financial services institution such as a bank and an entity with very substantial software capability?

What about the people factor? Will most users interface with the financial services industry without any contact with people for most purposes?

And will we end up being a society where everyone must have a bank account? What about the poor? We are already well on the way toward the use of plastic cards for distributing entitlements. What protections are needed for consumers?

That's a lot of questions, and I know you will have more.

Our challenge is to understand the framework of financial services in the coming years - where they are headed and in what form. That framework can then be used for more strategic policy development, either by getting ahead of the curve to promote desired policy objectives or in developing reaction to crises.

To expound on the idea of getting ahead of the curve, better understanding that framework can catalyze and inform, as the legislation creating this study envisioned, and assist proactive policy development to help our financial services system become more efficient, further strengthen safety and soundness, and assure that consumers across the spectrum of users are effectively served.

While we can make observations about policy and, if it seems appropriate, make recommendations, the purpose of this study is not to propose any new regulatory structure.

Rather, the primary thrust is to provide the framework to guide policymakers as they think proactively and strategically about policy for an industry which is part of the underpinning of our economy, which brings together the suppliers and users of capital, which touches the life of almost every American, and in which we are the unquestioned world leader.

The study we are launching today and the work of this advisory commission are important to achieving the central goals of all economic policymaking - raising living standards, creating growth and jobs, and competing and succeeding globally. The work undertaken here can have a lasting impact upon the American economy.

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