US finance bill rammed through both chambers of Congress

The Senate passed a final Conference Report on the Financial Services Modernisation Act of 1999 yesterday afternoon following a rather brief debate. (Conference Reports are the final drafts of bills after House and Senate versions are reconciled by a Conference Committee.) The bill enables banks, securities firms and insurance agencies to merge, and so to bless consumers with one-stop shopping convenience for all of life's most important decisions. Now a consumer may insure his health, his property and his life, invest in stocks and funds, and borrow heaps of capital for all manner of shaky scheme, just as he might bulk up on pasta primavera, pad Thai, souvlaki and Big Macs in a shopping mall food court, and never notice that they all taste exactly the same, and not very good at that. The bill has been controversial because the conglomerates contemplated under it will be able to amass enormous quantities of quite sensitive data pertaining to customers, and share it freely among their several divisions. Privacy provisions in the final draft require banks to inform customers of their privacy policies, or their total lack thereof, but permit customers to opt out of only those data-sharing schemes which involve outside third parties not affiliated with the financial conglomerate. Consumers will have no control over data shared among an institution's divisions, or its subcontractors, which may include the dreaded barbarian tribe known as telemarketers. Senator Phil Gramm (R--Texas) praised the bill lavishly as a means of bolstering American economic performance. "It is our destiny to dominate the next century as we dominated the last," he gushed. Conservative nay-sayers, like Richard Shelby (R--Alabama), were disgusted, but few in number. The bill passed on a vote of ninety to eight. The big surprise came late last night in the House of Representatives. While it had been assumed that House members would vote soon, and vote favourably, no one expected them to finish the business before the stroke of midnight on the same day. But by early evening it was clear that House proponents were determined to ride the Senate wave and ram the bill through, even if it kept them there all night. House debate mirrored that in the Senate fairly closely. The great argument for passage in both chambers was the inadequacy of the current Glass-Steagall Act of 1933. Spencer Bachus (R--Alabama) likened regulating today's banks with the Depression-era relic to driving a modern car along a dirt road. Almost without exception, proponents cited for justification the urgent need to update Glass-Steagall, and the fact that there is presently no federal privacy regulation addressing financial services, so some is better than none. Robert Menendez (R--New Jersey) proudly characterised the bill as a boon to consumers. "It's about more choices," he chirped. Edward Markey (D-Massachusetts) denounced the bill's privacy protections violently. "All you get is this," he shouted, and held up a placard with red block lettering: "NOTICE: You Have No Privacy Rights". Sheila Lee (D--Texas) summed up the moderate view: "It's not a great bill, but it's good enough," she sighed. She then quite reasonably and most intelligently recommended that Congress draft a comprehensive, stand-alone privacy bill at a later date, to address deficiencies in the banking bill's privacy protections. One objection which got very little mention is the likelihood that such vast financial empires might lead the US economy into financial interconnections and entanglements like those which have been strangling Japan and South Korea for decades. The legendary confidence Americans have in their genius for improvisation apparently persuades them that they can make precisely the same mistakes without consequence. In a letter urging passage of the bill, Treasury Secretary Lawrence Summers estimated it could save US consumers as much as $18 billion per year. Throughout the day, proponents lobbed the figure about to the point of exhaustion. Another tiring and endlessly-repeated refrain compared drafting the bill to labuors of Sisyphus. "We finally got the rock to the top of the hill," every other member joked. To be fair, financial sector legislation has been in the works for nearly a quarter century on Capitol Hill, with very little success. The banking, securities and insurance industries have been lobbying vigourously, but at cross purposes, for decades. It is only recently that they decided to harmonise their efforts; so if money talks, it has talked with one voice for only a very short time. The results have been spectacular. The bill passed the House at 11:20 PM on a vote of 362 to 57, and will now be submitted to the President for signing. It is not relevant that Congress has votes to spare in overturning a presidential veto. The Clinton administration likes this bill very much -- as it likes all accommodations of big-business ambitions -- and we would not be surprised to hear Al Gore taking credit for it during his election campaign. Of course one of his opponents, Senator John McCain (R--Arizona), actually voted for it, so there may yet be some dispute over bragging rights. We will keep you posted. ®