For Immediate Release November 4, 1999

Contact: Jim Farrell or Andy McDonald (202) 224-8440

U.S. Senator Paul Wellstone (D-Minn) forcefully urged his colleagues today to reject the financial services modernization bill conference report (S. 900) before the Senate. The measure, widely expected to be adopted by both chambers and signed into law by the President, would permit and encourage mergers between banks, insurance companies and securities firms. Wellstone pointed out in a floor speech that S. 900 will aggravate the trend towards massive economic concentration, endangering consumer privacy, our economy and our democracy.

"Modernization of the existing confusing patchwork of laws, regulations, and regulatory authorities would be a good thing, but that's not what this legislation is about. S. 900 is really about accelerating the trend towards massive consolidation of the financial sector. It fails to put in place adequate regulatory safeguards for these new financial behemoths, whose failure could jeopardize the entire economy. It's the wrong kind of modernization because taxpayers could be stuck with the bill if these conglomerates become ‘too big to fail,'" Wellstone said.

In his speech warning of the dangers that the bill poses, Wellstone cited among other issues his deep concern over the privacy of consumers' sensitive personal information; the "tidal wave" of mergers that S. 900 will set off; the exposure of taxpayers to tremendous liability if the new financial conglomerates fail; and the political influence and unaccountable economic power of these new financial conglomerates.

Wellstone warned that "S. 900 is legislation we will soon come to regret. It fails to protect consumers. It allows banks, insurance companies and brokerage houses to share personal information about consumers' credit history, investments, health treatments, and buying habits. It weakens requirements for banks to invest in their own communities. It will result in higher fees for many customers and price gouging of the unwary. And it will squeeze credit for small businesses and rural America.

"We seem determined to unlearn the lessons from our past mistakes. Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis. Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place."

"And what about the lessons of the Asian crisis? Just recently, the financial press was crowing about the inadequacies of Asian banking systems. Now we're considering a bill that would make our banking system more like theirs. The much-maligned cozy relationships between Asian banks, brokers, insurance companies and commercial firms are precisely the kind of "crony capitalism" that S. 900 would promote. "

"What's in store for us if we allow this trend toward concentration to continue? Pretty soon we're going to have three financial service firms in this country, four airlines, two media conglomerates, and five energy giants. And huge financial conglomerates the size of Citigroup will be truly ‘too big to fail.' Government officials and members of Congress will be prone to confuse Citigroup's interests with the public interest, if they don't already."

"The bigger these financial conglomerates get, the more influence they will have over our public policy choices. The bigger they get, the more money they will have to spend on political campaigns. The bigger they get, the more lobbyists they will be able to amass on Capitol Hill. And the bigger they get, the more weight they will carry in the media. It's a vicious circle. These financial conglomerates used their political clout to shape public policies that helped them grow so big in the first place. Now their overwhelming size makes it easier for them to dictate policies that will help get even bigger."

"The idea that concentrations of wealth, of economic power, and of political power are unhealthy for our democracy is a theme that runs throughout American history, from Thomas Jefferson to Andrew Jackson to the Progressive Era to the New Deal. Jefferson and Jackson warned not only against concentration of political power, but also against concentration of economic power. We should not let that debate die out. It's a vital part of our democratic heritage. It's a heritage which teaches us that ordinary people should have more say about the economic decisions that affect their lives. S. 900, on the other hand, takes us in the direction of more power for the privileged few and less say for ordinary citizens in the economic decisions that affect their lives," Wellstone said.