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Financial Services
At the start of 2001, I joined the newly-formed House Financial Services Committees.
The Committee has jurisdiction over banking, securities,
insurance, housing and international lending institutions like
the IMF and World Bank. I'm thrilled to be a member of this
Committee, which oversees so many issues important to
Fairfield County.
Fannie Mae and Freddie Mac
One of my main focuses on the Financial Services Committee
is to improve disclosure at these two government-sponsored
enterprises. Currently, Fannie and Freddie are the only
publicly-traded companies in the United States that do not
have to register with the Securities and Exchange Commission
or disclose basic information to investors.
Along with Congressman Ed Markey, I introduced H.R. 4071, the Uniform Securities Disclosure
Act. Our bill would repeal Fannie and Freddie's
exemptions from federal securities laws and put these two
firms in line with all other publicly-traded companies.
Reforming Accounting Practices
In response to the Enron bankruptcy and the
highly-questionable accounting practices of its accounting
firm, Arthur Andersen, the House passed the Corporate and Auditing Accountability,
Responsibility, and Transparency Act (CAARTA) by a vote of 334 to 90.
CAARTA contains important reforms to the accounting
industry and represents a balanced approach between industry
and government oversight. It prohibits accounting firms from
offering certain controversial consulting services to
companies they're also auditing. And it establishes a new,
public regulatory board to certify any accountant wishing to
audit the financial statement required from public issuers of
stock. This board will have enforcement powers and will be
under the direction of the Securities and Exchange
Commission.
Full
statement of Congressman Shays on CAARTA
Terrorism Reinsurance
I am an original cosponsor of H.R. 3210, the Terrorism Risk Reinsurance
Act, and voted for the bill when it passed the House
on November 29 by a vote of 227 to 193.
H.R. 3210 is a balanced response to the economic disruption
caused by the terrorist attacks. A lack of available,
affordable insurance coverage for businesses could cause
significant disruptions, and that's the last thing we need
while the economy is struggling to regain its footing.
H.R. 3210 protects taxpayers and consumers, with a
significant industry and policyholder stake in terrorism
claims. The bill includes relatively little regulation because
the program would only kick in if a significant terrorist
attack occurs.
H.R. 3210 institutes a federal risk-sharing program for
medium and large terrorism events, with the federal government
responsible for 90 percent of the claims. Insurance companies
would be responsible for the remaining 10 percent of the
claims. In the case of a medium-sized event ($100 million to
$20 billion), all U.S. property and casualty companies would
be assessed over time in order to pay back the federal
assistance. In the case of a large event (over $20 billion in
claims), all commercial policyholders would pay a terrorism
surcharge over time.
In the long term, H.R. 3210 will encourage insurance
companies to set aside terrorism reserves by removing the tax
penalty on these reserves. The reserve amount would be limited
and could only be used for future terrorism claims or in the
case of company insolvency.
The Gramm-Leach-Bliley Act
One of the most important congressional accomplishments in
recent years was the passage of legislation modernizing the
financial services industry. This historic legislation was 20 years in
the making.
I voted for the Financial Services Act, also known as
Gramm-Leach-Bliley for its principal authors, because it will
update our depression-era banking laws so they keep peace with
an evolving market. In my remarks on the House floor, I
stated:
The simple fact is, these banking reforms are long
overdue. The anti-affiliation provisions of the
Glass-Steagall Act are sorely outdated and have increasingly
impeded the United States' ability to compete in the new
world economy. Encouraging greater competition will lower
prices for financial services and improve products,
benefiting consumers and the economy.
The comprehensive financial reforms contained in the
Financial Services Act will promote greater competition by
allowing banks expanded activities such as securities and
insurance. It also allows insurance agents and companies to
offer financial services typically provided by banks, and to
affiliate with financial institutions.
While I realize some will benefit from the changes more
than others, fostering competition between financial
institutions ultimately will ensure consumers have greater
choices at lower cost.
I also believe any expansion of banking or insurance
powers, must be functionally regulated. Banks that offer
insurance should be regulated under the state insurance
commission. Insurance companies that offer financial services
should be governed by regulations that apply to banks. And the
Securities and Exchange Commission should regulate securities
activities. The Financial Services Act includes all these
requirements.
ATM Fees
The Financial Services Act also requires ATM operators to
disclose surcharge fees imposed on non-customers, both on a
sign placed on the machine and as part of the on-screen
display. The bill prohibits the imposition of these fees
unless the required disclosures are posted and the consumer
elects to proceed with the transaction after receiving such
notice.
Financial Privacy
During consideration of the Financial Services Act, I voted
for an amendment to strengthen the bill's consumer privacy
protections. The amendment, which passed by a vote of 427 to
1, does the following:
- imposes on all financial institutions an obligation to
respect the privacy and protect the confidentiality of
customers' personal information;
- requires financial institutions to disclose their
policies for collecting and protecting confidential
information;
- allows consumers to "opt-out" of information-sharing
policies with unaffiliated third parties;
- prohibits unaffiliated third parties that receive
confidential customer information from sharing this
information with any other unaffiliated party; and
- prohibits financial institutions from disclosing to
third parties any credit card, savings, and transaction
account numbers for marketing purposes.
The version of the Financial Services Act ultimately signed
into law further strengthened the above privacy protections by
stating that state laws that provide greater financial privacy
would not be preempted by the
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