News Release

“Banking Reform”?


The Clinton administration, the Republican congressional leadership and the financial services industry all seem to agree on the Gramm-Leach Act. If it becomes law, the legislation would abolish restrictions on banks, securities firms and insurance companies instituted in the aftermath of the Great Depression. Critics charge that — like the Telecommunications Act of 1996 — it will not provide the promised benefits to consumers, but will result in massive mergers and inadequate regulation. Among those available for interviews are:

Consumer advocate Ralph Nader called the proposed legislation “anti-competitive, anti-consumer and anti-community. It creates new risks for the nation’s financial system and enormous contingent liabilities for the taxpayers. The bill will mean fewer choices, higher prices and greater risks. Personal privacy will be virtually eliminated under provisions which allow financial affiliates to hijack the intimate details of individuals’ lives and freely share this information in wide-ranging cross marketing schemes.” Among the danger points highlighted by Nader was “a failure to establish a federal regulatory system that can withstand the stress of trillion-dollar conglomerates — a return to the congressional risk-taking that contributed to the $500 billion bailout of the savings and loan industry in the 1980s.” Nader also criticized “overly broad and unnecessary preemptions of state laws which are designed to protect rights of consumers in the financial marketplace.”
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A researcher specializing in Congress with the Center for Responsive Politics, Bailey said: “Banks, insurance, and securities firms for years have lobbied Congress to update laws which prohibit the industries from becoming financial ‘supermarkets,’ though lawmakers previously have given little heed to such proposals. Lawmakers enjoyed the amount of campaign cash, at least $150 million since 1996, spurred by the perennial issue. This year, lawmakers faced more pressure than ever from the industry to pass ‘reforms.’ Banks, insurance and securities — three of the wealthiest and most powerful lobbies on Capitol Hill — have made more than $30 million in soft money, PAC and individual contributions during 1999. Among the leading proponents was Citigroup. Without the new legislation, the company — which has contributed nearly $863,000 in donations to federal parties and candidates this year — would have been forced to sell some of the insurance operations it acquired from last year’s merger with the Travelers Group. In 1999, the leading recipient of banking, securities and insurance contributions — by a wide margin — was Sen. John McCain.”

For more information, contact at the Institute for Public Accuracy: Sam Husseini, (202) 347-0020 or David Zupan, (541) 484-9167

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