Statements to Congress - Transcript

Federal Reserve Bulletin, Sept, 1997

During the past two months, the Board and HUD have held meetings with a number of consumer advocacy and industry groups involved in the legislative reform process. These meetings have been designed to give interested parties an opportunity to share their concerns about TILA and RESPA, and ideas about reform, without having to be concerned that they are being locked into any particular position.

In addition, the Board and HUD will hold a joint public forum in which the groups involved in the RESPA-TILA reform initiative, as well as members of the public, can discuss the benefits of and problems associated with the current statutory schemes and the principles that should guide any reform effort. This one-day forum will be held at the Federal Reserve Board on July 30.

After the forum, the Board and HUD will identify potential areas for legislative recommendations. These meetings will address issues raised in the comment letters received, the information gathered from the public forum and informal meetings, and other background information. If needed, we may hold additional meetings in September with the groups involved in the reform process to discuss more specific proposals.

At the end of this process, likely some time in October, we will work with HUD to begin drafting the legislative recommendations. Our goal is to provide recommendations to the Congress by the end of the year.

Statement by Alan Greenspan, Chairman, Board of Governors of the Federal Reserve System, before the Subcommittee on Finance and Hazardous Materials of the Committee on Commerce, Us House of Representatives, July 17, 1997

I appreciate the opportunity to present the views of the Board of Governors on the Financial Services Competition Act of 1997. The Banking Committee is to be commended for addressing the complex issues associated with financial modernization. The committee has taken a major step forward in permitting affiliations of banking, securities, and insurance organizations within an appropriate framework for consolidated oversight. We believe such affiliations would improve the efficiency and competitiveness of the financial services industry and result in more choices and better services for consumers. However, in addressing financial modernization the bill encompasses a large number of far-ranging provisions. The Board has difficulty with the way some of the issues are resolved in the bill before you. Thus, while reemphasizing our support for much of the general thrust of the bill, I would like today to highlight our major concerns.

Banking and Commerce

The need to respond to the effects of technology is one of the major reasons we are here today. Technology has already eroded many of the previous distinctions between banking and nonbank finance, thereby supporting the desirability, if not the necessity, of permitting the merging of all financial activities.

It seems clear that the same forces are in the process of blurring the boundaries between financial and nonfinancial businesses. Most of us are aware of software companies interested in the financial services business, but some financial firms, leveraging off their own internal skills, are also seeking to produce software for third parties. Tracking software of shipping companies lends itself to payment services. Manufacturers have financed their customers' purchases for a long time but now are increasingly using the resultant financial skills to finance noncustomers. Moreover, many nonbank financial institutions are now profitably engaged in nonfinancial activities.