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And when you drop by your insurance agent a few days later to take out a new life insurance policy, will he, after a few clicks of the mouse on his computer, look over to you and ask, so, can you tell me what all those recent charges are for sky-diving lessons?

Well, if we allow all of this to be mixed into one company, each one of these people will have access to your file whether or not they have any basis to have access to it.

Now, your friendly banker or broker or insurer in that one company wouldn't be foolish enough to actually reveal to you that they have gathered all of this sensitive information about you because they know that if they ever did, you would reach right across the desk and throttle them for their insolence in prying into your personal affairs and talking about your daughter, your wife, your mother in those terms. But they do have the file right in front of them even though you didn't go to them, that broker or that insurance agent or any other part of that affiliate for those services.

Under current law, there is nothing, absolutely nothing to prevent them from taking your family secrets and selling or transferring them to their affiliates all in the name of synergies. H.R. 10 does very little to stop the principal harm done by those much touted synergies, the taking of an individual's most precious private property right, their right to privacy.

We are going to form a Congressional privacy caucus. We need one. As all of these technologies converge, as all of these financial institutions converge, we need a Congressional privacy caucus to ensure that we have an ongoing monitoring of these issues. Every citizen has a right to knowledge of the information that is being gathered about them, notice that the information is going to be reused for purposes other than that which they originally intended, and the right to say no, they don't want this information used for any other purpose.

I hope that as we move forward on the markup of this legislation that we can ensure that these privacy rights of every American are indeed protected.

I thank you, Mr. Chairman, and I yield back the balance.
[The prepared statement of Hon. Edward J. Markey follows:]

CONGRESS FROM THE STATE OF MASSACHUSETTS Thank you, Mr. Chairman. One of the most critically important domestic policy issues coming before the Congress this session is what is going to happen to the consumer's most personal information, including their financial records, or their health and insurance information when banks, brokerage firms, and insurance companies all merge with one another under the financial services modernization legislation, H.R. 10.

It has now become increasingly clear that consumers are today at great risk of having their privacy totally compromised as the affiliations occurring in the marketplace and sanctified under this bill allow banks, brokers, and insurance companies to compile a detailed digital dossier of a consumer's most sensitive health and medical records, their credit card and checking account transactions, their bank balances and loans, and their life and medical insurance information. If we fail to act now, we will soon be facing Big Brother Banking-financial institutions that can snoop into our lifestyles, our finances, our health records, our most personal family secrets. Now, the financial services industry likes to tell us all about the wonderful "synergies” that will result when our personal secrets are sold or transferred to affiliates.

But let's just take a look into the future at what some of these "synergies” actually could mean for consumers. The next time you get cold-called by a stock broker, will he tell you, "Hey, I see here that you've been buying Ritalin for your daughter. Well, you know, there are a lot of kids on Ritalin these days for Attention Deficit Disorder, and the company that makes this stuff is about to have its stock go right through the roof. But right now, it's undervalued and so we're recommending to our customers that they buy now.

"Oh, and I see that you've been buying Depends for your 85-year old mother-inlaw, who lives at home with you. Well, our health sector analysts are projecting continued growth in the incontinence market as the Baby Boomers reach their Golden Years, so now is really the time to get in on the stock of the companies that make these products. And speaking of companies whose products are selling like hotcakes, I guess I don't need to tell YOU how much that Viagra drug is taking off—if you know what I mean?"

And, the next day, when you and your wife drop by to visit your friendly banker seeking a mortgage for the dream home you've just made an offer on, does he sympathetically shake his head as he reviews his computer database, saying that he's so sorry to see that your wife has recently been under treatment for breast cancer, but “the bank is just going to have to require a larger downpayment and higher interest rate to reflect the increased risk it would bear if it were to grant this mortgage application, given the fact that you will be relying on both of your incomes to make the mortgage payments.”

“Oh, and by the way, we see that you've been charging quite a tab down at Joe's Tavern over the last two months, which I guess is understandable in light of your daughter's ADD, your mother-in-law's incontinence problem, and your wife's cancer treatments. But we're just somewhat concerned about the impact of your recently increased drinking habits on your continued ability to pay back this mortgage you're asking us to grant you.”

And when you drop by you insurance agent a few days later to take out a new life insurance policy, will he, after a few clicks of the mouse on his computer, look over to you and ask, “So, can you tell me what all these recent charges are for Skydiving Lessons?”. “And I also see that you've recently written several checks for psychiatric counseling and you've also submitted claims for a Prozac prescriptionwhat's that all about?” “Now, I am sorry to have to ask this, but you know—it's company policy. I mean, between your kid's ADD, your mother-in-law's incontinence, your wife's breast cancer, your recently increased drinking, your impotence, and, well, this new skydiving thing—well, our management might say that we shouldn't really insure you at all. I mean, let's face it, given all you've been going through, you are definitely one big suicide risk.

Now, of course, your friendly banker, broker, or insurer won't be foolish enough to actually reveal to you that they've gathered all this sensitive information about you, because they know that if they ever did you'd probably reach right across

the desk and throttle them for their insolence in prying into your personal affairs. But, under current law, there is nothing to prevent them from taking your family secrets and selling or transferring them to their affiliates—all in the name of "synergies.” And H.R. 10 does very little to stop the principal harm done by these much touted "synergies”—the taking of an individual's most precious private property right, their right to privacy.

In order to provide meaningful privacy protections, H.R. 10 needs to provide consumers with three things: Knowledge of what information is being collected about them; Notice before information is transferred to affiliates for purposes other than the original purpose for which it was provided, and a right to say No. I intend to offer amendments to this legislation which would provide consumers with Knowledge, Notice and Know, and I urge my colleagues to support this effort. In addition, I would like to notify the Members that I am today establishing a Congressional Privacy Caucus to serve as a clearinghouse for information on privacy matters and educate and organize Members with an interest in these critical issues, so that we can prevent the digital disutopia that I have just described from coming into being. I urge my colleagues to join me in this endeavor.

Mr. OXLEY. The gentleman yields back. The Chair now recognizes the vice president of the subcommittee, the gentleman from Louisiana, Mr. Tauzin.

Mr. TAUZIN. Thank you, Mr. Chairman.

I commend you for moving H.R. 10 again this year in an attempt to settle this incredibly complex and contentious set of issues. Just last week, Alan Greenspan, chairman of the Federal Reserve

Board, shared with us his concerns regarding H.R. 10 as it was reported out of the banking committee.

I am pleased to see my colleague from Louisiana who serves on that committee here. I wanted to say up front that I think Mr. Greenspan's concerns about the op-sub model proposed by the banking committee are shared by this member. As reported out of H.R. 10 as it came out of banking it would enable banks to transfer safety net subsidies to their operating subsidiaries engaged in financial activities not conducted directly in the banks.

Mr. Greenspan indicated his concern, I share it, that this would place traditional securities and insurance firms at a competitive disadvantage as it clearly would not have the access to the payment system that would be affordable indeed to banks engaging in these activities. Ultimately, I disagree with the notion that the securities or insurance firm should have access to a payment system just because it is an operating subsidiary of a bank. In fact, I can't see a good reason why any securities, insurance, and nonbanking entity should be afforded access to the payment system.

To try to put it in perspective here, banks have always been allowed to receive Federal safety net subsidies for one reason, because we believe that it is important to preserve the safety and soundness of the banking system in which Americans deposit their money for safekeeping. It makes sense. Depositing money in a bank should be, as much as possible, a riskless activity. And the payment system exists to ensure against or eliminate as many of those risks as possible when that money is deposited.

By contrast, it is counterintuitive, in fact it is ridiculous to say that an investor is going to expect any loss she might incur as a result of investing in an inherently risky capital market should be insured by the taxpayers through the Federal Government that insures these safety net deposits. Fundamentally then, it doesn't make sense for the Federal Government to insure against capital losses, and I can see no justification whatsoever for enabling subop investments and securities firms to access Federal safety nets subsidies.

That access would indeed result in competitive disadvantages, and I think would subsidize the capital investment activities on behalf of the investing customers. I understand that Secretary Rubin will favor the sub-op model, and I am anxious to hear if he can address those concerns. Ultimately, there is an additional concern that I have with H.R. 10 that I want to hear briefly.

I am concerned about the way that the insurance provisions are drafted. In my view, the bill in its current state seems to strip the States of their much needed authority to regulate the sale of insurance and protect insurance customers. In lieu of affording the States the requisite authority to properly regulate insurance, the bill appears to give the comptroller and the office of thrifts division a great deal of regulatory discretion to control these activities.

I just had some recent experience with the FCC that I think we all should remember. The FCC recently, through court action, deprived our States of their authority to local telephone rates based on economies of scale and local costs. Just as local special considerations and insurance has generally been regulated on a State and local basis, because of that, I have grave concerns about a policy that would move more and more authority to a Federal system of regulation and the uncertainties of changes in that Federal regulatory scheme from time to time.

That provision of H.R. 10 deeply concerns me. After all, the terms of the insurance policies are usually based on many local considerations to which Federal regulators are not at all sensitive. Again, Mr. Chairman, I am anxious to hear my good friend, especially my friend from Louisiana, but I also look forward to hearing Secretary Rubin's defense of what I consider to be some very bad policy when it comes to sharing the Federal safety net to risky capital investments. I yield back the balance of my time.

Mr. OXLEY. The gentleman yields back.

The gentleman now recognizes the gentleman from Michigan, the ranking member of the full committee, Mr. Dingell.

Mr. ÞINGELL. Mr. Chairman, I thank you for your courtesy and I thank you for the hearing.

Mr. Chairman, I will not belabor the points I made in my opening statement at last week's hearing. That record is, I think, a good one; and I am pleased to have made the opening statement and received the courtesy of the Chair on that matter.

I will reiterate one thing. I am strongly opposed to H.R. 10 in its current form. I am willing to work with my colleagues to improve it. However, unless it is significantly changed, I will regretfully be opposed to it at every stage of the legislative process with great vigor.

On behalf of the minority, I will need to note a serious procedural and substantive issue for the record. Last week we were informed by the majority staff that we could not hear from consumer group witnesses at today's hearing because there would be three panels of administration and industry witnesses and thus no time or room to accommodate the minority's request.

While I understand that time is dear, I would note that having a full and complete record is extremely important and having the views of consumers on this matter is something which is very important both to a proper hearing of the matter and also to a proper hearing record, as well as to give the committee the information on all viewpoints with regard to the legislation. I feel very strongly that we do need in this committee a strong record on key consumer issues, including privacy and the community reinvestment act. Therefore, it would be my hope that we could hear these witnesses at a time soon and that we could do a good job of achieving a proper and a full record.

I would note that two of my colleagues from the banking committee, Republican members, are being heard this morning. They were added at the last minute. That is fine. I have no objection to that and certainly there is no ill will either toward these members or toward having them heard. But we do believe that there should be an opportunity for the committee to hear from consumer witnesses and that we should make the necessary room and opportunity for them to be heard.

I would also note that the Treasury Department testimony arrived last evening after most members of the staff had left for the day. I respectfully request then that the record be kept open for the submission of written questions for the Secretary after we have had adequate opportunity to review his written statement and the issues that that statement raises.

I would note that the Chair has been providing good leadership in our consideration of this matter, and I thank you for recognizing me for my comments.

Thank you, Mr. Chairman.

Mr. OXLEY. The gentleman yields back. Without objection, any questions to the Secretary in writing would be in order. Without objection it is so ordered.

Mr. OXLEY. The gentleman from Kentucky, Mr. Whitfield.

Mr. WHITFIELD. Thank you very much, Mr. Chairman. Thank you, Mr. Chairman, for recognizing me.

I wanted to welcome today to this hearing George Nichols who is the Commissioner of Insurance from the State of Kentucky. I know he has testified before this committee before. He is a real expert in this area. He is considered one of the most effective insurance commissioners we have had in Kentucky for some time and his peers at the National Association of Insurance Commissioners respect him so much that they named him the chairman of their special committee on financial services modernization.

So, Mr. Commissioner, we look forward to your testimony as well as that of the other distinguished witnesses this morning.

I yield back the balance of my time.
Mr. OXLEY. The gentleman yields back.

The gentleman from Minnesota, Mr. Luther. No opening statement?

The gentleman from Iowa, Dr. Ganske.
Mr. GANSKE. Thank you, Mr. Chairman.

I think it would not have been unreasonable for a lobbyist when I started in 1995 to have said I expect that you will see a vote on war and a vote on an impeachment of the President before you

will ever see Glass-Steagell changed.

Well, it is possible that we are seeing light at the end of the tunnel, and the reason for that is that I think there is a consensus that the form of Glass-Steagell would provide for better services for consumers and would also help our financial services industry in the United States compete better globally. Des Moines has a very strong financial services and insurance industry, and so I have been very interested in this issue.

Why am I optimistic? Well, there was a big bipartisan vote that came out of banking, and I appreciate Mr. Baker and Mrs. Roukema for being here today. I am hearing that leadership on both sides of the aisle in both the House and the Senate would like to see something happen this year as well as the administration. That doesn't mean that there aren't some problems and some bumps along the way that we will have to look at. It has already been mentioned that the operating subsidiary issue, the financial medical privacy issue, CRA-but I feel that there is a coalition that is there that has come together based on work that we did in the last Congress that is delicate but is in agreement on most of the major things as it relates to insurance, securities, banking, and consumer protections.

And I am very hopeful, Mr. Chairman, that maybe this year we will actually get the job done. Maybe the stars will come into align

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