U.S. Senator Phil Gramm became chairman of the Senate Committee on Banking, Housing, and Urban Affairs in January 1999. A member of the committee since 1985, he had previously served as chairman and as ranking member of the Securities Subcommittee. Senator Gramm has been a leader in promoting and maintaining the global financial strength of the nation and its markets, and he has been a dogged defender of the independence of government monetary policy from political interference.

Senator Gramm holds a Ph.D. in economics, the subject he taught at Texas A&M University before winning election to the Congress in 1978.

Highlights of Senator Gramm's service include the following:

Gramm-Leach-Bliley Act - Senator Gramm was instrumental in the crafting and passage of the Gramm-Leach-Bliley Act, which was Congress' first successful effort to repeal the Depression-era barriers between banking, securities and insurance. The act won Senate and House approval on Nov. 4, 1999, and was signed into law by President Clinton on Nov. 12, 1999. Previously known as the Financial Services Modernization Bill (S.900), the Gramm-Leach-Bliley Act repeals the Glass-Steagall Act and sets out the most sweeping privacy protections ever enacted by requiring full disclosure of financial institutions' policies for the sharing of non-public personal information with both affiliates and third parties. The Gramm-Leach-Bliley Act also encourages accountability by requiring public disclosure of bank agreements related to the Community Reinvestment Act and amends the federal securities laws to incorporate functional regulation of bank securities activities and insurance activities.

Commodity Futures Modernization Act - Senator Gramm, working with Senator Richard Lugar, chairman of the Senate Agriculture Committee, won crucial market reforms with the passage of the Commodity Futures Modernization Act. The legislation, which cleared the Senate by unanimous consent on December 15, 2000, repeals the outdated ban on single stock futures and provides legal certainty for the $60 trillion dollar swaps market. With these reforms, the legislation allows the United States to retain its dominance of the global market in derivatives.

Securities - In a series of hearings in New York, Chicago and Washington, Senator Gramm and the Banking Committee took an important role in the debate over the structure of the U.S. securities markets. With his insistence on preserving competition in the marketplace, Senator Gramm was influential in the decision by large brokerage firms to abandon their plan for a so-called "Central Limit Order Book." The plan would have instituted rules for the routing of orders between various exchanges, electronic communications networks, market-making firms and other trading platforms in a way that would have stifled innovation and investor choice. Senator Gramm has also been an active advocate for competition during discussions of the Nasdaq Stock Market's plans to create a "SuperMontage" of prices for securities.

In previous Congresses, Senator Gramm was the lead proponent of these important securities laws:

The National Securities Market Improvement Act of 1996 (H.R.3005, S.1815). This regulatory reform bill made numerous changes to the securities laws to reduce regulatory burdens and costs. Prominent among its provisions are 1) a clear division of responsibility for investment adviser registration between the State governments and the Securities and Exchange Commission, 2) the preemption of state review of prospectuses of mutual funds and nationally-traded stocks, 3) an exemption of church pension plans from Federal and State securities laws, and 4) the reduction of excess SEC fees over a 10-year period, reducing the gap between these fees and actual SEC spending.

The Securities Litigation Uniform Standards Act of 1998 (S.1260). This law prevents parties from circumventing the reforms of the Private Securities Litigation Reform Act by using state laws rather than federal laws to promote abusive securities class action law suits. Under this law, class-action securities fraud cases involving nationally-traded securities will be subject to uniform federal standards. This law also includes provisions giving the SEC greater flexibility for hiring top-level economists, a longstanding priority for Senator Gramm.

The Private Securities Litigation Reform Act of 1995 (H.R.1058, S.240). This law, enacted over President Clinton's veto, has made abusive Federal securities law class action strike suits, once common, a rare occurrence. It also limits potential damages to actual damages and provides for a standard of proportionate liability instead of joint and several liability in most cases.

Accounting and Financial Reporting - Senator Gramm intensified the Banking Committee's oversight in the areas of corporate accounting and financial reporting. Hearings and an unprecedented roundtable discussion among industry leaders and accounting professionals focused attention on the proposal by the Financial Accounting Standards Board to eliminate the pooling method of accounting for corporate mergers. Senator Gramm helped forge the idea of impairment testing of intangible assets as an alternative to the FASB's controversial proposal of amortizing these assets over time. FASB has now adopted an impairment approach for all past and future acquisitions. The move has been heralded by many as improving the relevance, reliability, and comparability of American financial reporting.

Community Reinvestment Act (CRA) - Senator Gramm has been the leader on the Banking Committee in promoting reform of the Community Reinvestment Act. CRA provisions in the Gramm-Leach-Bliley Act include: the sunshine amendment, which requires full public disclosure of CRA agreements and requires each bank and each non-bank party to a CRA agreement to make a public report each year on how the money and other resources involved in the agreement were used; small bank regulatory relief, which provides that small banks and S&Ls with outstanding CRA ratings not receive a routine CRA exam more often than once each five years: and a Federal Reserve study, in which the Federal Reserve Board will examine the default rates, delinquency rates, and profitability of CRA loans.

International Trade - A long-time activist for free trade, Senator Gramm made full use of the Banking Committee's jurisdiction to air such issues as China's accession to the World Trade Organization and the Meltzer Commission's recommendations for reforms in the International Monetary Fund. In his own testimony before trade panels, Senator Gramm advocated the Africa Growth and Opportunity Act, permanent normal trading relations with China and the expansion of the North American Free Trade Agreement to include partners across the Atlantic Ocean.

The American Homeownership and Economic Opportunity Act - Senator Gramm was instrumental in drafting key pieces of this sweeping legislation that addresses issues ranging from the reform of federal housing programs to regulatory relief to Federal Reserve reports to Congress. The bill includes the Manufactured Housing Improvement Act, which originated in the Banking Committee and modernizes the requirements of the National Manufactured Housing Construction and Safety Standards Act of 1974. The American Homeownership and Economic Opportunity Act also renews some 45 reporting requirements for the executive branch and regulatory agencies, including the Federal Reserve's report on monetary policy, previously required under the lapsed Humphrey-Hawkins Act. The legislation requires, for the first time, that the Chairman of the Federal Reserve appear before Congress twice annually to report on the conduct of monetary policy.

Loan Guarantees - Under Senator Gramm's leadership, the Banking Committee created an important model for future loan guarantees in the Launching Our Communities Access to Local Television Act of 2000 (LOCAL TV Act of 2000), S. 2097, which passed the Senate by a 97-1 vote on March 30, 2000, and was signed into law Dec. 21, 2000. The legislation establishes key elements of an effective loan guarantee program by defining the financial responsibility of the lender, setting strong collateral requirements and requiring an independent allocation of credit through the use of a board that includes the chairman of the Board of the Federal Reserve System, the Secretary of the Treasury, and the Secretary of Agriculture, or their designees. In addition, S. 2097 increases the likelihood that unserved households in rural areas will receive local television signals, which is the primary purpose of the Act, by making it more difficult for projects that are not economically feasible to be approved.

12/22/00

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