TESTIMONY OF ARTHUR LEVITT, CHAIRMAN, U.S. SECURITIES AND EXCHANGE COMMISSION CONCERNING H.R. 268, THE "DEPOSITORY INSTITUTION AFFILIATION AND THRIFT CHARTER CONVERSION ACT" BEFORE THE SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT OF THE COMMITTEE ON BANKING AND FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES February 13, 1997 Chairwoman Roukema and Members of the Subcommittee: I appreciate the opportunity to appear on behalf of the Securities and Exchange Commission ("Commission") to discuss H.R. 268, the Depository Institution Affiliation and Thrift Charter Conversion Act, introduced by Chairwoman Roukema and Congressman Vento. I commend the Chairwoman for raising the important issue of financial services reform so early this session. H.R. 268 has been characterized as a "work in progress," and the Commission is pleased to offer its perspective on the securities issues raised by H.R. 268 as the debate on Glass-Steagall reform moves forward in the 105th Congress. I. Overview ==========================================START OF PAGE 2====== The Commission supports the primary goal of H.R. 268: modernization of the financial regulatory structure. As you know, such reform is long overdue. Recent decades have seen dramatic growth in the U.S. capital markets -- and corresponding shifts in the role and function of banks. For the first time ever, the American public has put more of their savings in mutual funds than in insured bank accounts.-[1]- As we move toward the next century, this trend likely will continue-[2]- -- and even accelerate -- particularly if recent proposals to privatize, or semi-privatize, the social security system are adopted.-[3]- Banks, meanwhile, have come to play an ever-larger role in the securities markets. Over the last twenty years, expansive regulatory interpretations have given banks entry into a wide range of securities activities that were once believed to be off- ---------FOOTNOTES---------- -[1]- Data compiled by Office of Economic Analysis, U.S. Securities and Exchange Commission, based on January 1997 Federal Reserve Bulletin and 1996 Mutual Fund Fact Book (as supplemented with data from Chief Economist, Investment Company Institute); see also, Remarks by Eugene A. Ludwig, Comptroller of the Currency, before the Exchequer Club, Nov. 20, 1996 (OCC News Release 96-127). -[2]- For example, three of the nation's largest mutual fund companies, Federated Investors, Vanguard, and T. Rowe Price, reported record-breaking cash inflows into stock mutual funds for the month of January 1997. See "Money Pours into the Stock Mutual Funds," N.Y. TIMES (Jan. 29, 1997) at D2. -[3]- See "Report of the 1994-1996 Advisory Council on Social Security" (Jan. 1997). ==========================================START OF PAGE 3====== limits under the Glass-Steagall Act. However, the statutory framework that governs banks' securities activities has not evolved to keep pace with these developments. As a result, we are left with an archaic and crazy-quilt regulatory framework that no longer corresponds to the realities of today's market. It is plainly time to modernize this framework. A new regulatory structure should provide the banking and securities industries with greater flexibility and new avenues for innovation. But, at the same time, financial services modernization must not lose sight of the needs of investors. Investor confidence is responsible for the vibrant and successful securities markets that we enjoy today. The Commission believes that investor protection, which is the basis for investor confidence in the markets, should be a top priority as Congress explores ways to modernize the financial system. Equally important, Congress also should consider carefully the overall impact of financial restructuring on the U.S. capital markets as a whole. The U.S. securities markets are the deepest, most liquid, and strongest in the world, with approximately $1.2 trillion raised in 1996 alone.-[4]- This capital was raised from investors, through the entrepreneurial and risk-taking ---------FOOTNOTES---------- -[4]- This figure includes firm commitment public offerings and private placements, and does not include best efforts underwritings. Securities Data Company. ==========================================START OF PAGE 4====== efforts of securities firms, without the benefit of any sort of federal deposit insurance safety net, as protects bank depositors. We must preserve the securities industry's ability to assume risks, without being saddled with layers of safety and soundness regulation, in order to ensure the continued vitality of the U.S. securities markets and the resulting flow of capital to the U.S. business community at large. H.R. 268 seeks to modernize the financial services system by creating a new, alternative, form of holding company, the "financial services holding company," under which well- capitalized banks could affiliate freely with all types of financial institutions (including securities and insurance companies) and with commercial companies, on a more limited basis.-[5]- The regulator of the largest bank in the holding company system would act as the "lead" regulator, monitoring the operations of the financial services holding company as a whole under a "risk assessment" approach. Holding company affiliates, including securities firms, would be regulated on a functional basis. Additional provisions would facilitate information-sharing between functional regulators and the "lead" bank regulator. Finally, the bill would create a National Financial Services Committee -- composed of the Secretary of the Treasury, the leaders of the Office of the ---------FOOTNOTES---------- -[5]- Commercial affiliations would be limited to 25% of the U.S. business of the entire financial services holding company organization. ==========================================START OF PAGE 5====== Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Commission, and a state insurance regulator. This Committee would implement key provisions in the new regulatory scheme. Notably, H.R. 268 would leave largely intact the existing scheme for banking organizations that choose not to operate under the new framework, and would not subject the activities of these entities to functional regulation. The Commission believes that H.R. 268 makes a useful contribution to the ongoing debate on financial services reform. In particular, the Commission is supportive of the broad concept of holding company risk assessment included in H.R. 268. This type of system has worked well in the securities context.-[6]- Viewing H.R. 268 as a whole, however, the Commission has reservations. In particular, the Commission has serious concerns regarding the bill's approach to functional regulation, a concept the Commission has consistently supported as different financial ---------FOOTNOTES---------- -[6]- Under the Commission's risk assessment program, broker-dealers are required to file quarterly reports on their affiliates within a holding company group whose business activities are reasonably likely to have a material impact on the financial and operational condition of the broker- dealer. Under this program, the Commission receives essentially the same information that an affiliated bank holding company of a registered broker-dealer is required to file with the Federal Reserve Board. ==========================================START OF PAGE 6====== reform proposals have been made. The bill would not provide adequate investor protection to the large number of customers buying securities through or obtaining investment advice from banks that would continue to operate under the current system. More generally, the Commission notes that the bill's incremental approach -- grafting a new regulatory scheme onto the existing framework -- may not go far enough. Rather than seeking to rationalize or simplify the current maze of regulatory requirements, H.R. 268 would add another bank-oriented regulatory framework to the many options available to banks, without addressing many of the problems that have arisen under the current system. Admittedly, H.R. 268 would provide securities firms with new options to affiliate with banks. However, these new affiliations would be subject to a complex, bank-centered regulatory scheme, even if a banking entity were only a small part of a securities firm's overall operations. Viewed from the securities perspective, the Commission believes that financial services reform should address the following key elements. ù Functional regulation, to be meaningful, needs to be fully implemented so that investors who do business with banks ==========================================START OF PAGE 7====== receive the same protections as other investors in the securities markets, without exception. ù A new financial regulatory scheme should attempt to rationalize the current regulatory scheme, moving beyond the traditional focus on banking (as banks move beyond their traditional functions and as investors opt to invest more of their savings in securities products). ù Opportunities for market participation should be provided to banks and securities firms alike, with competition occurring on the basis of market performance (rather than differences in regulation). The Commission believes that H.R. 268 falls short of these goals. The Commission urges the Subcommittee to work toward a regulatory framework that fully protects investors, that fits today's marketplace, and that will allow our financial institutions the flexibility to compete and innovate in a global economy. II. Functional Regulation For more than a decade the Commission has urged Congress to adopt a system of functional regulation for all participants in the securities markets in order to ensure that the securities and ==========================================START OF PAGE 8====== banking activities of all market participants -- regardless of the structure in which they are conducted -- would be subject to a single set of standards, consistently applied by one expert regulator.-[7]- The Commission continues to strongly support the principle of functional regulation. H.R. 268 would amend the federal securities laws to provide for a measure of functional regulation. The Commission believes, however, that the functional regulation provisions contained in H.R. 268 are flawed, for the following reasons. ---------FOOTNOTES---------- -[7]- See e.g., Testimony of Arthur Levitt, Chairman, U.S. Securities and Exchange Commission, Regarding H.R. 1062, The Financial Services Competitiveness Act of 1995, Before the Subcommittee on Telecommunications and Finance and the Subcommittee on Commerce, Trade and Hazardous Materials of the Committee on Commerce, U.S. House of Representatives (June 6, 1995); Testimony of Arthur Levitt, Chairman, U.S. Securities and Exchange Commission, Concerning H.R. 3447 and Related Functional Regulation Issues, Before the Subcommittee on Telecommunications and Finance of the Committee on Energy and Commerce, U.S. House of Representatives (April 14, 1994); Testimony of Richard C. Breeden, Chairman, U.S. Securities and Exchange Commission, Concerning Financial Services Modernization, Before the Subcommittee on Telecommunications and Finance of the Committee on Energy and Commerce, U.S. House of Representatives (July 11, 1990); Memorandum of the Securities and Exchange Commission (under Chairman David Ruder) to the Subcommittee on Telecommunications and Finance of the U.S. House Committee on Energy and Commerce, Concerning Financial Services Deregulation and Repeal of the Glass-Steagall Act (April 11, 1988). ==========================================START OF PAGE 9====== When the federal securities laws (which exempt banks from the definitions of "broker," "dealer," and "investment adviser") were written, it was widely assumed that the Glass-Steagall Act barred banks from engaging in most securities activities. That assumption no longer holds true. Today, banks engage in a wide range of broker-dealer and investment advisory activities that are comparable to, and competitive with, the services of registered securities firms and registered investment advisers. But, because the bank exclusions would remain intact under H.R. 268 for banks not operating under the proposed new framework, only banking law would apply to banks that engage directly in these activities.-[8]- As a result, investors who buy securities from these banks would continue to receive a different, and in our view lower, standard of protection than do investors who buy securities from broker-dealers. The Commission believes that this distinction ill-serves investors. Investors all deserve equally high protections regardless of the institution through which they invest in our markets. For example, in recent years, banks have become advisers to more and more registered investment companies. As of December 31, 1996, 119 banks advised 2857 funds (including individual classes), representing approximately 28% of all funds registered with the Commission. Also as of that date, assets of bank- ---------FOOTNOTES---------- -[8]- These banks, however, would continue to be subject to the antifraud provisions of the federal securities laws. ==========================================START OF PAGE 10====== advised funds totaled $493.2 billion, or 15% of total mutual fund assets.-[9]- Despite this dramatic growth, only banks that operate under the proposed new framework of H.R. 268 would become subject to the Investment Advisers Act. All other banks would continue to be exempt. These other banks, even though they act as advisers to registered investment companies, would not be subject to a number of substantive requirements applicable to registered investment advisers, including regulation of performance fees, procedures to prevent misuse of non-public information, and the anti-fraud provisions. More importantly, maintaining the bank exemption under the Investment Advisers Act will hinder Commission oversight of bank- advised funds because Commission examiners do not have access to all the books and records normally available when a fund adviser is registered with the Commission. Thus, the Commission would continue to have to regulate in this area "with one hand tied behind its back." Given the increased public demand for mutual fund investments, the Commission views these limitations on its mutual fund regulatory program as unacceptable.-[10]- ---------FOOTNOTES---------- -[9]- Lipper Analytical Services, Inc., Lipper Bank- Related Fund Analysis (1996). By contrast, banks in 1990 advised 517 funds with total assets of $85.9 billion. -[10]- In June 1995, the Commission and the Office of the Comptroller of the Currency agreed to conduct joint examinations of bank-advised mutual funds and of banks that provide advisory, custodial, transfer agency, or other recordkeeping services (continued...) ==========================================START OF PAGE 11====== Similarly, H.R. 268 would not adequately deal with the conflicts that exist when banks transact business with affiliated investment companies. For example, H.R. 268 would replace certain limitations under the Investment Company Act that apply to all fund affiliates (including banks and broker-dealers) with new limitations that apply solely to the activities of banks and broker-dealers that operate under the new regulatory framework. This change actually would reduce the Commission's ability to police conflicts of interest.-[11]- Likewise, H.R. 268 would allow banks not operating under the new regulatory framework to continue to engage in broker-dealer activities outside the federal securities laws. These "exempted" banks would continue to operate free of important requirements relating to protection of customer securities, continuing education of securities salespersons, disqualification of salespersons with disciplinary history, and the duty to supervise. Significantly, bank customers also do not have a forum to address grievances, such as the Commission-supervised ---------FOOTNOTES---------- -[10]-(...continued) to mutual funds. Under this agreement, the agencies have conducted five joint examinations of bank fund complexes. While these examinations have been useful, they have only been conducted on a limited scale and do not represent a long-term solution. -[11]- A more detailed analysis of the technical issues arising under the Investment Company Act and the Investment Advisers Act is included in the Appendix to this testimony. ==========================================START OF PAGE 12====== arbitration forum available to customers of securities firms.-[12]- In addition to the above problems, a bank operating within the new framework also would have many securities exemptions. Most dramatically, the bill would provide for an open-ended exemption for transactions in securities that banking regulators characterize as "qualified financial contracts," (which potentially could include any securities contract). Similarly, the bill would provide for an exemption for bank transactions in securities that are deemed by the banking regulators to be "banking products."-[13]- These provisions are of grave concern to the Commission. In addition, the Commission continues to have concerns regarding the large numbers of exemptions provided by the bill for significant securities activities, ---------FOOTNOTES---------- -[12]- As the Commission has noted in previous testimony, the federal banking laws do not contain private rights of action for investors. See e.g., In re Fidelity Bank Trust Fee Litigation, 839 F. Supp. 318 (E.D. Pa. 1993); In re Corestates Trust Fee Litigation, 837 F. Supp. 104 (E.D. Pa. 1993). Since banks are subject to section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, bank customers presumably can bring private actions against banks under these provisions. But see Simpson v. Mellon Bank, N.A., Fed. Sec. L. Rep. (CCH) 98,027 (E.D. Pa. 1993). -[13]- While the "banking product" exclusion would be interpreted by the National Financial Services Committee, we note that this Committee would be dominated by banking regulators. ==========================================START OF PAGE 13====== including private placements and asset-backed securities.-[14]- Investor protection would be a substantial concern given the bill's broad exemptions for firms that would affiliate under the new framework. By permitting the same product -- securities -- to be sold under two different regulatory schemes, this structure would result in disparate regulatory schemes for investors. The Commission believes that financial products that are, in fact, securities, should be treated as securities, and should be sold consistent with requirements promulgated by securities regulators.-[15]- Due to the disparate missions of the securities and banking regulators, investors at banks lack a number of protections available to their counterparts at broker- dealers, such as recourse to arbitration and insurance protections for securities held at banks. ---------FOOTNOTES---------- -[14]- The Commission expressed similar concerns regarding provisions contained in H.R. 1062 in the 104th Congress. See Testimony of Arthur Levitt, Chairman, U.S. Securities and Exchange Commission, Regarding H.R. 1062, The Financial Services Competitiveness Act of 1995, Before the Subcommittees on Telecommunications and Finance and Commerce, Trade and Hazardous Materials of the Committee on Commerce, U.S. House of Representatives (June 6, 1995). -[15]- In this regard, Commissioner Wallman has noted that, as distinctions between securities and nonsecurities financial products diminish, other forms of financial service regulatory reform may be worthy of long-term consideration. Remarks of Commissioner Steven M. H. Wallman before the SIA Conference on the National Securities Markets Improvement Act of 1996 (January 9, 1997). ==========================================START OF PAGE 14====== III. "Two-Way Street" A. Securities and Banking Affiliations. The Commission supports legislative efforts to permit affiliation among all types of financial institutions. The Commission believes, however, that such reform should allow for competitive equality among banks and securities firms. To the extent banks are allowed to own securities firms, securities firms should be allowed to own banks. Alternatively, if they choose, securities firms should be able to have access to banking functions, such as the payments system, through limited purpose entities that are fully subject to banking regulation, but without taking on intrusive holding company regulation. If legislation paving the way for a "two-way street" is not enacted, securities firms will find themselves at the wrong end of a "one-way street." This would be due to regulations (rather than statutes) giving banks and bank holding companies the ability to own securities firms as operating subsidiaries and as so-called "Section 20" subsidiaries -- options with no corresponding parallel for securities firms. Such a "one-way street" also creates competitive inequalities within the securities industry -- between those securities firms affiliated with banks (which would then have competitive advantages due to access to the payments system, for example) and those without any bank affiliation. ==========================================START OF PAGE 15====== H.R. 268 would permit securities firms to affiliate with banks through a new framework. For such reform to be meaningful, though, securities firms must be able to continue to engage in entrepreneurial, risk-taking activities crucial to the capital formation process without the constraints of bank-like regulation. Opening up a "two-way street," therefore, also opens up the issue of preserving the safety and soundness of any bank affiliated with a securities firm without unduly limiting the operations of the securities firm. The Commission believes that "safety and soundness" restrictions should not be applied to an entire organization made up of securities firms, insurance companies and other financial service providers. Rather, these restrictions should be focused expressly on the banking functions that require this type of regulation. Increased risks admittedly would accompany a more concentrated financial system resulting from the affiliation of securities firms and banks. The Commission believes that such risks can be managed, however, with separate and segregated entities having strong capital and with firewalls that are implemented within a simple, clear regulatory structure.-[16]- ---------FOOTNOTES---------- -[16]- Commissioner Wallman believes that, under a system of functional regulation where the Commission had appropriate authority to regulate the securities activities engaged in by banks and their related separate entities, the particular form of entity should be irrelevant to the Commission. See (continued...) ==========================================START OF PAGE 16====== For these reasons, the Commission supports the thrust of the risk-assessment provisions of H.R. 268. Use of the risk assessment model provides for oversight of regulated entities without applying cumbersome bank safety and soundness regulations to bank securities affiliates. However, H.R. 268 would depart from the securities risk assessment model, for example, in giving banking regulators unlimited authority to impose additional limitations, restrictions, or conditions on relationships or transactions among banks and their securities affiliates, based on "safety and soundness" considerations. Banking-type regulation should be isolated to the insured bank, leaving other affiliates to more market-style regulation. Moreover, the Commission believes that the allocation of "lead" supervisory authority to the bank regulator in all cases is inappropriate. Certainly when the securities firm is the largest affiliate in the holding company structure, the oversight of the holding company should be expressly allocated to the Commission, not to a bank regulator. B. Commercial and Banking Affiliations. The issue of mixing commerce and banking directly affects the viability of any "two-way street" proposal. Broker-dealers often are affiliated ---------FOOTNOTES---------- -[16]-(...continued) Testimony of Arthur Levitt, Chairman, U.S. Securities and Exchange Commission, on "The Financial Services Competitiveness Act of 1995" Before the House Committee on Banking and Financial Services (March 15, 1995) at n.27. ==========================================START OF PAGE 17====== with insurance companies, and they may also hold equity investments in commercial firms as a result of merchant banking activities. The Commission appreciates that mixing commerce and banking is a difficult issue from the banking perspective. Viewed from the securities perspective, however, the Commission has no objections to allowing commercial entities to engage in the securities business. We offer, as our contribution to the debate on mixing commerce and banking, a few comments on the recent experience of the securities industry in allowing such combinations. Several of the largest U.S. securities firms have been owned by or affiliated with major commercial enterprises.-[17]- These affiliations have not impaired the Commission's ability to oversee registered broker-dealers and do not appear to have resulted in the potential abuses targeted by banking regulation. For example, the larger commercial conglomerates do not appear to have abused their affiliate relationships by offering unfair discounts or tie-ins, and broker-dealers without commercial parent organizations have not disappeared because of their lack of commercial affiliations.-[18]- ---------FOOTNOTES---------- -[17]- Currently, for example, the Travelers Group Inc. owns Smith Barney Inc., Equitable Companies, Inc. owns Donaldson, Lufkin & Jenrette, Inc., and The Prudential Insurance Company of America owns Prudential Securities Incorporated. -[18]- In fact, such affiliations have produced benefits to the securities industry -- parent holding (continued...) ==========================================START OF PAGE 18====== In a somewhat related area, we note that several commercial firms (e.g., American Express, Chrysler, and J.C. Penney Co., among others) own grandfathered nonbank banks,-[19]- and that Congress loosened restrictions on these nonbank banks in the Economic Growth and Regulatory Paperwork Reduction Act enacted last year.-[20]- It appears, therefore, that Congress is comfortable with these combinations of banking and commerce operating under a framework that has been in existence for nearly a decade now. The statutory and regulatory requirements applicable to grandfathered nonbank banks seem to have been constructed tightly enough to contain the potential risks inherent in such combinations. Congress may want to consider including some aspects of the nonbank bank structure in ---------FOOTNOTES---------- -[18]-(...continued) companies from outside the securities business often bolster their broker-dealer subsidiaries' capital positions, either by direct capital infusions or by purchasing risky or illiquid assets from the broker-dealer. During the period 1993-1995, for example, The Prudential Insurance Company of America paid approximately $1.1 billion in limited partnership settlements to customers of its subsidiary, Prudential Securities Incorporated. -[19]- A few securities firms also own or are affiliated with such nonbank banks (i.e., The Bear Stearns Companies Inc., Dean Witter Reynolds Inc., Merrill Lynch & Co., Inc. and Prudential Securities Incorporated). -[20]- We note also that Chairman Leach, in his financial services reform bill (H.R. 10), proposes loosening further the restrictions on the activities of grandfathered nonbank banks. ==========================================START OF PAGE 19====== determining how to fashion a new regulatory structure that permits commercial and banking affiliations. We also note that a significant amount of financial services are provided today by firms with commercial parent companies that do not own banks, such as Ford Motor Company, General Electric, and Gulf & Western Industries Inc. Congress will need to determine whether the involvement of these companies in financial activities justifies allowing more combinations of banking and commerce. IV. Rationalizing Regulatory Structures The Commission supports the goal of H.R. 268 to provide a more effective financial regulatory structure, which, as noted above, is long overdue. However, the bill does not respond to the needs of the industry in providing for regulation that will position financial services institutions for global competition as we approach the next century. H.R. 268 would add yet another, optional "track" for regulation of banks and their affiliates that, unfortunately, would bring with it yet another maze of requirements. Along with a new regulatory option, the bill would add a new regulator, the National Financial Services Committee. This ==========================================START OF PAGE 20====== Committee would have significant duties, including (a) determining what types of institutions and activities would be considered "financial," (b) prescribing methods for calculating the "predominantly financial" test, (c) approving which types of products would be considered "banking products" for purposes of exclusions from securities regulation, and (d) setting standards for retail sales of nondeposit investment products for banks operating under the new framework. A Committee like that proposed under H.R. 268 may be an acceptable method of sharing information among regulators, as is the existing Working Group on Financial Markets. However, we have concerns that such a group would be less effective as a balanced, substantive regulator. A substantive regulator needs to have clear responsibility and clear lines of authority. Although the Commission agrees with many of the broad concepts proposed in H.R. 268 (as noted above), we wonder whether the new optional framework and the new regulatory structure are not to some extent already obsolete. Meaningful reform of financial regulation must reflect the current marketplace and, as importantly, must leave room for future growth and innovation. As we move toward a new century, with advances in telecommunications and technology, the need for such meaningful reform becomes even more critical. ==========================================START OF PAGE 21====== V. Concluding Remarks A. Investor Protection. The Commission urges the Subcommittee to make investor issues a top priority as you consider issues relating to financial modernization. In today's complex market environment, investors need appropriate tools to help them make informed choices. The Commission has taken several steps in this direction, including placing a new emphasis on "plain English," introducing mutual fund "profiles" that summarize critical investment goals, and providing individual investors with equal access to pricing opportunities in the trading markets. As noted above, the Commission strongly believes that investor confidence is essential to the successful operation of the nation's securities markets, which are the envy of the world. Today, individual investors are being called upon to make more decisions -- in a more complex environment than ever before -- regarding critical issues that will affect savings for their children's college education and for their retirement years. These investors deserve a simple scheme of protection that will apply whether or not they buy securities through a bank or through a securities firm. B. Recent Commission Experience. The Commission has the benefit of its experience relating to the enactment last year of ==========================================START OF PAGE 22====== the National Securities Markets Improvement Act (the "Improvement Act"), a landmark piece of legislation that was enacted on a bi- partisan basis. This Act made significant changes to the regulatory structure established under the securities laws in the interests of flexibility, cost-effectiveness, and reduction of multiple regulations and regulators. While these goals raised sensitive, sometimes contentious, issues, the end-result was clearly worth the difficult process and the necessary compromises. Under the federal and state securities laws, we now enjoy more focussed regulation (e.g., large investment advisers are regulated by the Commission and small ones by the states) and clearer lines of authority (e.g., certain securities registration requirements are now exclusively under federal law, which preempts state law in this area) than before. While the precise choices made in the Improvement Act do not directly translate to the Glass-Steagall choices facing this Subcommittee, we encourage the Subcommittee to broaden further its perspective, as the debate on financial restructuring moves forward. Again, we sincerely thank you for offering us the opportunity to appear here today and to provide our thoughts for your consideration. The Commission and its staff stand ready to provide the Subcommittee with assistance as the financial modernization debate continues.