Library / Laws / 113th / s / S. 985 / Introduced in Senate
II
113th CONGRESS
1st Session
S. 985
IN THE SENATE OF THE UNITED STATES
May 16, 2013
Mr. Harkin introduced
the following bill; which was read twice and referred to the
Committee on Banking, Housing, and Urban
Affairs
A BILL
To repeal certain provisions of the Gramm-Leach-Bliley
Act and revive the separation between commercial banking and the securities
business, in the manner provided in the Banking Act of 1933, the so-called
Glass-Steagall Act, and for other purposes.
1.
Short title
This Act may be cited as the
Return to Prudent Banking Act of
2013.
2.
Glass-Steagall
revived
(a)
Wall between
commercial banks and securities activities reestablished
Section 18 of the Federal Deposit Insurance
Act (12 U.S.C. 1828), as amended by section 615(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, is amended by adding at the end the
following new subsection:
(aa)
Limitations on
security affiliations
(1)
Prohibition on
affiliation between insured depository institutions and investment banks or
securities firms
An insured
depository institution may not be or become an affiliate of any broker or
dealer, any investment adviser, any investment company, or any other person
engaged principally in the issue, flotation, underwriting, public sale, or
distribution at wholesale or retail or through syndicate participation of
stocks, bonds, debentures, notes, or other securities.
(2)
Prohibition on
officers, directors and employees of securities firms service on boards of
depository institutions
(A)
In
general
An individual who is
an officer, director, partner, or employee of any broker or dealer, any
investment adviser, any investment company, or any other person engaged
principally in the issue, flotation, underwriting, public sale, or distribution
at wholesale or retail or through syndicate participation of stocks, bonds,
debentures, notes, or other securities may not serve at the same time as an
officer, director, employee, or other institution-affiliated party of any
insured depository institution.
(B)
Exception
Subparagraph (A) shall not apply with
respect to service by any individual which is otherwise prohibited under such
subparagraph if the appropriate Federal banking agency determines, by
regulation with respect to a limited number of cases, that service by such
individual as an officer, director, employee, or other institution-affiliated
party of any insured depository institution would not unduly influence the
investment policies of the depository institution or the advice the institution
provides to customers.
(C)
Termination of
service
Subject to a
determination under subparagraph (B), any individual described in subparagraph
(A) who, as of the date of enactment of the Return to Prudent Banking Act of
2013, is serving as an officer, director, employee, or other
institution-affiliated party of any insured depository institution shall
terminate such service as soon as practicable after such date of enactment and
no later than the end of the 60-day period beginning on such date.
(3)
Termination of
existing affiliation
(A)
Orderly
wind-down of existing affiliation
Any affiliation of an insured depository
institution with any broker or dealer, any investment adviser, any investment
company, or any other person, as of the date of enactment of the Return to
Prudent Banking Act of 2013, which is prohibited under paragraph (1) shall be
terminated as soon as practicable and in any event no later than the end of the
2-year period beginning on such date of enactment.
(B)
Early
termination
The appropriate
Federal banking agency, after opportunity for hearing, may terminate, at any
time, the authority conferred by the preceding subparagraph to continue any
affiliation subject to such subparagraph until the end of the period referred
to in such subparagraph if the agency determines, having due regard for the
purposes of this subsection and the Return to Prudent Banking Act of 2013, that
such action is necessary to prevent undue concentration of resources, decreased
or unfair competition, conflicts of interest, or unsound banking practices and
is in the public interest.
(C)
Extension
Subject to a determination under
subparagraph (B), an appropriate Federal banking agency may extend the 2-year
period referred to in subparagraph (A) from time to time as to any particular
insured depository institution for not more than 6 months at a time, if, in the
judgment of the agency, such an extension would not be detrimental to the
public interest, but no such extensions shall in the aggregate exceed 1
year.
(4)
Definitions
For
purposes of this subsection—
(A) the terms
broker and dealer have the same meanings as in
section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a));
and
(B) the terms
investment adviser and investment company have the
same meanings as in section 202 of the Investment Advisers Act of 1940 (15
U.S.C. 80b–2) and section 3 of the Investment Company Act of 1940 (15 U.S.C.
80a–3),
respectively.
.
(b)
Prohibition on
banking activities by securities firms clarified
Section 21 of
the Banking Act of 1933 (12 U.S.C. 378) is amended by adding at the end the
following new subsection:
(c)
Business of
receiving deposits
For
purposes of this section, the term business of receiving deposits
includes the establishment and maintenance of any transaction account (as
defined in section 19(b)(1)(C) of the Federal Reserve
Act).
.
(c)
Continued
applicability of ICI vs. Camp
(1)
In
general
The Congress ratifies
the interpretation of the paragraph designated the Seventh of
section 5136 of the Revised Statutes of the United States (12 U.S.C. 24, as
amended by section 16 of the Banking Act of 1933 and subsequent amendments) and
section 21 of the Banking Act of 1933 (12 U.S.C. 378) by the Supreme Court of
the United States in the case of Investment Company Institute v. Camp (401 U.S.
617 et seq. (1971)) with regard to the permissible activities of banks and
securities firms, except to the extent expressly prescribed otherwise by this
section.
(2)
Applicability of
reasoning
The reasoning of
the Supreme Court of the United States in the case referred to in paragraph (1)
with respect to sections 20 and 32 of the Banking Act of 1933 (as in effect
prior to the date of enactment of the Gramm-Leach-Bliley Act) shall continue to
apply to subsection (aa) of section 18 of the Federal Deposit Insurance Act (as
added by subsection (a) of this section) except to the extent the scope and
application of such subsection as enacted exceed the scope and application of
such sections 20 and 32.
(3)
Limitation on
agency interpretation or judicial construction
No appropriate Federal banking agency, as
defined in section 3 of the Federal Deposit Insurance Act, by regulation,
order, interpretation, or other action, and no court within the United States
may construe the paragraph designated the Seventh of section 5136
of the Revised Statutes of the United States (12 U.S.C. 24, as amended by
section 16 of the Banking Act of 1933 and subsequent amendments), section 21 of
the Banking Act of 1933, or section 18(aa) of the Federal Deposit Insurance Act
more narrowly than the reasoning of the Supreme Court of the United States in
the case of Investment Company Institute v. Camp (401 U.S. 617 et seq. (1971))
as to the construction and the purposes of such provisions.
3.
Repeal of
Gramm-Leach-Bliley Act provisions
(a)
Financial
holding company
(1)
In
general
Section 4 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1843) is amended by striking subsections
(k), (l), (m), (n), and (o).
(2)
Transition
(A)
Orderly
wind-down of existing affiliation
In the case of a bank holding company
which, pursuant to the amendments made by paragraph (1), is no longer
authorized to control or be affiliated with any entity that was permissible for
a financial holding company as of the date of enactment of this Act, any
affiliation by the bank holding company which is not permitted for a bank
holding company shall be terminated as soon as is practicable, and in no event
later than the end of the 2-year period beginning on that date of
enactment.
(B)
Early
termination
The Board of
Governors of the Federal Reserve System (in this Act referred to as the
Board), after opportunity for hearing, may terminate, at any time,
the authority conferred by subparagraph (A) to continue any affiliation subject
to such subparagraph until the end of the period referred to in such
subparagraph, if the Board determines, having due regard to the purposes of
this Act, that such action is necessary to prevent undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices, and is in the public interest.
(C)
Extension
Subject to a determination under
subparagraph (B), the Board may extend the 2-year period referred to in
subparagraph (A) from time to time as to any particular bank holding company
for not more than 6 months at a time, if, in the judgment of the Board, such an
extension would not be detrimental to the public interest, except that no such
extensions shall in the aggregate exceed 1 year.
(3)
Technical and
conforming amendments
(A)
Bank Holding
Company Act of 1956
The Bank
Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended—
(i) in section 2 (12 U.S.C. 1841)—
(I) by striking subsection (p); and
(II) by redesignating
subsection (q) as subsection (p);
(ii) in
section 5 (12 U.S.C. 1844)—
(I) in subsection
(c)—
(aa) in paragraph (2), by striking subparagraph
(E); and
(bb) by striking paragraphs (3), (4), and (5);
and
(II) by striking
subsection (g); and
(iii) by striking
section 10A (12 U.S.C. 1848a).
(B)
Federal Deposit
Insurance Act
The Federal Deposit Insurance Act (12 U.S.C. 1811
et seq.) is amended by striking section 45 (12 U.S.C. 1831v) and inserting the
following:
45.
[Repealed]
.
(C)
Gramm-Leach-Bliley
Act
Subtitle B of title I of the Gramm-Leach-Bliley Act is
amended—
(i) by
striking section 114 (12 U.S.C. 1828a) and inserting the following:
14.
[Repealed]
;
and
(ii) by
striking section 115 (12 U.S.C. 1820a) and inserting the following:
15.
[Repealed]
.
(b)
Financial
subsidiaries repealed
(1)
In
general
Section 5136A of the
Revised Statutes of the United States (12 U.S.C. 24a) is amended to read as
follows:
5136A.
[Repealed]
.
(2)
Transition
(A)
Orderly
wind-down of existing affiliation
In the case of a national bank which,
pursuant to the amendments made by paragraph (1), is no longer authorized to
control or be affiliated with a financial subsidiary as of the date of
enactment of this Act, such affiliation shall be terminated as soon as is
practicable, and in no event later than the end of the 2-year period beginning
on that date of enactment.
(B)
Early
termination
The Comptroller
of the Currency, after opportunity for hearing, may terminate, at any time, the
authority conferred by subparagraph (A) to continue any affiliation subject to
such subparagraph until the end of the period referred to in such subparagraph,
if the Comptroller determines, having due regard for the purposes of this Act,
that such action is necessary to prevent undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices, and is in the public interest.
(C)
Extension
Subject to a determination under
subparagraph (B), the Comptroller of the Currency may extend the 2-year period
referred to in subparagraph (A) from time to time as to any particular national
bank for not more than 6 months at a time, if, in the judgment of the
Comptroller, such an extension would not be detrimental to the public interest,
except that no such extensions shall in the aggregate exceed 1 year.
(3)
Technical and
conforming amendments
(A)
Federal Reserve
Act
The 20th undesignated paragraph of section 9 of the
Federal Reserve Act (12 U.S.C. 335) is amended by striking the last
sentence.
(B)
Federal Deposit
Insurance Act
The Federal Deposit Insurance Act (12 U.S.C. 1811
et seq.) is amended by striking section 46 (12 U.S.C. 1831w) and inserting the
following:
46.
[Repealed]
.
(C)
Clerical
amendment
The table of sections for chapter one of title LXII of
the Revised Statutes of the United States is amended by striking the item
relating to section 5136A.
(c)
Definition of
broker
Section 3(a)(4)(B) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)(B)) is amended—
(1) by striking clauses (i), (iii), (v), (vii),
(x), and (xi); and
(2) by redesignating
clauses (ii), (iv), (vi), (viii), and (ix) as clauses (i), (ii), (iii), (iv),
and (v), respectively.
(d)
Definition of
dealer
Section 3(a)(5)(C) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(5)(C)) is amended—
(1) by striking clauses (i) and (iii);
and
(2) by redesignating clauses (ii) and (iv) as
clauses (i) and (ii), respectively.
(e)
Definition of
identified banking product
Section 206(a) of the
Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is amended—
(1) in paragraph (4),
by inserting and after the semicolon at the end;
(2) in paragraph
(5)(B)(ii), by striking ; or and inserting a period; and
(3) by striking
paragraph (6) and all that follows through the end of the subsection.
(f)
Definition of
activities closely related to banking
(1)
In
general
Section 4(c)(8) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(c)(8)) is amended by striking the day before the date of
the enactment of the Gramm-Leach-Bliley Act and inserting
January 1, 1970.
(2)
Provision
allowing for exceptions after report to Congress
Section 4(j) of
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(j)) is amended to read as
follows:
(j)
Approval for
certain post-1970 subsection (c)(8)
activities
(1)
In
general
Notwithstanding the
limitation of the January 1, 1970, approval deadline in subsection (c)(8), the
Board may determine an activity to be so closely related to banking as to be a
proper incident thereto for purposes of such subsection, subject to the
requirements of this subsection and such terms and conditions as the Board may
require.
(2)
General
standards
In making any
determination under paragraph (1), the Board shall consider whether performance
of the activity by a bank holding company or a subsidiary of such company can
reasonably be expected to result in a violation of section 18(aa) of the
Federal Deposit Insurance Act, section 21 of the Banking Act of 1933, or the
spirit of section 2(c) of the Return to Prudent Banking Act of 2013, and other
possible adverse effects, such as undue concentration of resources, decreased
or unfair competition, conflicts of interests, or unsound banking
practices.
(3)
Report and
wait
No determination of the Board under paragraph (1) may take
effect before the end of the 180-day period beginning on the date by which
notice of the determination has been submitted to both Houses of the Congress
together with a detailed explanation of the activities to which the
determination relates and the basis for the determination, unless before the
end of such period, such activities have been approved by an Act of
Congress.
.
(g)
Repeal of
provision relating to foreign banks filing as financial holding
companies
Section 8(c) of the International Banking Act of 1978
(12 U.S.C. 3106(c)) is amended by striking paragraph (3).
4.
Reports to
Congress
(a)
Reports
required
Each time the Board
of Governors of the Federal Reserve System, the Comptroller of the Currency, or
another appropriate Federal banking agency (as defined in section 3 of the
Federal Deposit Insurance Act) makes a determination or an extension under
subparagraph (B) or (C) of paragraph (2) or (3) of section 18(aa) of the
Federal Deposit Insurance Act (as added by section 2(a)) or subparagraph (B) or
(C) of subsection (a)(2) or (b)(2) of section 3 of this Act, as the case may
be, the Board, Comptroller, or agency shall promptly submit a report of such
determination or extension to the Congress.
(b)
Contents
Each
report submitted to Congress under subsection (a) shall contain a detailed
description of the basis for the determination or extension.