WASHINGTON -- President Clinton signed into law Friday a sweeping overhaul of Depression-era U.S. banking laws, successfully ending more than two decades of efforts to allow banks, brokers and insurers into each other's businesses.
"This legislation is truly historic," Clinton told a packed audience of lawmakers and top financial regulators. "We have done right by the American people."The bill repeals parts of the 1933 Glass-Steagall Act and the 1956 Bank Holding Company Act to level the domestic playing field for U.S financial firms and allow them to compete better in the evolving global financial marketplace.
Analysts and industry leaders say it will likely fuel a wave of mergers in the financial industry as companies compete to build "financial supermarkets" offering all the services customers need under one roof.
Financial stocks were winners on Wall Street Friday, with J.P. Morgan & Co., Citigroup, American Express and Merrill Lynch all posting big gains. That helped the Dow Jones industrial average end up a solid 174.02 points, or 1.64 percent, at 10,769.32.
The Senate approved the final bill by 90-8 Nov. 4 and the House followed suit by a vote of 362-57. Congress had previously made almost a dozen unsuccessful attempts over the last 25 years to revise the statutes, which had increasingly come to be viewed as anachronisms.
"The world changes, and Congress and the laws have to change with it," said Senate Banking Committee Chairman Phil Gramm of Texas, one of the bill's prime sponsors.
Supporters of the legislation say it will also benefit consumers, providing them with greater choice and convenience and spurring competition that will lead to lower prices.
"With this bill," Treasury Secretary Lawrence Summers said, "the American financial system takes a major step forward toward the 21st century -- one that will benefit American consumers, business and the national economy."
Opponents have said it will have the opposite effect, creating financial behemoths that will ratchet up fees, violate customers' privacy by sharing and selling their personal data and put the stability of the financial system at risk.
The privacy issue was a key focus in the long and often contentious negotiations that produced a compromise bill, and Clinton made clear he still wanted to see more done to safeguard consumers' personal financial information.
"The bill takes significant steps to protect the privacy of our financial transactions," he said. "But I do not believe that the privacy protections go far enough."
Clinton said the Treasury and White House would put together a legislative proposal to take to Congress next year that would extend the privacy provisions of the legislation.
The bill currently requires financial firms to disclose their policies on collecting, using and protecting customers' information. Consumers can tell institutions not to give their personal data to some third parties, but no restrictions would be placed on sharing among affiliates of the firms.
"Without restraining the economic potential of new business arrangements, I want to make sure every family has meaningful choices about how their personal information is shared within corporate conglomerates," Clinton said.