I am pleased to be here today for the introduction of Representative John LaFalce's bill, which represents a very significant and constructive development in the effort to enact financial services modernization legislation.

Treasury has long believed in the benefits of financial modernization legislation but we have also been clear that the job needs to be done right. The LaFalce Bill goes a long way toward that goal.

First, the LaFalce Bill takes the fundamental actions necessary to modernize our financial system by repealing the anti-affiliation provisions of the Glass-Steagall Act and the Bank Holding Company Act, thereby allowing commercial banks, investment banks, and insurance companies to affiliate.

Second, the LaFalce Bill preserves the full relevance of the Community Reinvestment Act for the 21st Century. The Administration believes that the any bank seeking to conduct new financial activities should be required to achieve and maintain a satisfactory CRA record, as the LaFalce bill does.

Third, the LaFalce Bill contains important consumer protection provisions designed to ensure that customers of financial conglomerates clearly understand what they are buying.

Finally, the LaFalce Bill preserves the choice of banks to operate through subsidiaries or affiliates or both, preserving the subsidiary option. The subsidiary and the affiliate are precisely identical with respect to safety and soundness and the spread of the subsidy, except for in one respect where the subsidiary is better for safety and soundness. It is for this reason why the current FDIC Chair and three former FDIC Chairmen have endorsed the subsidiary approach. And there is an important public policy purpose served by so permitting this choice of structure, including greater safety.

No bill is perfect, and we do have serious concerns about the potential for affiliation between commercial firms and depository institutions. But I believe this bill represents the best chance I have seen in two years to build the bipartisan coalition that will be necessary to pass and sign into law financial modernization legislation.

Other than this concern, we fully support the LaFalce bill and hope and expect to work with Rep. LaFalce to reach consensus on financial modernization. My staff and I stand ready to provide whatever assistance Rep. LaFalce would like. Thank you very much.