FROM THE OFFICE OF PUBLIC AFFAIRS

Treasury Secretary Robert E. Rubin Wednesday unveiled the Clinton Administration’s plan for modernizing the financial services industry; a step the Secretary said could save consumers up to $15 billion a year through improved efficiencies and increased competition.

"The stakes are high for the American consumer, businesses and entrepreneurs," Secretary Rubin said. "The goal should be to give consumers more choice, bring down the cost of financial services, and make them more convenient for customers. Just as important, this proposal comes with increased safeguards."

American consumers spent nearly $300 billion on financial services in 1995. Based on the efficiencies gained from increased competition from financial modernization, consumers could save up to 5 percent -- as much as $15 billion per year, Treasury estimates.

Secretary Rubin said the challenges to reforming the 1933 Glass-Steagall Act would be to create an environment that ensures a level playing field for financial service providers, gives businesses the ability to be innovative without a new layer of red tape, and protects the deposit insurance funds.

The Treasury plan includes:

Breaking down of barriers that inhibit or prevent competition among various providers of financial products and services. Treasury supports permitting banks, securities firms and insurance companies to affiliate with one another.

Giving firms the choice to organize their financial activities in the most efficient way they see fit -- either as a subsidiary of a bank or as a bank holding company.

On the issue of "banking and commerce," Treasury will provide two alternative legislative models for debate and consideration.

Consumer safeguards would be protected and enhanced. We would provide for important disclosures -- in plain, straightforward terms -- so buyers can understand whether or not the products they purchase from financial service providers are insured.

Safety and soundness protections would be strengthened. The expanded business opportunities will be linked to greater protections for insured depository institutions. Banks would have to be well-capitalized and well-managed to qualify for broader affiliations.

"The time has come to modernize the rules of our financial service system," Secretary Rubin said. "Such a move must be done with regard for safety and soundness to benefit the broad range of users of financial services: consumers, small businesses, communities, and state and local governments."

Secretary Rubin will provide the details of the Treasury Department’s proposal on financial modernization to Congress during the first week in June.