Financial Overhaul Finally Here

After opposing it for years, President Clinton Friday signed into law the Financial Services Modernization Act, a sweeping measure that lifts Depression-era barriers and allows banks, securities firms and insurance companies to merge and sell each other's products.

Â"This is a day we can celebrate as an American day,Â" Mr. Clinton said, referring to the bipartisan support the legislation had on Capitol Hill. He said the legislation is both a victory for freedom and free markets and a victory for consumer protection.

Â"I have always believed that one required the other,Â" Mr. Clinton said.

Congress passed the measure Nov. 5, opening the way for a blossoming of financial Â"supermarketsÂ" selling loans, investments and insurance. Proponents had pushed the legislation in Congress for two decades, and Wall Street and the banking and insurance industries had poured millions of dollars into lobbying for it in the past few years.

At stake is an estimated $350 billion that Americans spend annually on fees and commissions for banking, brokerage and insurance services. Proponents say the legislation will save consumers some $15 billion each year, offering them greater choice and convenience and spurring competition. Consumer groups and other opponents maintain it will bring higher prices and jeopardize consumers' financial privacy.

Mr. Clinton said he believed the privacy protections Â"have teeth,Â" but expressed reservations about whether they go far enough. He directed his economic advisers to study the proposal and recommend additional legislation for Congress to address next year.

Â"I want to make sure every family has meaningful choices about how their personal information will be shared within corporate conglomerates,Â" the president said. Â"We cannot allow new opportunities to erode old and fundamental rights.Â"

The overhaul measure is one of the few major pieces of bipartisan legislation to emerge from the Republican-controlled Congress this year. Mr. Clinton was signing it today in a White House ceremony.

In a statement after passage, Mr. Clinton said the measure Â"will help the American financial services system play a leading role in propelling our economy into the 21st century, continuing the longest peacetime economic expansion in our history.Â"

Â"Eliminating barriers to financial services competition will allow American companies to better compete in the global economy,Â" he said.

Mr. Clinton's support for the legislation comes despite warnings from Democratic critics and consumer activists that it could lead to price-gouging of consumers and the erosion of their privacy by newly formed financial conglomerates that are too big and powerful.

Â"The bill is anti-consumer and anti-community,Â" Ralph Nader declared. Â"It will mean higher prices and fewer choices for low, moderate and middle-income families across the nation.Â"/b>

In addition, he said, Â"Personal privacy will be virtually eliminatedÂ" under provisions allowing affiliated businesses of the newly merged companies to share customers' personal financial data as they offer one-stop shopping.

Up until a few weeks ago, the Clinton administration itself had threatened a veto of the legislation as it took various forms that raised White House objections. In recent months, the administration objected most sharply over the issue of rules requiring that banks make loans in minority and low-income communities where they operate.

Senate Banking Committee Chairman Phil Gramm, R-Texas, an outspoken conservative who opposes the rules, last year managed to kill a similar bill that would have overhauled the community lending laws. The White House insisted that banks be required to have a strong track record in local loan-making as a condition for being allowed to expand into other financial activities.

The big breakthrough came in the wee hours of Oct. 22 when administration officials including Treasury Secretary Lawrence Summers and key Republican lawmakers reached a compromise after negotiating for days behind closed doors. The White House then lifted its long-standing veto threat.

Â"It was sweaty, it was tense, but it had momentum,Â" Sen. Charles Schumer, D-N.Y., said of the final bargaining session. He and Sen. Christopher Dodd, D-Conn., whose states are home to Wall Street and the banking industry (New York) and the insurance industry (Connecticut), helped broker the agreement.