First came the greed.
Then, courtesy of Republican Senator Richard Shelby, came the fear.
In his public debut as chairman of the Senate Banking Committee, Shelby plainly professed his faith: "Now is the time to put some fear in people," he admonished Wall Street veteran William Donaldson, whose nomination to head the Securities and Exchange Commission was being considered in a crammed Capitol Hill hearing room on a blustery late February morning. "I believe that some people that have cheated and stolen and committed fraud -- and might do it in the future -- need to fear you as the chairman of the SEC."
That's not the kind of talk that captains of finance anticipated when their Republican friends regained control of the Senate last fall. But unlike his most recent GOP predecessors, the reliably deregulatory Phil Gramm of Texas and Wall Street favorite Alfonse D'Amato of New York, this banking committee chairman doesn't intend to be Wall Street's man on the Hill.
"I'm not a lobbyist for the financial services industry," Shelby deadpans during a wide-ranging interview with Institutional Investor the day after Donaldson's hearing. The 68-year-old Alabamian is seated at the head of a shiny walnut conference table the size of a stretch limousine, in a high-ceilinged, wood-paneled office suite that showcases his seniority and power. Leaning forward, he delivers his words in a measured Deep South drawl: "I think they know that I'm not -- that I shouldn't be. That we will be vigorous in our oversight."
Why does Shelby want to intimidate investment bankers and corporate chiefs? It's not personal, although he personally knows the pain American investors felt at the end of the stock bubble. Take a look at his portfolio: In 1999 and early 2000, according to financial disclosure forms that members of Congress file each year, the former Tuscaloosa trial attorney invested approximately $200,000 in a host of high-flying technology and telecommunications stocks -- and lost almost all of it.
Shelby's holdings read like a who's who of corporate darlingsturned-dogs: 2,200 shares of Global Crossing, which went bankrupt in January 2002 amid a federal accounting investigation; 540 shares of WorldCom, also bankrupt and accused of perpetrating the largest financial fraud in history; 100 shares of beleaguered AOL Time Warner; 230 shares of Cisco Systems, the stock that defined the late 1990s bubble before plummeting 83 percent from its March 2000 high (see table, page 30).
Shelby has also felt the pain of the broader market's decline. At the end of 1999, he had between $500,000 and $1 million invested in Vanguard Group's Index Trust 500 mutual fund, according to his disclosure forms. The fund has declined by 38 percent since then. The brokerages he's used include Citigroup's Salomon Smith Barney unit and Merrill Lynch & Co., two firms that have paid substantial regulatory settlements after allegations that they misled individual investors during the bubble years.
Thanks to shrewd real estate investments, Shelby remains a millionaire. But make no mistake: His hefty market losses give him considerable sympathy for investors hammered by three years of market free fall, and fuel his anger at the unscrupulous behavior that added to their woes.
"It's a lot of money, but I've been blessed," he says, referring to his overall financial position. "My personal experience just accentuates to me what other people all over America have experienced, probably in bigger circumstances, where they had so much of their portfolio invested, so much of their money in various funds, and have really taken a hit."
But his penchant for intimidation doesn't stem from a personal vendetta. Rather, it reflects who Richard Shelby is and what he stands for. He's conservative, yes. But unlike the more ideologically rigid Gramm, Shelby also has Deep South populism in his blood. The son of a Birmingham steelworker, he worked as a tort attorney before going into politics, and he still receives most of his campaign funds from the plaintiff's bar. (Gramm and D'Amato got most of theirs from financial firms.) And he's not afraid to break with his party: As the senior Republican on the Senate's Select Committee on Intelligence, Shelby criticized the way the Bush administration had handled the terrorism threat before the World Trade Center and Pentagon attacks and called for the resignation of Central Intelligence Agency chief George Tenet. Shelby's independent streak spells trouble for Wall Street, which is already struggling through the hardest times it's seen since the Great Depression.
Indeed, Shelby appears poised to reexamine much of the industry-friendly legislation passed by recent Republican Congresses. A co-founder of the Congressional Privacy Caucus, he is expected to push for stricter controls on the sharing of client information within financial conglomerates -- controls that would not only cost those institutions money but would also diminish the strategic potency of the megamergers they've been pursuing over the past decade.
He's also likely to open hearings on the impact of 1999's Gramm-Leach-Bliley Act, which after decades of Wall Street lobbying effectively repealed the Glass-Steagall Act and allowed for the creation of financial supermarkets that mix banking, brokerage and insurance. Shelby was one of only eight senators who voted against the bill. One concern Shelby shares with many committee members is that big banks that have expanded under Gramm-Leach-Bliley may be forcing corporate clients to hire them for underwriting and merger advice as a condition of securing credit.
The new chairman has already put a marker down on the controversial issue of whether hedge funds deserve stricter regulation, by calling a hearing last month in which senators grilled Donaldson about an ongoing SEC study of the topic. He's also considering an oversight hearing examining the $1.4 billion state and federal regulatory settlement with ten securities firms that were accused of misleading investors by issuing overly rosy research reports on the stocks of investment banking clients.
Additionally, financiers fear that Shelby will seek to weaken a 1995 law that made it more difficult for shareholders to file securities-fraud lawsuits and will push for disputes between brokerage firms and their clients to be heard in court rather than in mandatory arbitration, which is the current practice. It would be awful news for securities firms if plaintiffs' attorneys could look to them as the next big pocket to empty.
"He's just plain scary," says one of many Wall Street executives who fear the new chairman but decline to say so publicly, in the interest of trying to forge friendly relations with him. "He's not easy to read, but when you look at where he stands on issues like privacy, like tort reform, it's not pretty." Adds a senior lobbyist for a major New York investment bank, "This guy could be our worst nightmare."
Making matters worse for Wall Street, Shelby presides over a banking committee that has tilted significantly to the left, despite the new Republican majority in the Senate. Three of the four Republicans who voted against sending last year's landmark Sarbanes-Oxley market reform legislation out of the committee for a floor vote -- Mike Crapo of Idaho, Mike Enzi of Wyoming and Rick Santorum of Pennsylvania -- remain. But the fourth, Gramm, is gone, and one of the new Republicans, Lincoln Chafee of Rhode Island, frequently votes with the Democrats; he is rumored to be considering switching parties. The running joke among Washington lobbyists is that banking is the only Democrat-controlled committee on the Hill.
Wall Street should have rejoiced when Republicans took back the Senate and stripped Paul Sarbanes -- the driving force behind Sarbanes-Oxley, arguably the most restrictive capital markets legislation passed since the Depression -- of control of the banking committee. But Shelby so frightens Wall Street executives and their hired guns on Capitol Hill that in January industry lobbyists pressed new Senate majority leader Bill Frist to block his chairmanship. People familiar with the matter say that lobbyists tried to persuade Frist to waive a term-limit provision that kept Shelby from remaining as chairman of the intelligence committee. They also argued that Shelby's seniority on the banking committee should be reduced because eight of his 16 years in the Senate were served as a Democrat. Had either pitch been successful, the banking gavel would have been handed to Utah Republican Bob Bennett, whom the finance lobby considers far less threatening than Shelby. But Frist balked.
"We cried when Phil Gramm retired," says one financial industry lobbyist who was involved in the campaign. "Shelby's a former trial lawyer. He's antibusiness. We were going to do whatever we had to do to keep him from becoming chairman."
"That doesn't bother me," Shelby shrugs. "I don't think anybody has anything to be nervous about unless they've done something wrong."
Frustrated and defensive, the industry has yet to figure out a strategy for dealing with the new banking chairman. One approach: Forget about Shelby and concentrate instead on cultivating the House Committee on Financial Services as a roadblock to unpalatable legislation. Lobbyists have gone so far as to woo Representative Barney Frank, an ultraliberal Massachusetts Democrat and ranking member of the committee, in an effort to prevent measures that they deem threatening from passing the House or making it through Senate-House conference committees.
"It's nice to know that people want to be my friend," says Frank, tongue planted firmly in cheek. "You can never have too many friends in my business. On the other hand, I have no interest in being part of an anti-Shelby bloc. If anything, I've been inclined to support him in the past."
Unlike many other lawmakers, Shelby doesn't need Wall Street's money. He'll be 70 when he completes his third Senate term in 2004, and with a $6 million campaign cash hoard and unrivaled popularity at home, he should cruise to reelection. There are no signs that he harbors any desire for higher office.
"Senator Shelby is an older, mature politician now," says Richard Roberts, a securities attorney at Washington-based Thelen Reid & Priest who was legislative director for Shelby in the House before serving as an SEC commissioner during the first Bush administration. "I don't think he needs or wants any new friends at this stage of his career."
SHELBY MAY BE FEARED TODAY, BUT FOR MOST of his life, he has thrived on being underestimated. In fact, friends say, he goes out of his way to cultivate an understated, almost simple image to disarm political opponents.
But his unassuming, aw-shucks public profile conceals a solid intellect and a strong ambition. A military history buff and classical music enthusiast -- he grew up listening to his mother play concertos on the family piano -- Shelby constantly engages staffers and acquaintances in policy debates. "He's always interested in talking about issues," says Thomas Young, who ended a 12-year tenure as Shelby's chief of staff last year to become a business unit manager for Huntsville, Alabamabased Intergraph Corp. "And he doesn't mind if you disagree with him. He enjoys the debate."
Shelby was interested in the law from an early age. A gifted flanker on his high school football team, he gave up a scholarship to the University of Alabama after suffering a severe knee injury in a high-school all-star game, and turned his full attention to a legal career. Characteristically, he downplays his athletic exploits: "I never played any college football. I got my knee messed up. It wasn't anything big. I loved sports like a lot of young kids do."
He also took an early interest in politics. At Alabama he befriended several members of a powerful secret society known as "the Machine," which is largely made up of student government officers and has served as a launching pad for generations of prominent Alabamians, including current governor Don Siegelman. Though not actually a member of the Machine, Shelby worked on the campaigns of, and forged close friendships with, several members who ran for student government offices. After graduating from Alabama in 1957 with a degree in history and political science, he stayed on to earn his law degree. He became partners with influential Tuscaloosa lawyer Walter Flowers, who also happened to represent the area in Congress. Under Flowers' tutelage Shelby served as Tuscaloosa city prosecutor and was elected to the Alabama state senate in 1970 as a Democrat. When Flowers ran, unsuccessfully, for the U.S. Senate in 1978, Shelby campaigned for and won his vacated congressional seat.
Friends recall a social gathering in Tuscaloosa when Shelby, then a first-term state senator, was asked what his ultimate career goal was. "Without a second thought, he immediately said U.S. senator or governor of Alabama," recalls someone who was there. "That was a pretty bold thing to say for a neophyte state senator."
Senator Tom Carper, a Democrat from Delaware who sits on the banking committee and has known Shelby since their days as Democratic comrades on the House Banking Committee, says that Shelby impressed his fellow representatives with his knowledge and political acumen: "I remember saying to people, 'Someday Richard Shelby will be chairman of the banking committee.' But I thought it would be the House Banking Committee. And I thought he'd be a Democrat."
Encouraging his opponents to underestimate him worked to Shelby's advantage in 1986 when he staged a dramatic, come-from-behind victory over Jeremiah Denton to win his first Senate term. Denton, a decorated Vietnam prisoner of war who in 1980 became Alabama's first Republican senator since Reconstruction, enjoyed a double-digit lead in the polls well into that summer and boasted a campaign kitty twice the size of his challenger's. Then-president Ronald Reagan campaigned for Denton in Alabama, calling him "a national treasure." Shelby refrained from attacking his opponent in public, but he hammered away at Denton with what political experts call some of the most venomous television advertisements in memory. The ads blasted Denton for cutting Social Security and raising his own pay and accused him of funneling federal benefits to illegal aliens, using campaign funds for a country-club membership and failing to support anti-wife-beating measures. Denton complained that the ads distorted his record, but Alabama's voters responded to the portrayal of him as an out-of-touch fat cat. The attacks erased Denton's huge lead. Shelby won by just 6,823 of more than 1.2 million votes cast.
"He wants you to view him as not threatening," says one longtime acquaintance of Shelby's. "Then, before you know it, he's whupped you and moved on to the next poor soul who's dumb enough to underestimate him."
On Capitol Hill Shelby has exhibited a principled pragmatism -- he'll stand up for what he believes in but won't let ideology get in the way of his political survival. His stand on privacy and his criticism of CIA director Tenet are good examples. But even as a Democrat, he was a conservative. In 1982 he was one of only 24 representatives to vote against a 25-year extension of the Voting Rights Act of 1965, which protects minority voters from disenfranchisement. One year later he voted against making Martin Luther King Jr.'s birthday a national holiday. During the Reagan administration Shelby was part of a group of conservative Southern congressmen -- called the "Boll Weevil Democrats" -- who were often at odds with the northeastern and Californian liberals in their party and joined forces with Republicans on crucial issues. A 1982 report by Ralph Nader's Public Citizen watchdog group said that Shelby was one of six House Democrats who voted with the Reagan administration on 12 key votes pertaining to the budget, taxes and defense.
Shelby chose not to highlight this part of his record when he attacked Denton in 1986. Rather, he had made a point -- even as he supported Reaganomics -- to drift slightly leftward in anticipation of his run for the Senate. In 1981 the American Conservative Union gave Shelby a score of 93 out of 100, but by 1985 his near-perfect rating had slipped to 67. During the same four-year period, his rating from the liberal Americans for Democratic Action rose from 5 to 25 out of 100.
Unlike the party switches of other Boll Weevils, Shelby's move to the Republican Party looks more calculated than principled. Gramm, for example, broke openly with then-speaker Thomas (Tip) O'Neill over the Reagan budget and was stripped of his chairmanship of the House Budget Committee in 1983. The Texan promptly switched parties, losing his committee seniority and risking a tougher reelection campaign by joining what was then the minority party in the House. But Shelby, representing an impoverished district where Republicans were so few and far between that the party didn't even bother to field a candidate in 1982 and 1984, stayed a Democrat until after the GOP congressional sweep of 1994.
"My only mistake, I think, was not doing it in '81," says Shelby of his jump to the other side of the aisle. "I thought I'd try to work within the Democratic Party to try to make it more conservative. And I remember President Reagan told me he wished me a lot of luck, because he had tried to do the same thing -- you know, when he was a Democrat."
More recently, Shelby has been solidly conservative, opposing the tax increases of the first Clinton term and pushing for federal agencies to publish the data on which they base new regulations. The latter initiative has burnished his reputation among conservatives. And Shelby has delivered plenty of pork for his home state, including $115 million from this year's budget appropriations bill, for projects like oyster bed recovery and transportation subsidies. Last year he rated an 89 with the ACU.
Roberts, his onetime legislative chief in the House, sums up his former boss: "Senator Shelby, like many successful politicians, has a nose for an issue and a knack for cutting a deal."
SHELBY'S OPPONENTS NO LONGER underestimate him. Instead, they're busy trying to cozy up and make friends.
Roberts and Ray Cole, a former Alabama state coordinator for Shelby who's now employed by Washington lobbying firm Van Scoyoc Associates, have been barraged with calls from financial institutions seeking advice on how to approach the new chairman. Goldman, Sachs & Co., in fact, recently hired Roberts as a lobbyist. Hoping to break the ice, Roberts coordinated a Manhattan fundraiser in January for Shelby's 2004 reelection campaign. Financial executives were invited to eat, drink and mingle with the senator and key staff members at the tony Sky Club in Midtown. Several fundraising chairmen were asked to raise at least $10,000 each for the affair. Individual attendees -- including Gramm, now an investment banker at UBS Warburg, and executives from the Investment Company Institute, Morgan Stanley and the Securities Industry Association -- were expected to cut personal checks, according to two people who attended.
Despite his willingness to listen to financiers at such gatherings, the new chairman remains extraordinarily tight-lipped about what he will or won't do now that he holds the gavel: "A lot of things. You know, a lot of things," is all he'll say. "We have an evolving agenda that will be coming up. A lot of oversight, but a lot of other things. We have broad jurisdiction. We've got a whole list of things." When pressed for details, he coyly says, "I didn't know you were going to be asking me about it. I don't have a complete agenda. But sure, there are all kinds of issues that are coming. We'll announce them as they come. I mean, nobody a year ago thought that Sarbanes-Oxley would be the issue of the day, because everything hadn't unfolded yet."
Indeed, Shelby at times seems evasive -- or at least noncommittal -- about almost everything. More than once during an interview, he answers questions about his life and career with a dismissive, "Oh, I didn't write it down."
Still, a rough sketch of Shelby's policy priorities can be drawn from conversations with those who have discussed them with his staff and associates.
Privacy tops the list. A 1996 amendment to the Fair Credit Reporting Act, prohibiting states from enacting laws to restrict subsidiaries and affiliates of large financial institutions from sharing client information, expires at year-end. Renewing the amendment is a top legislative priority for the banking lobby. But it's unlikely that Shelby will let that happen without first strengthening federal privacy standards. Specifically, he wants a provision requiring customers to "opt in" -- explicitly agree -- to such information-sharing programs rather than having to opt out, as is currently required. The chairman of a House subcommittee on financial institutions and consumer credit, Representative Spencer Bachus -- also an Alabama Republican -- supports the big financial institutions on privacy and plans to hold hearings in the near future on renewing the amendment. Shelby says he will also call a hearing on the matter, but he won't commit to one side of the issue or the other.
"I think my views on privacy are pretty well known," he says. "But you know, I'm one of many senators. Will that come to the front again? Will it be debated, legislated on? We'll have to see what happens. I know Senator Sarbanes and I are pretty close on some views on some privacy issues. I'm sure that we will hold a hearing on it and go from there."
Shelby is also likely to reexamine the Gramm-Leach-Bliley Act itself. He and others on the committee, including New York Democrat Charles Schumer, are concerned that the law has emboldened giant institutions like Citigroup, J.P. Morgan Chase & Co. and Bank of America Corp. to exploit their dominant positions in the commercial lending market by forcing corporate clients to also use them for investment banking business. SEC chief Donaldson has said that he too plans to look into the issue.
Although there have been no clear signals from Shelby about securities litigation reform, Wall Street fears that the bursting of the stock market bubble will prompt him to revisit the Private Securities Litigation Reform Act of 1995, which made it more difficult for shareholders to file class-action securities fraud complaints against publicly traded corporations. Of particular concern is whether lawmakers will move to allow plaintiffs more time to file claims after any alleged fraud occurs. A related concern that several senators brought up during the Donaldson confirmation hearing is whether investors are fairly served by the current practice of mandatory arbitration of disputes between securities firms and their clients. Some favor opening such disputes to litigation, which the industry vehemently opposes.
"The plaintiffs' bar is licking its lips now that Shelby's in power," says one apprehensive brokerage executive.
Perhaps not surprisingly, given his huge stock market losses, Shelby has already made it known that he wants the SEC to more aggressively pursue enforcement cases against individual stock analysts who engaged in bubble-era misconduct. And other senior members of the banking committee -- like ranking Democrat Sarbanes -- are expected to push for the prosecution of the executives responsible for the alleged massive fraud at WorldCom, as well as the corporation. Shelby himself lost nearly $50,000 in WorldCom's collapse.
Moreover, the new chairman is expected to hold frequent oversight hearings, just as he did as chairman of the intelligence committee in the mid-1990s. Donaldson and the heads of other agencies that fall under Shelby's jurisdiction -- including the Federal Reserve Board, the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission -- can expect to be testifying regularly on Capitol Hill about their efforts to police and regulate markets.
Indeed, barely two months after his confirmation hearing, Donaldson found himself testifying about hedge funds. And before letting Donaldson hop in a cab back to the SEC after that April 10 hearing, Shelby made sure to let him know that he would want to see the regulator at the witness table for another progress report when the agency had finished its hedge fund study.
Other topics likely to be examined by the banking committee include the federal deposit insurance system and money laundering -- a subject that particularly interests Shelby because of his long tenure dealing with intelligence issues. "If we find who's funding the terrorists in our banking system or our friends in the international banking system, we will stop a lot of terrorist attacks," he says. "Not all, but we'll stop a lot of them."
FIVE MONTHS IS NOT NEARLY long enough to show whether Wall Street's Shelby paranoia is justified. In the final analysis, that will depend on whether the wily Alabamian is really the master of pragmatism and compromise that some say he is. But for now he's got the leaders of American finance exactly where he wants them -- off balance.
At the New York fundraiser, Shelby told inquiring minds that he had no set agenda for the banking committee, and he pledged to listen to all constituencies before proceeding with legislation. Bankers went home that night with lighter wallets but with no assurance that their worst fears were unfounded.
"Most of the time he was talking about Alabama football, and Gramm was talking about Texas A&M football," says one person who attended the fundraiser. "It was all pleasantries, not a lot of substance. We still don't have a bead on the guy."
And that has Wall Street very frightened.
|Shelby's stock picks: Buy high?|
|Senate Banking Committee chairman Richard Shelby knows personally the pain felt by millions of ordinary investors who lost money on the stocks of companies that were overly hyped or cooking their books during the 1990s bubble. Below is a sampling of Shelby's investments gleaned from Senate financial disclosure forms.|
|Holding||No. of shares||Date purchased||Estimated purchase price||Current value|
|AOL Time Warner||100||1/11/00||6,400||1,400|
|Vanguard Index Trust 500 fund*||N/A||6/99||500,000||310,000|
|* Estimated purchase price and present value are minimums based on range ($500,000 to $1 million) provided in Senate disclosure form; number of shares not disclosed.|
|Sources: U.S. Senate, Bloomberg.|
Wall Street got more than it bargained for when Republicans won back control of the U.S. Senate last November. Phil Gramm, a free-market economist who never met a government regulation he didn't dislike, was in line to regain the chairmanship of the powerful Senate Banking Committee but instead resigned to become an investment banker. The gavel passed to Alabama's Richard Shelby, who, unlike Gramm, isn't close to Wall Street. He's regarded as a populist maverick whose views on issues like privacy rights and tort reform scare the heck out of a financial services industry that is struggling through its worst downturn since the Great Depression. Shelby sat down recently with Institutional Investor Senior Writer Justin Schack to discuss how he will approach his new job.
Institutional Investor: How do you feel about the fact that Wall Street lobbyists tried to block you from becoming chairman?
Shelby: That doesn't bother me. I think you have to start out with the basic premise that if you're a senator, you shouldn't be a lobbyist for any particular group. I'm not ever going to do that for anybody. I think that they knew that. I want to be open, fair. Will I be aggressive? They knew that I would be, because of my stint as chairman of the intelligence committee. A lot of people also knew that before the banking committee would be a lot of oversight, a lot of hearings dealing with sensitive things such as accounting fraud, corporate governance. I'm going to be involved in that. They knew that. And if they didn't know it, they must have been asleep. I don't think anybody has anything to be worried about unless they've done something wrong. If we know about it, we're going to pursue it. We've got a tough environment now. Maybe we can help restore some investor confidence. We've got to do it. And we can start in the banking committee.
According to your financial disclosure forms, you've lost a significant amount of money on technology and telecommunications stocks.
Oh, I lost some. I could have made some money off of Global Crossing at one time, and I didn't take the profit because I had no idea they were cooking the books and doing all those kind of things, you know? But what'd I lose? A hundred thousand bucks or so? Whatever it was, I forgot. It's a lot of money but, you know, I've been blessed. You know what I mean? But like most Americans, I had no idea that some of the accounting frauds were going on. I had no idea that companies the size of WorldCom or Global Crossing, for example, were being manipulated from the inside like they were. I was very fortunate to not have had everything my family owns in something like that.
Why did you buy these stocks?
Well, I talked to one of my brokers about them. He thought they were probably going to grow, and they were growing. But he was probably misled like everybody.
Did research recommendations play a role in your purchases?
Not my research. Whether they [the brokerage firm] did, I'm not sure.
And what brokerage firm was this?
I'm not going to get into that. I mean, it's not my broker's fault. At one time he called me, and I could have made 50, 60 grand off the stuff. I didn't do it. That's just the perils of the market. We understand there's risk in the market. But boy, there is a heck of a risk when people are cheating, stealing, committing fraud.
How does this experience color your opinion of the securities industry?
My personal experience just accentuates to me what other people all over America have experienced, probably in bigger circumstances, where they had so much of their portfolio invested, so much of their money in various funds, and have really taken a hit. I've been lucky in a lot of ways. Other people have not been that fortunate. But are you asking, Is it personal to me? No. Do I have a personal goal because I've experienced along with thousands and thousands of Americans the financial pain of what crooked accountants and corporate managers and others would do or have done? I try not to be personal about anything. It's principles, not personal.
On the issue of privacy, what do you intend to do about the amendments to the Fair Credit Reporting Act, which allow for the sharing of data between affiliated companies and which expire at the end of the year?
What that does now is preempt the states from being involved in a lot of fair credit reporting. That will be one of our first hearings in the banking committee. But I don't think we should rush to judgment on anything.
I'm hearing talk of a potential compromise that would allow firms to maintain an opt-out policy as long as they communicate it more clearly and directly to customers.
Well, that talk is going around, and I've talked to a number of people on both sides about it. You never get everything you want in a legislative setting. The other side never gets everything they want. Will there be something in between that'll satisfy no one but will probably be the best? We'll have to see. That's the story of legislation in general.
Do you expect oversight hearings to be a regular occurrence or only when issues come up that warrant them?
Oh, yeah. Absolutely. There will be some legislation that every year we will be holding oversight on. Gramm-Leach-Bliley, for example. How's it going? What are the problems in it? What needs to be done to it? Sarbanes-Oxley. The ink's just dry, but how's the [accounting] oversight board, how's the Securities and Exchange Commission doing? I think that a healthy, active committee with jurisdiction over anything ought to be involved. It has to know what the laws that we created are doing, and do we need them anymore.
One big concern about Gramm-Leach-Bliley is that the financial supermarkets it helped create are tying the extension of corporate credit to other services, like investment banking. What's your opinion about that?
I believe tying would be unfair. It's not what people ought to do. It disrupts a level playing field, which we all want for competition. I believe some of the House people have already been outspoken on that. We'll have our staff look at that first and see if it's widespread, if there's a problem. And if there is, we would look into it as part of our oversight responsibilities.