One-stop shopping in banking's new age; Financial reform: Sweeping measure creates financial giants that will require close federal scrutiny.


IMAGINE how annoyed you would be if a bank teller tried to sell you insurance while you deposited your paycheck.

Or how angry you might get if your bank were using your financial information to help other lenders or investment counselors target you.

That may not be just the stuff of bad dreams if Congress passes the Financial Services Act of 1999 and fails to follow up with oversights that ensure consumer protections don't suffer.

The law will likely spur financial institutions to embark on an unprecedented wave of consolidation. That could create convenient one-stop shopping for everything from banking to investing, borrowing and purchasing insurance. But it could also lead to abuses and a trampling of consumer financial privacy -- something the government must stand ready to prevent.

This comprehensive overhaul of the nation's financial industry is designed to replace the decades-long piecemeal dismantling of the Depression-era Glass-Steagall Act. Passed in 1933 after widespread bank failures, that law was designed to ensure that banks did not endanger deposits with potentially risky ventures such as underwriting securities or insurance.

The system served the nation well for about 50 years. But with the emergence in the 1980s of large European and Asian financial companies offering an array of financial services, U.S. companies said they were at a competitive disadvantage. They agitated for change. Congress, it appears, is ready to capitulate.

Fine. But how will consumers be protected from companies that could be more interested in feeding their subsidiaries than in protecting their customers' interests?

More important: What happens when one of these large companies hits hard times? Can the economy withstand it? What would happen to a bank's financial status if an insurance company under the same corporate umbrella goes under?

The legislation being considered provides safeguards for these and other problems that might arise. But it falls to the government agencies involved -- and the White House -- to ensure that these safeguards don't disappear once the bills becomes law.

The Treasury Department, Securities and Exchange Commission and the Federal Reserve will need adequate funding -- increased budgets, if necessary -- to supervise these behemoths.

Regulators, lawmakers and others also need to ensure the institutions aren't allowed to share personal financial information among their different companies, meaning banks shouldn't help sell insurance or drum up business for investment counselors. Fees should also remain reasonable.

Everyone could benefit from this legislation if it makes personal financial matters more convenient. But if that benefit comes at the expense of consumer protection and privacy, Congress and the White House will take the blame.

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