Return to Prudent Banking Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 2176 To repeal certain provisions of the Gramm-Leach-Bliley Act and revive the separation between commercial banking and the securities business, in the manner provided in the Banking Act of 1933, the so-called ‘‘Glass- Steagall Act’’, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 9, 2019 Ms. KAPTUR (for herself, Mr. LYNCH, Mr. KHANNA, Ms. SPEIER, Mrs. WAT- SON COLEMAN, Ms. SCHAKOWSKY, Mr. DEFAZIO, Ms. NORTON, Mr. MCGOVERN, Ms. GABBARD, Mr. COHEN, Ms. JAYAPAL, Ms. PINGREE, Mr. CICILLINE, Ms. ESHOO, Mr. TONKO, Ms. DELAURO, Mr. WELCH, Ms. LEE of California, Mrs. NAPOLITANO, Mr. POCAN, Mr. GRIJALVA, Mr. YARMUTH, Ms. ROYBAL-ALLARD, Ms. OMAR, and Ms. WILD) intro- duced the following bill; which was referred to the Committee on Finan- cial Services A BILL To repeal certain provisions of the Gramm-Leach-Bliley Act and revive the separation between commercial banking and the securities business, in the manner provided in the Banking Act of 1933, the so-called ‘‘Glass-Steagall Act’’, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 2 •HR 2176 IH SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Return to Prudent 2 Banking Act of 2019’’. 3 SEC. 2. GLASS-STEAGALL REVIVED. 4 (a) WALL BETWEEN COMMERCIAL BANKS AND SE- 5 CURITIES ACTIVITIES REESTABLISHED.—Section 18 of 6 the Federal Deposit Insurance Act (12 U.S.C. 1828) is 7 amended by adding at the end the following new sub- 8 section: 9 ‘‘(bb) LIMITATIONS ON SECURITY AFFILIATIONS.— 10 ‘‘(1) PROHIBITION ON AFFILIATION BETWEEN 11 INSURED DEPOSITORY INSTITUTIONS AND INVEST- 12 MENT BANKS OR SECURITIES FIRMS.—An insured 13 depository institution may not be or become an affil- 14 iate of any broker or dealer, any investment adviser, 15 any investment company, or any other person en- 16 gaged principally in the issue, flotation, under- 17 writing, public sale, or distribution at wholesale or 18 retail or through syndicate participation of stocks, 19 bonds, debentures, notes, or other securities. 20 ‘‘(2) PROHIBITION ON OFFICERS, DIRECTORS, 21 AND EMPLOYEES OF SECURITIES FIRMS SERVICE ON 22 BOARDS OF DEPOSITORY INSTITUTIONS.— 23 ‘‘(A) IN GENERAL.—An individual who is 24 an officer, director, partner, or employee of any 25 broker or dealer, any investment adviser, any 26 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 3 •HR 2176 IH investment company, or any other person en- 1 gaged principally in the issue, flotation, under- 2 writing, public sale, or distribution at wholesale 3 or retail or through syndicate participation of 4 stocks, bonds, debentures, notes, or other secu- 5 rities may not serve at the same time as an of- 6 ficer, director, employee, or other institution-af- 7 filiated party of any insured depository institu- 8 tion. 9 ‘‘(B) EXCEPTION.—Subparagraph (A) 10 shall not apply with respect to service by any 11 individual which is otherwise prohibited under 12 such subparagraph if the appropriate Federal 13 banking agency determines, by regulation with 14 respect to a limited number of cases, that serv- 15 ice by such individual as an officer, director, 16 employee, or other institution-affiliated party of 17 any insured depository institution would not un- 18 duly influence the investment policies of the de- 19 pository institution or the advice the institution 20 provides to customers. 21 ‘‘(C) TERMINATION OF SERVICE.—Subject 22 to a determination under subparagraph (B), 23 any individual described in subparagraph (A) 24 who, as of the date of the enactment of the Re- 25 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 4 •HR 2176 IH turn to Prudent Banking Act of 2019, is serv- 1 ing as an officer, director, employee, or other 2 institution-affiliated party of any insured depos- 3 itory institution shall terminate such service as 4 soon as practicable after such date of enact- 5 ment and no later than the end of the 60-day 6 period beginning on such date. 7 ‘‘(3) TERMINATION OF EXISTING AFFILI- 8 ATION.— 9 ‘‘(A) ORDERLY WIND-DOWN OF EXISTING 10 AFFILIATION.—Any affiliation of an insured de- 11 pository institution with any broker or dealer, 12 any investment adviser, any investment com- 13 pany, or any other person, as of the date of the 14 enactment of the Return to Prudent Banking 15 Act of 2019, which is prohibited under para- 16 graph (1) shall be terminated as soon as prac- 17 ticable and in any event no later than the end 18 of the 2-year period beginning on such date of 19 enactment. 20 ‘‘(B) EARLY TERMINATION.—The appro- 21 priate Federal banking agency, after oppor- 22 tunity for hearing, may terminate, at any time, 23 the authority conferred by the preceding sub- 24 paragraph to continue any affiliation subject to 25 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 5 •HR 2176 IH such subparagraph until the end of the period 1 referred to in such subparagraph if the agency 2 determines, having due regard for the purposes 3 of this subsection and the Return to Prudent 4 Banking Act of 2019, that such action is nec- 5 essary to prevent undue concentration of re- 6 sources, decreased or unfair competition, con- 7 flicts of interest, or unsound banking practices 8 and is in the public interest. 9 ‘‘(C) EXTENSION.—Subject to a deter- 10 mination under subparagraph (B), an appro- 11 priate Federal banking agency may extend the 12 2-year period referred to in subparagraph (A) 13 from time to time as to any particular insured 14 depository institution for not more than 6 15 months at a time, if, in the judgment of the 16 agency, such an extension would not be detri- 17 mental to the public interest, but no such exten- 18 sions shall in the aggregate exceed 1 year. 19 ‘‘(4) DEFINITIONS.—For purposes of this sub- 20 section, the terms ‘broker’ and ‘dealer’ have the 21 same meanings as in section 3(a) of the Securities 22 Exchange Act of 1934 and the terms ‘investment 23 adviser’ and ‘investment company’ have the meaning 24 given such terms under the Investment Advisers Act 25 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 6 •HR 2176 IH of 1940 and the Investment Company Act of 1940, 1 respectively.’’. 2 (b) PROHIBITION ON BANKING ACTIVITIES BY SECU- 3 RITIES FIRMS CLARIFIED.—Section 21 of the Banking 4 Act of 1933 (12 U.S.C. 378) is amended by adding at 5 the end the following new subsection: 6 ‘‘(c) BUSINESS OF RECEIVING DEPOSITS.—For pur- 7 poses of this section, the term ‘business of receiving depos- 8 its’ includes the establishment and maintenance of any 9 transaction account (as defined in section 19(b)(1)(C) of 10 the Federal Reserve Act).’’. 11 (c) CONTINUED APPLICABILITY OF ICI V. CAMP.— 12 (1) IN GENERAL.—The Congress ratifies the in- 13 terpretation of the paragraph designated the ‘‘Sev- 14 enth’’ of section 5136 of the Revised Statutes of the 15 United States (12 U.S.C. 24, as amended by section 16 16 of the Banking Act of 1933 and subsequent 17 amendments) and section 21 of the Banking Act of 18 1933 (12 U.S.C. 378) by the Supreme Court of the 19 United States in the case of Investment Company 20 Institute v. Camp (401 U.S. 617 et seq. (1971)) 21 with regard to the permissible activities of banks 22 and securities firms, except to the extent expressly 23 prescribed otherwise by this section. 24 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 7 •HR 2176 IH (2) APPLICABILITY OF REASONING.—The rea- 1 soning of the Supreme Court of the United States 2 in the case referred to in paragraph (1) with respect 3 to sections 20 and 32 of the Banking Act of 1933 4 (as in effect prior to the date of the enactment of 5 the Gramm-Leach-Bliley Act) shall continue to apply 6 to subsection (bb) of section 18 of the Federal De- 7 posit Insurance Act (as added by subsection (a) of 8 this section) except to the extent the scope and ap- 9 plication of such subsection as enacted exceed the 10 scope and application of such sections 20 and 32. 11 (3) LIMITATION ON AGENCY INTERPRETATION 12 OR JUDICIAL CONSTRUCTION.—No appropriate Fed- 13 eral banking agency, by regulation, order, interpre- 14 tation, or other action, and no court within the 15 United States may construe the paragraph des- 16 ignated the ‘‘Seventh’’ of section 5136 of the Re- 17 vised Statutes of the United States (12 U.S.C. 24, 18 as amended by section 16 of the Banking Act of 19 1933 and subsequent amendments), section 21 of 20 the Banking Act of 1933, or section 18(bb) of the 21 Federal Deposit Insurance Act more narrowly than 22 the reasoning of the Supreme Court of the United 23 States in the case of Investment Company Institute 24 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 8 •HR 2176 IH v. Camp (401 U.S. 617 et seq. (1971)) as to the 1 construction and the purposes of such provisions. 2 SEC. 3. REPEAL OF GRAMM-LEACH-BLILEY ACT PROVI- 3 SIONS. 4 (a) FINANCIAL HOLDING COMPANY.— 5 (1) IN GENERAL.—Section 4 of the Bank Hold- 6 ing Company Act of 1956 (12 U.S.C. 1843) is 7 amended by striking subsections (k), (l), (m), (n), 8 and (o). 9 (2) TRANSITION.— 10 (A) ORDERLY WIND-DOWN OF EXISTING 11 AFFILIATION.—In the case of a bank holding 12 company which, pursuant to the amendments 13 made by paragraph (1), is no longer authorized 14 to control or be affiliated with any entity that 15 was permissible for a financial holding com- 16 pany, any affiliation by the bank holding com- 17 pany which is not permitted for a bank holding 18 company shall be terminated as soon as prac- 19 ticable and in any event no later than the end 20 of the 2-year period beginning on such date of 21 enactment. 22 (B) EARLY TERMINATION.—The Board of 23 Governors of the Federal Reserve System, after 24 opportunity for hearing, may terminate, at any 25 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 9 •HR 2176 IH time, the authority conferred by the preceding 1 subparagraph to continue any affiliation subject 2 to such subparagraph until the end of the pe- 3 riod referred to in such subparagraph if the 4 Board determines, having due regard to the 5 purposes of this Act, that such action is nec- 6 essary to prevent undue concentration of re- 7 sources, decreased or unfair competition, con- 8 flicts of interest, or unsound banking practices, 9 and is in the public interest. 10 (C) EXTENSION.—Subject to a determina- 11 tion under subparagraph (B), the Board of 12 Governors of the Federal Reserve System may 13 extend the 2-year period referred to in subpara- 14 graph (A) above from time to time as to any 15 particular bank holding company for not more 16 than 6 months at a time, if, in the judgment of 17 the Board, such an extension would not be det- 18 rimental to the public interest, but no such ex- 19 tensions shall in the aggregate exceed 1 year. 20 (3) TECHNICAL AND CONFORMING AMEND- 21 MENTS.— 22 (A) Section 2 of the Bank Holding Com- 23 pany Act of 1956 (12 U.S.C. 1841) is amended 24 by striking subsection (p). 25 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 10 •HR 2176 IH (B) Section 5(c) of the Bank Holding 1 Company Act of 1956 (12 U.S.C. 1844(c)) is 2 amended— 3 (i) by striking paragraphs (3) and (4); 4 and 5 (ii) by redesignating paragraph (5) as 6 paragraph (3). 7 (C) Section 5 of the Bank Holding Com- 8 pany Act of 1956 (12 U.S.C. 1844) is amended 9 by striking subsection (g). 10 (D) The Federal Deposit Insurance Act 11 (12 U.S.C. 1811 et seq.) is amended by striking 12 section 45. 13 (E) Subtitle B of title I of the Gramm- 14 Leach-Bliley Act is amended by striking section 15 114 (12 U.S.C. 1828a) and section 115 (12 16 U.S.C. 1820a). 17 (b) FINANCIAL SUBSIDIARIES REPEALED.— 18 (1) IN GENERAL.—Section 5136A of the Re- 19 vised Statutes of the United States (12 U.S.C. 24a) 20 is amended to read as follows: 21 ‘‘SEC. 5136A. [REPEALED].’’. 22 (2) TRANSITION.— 23 (A) ORDERLY WIND-DOWN OF EXISTING 24 AFFILIATION.—In the case of a national bank 25 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 11 •HR 2176 IH which, pursuant to the amendments made by 1 paragraph (1), is no longer authorized to con- 2 trol or be affiliated with a financial subsidiary 3 as of the date of the enactment of this Act, 4 such affiliation shall be terminated as soon as 5 practicable and in any event no later than the 6 end of the 2-year period beginning on such date 7 of enactment. 8 (B) EARLY TERMINATION.—The Comp- 9 troller of the Currency, after opportunity for 10 hearing, may terminate, at any time, the au- 11 thority conferred by the preceding subpara- 12 graph to continue any affiliation subject to such 13 subparagraph until the end of the period re- 14 ferred to in such subparagraph if the Comp- 15 troller determines, having due regard for the 16 purposes of this Act, that such action is nec- 17 essary to prevent undue concentration of re- 18 sources, decreased or unfair competition, con- 19 flicts of interest, or unsound banking practices 20 and is in the public interest. 21 (C) EXTENSION.—Subject to a determina- 22 tion under subparagraph (B), the Comptroller 23 of the Currency may extend the 2-year period 24 referred to in subparagraph (A) above from 25 VerDate Sep 11 2014 23:21 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2176.IH H2176 kjohnson on DSK79L0C42 with BILLS 12 •HR 2176 IH time to time as to any particular national bank 1 for not more than 6 months at a time, if, in the 2 judgment of the Comptroller, such an extension 3 would not be detrimental to the public interest, 4 but no such extensions shall in the aggregate 5 exceed 1 year. 6 (3) TECHNICAL AND CONFORMING AMEND- 7 MENT.— 8 (A) The 20th undesignated paragraph of 9 section 9 of the Federal Reserve Act (12 U.S.C. 10 335) is amended by striking the last sentence. 11 (B) T [Text truncated for display. 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