BARN YOU KNOW WHAT WE DID IF WE CHASED THE HORSE, GOT THE HORSE
           AND BROUGHT IT BACK TO THE BARN. THAT'S NOT ROCKET SCIENCE. I
           DID HAVE TO TAKE A LOT OF SCHOOL COARSE TOSS TEACH ME THAT. YOU
           GO BRING THE HORSEBACK. NOW WHAT THEY HAVE DECIDED IS NO, WE
           WILL JUST DECIDE THE HORSES ARE OUT OF THE BARN HERE IN THE WAY
           THINGS ARE SUPPOSED TO WORK IN A MANNER THAT PRESERVES SAFETY
           AND SUNNESS OF OUR BANKS AND IN A MANNER THAT PRESERVES
           SEPARATION OF CERTAIN KINDS OF ACTIVITIES, SOME THAT ARE
           INHERENTLY RISKY AS OPPOSED TO THOSE THAT REQUIRE SAFETY AND

           SOUNDNESS, THINGS HAVE HAPPENED SO THAT WE ARE PERSUADED LET'S
           JUST GET RID OF ALL THE RULES AND REWRITE THEM IN A WAY THAT
           JUST CIRCLES THE ACTIVITY THAT'S NOT BEEN ENGAGED IN OUR
           COUNTRY TO STAY THOSE WHO HAVE DONE IT OKAY THAT'S WHERE YOU
           ARE, IT IS A NEW DAY, WE WILL CALL IT MODERN DAYS AND WE WILL
           SAY IT IS JUST FINE. WELL, IT IS NOT FINE WITH ME. YOU NOW, IT
           IS INTERESTING THAT WE LIVE IN 1999 NOW IN THE MONTH OF MAY.
           HAVING EXPERIENCED THIS REMARKABLE ECONOMY. I'M ONE WHO WITH

           ALL OF MY COLLEAGUES WOULD SAY, WHAT A REMARKABLE OPPORTUNITY
           TO LIVE IN AN ECONOMY THAT HAS VIRTUALLY NO INFLATION, HAS
           VIRTUALLY FULL EMPLOYMENT. IT SEEMS TO HAVE ECONOMIC GROWTH
           THAT CONTINUES UNABATED. AND WHOSE STOCK MARKET CONTINUE TO SET
           NEW RECORDS. 23 DAYS ANOTHER 1,000 POINTS. YOU GET THE FEELING
           GEE, THE STOCK MARKET IS LIKE ONE OF THOSE SLOT MAS SHEENS THAT
           PAYS OFF EVERY TIME YOU PULL THE HANDLE. EVERY TIME YOU PUT A

           QUARTER IN YOU GET A QUARTERBACK BEYOND WHAT YOU PUT IN. THERE
           ARE PEOPLE WHO HAVE BEGUN TO INVEST IN THIS ECONOMY OF OURS
           THROUGH MUTUAL FUNDS AND INTO THE MARKETS AND SO ON AND SO
           FORTH WHO APPARENTLY BELIEVE THERE IS ONLY ONE DIRECTION FOR
           OUR ECONOMY AND ONLY ONE DIRECTION FOR OUR MARKETS AND THAT'S
           UP. AND SINGLE DIGIT RETURNS ARE NOT ENOUGH U. SUFFICIENT.
           RETURNS ARE NOW EXPECTED OF 15%, 20%, 25, 30% A YEAR. WELL, OF

           COURSE THAT WILL NOT CONTINUE. WE WANT A COUNTRY WITH THE TWIN
           ECONOMIC GOALS OF STABLE PRICES AND FULL EMPLOYMENT AND
           ECONOMIC OPPORTUNITY AND GROWTH. BUT WE HAVE BEEN THROUGH
           PERIODS IN THIS COUNTRY WHERE WHEN YOU SIT DOWN AND ADD THINGS
           UP, SOMEHOW THE ANSWER DOESN'T SEEM CORRECT. THIS ISN'T ALL
           GOING TO CONTINUE. ONE DAY IN ONE WAY THERE WILL BE
           ADJUSTMENTS. COMPANIES SELLING THREE AND 400 TIMES EARNINGS WE
           THINK THAT'S GOING TO CONTINUE?
           I DON'T THINK SO. NOW, WHAT HAS HAPPENED IN RECENT YEARS IN

           THIS COUNTRY DESPITE ALL OF THE GOOD NEWS IS A SERIES OF
           ECONOMIC ACTIVITIES BY FIRMS THAT 20 YEARS AND 40 YEARS AGO
           WOULD NEVER HAVE THOUGHT IN ENGAGING IN THOSE ACTIVITIES, AND
           THOSE ACTIVITIES WHICH REALLY REPRESENT A KIND OF A NEW FORM OF
           GAMBLING BY FIRMS THAT SHOULD NOT BE INVOLVED IN GAMBLING,
           REPRESENTS NOW AN ACCEPTABLE KIND OF BEHAVIOR. LET ME GIVE YOU

           SOME DEMOCRATS OF SOME OF IT. I STARTED THIS MORNING BUT I AM
           GOING TO READ A BIT MORE BECAUSE I THINK IT IS IMPORTANT FOR HE
           SHALL TO UNDERSTAND AND HEAR THIS. I MENTIONED TOO BIG TO FAIL.
           BIG BANKS THAT HAVE BECOME SO BIG OUR GOVERNMENT SAYS THEY
           CAN'T BE ALLOWED TO FAIL. AND OF COURSE WE CONTINUE THEN EVERY
           DAY TO SEE MORE MERGERS TO ALLOW MORE BANKS TO JOIN THE TOO BIG
           TO FAIL LIST. BUT IT IS NOT JUST THE BANKS. I WANT TO READ THE
           STORY OF LONG TERM CAPITAL MANAGEMENT BECAUSE ILLUSTRATIVE OF

           NOT ONLY WHAT'S HAPPENING AT THIS MOMENT IN THIS CHAPTER OF OUR
           HISTORY, BUT ALSO WHAT HAPPENED IN 1994 WITH A MASSIVE LOSSES
           ACROSS OUR COUNTRY IN DERIVATIVE ACCEPT S, THE RISK THAT BOND
           GO AWAY. THEY ARE TIGHTENING THERE GRIP ON THE WORLD ECONOMY
           AND NO ONE KNOWS HOW TO CONTROL THEM. UNREGULATED HEDGE FUNDS,
           BANKS, HOLDING COMPANIES THAT NOW FUSE AND MERGE BANKS
           UNDERWRITING SECURITIES, INSURANCE, IS ALL OF THAT A CAUSE FOR
           CONCERN?

           LET ME READ A COUPLE THINGS AND SEE WHETHER PERHAPS THIS CAN BE
           INTERPRETED IN A MANNER DIFFERENTLY THAN THOSE WHO HAVE DRAFTED
           THE CURRENT LEGISLATION. IT IS NOT A SECRET THAT I HAVE SAID
           THAT I THINK THIS CURRENT BILL, THE UNDERLYLE BILL, FINANCIAL
           MODERNIZATION FOR 1999 IS A TERRIBLE BILL. I DON'T MEAN
           DISRESPECT TO EITHER THE MANAGER OR THE CHAIRMAN OF THE
           COMMITTEE OR THE RANKING MEMBER OF THE COMMITTEE, I DON'T
           MEANEY DISRESPECT TO THEM, IT IS JUST THAT THIS IS MOOG THIS
           COUNTRY IN THE WRONG DIRECTION. THIS IS TERRIBLE LEGISLATION TO

           BE CONSIDERING AT THIS POINT. LONG TEMPLE CAPITAL MANAGEMENT A
           PRIVATE COMPANY?
           BIG INVESTORS, ALL RICH. GOT TO BE RICH TO INVEST IN THIS
           LONG-TERM CAPITOL MANAGE. YOU GOT TO BE SMART. A SMART OPERATOR
           WITH LOTS OF MONEY. YOU FORM A PRIVATE COMPANY CALLED LONG TERM
           CAPITAL MANAGEMENT AND YOU BEGIN BETTING. I WILL DESCRIBE THE
           BETS IN A MOMENT. BUT LET ME DESCRIBE AUGUST 21, LAST YEAR. IT
           WAS A FRIDAY. HALF THE PARTNERS AT LONG TM CAPITAL MANAGEMENT
           HAD BEEN GONE FROM THEIR OFFICE THAT FRIDAY. INSIDE THE

           ASSOCIATES THAT DAY LOGGED ON TO THEIR COMPUTERS AND SAW
           SOMETHING THAT BEGAN TO STRIKE SOME FEAR IN THEIR HEARTS. U.S.
           TREASURY RICE WERE SKYROCKETING. THROWING THEIR RELATIONSHIP TO
           OTHER SECURITIES OUT OF WHACK. THE DOW JONES INDUSTRIAL AVERAGE
           WAS SWOONING. BY NOON IT WAS DOWN. THE EUROPEAN BOND MARKET WAS
           IN SHAMBLES. THIS LONG TERM CAPITAL MANAGE, THIS HEDGE FIRM,
           THEIR BETS WERE BLOWING UP AND NOBODY COULD DO ANYTHING ABOUT

           IT. BY 1 1 O'CLOCK IN THE MORNING THE FUND LOST $150 MILLION IN
           A WAGER THEY MADE ON THE PRICES OF TWO TELECOMMUNICATIONS
           STOCKS ENGAGED IN A TAKE OVER. THEN IN A SINGLE BET THAT THEY
           HAD TIED TO THE U.S. BOND MARKET THEY LOST $100 MILLION.
           ANOTHER $100 MILLION EVAPORATED THE NEXT HOUR IN A SIMILAR
           TRADE IN BRITAIN. BY DAY'S END, THIS PRIVATE HEDGE COMPANY,
           L.T.C.M., HAD HEMORRHAGED ONE HALF OF A BILLION DOLLARS. IS

           EQUITY SUVENG TO $1.3 BILLION DOWN A THIRD FOR THE YEAR. THIS
           IS FROM "THE WALL STREET JOURNAL" RECOUNT OF IT. PARTNERS
           SCRAMBLE OUT OF THEIR OFFICES AND ON TO THE TRADING FLOOR AS
           ASSOCIATES STAIRED AT THEIR SCREENS IN DISBELIEF MAKING FRANTIC
           PHONE CALLS AROUND THE GLOBE THEY REACHED JOHN MERRY WHETHER
           THE FOUNDER OF THIS FIRM AT A DINNER IN BEIJING. HE BOARDED THE
           NEXT PLANE TO THE U.S. ARROWS ENFELLED CALLED IN FROM SUN
           VALLEY, IDAHO WHERE HE WAS SETTLING IN FOR A VACATION. LEFT HIS
           WIFE AND CHILDREN BEHIND AND MADE AN ALL NIGHT TRIP TO

           GREENWICH. THEN THE BRASS A SEMI-BELLS THE NEXT MORNING.
           
           IT IS 7:00, ON SUNDAY, AND ONE AFTER ANOTHER THE PARTNERS FROM
           LONG TERM CAN TALL MANAGEMENT BEGIN CALLING IN, TOKYO AND
           LONDON, THEY REPORTED THEIR MARKETS HAD DRIED UP. THERE WERE TO
           BUY YEARS, NO SELLERS WAS ALL BUT IMPOSSIBLE TO MANEUVER OUT OF
           THESE LARGE TRADING BETS THAT THEY HAD. THEY HAD SEEN NOTHING
           LIKE IT. THE CARNAGE THAT WEEKEND SET OFF EVENTS UNPRECEDENTED
           IN THE WORLD OF HIGH FINANCE CULMINATING WITH A $3.625 BILLION

           BAIL OUT FUNDED BY A CONSORTIUM OF 14 WALL STREET BANKS AND
           ENGINEERED BY THE FEDERAL RESERVE BOARD. LONG TERM CATCH TALL
           MANAGEMENT LOST MORE THAN 90% OF ITS ASSETS BY THE TIME IT WAS
           BAILED OUT AND THE MARKETS WERE ROYALED FOR WEEKS. LONGER TERM
           IT FORCED MANY OF THE WORLD'S LARGEST AND MOST SOPHISTICATED
           INSTITUTIONS AL INVESTORS TO REDEFINE THE WAYS THEY MANAGE RISK
           AND TRIGGERED KAULTSZ FOR CURVE U. TOUGHER REGULATION OF HEDGE
           FUNDS THOSE FREE WHEELING INVESTMENT POOLS THAT KAY TER TO THE

           WEALTHY. SO, HERE IS A COMPANY THAT LOST $3.6 ABOUT THE. WHAT
           HAPPENED?
           IT GUESS BAILED OUT. IN A CONSORTIUM OF BANKS INVESTING AT THE
           BEHEST OF THE FEDERAL RESERVE BOARD AT MEETINGS AROUND BY THE
           FEDERAL RESERVE BOARD. WELL, LET'S HERE E. HEAR A BIT MORE
           ABOUT THIS CASE BECAUSE IT RELATE TO AN AMENDMENT I AM GOING TO
           OFFER. IN AN INDUSTRY OPERATED BY SHARP P MONEY MANAGERS, LONG
           TERM CAPITAL HAD THE MOST WELL-KNOWN. ROBERT HER TON AND MYRON

           SHOALS. IN THE END IT WASN'T ALL ROCKET SCIENCE. IT WAS ABOUT
           SMART MARKETING APPEALING TO A WEALTHY KLEIN ENTELL WHO WANTED
           TO BE ABLE TO SAY THEIR MONEY WAS BEING MANAGED BY A PASS ELF
           PHD'S. IT WAS ABOUT MASSIVE BORROWING, UP TO $50 FOR EVERY $1
           INVESTED. LONG TERM CAPITAL MANAGEMENT WAS LIKE A SUPERMARKET,
           A HIGH VOLUME LOW MARGIN BUSINESS TRYING TO EVENING OUT SMALL
           PROFITS FROM THOUSANDS OF INDIVIDUAL TRANSACTIONS. MYRON ONCE
           TOLD ME THEY ARE SUCKING UP NICKLES FROM ALL OVER THE WORLD

           SAYS HER TON MILLER A UNIVERSITY OF CHICAGO BUSINESS PROFESSOR
           AND A NOBEL PRIZE WINER IN ECONOMICS. "BUT BECAUSE THEY ARE SO
           LEVERAGED, THAT AMOUNTS TO A LOT OF MONEY, ALL WHICH HAVE
           EXPLAINS HOW SO MANY GENIUSES SOMETIMES OVERCOMING DIVISION NGS
           THEIR RANKS, GOT IT SO WRONG. AND ALL THE WHILE VANITY GREED
           AND A CONSULT OF PERSONALITY BLINDED SOME TO THE WORLD'S MOST
           REFUTABLE FINANCIAL INSTITUTION FRS WALL STREET -- EXCUSE ME,
           REPUTABLE FINANCIAL WALL STREETS STALL WARTS TO SWISS BANKS TO

           THE PITFALLS INHERIT IN SUCH A STRATEGY." THE ARTICLE ABOUT
           LONG TERM CAPITAL MANAGEMENT, THIS PRIVATE HEDGE FIRM IS A
           LENGTHY ONE AND I SHALL NOT READ IT ALL, ALTHOUGH I AM SORELY
           TEMPTED JUST BECAUSE I THINK THE SENATE RECORD OUGHT TO HAVE A
           COMPLETE DESCRIPTION. SO MR. PRESIDENT, LET ME ASK CONSENT TO
           AT LEAST INCLUDE THE ENTIRE ARTICLE AS A PART OF THE SENATE
           RECORD.
           

           THE PRESIDING OFFICER: WITHOUT OBJECTION.
           

           MR. DORGAN: THE REASON I OFFER THIS IS TO SAY WE ARE NOW
           TALKING TODAY ON THE FLOOR OF THE SENATE ABOUT A STRATEGY THAT
           SAYS WE WANT TO IGNORE THE LESSONS OF HISTORY. WE WANT TO
           IGNORE THE TACT THAT IN THE 1920'S, IN THE GO-GO 1920'S WHEN
           EVERYBODY MADE MONEY AT EVERYTHING, AND WHEN BANKS DECIDED TO
           FUSE THEIR ACTIVITIES AND BE INVOLVED NOT JUST IN BANKING BUT
           ALSO IN UNDERWRITING SECURITIES AND A RANGE OF OTHER VERY RISKY
           ENTERPRISES, WE ARE GOING TO IGNORE THOSE LESSONS THAT WE

           LEARNED DURING THAT PERIOD. YOU KNOW THE BANK HOLIDAYS THAT
           EXHIFTED AT THE -- EX O OWE EXISTED AT THE START OF THE GREAT
           DEPRESSION?
           THE WHEN STUDIES WERE DONE TO DETERMINE WHAT HAPPENED IN THE
           1920'S, ONE OF THE THINGS THEY DISCOVERED IS WHAT HAPPENED IS
           WHAT YOU WOULD EXPECT TO HAPPEN. IF YOU HAVE SOMETHING CALLED
           BANKS WHOSE PERCEPTION OF SAFETY AND SOUNDNESS IS AT THE ROOT
           OF THEIR STABILITY AND VIABILITY, WHEN YOU HAVE BANKS FUSING
           THEIR ACTIVITIES WITH INHERENTLY RISKY ACTIVITIES, UNDERWRITING

           SECURITIES, FOR EXAMPLE, AND OTHERS, ULTIMATELY THOSE KINDS OF
           RISKS, THOSE KINDS OF BETS THAT EXIST OVERCOME THE PERCEPTION
           AND THE REALITY OF SAFETY AND SOUNDNESS AND PEOPLE BEGIN
           GETTING WORRIED AND NERVOUS AND PULLING THEIR MONEY OUT OF
           BARNS AND YOU HAVE BANK FAILURES. SO THE CONGRESS IN THE 1930'S
           CALLED A BILL CALLED GLASS-STIEGALL, AND GLASS-STIEGALL SAID
           YOU KNOW WHAT WE SHOULD DO?
           WE SHOULD LEARN THE LESSONS. MY GOSH, LET US NOT PUT ACTIVITIES
           TOGETHER WITH BANKS THAT ARE SO INHERENTLY RISKY. LET US

           SEPARATE THEM FOREVER. AND SO WE DID. AND WE PROHIBITED CERTAIN
           KIND OF INVESTMENT AND ACQUISITION BY BANKS AND REQUIRED THAT
           CERTAIN ENTERPRISES DO BUSINESS AND COMPETE IN THEIR OWN
           SPHERE. BANKS WERE PROHIBITED FROM BEING INVOLVED IN MOST OF
           THE SECURITIES ISSUES, UNDERWRITING SECURITIES AND INSURANCE
           AND MORE. NOW, OVER THE YEARS THAT SERVED THIS COUNTRY PRETTY
           WELL, BUT BANKS HAVE MADE THE CASE IN RECENT YEARS AND THEY ARE
           RIGHT ABOUT THIS, THAT EVERYBODY ELSE WANTED TO INVADE THEIR

           TERRITORY. EVERYBODY NOW WANTS FOB A BANK. IF YOU ARE SELLING
           CARS YOU WANT TO FINANCE CARS. YOU WANT TO BE A BANK. EVERYBODY
           WANTS TO CREATE SOME SORT OF HO AMONG RECOGNIZED ONE STOP
           STATION WHERE PEOPLE CAN BUY THEIR INSURANCE, BUY THEIR HOME,
           FINANCE IT. AND SO BANKS SAY PEOPLE ARE INTRUDING ON OUR
           TOUGHER, AND THE ONLY WAY WE CAN COMPETIS TO COMPETE ON THEIR
           TUVER AS WELL AND WE WANT GLASS-STIEGALL REPEALED AND HERE IT

           IS. THE BILL SITS ON THE FLOOR OF THE SENATE TODAY, REPEALS
           GLASS-STIEGALL. IT JUST FORGETS, APPARENTLY 60 YEARS OR 70
           YEARS OF HISTORY. IT WILL ALL BE ALL RIGHT. DON'T YOU SEE
           AROUND YOU?
           THE ECONOMY IS GROWING, UNEMPLOYMENT IS DOWN, INFLATION IS IT
           DOWN. THE STOCK MARKET IS UP. DOWN YOU UNDERSTAND, SENATOR DOR
           BEGAN?
           I GUESS NOT. MAYBE AS I SAID PELESSLY HOLD FASHIONED ABOUT
           THIS. I THINK IT IS A FUNDAMENTAL MISTAKE TO DECIDE TO REPEAL
           GLASS-STIEGALL AND DECIDE WE OUGHT TO ALLOW BANKS AND ALL OF

           THE OTHER FINANCIAL INDUSTRIES MERGE INTO ONE GIANT
           SMORGASBOARD OF FINANCIAL SERVICES. THOSE WHO ARE AROUND TO
           VOTE TO BAIL OUT A FAILED SAVINGS AND LOAN INDUSTRY TO $500
           BILLION OF THE TAXPAYERS MONEY, ARE THEY GOING TO WANT TO BE
           AROUND 10 YEARS OR 15 YEARS FROM NOW WHEN WE SEE BAIL OUTS OF
           HEDGE FUNDS PUTTING BANKS AT RISK?
           OR HOW ABOUT THE BANKS NOT JUST BAILING OUT OF A HEDGE FUND,
           BUT BANGS HAVE THE OWNERSHIP OF THE HEM FUNDS. THAT'S WHAT WE
           HAVE NOW. THIS BAIL OUT OF LONG TERM CAPITAL MANAGEMENT SAYS

           THAT WE HAVE SIGNIFICANT INVESTMENTS BY SOME. LARGEST BANKS IN
           THESE HEDGE FUNDS. OR HOW ABOUT DERIVATIVES?
           I AM NOT AN EXPERT IN THIS
{END: 1999/05/06 TIME: 14-30 , Thu.  106TH SENATE, FIRST SESSION}