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Commercial National Bank

Compass Bank

Corestates Financial Corp.

Crestar Financial Corp.

Deutsche Bank, AG

Fifth Third Bancorp

First Alabama Bancshares, Inc.

First Fidelity Bancorporation

First Interstate Bancorp

First Michigan Bank

First Bank System, Inc.

First National Bank of Chicago

First National Bank of Omaha

First National Bank of wichita

First of America Bank Corp.

First Union Corp.

Firstar Corp.


Great Western Financial Corp.

Harris Bankcorp, Inc.

Hibernia Corp.

Huntington Bancshares, Inc.

LaSalle National Corp.

Liberty National Bancorp, Inc.

Mark Twain Bank

Marshall & Ilsley Corp.

Mellon Bank Corp.

Mercantile Bancorporation, Inc. Kidlantic Banks, Inc.

Morgan Guaranty Trust Co.

National Bank of Commerce

National Bank of Detroit

NationsBank Corp.

Northern Trust Corp.
Norwest Financial Services, Inc.

old Kent Financial Corp.

PNC Financial Corp.

Prenier Bancorp, Inc.

Provident National Bank

Riggs National Corp.

Seattle First National Bank

Security Financial Corp.

Shawmut National Corp.

Signet Banking Corporation

Society Corp.

South Carolina National Bank

Star Banc Corp.

State Street Boston Corp.


Trustmark Corp.

United Jersey Bank

United Missouri Bancshares, Inc.

United States Trust Company

Valley National Bank

Wachovia corp. .

Washington Mutual savings Bank

Wells Fargo & Company

wilmington Trust Corp.

Mr. DINGELL. Thank you, Mr. Cahouet. Mr. Stein.

TESTIMONY OF HOWARD STEIN Mr. STEIN. Mr. Chairman and members of the subcommittee, I am pleased both to respond to your questions and have the opportunity to discuss our merger with Mellon. How the participants in this transaction approach this matter, we believe, could well set the standard not only for this century's future, but the standard by which the savings and investing public's legitimate demands will be met.

There are issues here that we are anxious to discuss and I appear before you fully committed to the soundness of the transaction and the need to enter it in a way that will enhance public policy, as well as the economic vitality of the operations involved.

In my testimony today, there are three basic touchstones, one personal to myself, one dealing with the strongly held regulatory views, and one regarding the future of our industry that I know we and our colleagues at Mellon share.

First, I joined with Jack Dreyfus nearly 40 years ago to help create and build a mutual fund organization that, while hopefully successful, would reflect our shared values and sense of obligation to the public values that were perhaps more commonly held in the immediate post-war era than later. It was, we felt, key to whatever success we could achieve that Dreyfus' name, its reputation for prudence, conservative money management, and total integrity in all aspects of its business were embedded in the public's mind. Without that, the attempt to attain the fundamental goal of the Dreyfus Corporation, bringing the financial benefits to the many once reserved only for the few through mutual funds, would be in vain.

I think it is fair to say, Mr. Chairman, that since our beginning in the 1950's, the Dreyfus name has achieved some national recognition, earned a reputation for soundness, stability, strong corporate citizenship, and brought the necessary financial rewards to its stockholders. I stress this only to make the point that the people and culture of the Dreyfus Corporation hold the same values today and would not undertake any new direction that could possibly jeopardize our hard-earned respect of 40 years.

Second, while I would defer to the subcommittee and Congress at large on general matters of public policy, I retain for myself deeply held views on the need for regulatory protection of the public in my own industry. The Dreyfus Corporation and I have lived our entire business lives within the rules and regulations promulgated under appropriate laws by the Securities and Exchange Commission. I have not found this in any way burdensome, but totally appropriate, indeed helpful, in the public's growing acceptance and reliance on mutual funds as a reliable investment vehicle.

In fact, from time to time, I have been outspoken within the industry, as well as in public, concerning the need for even greater regulatory watchfulness by the SEC and for larger resources to be put at their disposal by Congress to better accomplish this work. It was perhaps the depth of my views on such regulatory matters in general that resulted in my appointment to the Presidential Task Force on Market Mechanisms, the Brady Commission, following the market break of October 1987.

Mr. Chairman, we at Dreyfus firmly believe that an essential element in the success of mutual funds has been comprehensive, strict and uniform regulation of the industry, primarily, of course, by the SEC. Because of the existing well developed scheme if disclosure, the mutual fund industry has prospered under the bright light of full and accurate investor information. Moreover, investors justifiably have confidence in an industry that because of effective regulation has been virtually untainted by scandals and failures despite its rapid growth and great size. It is vital that this regulatory structure not be disrupted and, further, that it be carefully adopted to bank participation in mutual funds. That is why we strongly support the core principles of the Dingell-Markey functional regulation bill and why Mellon and Dreyfus have committed to operating Dreyfus as an entity that will continue to be fully subject to SEC regulation.

Third, our Nation and economy is known throughout the world for its many attributes, not the least of which is its openness and accommodation to change. Whether in social or economic policy, that inclination has been marked by a unique mixture of adaptation to the demands of the future, tempered by retaining the best of the proven past.

What is true for the economy at large holds for the financial services industry, as well. If we cannot adapt to the competitive demands as we see them shaping for the future, if we cannot alter our relationships for the benefit of the investing public, our industry will not meets its promise, but we can and should do so only, as I have stated, under a sound and strong regulatory environment, coupled with a corporate commitment to total integrity; in other words, change bringing the best of the past with us.

And we at Dreyfus have always sought progress. Much as we were key in the creation of tax-free investing, key in the establishment of money market funds, with the finest attention to regulatory requirements to safeguard the investor, we propose to move forward once again believing that the growing complexity of the marketplace, the explosive growth in numbers of mutual funds available to the public through innovative channels of distribution, we recognize the future of financial services as we saw it and responded to it. That recognition, simply stated, was that two organizations that had played so prominent a role in our Nation's financial history, Mellon and Dreyfus, would be uniquely positioned to meet the public's growing desire for an array of high quality financial products delivered by a source committed to impeccable standards.

It is clear to us and to our colleagues at Mellon, as well, to expert observers of the field, that in the financial world, significant change was in the air and it required innovation and real leadership to react. But it was also clear to us that if we were to succeed, it would only result if we could set high standards for the industry, only if we and Mellon adopted standards of conduct that would not only satisfy current regulatory requirements, anticipate possible future requirements, and, of equal importance, satisfy ourselves as people that by so doing, we would achieve greater acceptance with our customers through enhanced competence and integrity.

We have submitted this policy statement, as well as other pertinent documents, to the subcommittee concerning the business and regulatory aspects of the merger.

Mr. DINGELL. Thank you, Mr. Stein. Mr. DiMartino or Mr. McGuinn, do you have any comments you'd like to add?

(No response.)

Mr. DINGELL. Gentlemen, the Chair has got to adjourn this meeting for 30 minutes. I will return immediately thereafter. You have my apologies for this. Before I do depart, I want to thank you both, gentlemen, for a very fine statement and I will return in exactly 30 minutes. Thank you very much for your courtesy. Then we will have the questions at that time.

[Brief recess.)
Mr. DINGELL. The subcommittee will come to order.

Mr. Cahouet, if the proposed merger between Mellon and Dreyfus goes through, amongst other things that will happen, Mellon Bank will be selling Dreyfus funds out of Mellon Bank's locations. It is my understanding that Mellon recognizes the potential confusion this will create in the eyes of bank consumers.

Tell me what your plan is to ensure that Mellon Bank customers don't infer that Mellon Bank protection such as FDIC insurance will now cover Dreyfus mutual funds.

Mr. CAHOUET. Mr. Chairman, with your permission, I would like to ask Mr. McGuinn, who is in charge of the retail operation, and that is through which we will be selling those funds, if he would respond to that.

Mr. DINGELL. That would be just fine.
Mr. McGuinn.

Mr. MCGUINN. Yes, sir. Let me describe, if I may, exactly how it would work if a customer came into one of our branches and inquired about a mutual fund.

First of all, we have on the doors to all of our branches a sign which makes it perfectly clear that while we have investment products, these products are not FDIC insured, the products involve investment risk, including the possible loss of principal. In fact, you can get back more or less than you originally invested. That they are not guaranteed by Mellon Bank or any bank, and that these products are not deposits for bank accounts.

Mr. DINGELL. Very well. Without objection, we will insert that in the record.

[The information follows:

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