Dianne Feinstein: “I rise to offer my support and cosponsor an amendment to S. 2673 offered by the senior Senator from New York, which…”

“I rise to offer my support and cosponsor an amendment to S. 2673 offered by the senior Senator from New York, which would prohibit all loans by a corporation to its directors or executive officers. Among the abuses committed by senior executives and directors at companies such as WorldCom, Enron, and Global Crossing is the practice of issuing large, favorable loans to those executives and directors. Those loans can create conflicts of interest that limit that the ability of outside directors, in particular, to voice their criticism of the institution. Many years ago, I served on the board of directors of a bank, and noted that at the time, several of the directors had hundreds of thousands of dollars worth of outstanding loans at that bank. At the time, this occurred to me to be wrong, and I could not understand why these directors did not take out loans at another bank, thereby avoiding any conflicts of interest. The only conclusion I could draw was that the loans to these directors were either easier to procure or made on more favorable terms than loans from another bank would be. I see no justification for providing loans to corporate directors or executive officers. The goal of the reforms that we are currently debating should be to create an environment in which outside directors and major corporate officers act in as pure and honest a manner as possible.”