[Congressional Record Volume 153, Number 175 (Tuesday, November 13, 2007)]
[Senate]
[Pages S14246-S14248]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             FISCAL POLICY

  Mr. DORGAN. Mr. President, let me describe a couple of things that 
represent front-page news these days. Regrettably, I believe, these 
things threaten the potential future prosperity of our country and 
require an urgent response on the part of the President and the 
Congress.
  The economy and fiscal policy of this administration--and the lack of 
regulatory interest on the part of this administration--has led us to 
an abyss that is very troublesome. We see the dollar dropping in value 
to other currencies. We see a dramatic trade deficit of $2 billion a 
day, that we are buying from other countries more than we are selling 
to other countries. We see a fiscal policy budget deficit that the 
President says is coming down. The only way he can say the deficit is 
significantly coming down is that he is taking all of the surplus 
Social Security revenues that are supposed to go into the Social 
Security trust fund and using every dollar of that surplus as an offset 
against other revenue and other spending in order to show a much lower 
deficit. We are far off track in trade policy and fiscal policy, and 
now we have in front of us a proposal for $196 billion in emergency 
spending--none of it paid for. That will bring us very close to three-
quarters of a trillion dollars that the President has requested on an 
emergency basis--none of it paid for. That is not conservatism. We have 
a responsibility to begin paying for these costs. We send soldiers to 
war and the President says to the American people: You go shopping and 
do your part for the American economy.

  That should not happen. What should happen is when we send soldiers 
to go to war and ask them to wear the uniform of their country and go 
in harm's way, we should, as a responsible Congress and President, pay 
for the costs as we go.
  I don't understand it. The President is down there at the White House 
saying $22 billion additional for the kinds of things that invest in 
our country--he says I am opposed to that. He said I will veto 10 of 
your bills, if necessary. He said, I am opposed to that $22 billion of 
your bills, half of which is invested in health care. Then he says, by 
the way, I want $196 billion on the other side, none of it paid for, 
for my priorities, and he says: But that is for the troops.
  I am sorry, it is not just for the troops. A substantial portion of 
that is for the contractors. There is dramatic

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evidence of the greatest waste, fraud, and abuse in the history of this 
country going to contractors who are profiteering, regrettably, during 
a war. For a long while I have believed--we have had votes in the 
Senate and all on the other side of the aisle have voted against it--
that we should have a Truman-type committee, such as the one Harry 
Truman led many decades ago, that began to investigate the waste, 
fraud, and abuse in contracting that is existing, that is fleecing the 
American taxpayer, undermining the American troops, going on under the 
nose of this administration, and nobody seems to care.
  With respect to a fiscal policy that is out of control, let me 
describe the second portion of that, and that is an administration that 
doesn't want regulators to regulate. I understand some do not like 
regulation, but this administration has gone way beyond the pale in 
saying to regulators, look the other way.
  Here is what is happening. This morning you read the newspaper and 
see that subprime loans are beginning to have a big impact on all 
Americans because it is beginning to have an impact on the economy. 
What does all this mean, subprime lending?
  Let me describe it to you. Again, the regulators were asleep, didn't 
do anything, didn't care very much. Here is what has been going on. We 
have had mortgage companies that used to be kind of the slow, little 
companies that would lend you money for your home, down on the street 
corner someplace, not much going on, somebody who was a thoughtful 
person with a pencil above their ear, they were wearing a white shirt 
and suspenders. You would sit down and say, I need a home loan. They 
would be glad to help you and they would sit down and work out a home 
loan for you. That was the way home loans worked.
  All of a sudden, home loans have changed. All of a sudden it is a go-
go industry. This is what they started doing. It is unbelievable. This 
is an advertisement from the biggest home lending company in this 
country: Homeowners, do you want to refinance and get cash? Countrywide 
has a great reason to do it now. A no cost finance. It has no points, 
no applications fee, no credit reporting and no third party fees. No 
title, no escrow, or appraisal fees. Absolutely no closing costs. So 
you wind up with a lot more cash.
  Here is another company that had a different thing to say, Zoom 
Credit:

       Credit approval is just seconds away. Get on the fast track 
     at Zoom Credit. At the speed of light, Zoom Credit will pre-
     approve you for a car loan, a home loan or a credit card. 
     Even if your credit's in the tank. Zoom Credit's like money 
     in the bank. Zoom Credit specializes in credit repair and 
     debt consolidation, too. Bankruptcy, slow credit, no credit--
     who cares?

  This is an ad from a mortgage company.
  Millenia Mortgage had to say in their advertisement:

       Twelve months No Mortgage Payment. That's right. We will 
     give you the money to make your first 12 payments if you call 
     in the next 7 days. We pay it for you.

  Let me describe what all this means and what they were doing. I will 
do it with respect to the largest mortgage lending company. Angelo 
Mozilo created Countrywide Finance, the biggest mortgage company in our 
country. They are the ones, along with others, who helped create the 
riskier loans and in many cases targeted those loans to those who could 
not repay.

       Do you have less than perfect credit? Late mortgage 
     payments? Denied by other lenders? Call us.

  That was one of Countrywide's advertisements. Let me say again:

       Do you have less than perfect credit? Do you have late 
     mortgage payments? Have you been denied by other lenders? 
     Call us--

  Countrywide says.
  So they began to attract borrowers through advertising, and then they 
had brokers on the phone soliciting, calling somebody up, saying: Let's 
talk about a new mortgage. We can get some cash for you and reduce your 
interest rates. So they created ``affordability loans,'' a new 
category; then adjustable rate mortgages; then interest-rate-only 
loans; then reduced documentation or no-documentation loans. When I 
heard that one, I thought, What does that mean? It means just what it 
says: If you want to get a loan, a home mortgage, and you don't want to 
document your income, they say that is fine, we will give you a no-doc 
loan. You will pay a little higher interest rate, but we will certainly 
give you a mortgage if you don't have documentation.
  One of the new mortgages they began to offer is interest-only loans 
so the borrower is required to pay interest charges only. They deferred 
any principal payment to much later; and then they came up with a pay 
option adjustable rate mortgage, which allowed the borrower to pay only 
a portion of the interest, none of the principal, just a portion of the 
interest, and defer all of it to the end of the loan. This means you 
might end up paying much more for the house than the house is worth.

  All these fancy things--what they were saying to potential borrowers 
was, if you have bad credit, come to us because we have an instrument 
for you.
  This is about greed, by the way, because the brokers and the banks 
made extraordinary amount of money. So what they did was they created a 
circumstance where they would loan to people something called subprime 
loans. There is evidence they put people into subprime loans, even 
though they could have qualified for prime loans. Why? Because subprime 
loans paid more. Then they rolled these subprime loans, in many cases 
for people who couldn't repay, and they would set the interest rate 
ridiculously low--pay 2 percent interest rate, for example, and then it 
will reset in 24 months, 36 months, and when it resets, it will reset 
way up here, but in the meantime here is your monthly payment.
  They were quoting monthly payments without the escrow, so they were 
recording ridiculously low payments. In some cases, they were quoting 
interest only loans, some cases with only partial interest, in other 
cases at ridiculously low rates that were going to reset at a high 
rate, and then they would attach prepayment penalties to them so they 
could lock people in. And then what they did is they rolled this up 
like sausage.
  There was a story about how there used to be sawdust in with meat 
when they rolled sausage up so you didn't know what you were eating. It 
was good filler, apparently. They rolled these up as securities with 
the subprime loans, the prime loans, rolled them up as a security, 
sliced them up to be sold.
  Guess what. The big investors out there liked this stuff. It paid 
pretty high rates at this point because you were able to have 
prepayment penalties and a whole series of things. They are buying 
these things without having the foggiest idea what is in them. The 
rating agencies are rating them as OK. So you have the folks investing 
in the securities that represent these subprimes. Then all of a sudden 
it is discovered people are not able to pay. They can't make their 
house payments. The interest rate gets reset. It is way up. They don't 
have a ghost of a chance of making the house payment, and then they 
stand around scratching their head wondering what happened. I will tell 
you what happened, a carnival of greed on the part of the mortgage 
brokers, bank security firms--all of them, a total carnival of greed. 
Now they are all walking around scratching their head, trying to figure 
out what do we do next.
  Well, Merrill Lynch, for example, lost $8.4 billion, I guess it was, 
2 weeks ago, so they fired their CEO. I believe he got $161 million in 
securities and retirement benefits--as he went out the door.
  Last week it was CitiGroup that fired their CEO. There was a pretty 
substantial benefit.
  That is going on all over the country. By the way, the head of the 
company that is the largest company, Mr. Mozilo, in the midst of all 
this, head of the largest company that is engaged in all this, 
Countrywide, earned $142 million last year. He was celebrated as the 
executive--Fortune Magazine's prestigious Company of the Year. The 
Horatio Alger award. He made $142 million last year and the New York 
Times reports that he was selling $138 million of his stock in the 
company as he was talking about how well the company was doing.
  This subprime scandal is all about greed. It is not new. It happened 
in the savings and loan industry. It has happened in other areas. It is 
now happening with respect to this mortgage industry scandal. The 
administration, of course, doesn't want anybody looking over anybody's 
shoulder, so there

[[Page S14248]]

has been no regulation. You have hedge funds buying into these things. 
They are unregulated, by and large. There is no regulation, no 
oversight, Katy-bar-the-door, do what you want to do, the private 
sector will be fine.
  It is not fine. This is having a significant and serious impact on 
this country's economy. I am going to come back to this in a moment, 
but let me describe the other issue that is happening.
  We wake up this morning and oil is $90 to $100 a barrel. You ask why 
is that the case? Why is oil $90 to $100 a barrel? Once again, it is 
lack of oversight. Here we have a futures market on which oil is bought 
and sold. This futures market has now become an unbelievable orgy of 
speculation.
  I was reading yesterday from an article, an analyst from the 
Oppenheimer Company in New York, was talking about the price of oil. He 
says:

       I'm absolutely convinced that oil prices shouldn't be a 
     dime above $55 a barrel. Oil speculators include the largest 
     financial institutions of the world. I call it the world's 
     largest gambling hall. It is open 24-7. Unfortunately there 
     are segments of the market that are unregulated. This is like 
     a highway with no cops, no speed limit, and everybody is 
     going 120 miles an hour.

  What is happening with oil? It is interesting, if you take a look at 
this unbelievable speculation that is going on in the futures market. 
You have industrial banks in this country, investment banks. They are 
actually buying tanks to store oil. This takes the oil off the market. 
They are doing this because they believe that the price of oil will be 
higher in the future. So they take oil off the market now, store it, 
and sell it later for a profit. This creates an upward pressure on 
price. You now have hedge funds hip deep in the futures markets. They 
didn't used to be. It used to be that the futures market for oil had a 
relationship to the supply and demand with respect to oil. There were 
other tensions in various parts of the world that might affect it some, 
but not like we have seen recently. As is the case in most areas, this 
has gotten way out of hand. There is no way that current supply-and-
demand relationships with oil justify $100 a barrel. It is a futures 
market that is propelled by unbelievable speculation in search of 
profits by a whole range of interests, especially now including hedge 
funds and investment banks and others.

  The question is, who are the victims of all of this? The victims are 
people, the people who drive up to the gas pump. The victims on the 
subprime market are the people who cannot repay a mortgage; and 
somebody says maybe they should have known better. Maybe so, but when a 
broker is going to make a $30,000 commission by writing a $1 million 
mortgage and selling over the phone 2 percent interest rates, I am 
telling you there are a whole lot of folks who get sucked into that.
  The point here is we face a situation in several areas where there is 
a total, complete lack of common sense. There is this little book 
written by Robert Fulghum a long while ago that would, in my judgment, 
provide some benefit to some people. The title of the book is, ``All I 
Really Need To Know I Learned In Kindergarten.'' The lessons are not 
unusual. The lessons are: Play fair, don't hit, don't take what is not 
yours, wash your hands, flush--you know, the things I learned in 
kindergarten; the things that are important.
  We could write a primer on ``All The Things I Really Need To Know I 
Learned In Kindergarten.'' We could write that primer and instantly 
people would say you can't have an oil futures market that is rampant 
in speculation with hedge funds and others now pushing up the price of 
oil having little to do with supply and demand. You can't have a 
mortgage industry in which the mortgage companies decide they are going 
to provide loans to people who cannot afford to repay the loan and make 
very big profits and lock them in with a prepayment penalty. They are 
all fat and happy and making a massive amount of money. You can't have 
that without a significant consequence to our economy.
  What do I suggest? It is simple. Let's sober up a little bit on 
fiscal policy in this administration and this Congress. Maybe we can 
say to the President: You want $196 billion. OK. You tell us how you 
want to pay for it. Send us the recommendation, and we will certainly 
take a look at that. We want to do everything that needs to be done to 
support our troops. But a substantial portion is not going to support 
our troops. It is going to support big contractors that have been 
bilking the taxpayer for a long time. We are going to take a hard look 
at that and investigate it and get to the bottom of it.
  We need to get back on track in trade and fiscal policy. Ignoring it 
might feel good, but it is not the right thing for the future.
  With respect to the issue of subprime lending and futures markets, if 
that doesn't persuade Members of this body there needs to be some 
thoughtful, sensible regulation, then I don't know what will. I chaired 
the hearings on Enron. It was to my subcommittee that Ken Lay came on 
behalf of Enron, raised his hand, and took the fifth amendment. Mr. Lay 
is dead. Many of the folks who worked with him at Enron are in prison. 
But I understand what happened in that scandal. The American public, 
again, was a victim. They got fleeced. In Enron's case, they were 
manipulating markets to drive up the cost of electricity on the west 
coast and bilk people out of billions of dollars. What did it mean? It 
meant we had to put in place some regulations to prevent that from 
happening again. What does this mean, the subprime scandal that exists, 
and its impact on the economy? It means we have to put in place some 
regulations to prevent this sort of thing from happening. People have 
profited in a very unholy way at the expense of a lot of victims across 
the country.
  What does it mean when people go up to the gas pump this afternoon 
and pay a substantial amount for a tank of gasoline at a time when the 
price of oil is running toward $100 a barrel and the futures market is 
driving that price up, having very little to do with supply and demand 
but more to do with an orgy of speculation? It means we ought to care 
about that. It means there ought to be some regulatory oversight.
  This administration has a lot to answer for, as does the Congress. I 
am pleased to be a part of the majority, and we are working hard to try 
to respond to and deal with these issues. But these issues are not 
going to go away. The prosperity of this country's future is at stake. 
We need to get it right.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Hawaii.

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