[Congressional Record Volume 154, Number 54 (Monday, April 7, 2008)]
[Senate]
[Pages S2622-S2624]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             HOUSING CRISIS

  Mr. DORGAN. Mr. President, I know the subject is housing. We will 
have a fair amount of discussion about the legislation on the floor of 
the Senate today, tomorrow, and later this week when we begin voting on 
it. I wish to start by talking about what got us into this mess because 
it seems to me, if what we are doing at the moment is trying to 
evaluate what we do with the difficulties that exist and the 
difficulties that confront us and do not deal with the underlying 
cause, we will have missed something very important.
  The other day, I came to the floor and talked about what was 
happening in the mortgage industry. What was happening, of course, was 
an unbelievable amount of greed, unbelievable speculation, and the 
result is this occurrence of subprime loans proliferated across the 
country, and then it collapsed. We have investment banks that are about 
to go broke. We have the Federal Reserve Board coming in with a safety 
net, saying: We will have the taxpayers bail out the investment banks. 
All of this going on while the Federal Reserve Board, which did its 
best imitation of a potted plant on these issues, began reducing 
interest rates and then antes up $30 billion so the American taxpayers 
could inherit the risk so JPMorgan could buy Bear Stearns. All of this 
has occurred in recent months.
  What started it? A lot of things started it. Let me give some 
examples.
  This is from an advertisement on radio and television. It is from 
Zoom Credit. I don't know Zoom Credit company. But here is what they 
said when they advertised their services to unsuspecting buyers. They 
said:

       Credit approval is just seconds away. Get on the fast track 
     at Zoom Credit. At the speed of light, Zoom Credit will 
     preapprove you. Even if your credit's in the tanks. Zoom 
     Credit's like money in the bank. Zoom Credit specializes in 
     credit repair and debt consolidation. Bankruptcy, slow 
     credit, no credit--who cares?

  That is what they were advertising: Let us give you a loan. You have 
been bankrupt, you can't make your payments, come to Zoom Credit. Does 
it sound like a business model that makes sense to anybody? Not to me.
  Millennia Mortgage. I don't know this company. Here is what they were 
advertising:

       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. Our loan program may 
     reduce your current monthly payment by as much as 50 percent 
     and allow you no payments for the first 12 months.

  They say: Come and get your home loan from us. You won't have to make 
a payment for 12 months. We will make it for you. What it doesn't say 
is it goes on the back of the loan and increases the price of that 
house.
  Countrywide was the biggest mortgage company in America, and now it 
has been acquired by Bank of America. Here is what Countrywide said:

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

  Are you a bad credit risk? Call us, we are going to lend you some 
money. That is unbelievable to me.
  So you ask, how did we get into this mess? Let me continue.
  Lowest fixed rate loan in America, they are advertising on this one. 
One-quarter of 1 percent; that is a twenty-five-hundredths of 1 percent 
interest rate. A $200,000 home loan, a monthly payment of $41.66. You 
want to borrow half a million dollars; pay $146.16 a month?

  Is that a business plan from a mortgage company? It doesn't look to 
me like it is. This, by the way, came off the Internet today. The 
reason I am mentioning it is, nothing has changed. They are still doing 
it.
  This says First Premier Mortgage. One hundred percent loans you get, 
conforming loans. We will offer conforming loans. Perfect credit, by 
the way, isn't required. So on the Internet you can go to First Premier 
Mortgage. Perfect credit isn't required. If you have less than perfect 
credit, we have loans that will allow you to qualify for a competitive 
interest rate. You can consolidate everything.
  So don't worry, perfect credit is not required to borrow from this 
company.
  This is Florida Mortgage Corporation. This is Monday, April 7, 2008. 
That is today. Go to the Internet today. Here is what they tell you. 
Each month you will receive a loan statement. We have a 30-year fixed 
mortgage that is available to you--30-year fixed mortgage. By the way, 
no income verification.
  What does that mean? It says: Come to us, borrow some money, we will 
give you a 30-year fixed mortgage. You can pay up to 2.75 percent 
interest rate and, by the way, no income verification. We will not have 
to verify your income to give you a big old fat home mortgage. Isn't 
that unbelievable? Not credit score driven.
  This is on the Internet today. Nothing is changing. This one is on 
the Internet today as well: OptionArmConsultants.com. They make this 
sound like this is a terrific loan. You can lower your mortgage payment 
by 50 percent or more per month. You can control up to two or three 
times as much real estate as other fixed mortgages. It is saying: Hey, 
come over here, get a mortgage from us, that way you can speculate, own 
more real estate.
  None of these have indicated to the borrower what the terms really 
are. These are all seductive approaches that say: Come and get a 
mortgage from us. You don't need good credit. You can have bad credit. 
You can be bankrupt. Come and borrow money from us.
  What they do not say is they are going to throw all those extra 
charges on the back of the mortgage. They do not tell them when it 
resets later they will not be able to pay the mortgage payment.
  So that is what has happened. I have heard the largest reset of 
mortgages is going to occur in the fourth quarter of this year. But 
what has happened is, millions of families took out these mortgages. 
Were they wrong? Yes, they were wrong. But was the advertising for this 
deceptive? I believe it was. So millions of families took out a 
mortgage without understanding the consequences.
  They said: Come and get a mortgage from us. Twenty-five-hundredths of 
1 percent interest rate, we will pay the payments for the first 12 
months--not describing to them, of course, what the reset is going to 
be on interest rates 3 years from now or 2 years from now.
  So what happens? Well, what happens is they stick these mortgages in 
what they call subprimes. And, by the way, one-half of the folks who 
were put into a subprime would have qualified for a regular mortgage. 
Why did they get put into subprime? Because it was much more profitable 
for the big investment banks and mortgage banks. So they stack all 
these subprime loans together with other loans, sort of like they used 
to make sausage. It is like packing sawdust and sausage, like they used 
to in the old days. They would put sawdust in sausage, slice it and 
dice it and ship it out. So they sell these loans to hedge funds and 
investment banks and everybody is fat and happy like hogs in a corn 
crib. Everybody is making lots of money, especially the big shots, 
until all of a sudden they understand that in these little pieces of 
sausage they bought, they didn't understand what was there. There were 
subprime mortgages there that could never, ever be repaid, and the 
whole thing started collapsing.
  It collapsed to the point of Bear Stearns losing tens of billions of 
dollars of value in 2 weeks. But not to worry. This is a no-fault 
economy, at least no-fault capitalism for the folks at the top. So the 
Fed comes in and says: JPMorgan, you buy Bear Stearns, and we will put 
up $30 million at risk for the American taxpayer.
  I want to ask this question of the Federal Reserve Board and the 
Treasury Secretary. If these companies are

[[Page S2623]]

too big to fail--and that was the proposition with respect to the 
bailout of Bear Stearns--if investment banks are too big to fail, then 
why are they too small to be regulated? If we are going to designate 
companies as being too big to fail, is there not some responsibility, 
some obligation on behalf of the American taxpayer to have effective 
regulation?
  I know regulation is a four-letter word for some, but the fact is, 
somebody should have been looking over the shoulder of these mortgage 
companies. Somebody should have been looking over the shoulder of the 
investment banks and, yes, the hedge funds, all unregulated largely, 
and as a result, the tent comes collapsing down.
  And guess what. The American taxpayer is told: You pay the cost. You 
bear the burden. Even while they are told that, it still goes on today. 
Go to the Internet and see the deceptive advertising on the Internet 
for the same kind of loans.
  So we have a housing bill on the floor of the Senate. What I wanted 
to do is to describe how we got here. If we don't do something about 
that, if we just sit around here like potted plants and say, well, it 
is OK, it is OK for us to decide that there are institutions that are 
too big to fail, including investment banks, so we can let them go 
broke. They are too big to fail because the consequences for the 
American economy would be catastrophic. If these institutions are too 
big to fail, then we have a reasonable expectation that there be 
effective regulation. And I am going to offer at least one amendment 
that deals with that subject, and that amendment will deal with the 
Federal Trade Commission.

  The fact is, the Federal Trade Commission does not have the ability 
at this point, in any meaningful way, to go after this kind of 
deceptive advertising on mortgages. Those who took these mortgages, in 
some cases, if they took them in order to flip the property and 
speculate, it is their fault. But I would say in many, and most cases, 
these are folks who didn't know what the terms were. These were cold 
calls via a telephone call into the home to say: What is your mortgage 
payment? We have a better deal for you--without disclosing all of the 
terms. Those homeowners are victims, and many are now losing their 
homes.
  My amendment will give the authority to the Federal Trade Commission 
to do a rulemaking under the Administrative Practices Act so they can 
develop rules about deceptive advertising and take effective and 
immediate action against those who are engaged in this practice. That 
is just something that must be done.
  If we just come to the floor of the Senate and pass what is called a 
housing bill and ignore the other pieces of this puzzle, we will have 
made a mistake. We need to give the Federal Trade Commission the 
ability and the opportunity to go after the companies that were engaged 
in deceptive practices--predatory lending. We have to do that.
  Now, Mr. President, I want to mention, as well, that my understanding 
is another amendment has been filed and is pending on the floor of the 
Senate to this bill dealing with the extension of renewable energy 
credits, including the production tax credit and the solar investment 
tax credit. I just wanted to say this: The amendment that is pending 
apparently, is a 1-year extension of the production tax credit to 
incentivize wind and other renewable energy resources.
  Let me tell you what we did with oil and gas. In 1916, this country 
put in place robust, aggressive, permanent long-term tax incentives for 
people to go look for oil and gas. Well, look what it did. We have 
produced a lot of oil and gas. Guess what we have done for renewables--
wind, solar, and others? In 1992, we had a tax credit for wind--the 
production tax credit. We had a solar investment tax credit for 
commercial purposes going back to 1985 but the residential credit was 
enacted in 2005. These have been short-term incentives though, not a 
particularly aggressive credits and short term.
  Since 1992, for a country that is desperate to be less dependent on 
foreign sources of energy, we have extended it short term five times. 
We have let the production tax credit expire three times, and every 
time it expires, investment simply dries up. This is certainly the case 
for wind energy. This is stutter, start, stop. It doesn't make any 
sense at all.
  Look, I will vote for anything that extends the production tax credit 
and renewable energy tax credits for a year or 2 years. I will vote for 
it, but the 1-year amendment look, but that is not what we should be 
doing.
  I have introduced a bill that, as a country, will say to the 
renewable energy industry: Here is where we are headed; count on it, 
invest on it. For the next 10 years, here is what we intend to 
incentivize.
  Why do we just stutter, step around with a baby step in one 
direction, saying start, stop, start, stop, go this way, with a 1-year 
extension of the production tax credit? Well, that will help for 1 
year, but that is not what we ought to be doing. Further, it will do 
nothing for solar, by the way. We are way behind on solar energy 
because the solar projects take longer to develop--3 to 5 years. If you 
have this on-off switch that you turn off every year or two, all you 
have done is dampen and injure the opportunity to make renewable energy 
a significant part of this country's energy life.
  So my hope is those who have announced the extension, and I want to 
work with them, but I am just saying I think what we have done since 
1992 is a pathetic, anemic response for a country that keeps saying it 
believes in renewable energy because we never do enough to manifest 
that in public policy. If we are going to have an amendment, let's 
boost that amendment, and let's decide to make this a real incentive. 
We did it permanently nearly a century ago for oil and gas, and now in 
the last three decades for renewable, we have turned it on five times 
short term and off three times. What kind of a signal is that? It is 
not a signal at all.
  Mr. President, on one other subject, I want to say a word about 
something I discussed last week. And I want to show you the photograph 
of a 22-year-old young man. His name is Efraim Diveroli. He is the 
president of a firm that was awarded $300 million in taxpayer contracts 
to provide ammunition to the Afghan army and police in Afghanistan.
  Three hundred million dollars was given to that company. It turns out 
the company is run by a 22-year-old man named Efraim Diveroli. And, by 
the way, his vice president was a massage therapist named David 
Packouz, a former masseur. Between the two of them, they got $300 
million in taxpayer contracts.
  I will tell you who gave it to them. The Army Sustainment Command 
did. I want the general who was in charge of the Army Sustainment 
Command when this contract was awarded to come to the Congress and 
explain how you give $300 million in contracts to what had been a shell 
company, now run by a 22-year-old and a 25-year-old massage therapist.
  This is a photo of the building in Florida that supposedly housed 
this company that received $300 million--$300 million.
  The office is just an office inside this building, no markings on the 
door. The 22-year-old president says he is the only employee, but they 
got $300 million.
  Here is a sample of what showed up for that $300 million. They sent 
ammunition to the Afghan fighters, and it turns out in some cases to 
have been mid-1960s ammunition made in China. Almost worthless. But we 
paid them $300 million.
  Now, I mention this again, as I have so often, because three times I 
have offered on the floor of the Senate an amendment, and I will again, 
that would establish a Truman committee to investigate waste, fraud, 
and abuse in this kind of contracting. We have shoveled more money out 
the door. We have sent pallets of one-hundred-dollar bills on C-130s--
billions in cash--to Iraq. We have such unbelievable waste and fraud 
and abuse, I think the greatest in American history, and yet there is 
nothing that represents the kind of oversight that Americans should 
expect of us. Three times I have offered the establishment of a Truman 
committee. Let me describe what the Truman committee was. Senator 
Truman from Missouri on the floor of the Senate proposed a bipartisan 
special committee to investigate waste, fraud, and abuse in the 
Pentagon, and it passed.

[[Page S2624]]

They did 60 hearings a year for 7 years. They were started with $15,000 
appropriations, and they saved $15 billion for the American taxpayer. 
If ever we need that kind of a committee, it is now.

  Three times I have offered that on the floor of the Senate--three 
times. Every vote on the Democratic side of the aisle has been to say, 
yes, we need it. Every vote save one on the Republican side of the 
aisle objected and opposed and we have not been able to get this done.
  I used this example because it was on the front page of the New York 
Times just last week, about a company that gets $300 million that 
appears now to have been largely wasted--American taxpayers' dollars 
once again just poured down a rat hole. I use this example to say we 
ought to be embarrassed to not have the kind of oversight we should.
  I am proud to say everyone on this side of the aisle has voted three 
times to establish a special bipartisan committee called the Truman 
committee. We know this works. We have done it before.
  I have held up on the floor so many examples. A little white towel 
that Halliburton was ordering for the troops because they have the 
LOGCAP contract to supply these things, a little white towel their 
buyer, Henry Bunting, was ordered to buy for the troops. So he orders 
the white towel and the supervisor says: You can't do that. You need to 
order a white towel with KBR, the subsidiary, Kellogg Brown & Root, 
embroidered on the towel.
  Henry says: Well, that will triple or quadruple the cost.
  The supervisor says: That doesn't matter. This is a cost-plus 
contract. The taxpayer will pay for that.
  That is a small example, and there are so many large examples. 
Whistleblowers have told us $85,000 brandnew trucks were left beside 
the road in perfectly safe areas, to be torched because they didn't 
have a wrench to fix the tire. The attitude was, it doesn't matter; the 
American taxpayer bought those trucks, and they will buy the 
replacement trucks on a cost-plus contract. It is unbelievable.
  A woman named Bunnatine Greenhouse came to testify before the policy 
committee which I chair. I have held almost all the hearings which have 
been held on these issues. The policy committee doesn't have the 
subpoena power, but you would be surprised how many whistleblowers want 
to talk about what is happening.
  Bunnatine Greenhouse became the highest ranking civilian official in 
the Corps of Engineers, judged to be outstanding by all accords. She 
said the awarding of these contracts in the Pentagon for 
reconstruction--the LOGCAP contract, RIO contract, all of these 
contracts--is the most blatant contracting abuse she has seen in her 
career. For that, this courageous woman was demoted. She paid for it 
with her job, but she would not be silenced. Now her career is behind a 
curtain over in the Pentagon. No one will comment.
  The American people should not stand for this. We should not stand 
for it. I intend again to offer the amendment that would establish a 
bipartisan committee to aggressively investigate waste, fraud, and 
abuse in contracting in Iraq; waste, fraud, and abuse in all of the 
other adjunct areas because I believe the American taxpayer is getting 
fleeced, and I believe American soldiers are being disserved by what is 
happening.
  I can speak for hours about this subject because I have had somewhere 
around 15 or 17 hearings on this subject. I have had whistleblowers 
come to tell me they were at a camp that was serving food to 5,000 
soldiers a day under the contract, but they were billing for 10,000 
soldiers.
  I have seen the reports that Halliburton was billing for 42,000 meals 
a day, and they were serving 14,000. They were overbilling by 28,000 
meals. It is just unbelievable when you see the evidence of waste, 
fraud, and abuse and so little interest in pursuing it.
  There is much more to say about this. I did want to say that the 
story in the New York Times yesterday ought to once again be a wake-up 
call. There is a commission that has been established, which is outside 
of this body. The Senator from Virginia, Mr. Webb, and Senator 
McCaskill and others have worked hard to establish the commission. I 
think that is a step forward--evaluating and looking at waste, fraud, 
and abuse. But that is not, in my judgment, a substitute for--it 
certainly is a complement to but not a substitute for the Congress 
having a select committee with subpoena power. Without subpoena power 
and the select committee being able to investigate things like a 
company getting $243 million to rehabilitate 140 health clinics in 
Iraq, 3 years later the money is gone and there are only 20 places they 
have rehabilitated; otherwise the money is gone. So what happened to 
all the money?
  We had testimony from a very courageous Iraqi yesterday who said $18 
billion, mostly American money, has disappeared. At least disappeared 
within his eyesight because he was in charge of anticorruption in the 
Iraqi Government. He was in charge of the anticorruption unit in the 
Iraqi Government. They tried to kill him three times. He finally left 
because he said the corruption was so unbelievable, and he was so 
unable to stop it. He said $18 billion of American taxpayers' dollars--
he believes most of it American taxpayers' dollars--has been wasted.
  Later this week, I am going to speak at greater length about the 
waste, fraud, and abuse issue because we have to stop ignoring it. We 
have to start confronting it. My colleague, Senator Reid, has been very 
strong and assertive in wanting to address this issue. All of my 
colleagues on the Democratic side have voted three times to establish a 
Truman committee.
  Let me just mention one additional point. Three weeks ago I met a man 
named Herman Wouk. He is one of the great authors in American history. 
He wrote the books ``The Caine Mutiny'' and ``War and Remembrance.'' I 
believe he is 91 years old. He has an unbelievable command of a lot of 
things. I was so impressed by him. It was a great honor to meet one of 
the great American authors, Herman Wouk.
  He said to me, somewhat with a twinkle in his eye, he said: Senator 
Dorgan, I don't know much beyond 1945, but I know everything 1945 and 
back because I spent my life studying that history. I was part of it in 
the military. But, he said, I have written about it, I studied it. He 
said: I know everything about this period.
  He said: You know what you ought to do in the Congress. I am reading 
about all of these things. You ought to do something, establish a 
Truman committee. Have you ever heard of a Truman committee?
  I said: Mr. Wouk, I have. I offered an amendment to do that three 
times.
  Then we talked about what the Truman committee had accomplished when 
a Democratic President was in the White House and a Democratic Senator 
wanted to put together that kind of investigative committee. People 
were concerned about it. The fact is, it got done, and the American 
taxpayer was served.
  This war in Iraq has lasted longer than the Second World War. This 
amount of waste, fraud, and abuse is the greatest in the history of 
this country, I am convinced, and we are not near what we should be 
doing to provide the oversight. It is not the fault of this side of the 
aisle. It is not the fault of the majority leader. He has been 
aggressive and so have we. We have offered it time and time again, and 
we are not going to stop. The American taxpayer deserves better.
  I yield the floor and make a point of order a quorum is not present.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. DORGAN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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