[Congressional Record Volume 154, Number 102 (Thursday, June 19, 2008)]
[Senate]
[Pages S5772-S5775]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    RENEWABLE ENERGY AND JOB CREATION ACT OF 2008--MOTION TO PROCEED

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will resume consideration of the motion to proceed to H.R. 6049, 
which the clerk will report.
  The legislative clerk read as follows:

       Motion to proceed to Calendar No. 767, H.R. 6049, an act to 
     amend the Internal Revenue Code of 1986 to provide incentives 
     for energy production and conservation, to extend certain 
     expiring provisions, to provide individual income tax relief, 
     and for other purposes.

  Mr. DODD. Mr. President, I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DODD. 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the quorum call be rescinded.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.


               Housing and Economic Recovery Act of 2008

  Mr. DODD. Mr. President, let me begin by thanking the majority 
leader, Senator Harry Reid of Nevada; the Republican leader, Senator 
Mitch McConnell of Kentucky; and the respective Members of our two 
parties, but particularly the leadership for their ability to make it 
possible for us to move forward on this very important piece of housing 
legislation. We have been at this for some time.
  Every Member in this Chamber, as well as the American people, realize 
the seriousness of the problem we face as a nation. We have a serious 
economic crisis in the country, and the heart of that economic crisis 
is the housing crisis. The heart of the housing crisis is the 
foreclosure crisis.
  Let me begin this discussion by noting that several months ago on two 
previous occasions we dealt with housing legislation--which I will 
point out is a part of this larger package today--and at that time we 
were having about 7,100 foreclosures a day. At least that was the 
number of filings of foreclosures when I first announced the level of 
foreclosures that were occurring. The numbers from May have just come 
in. The numbers are now close to 8,500, or 1,500 more than they were 
even 1 month ago. So we are now approaching 9,000 filings of 
foreclosures on a daily basis in our country.
  In light of these numbers, I hope no one will suggest the problem is 
not a serious and growing one. We have not even hit July 1 yet when, of 
course, we realize the resets on some of these adjustable rate 
mortgages will begin to kick in; and as they do, we are warned by those 
following this issue almost on an hourly basis that the tidal wave of 
foreclosures will increase in the coming months, not decrease.
  Obviously, with 1.5 million people who have already lost their homes, 
we are talking about a problem that is now spreading to commercial 
lending, municipal financing, student loans, and even having global 
implications as well for those who purchased these mortgage-backed 
securities. This is not confined to our own country. These were being 
purchased across the globe. So the problem begins with the foreclosure 
crisis, and yet the effects of it have spread far beyond the individual 
home, which is obviously the heart of most people's dreams in our 
country.
  So the fact we were able to have our leadership, and Senator Shelby 
will obviously speak for himself, but both of us, I can say with 
confidence, are very grateful to Senators Reid and McConnell for making 
it possible for us to move forward on this legislation.
  I will guarantee that if I were able to write this bill all on my 
own, it would look different. And I promise that Senator Shelby would 
probably write a different bill himself. But we don't live in a world 
where we get to write these things on our own. We serve in a body with 
100 Members, and we have to work closely with others in the Chamber and 
the other body with 435 Members. We have a White House and an 
administration with which we have to deal. There are also, obviously, 
private interests around the country, from consumer groups and lending 
institutions, all having a deep interest in what we are trying to put 
together. So it is no easy task to cobble together a piece of 
legislation that will allow us to deal with this crisis, get us back on 
our feet again, restore some confidence and optimism among the American 
people so we can see capital begin to flow again, and thus wring 
ourselves out of this foreclosure issue and begin to see our economy 
grow and prosper.
  That is what brings us to this very moment. I can't begin to express 
my gratitude to Senator Shelby, who is the former chairman of this 
committee, to the members on the Democratic side of the Banking 
Committee, beginning with Senator Tim Johnson of South Dakota, along 
with, of course, the Republican members as well. On two previous 
occasions we have brought forth pieces of legislation that have been 
adopted overwhelmingly by this body with 84 votes on the first bill and 
90 votes on the second.
  On the matter that will be a part of this bill, which has not been 
considered by the full Chamber, it passed our Banking Committee 19 to 2 
back on May 20. So we come to this day having spent a great deal of 
time working with our colleagues, listening and working with the 
Members of the other body, as well as those who bring unique and 
special expertise to these very complicated issues. That is what we 
hope in the coming days to be able to complete, send our product to the 
other body, and hope they will endorse and support it, and then send 
the bill to the President for his signature.
  With that as background, let me share a few thoughts about what are 
in these bills. As I mentioned already, most of what we are talking 
about has been voted on overwhelmingly by the Members of this body. On 
April 10, the Senate passed the Foreclosure Prevention Act of 2008, and 
passed it by an overwhelming majority. At that time, I shared my view 
of the legislation, and that it did not quite live up to the title. I 
told this body we had more work to do to prevent foreclosures in this 
country and to strengthen the housing finance system before we could 
say we had lived up to the name of that bill.
  I am very happy to report this morning that the Banking Committee of 
the Senate went back and did that work, and today Senator Shelby and I 
are reporting back to the Senate the Housing and Economic Recovery Act 
of 2008. This legislation incorporates all of the housing provisions of 
H.R. 3221 as it passed the Senate on April 10 by a vote of 84 to 12. It 
also includes the HOPE for Homeowners Act of 2008, which will help at 
least 400,000 families, we are told, and maybe more, to save their 
homes from this fate of 8,427 foreclosure filings a day. We need to try 
to put a break on that, if we can, and spare what it does to individual 
homeowners.
  The bill creates a new, strong, independent regulator for the housing 
government-sponsored enterprises--the so-called GSEs, Fannie Mae, 
Freddie Mac, and the 12 Federal home loan banks. It also establishes a 
new permanent fund that will help build affordable rental housing for 
low- and moderate-income families.
  I will review these titles in more detail momentarily, but first let 
me remind my colleagues why Senator Shelby and I have been working so 
hard on this issue for the past number of months and throughout this 
entire Congress. Quite simply, we are living through the worst housing 
market since the Great Depression of the 1920s and 1930s. Here are the 
facts, Mr. President.
  Residential construction in the United States fell by over 30 percent 
in the first quarter of this year. Sales of existing homes fell by 13 
percent over

[[Page S5773]]

the past year. And while the new data for April indicates that sales 
may have finally picked up slightly, most analysts believe that pickup 
in home sales occurred only because home prices have continued to fall. 
They call this ``price capitulation,'' which means homeowners finally 
gave up and are dropping prices precipitously at a great loss to their 
financial security.
  The number of new homes that remain unsold continues to rise, 
reaching the highest number in over a quarter of a century. Adding to 
this number are the increasing number of foreclosed homes.
  Foreclosures have hit a new all-time record, according to the 
Mortgage Banker's Association--MBA. This data shows that almost one in 
every 11 homes with a mortgage in the country is in default or 
foreclosure, as of the end of March. That is the highest level since 
the MBA began tracking foreclosures in 1979. Foreclosure rates have 
been growing at record levels for some time and last year alone 1.5 
million American homes entered into foreclosure.
  During each and every day of May, more than 8,400 American families 
entered foreclosure and the projections are that foreclosure rates will 
remain at historic highs for the foreseeable future. In fact, the 
investment bank Credit Suisse recently released a report in which they 
predict that 6.5 million homes will fall into foreclosure over the next 
5 years. They state:

       The coming flood of new foreclosures could put 8.4 percent 
     of total homeowners, or 12.7 percent of homeowners with 
     mortgages, out of their homes.

  The scenario that they are describing is one in which one out of 
every 8 American families with a mortgage would lose their homes. That 
is a chilling prediction.
  The effect that this is having on our economy cannot be overstated. 
Martin Feldstein, who served as President Reagan's chief economist, 
recently wrote in the Wall Street Journal:

       The 10 percent decline in house prices has cut household 
     wealth by more than $2 trillion, reducing consumer spending 
     and increasing the risk of a deep recession.

  That means that American families have lost more than $2 trillion of 
wealth. Losses of that magnitude are staggering. That is almost 20 
percent of our Nation's annual GDP. Put another way, a national loss of 
wealth of $2 trillion means that a typical family of four will have 
lost over $25,000 of wealth due to the current housing market crisis.
  This sharp loss in wealth for the average American homeowner comes at 
a time when they face record-high prices for the essentials of American 
life--food, gas, health care, and higher education. So the so-called 
foreclosure crisis is affecting more than those facing foreclosure. It 
is affecting nearly all of us. As one home falls into foreclosure, the 
values of countless other homes decline rapidly, if not immediately.
  Robert Shiller, the widely respected economist, predicted recently 
that home prices will fall by 30 percent nationally. If that happens, 
the loss to American families will exceed $6 trillion. That is more 
than half of our Nation's annual GDP. It would mean that the typical 
family of four would have lost approximately $80,000 of wealth. That is 
more than most American families earn in an entire year.
  The nationwide implications of this crisis help explain why consumer 
sentiment is at historic lows. Americans' expectations for future 
economic growth are at the lowest levels in 35 years, since the deep 
recession of the early 1970s.
  These negative views about our economic prospects are based on the 
real experiences of most Americans. The Pew Center recently conducted a 
survey on Americans' views on not only the economy as a whole, but on 
their personal well being. The Washington Post characterized the Pew 
Center's findings as:

       Offering the gloomiest assessment of economic well-being in 
     close to half a century, a new survey has found that most 
     Americans say they have not made progress over the past five 
     years as their incomes have stagnated and they have 
     increasingly borrowed money to finance their lifestyles.

  By almost any measure--by any measure, Americans are struggling more 
than at any time in recent memory. Real median family income has fallen 
this decade as the costs of gas, health care, and college tuition have 
risen at levels far outstripping any increases in paychecks. Just to 
keep pace with these rising costs, Americans have turned to borrowing 
from credit cards and their homes. But now, as the crisis in our 
capital markets begins to threaten sources of liquidity for people, 
such as mortgages, student loans and other types of lending, the 
American economy is in a precarious place. That is why we need new 
policies and new action to prevent this recession from becoming more 
severe, and to lay the foundation for our recovery.
  We have a responsibility to the American people to respond to their 
plight and to their pessimism, and to renew their confidence in the 
promise of the American dream.
  The package Senator Shelby and I bring before the Senate today meets 
this test. Is it perfect? Hardly. Never is there a piece of legislation 
that is perfect. Would either of us have done it a bit differently? I 
am confident we would. Are we guaranteeing it will work? Absolutely 
not. All we know is this is our best judgment, having worked together 
now for the last year and a half to listen to people at some 50 
different hearings on a wide range of subject matters. Then we put 
together legislation that has enjoyed, I say again with thanks to our 
colleagues, overwhelming support in this Chamber on a bipartisan basis. 
That is not something we have done with great frequency, I might point 
out, in recent years. The package is a good one. It is one we think 
covers many of the issues, if not most of them, with which we are 
grappling.

  Let me review the major provisions included in this package.
  First, FHA Modernization. FHA Modernization will help hundreds of 
thousands of homeowners gain access to safer, more affordable loans. 
FHA does not insure the kinds of risky, adjustable rate mortgages that 
so many homeowners were steered into, to their great peril and eventual 
sorrow. I want to point out to my colleagues that the only change from 
the FHA Modernization provisions passed in April is hat we have 
increased the maximum loan limit to $625,000, a provision that will 
expand the reach of this crucial mortgage lifeline to a broader cross-
section of the country.
  Veterans housing provisions--a number of our colleagues included 
important improvements to update the loan limits for VA loans; assist 
returning soldiers avoid rising mortgage rates and foreclosure; and 
expand housing benefits to disabled veterans.
  CDBG funds--the bill includes about $3.9 billion in emergency CDBG 
funds directed to those communities most affected by the foreclosure 
crisis. These resources will be used to buy foreclosed homes at a 
discount, renovate them, and return them to the market. These funds 
will help turn around neighborhoods decimated by disinvestment by 
bringing in new capital to start rebuilding homes and communities.
  Counseling Funds--the bill also includes $150 million in additional 
funds for housing counselors to help keep people out of foreclosure. 
There are many Members who care about this and were involved and talked 
about it. This language we have already adopted, but it is in this bill 
as well.
  The HOPE for Homeowners Act of 2008, another provision in this 
legislation, creates a new fund at FHA to make loans to distressed 
borrowers to refinance them out of mortgages with payments they cannot 
make into safe, affordable, 30-year fixed rate loans.
  Only homeowners--not investors or speculators--will qualify for these 
loans. And the lenders must agree to take steep discounts from the 
existing outstanding mortgages.
  Only homeowners who cannot afford their current payments will 
qualify, and, once they take out the new loan, they will have to agree 
to share all newly created equity and future appreciation with FHA to 
help defray the Government's cost.
  We have heard many people voice concerns about this bill, calling it 
a taxpayer bailout. Let me assure my colleagues, the Congressional 
Budget Office makes it clear that no taxpayer money will be used to 
fund this program. We pay for this important new program by all or part 
of the first 3 year's funding from the affordable housing fund created 
in the GSE portion of the legislation. Then we have

[[Page S5774]]

an additional $2 billion cushion at the Treasury Department, should 
there be any negative implications.
  In fact, according to the CBO, this program will make nearly $250 
million for the taxpayers over the next 10 years. In return, we will be 
saving the American dream for hundreds of thousands of elderly and 
hard-working families; stopping the bleeding in our communities; and 
helping restore confidence in our capital markets.
  Finally, this package establishes a new, independent, world class 
regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, 
known as the housing Government-sponsored enterprises, GSEs. The 
legislation endows this regulator with broad new authority, equivalent 
to the authority of other Federal financial regulators, to ensure the 
safe and sound operations of the GSEs. Let me recite the powers 
included in this legislation: Establish capital standards; establish 
prudential management standards, including internal controls, audits, 
risk management, and management of the portfolio; enforce its orders 
through cease and desist authority, civil money penalties, and the 
authority to remove officers and directors; restrict asset growth and 
capital distributions for undercapitalized institutions; put a 
regulated entity into receivership; and review and approve, subject to 
notice and comment, new product offerings.

  As we all know, the housing GSEs have played the central role in 
keeping the mortgage markets functioning. Yet in recent months, like 
many others in the mortgage industry, Fannie Mae and Freddie Mac have 
lost billions of dollars. It is their very importance that makes it 
imperative that we assure ourselves, and the American people, that the 
GSEs are on solid financial footing so they can continue to serve that 
crucial function. A strong and of active regulator can help make sure 
that the GSEs continue to operate in a safe, sound, and effective 
manner.
  The new legislation significantly enhances the affordable housing 
component of the GSEs' mission, and expands the number of families 
Fannie Mae and Freddie Mac can serve by raising the loan limits in 
high-cost areas to 150 percent of the comforming loan limit. Currently, 
this limit would be $625,000.
  The legislation tightens targeting requirements of the affordable 
housing goals, and rewrites those goals to ensure that the enterprises 
provide liquidity to both ownership and rental housing markets for low- 
and very-low income families.
  Finally, the legislation creates a permanent, new Housing Trust Fund 
and a Capital Magnet Fund, financed by annual contributions from the 
enterprises, which will used for the acquisition or construction of 
affordable rental housing, some ownership housing, and economic 
development for low-income families and communities.
  This new affordable housing fund--financed fully by the enterprises--
will provide a steady stream of financing to build housing for those 
most in need. The Capital Magnet Fund requires that each dollar 
leverage at least an additional $10. Together, these programs will 
provide billions of dollars for new affordable housing in years to 
come. I want to acknowledge the important contributions of Senator Jack 
Reed to this part of the legislation. This is going to be a permanent 
program that will make a difference for millions of people in years in 
come.
  I thank my ranking member, Senator Shelby, and his staff, for their 
hard work to reach consensus on this whole package.
  This is what we are supposed to be doing. This is what we get elected 
to do. We don't get elected to decide exactly what we want to do at the 
expense of everyone else. It means sitting down and working together to 
come up with solid ideas that can make a difference in our country. 
Today, 8,427 people are going to start to lose their homes. Tomorrow 
another 8,427 will have that happen, and that will happen every single 
day until we do something to bring this to a halt. That number has gone 
up by 1,000 families in the last 2 months. We cannot waste another day. 
There is no other issue which demands our attention and our action more 
than this one, and any effort to be dilatory and to stop us from saving 
these people and keeping them in their homes ought to be rejected by 
every Member of this body.
  This is a cancer in our society, and it is causing us deep problems. 
We need to do something about it. Senator Shelby and our staffs and the 
members of our committee have worked hard and long to bring this 
package forward. It enjoys broad-based bipartisan support, as we hoped 
it would. Now we have a chance to complete action on this and to make a 
difference and to say to the American people: In this Congress, we did 
something. We stepped up and tried to make a difference for that great 
dream of home ownership, of raising your family in a decent house, of 
being able to provide for your long-term security, of making a 
difference for your neighborhoods and communities. We are going to do 
everything we can to see to it that these numbers decline, that 
foreclosures at this rate on a daily basis are going to stop in our 
country.
  Again, we say to you, we realize not everyone agrees with what we are 
doing here.
  You never can here. I have been here for 27 years. The greatest 
moments of this body are where people have come together to try and 
make a difference, not trying to get their own way all the time. You 
are part of a larger body representing a great country. And even though 
you come from one State and one area of the Nation, we all have a job 
to do, to take care of all of us in this country.
  While this problem does not affect every citizen of the country, it 
is growing. If we do not do something soon about it, we will be 
indicted by history for not doing it.
  I thank my great friend from Alabama, who has been a great chairman 
of this subcommittee, been a great member of this committee, and he has 
worked awfully hard to bring us to this moment. I am grateful to Harry 
Reid and to Mitch McConnell for making it possible.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Alabama is 
recognized.
  Mr. SHELBY. Mr. President, this morning I am pleased to join my 
colleague, the chairman of the Senate Banking Committee, Senator Chris 
Dodd. The Banking Committee has devoted considerable time and effort to 
developing comprehensive and complex housing legislation. The proposed 
legislation's most significant provisions include a new regulatory 
structure for Fannie Mae, Freddie Mac, and the Federal Home Loan Bank 
system, a new program to help qualified homeowners stay in their homes, 
and reforming the FHA.
  This legislation creates a new regulator who has the authority and 
the flexibility to regulate the GSEs appropriately. I am also pleased 
that the HOPE for Homeowners proposal is paid for; not by taxpayer's 
money either. I believe we should do what we can to help struggling 
homeowners, short of asking the taxpayers to foot the bill.
  The legislation also provides immediate help to the marketplace by 
reforming the Federal Housing Administration, allowing it to provide 
greater liquidity and thereby enhancing the options available to 
America's homeowners.
  It also provides additional funding for foreclosure prevention 
counseling, which will hopefully help homeowners stay current on their 
mortgages and able to remain in their homes.
  In order to prevent this situation from repeating itself, the 
legislation increases the disclosures made to consumers obtaining 
mortgages. I believe that giving consumers more information and a 
greater ability to understand the choices they are making will help 
them avoid the pitfalls and bad decisions many underinformed consumers 
made in the recent past.
  To better protect our soldiers, sailors, and airmen, this legislation 
extends additional consumer protections and provides those returning 
from combat a chance to get back on their feet before they face 
foreclosure of their homes.
  In an effort to provide communities with the ability to clean up the 
damage caused by foreclosures that have already occurred, we have also 
included funding to allow States and communities to buy up and repair 
foreclosed residences. Attached to this funding is a requirement--here 
I think this is important--that any profit from the sale of properties 
must be used to buy and repair additional properties. I believe

[[Page S5775]]

the reuse of this funding in this manner will maximize the impact of 
these dollars and minimize the possibility that funds will be wasted or 
profits inappropriately pocketed by someone.
  The bill also contains a number of tax-related provisions prepared in 
a bipartisan fashion by the chairman and the ranking member and the 
staffs of the Finance Committee.
  While there is a large and growing number of homes entering 
foreclosure in this country, we must remember that the vast majority of 
homeowners are living within their means and making their mortgage 
payment. Therefore, my primary consideration here during negotiations 
on this bill has been to protect the American taxpayer. In creating a 
strong regulator for the GSEs and using an independent funding stream 
to pay for the FHA program, I believe we have met that goal.
  With crises such as this one we are facing now in this country, I 
believe the American people expect us to provide effective and timely 
solutions the best we can. Chairman Dodd and I have worked together to 
develop a package of targeted measures intended to stabilize and 
strengthen the housing financial markets.
  I strongly urge my colleagues to support this carefully crafted 
compromise.
  I remind my colleagues that this bill came out of the Banking 
Committee 19 to 2. That is a strong vote for a bipartisan measure.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Connecticut.
  Mr. DODD. I thank my colleague from Alabama.
  I want to read this list into the Record to give our colleagues some 
sense of the broad support this proposal has developed. Let me quote 
from several of our major editorials as well as major economists 
representing the political spectrum in our country. I will share this 
with you.
  Alex Pollack, resident fellow at the American Enterprise Institute:

       This is an appropriate and targeted approach to the 
     downward spiral caused by the deflation of the great housing 
     and mortgage bubble of the 21st century.

  Alan Blinder, an economist at Princeton University and the former 
vice chairman, Board of Governors of the Federal Reserve System:

       I think that the HOPE for Homeowners bill is the most 
     important piece of economic legislation before the Congress 
     today.

  The Miami Herald:

       The Senate represents a bipartisan compromise that deserves 
     wide support.

  The Boston Globe:

       There is no bailout or windfall here. Congress is merely 
     offering a fighting chance for families and credit markets to 
     recover.

  Newsday:

       The Senate program is called Hope for Homeowners. That's 
     just what families facing foreclosure need.

  Fran Grossman, the senior vice president of Shore Bank in Chicago:

       With millions of hard working Americans torn between 
     looking for work and putting gas in the tank or paying their 
     mortgage, we must enact legislation to provide access to the 
     resources that will help families to hold onto the American 
     dream and get our economy moving again.

  Robert Shiller, as I pointed out earlier, supports this legislation. 
He is highly respected, by the way, as someone who deals with the issue 
of the index dealing with housing values.
  Again, groups from the American Enterprise Institute to the Consumer 
Federation of America.
  Alan Fishbein. Let me quote him:

       With foreclosures on the rise a stepped-up Federal lifeline 
     is desperately needed if many hard-pressed families are to 
     save their homes.

  From the Consumer Federation of America to members of the American 
Enterprise Institute, former members of the Federal Reserve Board, 
members of the Reagan administration, the Council of Economic Advisers, 
others, all are advocating--and I am not suggesting dotting every ``i'' 
and crossing every ``t.'' But they have taken this work of Senator 
Shelby and 17 of our other colleagues of the 21-member committee, 19 
out of 21 having gone through all of the hearings, 50 of them over the 
last year, listening to all sorts of people talking about what needs to 
be done. It is now the bipartisan overwhelming majority opinion of us 
on that committee that this package we offer here is our best step 
forward.
  Having done the work for a year now, spending the hours that we have 
listening to people and getting solid advice, this is what we believe, 
as they believe, is the best response America can make at this moment.
  Remember, this HOPE for Homeowners is voluntary; it does not mandate 
anything. It creates an opportunity for people. We hope they will take 
advantage of it when this legislation is signed into law.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Whitehouse). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________