[Congressional Record Volume 154, Number 176 (Wednesday, November 19, 2008)]
[Senate]
[Pages S10660-S10661]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself and Ms. Snowe):
  S. 3698. A bill to prohibit any recipient of emergency Federal 
economic assistance from using such funds for lobbying expenditures or 
political contributions, to improve transparency, enhance 
accountability, encourage responsible corporate governance, and for 
other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.
  Mrs. FEINSTEIN. Mr. President, I rise today on behalf of myself and 
Senator Snowe to introduce legislation that will enhance transparency, 
strengthen oversight, and encourage responsible corporate governance 
for firms receiving financial lifelines from the Federal Government.
  Our bill--the Accountability for Economic Rescue Assistance Act--will 
achieve four essential objectives.
  It will prohibit firms receiving loans from the Federal Reserve or 
any of the $700 billion economic rescue funds from Treasury from using 
this money for lobbying expenditures or political contributions; 
require that firms receiving

[[Page S10661]]

government assistance provide detailed, publically available quarterly 
reports to Treasury outlining how taxpayer dollars have been used; 
establish corporate governance standards to ensure that firms receiving 
federal assistance do not waste money on unnecessary expenditures; and, 
create penalties of at least $100,000 per violation for firms that fail 
to meet the corporate governance standards established in the bill.
  The need for such legislation has become apparent in the weeks since 
Congress approved the economic rescue plan.
  Since then, news reports have uncovered multiple instances in which 
rescued firms have been caught making unnecessary and outrageous 
expenditures, which calls their assistance from taxpayers into 
question.
  Last week, Treasury Secretary Paulson announced that the $700 billion 
approved by Congress to stabilize financial markets would not be used 
to purchase illiquid assets but rather to make direct capital 
injections into financial institutions.
  Given this new mission, the need for additional transparency and 
disclosure is striking.
  We have learned that we cannot necessarily count on these firms and 
their executives to act sensibly and do what is right.
  The public needs to know that their tax dollars are being put to good 
use. A simple ``trust me'' from the bank executives is not enough.
  On October 16th, the Wall Street Journal reported that American 
Insurance Group, AIG, which received billions of dollars in Federal 
rescue funds, was continuing to lobby state regulators to delay 
implementation of strengthened licensing standards for mortgage brokers 
and lenders.
  AIG was lobbying against sensible standards created by the SAFE 
Mortgage Licensing Act of 2008. This bill, introduced by Senator 
Martinez and myself, established basic minimum regulations for the 
mortgage industry to ensure consumers were adequately protected.
  Before this bill, in some states virtually anyone--even those with 
criminal records--could go out and get a mortgage broker's license.
  Left unchecked, and with no regulations to stop them, unscrupulous 
mortgage brokers and lenders flooded the markets with subprime loans 
that they knew would never be paid back, and this served as one of the 
catalysts for our current economic predicament.
  Now AIG, having succumbed to bad investments and propped up by 
billions in government money, was lobbying against the strong 
enforcement of state laws that might have helped prevent this 
catastrophe in the first place.
  Senator Martinez and I wrote a letter to AIG and, to the company's 
credit, CEO Edward Liddy immediately suspended the company's lobbying 
operations.
  I find it completely unacceptable that taxpayer dollars intended to 
stabilize the economy could find their way into the bank accounts of 
lobbying firms. The legislation which I introduce today will make sure 
that doesn't happen.
  I do not mean to pick on AIG, but they have also been the poster 
child for wasteful spending by rescued firms.
  In September, just days after receiving an $85 billion federal 
lifeline, the management of AIG treated itself to a $444,000 spa 
weekend at the St. Regis resort in Monarch Beach, California. This 
included $200,000 for rooms, $150,000 for fine dining and $23,000 in 
spa charges.
  AIG executives spent the last two days of September on a golf outing 
at Mandalay Bay in Las Vegas at a cost of up to $500,000. They were 
planning to follow this with a few days at the Ritz Carlton in Half 
Moon Bay, but cancelled after it hit the news and drew fire from 
Congressional leaders.
  As news of these wasteful expenditures was making headlines, AIG 
received another $37.8 billion in emergency loans from the Federal 
Government. Shortly thereafter, the Associated Press reported that--
even as AIG was asking Congress for these loans--AIG executives were 
spending $86,000 on a pheasant hunting expedition in England. During 
the trip, they stayed at a 17th century manor.
  One AIG executive named Sebastian Preil was quoted as saying that: 
``The recession will go on until about 2011, but the shooting was great 
today and we are relaxing fine.''
  Once these lapses in judgment came to light, AIG chief executive 
Edward Liddy informed Congress that he was putting an end to all 
nonessential expenditures. Yet earlier this month, an undercover news 
crew caught AIG executives at the Hilton Squaw Peak Resort in Phoenix, 
hosting a seminar for financial planners complete with cocktails and 
limousines.
  One would think that a brush with collapse and total failure might 
have a sobering effect on some of these firms.
  But this penchant for wasteful junkets in the face of complete 
failure was not unique to AIG.
  The Wachovia Corporation was caught shipping its top brokers off to 
the Greek Isles on a cruise ship for an all-expenses paid luxury trip--
even as the company awaited a buyout potentially backed by taxpayers.
  Wachovia cancelled the trip due to the storm of criticism attracted 
by this stunning display of what the ancient Greeks called hubris.
  While the economic rescue legislation passed in September includes 
several oversight boards and accountability provisions to ensure that 
public funds are effectively distributed, the bill does not include any 
reporting requirements for firms that receive Federal dollars.
  This is a significant omission, especially given the amount of 
Federal money that some firms are receiving.
  The Treasury Department has already approved the purchase of $160 
billion of preferred stock in 30 financial institutions. We know that 
of these funds $125 billion was allocated to nine large national banks.
  It was also reported last week that AIG will receive an additional 
$40 billion, meaning that at least $165 billion of the economic rescue 
funding will be allocated to only 10 firms.
  When you add up all of the taxpayer dollars put on the line--from $30 
billion provided to Bear Stearns in March, $200 billion available to 
Fannie Mae and Freddie Mac, $150 billion to AIG, $700 billion in 
economic rescue funds, plus the direct lending programs at the Federal 
Reserve--we are talking about well over 1 trillion Federal dollars.
  I certainly don't think it is unreasonable for the public to know how 
their money is being spent.
  As the end of the year nears, we are approaching bonus time on Wall 
Street. Certainly Americans deserve assurances that struggling firms 
will not use public funds to pay higher bonuses.
  The same can be said for these funds going towards dividend payments, 
or mergers and acquisitions.
  Shining light on how firms use public dollars not only makes good 
sense, but it will also act as a deterrent to irresponsible behavior.
  My vote on the economic stabilization bill was one of the toughest I 
have taken during my time in the Senate.
  My office received more than 160,000 calls, letters, and e-mails from 
Californians concerned about this course of action.
  But, I decided to support the bill to ensure that action would be 
quickly taken to ease the flow of credit to consumers and businesses.
  Our economy continues to struggle today. The money approved by 
Congress must be used sensibly to ensure its maximum impact.
  Americans are struggling, and the pain in my State of California, 
where unemployment is 7.7 percent, and foreclosure filings exceed 
680,000 this year, is especially acute.
  This bill puts in place commonsense solutions to fix some of the 
deficiencies in the economic stabilization bill.
  This bill is significant and sorely needed. We must act soon to help 
restore confidence in this effort and shed light on how public funds 
are used. We promised the American people transparency and oversight, 
and this legislation will make good on that promise.
  I hope my colleagues will join me to ensure that taxpayer dollars are 
spent efficiently and responsibly.
                                 ______