[Congressional Record Volume 155, Number 1 (Tuesday, January 6, 2009)]
[Senate]
[Pages S114-S115]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself, Ms. Snowe, Mr. Lieberman, Mrs. 
        Boxer, Mr. Nelson, of Florida, Mr. Kerry, and Mr. Specter):
  S. 133. 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 on behalf of myself and Senator 
Snowe to introduce legislation that will increase transparency, 
strengthen oversight, and require firms receiving financial lifelines 
from the Federal Government to practice responsible corporate 
governance.
  Our bill--the Troubled Asset Relief Program Transparency Reporting 
Act--will achieve four essential objectives, prohibit firms receiving 
loans from the Federal Reserve or participating in the Troubled Asset 
Relief Program, TARP, from using this money for lobbying expenditures 
or political contributions; require that firms receiving government 
assistance provide detailed, publicly 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 very apparent in the 3 
months since Congress approved the economic rescue plan.
  The economic rescue legislation passed in October includes several 
oversight boards and accountability provisions to ensure that public 
funds are effectively distributed. But, it 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 committed to purchasing $250 billion of 
preferred stock in financial institutions. More than 200 financial 
institutions have received roughly $188 billion. Of these funds, $125 
billion was allocated to nine large national banks.
  In addition to injecting capital into banks, American Insurance 
Group, AIG, has received an additional $40 billion and CitiGroup has 
received $20 billion of TARP funds.
  Last month, GM received more than $10 billion in financing through 
the recently implemented Automotive Industry Financing Program.
  This effectively means that the entirety of the first $350 billion of 
rescue funds has been spent.
  When you add up all of the taxpayer dollars put on the line--from $30 
billion

[[Page S115]]

provided to Bear Stearns in March, $200 billion available to Fannie Mae 
and Freddie Mac, $150 billion to AIG, $700 billion for TARP, 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, and I am not the only Member of Congress or 
elected official who feels this way.
  In response to questions posed by the Congressional Oversight Panel 
for Economic Stabilization, the Treasury Department noted that it was 
committed to rigorous oversight of executive compensation packages. 
This may be the case, but executive compensation is only the beginning.
  While I am pleased that CEOs at some financial institutions that 
accepted Federal assistance did not accept their annual bonuses last 
year, we still do not have an official accounting of how Federal funds 
were used.
  Certainly Americans deserve assurances that struggling firms will not 
use public funds to pay exorbitant salaries or bonuses.
  The same can be said for these funds going towards dividend payments, 
or mergers and acquisitions.
  The Government Accountability Office, GAO, has reported that the 
Treasury Department had no strong accountability or oversight function 
to ensure that banks were using rescue assistance with the best 
interests of the public in mind.
  It noted that Treasury had little ability to ensure that 
participating firms complied with laws already limiting executive 
compensation and conflicts of interest.
  An investigation last month by the Associated Press found that many 
banks that have accepted Federal assistance are not able to say with 
certainty exactly how they have used the money. Some of these banks 
would not even discuss the issue.
  We cannot be sure that the rescue funds are being used to stabilize 
the economy if banks are not keeping proper accounting of their use, 
and those that do will not disclose it.
  Shining light on how firms use public dollars not only makes good 
sense, but it will also act as a deterrent to irresponsible behavior.
  On October 16, 2008, the Wall Street Journal reported that 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. 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.
  Of course, this has served as one of the catalysts for our current 
economic predicament.
  And now AIG, propped up by billions in Government money after having 
succumbed to bad investments, 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 am reintroducing today will 
make sure that does not 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 2008, 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 2 days of September 2008 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 weeks later, 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.
  Following enactment of TARP, news reports have uncovered multiple 
instances in which rescued firms have been caught making unnecessary 
and outrageous expenditures, leading many taxpayers to question why 
these firms are receiving Federal assistance in the first place.
  In November, 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.
  Americans are struggling, and the pain in my State of California, 
where unemployment is 8.4 percent, and foreclosure filings exceeded 
750,000 last year, is especially acute.
  This bill puts in place commonsense solutions to fix some of the 
deficiencies in the economic stabilization bill.
  This legislation 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.
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