[Congressional Record Volume 155, Number 184 (Wednesday, December 9, 2009)]
[House]
[Pages H14418-H14427]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2009

  The SPEAKER pro tempore. Pursuant to House Resolution 956 and rule 
XVIII, the Chair declares the House in the Committee of the Whole House 
on the State of the Union for the consideration of the bill, H.R. 4173.

                              {time}  2041


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 4173) to provide for financial regulatory reform, to protect 
consumers and investors, to enhance Federal understanding of insurance 
issues, to regulate the over-the-counter derivatives markets, and for 
other purposes, with Mr. Teague in the chair.
  The Clerk read the title of the bill.
  The CHAIR. Pursuant to the rule, the bill is considered read the 
first time and the amendment printed in House Report 111-365 is 
adopted.
  Pursuant to the rule and the earlier orders of the House, general 
debate shall not exceed 3 hours, with 2 hours and 20 minutes equally 
divided and controlled by the Chair and ranking minority member of the 
Committee on Financial Services, 30 minutes equally divided and 
controlled by the Chair and ranking minority member of the Committee on 
Agriculture, and 10 minutes equally divided and controlled by the Chair 
and ranking minority member of the Committee on Energy and Commerce.
  The gentleman from Massachusetts (Mr. Frank) and the gentleman from 
Alabama (Mr. Bachus) each will control 1 hour and 10 minutes. The 
gentleman from Minnesota (Mr. Peterson) and the gentleman from Oklahoma 
(Mr. Lucas) each will control 15 minutes. The gentleman from California 
(Mr. Waxman) and the gentleman from Texas (Mr. Barton) each will 
control 5 minutes.
  The Chair recognizes the gentleman from California.
  Mr. WAXMAN. Mr. Chairman, I rise in strong support of H.R. 4173, the 
Wall Street Reform and Consumer Protection Act of 2009. I have long 
advocated for comprehensive and effective financial regulatory reform. 
Last year, as the chairman of the Oversight Committee, we held many 
hearings examining the causes of the financial crisis. Those hearings 
showed government regulators were asleep at the switch while Wall 
Street banks drove our economy off a cliff. Change is necessary, and I 
believe this legislation will strengthen the Federal Government's 
ability to prevent and respond to future crises.
  Consumer protection is a central element of the Energy and Commerce 
Committee's jurisdiction, and I support the reforms in the bill.

                              {time}  2045

  The legislation provides four essential improvements to the 
operations of the Federal Trade Commission. These improvements allow 
the FTC to seek civil penalties in enforcement actions against 
violations of the FTC Act, not just violations of rules and orders, as 
the FTC Act currently allows; enforce against those who provide 
substantial assistance to entities that commit fraud; promulgate rules 
using the Standard Administrative Procedures Act, processes used by 
virtually all other agencies; and litigate its own cases without delay 
when it seeks civil penalties against fraudulent actors.
  Each of these four provisions will strengthen FTC's consumer 
protection abilities and enable it to be a powerful partner with the 
Consumer Financial Protection Agency in protecting consumers from 
financial fraud.
  The Energy and Commerce Committee shares jurisdiction over the new 
Consumer Financial Protection Agency with the Financial Services 
Committee, and I am pleased Chairman Frank and I were able to find a 
compromise in this area. Under the agreement we have reached, the 
agency will start off with a single director who can take early 
leadership in establishing the agency and getting it off the ground. 
After a period of 2 years, the agency will continue operations with the 
leadership from a bipartisan commission.
  I have also been concerned about the provisions of this legislation 
relating to the regulation of financial instruments associated with the 
energy sector. I'm pleased to report that the Agriculture Committee and 
the Energy and Commerce Committee reached an agreement to address 
potential regulatory conflicts where the jurisdiction of the Commodity 
Futures Trading Commission as enhanced by the proposed bill could 
overlap with the jurisdiction of the Federal Energy Regulatory 
Commission.
  I want to thank Chairman Frank and his staff for leading this 
important legislation through Congress. I also want to thank Commerce, 
Trade, and Consumer Protection Subcommittee Chairman Bobby Rush for 
taking an early lead in examining the CFPA proposal in his 
subcommittee, and Chairman Emeritus Dingell for ensuring that we 
enhance FTC's role. Ranking Member Barton worked closely with us on our 
proposal to create a commission to lead the CFPA. And I finally want to 
thank Chairman Peterson for working with us to resolve the energy 
regulatory issues.
  I urge all of my colleagues to support this legislation.
  I yield back the balance of my time.
  Mr. BARTON of Texas. Mr. Chairman, I would yield myself 4 minutes.
  (Mr. BARTON of Texas asked and was given permission to revise and 
extend his remarks.)
  Mr. BARTON of Texas. First, let me say I rise in strong opposition to 
this bill. I did support marking it up at the Energy and Commerce 
Committee to maintain jurisdiction over this agency and other agencies 
in our committee's jurisdictions, and I did work with

[[Page H14419]]

Chairman Waxman to make some perfecting changes to the bill that is 
before us. But having said that, I think that it is a bad bill, it's an 
unnecessary bill, and it's a bill that will have unintended 
consequences of a negative fashion if enacted in its current form.
  I'm glad that some of the Federal Trade Commission's jurisdiction 
that was originally stripped from the bill and given to the new agency 
has been retained and put back with the FTC. I also think, though, that 
a new agency cobbled together by Congress from existing regulatory 
structure will not eliminate one of the world's oldest sins. Hucksters 
and scam artists will not throw up their hands and turn honest because 
there is a new Federal regulator on the block. They will simply find 
new ways to cheat the government as it tries to get on its wobbly new 
feet. Bureaucracies, particularly new ones, don't move at the speed of 
businesses, especially shady, illegal businesses, and they certainly 
don't move at the speed of fraudsters.
  I want to commend Chairman Frank for his hard work on a tough issue. 
Having said that, the outcome of his hard work is an enormous bill and 
an enormous bureaucracy that, in my opinion, just won't do the job. 
Having said that, the Obama administration apparently wants this new 
behemoth, so we're going to get it--at least we're going to attempt to 
get it through the House on the floor this evening or tomorrow, 
whenever the vote may occur.
  I wish that a superregulator could find and repair the underlying 
problems with the housing and mortgage markets, but I don't think it 
can. Empowering a new agency with nearly limitless power to deem almost 
any product or service of financial activity is questionable at best 
and tyrannical at worse. This legislation even fails to create a 
national standard for the superregulator to enforce. Instead, it adds 
another layer of Federal regulation on top of existing State laws.
  Finally, the legislation gives broad, new authority to the FTC that 
really has nothing to do with the proposed agency and covers everything 
beyond consumer financial products.
  Mr. Chairman, I rise in opposition to the bill, and I would hope that 
we would defeat it.
  With that, I want to yield the balance of my time that I control to 
the distinguished ranking member of the Financial Services Committee, 
Congressman Bachus of Alabama.
  The CHAIR. The Chair cannot entertain that request in the Committee 
of the Whole.
  Mr. BARTON of Texas. I reserve the balance of my time.
  Mr. FRANK of Massachusetts. Mr. Chairman, I begin by yielding 4 
minutes to one of the Members of the House who has a very significant 
imprint in this bill, all to the protection of investors and the 
integrity of our markets, the chairman of the Capital Markets 
Subcommittee, the gentleman from Pennsylvania (Mr. Kanjorski).
  Mr. KANJORSKI. Mr. Chairman, I want to thank the chairman of the full 
committee for recognizing me and to assert for the record in the full 
House that although today this huge bill of 1,300 pages or 1,200 pages 
will be difficult to describe and probably not well understood by 
either the people watching this proceeding nor all of the Members of 
the House, I want to say that I am proud to have worked under the 
tutelage of the chairman, Mr. Frank, and I think that in years to come, 
history will look back at this moment and say, when there was need in 
this country for reformation, it was had in the major part of this 
bill.
  Mr. Chairman, I have had the pleasure of participating in major 
portions of the bill--Title V, Title VI, and then part of Title I.
  What we tried to do, in essence, so that the viewing public can 
understand, is to recognize some of the problems, not all of the 
problems, but some of the problems that we were facing as a result of 
the actions of last year of the capital markets of the United States.
  First and foremost, we had discovered that there were great 
irregularities in transparency and accountability in the rating 
agencies as they acted to evaluate various sets of securities in the 
world markets. And when we examined the rating agencies in great detail 
and through hearings and examination, we found that these entities were 
poorly--not really regulated at all but certainly poorly accounting for 
their own responsibilities in the system. We found they were enticing 
investors throughout the world to buy securities that were rated AAA 
when, in fact, some of those securities weren't even of B class 
quality. As a result, millions of people around the world and billions 
of dollars came in to the purchase of these securitized--or these 
securities, and as a result, when the market failed, they failed. And 
there was an impression around the world created that the American 
Government, the United States of America, stood behind these rating 
agencies when, in fact, we didn't, and that there was a great 
compromise.
  Some of these rating agencies, because of the internal conflicts 
within the agencies, were taking great liberty in evaluating and 
analyzing the values of certain securities to the extent that, because 
they were paid by the individuals that were issuing the agency, there 
was an internal conflict. Whether that conflict caused, to a large 
extent, a scandal or caused failure in the system, one will probably 
never know, but certainly the aspects of the operations of the rating 
agencies have been called into question, were called into question at 
the time, and certainly have been since our examination.
  So what have we done? We have developed a set of principles and rules 
to account for accountability and transparency in the rating agencies 
in the United States. Will that cure the problem? No. We're going to 
have to watch very closely, monitor very closely that these rating 
agencies do not stray from the straight path. If they do, we will have 
to come back and impose greater restrictions on them and take 
extraordinary actions in the future if necessary.
  But we will have rating agencies now that can be sued when they could 
never be sued before. We will have rating agencies that will have the 
responsibility to provide disclosure, will have the responsibility of 
showing their methodologies and explanations to the buying public of 
the securities they rate and analyze. To that extent, we hope the 
public will be protected.
  Next, we looked at who is accounted for in our system, and we found, 
as we've all known, that some 10, 12 years ago, hedge funds were denied 
the examination of the Securities and Exchange Commission. We have now 
formed what is known as the Private-Funded Investment Advisors 
Registration Act, which is Title V of this act, part A, and that 
provides that all advisers that want to play in the capital markets 
must register and must disclose certain information so that knowledge 
of what capital is doing, where it is and in what amounts will be known 
by our regulators. That is the first time in the history of the United 
States that that will prevail. It should go a long way of having inside 
information in the role of the regulators of the United States as to 
what is at risk.
  Then, finally, we created an Investors Protection Act. The Investors 
Protection Act has done so many things it's almost impossible to 
enumerate, but the SEC gave recommendations which were incorporated in 
the bill.
  The CHAIR. The time of the gentleman has expired.
  Mr. FRANK of Massachusetts. I yield an additional 1 minute.
  Mr. KANJORSKI. Authorities that they lacked, they were given. With 
that inclusion, I think we have one of the finest investment protection 
acts that ever existed.
  Finally, we have something new we created. We created the Federal 
insurance office that will, for the first time, will encompass 
information encompassing the insurance industry in the United States.
  Finally, I'm proud to say I had a major part in putting together an 
amendment to the act, the first provision of the act, part one, that 
allows ``too big to fail'' protection in the United States. For the 
first time, the regulators in the United States will have the 
opportunity to analyze the structure of corporations and the financial 
service industry that either may be too large, interconnected, or too 
large in scope or too inexperienced in management or some other 
condition that may, in the future, cause them to be of systemic risk to 
the economic system of the United States. And we've empowered the 
regulators to move in and require changes, controls,

[[Page H14420]]

and regulations to prevent that occurrence so that never again, we 
hope, the ``too large to fail,'' in fact, will be, in fact, too large 
not to fail.
  So with that, I recommend to all of my colleagues on both the 
Democrat side and the Republican side, stop for a moment and think what 
we've done.
  May I call the attention of the Republican side, three of the eight 
bills that we passed through our committee went through with 
significant bipartisan support.
  Mr. Chair, over the next few days this body will have the opportunity 
to consider sweeping, meaningful reforms to protect American investors, 
safeguard consumers on Main Street, and fundamentally change the way 
Wall Street and large financial institutions operate. For roughly two 
years, we have endured a severe crisis that exposed vulnerabilities in 
our system for overseeing the financial sector and demonstrated the 
perils of deregulation.
  During this calamity, Americans have unfortunately lost trillions of 
dollars in personal wealth and retirement savings, millions of families 
have lost their homes, and far too many workers have lost their jobs. 
Last year, in order to save the financial system itself, we had to act 
courageously and pass the Troubled Asset Relief Program, despite 
considerable criticism. This law has worked to stabilize our system, 
but public faith in our financial markets has also nearly vanished. We 
therefore must now take bold steps to restore trust in the financial 
services industry by significantly modifying its regulation. H.R. 4173, 
the Wall Street Reform and Consumer Protection Act, will do just that.
  While this broad, comprehensive legislation encompasses substantial 
reforms in many areas--from the regulation of complex financial 
derivatives to the creation of a Consumer Financial Protection Agency--
I want to focus my comments on the proposals that I worked to develop 
and incorporate into this package. These reforms include investor 
protection improvements, the registration of hedge fund advisers, 
changes to credit rating agency oversight, and the creation of a 
Federal insurance office. I also want to discuss how this legislation 
will rein in ``too-big-to-fail'' financial institutions.
  The failure to detect the massive $65 billion Madoff Ponzi scheme, 
the problematic securities lending program of American International 
Group, the freezing up of the auction-rate securities market, and the 
``breaking of the buck'' by Reserve Primary Fund each demonstrated the 
need for comprehensive investor protection reform. In response, the 
Investor Protection Act of 2009--a key part of H.R. 4173--contains more 
than six dozen provisions aimed at strengthening the oversight of U.S. 
securities markets and closing regulatory loopholes.
  For the first time, every professional who offers investment advice 
about a securities product will have a fiduciary duty to their 
customer. For the first time, we will create a bounty program to 
encourage tipsters to come forward with information about securities 
fraud. For the first time, we will regulate municipal financial 
advisers. Moreover, by doubling the budget of the U.S. Securities and 
Exchange Commission and by requiring a comprehensive study to 
fundamentally reform the way the agency operates, this bill lays the 
foundation for us to put in place a superior securities regulatory 
system going forward.
  We also need to regulate everyone who plays in our capital markets. 
By mandating the registration of hedge fund advisers and others who 
currently operate in the shadows of our markets and subjecting them to 
recordkeeping and disclosure requirements, for the first time 
regulators will have the information needed to better understand 
exactly how these entities operate and whether their actions pose a 
threat to the financial system as a whole.
  Without question, the actions of Moody's, Standard and Poor's, and 
Fitch exacerbated this financial crisis. In response, H.R. 4173 takes 
strong steps to reduce conflicts of interest, stem market reliance on 
credit rating agencies, and impose accountability on rating agencies by 
increasing liability. As gatekeepers to our markets, credit rating 
agencies must be held to higher standards. We need to incentivize them 
to do their jobs correctly and effectively, and there must be 
repercussions if they fall short.
  Insurance also plays a vital role in the smooth and efficient 
functioning of our economy, but the credit crisis highlighted the lack 
of expertise within the Federal Government on the industry, especially 
during the collapse of American International Group and last year's 
turmoil in the bond insurance industry. I have long championed the need 
to establish a place within the Federal Government to collect 
information and build expertise on this sizable industry. The Federal 
Government needs a fundamental knowledge base on these matters, and for 
the first time we will have such a repository because of this bill.
  Finally, I am pleased that H.R. 4173 includes my amendment addressing 
companies that have become too big to fail. This bill will empower 
Federal regulators to rein in and dismantle financial firms that are so 
large, inter-connected, or risky that their collapse would put at risk 
the entire American economic system, even if those firms currently 
appear to be well-capitalized and healthy. By ensuring that financial 
companies cannot become so big that their failure would pose a threat 
to economic stability, we will protect American taxpayers from future 
bailouts. By outlining clear and objective standards for regulators to 
examine financial companies, we will also reduce the level of risk 
their activities pose to our financial stability and our economy.
  In sum, I want to thank the Members of the Financial Services 
Committee for their hard work and their support of my efforts to better 
protect investors, advance credit rating agency accountability, 
register hedge fund advisers, establish a knowledge base on insurance, 
and curb too-big-to-fail companies. I especially want to congratulate 
the Chairman of our Committee, the gentleman from Massachusetts (Mr. 
Frank), for his tireless efforts in pulling this comprehensive package 
together during the last year. I urge all of my colleagues to support 
this landmark bill.
  Mr. BARTON of Texas. May I inquire how much time I still control, Mr. 
Chairman?
  The CHAIR. The gentleman has 2 minutes remaining.
  Mr. BARTON of Texas. I yield 2 minutes to the gentleman from 
California (Mr. Royce).
  Mr. ROYCE. Thank you.
  The gentleman from California referred to the Wild West earlier. No 
two institutions better fit that description than the government-
sponsored enterprises Fannie Mae and Freddie Mac.
  Over the years, some of us pleaded for additional regulation. You may 
recall, in 2005, we tried to pass strong legislation to fix this 
problem and bring reforms to the government-sponsored enterprises. I 
brought an amendment to this floor to give the regulator the ability to 
rein in their mortgage portfolios that were spiraling out of control. 
The Federal Reserve came to us and said, These institutions at the 
heart of the U.S. mortgage market pose a systemic threat to our 
economy.
  That is why I offered my amendment, which was defeated, as were 
others, that would have provided stronger regulation. That is why 
Senator Chuck Hagel offered similar legislation which passed the Senate 
Banking Committee on a party-line vote but was blocked by the Senate 
Democrats from coming to the floor.
  We understood the risks posed by those government companies, 
especially when it came to the affordable housing goals the Democratic-
controlled Congress mandated in 1992. Those affordable housing goals 
led the GSEs into the subprime Alt-A market, and they ultimately led to 
their collapse.
  Former President Bill Clinton understands this epic blunder. Last 
September, the former President said in an interview, ``I think the 
responsibility that the Democrats have may rest more in resisting any 
efforts by Republicans in the Congress, or by me when I was President, 
to put some standards and tighten up a little on Fannie Mae and Freddie 
Mac.''

                              {time}  2100

  This is one of the main reasons why our economy is where it is today. 
And this is why we must reform the GSEs, which this bill does not do. 
Instead, this bill creates a perpetual bailout fund and ensures that 
the ``too big to fail'' doctrine is with us definitely.
  For the first time in its history, Washington will officially become 
the center of our financial system.
  The CHAIR. The time of the gentleman has expired.
  Mr. BACHUS. Mr. Chairman, I yield the gentleman 1 additional minute.
  Mr. ROYCE. Regulators will be able to rescue certain companies and 
liquidate others. They will be able to pay off some creditors and 
counterparties and not others, and keep failed or failing companies 
operating and competing in the market for years. They will even be able 
to dismantle a healthy institution that they believe may pose a risk.
  If there is any doubt that this type of authority will be abused, 
look at how the administration handled the Chrysler bankruptcy earlier 
this year. It was their desire to do away with the clearly defined 
rules of the road found in the bankruptcy code in order to reward their 
political allies. Those rules of the

[[Page H14421]]

road that were so easily dismissed by the administration have acted as 
the bedrock of our capital markets for decades. They differentiate us 
from much of the world and serve to attract capital from all corners of 
the globe. This bill throws that model out the window. It replaces 
objectivity with subjectivity, market discipline with political pull.
  What is the likely outcome of all of this? The larger, politically 
connected institutions will have the edge over their competitors.
  Mr. PETERSON. Mr. Chairman, I yield myself such time as I may 
consume.
  I rise today in support of H.R. 4173 and of the Peterson-Frank 
amendment to this legislation, which will be considered at a later 
time. I want to thank Chairman Frank and his staff for working with us 
and our staff over the last few months on the amendment and on the 
provisions in the underlying bill that affect both of our committees. 
Mr. Chairman, passage of this bill is necessary to improve the 
financial regulatory structure in America.
  The House Agriculture Committee has played a significant role in 
contributing to this legislation, and while I may not agree with every 
provision in this bill, I support the goals of increased oversight, 
more transparency, and an end to taxpayer bailouts of large financial 
institutions.
  Mr. Chairman, our committee has spent over 2 years examining various 
elements of derivatives markets, and we have focused for the last year 
specifically on their contribution to this financial meltdown, most 
notably the prevalence of unregulated, heavily traded bilateral swaps 
used by large financial institutions that either collapsed or received 
taxpayer bailouts.
  Now derivatives, in and of themselves, were not the cause of the 
financial meltdown in the second half of last year, but they did play a 
role. Had the provisions of the Peterson-Frank amendment that we will 
consider later been in place last year, financial institutions like AIG 
would have never gotten themselves into a position where they needed 
billions of taxpayer dollars just to keep them solvent.
  The derivatives reforms in the Peterson-Frank amendment and the 
resolution authority provided for in the underlying bill will mean 
large financial institutions, and not the taxpayers, will be 
financially responsible for their own undoing.
  I also want to thank Chairman Frank for the work he did with our 
committee on ensuring that this legislation does not have unintended 
consequences for the Farm Credit System, a network of rural lenders 
that support local agricultural producers, utilities and businesses. So 
Mr. Chairman, Farm Credit had nothing to do with the financial crisis, 
and in fact, the strong underwriting, capital, security, appraisal, and 
repayment statutory standards that we put in place after farm country 
went through its own stressful credit period have resulted in a more 
stable financing network. The Treasury Department agreed with this 
assessment when they said it was not their intention to bring Farm 
Credit into the regulatory reform discussion, and I thank Chairman 
Frank for recognizing this.
  With that said, Mr. Chairman, I still have some concerns with some 
parts of the underlying bill, particularly the establishment of a 
systemic risk regulator and the empowerment of the Federal Reserve to 
take a leading role.
  I am concerned that the real power resides in the Federal Reserve 
instead of the Financial Services Oversight Council established by this 
bill, particularly the ability to impose whatever prudential standards 
it sees fit. And there does not seem to be any mechanism for the 
Council to check the power of the Federal Reserve if it believes the 
Fed is going too far.
  While I think the systemic risk language needs much more refinement, 
I will not let these concerns deter my support for the underlying bill 
and the much-needed Peterson-Frank amendment that will finally shine 
light on the previously dark markets for over-the-counter derivatives 
and ensure that we will never again threaten the stability of our 
financial system.
  Mr. Chairman, I urge my colleagues to support the bill.
  I reserve the balance of my time.
  Mr. LUCAS. Mr. Chairman, I yield myself what time I might consume.
  Mr. Chairman, I must rise today in opposition to H.R. 4173. 
Regulatory reform of our financial system is indeed needed. However, 
rather than using this opportunity to enact meaningful reform that 
creates financial stability and encourages economic growth, the 
majority has constructed a massive piece of legislation that will 
restrict credit availability and does little to address the real 
problems in the financial industry.
  In addition to dramatically expanding the power of the Federal 
Reserve and establishing what is, in effect, a ``credit czar'' who will 
have virtually unlimited authority to restrict consumer choices, this 
bill will create a permanent bailout, some would call slush fund, for 
so-called ``too big to fail'' companies funded by a $150 billion tax on 
financial institutions. This tax will reduce available capital for 
lending and will most certainly be passed on to consumers in the form 
of higher fees.
  As the ranking member of the Agriculture Committee, I also rise in 
opposition to title III, the OTC derivatives title, that is currently 
in H.R. 4173. This is the same title that was adopted by the Financial 
Services Committee. I opposed this title in the committee, where I'm 
also a member, because it makes it too costly for end-users to manage 
risk and unnecessarily ties up capital that could otherwise be used to 
create jobs and grow their businesses.
  However, Chairman Peterson and Chairman Frank will bring an amendment 
to the floor that will strike and replace this derivatives title. This 
Peterson-Frank amendment is the product of negotiations between our two 
committees. I prefer, I must admit, the version reported by the 
Agriculture Committee, but this compromise is significantly better than 
the current title in the bill, and I will support its inclusion. But, I 
support its inclusion only if the other secondary amendments that may 
be offered by my friends on the other side of the aisle are defeated, 
save one.
  I would be remiss if I didn't thank Chairman Peterson for working 
with Agriculture Committee Republicans in a process that started back 
in February when our committee reported out H.R. 977. Chairman Peterson 
worked in good faith to address issues our members brought to the 
table, and we learned together the concerns of all of the participants 
in the over-the-counter derivatives markets. Although we were able to 
address some of these concerns, many still remain unresolved.
  We were able to improve areas most important to end-users; the 
manufacturers, the energy companies and food processors that use swap 
agreements to manage price risk so they can provide consumers with the 
lowest-cost products. End-users should not be regulated as though they 
were major financial houses residing on Wall Street. They did not cause 
the financial collapse. They should not be regulated like they did.
  I would have preferred language that would have made clear that only 
those entities that can have a significant adverse impact on the U.S. 
financial system be regulated as major swap participants. Similarly, I 
don't understand why market makers that only deal in cleared products 
need to have additional capital and margin requirements imposed upon 
them by the Federal Government.
  Finally, we should not forget that new opportunities, innovative 
products and services, and ultimately economic growth are born from 
people willing and able to take risk and invest. We should not attempt 
to regulate risk out of existence. As it stands now, the Peterson-Frank 
amendment allows the appropriate financial regulator to closely monitor 
market trends and market participants who may generate too much risk 
for a healthy and robust financial system. This amendment also gives 
the regulator the appropriate tools to reduce risk before it can 
negatively affect our economy. The Peterson-Frank amendment isn't 
perfect, but it is a marked improvement over other legislative efforts 
either proposed or considered.
  Mr. FRANK of Massachusetts. I yield myself such time as I may 
consume.
  Mr. Chairman, my Republican colleagues are in the throes of regret 
that things that they would like to have denounced are not in this 
bill. There will

[[Page H14422]]

be a certain amount of fantasy tonight on the floor of the House as 
they lament the existence of things that are not here.
  One of the major bailout instruments, section 13.3 of the Federal 
Reserve Act, was used during the Bush years to bail out not the 
institution, but the creditors of Bear Stearns, but then it was used by 
a unilateral decision by the Federal Reserve with no congressional 
input in September during the Bush year of 2008 to provide substantial 
amounts of money to AIG. The bill before us today wipes that power out. 
There will be no more use of section 13.3 to provide funds to any 
existing institution.
  There will be, as the Republican bill also said, instead, the ability 
to fund an instrument to which companies can apply if they are solvent 
in the midst of a national liquidity crisis. But there will be nothing 
like AIG.
  There is a fund in here for the FDIC to use if a financial 
institution has to be put out of existence because it had become too 
indebted and unable to meet its debts, and it was big enough so that 
its failure would cause the kind of systemic negative consequences that 
we saw from Lehman Brothers.
  Last year, the problem was Lehman Brothers went under, and the Bush 
administration felt they couldn't pay anybody, and there was a crisis. 
So then AIG went under, and the Bush administration said, well, we 
better pay everybody because we don't have the legal authority to pick 
and choose. We now end that dilemma. We say, and this is absolutely 
crystal clear in the bill, it says if an institution gets to the point 
where it cannot pay its debts, and it is of such size that those debts 
threaten systemic negative consequences reverberating throughout the 
economy, it dies. There is no bailout. There is no continuation of that 
entity. It's a dissolution fund. It is put into receivership.
  There is a fund raised, it is true, by assessments on the financial 
institutions, and my Republican colleagues are far more solicitous than 
I of those institutions. They don't want to restrain their 
compensation, and they don't want them to have to contribute to 
expenses that may be incurred by their own irresponsibility. That is 
clearly a difference between us.
  We say that if the Federal agency that is putting this out of 
business and takes it over, and, yeah, there's a takeover of failing 
institutions who threaten, by the size and complexity of their 
indebtedness, to threaten the stability of the country, we take them 
over to put them out of business. The shareholders are wiped out, the 
boards of directors. These are all absolute conditions that have to be 
met.
  And it may be that in winding them down, some money has to be spent. 
You don't just walk in the next day and say, okay, the door is closed. 
That is irresponsible. We say it may take some money to wind them down. 
So we assess the business community that caused these problems in the 
whole for that. And we do say if there is a need and there's a 
shortfall before, if one of these things happens before the fund is 
built up, money will be borrowed from the Treasury with an absolute 
requirement of repayment in this fund. There are no taxpayer dollars 
that will be used. They will be lent, in some cases, as has been lent 
in other cases, but they must be repaid, and there must be a repayment 
schedule.

                              {time}  2115

  The assessments will continue until they are repaid.
  Now, one of the odd things is, and I apologize to my colleagues, the 
bill is too big. I don't know whether that means it was too much to 
read or too heavy to carry, or some really short ones can't see over it 
when they are sitting down. I don't know what the problem was. This 
notion that the value of a piece of legislation is inversely related to 
its size is rather odd.
  But let me tell you how they managed to slim down--which I would like 
to do, now that I am through with all of that, but I will have to start 
my diet next week. How do they slim it down? They don't do anything in 
their bill about executive compensation.
  I agree, we spent some pages saying that the kind of bonuses and 
large payments to take risks and not be penalized if they fail, we have 
language in here to stop that. They don't. Save some pages.
  We say, let's ban the kind of subprime loans that got this country 
into so much trouble. We have a lot of language in here to ban subprime 
loans. They don't. Save some more pages.
  We do regulation in other ways that they don't do. They don't have 
registration of hedge funds. They don't have requirements on private 
advisers. They don't have anything about a whole lot of things. It is 
true if you avoid subjects, you shrink the size of the bill.
  By the way, as to the size of the bill, this didn't come--one of the 
things, you know, sometimes it's what's not said that you open--you 
haven't heard any complaints today, and I appreciate that, about the 
process. We began marking up the elements of this bill before the 
summer recess. We have had a large number of hearings. We have spent 
over 50 hours in actual markup debate on this bill.
  There have been hundreds of amendments offered, dozens of amendments 
accepted from both the Republican and Democratic sides in many days of 
markups. It has been very thoroughly vetted. It was made public and 
available.
  I am sorry that they had to read a lot of pages about things they 
didn't want to read about. They don't like to be reminded of 
compensation abuses. They don't want to hear about subprime, but we do. 
We want to stop it.
  There is no bailout fund. The bailouts of AIG and Bear Stearns, not 
possible, illegal under this bill. If a company fails, it will be put 
to death. Yes, we have death panels, but they got the death panels in 
the wrong bill. The death panels are in this bill. We will spend money 
to get rid of them in ways that will minimize damage, money that will 
come from the financial community.
  Now, we heard that it's going to have a restriction on credit. Well, 
it's true, many of them were opposed to the credit card bill. Many 
voted for it. The National Federation of Independent Business supported 
the credit card bill. They say there is a credit czar. That one is too 
odd to put any meaning behind. I would like them to point to the 
sections that do it. Maybe, if it's too much to read all at once, they 
could divide it up. Like there are 177, if they each read 8 pages, I 
think they could get the whole bill done. Maybe they could then find a 
credit czar in there. I can't.
  We do say that if you are identified by the systemic risk council as 
overleveraged, and you are big, we will step in and tell you, as the 
gentleman from Pennsylvania's amendment said, you are too big, raise 
your capital. Maybe that's a credit czar.
  Maybe when someone would have told AIG a couple of years ago, stop 
selling those credit default swaps that you can't back up, because 
mortgages that you are ensuring against loss can lose money, maybe they 
think that's a credit czar if you tell AIG don't do it, because nothing 
in that bill, nothing, zero in that bill would have interfered with 
AIG's recklessness. There's not a word in here that would have done 
that in terms of the overleveraging of AIG, nor of the subprime loans 
that were there.
  Yes, the lack of regulation over many years allowed big problems to 
grow up. It takes a fairly comprehensive bill to do it. We have been 
working on this bill for literally months. We have had days and days of 
hearings. We have voted on it; we have amended it. It's been available.
  I would hope they would stop complaining about the size. I would hope 
they would deal with the substance. But the real substance of this 
bill, not a bailout that does not exist, I want someone to read me the 
sections that show there is taxpayer money that can go to keep a 
failing institution going. There absolutely is not. I would like them 
to tell me, do they think we should ever do anything about subprime 
loans, anything about executive compensation, anything about subprime 
hedge funds, about any of these other things?
  Yes, here is the situation. Years of an absence of regulation, both 
an absence of war and an absence of will to regulate--mostly under 
Republican rule but some with Democratic complicity--led to the largest 
crisis in recent memory since the Depression.

[[Page H14423]]

  They talk about job loss. As I said before, what a terrible day 
January 21 was. Apparently, we had a wonderful economy up until January 
20. Barack Obama took power and millions of jobs disappeared 
retroactively. A deficit sprung up that had not been there. Bailouts 
were retroactively pushed back to September.
  The major factor in jobs loss was this terrible crisis. What we do 
for jobs is to say you will not be allowed, once again, the financial 
irresponsibility of some in that community to get us into trouble.
  The Republican proposal is very clear. Do not interfere with the 
ability of an AIG, Lehman Brothers, Citicorp, Countrywide or any of 
those other financial entities. Do not prevent them from doing again 
what they did before. If and when they have done such a bad job that 
they are collapsing, then let them go bankrupt and don't do anything to 
deal with the consequences. Let's have another Lehman Brothers.
  We say ``no.'' Let's try to stop them from getting there. If they do 
get there, yes, we will put them out of business, but in a more orderly 
way.
  I reserve the balance of my time.
  Mr. BACHUS. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, this is a great country, and I think we are all proud 
of our country. It is no small tribute to our country that people all 
over the world dream about coming to America. Our forefathers, they 
were either born here or they dreamed of coming to America.
  America is not just a country; it's an idea, and that idea is about 
the individual. That's the basis of our country. It's not about the 
government. It's about the individual, it's about the citizen, it's 
about freedom, it's about choice.
  Mr. Chairman, the problem with this bill isn't the size of the bill. 
The problem with this bill is that it goes right to the heart and 
strikes a wound against the character of our country. It's the 
character and the culture of this legislation that is so wrong, and not 
the size.
  Individuals in this country ought to have the right to choose. They 
ought to have the right to choose their health care provider, their 
doctor. They ought to be able to make choices, health care choices, 
treatment choices between themselves, their doctor, their family, not 
the government.
  We see with health care that this idea of the individual, this idea 
of choice, this idea of freedom to make those choices is under attack. 
We found that with energy that not the individual, the country, but the 
government determined that we weren't going to use coal, our most 
abundant source. We weren't going to use oil, that we were going to 
tax, that we were going to tax energy, we were going to discourage 
that. We are taxing health care in the health care bill.
  In this bill we levy taxes. We have sanctions. People may still be 
able to make choices, but they will be discouraged or they will be 
taxed when they make those choices.
  The decision about seeking the doctor of your choice or the decision 
about borrowing money or the choice about lending money or the choice 
about the terms of that loan, those ought to be choices between 
individuals; those should not be managed by the government.
  Now, the chairman has brought this legislation before, and it is his 
legislation. I mean, his image and his imprint is clear on each and 
every page of this legislation.
  I have not really seen such an individual drive legislation since 
perhaps the first lady, Hillary Clinton, brought her government-managed 
health care to the floor in the early 1990s. This is just simply 
another way of an attempt on the part of, really--and I think the 
chairman really has faith in the government and the government's 
ability to manage and the government's ability to make decisions, that 
he actually has a sincere faith.
  In fact, members of this committee, members of this committee on TV 
this morning, and Democratic members, actually made references to 
Europe, the way they do things in Europe, the fact that the government 
is making these decisions in Europe. We are the greatest, as I said, 
the greatest country on the face of the Earth, and we didn't get there 
through government management. We didn't get there through government 
management of health care. We won't get there by government management 
of creditor or of lending or of other financial services. It won't 
happen.
  We are the largest economy in the world. It's not the British 
economy, it's not the French economy, it's not the Chinese economy, 
it's not the Japanese economy. It's the American economy. How did we 
get to be the largest economy in the world, three times larger than the 
next largest economy, the Japanese economy, bigger than the Chinese 
economy, the Japanese economy, the British economy and the French 
economy put together? We got there with faith in the individual, not in 
the government.
  That is what's wrong with this bill. You can clearly look, and 
nowhere is it more evident than in this bill that not only do we not 
have faith in the individual and in individual responsibility and an 
individual's right, sometimes, to take risk, but we also give 
individuals the right in this country to succeed. But when you do that, 
unlike in other countries, you give them the right to fail.
  This bill clearly establishes a bailout fund. It says when the 
largest companies in this country, when the largest companies in this 
country, when they fail, we are going to establish a $150 billion fund, 
a permanent fund, a permanent TARP.
  The Democratic gentleman from California, Mr. Brad Sherman, said TARP 
on steroids, and where do you get this money from? Well, actually, it's 
200 billion, 150 you get, not from the companies that are failing, but 
from their competitors who are succeeding. You transfer that money to 
those companies that have taken risk they shouldn't have taken. You 
take it from those companies that didn't take those risks. That's not 
competition; that's socialism.
  Now, you can call it what you want to, but it's socialism. It's 
government managed. It's not what America is about.
  This is not about a crisis that occurred last September. This is not 
about the continuing bailouts that started with the Federal Reserve, an 
independent body, but continued and have grown in intensity under the 
Obama administration. But there is enough fault to go around.
  But can we not agree on one thing, that it is time that we allow 
people in this country to succeed, and we allow them to fail? Isn't it 
time in this country that we decide that there is no more ``too big to 
fail,'' because if you make that determination, you make the 
determination, as we have over the past year, that there are thousands 
of small businesses and medium-sized businesses and companies that were 
too small to save.
  That's not fair. That's not what America is about. It is not about 
taking from people who pay their mortgage.
  No matter what the circumstances of those who failed to pay their 
mortgage, it's not about transferring money from one to the other. 
That's not about America. It might be about charity, it might be about 
neighbor helping neighbor, but that is not what this country was 
established about.

                              {time}  2130

  So let's not use the crisis that we have experienced this past year 
to create the calamity of a government-managed country where the 
individual, where freedom, where choice is a thing of the past.
  Mr. Chairman, I reserve the balance of my time.
  Mr. PETERSON. Mr. Chairman, I yield 3 minutes to the distinguished 
gentleman from Ohio (Mr. Boccieri), a member of our committee.
  Mr. BOCCIERI. Mr. Chairman, in this season of yule tidings, gift 
gifting, and silver and gold, just what are my colleagues on the 
Republican side attempting to give Americans with their opposition to 
this bill?
  My colleagues who oppose this bill would rather give gold to the big 
executive corporate execs at Goldman Sachs rather than put a little 
silver and gold under the Christmas tree of ordinary Americans. Bah 
humbug.
  My friends on the other side of the aisle would rather stand with 
corporate executives and their thousand dollar suits than stand with 
those who are in the unemployment line. Bah humbug.

[[Page H14424]]

  They'd rather bail out the big banks on Wall Street than help 
Americans try to keep their homes on Main Street. Bah humbug.
  My colleagues who oppose this bill would rather give bonuses to big 
corporate executives than protect the pensions of millions of middle 
class Americans. Bah humbug.
  They'd rather stand with hedge fund managers, predatory lenders who 
are betting on the price of oil going up, betting on the price of food 
going up, and betting on Americans failing to pay their mortgages 
rather than helping those families who are now standing in the line at 
food banks this holiday season. Bah humbug.
  This bill will end taxpayer bailouts so that Americans are never 
again on the hook for Wall Street's risky behavior and bad bets. It 
protects families and retirement funds and college savings and small 
businesses' financial futures from the unnecessary risks by Wall Street 
lenders and speculators and high-paid execs. It brings transparency and 
accountability to a financial system that has run amok. This bill is 
about instituting commonsense reforms, holding Wall Street and big 
banks accountable.
  Now, Republican leaders would rather vote to rescue big banks on Wall 
Street than find it in their hearts to help struggling Americans on 
Main Street.
  Don't be a Scrooge this Christmas and vote against this bill. Help 
our people, or surely you're going to be visited by the ghosts of 
Christmas past.
  Mr. LUCAS. Mr. Chairman, I yield 2\1/2\ minutes to the gentleman from 
Kansas (Mr. Moran).
  Mr. MORAN of Kansas. Mr. Chairman, I rise this evening, as one might 
expect, in my opposition to H.R. 4173 certainly as written, as the 
gentleman from Massachusetts says, this massive financial regulation 
bill.
  Once again we have 1,200-plus pages, a so-called ``reform'' bill 
before the House of Representatives that would dramatically increase 
government involvement in our economy. If this Congress is serious 
about economic recovery, then we should be reducing burdensome 
regulations, not increasing them.
  I have heard from many Kansans about their inability to access credit 
from their local community-based lending institutions. Small businesses 
and farmers rely upon these loans to make payroll, expand, and to make 
their ends meet. Local lending institutions would love nothing more 
than to make these loans, but the overly broad regulations and the 
inconsistency with which different examiners enforce those regulations, 
together with higher FDIC insurance premiums and increased reserve 
requirements, has greatly restricted family and small business access 
to capital. This House should be more focused on the credit crunch and 
helping institutions cut through the bureaucracy and lend money, not 
creating more layers of regulation.
  Among the provisions I oppose within this legislation is the creation 
of a permanent TARP-like bailout authority. This authority will 
continue to shield large financial firms from their mistakes and pass 
those costs of their miscalculations on to the American taxpayer. The 
legislation takes an overly broad approach, disrupting markets that 
have performed well and placing more regulatory burdens into places 
where they are not needed.
  One example of these changes that this legislation would make is the 
commodities futures market known as designated contract markets. These 
are not the over-the-counter derivatives markets you will hear most 
Members discuss during this debate. In the wake of last fall's 
financial collapse, these regulated contract markets performed 
relatively well under the current core principle regulatory regime. 
This regime allowed both regulators and exchanges the ability to adapt 
their regulatory approach to changing market conditions.
  Rather than recognize the success, this legislation replaces those 
core principle regimes with an antiquated rules-based structure that 
has failed at the SEC. This legislation also redefines the definition 
of a bona fide hedging transaction in the contract markets so narrowly 
that it will be difficult for many commercial market participants to 
properly hedge their risk. These changes will hurt, not help, our 
economic recovery and introduce more, not less, volatility into the 
marketplace.
  For these and many other reasons, I urge the House to reject this 
legislation.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 30 seconds 
to note that with all these assertions that this is going to hurt 
credit and small banks, the Independent Community Bankers Association, 
a great representative of small banks, supports this bill. Now, they'll 
be upset if we do bankruptcy. But as far as the bill is concerned and 
the provisions we have been talking about now, the Independent 
Community Bankers Association supports this bill. They believe exactly 
the opposite about credit.
  Mr. Chairman, I yield 4 minutes to the gentleman from California (Mr. 
Sherman).
  Mr. SHERMAN. The ranking member came to the floor and quoted me as 
describing this bill as ``TARP on steroids.'' That's the phrase I used 
to describe the original bill submitted to us by the Secretary of the 
Treasury. This bill is very different.
  I want to thank Chairman Frank for all the changes we have been able 
to make and declare that this bill is now a step forward in limiting, 
on balance, the power of the executive branch to put taxpayer money at 
risk or to bail out private institutions.
  The bill does include two provisions that those concerned with 
bailouts might object to, but these provisions are limited as to amount 
and purpose, and they are sunsetted in 2013. Finally, while taxpayer 
money may be put at risk initially, ultimately the cost falls on the 
industry.
  But you cannot call this bill ``TARP on steroids'' and quote me to 
that effect without noting the major change this bill now makes in 
section 13(3) of the Federal Reserve Act. That is the most dangerous 
provision in the U.S. Code, and this bill is a major step toward 
limiting that section. Code section 13(3) now allows the Federal 
Reserve to lend, at times of systemic risk that they declare to be in 
existence, unlimited amounts to just about anyone on whatever terms the 
Fed thinks is adequately secured. Unlimited amounts. They've already 
done about $3 trillion, and under current statute they could do $30 
trillion. And the Republican alternative does nothing to limit section 
13(3). It leaves the giant freeway of bailouts open forever.
  In contrast, this bill contains three important limitations. The 
first was drafted by the chairman, and it says that 13(3) can only be 
used to put money in the economy in general, not to bail out one or two 
firms. And I thank the chairman for accepting two of my amendments. One 
limits section 13(3) to $4 trillion and does not adjust that amount for 
inflation so that the power of the Fed will decline with inflation over 
time, which is only fair since it's the Fed that's supposed to be in 
charge of limiting and eliminating inflation.
  The second amendment that was accepted was the idea of requiring the 
highest possible security for amounts of credit extended under 13(3). 
This bill is a step toward limiting the power of the executive branch 
to put money, taxpayer money, at risk. It does contain section 1109 and 
1604, both of which are, pursuant to an amendment accepted in committee 
which I authored, sunsetted in 2013.
  Section 1109 replaces 1823 under current statute, so it doesn't 
expand bailout authority. In fact, it contrasts it, because it's 
limited to $500 billion, while 1823, which is suspended by this bill, 
is an unlimited amount. Section 1109 as it will appear in the manager's 
amendment requires an advance fee so that taxpayers are compensated for 
any money put at risk and, finally, any losses to be collected from 
those companies which participate in the section 1109 loan guarantee 
program.
  Section 1604 does provide funds to resolve insolvent institutions, 
but as the chairman points out, it's a death panel, not a bailout. It's 
only for institutions that are going to be liquidated.
  The CHAIR. The time of the gentleman has expired.
  Mr. FRANK of Massachusetts. I yield the gentleman 1 additional 
minute.
  Mr. SHERMAN. It's limited to $150 billion collected in advance from 
the same large companies whose creditors could be eligible for relief. 
And section 1604 is sunsetted in the year 2013.

[[Page H14425]]

  Taken as a whole, this is antibailout legislation and contrasts with 
the Republican alternative that does nothing to limit section 13(3), 
which has already been used chiefly under the Bush administration to 
put over $3 trillion of taxpayer money at risk. It does provide for 
section 1109 and 1604, but under the bill these are limited in amount 
and they're temporary in time. And most importantly, it limits section 
13(3) three ways: as to dollar amount, as to the purpose that money is 
put at risk, and, finally, as to the degree of risk which the Fed is 
able to take.
  What I said about this bill when it was originally proposed may well 
have been true. The bill now is a step away from the TARP approach, a 
step away from bailouts.
  Mr. BACHUS. Mr. Chairman, I yield 4 minutes to the ranking member of 
the Subcommittee on Oversight and Investigations, the gentlewoman from 
Illinois (Mrs. Biggert).
  Mrs. BIGGERT. I thank the gentleman for yielding me the time.
  There's no question and no disagreement among Members from both sides 
of the aisle that we need financial reform, for consumers, for the 
health of our financial services industry, and for the economy. But 
this bill isn't the answer.
  In fairness, you can find some good bipartisan provisions in this 
bill. For example, Mr. Kanjorski and I worked out insurance language to 
bridge the gap in communication among regulators and address problems 
with multifaceted businesses like AIG. Mr. Hinojosa and I worked on 
language to bolster housing counseling efforts at HUD. And the bill 
contains much-needed credit rating agency reform.
  Unfortunately, the good does not outweigh the bad. Today credit is 
less available than ever, small businesses are struggling to keep their 
doors open, and a record number of Americans are jobless. According to 
a report issued yesterday by the U.S. Conference of Mayors, the number 
of homeless and hungry families is still on the rise.
  We need a bill to unfreeze the credit markets so that financing is 
available to allow U.S. businesses to grow and create jobs. We need a 
bill to improve regulation. We need a bill to help Americans get back 
to work so that they can provide for their families and put food on the 
table.
  Instead, Mr. Frank's bill sets us back. It imposes a new tax on 
financial institutions, diverts financing away from lending and job 
creation, and creates a permanent Federal bailout fund, TARP II. 
Successful businesses and taxpayers will pay in advance for the 
failings of those that are reckless. And guess what? Taxpayers are on 
the hook once again if there isn't enough money. Does that sound 
familiar? Of course, because it's more of the same.
  This bill doubles down the government intrusion in the private 
sector, and it increases fees and Federal spending. Instead of 
strengthening consumer protections, it creates a giant new Federal 
bureaucracy. Five D.C. bureaucrats will tell groups across America, 
anyone involved in financial activities, including churches that 
provide payment plans for funerals, what products and services they can 
offer. Did churches cause the financial meltdown? No. Why not address 
the disconnect among dozens of existing Federal agencies before 
layering on a new one? Are we creating another agency or another 
problem?
  Finally, we need straightforward, over-the-counter derivatives 
reform. What we don't need is regulation that charges regulators with 
creating a one-size-fits-all approach to regulatory compliance, 
enforces unjustified mandates, and kills jobs.
  We must crack down on illegal, unfair, and deceptive activity, 
eliminate regulatory gaps, and strengthen the effectiveness of 
enforcement agencies. We should create a culture of transparency and 
accountability on Wall Street that will discourage, not promote, risky 
behavior, and never ever, ever again leave taxpayers holding the bag 
when those deemed ``too big to fail'' cannot meet their obligations.

                              {time}  2145

  That's what our Republican alternative aims to do.
  My Republican colleagues on the Financial Services Committee and I 
have offered, at every step of the way, solutions for smarter, stronger 
financial regulations, and yet Mr. Frank's bill steamrolls ahead, 
threatening to weaken the economic competitiveness of our markets, tie 
up capital, tie the hands of businesses, limit consumer choice, and 
place taxpayers on the hook for Wall Street's mistakes.
  This bill is an overreach and an overreaction, and it should be 
thrown overboard. It will cause irreparable harm. We need bipartisan 
reform to get our financial system and our country back on track. 
Americans, consumers, taxpayers, job seekers, the homeless, the hungry, 
and Main Street businesses deserve financial reform. This bill is not 
it.
  I urge my colleagues to oppose the bill and support the Republican 
alternative.
  Mr. PETERSON. Mr. Chairman, I would like to engage Chairman Frank in 
a short colloquy, and then give the rest of our time on our side to Mr. 
Murphy, who is our last speaker. So if Mr. Frank would be willing, I 
would yield myself as much time as I may consume and would like to 
enter into a colloquy with my good friend, the chairman of the 
Financial Services Committee.
  Title I of this legislation creates a systemic risk oversight and 
regulatory structure that enables regulators to raise capital 
requirements and impose heightened prudential standards on large, 
interconnected firms that could pose a threat to financial stability. 
The legislation also empowers the Federal Reserve Board to impose a 
host of additional requirements on institutions and activities deemed 
systemically important.
  It appears that this new structure is not intended to replace or 
duplicate regulation of securities or derivative exchanges that are 
already subject to regulations by the SEC or the CFTC. In looking at 
the statutory criteria for determining whether a financial company 
should be subjected to stricter prudential standards, it is hard to 
visualize the application of these criteria to derivatives and 
securities exchanges. Exchanges are not the players who perform the 
trading, but the administrators of the marketplace where such trading 
occurs.
  Do you agree that while derivatives and security exchanges would 
certainly qualify for the definition of a financial company in Title I, 
the intent of the legislation is targeted more at the players in the 
marketplace as opposed to the administration of the marketplace?
  Mr. FRANK of Massachusetts. If the gentleman would yield, the answer 
is yes, I agree completely, as they have operated, as they are almost 
certainly going to operate, as they are intended to function as 
marketplaces rather than themselves, it is inconceivable to me that 
they could be designated in that way.
  Mr. PETERSON. I thank the chairman for the clarification of the 
intent.
  I recognize the gentleman from New York (Mr. Murphy) for the balance 
of our time, a new member of our committee who has actually got some 
real world experience in this area and has been a great member in 
helping us put this together.
  Mr. MURPHY of New York. Thank you, Chairman Peterson, and also thank 
you to Ranking Member Lucas.
  The work we did on the Ag Committee I think is the kind of 
commonsense solution that Americans are looking for. We worked together 
to come up with regulatory reform in the Ag Committee with respect to 
the derivatives legislation. And we saw overwhelming support from not 
just Democrats, but Republicans, because people in that committee know 
what the American public knows: For the last 10 years, Washington has 
failed to regulate our financial markets. As a result, some of those on 
Wall Street and at the big financial firms have taken that opportunity 
to gamble with our money. They have put our future at risk, and they 
have put the very American dream that so many Americans spend their 
time hoping and praying for at risk. It is time for us to respond to 
that.
  The failures in Washington and the failures on Wall Street 
precipitated the worst financial crisis since the Great Depression, and 
it is our job here and now to come up with solutions to that. Wall 
Street melted down, and Main Street paid the price. This cannot happen 
again.

[[Page H14426]]

  So what do we need to do? We need to regulate what wasn't regulated. 
So many people now recognize that no one was looking at systemic risk, 
no one was looking at the AIGs of the world and seeing what they were 
up to. There were whole sections of the derivatives marketplace that no 
one was regulating; in fact, by a law that was passed here in 
Washington, no one was responsible for looking at it. That cannot 
continue.
  There were whole parts of the consumer world that were not 
regulated--mortgage brokers, payday lenders. This cannot continue. We 
must regulate what was unregulated to bring everything into the system.
  We need to protect our consumers. We talked about payday loans and 
mortgage brokers and the kind of liar loans that were put out there and 
passed. No one was responsible strictly for looking at protecting our 
consumers. This legislation will do that.
  With the Consumer Financial Protection Agency, there will be a focus 
on protecting our consumers. That's something that is common sense. 
That's something that all Americans want us to do here in Washington.
  The last thing that everybody in my district wants--and I think 
Americans all over this country want--is they want protection from 
taxpayers having to fund any future bailouts. Nobody thinks that Main 
Street should be bailing out Wall Street; it shouldn't have happened in 
the past, and it sure should not happen again in the future. It is 
critically important that we fix that. The bill that we have in front 
of us does set up dissolution authority. It is funded by the large 
financial institutions to help shut down those that fail. That is what 
needed to happen in the past; that is what needs to happen in the 
future. That is the kind of commonsense reform that we all need to come 
behind.
  We need to regulate what wasn't regulated, we need to protect our 
consumers, and we need to make sure that taxpayers never again have to 
fund a bailout. That's what we are working on here. That's what this 
legislation would do. And I think it's very important that we come 
together to pass this and protect America's taxpayers, protect our 
financial system, and get our economy moving again.
  Mr. LUCAS. Mr. Chairman, I yield 2\1/2\ minutes to the gentleman from 
Iowa (Mr. King).
  Mr. KING of Iowa. I thank the gentleman from Oklahoma for yielding, 
and I appreciate the debate that we have here tonight.
  I am going to stand with the gentleman from Oklahoma and thank the 
gentlemen from Minnesota for the work that they've done on the credit 
default swaps and the regulation that is there. I do think it is an 
improvement, and I am certainly going to support that amendment.
  But I think it is important for us, as Members of this Congress, to 
bring a perspective to this. And the words of Mr. Bachus from Alabama 
echo in my ears, Mr. Chairman, and that is, it isn't so much about this 
stack of the bill that Mr. Frank says might be too heavy for us all to 
carry; it's about the culture of the bill that may be too heavy for the 
American people to carry. It's about the difference between believing 
the Federal Government can regulate more aspects of our society, more 
aspects of our economy, and the difference in believing whether people 
can become and entities can become too big to be allowed to fail, or 
whether small businesses might be too small to be allowed to succeed. 
And it's about the difference between a free enterprise economy and a 
managed and controlled economy. It's about the difference between 
liberty and the difference between a socialized economy.
  I have watched as this economy has spiraled downward over the last 15 
or more months. And we've been involved in this, we've been engaged in 
it intensively. And it comes down to two divergent philosophies; one of 
those philosophies is echoed in some advice we got from one of our top 
economic advisers--who will remain nameless--who said to us 2\1/2\ 
years ago at the beginning of the subprime mortgage discussion, what's 
going on is these large financial institutions are doing what everybody 
else does. They're doing that because the other people are making 
money, and they're making money. And their psychology is, if things 
fall apart and melt down, there is likely to be a bailout; if they do 
what everybody else does, they will get bailed out like everybody else. 
That is at the root of this: Whether you can be allowed to fail so that 
we have a free enterprise system.
  There is a stack of immigration cards produced by U.S. Citizenship 
Immigration Services, glossy flashcards. And you look through those 
flashcards and it asks, Who is the founder of our country? George 
Washington. Turn to another one, What is the basis of our economy in 
the United States? Flip the other side of it, free enterprise 
capitalism. It is a principal tenet of the American way of life that 
you must answer that question accurately if you want to become a 
citizen of the United States, and yet here we are debating whether 
we're going to have a managed economy or whether we're going to have 
freedom in free markets. Mr. Chairman, I am going to submit that we 
have got to be able to take a chance to succeed and fail.
  The CHAIR. The time of the gentleman has expired.
  Mr. LUCAS. I yield the gentleman an additional 30 seconds.
  Mr. KING of Iowa. I thank the gentleman for yielding.
  So I will point this out: We had a chance, and we should continue 
forward, to repeal the Community Reinvestment Act. We should regulate 
Fannie Mae and Freddie Mac. We ought to require them to meet the same 
standards of every other financial institution in the United States. We 
should let people fail, though, so that others can succeed. And AIG 
should be split up. This is the seventh Federal agency when we have 
already too many. We need to have free enterprise succeed.
  Mr. FRANK of Massachusetts. First, I yield myself 15 seconds to 
invite Members to show me the part of the bill where there is a bailout 
that goes to failed institutions and keeps them going. I will read the 
parts that make it very clear that that's not the case, but maybe there 
is something I didn't read. So anybody who tells me there is a bailout 
that goes to continuing business institutions----
  Mr. GARRETT of New Jersey. Will the gentleman yield?
  The CHAIR. The time of the gentleman has expired.
  Mr. FRANK of Massachusetts. I yield myself 2 more minutes and yield 
to the gentleman.
  Mr. GARRETT of New Jersey. I appreciate the gentleman yielding.
  The language of the bill says that----
  Mr. FRANK of Massachusetts. What page? Give me the page or we can't 
have a serious discussion, obviously.
  Mr. GARRETT of New Jersey. The language of the bill gives the 
authority to set up a bailout----
  Mr. FRANK of Massachusetts. I take back my time. If the gentleman 
will point to the page. I'm not interested in their misconceptions; I'm 
interested in actual language. The gentleman rose voluntarily, I would 
assume he would have the language.
  Mr. GARRETT of New Jersey. Page 3 of the Judiciary Committee's self-
executing amendment.
  Mr. FRANK of Massachusetts. And it says what?
  Mr. GARRETT of New Jersey. It says, on page 291, after line 4, Insert 
the following new subsections: Conversion to Bankruptcy (1) Conversion: 
The corporation may at any time, with the approval of the Secretary--
meaning the Treasury Secretary--and after consulting with the council, 
convert the receivership of a covered financial company to a proceeding 
under chapter 7 or chapter 11 of title 11, United States Code, by 
filing a petition against the covered financial company under section 
303(m) of such title. The corporation may serve as the trustee for the 
covered financial company.
  Basically, what you have established here is a political decision by 
the Treasury Secretary to take an institution that they decide they are 
going to put into receivership--which you said before would be the end 
game--and allow them to convert back into 7 or 11 bankruptcy.
  So your statement before--and this goes to my opening comment, which 
you responded to, why are we so concerned with such a large bill? The 
reason we are so concerned with such a large bill is because obviously 
the Chair and Members of your side of the

[[Page H14427]]

aisle have not read the entire bill. The reason we presented a much 
smaller bill was because obviously you have not read our bill either. I 
know our opening comment----
  Mr. FRANK of Massachusetts. I will take back my time.
  Mr. GARRETT of New Jersey. You yielded it to me, so I am responding.
  Mr. FRANK of Massachusetts. I yielded to you--and I want to respond 
to the response.
  Mr. GARRETT of New Jersey. You yielded me 2 minutes, I believe.
  The CHAIR. The time of the gentleman has expired.
  Mr. FRANK of Massachusetts. I took 2 minutes for myself, and then 
yielded to the gentleman.
  Mr. GARRETT of New Jersey. I'm sorry, I thought you wanted a 
response.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 30 seconds 
just to explain to the gentleman from New Jersey, who misunderstands 
the rules, I yielded myself 2 minutes so we could have a conversation. 
He then used up the 2 minutes. So it was not within my power to 
continue it.
  Mr. GARRETT of New Jersey. Hopefully I answered the gentleman's 
question.
  Mr. FRANK of Massachusetts. Mr. Chairman, I move that the Committee 
do now rise.
  The motion was agreed to.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. Al 
Green of Texas) having assumed the chair, Mr. Teague, Chair of the 
Committee of the Whole House on the State of the Union, reported that 
that Committee, having had under consideration the bill (H.R. 4173) to 
provide for financial regulatory reform, to protect consumers and 
investors, to enhance Federal understanding of insurance issues, to 
regulate the over-the-counter derivatives markets, and for other 
purposes, had come to no resolution thereon.

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