[Congressional Record Volume 156, Number 7 (Thursday, January 21, 2010)]
[Senate]
[Pages S114-S116]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           CHAIRMAN BERNANKE

  Mr. DORGAN. Mr. President, I rise to briefly explain why I am going 
to vote against the nomination of Mr. Ben Bernanke as Chairman of the 
Federal Reserve Board. Mr. Bernanke has been serving as Chairman of the 
Federal Reserve Board. I will be the first to say I think there are 
things that Mr. Bernanke has done that are very important to this 
country. He steered our country in a very difficult circumstance. There 
was a time when our economy could have completely collapsed, which 
would have been devastating. It was teetering on the precipice of that. 
Mr. Bernanke and others made decisions, some of which I thought were 
good decisions.

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  It is the case that Mr. Bernanke worked for the previous 
administration that in many ways created circumstances that took us to 
that cliff or near the cliff with economic policies. I will talk about 
that for a moment. But when Mr. Bernanke became Chairman of the Fed, I 
understood that his background fit fairly well what we were going 
through, and I think he did some things that should be commended and 
supported. I have told him that I supported a number of these actions 
that were very important.
  One of those actions was to open, for the first time in history, the 
window at the Federal Reserve Board to extend credit directly from the 
Federal Reserve Board to the biggest investment banks in the country. 
It has always been the case that FDIC-insured banks, commercial banks, 
would have a window at the Fed to go get direct loans from the Fed, but 
it has never been the case that the investment banks were able to do 
that. During this great crisis, Fed Chairman Bernanke and the Board of 
Governors opened that window for direct lending from the Federal 
Reserve Board to the investment banks.
  I wasn't critical at that moment. I didn't come to the floor and 
express criticism. I don't know exactly what they saw that persuaded 
them to do that. But some months later, I sent, along with nine of my 
colleagues who signed the letter, a letter, dated July 31, to Chairman 
Bernanke and said: The Federal Reserve Board took action to allow all 
of the major investment banks in the United States to effectively 
access direct lending from the Federal Reserve Board for the first time 
in history.
  Down in the letter I say: We now urge you to release the names of 
financial institutions that have received the emergency assistance and 
how much each has received. The American taxpayers' funds were put at 
risk, and we believe the American people deserve information about the 
Federal Reserve Board's bailout activities to determine how much and 
what kind of funds were used, and so on.
  We received a letter back from the Chairman of the Fed in which he 
said: Publicly releasing the information on the names of borrowers and 
amounts borrowed under the Federal Reserve Board liquidity program 
could seriously undermine our liquidity programs. He essentially said: 
I don't intend to tell you, and I don't intend to tell the Congress or 
the American people.
  It is interesting to me that a Federal judge last year ordered the 
Fed to release the names of the institutions that received the 
emergency financial assistance from the Federal Reserve Board and the 
amount of the assistance. A Federal judge said to the Fed: You must 
release that information to the American people. The judge in this 
case, which was an FOIA case, found that the Federal Reserve had 
``improperly withheld agency records.'' The judge said that the Fed's 
argument that borrowers would be hurt if their names were released was 
``conjecture without evidence of imminent harm.'' But the Fed went 
ahead to appeal the judge's ruling and, therefore, it has been stayed.
  The American people are now in a situation where their Federal 
Reserve Board said for the first time in history: We will give the 
biggest investment banking institutions direct access to loan money 
from the Federal Reserve Board, and we don't intend to tell anybody who 
got it, how much they got, or what the concessions or prices were. We 
don't intend to give anybody that information.
  I find that completely untenable. I just am not going to vote for the 
nomination of a Chairman of the Federal Reserve Board who says to 
Congress and the American people: Yes, we opened that window. We 
decided to do direct lending to the biggest investment banks, which, by 
the way, steered this country right into a huge wreck. Take a look at 
what and who caused this financial wreck that cost this economy $15 
trillion in wealth. American families had lost $15 trillion in wealth.
  The Federal Government had either spent or lent or committed $12 
trillion to bail out particularly Wall Street and the biggest firms on 
Wall Street. All of those biggest firms on Wall Street, I believe, and 
even those that are now the healthiest firms that are experiencing 
record profits and are preparing to pay out record bonuses of somewhere 
around $120 to $140 billion, those firms would not have survived. They 
would have gone under were it not for the help of the American people 
through their government.
  The question for the Federal Reserve Board from the Congress and the 
American people is: What did you do? How much did you do? What was the 
collateral? Under what conditions? We need to know.

  The Chairman of the Fed said he supports transparency. If that is the 
case, show us a little transparency. How is it that someone can 
possibly argue that telling us now that they gave $200 billion here or 
$1 trillion there to firms that are now showing record profits and 
preparing to pay the biggest bonuses, how can that possibly injure 
those firms? In fact, many of them have apparently paid the TARP funds 
back, let alone the direct loans from the Federal Reserve Board.
  My only point is simple. I don't have a beef against Ben Bernanke 
personally. I kind of like him. I met him a number of times. I think he 
steered us through some tough times and probably made some good 
decisions at the right time. I also have some differences with him on 
economic policy and monetary policy. But I have a very big difference 
on this question. This question is controlling for me. If the Federal 
Reserve Board believes it has unlimited capability to decide it will 
change the rules on everything, open a direct lending window and give 
it to the biggest investment houses in the country, and they don't 
intend to ever tell any of us what they did or why or how; they don't 
intend to disclose any of it, that is not what I call open government.
  That is not something that is written in the Constitution. It is not 
something that this Congress should tolerate.
  This Congress should say to Mr. Bernanke: Your nomination is here in 
front of the Senate. We will act on it as soon as you provide the 
information Senators have requested of you--by the way, the information 
that a Federal judge has already ordered that you disclose. As soon as 
you comply with that, then your nomination shall have a vote in the 
Senate.
  I wanted to explain in more detail my response to people who had 
asked me what I was going to do on the nomination. That gives adequate 
explanation.
  I also wanted to comment briefly that the President today said 
something quite extraordinary, and I want to compliment him for it. I 
know he is walking into a thicket of trouble because a whole lot of big 
interests are going to gang up on these proposals. Let me tell you the 
two proposals the President offered that make a lot of sense.
  No. 1, he said big financial institutions that are too big to fail 
are too big. That is pretty simple. If they are too big to fail, they 
are just flat out too big. We ought to stop this concentration because 
too big to fail means no-fault capitalism. If they run themselves into 
trouble, the taxpayer picks up the tab. The taxpayer bails them out. 
That is what too big to fail means.
  The President says no more. Let's get rid of that too-big-to-fail tag 
and let's decide that if they are that big, let's stop this 
concentration.
  The President also has indicated that we ought to have financial 
institutions that are not trading in derivatives on their own 
proprietary accounts. I wrote a piece in 1994, 15 years ago, that was 
the cover story for Washington Monthly magazine. The piece I wrote was 
``Very Risky Business.'' I believe at the time there was $16 trillion 
of notional value of derivatives in our country. I said what is 
happening is outrageous. We have taxpayer-insured banking institutions 
that are trading on derivatives in their own proprietary accounts, 
putting taxpayer money at risk. It is flat out gambling. I said they 
may just as well have a craps table or a Keno table in their lobby. Oh, 
they can still call it a bank, but it is a casino.

  Fifteen years ago, I wrote that article. The fact is, we have gone 
through this unbelievable collapse of the economy--$15 trillion of 
wealth lost by the American people--and we still have

[[Page S116]]

these institutions trading on proprietary accounts. The President says 
it ought to stop. I agree with him.
  The President also says we ought to separate, as Paul Volcker 
suggests, the FDIC-insured commercial banking institutions from the 
investment banks over here. They were put back together. I said on the 
floor of this Senate 10 years ago--five, six, eight times--and gave 
long speeches predicting that if you do this, if you fuse together 
commercial banks and investment banks, you are headed for trouble. I 
said on this floor: Within a decade I think you are going to see 
massive taxpayer bailouts. People have asked me: How did you find the 
crystal ball? I just guessed. But I worried that if you put this 
together, this is a bargain for trouble, this is asking for trouble. 
Ten years later, we have seen this unbelievable collapse.
  The President is right; and it takes courage for him to say it--let's 
decide to separate investment banking from commercial banking. Paul 
Volcker has talked a lot about that, and he is right about it. So I 
know what is happening.
  I just saw, in CongressDailyPM: ``Banks Kick Off Effort Against 
Volcker Rule.'' ``A furious lobbying effort among large banks was set 
off today by President Obama's announcement that he will push a rule 
forcing them to choose between being a commercial institution or an 
investment bank that focuses primarily on trading for its own 
profits.'' The President dubbed this plan the ``Volcker Rule.''
  I met with Paul Volcker in my office recently. I have talked with him 
at some length about this. Paul Volcker is dead right, and so is the 
President. This is going to provoke an unbelievable battle here. I 
understand that. There is a lot at stake. The big interests--they want 
to keep doing what they are doing. The big investment banks, at the 
moment--you take a look at their balance sheet. They are not, by and 
large, loaning money to the interests in this country that desperately 
need it. They are trading on proprietary accounts and making a lot of 
money trading. The fact is, if they are still too big to fail--and they 
are--that is called no-fault capitalism, and it is our risk, not 
theirs.
  None of them would be around anymore had the U.S. Government not 
stepped in to provide a safety net. Now they are telling us: Well, 
these changes the President and others suggest, they are radical 
changes. No, they are not. They are changes that go back to the future 
in many ways. They are changes that go back to a period--1999--before a 
piece of legislation that was passed by the Congress to decide: Let's 
put together these big old holding companies and put everything into 
one. One-stop financial shopping, they said. Compete with the 
Europeans. We will put up firewalls. It turned out they were made of 
tissue paper and the whole thing collapsed.
  I just say I think the President has made the right call. It is 
gutsy. It is going to provide a big fight around here. But it is not a 
secret, perhaps--given my history and what I have said in opposing the 
kinds of things that were done 10 years ago that set us up for this 
fall--it is not surprising that I fully intend to support the 
President's effort. I think it is critically important to get our 
financial system reformed and done right.
  Then, it is important to do one other thing; and that is have 
regulators who do not brag about being willfully blind. We had a bunch 
of folks in here for a bunch of the last decade who said: Do you know 
what? We have decided to take this important government job--in any 
number of these regulatory areas--and we are proud to say we are 
probusiness. What does that mean? We are proud to say we are at the 
SEC, we are at this agency or that agency, and you all do whatever you 
want. We won't look. We won't watch.
  In fact, some of them were so incompetent that even when people--
whistleblowers--came and said: Bernie Madoff is running a Ponzi scheme, 
even when somebody told them what was going on, they did not have the 
guts or the time or the intelligence to investigate it.
  But being willfully blind ought not be something to boast about 
anymore. Going forward, we want effective regulation. Regulation is not 
a four-letter word. The lack of regulation caused this crash in many 
ways and cost trillions of dollars to American families.
  I am not suggesting overregulation. I am saying when you have certain 
areas that are regulatory in this government, to make sure the free 
market system works, and works well, when people commit fouls in the 
free market system in this area of competition, you need to have 
somebody there with a whistle and a striped shirt to blow the whistle 
and say: That's a foul. If you do not have that, the system does not 
work and the system gets completely haywire. That is what happened in 
the last decade. That is not a technical term, that haywire issue. But 
we have the right and the opportunity to get this right now, and I say 
to the President, good for you. This proposal is the right proposal.
  Then, let's see, in the weeks ahead and the months ahead: Whose side 
are you on? I say to those in public service on these issues: Whose 
side are you on? Are you on the side of the big investment bankers who 
helped steer us into the ditch that involved substantial wagering and 
gambling here, and then we pick up the tab because it is no-fault 
capitalism on too-big-to-fail issues? Or are you going to stand up for 
the American people here and decide you have to put this back in place 
the right way? I hope we will have enough support to follow the 
President's lead on this issue.
  Let me just make one final comment. I understand the need for a 
financial system that works. I admire bankers who do banking the old-
fashioned way: take deposits and make loans and do underwriting in 
between, looking in somebody's eyes to say: You want a loan? What is it 
for? Let me evaluate that. Can you repay this loan? That is 
underwriting. That is the way it works. The Presiding Officer, I know, 
ran a bank and understands that.
  We need a good financial system. You even need investment banks. I 
know one of my colleagues once said: Investment banking is to 
productive enterprise like mud wrestling is to the performing arts. 
Well, that was tongue in cheek. But we need investment banks to take 
the riskier investments out there. But our investment banking system 
went completely off the map. We need good commercial banks that are 
capitalized. We need investment banks. All of that is important. We 
need to get it right. I do not mean to denigrate all finance because 
finance is very important in this system to help this free enterprise 
system work, to help people who want to start businesses and hire 
people. That is very important for our country.
  So we will have that debate in a longer fashion in the weeks ahead.
  Mr. President, I yield the floor and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DORGAN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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