[Congressional Record Volume 156, Number 61 (Wednesday, April 28, 2010)]
[Senate]
[Pages S2733-S2750]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Mr. SANDERS. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SANDERS. Madam President, since the beginning of the financial
crisis, the Federal Reserve, the Fed, has provided over $2 trillion in
taxpayer-backed loans and other financial assistance to some of the
largest financial institutions and corporations in the world. Let me
repeat that: over $2 trillion--with a ``t''--$2 trillion.
Over a year ago, as a member of the Budget Committee, I asked Ben
Bernanke, the Chairman of the Fed, a very simple question--very simple
question; it could not be simpler--and the question, in so many words,
was: Mr. Bernanke, you lent out $2 trillion. Who got that money? Who
received the money? What were the terms of those loans?
Mr. Bernanke's answer was: No; I am not going to tell you, Senator
Sanders. I am not going to tell the Budget Committee, and I am not
going to tell the American people.
I think that is outrageous. I think when $2 trillion of taxpayers'
money is placed at risk, the American people have a right to know. How
many debates have we had on the floor of the Senate about legislation
dealing with $5 million, $30 million, with feverish debate--whether it
is a good idea or a bad idea--and now you are looking at trillions of
dollars of taxpayer money being placed at risk, and we do not know who
received that. That, to me, is an outrage and that, to me, is
unacceptable.
On that very day, after Ben Bernanke denied the American people the
right to know who received those loans, I introduced legislation
requiring the Fed to put that information on their Web site.
The Presiding Officer knows as well as I do, millions of lives have
been ruined by the greed, the recklessness, and the illegal behavior of
Wall Street. While the Fed was providing secret loans, at virtually no
interest, to some of the largest financial institutions in this
country, millions of Americans were losing their jobs, their homes,
their life savings, their ability to send their kids to college--as a
direct result of the same Wall Street firms the Fed was propping up.
So you have a situation where all over this country families are
suffering, small- and medium-sized businesses are in desperate need of
affordable loans. Yet you have the Fed providing trillions of dollars
to the people who caused the recession and to some of the wealthiest
and most powerful CEOs in the country.
The very least we can do for the American people is to tell them, to
give them the information as to who got bailed out by the Fed. I do not
think that is too much to ask. We have to explore whether there were
conflicts of interest. How does it work when financial institutions get
huge amounts of zero or near zero interest loans? Who sits on the
committee? Are there conflicts of interest?
We have to know, for example, what I believe to be the case: that
some of those financial institutions that received billions in zero or
near zero interest loans may have invested that money in T-bills, in
Treasury bonds, earning 3 or 4 percent interest. What kind of scam is
that? You get zero interest loans from the Fed, and you invest in
government-backed T bonds at 3 or 4 percent interest. That is an
incredible scam. Did some of those financial institutions do that? I
suspect they did. But we do not know what they did with that money and
we have a right to find out.
Let us be very clear: The money put at risk does not belong to the
Fed. It belongs to the American people. The American people have a
right to know where their taxpayer dollars are going. Therefore, during
the debate on financial reform, I will be offering an amendment to
audit the Federal Reserve and to require that the Fed release all the
details regarding the more than $2 trillion in virtually zero interest
loans the Fed has provided to large financial institutions since the
beginning of the economic crisis.
We talk a lot around here about the need for bipartisanship or
tripartisanship. I am an Independent.
[[Page S2734]]
Well, this amendment does that. I do not know that there is any
amendment out there that has more bipartisan support. This amendment is
being cosponsored by Senators Feingold, Leahy, Wyden, Dorgan, and
Boxer; Democrats. It is being cosponsored by Senators DeMint, McCain,
Grassley, Vitter, Brownback, Graham, Risch, and Wicker; Republicans.
But, quite significantly, on the base bill I introduced, from which
this amendment comes, this legislation is being supported by 32
cosponsors; that is, 22 Republicans and 10 Democrats, and they run the
gamut from some of the most conservative Members of the Senate to some
of the most progressive.
The Senators who are supporting the base bill are Senators Barrasso,
Bennett, Boxer, Brownback, Burr, Cardin, Chambliss, Coburn, Cochran,
Cornyn, Crapo, DeMint, Dorgan, Feingold, Graham, Grassley, Harkin,
Hatch, Hutchison, Inhofe, Isakson, Landrieu, Leahy, Lincoln, McCain,
Murkowski, Risch, Thune, Vitter, Webb, Wicker, and Wyden.
That is a very broad cross-section of the Senate, from some of the
most conservative to some of the most progressive Members on the base
bill, who say it is absurd that the Fed could lend out trillions of
dollars without the American people knowing who has received that
money.
Let me tell you what our amendment would do, and it is pretty simple.
No. 1, it would require the nonpartisan Government Accountability
Office, the GAO, to conduct an independent and comprehensive audit of
the Fed within 1 year. Secondly, it would require the Fed to disclose
the names of the financial institutions that received over $2 trillion
in virtually zero interest loans since the start of the recession. That
is it. That is the whole amendment. Pretty simple. I would hope and
expect we would have widespread bipartisan support for this amendment
when it gets to the floor.
This amendment also has widespread community support from
organizations all over this country. It has the support of Americans
for Financial Reform--a coalition of over 250 consumer, employee,
investor, community, and civil rights groups, including the AFL-CIO and
the AARP.
I should also mention that increasing transparency at the Fed is
obviously something the American people want to see, and poll after
poll suggests that.
This amendment is similar to the Federal Reserve Transparency Act
that was introduced in the House by Congressman Ron Paul and now has
320 bipartisan cosponsors. That is a lot. There are 435 Members of the
House, and 320 are on the House bill. A version of that bill passed the
House Financial Services Committee by a vote of 43 to 28 and was
incorporated into the financial reform bill that passed the House last
December. So not only do we have widespread bipartisan support in the
Senate, that same type of support exists in the House.
Last year, the Speaker of the House, Nancy Pelosi, said Congress
should ask the Fed to put this information ``on the Internet like
they've done with the recovery package and the budget.'' That is
exactly what this amendment would do. Interestingly enough, not only do
we have widespread bipartisan support in the Congress, not only has the
House moved vigorously on this issue already, but, importantly, the
courts have ruled in support of what we are trying to do.
Bloomberg News has been very aggressive on this issue, and they have
won court decisions requiring the Fed to release this information to
the public. But despite widespread congressional support, despite two
court decisions, the Fed continues to resist the transparency which our
country desperately needs.
As long as the Fed is allowed to keep the information on their loans
secret, we may never know the true financial condition of the banking
system. This has resulted in a whole myriad of problems, and I think it
is time we brought some sunshine to the goings on of the Fed.
Let me conclude by saying this: The American people are outraged,
regardless of their political views, by the behavior of Wall Street.
They have seen the greed of Wall Street lead us into a recession in
which millions of jobs have been lost, homes have been lost, savings
have been lost, families have been destroyed, and they want to make
sure we do everything we can to make sure what caused this terrible
recession never happens again.
I think one of the most important things we can do in terms of Wall
Street reform is to bring transparency to the Fed. So this is an
incredibly simple amendment. This is an amendment that has grassroots
support. This is an amendment that has support from the most
progressive and conservative Members of the Congress.
When I bring up this amendment, I certainly hope we can get a great
deal of support from Members of the Senate.
Mr. DURBIN. Madam President, will the Senator from Vermont yield for
a question?
Mr. SANDERS. I am very pleased to yield to my friend from Illinois.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. I would like to ask the Senator from Vermont, through the
Chair, about another issue in this bill relative to the interest rates
that are being charged across America. I would like to ask the Senator
from Vermont if he would tell me his take or evaluation of the
provision in this bill which exempts usury laws and interest rates from
the consideration of the Consumer Financial Protection Agency.
I know the Presiding Officer has an interest in some exploitation
that is occurring in her State of North Carolina--frankly, in my State
of Illinois, and probably across this Nation--by the so-called payday
loan and title loan operations, where average people who are struggling
economically go in for high-interest loans that are then rolled over,
time and time and time again, until they lose whatever security has
been offered for the loan and, frankly, find themselves even deeper in
debt.
I would like to ask the Senator from Vermont, whom I have discussed
this with on many occasions, his thoughts about consumer financial
protections and the interest rates being charged across this Nation.
Mr. SANDERS. I thank my friend from Illinois for raising that
question. I wish to congratulate him because our colleagues should know
he has been a leader on this issue for many years and has already
achieved some significant success.
My memory is, we had payday lenders that, if you can believe this,
were charging men and women in the U.S. Armed Forces--who, in many
cases, do not have a lot of money, who are trying to take care of their
families--outrageously high interest rates on check cashing and payday
loans. The Senator from Illinois led the effort successfully to put a
cap on that, and I thank him very much for doing that. That is a start.
But, clearly, as the Senator from Illinois indicates, we have to go
further. Here is the story. Just a couple weeks ago, there was a rally,
right here on Capitol Hill, led by religious groups--religious groups--
who said it is immoral and unacceptable that in the United States of
America we are now seeing usury and loan sharking taking place by some
of the largest financial institutions in this country. So we are not
just talking, I would say to my friend from Illinois, about an economic
issue; we are talking about a basically moral issue. If one reads the
Bible, the Old Testament, the New Testament, the Koran, every major
religion on this planet has said that usury is immoral; that if you are
desperate and you need money, I cannot charge you outrageously high
interest rates. That is immoral and the wrong thing to do. Yet in this
country today, as a result of a Supreme Court decision some years ago,
we have millions of Americans who are paying 25, 30, 35, 40 percent
interest rates. This is not from loan shark gangsters on a street
corner in Chicago; this is from some of the largest, most distinguished
financial institutions in the world. We have to put an end to that.
I would tell my friend from Illinois that the legislation we have
offered would put a cap of 15 percent, except under extraordinary
circumstances, on the interest rates banks can charge the American
people. We came up with this idea because this is what credit unions in
this country have been doing for several decades, and they have been
doing it successfully.
Mr. DURBIN. Madam President, I wish to ask through the Chair again--
first, I wish to give credit where it is due. The original amendment we
[[Page S2735]]
talked about that protects military families was offered by Senator Jim
Talent of Missouri, and I supported it and everyone supported it
because we found men and women in the military trained to defend our
country who signed up for these payday loans and quick loans, and they
became so deeply mired in debt they were forced to leave military
service. So we said as a matter of national security, we can't
sacrifice well-trained men and women who can keep us safe as a nation
to loan sharks who have these storefront operations in my hometown of
Springfield and in your hometown in Vermont and all across the Nation.
I would say to the Senator from Vermont--and he and I have joked
about this a little bit--I tried to come up with a number to say this
will be the maximum interest rate that can be charged. I went to a
mutual friend whom I respect and said: What is a number that no one can
argue with? She said 36 percent. When I mentioned that number to people
back in Illinois and other places, they were aghast. They said: We
don't want to pay 36 percent for anything. I said: I don't either. But
this is like a ceiling.
Well, it turned out it is a little more confusing than illuminating.
I happen to think the Senator from Vermont is certainly right with the
cap he is suggesting.
Now, is it not true, I ask the Senator from Vermont, as this rollcall
vote reflects, if the Republican Senators in this Chamber continue this
filibuster against this financial reform bill, this Wall Street reform
bill, this consumer financial protection bill, we can't even engage in
this debate, let alone this amendment, to try to protect families
across America from being preyed upon by these outrageous reptilian
credit operations?
Mr. SANDERS. The Senator from Illinois is, of course, absolutely
right. The point the Senator from Illinois is making, which makes
eminent sense, is if our friends disagree, if our friends want to offer
an amendment, if the Republicans want to alter the bill, that is their
right. That is what the Senate is about. But we can't proceed or go
forward in putting a cap on the outrageous interest rates financial
institutions are charging the American people--the loan sharking--
unless we get this bill going. We can't talk about Fed transparency
unless we get this bill going.
So I certainly agree with my friend from Illinois. People have a
right to disagree, but the American people are disgusted and frustrated
with what is going on on Wall Street. They want action. So to simply
have our Republican friends saying: No, no, no, we are not going
forward, doesn't make any sense to me.
Mr. DURBIN. Madam President, I would ask the Senator from Vermont
through the Chair, as informative and as entertaining as our
presentations are on the floor, the fact is, 98 chairs are empty on the
Senate floor, chairs that could be filled with Members of the Senate
from both political parties debating the issues we are talking about;
actually voting on amendments, proposing changes in the law to
ultimately work with the House and send it to the President to solve
some of the problems of our Nation. But as long as we are facing--and
we have had three filibuster votes so far this week with more to
follow--as long as we are facing this Republican filibuster where not
one single Republican Senator will break with the Republican caucus or
the Wall Street position that opposes any reform, we can't even bring
this bill to the floor for debate so we can address the biggest
economic and financial challenge America has faced in decades.
Mr. SANDERS. Madam President, my friend from Illinois is exactly
right. Let me just add to it. We have the House of Representatives that
voted to go forward. We have the President of the United States who
wants to go forward. We have 57, or whatever the number is, Senators
who wish to go forward. Now is the time to go forward.
I would add to what my friend from Illinois has just said. Let's be
very clear about this. Last year, in 2009, as I understand it, our
friends on Wall Street who are doing everything they can to make sure
Congress does nothing to reform the way they do business--that is what
they want; let's be clear about it--do you know what they spent last
year? I would tell my friend from Illinois that my understanding is
they spent $300 million on lobbying and campaign contributions.
I know my friend from Illinois knows that we can't walk around the
Capitol without bumping in to one or another lobbyist representing Wall
Street. Why are they here? Why are they representing hedge fund
managers who make billions of dollars in a year? They want to be able
to continue to do the exact same things they have done in the past
which has led to this terrible recession.
So let's not be naive. There are huge amounts of money flooding
Capitol Hill right now, and the goal is, no matter what anybody may
say: Let's do no Wall Street reform.
Mr. DURBIN. I thank the Senator from Vermont for yielding for
questions. I yield the floor and unless someone----
Mr. SANDERS. Madam President, I wish to thank the Senator from
Illinois for his continued efforts on Wall Street reform and the
excellent work he has done.
Mr. DURBIN. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. BURRIS. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BURRIS. Madam President, we just witnessed a few moments ago the
third attempt to try to do something about financial reform legislation
in this body, and for the third time, it went down. I am an old
baseball player. I played a lot of baseball in my young days, and there
is a rule in baseball that says three strikes and you are out. Well, we
have had three tries at this financial reform, and I will tell my
distinguished colleagues on the other side of the aisle: We are not
out. We are just beginning to fight under the circumstances we are
confronted with because we are fighting on behalf of the American
people.
Earlier this week, our distinguished majority leader called for a
vote to open the debate on major financial reform. We have seen well-
designed proposals from the Senator from Connecticut, Chairman Dodd.
This bill reflects the priorities articulated by President Obama and
supported by an overwhelming majority of the American people. It will
end the so-called ``too big to fail'' and prevent massive banks from
making risky decisions that threaten the entire American economy. It
will eliminate the need for government bailouts, and it will institute
commonsense regulations so companies cannot create investments that are
designed to fail and then bet against them.
In short, this legislation is a good starting point. As a matter of
fact, we have heard Chairman Dodd say time and time again we have to
get it on the Senate floor so we can improve this legislation. I know I
am supportive of a couple of amendments that would be beneficial to
improve the legislation. It may not be the complete Wall Street reform
package in its final form, but it contains a number of good provisions,
and it is worth debating. So I am asking my colleagues, let's stop
debating to debate.
The majority leader scheduled a vote to bring this bill to the floor
so Members of both parties could offer amendments and make
improvements. This was not a vote on the legislation itself. Leader
Reid was not asking the Senate to pass the bill without debate or
without amendment. He simply wanted to start the process. He wanted to
begin deliberations on the floor of this Chamber in front of C-SPAN
cameras and in front of the American people. But when the roll was
called and my colleagues and I came to the Chamber, every single one of
my Republican friends voted to block the debate, plus one of ours.
So we will try again, I hope, this afternoon, if not tomorrow, but we
are not playing baseball on the floor of the Senate. This is not the
all-American game, but it is the all-American future.
There was a second vote to start debate--to move ahead this process
and take up the consideration of financial reform. But for a third
time, my Republican friends stood in the way. They know they will have
plenty of opportunity to try and defeat the bill once it
[[Page S2736]]
is on the Senate floor, but they decided to drag their feet anyway.
We have seen this kind of thing before. This is the same Republican
playbook we saw with health care reform, the same obstructionism, the
same tired politics. In the past, they have been able to use this
strategy to score political points. This time, I would respectfully
suggest that my Republican friends have miscalculated. The issue of
health care reform was complicated, so when it came time for debate, it
was easy to distract and delay and to spread misinformation.
It was easy to muddy the waters so they could gain traction and delay
President Obama's agenda. When the health care debate was over, good
policy won out over good politics, and we passed the bill--but not
before my friends on the other side had scored some political points.
This time it is different. Financial reform itself is very complex.
That is why it is so easy for big banks to take advantage of consumers.
That is why it is difficult to apply the kind of oversight we should
have seen in the years leading up to the recent collapse.
The issue itself is hard. This time around, the tactics of
distraction and delay will not work. That is because Americans are
smarter than that. They know who the bad guys are.
About 2 years ago, Lehman brothers was one of the first dominoes to
fall. Next came Bernie Madoff. Then a handful of other Ponzi schemes
came crashing down. Most recently--just yesterday--we witnessed Goldman
Sachs, one of the largest and most respected firms on Wall Street, was
charged with fraud.
When it comes to financial reform, we know where the problem lies. My
Republican friends can try to distract and obstruct all they want, but
they will not succeed in confusing the American people. Ordinary folks
have had their pocketbooks bled dry by this financial crisis. They have
seen their hard-earned savings disappear and their future become
dramatically less secure, and they know exactly who to blame.
For far too long, Wall Street banks have been subject to relaxed
oversight. As a result, the focus of their business has changed. It
stopped being about lending money to businesses, making smart
investments, and encouraging free enterprise. When I was in the banking
business, that is what we did. I was at the biggest bank in Illinois,
the seventh largest bank in America, where we worked with companies,
made loans, collected interest, and took the people's deposits in and
paid them interest. And we kept the economy going.
Instead, Wall Street has basically turned into a casino. Look at the
derivatives market. Here you essentially have an object that is being
traded that has no value of its own. It has no ties to the actual
economy. There is no product, no business idea, and no actual
investment. It is just a high-stakes bet.
Without intelligent risk management, capital standards, and basic
rules of the road, these bets have the potential to undermine the
strength of our entire economy. Wall Street is a casino gone wild, and
they are gambling with our money not theirs. They are making money off
of our money.
The American people know this. They can see through the distractions
and political posturing. They recognize the need to reform Wall Street
so we can end bailouts, put commonsense rules in place, and make sure
we never experience this kind of economic crisis ever again.
I am not sure what my Republican friends hope to gain by blocking our
debate on this bill. They say they want to improve it, but that is
exactly what we would be able to do once it is on the floor. Maybe they
believe they can water down our reform package by dragging out this
process. Maybe they would like the chance to hold some more Wall Street
fundraisers before they have to take a vote on the legislation itself.
Maybe they simply don't have an alternative plan, and they know they
cannot win this argument on the floor of the Senate, with the eyes of
the Nation on them.
I am not sure what they hope to gain by stalling financial reform. I
urge my distinguished colleagues on the other side to please let us
move ahead with this process. I urge them to set aside these political
tactics and bring their ideas to the table so we can strengthen this
bill and make sure our economic future is safe.
I call upon them to join us in debating, amending, and improving this
important legislation rather than dragging their feet on a bill that
has so much public support.
When we pass this into law, after extensive discussion, it will be a
victory for the American people. If my Republican friends join us in
this effort, it can be a victory for both political parties, as well.
We will all benefit. The American people will benefit.
This legislation deserves to be debated in open session. I ask my
Republican friends to let us move ahead. But if they will not, and they
continue to delay and obstruct, then I challenge them to come to the
floor and explain. I challenge any one of my distinguished colleagues
on the other side of the aisle to walk into the Senate Chamber today
and seek recognition from the Chair. I challenge them to stand before
the American people and tell them why American families should be asked
to fund Wall Street's recklessness and greed.
I want them to explain that, Mr. President. I believe we need to end
these practices. I believe we need to take up the issue of financial
reform without delay. If my friends on the other side disagree, it is
their privilege to do so. But I believe they owe the American people an
explanation. I am pretty sure it will be very difficult to explain to
them why they are holding up this important piece of legislation.
Mr. President, I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Missouri is
recognized.
Mr. BOND. Mr. President, I am delighted to join in this debate, and I
invite my friends on the other side to listen to what the people in
communities in our home States are saying, who don't spend time
soliciting funds on Wall Street.
Let's be very clear: We all agree we need to hold Wall Street
accountable for the havoc wreaked on Main Street. We all agree we need
to enact reform to prevent another financial crisis. Where we disagree
on is what the responsible reform looks like. I have real concerns
that, in its current form, the Democrats' bill, written with the White
House, is a massive government overreach that will punish Main Street,
hurt families, and cost jobs by stifling small businesses and
entrepreneurs.
To sum it up, Democrats want to treat Main Street, our community
banks, our farm lenders, and our auto dealers like they were Goldman
Sachs or others on Wall Street. We Republicans want to ensure we fix
Wall Street, without crippling Main Street. The only way to do that is
to force the Democrats to listen to the concerns of Main Street, to
open this up and make it a bipartisan process. It has not been, and it
isn't going to be until we get some discussion and real substantive
changes in what I view as a very dangerous bill to the economic climate
and health of our country, our States, our communities, and the
creation of jobs.
Today, let me share with you some of the concerns I have heard from
Main Street. Like families in every community and every State, small
businesses were the victims. They weren't the perpetrators of the
financial crisis caused, among other places, on Wall Street.
Small businesses were not responsible for the financial crisis and
should not be treated as if they were. But that is exactly what this
bill does. This 1,400-page bill reaches far beyond Wall Street and will
impose new costs and onerous new regulations on small businesses to fix
a problem they were not responsible for causing. In short, this bill
would change the way every American does business.
We are not just talking about changing the way Wall Street banks do
business, but also how every community banker, local dentist, farm
lender, and auto dealer does business. I urge my colleagues to take
time away from the floor and listen to the people at home. They have a
very different message than that which we are hearing from our friends
on the other side of the aisle.
These concerns are not just Republican concerns. I hope my colleagues
on the other side of the aisle are also hearing from their constituents
back home about disturbing provisions in the Democrats' proposal and
have begun to agree with Senate Republicans that there is a lot of work
to be
[[Page S2737]]
done before we bring this 1,400-page monstrosity to the floor.
Don't misunderstand me. Like the nearly two-thirds of all Americans
who favor some sort of reform of Wall Street, so do I and my Republican
colleagues. But we need responsible and bipartisan reform that all
Americans and businesses can be proud of. I want to work with my
friends on the other side to ensure that the concerns I have heard from
Missourians--1,000 miles away from Wall Street--are addressed as the
process moves forward.
First, I continue to be stumped that any real form of our financial
system could ignore Fannie Mae and Freddie Mac, which were
significant--if not the majority--contributors to the financial crisis.
But that is what this bill does. That is a mistake, and so is leaving
out the rating agencies who gave triple-A ratings to bad paper that was
foisted on the system.
Fannie Mae and Freddie Mac--these government-sponsored GSEs--
contributed to the financial meltdown by buying high-risk loans made to
people who could not afford them. In addition to the cost to taxpayers,
these irresponsible actions turned the American dream into the American
nightmare for too many families who faced foreclosure, lost their
homes, which devastated entire neighborhoods and communities as the
property values diminished, as well as the credit rating of the
families displaced.
Responsible reform must address the GSEs. Responsible reform would
put an end to the taxpayer-funded bailout of Fannie and Freddie and
refocus them on promoting affordable housing.
Next, it is critical that in reforming Wall Street, we are not
punishing Main Street. Instead, we should be protecting small business
startups that are so critical to job creation.
Unfortunately, this bill will kill small business startups. While
title IX of the Dodd bill has been little noticed, it would have
devastating consequences. Specifically, this provision would kill small
business startups by delaying and limiting the availability of private
investor seed capital, which is essential for the survival and growth
of these startups.
Through new, burdensome regulation by the SEC, innovators and
entrepreneurs would be subject to registering with the Commission for a
4-month review before they could get out and start soliciting money.
This tying up of vital venture capital dollars needed for immediate use
by small businesses would cripple their startup efforts. This is not a
measure that will protect people from Wall Street. This is not a
measure needed because venture capitalists and small startup
entrepreneurs and innovators were causing the crisis. No, they are part
of the solution of the jobless problems we have now.
This provision is an overreach by the Federal Government, which would
shut down the job creation that Main Street provides, which this
country desperately needs. Raising the net worth threshold for those
who can invest in these venture capital firms to $2.3 million from the
existing $1 million, and raising the annual household income threshold
to $450,000, as the Dodd bill proposes to do, would disqualify two-
thirds of the current accredited investors, according to the Wall
Street Journal, who otherwise would help fund small startups in our
communities. These are the people whom these innovators and
entrepreneurs have to go to, and this will make it impossible for them
to get the money they need. Therefore, some woman, some man with a
great idea is much less likely in your hometown to be able to get the
funds she or he needs to start a business.
I believe strongly--and I have always said and will continue to say--
that small businesses and the startup companies are the backbone of our
country. I understand the critical role these so-called angel investors
can play in the creation and development of new companies, small or
large. Let me tell you about my position. Right now, in Missouri, I
have been working to help build an agri-biotech corridor across the
State. In Missouri, we have the potential to foster a whole new
industry in advanced agricultural research and biotechnology. This
agriculture research and biotech industry is our best opportunity to
stimulate and create high-paying skilled jobs in rural Missouri, rural
America, and in the cities as well.
The stimulus these biotech companies are spurring in Missouri is also
happening in other States across the Nation. According to the Kauffman
Foundation, located in Kansas City, between 1980 and 2005, companies
less than 5 years old accounted for all--all--net job growth in the
United States. As a matter of fact, the same study showed that in 2008,
angel investors provided roughly $19 billion in more than 55,000
companies. You are going to put an end to that with this bill?
Let us go back and think about it before we bring this monstrosity to
the floor. The new bill, if enacted, would deny immediate access to
capital. If enacted, it would say to innovators and entrepreneurs: You
are too small to succeed, too small to survive. That is far different
from what this bill was promised and promoted as doing--stopping too
big to fail. Yes, I am going to see in my communities and you are going
to see in your communities too small to survive. That is not where we
should be going.
Killing small business startups and jobs on Main Street is not the
only unintended consequence of the Democrats' current proposal that has
come to light. Caught up in the Democrats' fervor to pass a bill--any
bill--without careful consideration, are members of the U.S. military
and their families. Last week, I heard from active-duty and retired
military members who fear this bill would hurt their financial
security. You see, under the Democrats' bill, United Services
Automobile Association--USAA, a financial and insurance provider for
members of the U.S. military and their families--would, after an 87-
year track record, no longer be able to manage their own portfolio.
Also as a result of the Dodd bill, this company that serves our
military and veterans would have their ability to offer certain
competitive products to servicemembers and their families jeopardized
and their ability to return money to servicemembers and their families
limited by this massive expansion of government authority. This must be
fixed. I would urge my colleagues to listen to the military and
veterans and their families in your States. See what they think.
Unfortunately, the unintended consequences of this bill keep piling
up. The next major concern I have heard from Missouri community banks
that provide critical lending to families and small businesses is the
creation of the so-called Consumer Financial Protection Bureau--CFPB.
This massive new government bureaucracy has unprecedented authority and
enforcement powers to impose mandates on any entities that extend
credit. We are not just talking about big Wall Street banks here but
also your community banker, your local dentist. Dentists are telling me
that if they offer credit, they would be regulated. Farm lenders would
find it very difficult for them to be able to operate to make their
farm loans and to be able to hedge the risk that they normally do. Auto
dealers can sell cars only through the benefit of private sector
financing. As a result, there will be no choice but to pass the costs
on for this financing, if they can get it, to the consumers--the very
people this bill is supposed to protect. And it may cut some of them
out of getting credit altogether.
The National Federation of Independent Businesses, a strong voice for
small businesses, voiced their serious concern over the creation of
this new bureaucracy. I am sure you all have received it, but if you
have not, I would urge you to check your mail, because the letter from
the NFIB to Congress says:
These small businesses had nothing to do with the Wall
Street meltdown and should not be faced with onerous new and
duplicative regulations because of a problem they did not
cause. Further, as the most recent NFIB Small Business
Economic Trends survey shows, small businesses continue to
struggle with lost sales, and such regulations could make
these problems worse--stifling any small business recovery.
In other words, they are saying: We do this and small businesses are
going to be even less likely to be able to create jobs. We have already
put too much debt on the Federal books. We are threatening to increase
their taxes by a tremendous amount, and now we see regulations that are
going to interfere with their normal credit operations. That is a cause
for concern.
[[Page S2738]]
This very high unemployment the stimulus bill didn't touch, other
than getting more people working for the Federal Government. It was
supposed to bring our unemployment rate down to 8 percent, but it is
going to continue to fail and fail miserably if we stifle the ability
of small businesses to create jobs.
The only way to ensure that the CFPB does not unintentionally hurt
Main Street but still protects consumers is to narrow the scope and
authority with clear language outlining exactly who this new regulator
will regulate and what it will do. Instead of unlimited authority, this
new regulator should focus on the shadow banking entities operating
outside of the regulatory framework and preying on vulnerable people.
The banks and the savings and loans that issue loans are regulated by
government regulators. Are the people who are making these large loans,
such as home loans, regulated? In a lot of areas they are not. CFPB
could look at those.
I proposed 2 years ago a mortgage origination commission to make sure
everybody originating mortgages was regulated by some appropriate State
agency. Well, we haven't done it. We also need to ensure that we are
not empowering, through this new government agency regulator, the same
organizations which pushed home ownership at any cost onto families who
could not afford to repay their loans. This is one of the key problems
we had. People who couldn't afford homes were told that they could get
them with no downpayment, even if they had bad credit. If they didn't
have the money to have a home, they were told they could have a home
anyhow. These are the people who saw their American dream turn into the
American nightmare. These are the people whose houses were foreclosed,
their families thrown out, their communities devastated, and ultimately
the entire network of not only America's financial system but the
world's financial system brought down by this bad paper.
Surely, my colleagues would not want to vote for a bill that creates
a new government bureaucracy without knowing exactly what the
bureaucracy is empowered to do and if it will take on the real bad
actors who got us into this mess. This CFPB is a perfect example of how
the ``one size fits all'' of this hurried legislation will have
unintended consequences for those who did not contribute to the
financial meltdown. Treating community banks like Goldman Sachs is a
mistake, and one we cannot afford to make.
If we are aware of these unintended consequences now, why won't we
correct them now? Why do my colleagues want to bring these unintended
consequences in the bill closer to being codified into law on the
Senate floor? If you want to have some real consumer protection, I
purchased several homes, as we have moved around recently, and I can
tell you that the best thing we can do for consumer protection is to
repeal all the laws that require a stack of paper that high that you
are supposed to sign saying you have read it. Have consumer protection
with a very simple one- or two-page form. I have talked about that
before. That is simple consumer protection. Let people know, for people
who are not adequately informed on financial situations.
The one thing we found out when I joined with the chairman of the
Banking Committee, Senator Dodd, in pushing home foreclosure
counseling, as we worked with agencies that were counseling people who
were losing their homes through foreclosure, is these agencies were
crying out and saying: We need financial counseling for these people
before they get into homes. That is the best way to avoid foreclosure.
Let us go back to that. It sounds simple, but it happens to be the
thing that would work.
I doubt my Democratic colleagues intend to pass a bill that will hurt
families every time they turn on the light switch or try to heat their
home, but that is what this bill in its current form will do, once
again, trying to go for the easy one-size-fits-all approach to entities
that it does not fit in any way. The $592 trillion over-the-counter
derivatives market needs stronger rules of transparency on the things
that are run through Wall Street. Some of these derivatives traded in
this market played a significant role in the recent crisis, through
products such as credit default swaps.
I have called these derivatives computer game derivatives. They were
so complex. They were something somebody thought up and ran through a
computer. You know what. Our regulators fell down on the job. They
didn't look at these derivatives. They were not transparent. They were
not regulated. Some of that is the fault of the regulators, who are now
scrambling to come in and file suits. They are supposed to regulate and
make sure that these products that are complicated are fully
transparent and related to reality and go to those who are at least
sophisticated. You can't guarantee that they win or lose, but at least
know what they are; make sure they are clearly understood by everybody;
get the rating agencies to judge them independently, not as captured
entities for the people who issue them and will pay the rating agency
if they get the rating they want.
But there is an important distinction between the computer game
derivatives or the very sophisticated derivatives that are traded on
Wall Street. You can make good financial arguments for them, so long as
they are traded on an exchange--the Wall Street derivatives, so long as
somebody is looking at them to make sure there is some integrity in
them. But not all derivative contracts pose systemic risk. As a matter
of fact, commercial contracts initiated by energy companies, utilities,
and the agricultural industry are used to manage risks associated with
their daily commercial operation, from cost fluctuations in materials
and commodities to foreign currencies used in international business.
These end users, these commodity hedgers, make up less than 3 percent
of the market.
I don't know of any farmer or any farm agency or any utility who
caused the crisis on Wall Street by entering into a long-term supply-
and-purchase contract. There is no reason to make this be traded on an
exchange when you have an ongoing partner; no reason to acquire
collateral to be posted. The end users, as they are called, do so in
order to plan for future pricing so they can provide the least
expensive goods or services to the consumer as possible. Costly margin
requirements for the end users will be directly passed on to their
families. Guess who pays for that? That is us. That is us. Because all
Americans will see their costs go up whenever they turn on their
lights, put food on their table, and use any form of transportation--
whether it be cars, trucks, buses, or airplanes. This is a problem that
must be fixed.
For the purpose of my time on the floor, I won't go into each and
every problem I have heard about in the bill. I have only been given
minutes to speak rather than hours. But the current concerns I have
outlined are critical. The unintended consequences on which I have
shined a light must be stopped. Americans do not want another massive
flawed bill that will kill more jobs, make it harder to get a home or
car loan, or make it more expensive to heat their homes.
Yes, Americans are rightfully angry and frustrated about the bad
actors on Wall Street who caused the financial crisis, costing many
Americans their jobs and even their homes. Americans are rightfully
angry and frustrated about the trillions of dollars the government has
committed to rescuing the financial industry when so many of them are
still struggling to pay their bills. These are the people from whom I
am hearing. I agree with the majority of Americans who believe it is
unfair for bad actors who caused this financial crisis to get bailed
out with their tax dollars--with our tax dollars--when there is no
bailout for families who lost their savings or jobs. I agree with the
majority of Americans who are rightly skeptical of the Democrats' bill
and the rush the majority wants to pass it in. It is no surprise that
my constituents are skeptical. After all, it is the few bad actors on
Wall Street who caused the financial crisis who are now cheerleading
this so-called reform bill.
I was stunned when I read that the head of the investment bank
Goldman Sachs, Mr. Blankfein, said, ``The biggest beneficiary of reform
is Wall Street itself.'' The head of Goldman Sachs said that the
biggest beneficiary of this reform bill is Wall Street. Did you hear
that, everybody who has been looking at Goldman Sachs? I also
understand that Citigroup now supports
[[Page S2739]]
this measure. They are huge Wall Street players who have had access to
the White House and the majority leaders of both Houses to push for all
the good things this bill does for them. They are the ones who have
been in there. They are the major contributors. Look where the money
goes. If you want to say: OK, who is looking for contributions, look at
that and see what is in the bill.
This bill clobbers Main Street and it glances off of Wall Street.
Instead of helping Wall Street, I want to ensure a bill is passed that
will protect Main Street. While Wall Street may be cheering this bill,
I am here to ensure this bill represents Main Street concerns. What I
am hearing from Main Street, they are concerned, and it doesn't address
their concerns, it puts more burdens on them. I urge you, I ask you to
listen to the folks at home.
We need to hold Wall Street accountable for the havoc wreaked on Main
Street and enact reform to prevent another financial crisis. This bill
is too large, too costly for consumers, and will kill job creation at a
time when working Americans need to be left to do what they do best;
that is, succeed.
My friends on the other side of the aisle can hold vote after vote,
but until this bill fixes the problems and I can be sure it is not just
Goldman Sachs, Citigroup, and the rest of Wall Street that will
benefit, I will continue to force Democrats to listen to the concerns
of Main Street America.
I urge my colleagues to turn up the hearing and turn down the volume
and listen to what the people in your States are saying.
I yield the floor and suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The assistant editor of the Daily Digest proceeded to call the roll.
Mr. REED. I ask unanimous consent that the order for the quorum call
be rescinded.
The PRESIDING OFFICER (Mr. Merkley). Without objection, it is so
ordered.
Mr. REED. Mr. President, yesterday we and the nation heard from
Goldman Sachs executives indicating they had no regrets about the
financial crisis, a crisis that has left 8.5 million people without
jobs and stripped billions of dollars of retirement savings from
working Americans. In fact, the Pew Institute released a study that
indicates the financial crisis and recession have already cost U.S.
households $100,000, on average, in lost wealth and income. That is a
huge blow to the families who are struggling to pay for their
retirement, to pay for their children's education, and provide a better
life for themselves and their children.
We have seen, in the last five quarters, because of this financial
crisis associated with and connected with the recession, $648 billion
less in gross domestic product than was projected initially--$648
billion of productive enterprises. The cost of this crisis is something
we all should not only recognize but commit to preventing in the
future. We also should calculate the cost not just in terms of gross
domestic product and how well executives on Wall Street are doing, who
are doing pretty well, but how well the average family in this country
is doing, and how well they will do in the future. We must consider how
much in terms of their wealth has been diminished, if not lost, in
rebuilding our economy.
One of the major functions of any financial sector in any part of the
world is to efficiently allocate capital to grow domestic product--not
to reduce it--to invest in productive enterprise and employ people. The
financial sector shouldn't undercut companies or force them to lay off
workers. All of this, in the last few months, I think has represented a
failure in that basic function of making sure capital is accumulated
and then efficiently allocated to productive means.
So Wall Street, I think, has a lot to regret about their role, and we
have a lot to do to improve the situation, to ensure the regulatory
structure is in place, and to set clear rules for the conduct of
financial business that will protect families, protect consumers, and
protect the taxpayers.
This is the third time our colleagues on the other side have blocked
such efforts to begin the discussion. We recognize this is a complex
topic, with many different parts: credit rating agencies, capital
requirements, financial institutions, derivatives. You can go on and on
and on. So anyone who implies they have all the wisdom, I think, will
find themselves sadly mistaken. But we have to get on with this bill
because unless we bring the bill to the floor, we cannot begin to, in
the open, talk about those policy issues that people can disagree on--
people have different approaches--and ultimately resolve this and
create a better regulatory structure and a stronger foundation for our
economy.
But in the last several days, this has been, again, ``say no and the
problem might go away.'' Well, if they continue to say no, the problem
will get worse. We are looking across the globe today at a crisis in
Europe because of Greek sovereign debt. It is spiraling. Already,
Spanish debt has been downgraded. If we think we are immune from these
global currents, both good and bad, we are mistaken. If we do not put
in a stronger structure of regulation, the next crisis might not be
starting on Wall Street, but the impact on Main Street could be the
same, and it could be just as devastating.
We have to look forward. We have to move on. The notion that we have
all the time in the world and we can sort of nonchalantly go about our
business--or in some cases, if it is a political judgment that it is
better to resist--is not serving the people of this Nation well.
We recognize there are principle differences. Let's resolve them, as
we do on the floor through debate, through discussion, and through a
vote, and let's move on. We have a lot of work to do. The underlying
bill Senator Dodd has brought to the floor already incorporates so many
of these disparate views, and I think in a very sensible way.
Let me, for the record, recall that legislation like this has been
pending for months and months and months. The Presiding Officer will
recall--because he participated with me in the first markup last
November--Senator Dodd brought a bill to the committee, opened it up to
amendment, and it was quite clear there was going to be no serious
discussion. In fact, our colleagues on the other side said: We need
more time. We want to participate with you. I think it was done with
great sincerity. Senator Dodd entertained those proposals for months.
From November until a few weeks ago, we were working collaboratively
and creatively to try to bridge our gaps and bring a bill to the floor.
Well, finally--and somewhat in exacerbation--Senator Dodd concluded
this was leading nowhere, except to more delay, if not denial of the
great problem we face. So we had a committee markup. Again, it was an
opportunity for our colleagues on the other side to bring forth their
proposals, their ideas, in a markup in which we would be able to
consider their views, vote on them, and then move that bill to the
floor. But it was a perfunctory session. They had concluded that, no,
they were not quite yet ready to offer their proposals, their ideas,
and to engage in the business of legislation.
So now the bill is before us, months after we started this process,
months after we have entertained and incorporated proposals that have
been made by our colleagues because they are very good proposals. It
was Senator Corker and Senator Warner--who have done an outstanding
job--who structured the whole issue of resolution, that there would be
an upfront fund so that financial institutions--not taxpayers--would
pay for the failure of a financial institution.
Yet when that bill was brought to the floor--or we attempted to do
it--that provision, that bipartisan provision was singled out for,
shall we say, criticism, if not ridicule, as a perpetual bailout bill.
That was a misrepresentation of the bill and it, frankly, contradicted
the whole effort, the whole bipartisan effort to come up with something
that both sides could support.
But this bill incorporates so many different ideas and aspects that
have been shared. In fact, it was interesting, in the lead up to this
floor consideration, so many times on both sides of the aisle, people
would say, routinely: well, we agree on 80 percent of the bill. I think
if you have 80 percent of the bill agreed to, at least conceptually,
you are probably ready to bring the bill up for debate and to vote. Yet
again, the Republican side refuses to do that.
[[Page S2740]]
They are, I think, assuming, I guess, they have a lot of time. But as
you look around the globe, at the crises in Europe, at the stock market
falling dramatically yesterday because of Europe, I think we have to
move aggressively to protect American families, and that means getting
the bill on the floor and voting for it.
This bill will make changes that are urgently necessary. Again, the
issue of too big to fail--through the extraordinary effort, painstaking
effort, the hours of discussions by Senator Warner and Senator Corker,
there was a proposal for resolution that effectively ends too big to
fail. In fact, Sheila Bair, who is the Chairwoman of the FDIC and was
appointed by President Bush, says it virtually eliminates the
possibility of a taxpayer bailout. So that is part of it. Strengthening
consumer protection. There has been, I think, an unfortunate
generalization that consumer protections are bad for business. Frankly,
we should have discovered in the last several months that good consumer
protections are very good for business. Many of those consumer laws--
which would have protected people seeking mortgages--which were ignored
or exempted would have, I think, improved dramatically the mortgage
situation. It would have improved business. It would have made that
overriding issue of efficient allocation of capital much easier.
But when you have very little protections for consumers, they are at
the mercy of people who will exploit them for a quick buck. And that is
what happened. Mortgages were given to people who were not qualified.
Why? Because no one was watching out for them. But not only that, the
individual issuing the mortgage did not have, as they say, any skin in
the game because they simply sent it in to the big securitization
process. Someone got a fee for securitizing it. Someone wrapped it up
into a big mortgage-backed security. Someone else wrapped it up into a
collateralized debt obligation, which is a collection of securities.
Then someone else wrapped that up into a synthetic collateralized debt
obligation and sold it off. Not a lot of efficient allocation of
capital for productive means, but a lot of fees for investment bankers,
securitizers, and mortgage brokers. At the very beginning, good
consumer protections would have been an effective way to mitigate some
of that damage. They are in this bill.
We are attempting to eliminate huge gaps and loopholes in financial
regulation. Our regulatory scheme has grown up over many years, in
fact, through the life of this country. So we have a national bank
authority that was created in the 1860s. We have an Office of Thrift
Supervision that was created many years later because of thrift
institutions. We have the FDIC, which was created in the 1930s by
Franklin Roosevelt as a result of the Depression and the need to insure
deposits. We have the Federal Reserve System that monitors local banks
and large banks that was created in the Wilson administration.
All of them have a little different piece of the action, and all of
them have been routinely used in what is termed regulatory arbitrage,
to move to the most favorable position for your business, which may not
be favorable to the overall economy. Some of the big mortgage lenders
that ultimately collapsed started off being regulated by the Office of
the Comptroller of the Currency, and then they decided they would have
a better deal at OTS. Frankly, if they had an opportunity--if they were
still with us--they would be looking elsewhere. Hit and run, I think,
was probably the business plan. We have to stop that.
This bill takes a strong step forward, consolidating that
supervision, by consolidating the Office of the Comptroller of the
Currency and the Office of Thrift Supervision, by limiting the
supervision of the Federal Reserve over a countless number of small
banks, and concentrating their efforts at the big institutions, where
their expertise and their focus should make a difference.
This is a huge improvement over what the present system is. Yet our
colleagues are not recognizing the need to improve and the need to move
forward. We have been engaged, through Senator Lincoln and Senator
Dodd, with derivatives legislation, which, for the first time,
recognizes and regulates those derivatives. There was a great debate
here in the 1990s, and through that debate derivatives were left
unregulated. Today we have to recognize we have to put them back under
regulatory supervision.
The legislation creates the steps, the architecture, which will go a
long way to prevent some of the problems we have seen. It requires
reporting all derivative transactions to a data repository which the
regulators will have access to so they can see firsthand in real time
what is happening out there. Is there a big buildup in Greek debt? Are
there huge positions in credit default swaps on Greek bonds? They can
quickly get a macro sense of what is happening.
Then, with limited exceptions, all derivatives have to be cleared on
a clearing platform. That takes away the bilateral nature of
transactions. Someone says: I will sell you insurance on this interest
rate for a fee. You give me the fee, et cetera. That is bilateral. If
one of these parties is unable to carry out its obligations, the
transaction fails. In a clearing platform, there is a central party
that assumes the risk of one of the parties failing. It is a
mutualization, really, of risk, and it is a step forward.
But we have to step even farther than that. We have to push as many
of these trades onto a trading platform, not just clearing it and
holding collateral, but actually pricing it. Because of the complexity
of some of these products, unless there is a market, no one knows the
real value. On a trading platform, there is a market value and people
can value it because basically if someone will buy it, that is the
value. So we have to do that. This legislation goes a long way to doing
that.
With respect to credit rating agencies, one of the great failures is
the credit rating agencies. As to all of these exotic mortgage products
that collapsed in value, most of them were rated investment grade--AA,
AAA, according to whatever the rating is--and yet they failed. Part of
it was because of the way credit rating agencies operate.
Senator Levin conducted recently some very good hearings on this
issue. The familiarity between the investment bank that is bringing the
product to the street and the raters, the interconnectedness, the
failure to have the appropriate checks on the models that raters were
using, an independent risk analysis within the rating agency that is
going to look at these models not for the benefit of who is paying for
it but for the propriety and correctness of the model. That is in the
legislation.
We have done something else too: We have inserted language that would
allow someone who has invested their savings through a pension plan or
other method to go to court and make the case that they should find out
what happened within the rating agency with respect to the poorly rated
investment that caused them to lose their savings. Today, these cases
are routinely dismissed before anyone can question the rating agency.
Our legislation would allow them to get beyond the pleadings stage. But
it would also give the rating agencies an affirmative defense. They
would have to factually check their models. They would have to actually
look at some of these mortgages. Frankly, this might be 20/20
hindsight, but if someone drove out to one of those counties in Florida
where there were all of these exotic mortgages but no one seemed to be
living there and the communities were deteriorating, I think they would
pretty quickly check their rating. That appears not to have been done.
For the first time, hedge funds are regulated. They would have to
register with the SEC and be subject to registration, notifying the SEC
of the size of their pool and other basic information.
Well, we have had months of opportunities to share additional
thoughts and work together to amend the bill in committee, which was
not done, but, more importantly, to begin today--in fact, we should
have begun last week--this issue of finally passing a Senate bill that
responds to the crisis we saw; that builds a stronger foundation of
financial expansion; that protects consumers and taxpayers as well as
leads to the increase in the wealth of families, not to the dramatic
decrease and decline we have witnessed because of some of these forces
at work today in the marketplace on Wall Street, which still have to be
addressed.
[[Page S2741]]
There will be parts of the proposals that come up that will be an
attempt to weaken some of these provisions, particularly with respect
to consumer protection. Again, I think it flows from the false logic
that if it is good for consumers, it is bad for business. Actually, I
always thought, in smalltown business, the customer is always right.
You believed the customer, made sure you provided value for your
product, and made sure he or she would come back because they were
happy and satisfied. Apparently, that old-fashioned rule has been
tossed out, but I think that old-fashioned rule has to be
reestablished.
We have seen, as a way to deflect attention from the need to reform
and the need to move this legislation, misrepresentations about the
bill. I mentioned one: It is a bailout bill. Well, I think that has
been dropped because it was transparently misleading. Indeed, this
bailout mechanism was a bipartisan product of two of our distinguished
colleagues, Senator Warner and Senator Corker. Now we are at the old
standby: It is going to hurt business. I will tell my colleagues what
has hurt business, and that is the behavior on Wall Street.
I can recall that several years ago there was a study by the McKinsey
Company that said that if we did not loosen further the already, I
think, lax rules, we would lose all the securities business; all of
Wall Street would go to England or other places; we would lose
thousands of jobs. Guess what. They have lost, unfortunately, thousands
of jobs there. And it wasn't because regulation was too stringent; it
was because it was too lax.
Again, if there is any case to be made for what hurts business, it is
irrational allocation of capital; lax rules with respect to consumers;
a market driven not by value but by compensation, not by long-term
growth but by short-term profit. That is what has cost every family in
America $100,000.
So if we move purposely and with the input of our colleagues, which
we have already accepted, we can establish a framework where business
will begin to grow again. So I reject the argument that what we are
doing will hurt business. In fact, I think this uncertainty of whether
we will have this reform or that reform continues to, at least to a
degree, impede capital formation and to impede investments in the
country. When there are clear rules of the road, then the economy will
again begin to pick up, as it is beginning to pick up for other
reasons.
If we don't take up this bill, work on it, and pass good legislation,
who wins? Well, I will tell my colleagues who wins. It is the big banks
that have survived this crisis today, that are reporting record
profits. What are they making their money on? Giving loans to small
business men and women across America? Investing in municipalities? No.
They are making huge profits in trading--betting, in some respects, on
how the economy is going to do. Well, we need a situation in which
capital is dedicated to growth and to investment and productivity.
The speculators will continue to reap billions of dollars of profits.
I am sure there are several clever people who are doing quite well over
the demise of sovereign wealth in Greece, who have taken short
positions on Greek bonds and are making a lot of money. That is not
helping us, it is not helping the country, and indeed it is not helping
our trading partners across the globe. That, unchecked, will continue.
The opaque and unregulated market that I just referred to in
derivatives, a $600 trillion notional market. When you talk to people
about clearing of derivatives, it is not billions, no; it is trillions
of dollars. That market is unregulated, and if it goes the wrong way
quickly, the consequences can be devastating. We have seen that with
the mortgage crisis.
So we have to move. We have to move at every level, not just the big
banks, but we have to provide appropriate regulation for people in
terms of the mortgage industry so those abuses in mortgages will be
corrected. We have to go ahead and look at payday lenders who are
charging 900 percent interest, who are stripping people of their hard-
won resources. We have to look at the credit card companies. We have
passed legislation, but we have to look at what they are doing. If
those people--the payday lenders and the mortgage brokers--can continue
to operate with impunity, the bankers win. Who loses? Well, consumers
lose--paying the excessive rates, seeing their homes devalued, all of
that.
I think we have to stand up and start the work of legislating. The
status quo is no longer affordable, and I think the notion that we will
never see another crisis is undercut by looking around. If there are
not today some steady hands at the tiller in Europe in terms of the
European community and their financial arrangements, the cascading
effect of Greece to Spain to Ireland, et cetera, could be another
problem we have to deal with.
We have lots of work to do, and the longer we delay, the more we are
neglecting the real needs of our constituents. I urge that on the next
vote we get down to business.
Mr. President, I note the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant bill clerk proceeded to call the roll.
Mr. NELSON of Florida. Mr. President, I ask unanimous consent that
the order for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Franken). Without objection, it is so
ordered.
Mr. NELSON of Florida. Mr. President, I ask unanimous consent to
speak on the motion to proceed for up to 30 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NELSON of Florida. Mr. President, we have now voted three times--
once on Monday, the second time on Tuesday, and a third time today--
merely trying to get to the Wall Street financial reform bill. Each
time we have been blocked from being able to proceed because we can't
muster 60 votes to cut off the debate to get to the bill.
The Republican leadership remains united in opposition to bringing up
the bill, at a time in which we have just seen a display of
extraordinarily intense, shall we say, arrogance on the part of
executives at a major Wall Street firm in the way they conducted
themselves in front of Senator Carl Levin's investigation subcommittee
yesterday in a hearing. It is rather extraordinary that the Republican
leadership is not letting us come up with the bill so we can get it out
here, debate it, and amend it.
This Senator has a number of amendments that I would like to offer in
order to, as we say, perfect the Banking Committee's bill. But we can't
even get to that.
I don't know what the thinking of the Republican leadership is that
they would do this, especially in light of the fact that the American
people want some changes with the way investments are handled on Wall
Street. They want to see some movement. They want to see some action.
So when we attempt to bring up a comprehensive bill to reform Wall
Street and the reckless practices that nearly brought down the global
economy, we are prevented from having a free and open debate on the
bill and we are prevented from perfecting that bill by adopting
amendments.
I guess the Republican leadership's alternative to this, since we
can't do it out here in the normal legislative process, is to do this
in the backroom, behind closed doors, outside of the sunshine. They
want to have a deal cut before it comes to the floor in order to avoid
an open and free debate to reform the financial system.
Why do they want to do this? Well, it seems to me common sense would
tell us it is because they want to water down the bill. They want to
water it down to the point where Wall Street--where we are trying to
tighten the screws in order to better regulate them and prevent another
near financial meltdown such as we had--will sign off on a final
compromise, and that is why they are blocking the motion to proceed to
get to the bill.
Does this tactic sound familiar? It is the exact kind of backroom
wheeling and dealing the American people have come to resent. The only
difference between now and decades ago is that in the old days those
deals were cut in smoke-filled backrooms. At least now there is not a
lot of tobacco that is being consumed in those backrooms. But what is
similar is that the special interests are still calling the shots.
So my plea is that we break this filibuster. Let's get a bill in
front of the
[[Page S2742]]
Senate so it can be in the full light and the glare of the headlights
and the cameras. Let's get it in front of the American people and then
let's let the legislative process work its will as we amend the bill.
Listen to some of the arguments the Republican leadership, over and
over and over, has used. They have said the Banking Committee bill
guarantees future bailouts. Well, that is not true. It might be a good
sound bite, but it is simply untrue. The Banking Committee bill puts an
end to the promise of future bailouts.
The Republican leadership attacks the $50 billion resolution fund
created in the bill. This Senator is not convinced we need that fund,
and I am certainly not convinced it is going to survive the debate on
the floor, but we ought to have some honest debate about that
particular provision. The fund is paid for in the Banking Committee
bill directly from the coffers of the largest banks. The fund acts, in
the way it is devised by the Banking Committee, as a buffer to protect
taxpayers so that if there is another breakup, another potential
meltdown, the fund is there--already funded by the banks--so the
taxpayers don't have to go in and do the rescue operation such as we
have done in the past.
Under the Banking Committee bill, the fund can only be used to
liquidate a financial institution, to break it up. In short, it is a
funeral tax. It is a funeral tax on the largest banks, not the
taxpayers. The $50 billion fund in that Banking Committee bill only
gets tapped to pay for their funeral expenses.
So here we are. The American people hear the Republican leadership
talking about all this, and it is a red herring. The American people
want action, and here we are stuck in procedural gridlock. Guess who
the only real winners are. As we sit here, trying to break a filibuster
on Monday, again Tuesday, and again today, shortly after noon, the only
winners are the Wall Street bankers who have mastered the art of using
the broken financial regulatory system to almost bring down the
country's finances by deceiving investors and, ultimately, in order to
save our system, milking the American taxpayer.
One of the major beneficiaries of the current system is the credit
rating agencies. This is a subject matter the Senator from Minnesota--
who now sits in the Presiding Officer's chair--has some familiarity
with and on which he will be offering an amendment. This Senator is
going to join him in that amendment. Credit rating agencies--something
that normally is down in the weeds because it is so complicated--are
private companies that assess the creditworthiness of various types of
debt instruments, such as bonds and mortgage-backed securities, as well
as the issuers--rating the issuers of those instruments.
They typically assign a letter grade that is designed to convey the
risk of default, and there are three major credit rating agencies on
Wall Street: There is Moody's, there is Standard & Poor's, and there is
Fitch Ratings. For most of the last century, the rating agencies were
paid by investors who subscribed to their services. Why did they do
that? Because it made sense. Investors were the ones who were investing
their money and they were the consumers of the ratings. They wanted the
best information regarding the risk that they would have in that
investment.
Well, unfortunately, in the 1970s, all this changed and the business
model flipped. The rating agencies began charging the issuers of the
bonds, not the people who were seeking to know if it was a good credit
risk in order to invest their money. It was reversed. It was the very
issuers of the credit, rather than the investors, who were charging for
their services. So beginning in the 1970s, rating agencies began to be
paid by the very same people who had a vested interest in receiving a
high investment grade.
Think about that. The very issuers of the bonds who wanted people to
invest their money in these bonds needed a high credit rating on that
bond in order to get people to invest. If they could be rated at AAA,
as opposed to B, people were much more willing to put their money into
this instrument.
Well, talk about a conflict of interest. Now the issuers of the
bonds, who have an interest in a high AAA rating, go out and hire the
services of the credit rating agencies.
Did you ever hear the old adage, ``He who pays the piper calls the
tune''? Well, those who were going to pay the piper were going to call
what that tune was. Do you think if you are paying the bill to the
credit rating agency that you have a better chance of getting a AAA
rating than a lower rating? Of course you do. That is a walking
conflict of interest.
How could we allow this unavoidable conflict of interest to exist and
allow it to exist since the 1970s is unfathomable and unbelievable. Yet
that is the way it is. Credit rating agencies failed miserably in the
runup to the financial crisis, and it sure looks like--looking
backward--they put profits ahead of professionalism. They failed to
detect the severe deterioration in lending standards that began in the
late 1990s. They failed to review all available information about the
loans on which the securities they were rating were based. The conflict
of interest in their business model gave the rating agencies an
enormous incentive to overlook problems in mortgage-backed security
markets.
In 2006, Congress passed the Credit Rating Agency Reform Act. I put
that in quotes, the Credit Rating Agency ``Reform'' Act. The bill was
written in the Senate by the Republican leadership, and it had the full
sign-off of the credit rating industry. Here is what the bill did--
2006. It standardized the process for registering rating agencies, and
it gave the SEC some new oversight powers over rating agencies. At the
same time, however, this so-called reform act prohibited the SEC from
regulating ``the substance of credit ratings or the procedures and
methodologies by which any rating agency determines credit ratings.''
It gutted the ability to double-check credit rating agencies.
Furthermore, to add insult to injury, the act also clarified that it
creates no private right of action. So if a party invested in a
particular financial instrument because that credit rating was high,
and it turned out to be a dog and they lost lots of money, they had no
private right of action through the courts.
No wonder the industry supported that legislation back in 2006. The
bill, written by the Republican leadership, took away any power of
Federal regulators that they might have had to crack down on the
baseless credit ratings that were fueling the boom in subprime lending.
To make matters worse, the bill made it clear it was not empowering the
private sector to hold the credit rating agencies liable for their
ratings.
The bill we hope one day, at some hour, to get to the floor so we can
start working on it does some important things to improve credit rating
agencies. It requires these agencies to disclose their methodologies
and their ratings track record. Wouldn't you think you would want to
know their track record if you are going to invest a lot of money based
on their triple-A rating? It requires agencies to consider information
in their ratings that comes from outside sources. But when it comes to
addressing the fundamental conflict of interest in the credit rating
agency business model, this bill coming out on the Senate floor falls
short.
It would require the rating agencies to separate ratings activities
from their sales and marketing activities, and that is like saying my
left arm has no idea what my right arm is doing. In reality, it is the
brain in your head that controls both the right arm and the left arm,
and no one is proposing to chop off the head. So we have to deal with
this conflict of interest, and we are going to. Here is what we are
going to do.
We are going to do this with the help of the Presiding Officer of the
Senate. We are going to offer an amendment that would establish a
clearinghouse to randomly assign rating assignments with rating
issuers. As simple as that, we can end the conflict of interest in the
credit rating industry if, randomly, it is going to be assigned among
companies that rate issuers of financial instruments.
Second, this Senator is going to offer an amendment to require the
rating agencies to monitor, to review, and to update their credit
ratings after the initial issuance of their credit rating so it does
not become stale. They are going to have to continue to look at it,
[[Page S2743]]
to review it, to update it, and to publish it. The rating agency should
not be able to walk away from a rating after it has been issued. It is
going to be fresh. The rating agencies ought to conduct continued
surveillance of these securities and update them along the line.
The credit rating agency reform is just one of the many areas the
Senate needs to debate. But as long as the Republican leadership
continues to prevent the bill from coming to the floor, this broken
system remains in place. The Wall Street bankers win and the American
public loses.
Let me give some other examples. Remember the name ``AIG''? It was
this Goliath organization that started out as an insurance company. It
became this huge financial institution. The core product of this
company was its insurance. It was deemed too big to fail at the time of
the near meltdown of our financial system. This was back in the fall of
2008.
It was deemed that when we passed the Troubled Assets Relief Program,
TARP, that money had to go into this big, Goliath organization, all the
way to the tune of about $80 billion of taxpayer money, as I last
recall. It may be a lot more than that.
Guess what this did. They had already issued, in effect, an insurance
policy that had a fancy name. It was called a credit default swap. It
was an insurance policy against some of the companies if their
investments went bad. That is not bad. But what happened was, when the
American taxpayer dollars went in to save AIG, AIG took those taxpayer
dollars and turned around and paid off those insurance policies, 100
cents on the dollar. Is that fair, when folks like some of these folks
who have been in the news recently, such as Goldman Sachs, got paid off
to the tune of $13 billion instead of going in and negotiating a lower
payoff since it was taxpayer money? We ought to change that, and I
think we will if we can ever get to the bill, if the Republican
leadership will ever allow us to get to the bill.
Let's take another example. What about the same insurance policies
called credit default swaps? Let's say the same set of circumstances
with AIG occurred, but AIG had not been bailed out by the American
taxpayer and instead had gone into bankruptcy. AIG, in this
hypothetical example, had a lot of creditors that would get in line
under the bankruptcy law to get whatever they could. But, oh, no; these
insurance policies called credit default swaps would be exempt from the
bankruptcy laws. They would get paid off in full first instead of
having to get in line with all the other creditors under the bankruptcy
law.
That is not right. This Senator is going to have an amendment to the
Banking Committee's bill to correct that. There is no reason those
insurance policies should be at the head of the line of everybody else
in the case of bankruptcy.
Are we pleased about the executive compensation of some of these
folks who have nearly caused the financial collapse of our country?
When taxpayer money, through the TARP system, was bailing out these
institutions--whether it was directly, such as into AIG, or directly
into a place such as Bank of America, or whether it was indirectly
coming through these credit default swaps that were getting paid off
100 cents on the dollar that I just described, through the conduit of
AIG--what was happening to the compensation of those executives? Were
they still getting bonuses? Were they still getting high salaries? Were
they having to tighten up their belts when, in fact, their financial
institutions were kept alive by the American taxpayer bailing them out?
No, we didn't see that tightening of the belt. We did not see any
evidence of humility. We didn't see any evidence of appreciation. But,
instead, we saw arrogance displayed through huge bonuses that were
being given with a total disregard for the American people's sacrifice,
of putting their hard-earned taxpayer dollars in to save those
financial institutions.
Mr. President, I think you will see once we get out here on the floor
that we are, in fact, going to get a number of amendments, including
the amendment of this Senator, on a limitation--not on executive
compensation but a limitation on the ability to deduct from their tax
liability excessive executive compensation, and a tie of that excessive
executive compensation to, in fact, performance for that company that
pays their salary. We are going to see that. Sooner or later, we, in
fact, are going to get to the bill, even though the Republican
leadership continues to try to obstruct and delay because sooner or
later the American people are going to have their way. They clearly
want Wall Street financial reform.
I yield the floor.
The PRESIDING OFFICER. The Senator from Texas.
Mrs. HUTCHISON. Mr. President, I rise today to speak on the financial
regulatory reform, and particularly the effect of the Dodd proposal
that came out of the Banking Committee on which I sit, that we have
been voting on cloture on for this whole week.
I heard Senators from the other side talk about delay; the
Republicans are delaying this bill. I have heard them for the last week
say it is because we are siding with Wall Street, Republicans are
siding with Wall Street.
That is odd to me because it is the Wall Street big banks that are
for this bill. It is Citigroup, it is Goldman Sachs that are in support
of this bill. They are publicly supporting the bill.
It is the community banks that are flooding my office and the offices
of my colleagues. It is the community banks that had nothing to do with
the financial meltdown that are hugely concerned with this bill.
That is the issue. The groups that are opposing Dodd's bill are the
National Federation of Independent Businesses, the small businesses of
our country; the U.S. Chamber of Commerce; Americans for Tax Reform;
the Americans for Limited Government; Freedom Works; the National
Taxpayer Union; the United States Automobile Association.
We have had auto dealers in our offices all week who are very
concerned about not being able to get credit from the little banks and
the ability to finance the buying of automobiles. It is the Military
Officers Association that has concerns with this bill; the National
Council of Farmer Cooperatives; the Farm Credit Council; the National
Association of Home Builders; the Fertilizer Institute.
This is a bill that is going to affect our economy. So many of the
groups I have named are the groups that are providing jobs in our
country that we want to encourage to create more jobs, not discourage
in a time such as this. So, yes, Republicans have been trying to have
input on this bill. There has not been any Republican input at all. If
we have learned one thing as Republicans, it is that we know what it is
like to be completely shut out. We were completely shut out of the
health care debate. We had amendments offered day after day after day.
Oh, the process worked. Not one Republican amendment was passed. Not
one. Neither was there one Republican vote in the House or Senate on
the health care bill. So we have had that experience. So this time,
because we see the dangers in the Dodd bill to our economy and the
small businesses and the small banks, we are saying we are not going to
let this bill go to the floor if we have the power to stop it until
there is Republican input.
The biggest failure in the bill is that it still allows taxpayer
bailouts. That is wrong. That is why Republicans are voting not to
bring it up yet, because we are trying to change the language in the
bill before it comes to the floor to assure that the taxpayers will not
have the responsibility to bail out big financial institutions that
took gambles with other peoples' money. That is the holdup.
This bill is not a bill that is favored by community and little
banks. It is favored by the big banks. It is favored by Goldman Sachs
and Citigroup. So let's be clear about that. As we consider the bill
before us, the Dodd bill, it should focus on the gaps and holes in
regulations that led to our nation's financial crisis from which we
have not yet recovered, because there are still millions of people who
are unemployed because of the financial crisis.
We must end too big to fail. We must end taxpayer bailouts. That is
not done in this bill, and that is why Republicans are saying: Stop
this bill from coming to the floor until it does at least that one
major thing; that is, to be clear, that we stop too big to fail in this
country.
[[Page S2744]]
Putting the big banks in one level of operation and scrutiny and one
level of access to the Fed, which this bill does, the Fed keeps its
scrutiny of every bank company holding company of $50 billion or more
in assets. That is it. All of the other banks in our system throughout
our country are not allowed access to the Federal Reserve. They cannot
be members of the Federal Reserve under the Dodd bill. That is the
major reason I am not supporting this bill.
In fact, I have an amendment, if this bill comes to the floor, I am
going to offer that says the law today will prevail, that is, that
community banks may join the Fed, the State-chartered banks may join
the Fed, because if you do not do that, you are going to give the
impression that the $50-billion-and-above banks are in one category,
that they are going to be taxpayer protected. That means they are going
to be able to give lower rates in competition with the community banks
because it will be perceived that the risk is less.
That is not what we ought to be doing. So I am going to offer an
amendment to the Dodd bill which would eliminate that part of the Dodd
bill that takes away Fed access to the community banks. The other
reason it is important is that we have regional Fed banks. The reason
it was set up that way is so that throughout the country the Federal
Reserve would be able to make monetary policy with input, with input
from Kansas City, and Dallas, and Houston, and San Antonio, and Los
Angeles, and San Francisco, and San Diego, and Minnesota, and
Wisconsin.
That was the concept of the regional Fed bank. Let me give you an
example. The Federal Reserve Bank of Dallas is headed by Richard
Fisher, who came to see me last week. He said: I would go from
regulating about $70 billion in bank assets, with all the community
bank members that we have in the Dallas Regional Fed, to 3.
If the Fed is going to listen in Washington, when they are making the
monetary policy, to the Kansas City Fed chief who completely agrees
that we need to keep access for State and community banks to the Fed,
for their information, as well as the level playing field. So that will
be my amendment.
Community banks did not cause the financial meltdown. In fact, they
provided lending and depository services to families and small
businesses across Texas and across our country. Even in the hard times
they were mostly the ones that helped small business get their
inventory loans and the help they needed for liquidity.
A lot of people I talked to in my home State, when I visit the small
businesses and the community, felt as though nobody was lending. The
big banks certainly were not. So the community banks are continuing to
make credit available, much more than the big banks, so businesses and
consumers can invest and create jobs that will lift our Nation into a
recovery.
Do not talk to me about recovery when it is still a jobless--that is
an oxymoron--a jobless recovery. There are millions of people out there
unemployed. Is that a recovery? No. ``Jobless recovery'' should be out
of our lexicon. That is wrong. If we are going to build jobs in this
country, it is going to be through small businesses. The big businesses
are not hiring. Do you know why the stock market is up right now? It is
because the big businesses are not hiring. They have lowered their
costs. Yes, they are more profitable because they are working with
fewer people. I do not considering that a success. I think we have to
save our community banks. This bill before us is going to hurt them.
That is why we are holding it up.
I wish I could say that is the only part of the bill that hurts
community banks, but there is another part. It is the Consumer
Financial Protection Bureau that is created in the Dodd bill that will
add a new layer of regulations and a new agency issuing new regulations
that will affect those same community banks that are already fully
regulated.
We have seen the effect of poor and predatory lending standards in
this financial meltdown. We need reform in that area. Americans should
understand all the terms of a transaction, and they need to be
creditworthy. Subprime loans to people who are not creditworthy are not
healthy for our economy. We have learned that for sure. We do not need
a new bureaucracy housed in the Fed but without Fed oversight, which is
sort of a non sequitur. But that is the way it is in this bill, which I
hope we can change. Community banks are already regulated. They have
all of the regulations, either State bank regulation or by the FDIC
insuring them, requiring reserves. They are doing their job.
The new agency would remove safety and soundness from consumer
protection and have unlimited and unchecked rule-writing authority. The
legislation does include an exemption which would allow a community
bank with less than $10 billion in assets to retain examination from
its prudential regulators, or the regulators they have now.
But the exemption is false because community banks will still be
subject to the new agency's new rules, pricing, and prohibitions, all
of which will only serve to curtail consumer credit options.
Enhancing consumer protections should instead focus on leveraging the
experience of agencies that are already in place, such as the Federal
Trade Commission. I am the ranking Republican on the Commerce
Committee. I see the work the FTC is doing on a daily basis to stop
unfair and deceptive practices that prey on consumers of financial
products and services offered by nonbank entities such as mortgage loan
services.
As an example, in 2009 alone, the FTC and the States, working
together closely, brought more than 200 cases against firms that
peddled phony mortgage modification and foreclosure rescue scams.
Rather than focusing on too big to fail or the practices of large
banks, the Dodd bill overreaches and threatens the authority of the FTC
to protect consumers of nonbank financial products, as it has for many
years.
The FTC wrote a letter to me as ranking member of Commerce, and our
chairman, Jay Rockefeller, and asked for assistance with preserving
their consumer protection and enforcement authority. I am working now
with Chairman Rockefeller. He is very focused on this. I can tell you
he is very focused, because I talked to him on the telephone yesterday
several times, including at 8 o'clock last night, because he is so
concerned that we are not going to fix this bill to make sure the FTC
is not shut off from what it already does, what it already has in
place, with a new overlay of a new agency that does not have the
experience, that does not now exist, and would need startup time and
more taxpayer dollars.
Instead, Senator Rockefeller will have an amendment, and I will
cosponsor it, that will keep the FTC exactly where it is now with the
enforcement actions against companies that offer nonbank financial
products. I hope Senator Dodd will work with us on that amendment. In
fact, I am going to expand it even beyond that and say: We should put
all of the nonbank regulation into the FTC instead of this new agency
that will be another bureaucracy that will be confusing in many
instances to the banks which are already regulated.
I hope we can do something in this bill that is right in the
regulatory area, and particularly the area that contributed to the
financial meltdown, such as the nonbank financial institutions, not the
banks. The community banks did not have a part in this financial
meltdown. I hope we can fix this bill when it comes to the floor.
It appears that the chairman of the Banking Committee and the ranking
Republican, Senator Dodd and Senator Shelby, have come to an agreement
on the language that will tighten and close the loophole in too big to
fail. We are going to hear exactly what that language is in a few
minutes in our Republican caucus. That will be very good for us to be
able to then come to the floor, if the Democrats will allow Republicans
to have some input into this bill on the other issues, such as Federal
Trade Commission jurisdiction, the new consumer agency that I think is
overreach and overkill, and most certainly to keep community banks
without a competitive disadvantage against the big banks. I want a
level playing field because I don't want the community banks to suffer
in this country. They are the lifeblood of the heartland, and they are
in peril with this bill.
[[Page S2745]]
I am somewhat frustrated at hearing some of the speeches in the last
week that have railed against Republicans for holding up this bill.
Sometimes ``no'' is the right answer because if we bring a bill to the
floor with no ability to amend it and we don't fix too big to fail,
then once again, like the health care reform bill that was jammed
through the Senate and the House with no Republican support and no
input, we will be doing it to our economy and our financial
institutions. I hope we will not do that again.
I hope that we will have a bill we can all agree closes the loopholes
on too big to fail so that taxpayers will not be on the hook again for
big financial institutions that bet with other people's money on fancy
derivatives and all of the hedges that don't make sense; that we
protect the hedges that do make sense, that are used by the end user to
keep a budget in place rather than passing big price hikes on to
consumers in oil and commodities. That is what derivatives are supposed
to be for, and we don't need to stop that. We just need to know what is
in those big derivatives so that people will have the information and
so will the regulators.
We can do this job right. This should not be political. Democrats and
Republicans aren't going to get an advantage for passing a financial
regulation bill because most people are not going to know how it will
affect them until it is passed and in place. Why don't we do it right?
Let's bring the bill to the floor with some key parts that are agreed
to, and then let's start having amendments. I am not saying every
Republican amendment should pass, but I think it should have a fair
hearing. And I think some of them should pass if this bill is going to
pass the test of a true bipartisan bill that will have more than just a
partisan vote out of the Senate.
I thank the Chair for listening--not that it was his choice, but I
appreciate it anyway.
I hope we will do the right thing on this bill. It will affect our
financial communities, every community in Texas, and especially small
businesses and community banks that are going to be the reason we
recover, if we do this right.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant editor of the Daily Digest proceeded to call the roll.
Mr. GRASSLEY. I ask unanimous consent that the order for the quorum
call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. I ask unanimous consent to speak for 12 minutes as in
morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
General Motors and TARP
Mr. GRASSLEY. Mr. President, I ask unanimous consent to have printed
in the Record at the end of my remarks some letters to which I will
refer.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. GRASSLEY. Mr. President, last Thursday, I wrote Secretary
Geithner asking why the Treasury Department allowed General Motors to
use TARP money from a Treasury escrow account to repay its
multibillion-dollar TARP taxpayer loan. This afternoon, I received a
response from Treasury. I would like to say a few words about the reply
and the questions that remain unanswered.
Last week, Treasury and GM announced with press releases and
nationwide TV commercials that GM had repaid its TARP loans ``in full,
with interest, ahead of schedule, because more customers are buying [GM
vehicles].''
However, the hype does not match the reality. Taxpayers have not been
repaid in full--far from it. Many billions of TARP dollars remain
invested by Treasury in GM, and much of it will never be repaid. The
Congressional Budget Office estimates that taxpayers will lose around
$30 billion on GM.
In addition, the payment that occurred last week did not come from
revenue GM earned by selling cars, despite what was claimed. Instead,
Treasury allowed GM to use funds in a separate escrow account to pay
its TARP debt. The Treasury Department's response to me today makes a
point of saying that GM ``owns'' the money in the escrow account, as if
that somehow justifies all the hoopla about GM's so-called
``repayment.''
Well, let's look at how GM came to ``own'' those escrow funds in the
first place. The escrow funds were part of the TARP money Treasury paid
for GM stock coming out of the bankruptcy. The money was supposed to be
used by GM for expenses, as Treasury concedes. Treasury had the power
to approve or disapprove GM's use of the money to repay the TARP
taxpayer loan. Treasury approved, and GM pretended it was paying the
loan back from revenue because business had improved.
Business may have improved, but that is not how they paid the loan.
Taking TARP money out of one account to pay back TARP loans in another
account is not at all the same as paying off a loan with earnings, as
GM's TV commercials imply they have done. That is why I called it ``an
elaborate TARP money shuffle'' and nothing in Treasury's reply today
changes that.
The public would know nothing about the TARP escrow money being the
source of the supposed repayment from simply watching GM's TV
commercials or reading Treasury's press release. Treasury's letter
today says all these details are public knowledge and nothing new.
Well, that may be technically correct, but it wasn't clearly
communicated that way to the average citizen. Most Americans don't pore
through SEC filings and special inspectors general reports.
The GM commercial also did not mention that GM could have used the
TARP escrow funds to repay a $2.5 billion 9 percent loan it received
from its union health plan as part of the bankruptcy process. The union
loan runs until 2017. The TARP loan was at 7 percent and ran until
2015. What sort of money manager would advise you to pay off a lower
interest loan before a higher interest loan? GM and Treasury have still
not explained that, and I have asked the TARP watchdog, Special
Inspector Neil Barofsky, to get to the bottom of it. And to make
matters worse, Treasury has admitted that it let GM take an additional
6.6 billion of TARP dollars out of the escrow fund last week with no
strings attached. That money, too, could have been used to repay the
high interest union loan.
There are reports that GM also applied to the Department of Energy
for a $10 billion 5 percent loan to retool its plants to meet fuel
economy standards. GM seems to be using government money to pay back
government money, and then asking for more government money at a lower
interest rate. It sounds like a plan to refinance GM's government debt
with more taxpayer money--not pay it back.
GM had to ask permission from Treasury to use the taxpayers' stock
investment to pay off the taxpayers' loan. Treasury's response to my
letter says that ``Treasury retained approval rights over GM's use of
funds from the escrow account in order to protect the taxpayer.'' Well,
why didn't they protect the taxpayer then?
Why would Treasury allow GM to use its equity investment to pay off
the loan when it means giving up the legal right to 7 percent rate of
return for the taxpayers in exchange for essentially nothing? Since the
taxpayer has an equity stake in the company, it's true that future
growth of GM could theoretically make taxpayers whole, but taxpayers
already had that equity interest before this latest transaction and
didn't get any more equity as a result of the transaction.
Another key question is: Why would GM orchestrate a major media
campaign to make the public think this all represents some big
accomplishment by GM when the truth is that the taxpayers are still on
the hook for billions that we may never recover?
Using the taxpayers' stock investment in GM to reduce its debt to the
taxpayers is not the same as repaying that debt from money actually
earned by selling cars. Treasury's reply today does not explain why it
approved this transaction. Maybe it is a step in the right direction,
maybe not. But instead of misleading the American people, we should be
clear and up front about what happened here.
[[Page S2746]]
Exhibit 1
U.S. Senate,
Committee on Finance,
Washington, DC, April 22, 2010.
Hon. Timothy F. Geithner,
Secretary, U.S. Department of the Treasury, Washington, DC.
Dear Secretary Geithner: General Motors (GM) yesterday
announced that it repaid its TARP loans. I am concerned,
however, that this announcement is not what it seems. In
fact, it appears to be nothing more than an elaborate TARP
money shuffle.
On Tuesday of this week, Mr. Neil Barofsky, the Special
Inspector General for TARP, testified before the Senate
Finance Committee. During his testimony Mr. Barofsky
addressed GM's recent debt repayment activity, and stated
that the funds GM is using to repay its TARP debt are not
coming from GM earnings. Instead, GM seems to be using TARP
funds from an escrow account at Treasury to make the debt
repayments. The most recent quarterly report from the Office
of the Special Inspector General for TARP says ``The source
of funds for these quarterly [debt] payments will be other
TARP funds currently held in an escrow account.'' See, Office
of the Special Inspector General for TARP, Quarterly Report
to Congress dated April 20, 2010, page 115.
Furthermore, Exhibit 99.1 of the Form 8K filed by GM with
the SEC on November 16, 2009, seems to confirm that the
source of funds for GM's debt repayments was a multi-billion
dollar escrow account at Treasury--not from earnings. In the
8K filing GM acknowledged:
Of the $42.6 billion in cash and marketable securities
available to GM as of September, 30, 2009, $17.4 billion came
from an escrow account with Treasury,
$6.7 billion of the escrow account available to GM was
allocable to the repayment of loans to Treasury,
$5.6 billion in cash would remain in the Treasury escrow
account following the repayment by GM of their loans, and
Upon repaying Treasury, any balance of escrow funds would
be released to GM.
Therefore, it is unclear how GM and the Administration
could have accurately announced yesterday that GM repaid its
TARP loans in any meaningful way. In reality, it looks like
GM merely used one source of TARP funds to repay another. The
taxpayers are still on the hook, and whether TARP funds are
ultimately recovered depends entirely on the government's
ability to sell GM stock in the future. Treasury has merely
exchanged a legal right to repayment for an uncertain hope of
sharing in the future growth of GM. A debt-for-equity swap is
not a repayment.
I am also troubled by the timing of this latest maneuver.
According to Mr. Barofsky, Treasury had supervisory authority
over GM's use of these TARP escrow funds. Since GM's exit
from bankruptcy court, Treasury had approved the use of the
escrow funds for costs such as GM's obligations to its parts
supplier Delphi. See, Office of the Special Inspector General
for TARP, Additional Insight on Use of Troubled Asset Relief
Program Fund (SIGTARP-10-004), dated December 10, 2009, at
page 6. According to the GM 8K, GM had planned to use the
TARP funds in escrow to pay back the TARP loans on a
quarterly basis beginning in the fourth quarter of 2009. But
following the April 20, 2010, hearing of the Senate Finance
Committee, where Treasury's decision to exempt GM from the
bank TARP excise tax was questioned and GM's refusal to
testify was noted, it is odd that GM suddenly drew down on
the TARP escrow and accelerated the repayment of the
remaining balance of GM's outstanding TARP loans.
The bottom line seems to be that the TARP loans were
``repaid'' with other TARP funds in a Treasury escrow
account. The TARP loans were not repaid from money GM is
earning selling cars, as GM and the Administration have
claimed in their speeches, press releases and television
commercials. When these criticisms were put to GM's Vice
Chairman Stephen Girsky in a television interview yesterday,
he admitted that the criticisms were valid:
Question: Are you just paying the government back with
government money?
Mr. Girsky: Well listen, that is in effect true, but a year
ago nobody thought we'd be able to pay this back.
Mr. Girsky then said that GM originally planned to pay the
loan over the next five years. So the question is why--other
than a desire to justify excluding GM from the
administration's TARP tax proposal--would Treasury and GM
reduce GM's TARP debt with TARP equity and then
mischaracterize it as a repayment from earnings? Accordingly,
please explain:
Your department's justification for allowing GM to use
funds from the TARP escrow account to repay TARP loans,
The amount of funds remaining in the TARP escrow account at
Treasury that may be released to GM, and
The date that you anticipate that the remaining funds in
escrow will be released to GM.
Thank you in advance for your cooperation. Please provide
the requested information by April 30, 2010. Should you have
any questions regarding the contents of this letter please do
not hesitate to contact Jason Foster. All formal
correspondence should be sent electronically in PDF format to
Brian_D[email protected].
Sincerely,
Charles E. Grassley,
Ranking Member.
____
Department of the Treasury,
Washington, DC, April 27, 2010.
Hon. Charles E. Grassley,
U.S. Senate, Washington, DC.
Dear Senator Grassley: Thank you for your letter dated
April 22, 2010 to the Secretary regarding General Motors'
(GM) repayment of its loan from the Department of the
Treasury. He asked me to respond on his behalf.
Your letter states that the repayment of the loan was made
with funds from ``an escrow account at Treasury'' and that it
constituted a ``debt-for-equity'' swap. These statements are
not accurate.
On April 20, GM repaid the Treasury loan with cash in an
escrow account that it owns. The escrow account was created
last summer in connection with the restructuring of GM. The
money used to fund the escrow account came from a portion of
the proceeds of a loan made by both the Treasury and the
Canadian government. The escrowed funds were expected to be
used for extraordinary expenses, and a portion of the funds
were so used. Treasury retained approval rights over GM's use
of fluids from the escrow account in order to protect the
taxpayer, but the cash was still the property of GM.
In making its April 20 loan repayment, GM determined that
it did not need to retain the escrowed funds for expenses.
The fact that GM made that determination and repaid the
remaining $4.7 billion to the U.S. government now is good
news for the company, our investment, and the American
people. Consistent with Treasury's goal of recovering funds
for the taxpayer and exiting TARP investments as soon as
practicable, we approved GM's loan repayment.
It has long been public knowledge that GM would use these
specific funds to repay the Treasury and Canadian loans, if
it did not otherwise need them for expenses. Under GM's loan
agreement with Treasury, any funds in the escrow account on
June 30, 2010 had to be used to repay the Treasury and
Canadian loans. We have highlighted the repayment requirement
in our monthly Section 105(a) reports to Congress. During a
meeting last fall, we also informed the staff of the Special
Inspector General of TARP (SIGTARP), Neil Barofsky, that we
expected GM to use these funds to repay these loans. In fact,
according to the SIGTARP Report on the Use of Funds (released
on December 10, 2009), ``GM officials stated that it intends
to seek release of additional escrow funds to repay its
outstanding $6.7 billion loan to Treasury and $1.3 billion
loan to the Canadian Government.''
After the full repayment of the Treasury loan,
approximately $6.6 billion remained in GM's escrow account.
These funds became unrestricted on April 20 and available for
GM's general use.
In addition, it is not correct that the timing of the
repayment was motivated by concurrent Senate hearings. In
fact, GM's Board of Directors approved the loan repayment at
its monthly meeting on April 13, 2010.
As is widely known, Treasury continues to hold $2.1 billion
in preferred stock and 60.8% of the GM's common equity that
it received in the restructuring in July 2009. Treasury will
begin selling equity once GM makes an initial public
offering.
Thank you again for your attention to this important
matter.
Sincerely,
Herbert M. Allison, Jr.,
Assistant Secretary for Financial Stability.
____
Reserve Notice
U.S. Department of the Treasury,
1500 Pennsylvania Avenue, NW.,
Washington, DC.
Attention: [XXXXX]
Telecopy: [XXXXX]
Email: [XXXXX]
with a copy to:
The U.S. Department of the Treasury,
1500 Pennsylvania Avenue, NW.,
Washington, DC.
Attention: Cash Management Officer
Telephone (for borrowing requests): [XXXXX]
Email: [XXXXX]
Reference is made to that certain $7,072,488,605 Second
Amended and Restated Secured Credit Agreement dated as of
August 12, 2009, as amended, supplemented or modified from
time to time (the ``Credit Agreement''), among General Motors
Holdings LLC, a Delaware limited liability company (the
``Borrower''), the Guarantors named therein and The United
States Department of the Treasury (the ``Lender''). Terms
defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
In connection with the repayment in full of the outstanding
Loans and other Obligations on April 20, 2010 (the
``Repayment Date''), the Borrower hereby requests that a
Reserve Disbursement in an amount equal to the entire amount
of the Reserve Funds (the ``Disbursement'') be made as
described below.
$4,684,964,350.73 of the proceeds of the Disbursement shall
be used to pay the entire outstanding amount of the Loans and
other Obligations, including all accrued and unpaid interest
on the Loans, on the Repayment Date.
In accordance with Section 4.2(e) of the Credit Agreement,
the balance of the proceeds of the Disbursement shall be
retained by the Borrower.
[[Page S2747]]
The Borrower hereby requests that the proceeds of the
Disbursement be made available to it as follows:
A. On the Repayment Date, $4,684,964,350.73 to be wired to:
Bank: [XXXXX]
ABA No: [XXXXX]
Beneficiary: [XXXXX]
Account No.: [XXXXX]
B. On the Repayment Date or on any date thereafter, as
shall be determined by the Borrower in its sole discretion,
all remaining amount of the Disbursement or a portion
thereof, as shall be directed by the Borrower in its sole
discretion, are to be wired to:
Bank: [XXXXX]
ABA No: [XXXXX]
Beneficiary: [XXXXX]
Account No.: [XXXXX]
General Motors Holdings LLC
By: [XXXXX]
Dated: April 19, 2010.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant editor of the Daily Digest proceeded to call the roll.
Ms. KLOBUCHAR. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Ms. KLOBUCHAR. Mr. President, I rise to discuss the very important
bill we are very hopeful we can move on today to start the debate on
Wall Street reform. I understand there may be an agreement to move
forward with this bill. We don't know that yet. If it is true that we
have an agreement to start the debate on this bill, then it is very
fitting that I go through why this bill is so important. If we don't
have an agreement, then it is even more fitting because we know the
American people got severely hurt by the crisis on Wall Street, by the
fall of many of our financial institutions, and they were not the ones
who were supposed to be hurt. So we need to fix this so it doesn't
happen again.
Nearly 3 years after the financial system began to melt down, America
continues to suffer the effects of the worst economic crisis since the
Great Depression. Millions of Americans have lost their jobs, homes,
and their retirement savings. Although some key indicators are
beginning to move in the right direction, many families, such as those
we know in Minnesota, are still struggling, and the economic damage is
very slow to heal in their towns.
On Wall Street, however, it seems to be back to business as usual.
Last year, Wall Street's largest firms handed out record bonuses
totaling nearly $146 billion, an 18-percent increase from 2008.
Meanwhile, overall U.S. per capita income declined 2.6 percent. So it
is little surprise that Wall Street financiers are not enthusiastic
about reforms that could change the way they do business. In fact, some
of them claim Wall Street just has a few potholes that need fixing.
Well, I think they need more than that. What Wall Street needs is more
stop signs and key intersections and some good traffic cops.
This bill we have is the product of months of bipartisan
negotiations. For the first time ever, this bill would create a nine-
member financial oversight council chaired by the Treasury Secretary
and made up of Federal financial regulators. This council would serve
as an early warning system for systemic risk, something that was
clearly lacking 3 years ago when these institutions that people were
advertising as gold and their investments as gold went tumbling down
onto the people of this country.
The domino effect of deeply interconnected financial companies, such
as insurance giant AIG, didn't just create economic ripples, they sent
a tsunami surging through the entire economy. This financial oversight
council will be charged with scanning the system for systemic risks and
putting speed bumps in place to ensure we never see a crisis such as
this one again. This council will, for the first time, bring the
regulators together to form a picture of the entire system, so one
regulator will not be dealing with one problem while another is dealing
with another with no information being shared. This way there will be
one place where they can look at the entire financial system and look
for those warning signs of problems.
This bill will also stand at the intersection and make firms slow
down by increasing the costs of being large and complex. The most
interconnected firms will be required to hold larger levels of capital
to minimize their risk to the system if the investments go bad. All we
are asking for, so taxpayers don't have to bail out these firms, is
that they have significant resources and enough resources on hand in
case they face troubled times again. If firms are going to create risk
to the system, they need to take some responsibility. We clearly saw in
this crisis what a lack of capital can do, how it can bring a firm to
the brink, and the downward spiral it can cause when they are unable to
attract new investors.
As much as we would like, we simply can't predict how a future crisis
might unfold. I believe one of the most important lessons we can take
from this crisis is that the American taxpayer should never again be
left on the hook for the unconscionable bets of Wall Street. The
American taxpayers' money is not meant to be used to play games within
a casino, where you can throw their money around and then maybe some of
it will come back and some of it will not. We have to make sure this
doesn't happen again. Preventing American taxpayers from being forced
to bail out financial firms starts with strengthening big financial
firms to better withstand stress, looking out for systemic risk, and
putting a price on activities that pose a risk to the financial system.
In the event that a firm was to fail, this bill creates a safe way to
liquidate failed financial firms that will not leave the taxpayer on
the hook. First of all, it updates the Federal Reserve's authority to
allow systemwide support but no longer allows it to prop up an
individual firm. Second, it requires large, complex financial companies
to submit plans for their rapid and orderly shutdown should they start
to go under. These plans will help regulators understand the structure
of the companies they oversee and serve as a roadmap for shutting them
down if the company fails.
Under this plan, most large financial companies are expected to be
resolved through the bankruptcy process. Bankruptcy allows those who
invest in a firm to better access their risks, and it allows the
possibility that a company will emerge again in some way intact. If we
have a situation where a firm would not go into bankruptcy and its
failure could bring down the whole system, we make the process of
resolution as hard as we can on that firm. We start by shutting down
the business and throwing out those who caused the mess. This is a very
different route than we took in this crisis where we propped up firms
and kept them alive because of the risk it was going to pose for the
entire financial system. We don't want to be in that position again.
The taxpayers don't want to be in that position again.
If a firm chooses our resolution, the Treasury, the FDIC, and the
Federal Reserve must first all agree to put a company into the orderly
liquidation process. A panel of three bankruptcy judges must then
convene and agree within 24 hours that a company is insolvent. At that
point, the FDIC would step in and resolve the firm through this orderly
process and in a way that doesn't harm the overall system. The cost of
resolution would be paid for not by the taxpayer but by a $50 billion
fund built up over time--and this is key--paid for by the industry,
paid for by the industry, not by the taxpayers.
Finally, I wish to talk about a key portion of the bill that came out
of the Agriculture Committee, a committee on which I serve, led by
Chairman Lincoln. The portion of that bill I wish to talk about is the
focus on transparency and accountability to the over-the-counter
derivatives market.
Bringing transparency and accountability to the over-the-counter
derivatives market is essential to our economic system and the American
taxpayer and is as important as any other piece of reform we are going
to be debating. Reckless trading of unregulated over-the-counter
derivatives played a significant role in triggering the financial
crisis in the fall of 2008. AIG, using a type of derivative known as a
credit default swap, took enormous risks in guaranteeing at least $400
billion worth of other companies' loans, including those of Lehman
Brothers. When the financial crisis hit and AIG was unable to make good
on its commitments, Treasury and the Federal Reserve were forced to
step in to accept untold, unknown risk to the financial system. In
[[Page S2748]]
the end, the government put up $180 billion of taxpayer money to save
AIG from collapse.
I bring up AIG to point out the dangers of an unregulated, over-the-
counter derivatives market. Derivatives, when used properly and backed
by sufficient collateral, play a crucial role in our financial and
economic systems. We think about airlines that want to hedge their risk
with the price of oil. You think about agribusinesses. All over this
country that goes on. But this is a whole different issue we are
talking about. When irresponsible financial institutions are allowed to
make unconscionable bets, hidden from the view of the markets and its
regulators, the stability of our entire financial system is threatened.
Right now, the over-the-counter market counts its transactions in the
hundreds of trillions of dollars, but under the current system, there
are almost no requirements that the most basic terms of these contracts
or even their existence be disclosed to regulators or the public. Think
about it: Trillions of dollars changing hands and no one even knows
what is happening.
The goal of the bill we have today is to finally bring transparency
and accountability to these unregulated markets. For the first time,
under this bill, all trades will be required to be reported to the
regulators and to the public. With this information, regulators will be
able to effectively monitor risks to the system and prevent market
manipulation and abuse. Transparency will also benefit those who use
derivatives to hedge risks, as they will be better equipped to evaluate
the market, as price information will finally be made public. By
requiring mandatory clearing and trading for standardized derivatives,
this bill will greatly reduce the ability of risk to build up to a
point that could, once again, burst and threaten the financial
stability of our financial system.
I have often said that when Wall Street gets a cold, Main Street gets
pneumonia. We can't let this happen again. In this bill, careful
consideration has been made to ensure that commercial entities--this
was the work done in our Agriculture Committee--to make sure that
commercial entities that hedge solely to mitigate their own commercial
risk are not brought under requirements meant to address the failures
of a market they had no hand in. We think about all the people who
didn't have a hand in this problem that got affected. We think even
about our small banks in the State of Minnesota. They didn't engage in
this kind of risky behavior. I think about them sometimes standing
there with their briefcases in the heartland, with those credit default
risks swirling around their head that they never used or engaged in,
saying: Toto, we are not in Kansas anymore. Because, as we know, some
banks in this country had a brain. Some banks didn't go to Oz and think
they could go back with the American taxpayers' money. So we have to
remember that as we go forward.
But the most important thing is to make sure we put a traffic cop at
those intersections, that we put some stop signs at those
intersections, that Wall Street isn't allowed to drive down in their
Ferraris while the government is following behind in a Model T Ford.
Enacting these reforms is not just important for our financial
markets, it is important for ordinary Americans. While very few people
outside of those involved in these markets understand or see the impact
of derivatives on their daily lives, their misuse contributed to a
recession that left millions without jobs, businesses shuttered, and
trillions in household savings lost. The legislation we passed out of
the Agriculture Committee and that Chairman Dodd has worked to
incorporate into this bill will bring these dark markets into the light
of day and ensure they will never again threaten the stability of this
financial system.
It is very important that we bring this before the Senate, that we
begin debate on this bill. That is why, as we look at the rumors
swirling around that, in fact, there is a deal and that we are going to
be able to at least begin the debate on whether to proceed--not debate
on the bill--we are still working out the details. We think this is a
good bill. We look forward to working with our colleagues on it, but we
can't even get to ``go,'' we can't even get to ``start'' if we can't
get this bill on the floor to debate.
So we are looking forward to discussing this bill, debating for the
American public and getting it done. The Americans who lost their jobs,
their homes and their savings and are scared every day that it is going
to happen again because of the recklessness of Wall Street deserve no
less.
Thank you. I yield the floor. I note the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant bill clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER (Mr. Begich). Without objection, it is so
ordered.
Mr. REID. Mr. President, I now ask unanimous consent the motion to
proceed to S. 3217 be agreed to; and that once the bill is reported
tonight, the Senate then proceed to a period of morning business, with
Senators permitted to speak therein for up to 10 minutes each, and on
Thursday, April 29, following the recognition of the leaders or their
designees, the Senate then resume consideration of S. 3217; that after
the reporting of the bill and recognition of Senators Dodd and Shelby
to make opening statements on the bill, Senator Lincoln then be
recognized to speak for up to 20 minutes; that on Thursday, no
amendments or motions be in order prior to the offering of the Dodd-
Lincoln substitute amendment; and that once the substitute amendment is
offered, it be considered read.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The Republican leader.
Mr. McCONNELL. Mr. President, I want to take a few moments here to
thank the distinguished Senator from Alabama who has been our leader on
the Banking Committee and an expert on this very complex subject of
financial regulation, for his steadfast effort in bringing us to where
we are today. As Senate Republicans plus Senator Ben Nelson of Nebraska
have demonstrated over the last few days, we believed the bill we
started with was not insignificant but that it needed to be improved.
Senator Shelby was given the opportunity, as a result of us staying
together, to be empowered to improve the bill that had previously come
out of the Banking Committee on a straight party-line vote. So I want
to take the opportunity to thank all of my Republican colleagues, plus
Senator Nelson of Nebraska, in giving us the opportunity to improve the
underlying bill.
I want to thank the Senator from Alabama for his efforts in that
regard. I think we have a better starting place than we would have had
earlier and we look forward to, as the majority leader indicated, an
open amendment process and plenty of opportunities to treat this like
the serious comprehensive bill it is. We have many amendments we intend
to offer. Our members will be prepared to accept reasonable and short
time agreements so we can get these amendments up and voted on, and
hopefully have an opportunity to make further improvements in the bill.
I know Senator Shelby may want to make a few observations.
The PRESIDING OFFICER. The majority leader.
Mr. REID. I will be happy to yield to my friend from Alabama and my
friend from Connecticut, but I want to say a few words first. I too
have great respect for my friend Senator Shelby. He and I were
neighbors in the Longworth Building many years ago and we have
maintained that friendship since. There are times when we disagree on
issues but our relationship is one of friendship.
Chris Dodd has had an extremely difficult year. He has had to
legislate on some of the most difficult issues to come before this
body, and he has been the one who has been the chairman of that
committee and had to do it. In addition to that, his dear friend, his
best friend, Senator Kennedy, was ill. He had to take over that
committee and do his Banking Committee. It has been a tremendously
difficult year for him. He has done it with mastery of the Senate rules
and with the ability to articulate his position as well as anyone who
has ever served in the Senate. I admire and appreciate him so very
much.
[[Page S2749]]
We also have a new chairman, Senator Lincoln, on the Ag Committee.
She has done a very good job. She took it over a couple of months ago
but stepped into that committee and has done a remarkably good job on
an extremely difficult issue dealing with derivatives and things such
as that. I admire her work and I appreciate so much the ability of
Senator Dodd and her to work together. Their staffs worked all weekend,
trying to put together this substitute amendment we will offer
tomorrow. I am very grateful for their leadership in the conference,
the Democratic conference. They do good work all the time.
We have so much to do in the weeks ahead in this work period. But
this is the issue we are going to go on. The American people waited
long enough for their leaders to get to work cleaning up Wall Street--
first on Monday, then on Tuesday, and twice more today. We didn't have
to vote today. That is a decision that Senator McConnell and I made--
that there was no need to have a vote. There was an agreement to move
to the bill and that is what we have been trying to do all week.
Senate Democrats have asked one thing, that we be allowed to debate,
we simply be allowed to do our job as legislators and legislate. We
believe in this bill to crack down on Wall Street, to protect families'
savings and seniors' pensions. We never asked the Senate to unanimously
or blindly approve a single policy. We never sought to send this bill
directly from the committee room to the President's desk. The only
thing we fought for is the opportunity to have that conversation.
After months of bipartisan meetings and negotiations, it is time to
move this debate from the sidelines to the playing field, to the Senate
floor, which is where it belongs. Senate Republicans have finally
agreed to let us begin this debate. I appreciate that and I hope it
foreshadows more cooperation to come. I know Republicans have their own
suggestions and amendments for improving this bill. So do Democrats.
Now that we will be able to begin that process, the American people
will finally have the opportunity to watch and weigh those ideas.
Nothing has changed from our end since Monday. The only thing that is
different is the date. We have always wanted to start the debate on
Wall Street reform with an open, bipartisan amendment process.
I will offer the first amendment combining the best parts of the
Banking Committee and Agriculture Committee's bills. That will be what
we will work from. Obstruction has wasted enough of the American
people's time. Now let's do our work and do our utmost to make the
American people proud of our efforts. Let's work for them, the American
people. Let them know Wall Street needs reforming. Democrats and
Republicans all over America believe it, so let's show the American
people we will listen to what they say.
There will be no more votes tonight.
The PRESIDING OFFICER. The Republican leader.
Mr. McCONNELL. Mr. President, let me say again before turning to
Senator Shelby how much we appreciate his leadership on this and how
much we appreciate all of our Republican colleagues, plus Senator
Nelson, giving him the ability to improve the bill that came out of
committee. Much has indeed changed since Monday. I thank Senator Shelby
for his leadership. I also commend Senator Dodd for the spirit in which
those discussions were commenced.
I see the Senator from Alabama on the floor.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SHELBY. I will be brief.
First, I thank the Republican leader Senator McConnell for his kind
words. Also I thank my friend, the majority leader, Senator Reid, for
helping bring us where we are today.
But more than that, I commend Senator Dodd, the chairman of the
Banking Committee, with whom I have worked for years and years. We have
worked exceedingly closely on many issues dealing with the Banking
Committee. What we are bringing to the floor now is something very
complex, very far reaching. The idea that something should be too big
to fail is very important to me. Nothing should be too big to fail, in
my judgment, in this country.
I commend Senator Dodd. In our negotiations, they haven't been all
loss--we have reached some assurances in that. He and his staff have
made some recommendations that we like. We made some they liked. I
think we have made real progress. I know we have to seal it all, but I
think Senator Dodd is working in good faith on that.
But we have the derivatives title and we have the consumer products
deal. We have not been able to resolve those yet. I hope we will on the
floor of the Senate. We have moved to a new forum and it is going to be
a very important debate in the weeks ahead here because this is very
important to the American people.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Let me begin by thanking the majority leader for his work.
I thank the minority leader as well. This has been a bit acrimonious
over the last 10 days or so as we tried to get to the floor with this
bill.
Of course I thank Richard Shelby. He and I, as he points out, have
been working together over the last about 37 months during my
stewardship of the Banking Committee that I inherited in January of
2007.
I noted the other day there are some 42 measures we brought out of
our committee and 37 of them have become the law of the land. This is a
good result. We will now be on this bill, which the American people
want us to be on. This is an important issue. As I pointed out this
morning, we had the headlines, the hearings here yesterday involving
mortgage deals and the other headlines about Greece and its debt. Its
bonds were sinking, causing economic problems in Europe and potentially
here.
These problems are huge. As Senator Shelby has said and I have said
over and over, this is a complex area of law we are talking about and
it has to be gotten right. We have had very good conversations on a
number of issues, but on this over many weeks, going back, obviously,
and clearly we both share, as everyone does in this Chamber, our
determination that we never again have institutions that become too big
to fail where there is that implicit guarantee that the Federal
Government will bail them out.
I am satisfied that our bill does that already, but I appreciate that
there are others who would like to see it tighter, who think we can do
more to make it better and more workable. I am anxious to hear them.
I know our colleague from California, Barbara Boxer, has some ideas
on this as well that she has raised and I mentioned those with my
friend from Alabama. He has raised issues with me that I like as well,
and he can help us get there. As he rightly points out, we have not
sealed anything but we have had great conversations, as two people of
good will can have, that I think will allow us to get there.
We are going to have a very busy couple of weeks coming up now. There
are a lot of Members who have very strong feelings about this bill. My
job--our job--will be to see to it people have a chance to offer their
amendments, to debate them, to go through that process.
I may sound pretty old-fashioned in this regard. I pointed out last
night, I first got involved in this Chamber as a young person sitting
here in the same outfits as these young people in their blue suits, as
a page, watching Lyndon Johnson sitting in that chair where you are,
Mr. President, and watching Mike Mansfield in that chair over here and
Everett Dirkson in that chair.
I remember sitting there and listening to the debates on civil rights
in the early 1960s, when this Chamber, in difficult moments, worked
together to achieve great results for our country. I have great
reverence for this institution and I want to see it work as our
Founders intended, where you have a great, important debate--and this
is one--that we work together as American citizens chosen by our
respective States to represent them in this great hall. That is what I
intend to do as the manager of this bill, to make sure that each and
every one of my colleagues--whether they sit on this side of the aisle
or that side of the aisle--are all in this Chamber together to try to
improve the quality of life for the people who have been so badly hurt,
homes
[[Page S2750]]
lost, jobs that have evaporated, retirement accounts that disappeared
for people. They want to see us work together to get a job done to make
a difference for our country and I firmly believe we can do that. I
will do my very best, I say to my friend from Alabama, I say to the
minority leader, as I said to the majority leader, to act with
fairness, to work together to try to resolve matters so we can have a
good outcome on this bill.
Obviously we cannot predict that. I know there are some who want to
make this a great fight--that this is a great, great issue, maybe, for
the day or the week you do it--who wins, who loses. That is a great
story. But this is not an athletic contest we are involved in. It is a
decision to try to put our country on a far more sound and secure
footing than it is today. I look forward to the opportunity to work, as
I have, with Senator Shelby. We are good friends. I admire him
immensely. He was chairman of this committee before I was. He
understands the job of being a chairman.
I am determined to get this job right. I encourage our colleagues who
have ideas and amendments to come forward and share them with us. We
are going to set up shop over the weekend to make sure we are there. So
we have ideas to consider, accept, maybe modify, make it work right. If
that spirit comes forward we can do a good job here and we can leave
this Chamber at the end of this Congress, knowing we confronted a
serious problem and stepped up to the best of our ability to try to
solve it for the people we seek to represent.
Again, I thank the majority leader and the staff and others for their
work. I thank Senator Shelby in his work. This conversation will
continue. We have a lot of work to do. It has been very worthwhile and
very productive over these last number of weeks and we intend to keep
it in that form. I thank the minority leader as well and the Republican
Conference. I know it must have been probably a healthy, good, vibrant
conversation for the last hour and a half in there. But for those who
question whether we can do this, I want this institution to get back
again to the idea of listening to each other, debating the issues,
taking our votes and putting together the best product we can.
I yield the floor.
____________________