[Congressional Record Volume 156, Number 67 (Thursday, May 6, 2010)]
[Senate]
[Pages S3296-S3303]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           RESTORING AMERICAN FINANCIAL STABILITY ACT OF 2010

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of S. 3217, which the clerk will report.
  The bill clerk read as follows:

       A bill (S. 3217) to promote the financial stability of the 
     United States by improving accountability and transparency in 
     the financial system, to end ``too big to fail,'' to protect 
     the American taxpayer by ending bailouts, to protect 
     consumers from abusive financial services practices, and for 
     other purposes.

  Pending:

       Reid (for Dodd/Lincoln) amendment No. 3739, in the nature 
     of a substitute.
       Shelby amendment No. 3826 (to amendment No. 3739), to 
     establish a Division of Consumer Financial Protection within 
     the Federal Deposit Insurance Corporation.
       Tester amendment No. 3749 (to amendment No. 3739), to 
     require the Corporation to amend the definition of the term 
     ``assessment base.''


                           Amendment No. 3749

  The PRESIDING OFFICER. Under the previous order, the time until 10 
a.m. will be for debate on amendment No. 3749, with the time equally 
divided and controlled in the usual form.
  The Senator from Nebraska.
  Mr. JOHANNS. Madam President, I am just going to speak for 2 minutes 
this morning, but I would like to stand to take a moment to voice my 
support for the Tester-Hutchison amendment.
  This amendment will ensure that banks of all sizes pay their fair 
share by broadening the assessment base that is used by the FDIC. The 
FDIC would determine bank premiums by basing it on total assets, not 
just domestic deposits. For far too long, community banks have paid a 
disproportionate share of the deposit insurance premiums.
  This amendment levels the playing field. It is a good piece of 
policy. It will put community banks on a more equal footing with the 
large bank conglomerates. So I urge my colleagues to vote for this 
commonsense amendment.
  Let me wrap up by saying, the Independent Community Bankers have 
looked at this amendment. This amendment would reduce assessments for 
98 percent of the banks with less than $10 billion in assets, keeping 
nearly $4.5 billion in the banks--much needed capital to make our 
economy grow.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from Texas.
  Mrs. HUTCHISON. Madam President, how much time is on our side?
  The PRESIDING OFFICER. Eight minutes.
  Mrs. HUTCHISON. Madam President, would you notify me when I have 
consumed 5 minutes because there is another speaker.
  The PRESIDING OFFICER. Yes.
  Mrs. HUTCHISON. Thank you, Madam President.
  I rise to join my colleague, Senator Tester, and an increasing number 
of

[[Page S3297]]

cosponsors, in support of our amendment which will ensure that banks of 
all sizes pay their fair share in deposit insurance for the risk they 
pose to the banking system.
  Our amendment is intended to level the playing field for our safe 
community banks that for far too long have paid assessments into the 
FDIC insurance fund above and beyond the risk they pose.
  The FDIC levies deposit insurance premiums on a bank's total domestic 
deposits, but domestic deposits are not the best means to analyze the 
safety of banks. Financial assets other than deposits create risk in 
the system. Nondeposit assets are held disproportionately by larger 
noncommunity banks and can be more complex and more risky.
  Community banks with less than $10 billion in assets rely heavily on 
customer deposits for funding. This penalizes safe institutions by 
forcing them to pay deposit insurance premiums above and beyond the 
risk they pose to the banking system.
  Despite making up just 20 percent of the Nation's assets, these 
community banks contribute 30 percent of the premiums to the deposit 
insurance fund. At the same time, large banks hold 80 percent of the 
banking industry's assets. Yet they just pay 70 percent of the 
premiums.
  We must fix this inequality. That is what the Tester-Hutchison 
measure does. It will do so by requiring the FDIC to change the 
assessment base to a more accurate measure: a bank's total assets, less 
tangible capital. This change will broaden the assessment base and will 
better measure the risk a bank poses.

  A bank's assets include its loans outstanding and securities held. 
One need only look back to the last 2 years to know those are the 
assets that are more likely to show a bank's exposure to risk than just 
plain deposits. It wasn't a bank's deposits that contributed to the 
financial meltdown. The meltdown was caused by bad mortgages which were 
packaged into risky mortgage-backed securities which were used to 
create derivatives. These risky financial instruments and the large 
institutions that created and held them are what led to our financial 
crisis.
  So our amendment is particularly timely because the FDIC has now said 
banks are going to have to prepay into the insurance fund for 3 years, 
and all that will be due this year, so a 3-year assessment will be due 
at the end of this year. It is so important to have a fair assessment 
ratio, and that is what the Tester-Hutchison amendment will do. It will 
have a ratio for what a bank owes into the deposit fund that is based 
on its risk, based on assets minus capital.
  I am very pleased to be the sponsor of this amendment. I worked on 
this amendment in committee. I did the research on it to try to make 
sure we were doing the right thing. I am pleased Senator Tester joined 
me in this effort, and we have a very bipartisan group of supporters of 
this amendment. It is my hope that we pass by an overwhelming vote this 
amendment which will put into the law that the FDIC deposit insurance 
will be based on a standard that levels the playing field for community 
banks so big banks don't have an advantage over community banks. It is 
our community banks that are giving the loans to businesses throughout 
our country. They are the ones that were there in the crisis as best 
they could to try to put liquidity into the market. They didn't cause 
the crisis and they certainly shouldn't pay the price for it.
  I urge all my colleagues to support the Tester-Hutchison amendment.
  Madam President, I was going to suggest we allocate the time being 
used against both sides. That would be my request.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Connecticut.
  Mr. DODD. Madam President, let me commend our two colleagues, Senator 
Tester and Senator Hutchison, for this proposal. As I said several 
times yesterday, I think this is a very sound contribution to this bill 
for the very reasons outlined this morning by Senator Hutchison and 
Senator Tester earlier--reducing the cost to our community banks at a 
time when obviously they are all feeling tremendous pressures under 
this economy. So I am a strong and ardent supporter of their proposal, 
and I am confident it will be overwhelmingly supported by our 
colleagues.
  Let me quickly add we are going to be moving on after that vote to 
the Shelby, et al., amendment regarding consumer protection and 
complete replacement for the title. My colleague from Texas has written 
to me along with Jay Rockefeller regarding the Federal Trade 
Commission's interests, and we have worked that out, I believe, to the 
satisfaction of my colleagues on the Commerce Committee. But I draw to 
the attention of Members the amendment we will be voting on does great 
damage to the FDIC's rulings and abilities in this legislation. I urge 
people to take a good look at what we are going to be asked to support, 
as it deprives the FDIC of some of the very authority and rulemaking 
that I think we want to preserve in our legislation. So I will address 
the Shelby amendment after the Hutchison-Tester amendment is disposed 
of.
  But let me say in response to the minority leader, one of the 
strongest features of what has happened to our country over the last 
several years is we have had seven different Federal agencies that have 
divisions on consumer protection. They have been around for a long 
time. The reality is, most of them were asleep at the switch and were 
treated as second-class operations within their prudential regulator to 
such a degree that even though we mandated legislatively to protect 
home mortgages and people, they never even promulgated a single 
regulation in this area. Small businesses watched credit card rates go 
through the ceiling. Many people who rely on that ability are watching 
their rates jump from 5 percent to 22 percent, which is not uncommon.
  So the idea that this has been a division between bureaucracy in 
Washington and what happens on Main Street is a complete aberration. We 
have seen 7 million people lose their homes, many of them because they 
were lured into deals they never could afford at the fully indexed 
price. We saw the outrage expressed by consumers and we saw consumer 
credit cards again where rates exploded, making it difficult. There are 
all sorts of features.
  This bill covers only financial products and financial services. That 
dentists and butchers and retailers on the street are going to be 
affected by this is a complete myth, totally so, and the provisions of 
the bill couldn't be more clear about it. There are no new regulations. 
We are taking existing consumer laws, things such as truth in lending, 
fair credit. Some legislation goes back 50 years to protect consumers 
and others from the kind of activities people have to worry about every 
day, in terms of making sure they are not going to be abused by people 
who would take advantage of them. The question is whether anybody is 
going to enforce any of this. So by setting up this agency in the 
Federal Reserve, we are giving them independent rulemaking authority, 
appointed by the President, confirmed by the Senate as an operation, 
and then working in consultation with prudential regulators so we don't 
end up with a conflict between the safety and soundness requirements of 
our financial institutions and the consumer protection issues.
  In the absence of this, what we are confronted with every year is 
having to draft legislation to deal with one consumer problem after 
another, and we all know how long that can take, if it ever gets done 
at all. In the meantime, we see what happens to average citizens who 
have paid dearly.
  As to the whole shadow economy, community banks are right to be 
annoyed. Here they are located on one street corner, and they have a 
payday lender on the other corner completely unregulated. Here they are 
as a community bank having to go through a regulatory process to make 
sure things are working right and yet the shadow economy operating 
maybe 100 yards away and no protections. Under this proposed amendment, 
we require assessments of community banks to pay for the regulation of 
the nonbanks. Here they go again. Another cost. Our bill does none of 
that. The cost of the consumer protection agency comes out of Fed 
money; no assessment, no appropriations to support it. This one 
requires an assessment. Here we are

[[Page S3298]]

going to adopt an amendment, the Hutchison-Tester amendment, which 
reduces the cost to 98 percent of consumer banks, and the next 
amendment adds an assessment onto them. We have to be a little bit 
consistent about this.
  So that is what the Shelby amendment does. There is an assessment in 
his bill on community banks, on the nonbank community. So while 
nonbanks will pay some, the other ones do. We don't do that in our 
bill. I think there are so many assessments out there already. That 
shouldn't be the case. We consolidate so you get clarity, not seven 
agencies telling you what consumer regulation you ought to follow or 
not. They deserve clarity in thought so there is a consistent line of 
what is occurring out there and that consultation and cooperation with 
prudential regulation so we don't have the conflicts.
  We spent a lot of time going through this. This amendment, the 
provision of the bill, is one that was worked on, by the way, on a 
bipartisan basis as we were drafting it so we could have this feature 
of the bill.
  Again, I am willing to listen to ideas on how we can strengthen this 
and make it more clear against some of the accusations that we are 
reaching into Main Street on this legislation. Nothing could be further 
from the truth. We are not reaching into it at all. Obviously, any 
proposal deserves to be looked at again and other ideas that can tweak 
it and make it look better. But the idea that we are going to level 
assessments--the FTC gets damaged, in my view, as it is presently 
written. I think people need to read carefully what they are going to 
be asked to vote on in the Shelby amendment and then walk away from it. 
It is worse than the status quo in many ways. It takes a huge step 
back. If there is anything we have learned in the last 2 years, it is 
those small businesses, those people out there who rely on the flow of 
credit, the access to capital, to see to it there is going to be 
someone watching out on a consistent basis to what happens to them, we 
believe we have a very strong provision in our legislation.
  Senator Tester is here to close on the amendment. I apologize for 
drifting off into this other area. I see my colleague and friend from 
Massachusetts. But I know Senator Tester wishes to be heard on the 
Hutchison amendment. So I apologize to my colleagues.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Texas.
  Mrs. HUTCHISON. Madam President, the Senator from Montana, I believe, 
is gesturing that the Senator from Massachusetts could have up to 3 
minutes.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. BROWN of Massachusetts. Thank you, Madam President. Thank you to 
my colleague from Montana. I have enjoyed working with him very much 
over the last couple days and the Senator from Texas as well. I know we 
have been working very hard on this amendment. I wished to commend the 
Senator who just finished speaking as well--I have privately and 
publicly--for taking this effort and trying to work through it in a 
bipartisan manner because, as I have said many times, this is an issue 
that affects the American people in very serious ways. I don't want to 
rush in. I want to do it right so we don't have to come back next year 
or next month and try to fix problems we may have inadvertently 
created. So I appreciate the Senator from Connecticut allowing me to 
come and speak to him privately in his office and his staff and work 
through this and I am hoping we can continue with that bipartisan 
effort.
  As a reflection of that, I have signed on to many amendments, some by 
my Democratic colleagues and some by my Republican colleagues, and I am 
thankful the majority leader has said publicly that we are going to get 
a full and fair discourse on these issues. The one I am referring to 
today is the Tester-Hutchison amendment, of which I am also a 
cosponsor, amendment No. 3749.
  For more than 75 years, the presence of FDIC deposit insurance has 
meant that Americans who deposit savings in insured banks sleep soundly 
at night. That is kind of the basic small community bank. You know when 
you are giving your money to a bank it is not going to be treated as a 
casino; it is going to be protected. But as our banking sector has 
consolidated and large national banks have emerged, our smaller 
community banks have been getting squeezed. These small banks pay 
approximately 30 percent of the total of the FDIC assessments but hold 
only 20 percent of the Nation's banking assets.
  I feel it is time for the larger institutions to pay their fair 
share. This amendment will improve competition in the marketplace and 
help small businesses. Everyone knows small businesses across the 
country are having a hard time getting loans. Lowering the assessments 
on these community banks, I believe and others who are sponsoring this 
amendment believe, will help increase loans to small businesses. On a 
relative basis, our small community banks are far more active in the 
market compared to larger banks. As someone who was, in a prior life 
before I got here, involved in representing some of those banks, I can 
tell my colleagues they are the ones that are continuing to keep the 
economic engine going in these small towns.
  I am pleased the amendment we will vote on today also makes sure the 
institutional custodial banks and bankers' banks are protected from 
unfair assessment levels that are not in line with the true role in the 
financial system. This matters a great deal to my State of 
Massachusetts--the global hub of institutional asset management--and 
will allow us to restore fairness to the FDIC assessment system without 
imposing large, unjustified assessment increases on custodial banks.
  So I urge my colleagues to support the amendment. Thank you, Madam 
President, and the Senators from Montana and Texas.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. TESTER. Madam President, first of all, I wish to thank the 
Senator from Massachusetts for his comments. I very much appreciate his 
cosponsorship and support of this amendment. I also wish to thank 
Senator Hutchison for her hard work on this amendment. I very much 
appreciate her ability to get things done in a fair way, and I thank 
her very much for that.
  Senator Hutchison and I have come to the floor several times to talk 
about this bipartisan, commonsense amendment to hold banks accountable 
for their behavior and to preserve the integrity of the FDIC deposit 
insurance fund. It has been said before that this would direct the FDIC 
to base assessments on assets rather than deposits, forcing big banks 
to pay their fair share into the fund. This amendment will ensure that 
the community banks that make rural America run will pay only their 
fair share into the fund--no more and no less--fixing the lopsided 
system we have now. It would also protect the integrity of the deposit 
insurance fund, which is critically important, ensuring that it has the 
resources to be self-sufficient and prepared to address any future 
crises.
  Let me say, Senator Hutchison and I think this amendment makes a 
great deal of common sense, as do the other 13 cosponsors of this 
legislation. I am pleased we are joined by so many of our colleagues on 
this important amendment and that it is one of the first amendments up 
for consideration. It is a question of equity. It is a question of 
making sure the FDIC insurance fund is solvent for years and decades to 
come.
  I wish to thank all the people who have cosponsored it, and once 
again let me thank Senator Hutchison as well as the chairman of the 
Banking Committee, Senator Dodd, for working with us on this amendment.
  Madam President, is it appropriate to ask for the yeas and nays?
  The PRESIDING OFFICER. Is there a sufficient second? There appears to 
be a sufficient second.
  All time is yielded back. Under the previous order, the question is 
on agreeing to amendment No. 3749.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from West Virginia (Mr. Byrd) 
is necessarily absent.
  Mr. KYL. The following Senator is necessarily absent: the Senator 
from Utah (Mr. Bennett).
  The result was announced--yeas 98, nays 0, as follows:

[[Page S3299]]

                      [Rollcall Vote No. 132 Leg.]

                                YEAS--98

     Akaka
     Alexander
     Barrasso
     Baucus
     Bayh
     Begich
     Bennet
     Bingaman
     Bond
     Boxer
     Brown (MA)
     Brown (OH)
     Brownback
     Bunning
     Burr
     Burris
     Cantwell
     Cardin
     Carper
     Casey
     Chambliss
     Coburn
     Cochran
     Collins
     Conrad
     Corker
     Cornyn
     Crapo
     DeMint
     Dodd
     Dorgan
     Durbin
     Ensign
     Enzi
     Feingold
     Feinstein
     Franken
     Gillibrand
     Graham
     Grassley
     Gregg
     Hagan
     Harkin
     Hatch
     Hutchison
     Inhofe
     Inouye
     Isakson
     Johanns
     Johnson
     Kaufman
     Kerry
     Klobuchar
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     LeMieux
     Levin
     Lieberman
     Lincoln
     Lugar
     McCain
     McCaskill
     McConnell
     Menendez
     Merkley
     Mikulski
     Murkowski
     Murray
     Nelson (NE)
     Nelson (FL)
     Pryor
     Reed
     Reid
     Risch
     Roberts
     Rockefeller
     Sanders
     Schumer
     Sessions
     Shaheen
     Shelby
     Snowe
     Specter
     Stabenow
     Tester
     Thune
     Udall (CO)
     Udall (NM)
     Vitter
     Voinovich
     Warner
     Webb
     Whitehouse
     Wicker
     Wyden

                             NOT VOTING--2

     Bennett
     Byrd
       
  The amendment (No. 3749) was agreed to.
  Mr. DORGAN. Madam President, I move to reconsider the vote, and I 
move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. JOHANNS. Madam President, I rise today to discuss the consumer 
protection piece of the financial reform bill we have been debating.
  Let me start by expressing my appreciation for the good work of 
Chairman Dodd and the good work of Ranking Member Shelby and others who 
are making their way through a thoughtful process to try to get an 
overall bill that will work.
  This piece of the bill, though, in my judgment, needs a tremendous 
amount of effort, attention, and work yet. The consumer protection 
piece has generated a lot of debate. We have all asked the question in 
Banking Committee hearings and on the floor: What is the best way to 
protect consumers? Let me underscore that. This has not been a debate 
about whether we do or not. No one is talking about ignoring this piece 
of the legislation. No one is advocating that we do nothing on consumer 
protections. What we are trying to focus on is the best way of doing 
it. We need to keep that perspective in mind as this debate unfolds and 
motives and words get distorted and stretched.
  The bill before us establishes a consumer protection regime that is 
going to be housed at the Federal Reserve. But let me emphasize, that 
does not mean it is under its supervision. It functions like a stand-
alone agency.
  This new ``bureau'' will have what I would describe as unprecedented 
powers. It will reach into nearly every area of our economy with power 
over nearly everything. Anything that resembles the term ``financial in 
nature'' will come within the purview of this bureau.
  I must admit, as this debate was going on, I found it surprising, if 
not shocking, that folks such as car dealers, accountants, and lawyers 
were showing up at my office to talk about the impact on them. It is no 
wonder that so many business groups have come out in opposition to this 
current piece of this legislation. I am not talking about banks. I am 
talking about business groups.
  The Chamber of Commerce sent a letter outlining concerns on April 28 
on behalf of--and I am using their language--``hundreds of thousands of 
nonfinancial services businesses.'' These hundreds of thousands of 
businesses--many of them small businesses--had absolutely nothing to do 
with the last crisis. Yet with this new bureau, I believe they will be 
punished or, at a minimum, tied up in redtape.
  There are many pieces of this on which I could spend a lot of time 
talking on the floor, but what I have tried to do today is to 
encapsulate my thoughts into five areas, five concerns, if you will.
  The first area is the unlimited rulemaking authority provided for in 
this legislation. Because the term ``abusive'' was added to the unfair 
and deceptive acts or standards, there is virtually no limit to the 
kinds of rules this new bureau can write.
  We also know that the term ``abusive'' is entirely subjective. So how 
do you determine abusive? Will you make each customer take a financial 
literacy test? Is abusive different for Mike Johanns than it is the 
next customer? Because ``abusive'' can be defined so differently from 
one customer to the next, we can see the unlimited problem that is 
created.
  The second area, no veto power. I consistently said that it is a 
mistake to separate consumer protection from the issues of safety and 
soundness of the institution. If a proposed rule will have a negative 
effect on the safety and soundness of financial institutions, then we 
need some kind of checks and balances. Checks and balances are good. In 
this bill under debate, this new agency only has to list the 
regulator's concerns, not take them into any kind of meaningful 
consideration.
  The third area, privacy rights. While there are a lot of privacy 
concerns here, two major ones come to mind.
  Let me go to the language of the bill itself. Section 1022 mandates 
the bureau to:

       . . . gather information . . . regarding the organization, 
     business conduct, markets, and activities of persons 
     operating in consumer financial services markets.

  A person is defined in the bill as an ``individual.'' So do you 
follow me? What this means is the bureau can look into the business 
conduct of the average person out there.
  Section 1071 requires any deposit-taking financial institution to 
geocode customer addresses and maintain records of deposits for at 
least 3 years.
  As Jim Harper from the Cato Institute described it:

       Think of the government having its own Google map of where 
     you and your neighbors do your banking.

  Is that what Americans want out of this bill?
  The fourth item is the preemption standard. The current bill really 
changes current Federal law under the guise of giving States more power 
over their consumer protection laws. This worries me. This will wreak 
havoc for financial companies operating in more than one State. What we 
would be saying is they will have to comply with a patchwork of 51 
State laws, and State AGs will have the power to enforce State and 
Federal laws against national banks. If this were the way since the 
beginning of time, one might say: Well, they have adapted to it. But to 
put them in this kind of regimen is literally to say to them: You are 
going to have to chew up mountains of capital to try to comply with all 
these various rules and regulations and laws of the various States.
  The fifth item I wanted to mention is the expansive reach. This bill 
includes what I regard as an overly broad definition of ``consumer 
financial product or service'' and ``service provider.'' Specifically, 
section 1027 will subject numerous merchants to the regulation of this 
new bureau just because the business provides the ability to their 
customers to repay in four installments.
  Imagine that you order a camcorder for the holidays off a home 
shopping network. This company provides you with the flexibility of 
making four installment payments. This new company could be swept under 
this new bureau. How long do you think companies will continue to 
provide that kind of flexible option to consumers if they are going to 
be buried in regulation? That is why the dentists, the lawyers, the 
advertising agencies, the accountants, and even florists are concerned 
with this bill and are showing up in our offices saying: What are you 
doing? I don't know about anyone else, but I can make the case without 
any hesitation that my local florist doesn't come to mind when I think 
about the players who brought our economy to the edge.
  In response to this expansive and unfettered bureau, I am proud to 
announce my support for an alternative. This alternative, led by 
Senator Shelby, is well thought out, is a reasonable approach and I 
believe a compromise to a very difficult issue in this legislation. It 
would establish a consumer protection division within the FDIC, which I 
believe is a natural fit since this agency is already tasked with 
protecting consumer deposit accounts. This new division would have 
authority to make rules relative to consumer protection. All rules, 
regulations, and

[[Page S3300]]

orders would receive the approval of the board of the FDIC--an 
important check and balance. This is a very important distinction in 
terms of what we are debating today. Board approval will ensure that 
actions taken by the division appropriately consider safety and 
soundness of the financial institution, while ensuring that consumer 
safeguards are in place. While it allows primary supervision and 
enforcement to exist with the existing regulators, it does not bring in 
nonbank mortgage originators for supervision.
  I will end on a final thought. Many have claimed that these mortgage 
insurers acted unfairly and that they preyed upon unsophisticated 
borrowers during the last crisis. This ensures the mortgage broker 
operating out of his garage or whatever is going to be regulated.
  Finally, this new agency will be able to go after the bad actors, and 
that is what we should be doing. Anyone who shows a pattern of material 
violations will be brought under this new FDIC division.
  Let me wrap up where I began. I applaud all my colleagues who have 
spent so much time and energy focusing on the consumer piece of this 
regulatory reform. Chairman Dodd led us through hearing after hearing 
trying to figure out the best way to protect consumers. Senator Shelby, 
our ranking member, worked on those issues in concert. We can get this 
right, but in my judgment, where we are today, the proposed legislation 
on the floor does not get it right. Let's focus on getting it right, 
getting the bad actors.
  I believe the approach that is being championed by Ranking Member 
Shelby is a reasoned one that elevates consumer protection while 
keeping safety and soundness as a paramount consideration. I ask my 
colleagues to support the alternative.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Madam President, first of all, if I may, let me acknowledge 
the contribution of the Presiding Officer, my colleague from New York. 
Everyone brings value to this Chamber from time to time based on what 
they have done in their earlier lives. I thank her immensely for 
bringing her background and experience to this critical debate we are 
having. She spent a lot of years working in this area of the law, knows 
it well, and I have come to appreciate her counsel and advice and 
thoughts on all of this, and I want to acknowledge that, if I may.
  Madam President, as I said at the outset, there are four major pieces 
of this bill of ours, and I will add a fifth, obviously, dealing with 
the derivative section that was worked on by the Presiding Officer as a 
member of the Agriculture Committee, Blanche Lincoln being the chairman 
of the Agriculture Committee. Title VII of this bill deals with that 
section. The Banking Committee side deals with the four other major 
parts of this bill, and they are, No. 1, end too big to fail; No. 2, 
set up an early warning system--and I am being simplistic in describing 
these--deal with the derivatives and the so-called exotic instruments; 
and have a strong consumer protection feature to this bill. Those are 
the four points.
  We have resolved, I believe to virtually all of our satisfaction, the 
too-big-to-fail argument. We did that yesterday. And again, I thank my 
colleagues, particularly Senator Shelby and others, for helping us work 
through that to come to a conclusion that ends the debate as to whether 
the bill before us ends too big to fail. I think that in itself would 
be justification for supporting the legislation--knowing that if we 
adopt this legislation, as I am hopeful we will, and Lord forbid we are 
confronted with another major economic crisis, we will not be faced 
with the choices we were in the fall of 2008 where the American 
taxpayer wrote out a check for $700 billion to bail out major financial 
institutions that were on the verge of collapse. We were told that if 
they did so, the financial system of our country, and possibly 
globally, would melt down, to use their words. What we wanted to avoid 
was ever being put in that position again, where you had the implicit 
guarantee that the Federal Government would write that kind of check. 
We have done that now in this bill, so let's check that box. Too big to 
fail is over with, and this bill takes care of that. We need to pass 
the bill, and we need the President to sign it so that it becomes law. 
But as of right now, we are far closer to resolving that issue than 
ever before.

  The derivative section of the bill and so forth--I know people are 
working on this and working with Senator Lincoln and others on that 
section of the bill. I respect immensely their efforts to make sure we 
can arrive at a compromise. We think we have good provisions in the 
bill, but I think all of us recognize other ideas and thoughts are 
always welcome. So that is being worked on.
  The sort of radar, the look-ahead approach to our legislation, I 
don't think there is any debate about, so that box has sort of been 
checked. Maybe someone has some amendments on what they would like to 
do to strengthen it but not the idea that we have an early warning 
system so that we pick up these problems far earlier than we did or 
were willing to acknowledge as they were developing within the 
residential mortgage market as early as 2005 and 2006, beginning to 
explode in 2007, and then, of course, watching the events of 2008, 
culminating in the fall with the decisions we had to make in order to 
stabilize the financial system in our country. Had we had that early 
warning system--more than just one set of eyes at the Federal Reserve, 
which did, to put it mildly, a very inadequate job of picking up what 
was occurring in the real estate bubble--we would never have found 
ourselves in the situation we did in our country in the fall of 2008.
  We believe the early warning system will be a major step in limiting 
the kinds of problems we have seen in the last couple of years. It does 
not stop the next economic problem. There will be another economic 
crisis. Future generations will deal with that. There is nothing in 
this bill that prohibits us or guarantees us that we have once and for 
all avoided economic crises. First of all, we are no longer in total 
control of that within our own country. How many more headlines do we 
have to read about Greece and what is occurring there--the riots in the 
streets today because of the economic decisions they are making to 
stabilize their country. These are already having an effect globally. 
So while we can do a lot to minimize what happens here, we recognize 
today that we live in a far more interconnected world that poses its 
own set of risks.
  Nonetheless, I think the fact that we have established, on a 
bipartisan basis--and again, our colleagues Mark Warner and Bob Corker, 
along with other Members, did a great job, in my view, in crafting that 
part of our bill. So I think we have done a good job there, and I see 
very little dissent about it.
  The fourth piece, the consumer protection, is the one in which we are 
now engaged. This is a debate that I believe is worth having over the 
next hour or two and then vote. Let me say to my friend from Alabama, 
the author of the amendment, and his cosponsors that we have to come 
and debate this stuff. I am here and will be glad to engage in the 
debate, but I have one other colleague here right now involved in this 
question. This is a major part of the bill.
  People have told me over and over again that this is a big issue for 
them. I am willing to accept their determination. I think it is a big 
issue too. But we have about 100 amendments people want to offer, and 
we have about 39 legislative days between now and the end of this 
Congress, with an awful lot to do.
  Now, I can't get there for you. I can't get your amendments up if 
others insist upon elongated times on the consideration of their 
amendments. We have all been debating consumer protection for years 
now, particularly over the last 18 months. There is no reason to have a 
protracted debate on this question. My Republican friends have offered 
a substitute to my bill on this issue, and I welcome that substitute. 
We need to now debate it and then vote on it and move on to the next 
issue.
  Madam President, I am delighted to see my good friend, who just 
arrived to engage in this discussion. So let me address this issue of 
consumer protections in terms of both what we have in the bill, reading 
the language of it, and what the alternative would do.
  Let me first of all say that I listened to my friend from Nebraska, 
Senator

[[Page S3301]]

Johanns, a wonderful member of our committee and a person I have come 
to respect very much. He has been very productive and very helpful in 
the Banking Committee.
  But the idea, to use his language, that we are covering florists and 
accountants and lawyers and dentists--nothing could be further from the 
truth. I guess the old adage is, if you say something often enough and 
repeat it often enough and if it goes unchallenged, it becomes a fact. 
It is not a fact. In fact, it is anything but a fact. I know they wish 
to use that argument to try to pass their amendment or to defeat the 
sections of the bill I have included, but I cannot say it any more 
clearly to my colleagues. I believe it is section 1027 of the bill. You 
have all got copies of the bill on your desk. Read section 1027 when 
you come to the floor. It is not complicated legislative language. It 
says specifically the only reason you would be covered by the consumer 
protection language in this bill is if you are significantly involved 
in financial services or financial products.
  I realize the word ``significantly'' is what people want to work on, 
and I am willing to listen to some ideas as to how we can define that 
word ``significantly.'' That is not a bad point. I understand that. But 
don't tell me it covers a florist under any definition of the words 
``significantly involved in financial services and products.'' It 
excludes retailers and merchants across the country. Again, I am 
willing to debate all sorts of language here but don't make me debate 
completely false allegations about what is in the bill.
  At any rate, we have been working on our bill for a long time. My 
compliments and thanks to my colleague from Alabama for the efforts 
yesterday and so forth. But this is a very important part of the bill. 
We have worked to create an early warning system, as I mentioned, and 
of course too big to fail, but consumer protection is critical because 
it goes to the very heart of what we are trying to do. In fact, it was 
consumers, small businesses, families, individuals, farms that were 
adversely affected. Wall Street did fine, as we have seen. Some people 
lost some jobs along the way. A couple of these large institutions did 
collapse. But we have heard about the bonuses that went to top 
executives. The buildings are still there. They have been making record 
profits over the last couple of years. But what happened to those 
millions of people who had a home that now is gone? What happened to 
those 8.5 million jobs? Gone. What happened to those retirees in our 
country who watched 20 percent of their retirement evaporate? What 
happened to those people who still have a house but the value of that 
home has declined by 30 percent in the last year and a half? I don't 
know what you call them; I call them consumers, the average person in 
our country who did not do anything except try to hold body and soul 
together, got lured into a bad deal by people who were unregulated and 
were willing to convince them they could buy a home they never could 
afford, knowing that the fully indexed adjustable rate mortgage was 
going to wipe them out.
  I talked about Dolores King, who was the first witness I brought to 
our committee 3 years ago, in January or February of 2007. She was a 
retiree in Chicago who worked as a librarian for 30 or 40 years. Her 
husband had died. She had about a $30,000 or $40,000 credit card debt 
and some unscrupulous broker came in and convinced her she needed to 
rewrite her mortgage and an adjustable rate mortgage would work for 
her. She lost everything. She lost her home--70 percent of her fixed 
retirement income went to pay that mortgage.
  So when people tell me you cannot get consumer protection, when that 
automobile company a few weeks ago had to recall its cars because the 
accelerator got stuck, they got recalled. Did Dolores King get her 
mortgage recalled because it was faulty, when she lost her home? That 
is what consumer protection does. If you are in the business of 
financial services and products, having someone watch out for the 
average citizen ought not be such a radical idea when we talk about 
financial reform.
  We have this in a way, on a bipartisan basis, I might add, that sets 
up an independent consumer protection agency housed at the Federal 
Reserve. Its director is appointed by the President and confirmed by 
the Senate. It has the authority to write rules on consumer protection 
in the financial services area where financial products are involved.
  Then of course it has examination and enforcement authority--only for 
those institutions that have assets more than $10 billion--for 
enforcement; otherwise, it is done at the local level. The rules are 
the same. We don't write any more rules. The rules are there. They have 
been around in some cases for 50 years--truth in lending, fair credit, 
RESPA--all of these laws in place. All we are saying, can someone 
enforce them and examine institutions and determine whether they are 
living up to them?
  Right now there are seven agencies that have a consumer protection 
division. For a huge part of our economy, no one is watching them. One 
of the very legitimate complaints our community banks make: We get 
regulated but that guy down the street, that payday lender, no one is 
watching out what he is doing every day, and we are disadvantaged. Our 
bill stops that. If you are a payday lender, you are under the same 
rules that banks would be under--at least have someone watching out 
there. That is a major step forward. We recognize a major part of our 
economy's collapse or near collapse was in the shadow area of our 
economy. Our legislation fills those gaps.
  We understand, or should understand, how important having an 
independent agency with rulemaking authority is. Again, the issue is--
wait a minute, you have to be careful, Senator, because you have safety 
and soundness and the prudential regulators have to be considered in 
all this. That is a legitimate point. I don't disagree with that, 
although I think sometimes the accusation that there is this great 
conflict is exaggerated. Our bill says the prudential regulators have 
to examine and look at the rules coming out. If they vote, two-thirds 
of them, and say that rule creates a conflict or some problem, it does 
not go into effect. There is not another agency in government that can 
have its own regulations or rules vetoed by another group of 
regulators. That was a suggestion, again, by Republican colleagues to 
include in our bill, to provide the kind of safeguards against 
potential conflicts of interest between safety and soundness and 
consumer protection.
  Again, that today with seven agencies tasked with consumer 
protection, not one of which did the job to anyone's satisfaction in 
the lead-up to this crisis, ought to be justification alone for what we 
are trying to do. Our legislation will have an independent director 
appointed by the President and confirmed by this body, as I said. They 
will have a dedicated independent budget paid for by the Federal 
Reserve Board.
  The proposal we are being asked to vote on adds additional 
assessments to banks and to nonbanks. We just got through adopting the 
Tester-Hutchison amendment regarding assessments, to reduce the 
assessments on community banks. If you adopt the Shelby amendment, you 
are going to add assessments on again. Here we vote on one hand to take 
them away, and now with an amendment--this asks to put them back on and 
is asking our community banks for additional assessments to cover the 
activities of nonbanks. I thought I heard my colleagues say around here 
we ought to be more sensitive to what is happening at the community 
bank level. Yet this amendment my colleagues are going to be asked to 
vote for does the opposite. So be very careful when you get up and vote 
for this amendment to explain why, later, if in fact it gets adopted, 
this bill does, why we are adding assessments to those banks.
  Our bill will have an office of financial literacy to ensure 
consumers are able to understand the products and services being 
offered, which was a major problem in the last crisis, and a national 
toll-free consumer complaint hotline so Americans have somewhere to go 
when they need to report a problem.
  Our bill will make us empowered to write consumer protection rules 
governing any institution, bank, or payday lender that offers consumer 
financial services or products, and only those businesses that do that. 
In short, we are ending the alphabet soup of distracted and ineffective 
regulators and

[[Page S3302]]

replacing it with one single, empowered, focused cop on the consumer 
protection beat.
  Again, a complaint, I think legitimately, is when you have seven 
agencies with consumer protection jurisdiction--I think the lack of 
clarity is important. My colleagues should understand that. My 
colleague from Alabama has come out with a Republican substitute for 
the consumer protection bureau. I am surprised. I know my friends were 
not going to agree with the consumer protection provisions as strongly 
as some of the ones in my bill, and in some of my more pessimistic 
moments I thought they might want to maintain the status quo, but this 
is worse than the status quo. This is a major step back. This 
substitute actually goes backward, making it easier for unscrupulous 
lenders to rip off the American public, businesses, and families. It is 
a stimulus package for scam artists, that is what it is, this 
amendment; nothing short of that. For the life of me, I cannot 
understand, after months of hearings, months of analysis, months of 
discussion regarding the fact this financial crisis started with a 
failure of consumer protection, anyone would think that the right 
solution is less consumer protection. Yet that is exactly what this 
amendment does.
  It is as though we are in a deep hole and we spent a full year 
debating how to get out and our Republican friends' solution is: Keep 
digging.
  I am going to walk through the provisions of their substitute but, in 
short, here is why it is simply unacceptable.
  First, when it comes to writing new consumer protection rules, the 
Wall Street substitute--and that is what it is--relies on the same 
regulators who screwed up the country in the first place. Why would you 
ask them to do it again?
  Second, when it comes to enforcing rules, their plan actually makes 
things worse, reducing regulators' ability to stop rip-offs and leaving 
American families even more vulnerable.
  Third, the Republicans' substitute wants to raise taxes on community 
banks and credit unions to pay for the regulation that will not even 
happen.
  Fourth, they want to make it easier to sell Americans mortgages they 
cannot afford which, if you have been paying any attention at all to 
what has been going on in the last 18 months, is the very reason we got 
into this mess in the first place, making it easier to sell Americans 
mortgages they cannot afford.
  Fifth, to top it all off, this substitute eliminates the provision of 
any consumer protection proposal that targets discrimination in 
lending. How on Earth could anyone be against ending discrimination in 
lending? Yet that is also a part of this substitute.
  If you look at how we got into the crisis and you conclude that the 
answer is to weaken consumer protection, you are doing it all wrong. 
Let me go into a bit more detail, and then I see my colleagues want to 
be heard as well.
  The first important change in the Republican substitute is, instead 
of having an independent agency write consumer protection rules, it 
puts the task in the hands of the same distracted and ineffective 
regulators who failed so badly in the first place.
  What would that mean for the consumers? Here is a preview. One of 
those regulators has already demonstrated itself to be anticonsumer, 
opposing proposed rules to keep credit card companies from 
retroactively raising interest rates on outstanding balances.
  I can speak firsthand. I am the guy who wrote the credit card bill. 
The agency that fought me on it now is going to be tasked with the job 
of protecting people from it. For the life of me, of all the agencies 
you could have picked to run this in your bill, you picked the one 
agency that has fought us on credit card reform. It is stunning to me 
that someone would actually write a substitute tasking this agency, 
knowing this was the agency that did so much damage, was opposed to the 
idea that we put limits on interest rates to be charged on outstanding 
balances. That is not putting consumer protection at the heart of our 
financial system, that is putting consumer protection in the backseat, 
where it has been for far too long.
  That is not the worst of it. The Republican substitute limits 
enforcement powers to ``large nonbank mortgage originators.'' Large 
nonbank mortgage originators--other finance companies will avoid 
enforcement unless they demonstrate a ``pattern or practice'' of 
consumer abuses. In other words, their version of the consumer 
protection agency will not be allowed to prevent abuses committed by 
commercial--or banks, or payday lenders, check cashers, credit card 
companies, debt collectors, car dealers who are involved in the finance 
business, and a wide range of the worst actors in the subprime mortgage 
industry, until it is already too late for potentially thousands of 
consumers to be protected. It is as though they want to create a police 
department that is allowed to enforce laws against littering. Maybe 
they will cut down on littering, but to leave the same regulators to 
deal with the rest of the financial sector, they are essentially 
turning a blind eye to every other kind of crime out there. In fact, it 
is like legalizing those crimes by eliminating the Federal Trade 
Commission authority to police unfair and deceptive financial practices 
in these other sectors. The substitute is worse than the status quo, 
and the status quo is very bad indeed.
  Meanwhile, the substitute raises taxes on potentially any nonbank 
financial services company. It allows the Federal Deposit Insurance 
Corporation to raise assessments on banks, including community banks 
and credit unions. In fact, their plan would ask credit unions to pay 
for the regulation of their nonbank competitors--the same competitors 
who will be getting a free ride, exempted from any Federal oversight 
whatsoever.
  Our plan is to have the Federal Reserve pay for enforcement. Their 
plan is to have community banks pay for enforcement, and then do not 
have the enforcement, of course. That is a tax increase they don't need 
and one that our depository institutions, so critical to rebuilding our 
economy, cannot afford.
  The amendment also prohibits the establishment of strong mortgage 
underwriting standards. We all know how important it is to establish 
better underwriting standards. If we had rules in place 2 years ago 
that required banks and mortgage lenders to make loans only to people 
who could show that they have the ability to repay them, we would not 
be in this mess--if that had been the case.
  The amendment before us would prohibit the new division we have 
proposed to create from issuing commonsense rules like these. If you 
had to pick one thing in this bill to undermine and ensure that we have 
another financial crisis, in my view, this would be it.
  The substitute also eliminates as an objective of the new consumer 
division the goal of eliminating discrimination. I believe this goal is 
essential to restoring America's faith in our markets.
  In short, I find it impossible to work with this proposal. There are 
ideas I am willing to listen to, that we might define ``significantly'' 
and things like that. That is fine. I understand that. But this 
approach does more damage than you can imagine.
  Again, to go back to what I said at the outset, we have spent a lot 
of time talking about what happened to the big firms on Wall Street and 
what happened to large institutions and large manufacturers. The root 
cause of the problem we are in began because there was a total 
disregard for small businesses and families and individuals out there; 
that they could take advantage of them, as they did, because they could 
sell off--they could get paid immediately, they securitized these 
crummy mortgages out there, leaving that home owner in a situation they 
could never afford to sustain, and the house of cards came tumbling 
down. And it all began--it all began--with that problem.
  I say, respectfully, this proposal goes right at the heart of the 
very issue we must address in this bill, in addition to all of the 
other aspects we are talking about. There is no more very important 
vote we will cast, in my view, in this debate than this one. If we walk 
away from providing the safeguards for the average American--I do not 
care what their politics are, what their ideology is, anything else, 
they deserve to know in this debate, at long last, they are being 
considered, that watching out for them is part of this.

[[Page S3303]]

  The outrageous case that this somehow reaches into retailers and 
merchants is highly offensive to me. It is the last thing I would ever 
suggest to my colleagues, that we somehow get into the business as 
Federal regulators of poring over florists and dentists and butchers 
and accountants and lawyers. Nothing could be further from the truth.
  This goes after those businesses involved in financial services and 
products. It does so in a way that provides clarity, provides an 
opportunity for those institutions to be regulated, to know what rules 
they have to follow, and who is in charge of insisting that they meet 
those obligations.
  So with that, I urge my colleagues to vote against this amendment. My 
hope is we will vote fairly soon. Again, we have hundreds of amendments 
that people want to be heard on, and we do not have all of the time in 
the world to deal with it. So we have to move on on these issues.
  I think people understand the debate. They can read the amendment. I 
urge you to read 1027 in our bill, the section dealing with consumer 
protection, dealing with who is covered. Then we will have a vote.

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