[Congressional Record Volume 156, Number 67 (Thursday, May 6, 2010)]
[Senate]
[Pages S3303-S3333]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     RESTORING AMERICAN FINANCIAL STABILITY ACT OF 2010--Continued

  The PRESIDING OFFICER. The Senator form North Dakota is recognized.
  Mr. DORGAN. Madam President, I will join my colleague from 
Connecticut in opposing the amendment on the floor if it weakens the 
underlying bill, but I do not come to speak about that proposal at the 
moment. I wanted to speak about an amendment I have discussed 
previously on the issue of too big to fail.
  There is much yet to do on this subject of too big to fail. I recall, 
in a room just steps from here, on a Friday, I believe it was, the 
Treasury Secretary leaning over the lectern in a very stern way saying 
to the caucus that I was involved in, if within 3 days a three-page 
bill granting $700 billion to the Secretary of the Treasury, with which 
to provide funds to stabilize some of the biggest financial 
institutions in the country, if that did not come about, our economy 
could very well collapse completely.
  I remember that moment and remember thinking that it was pretty 
bizarre that our country got to that point: that all of a sudden 1 day, 
after being told month after month that the economy was strong, the 
economy was in good shape, that there were some ripples and hiccups 
here and there, but things were on course and we had confidence in the 
strength of the economy, that we were now being told the economy may 
well collapse in days unless the Congress comes up with $700 billion.
  Why was that the case? Because institutions that were so large in 
this country, at the top of the financial industry, were so important 
to the economy that their failure could very well result in failure of 
the entire American economy. That is what is called too big to fail.
  Let me show a chart that shows the six largest financial institutions 
in the country and what has happened to them since 1995. This is their 
growth as a percentage of GDP. It shows that they are getting larger 
and larger and larger and much larger. Even during this period of near 
collapse, the same institutions that were judged too large to fail and 
judged to represent a grave risk to the entire economy have gotten 
larger than just too big to fail.
  We had a vote yesterday, but that cannot be the end of this 
discussion about how to address too big to fail. The vote yesterday was 
rather Byzantine, as far as I was concerned. I was not someone who was 
a big fan of the $50 billion to be pre-funded for resolution of too-
big-to-fail companies. But having said that, to decide that the $50 
billion, which would come from the very institutions that are too big 
to fail, should be abolished, and that the funds instead would come 
from the FDIC, which are initially funds from the American taxpayer, 
made no sense to me. Then suggesting that it will be all right because 
the FDIC will be repaid with the sale of assets--oh, really? Well, 
firms that are too big to fail that are going to get in trouble in the 
future are not going to have very many assets. They are going to be in 
trouble because of dramatic amounts of overleverage, leverage that goes 
far beyond their ability to continue to do business. And when the firm 
comes tumbling down, I fail to see where assets are going to exist in 
substantial quantity to repay the taxpayer.
  But that was yesterday. I did not support that. That was yesterday. 
This issue of creating a circumstance of early warning on too-big-to-
fail firms is not satisfactory to me. The only way to resolve too big 
to fail is to abolish too big to fail. I mean abolish too big to fail. 
That means having firms that are not too big to fail, that will not 
cause a moral hazard or a grave risk to the entire economy should they 
fail.
  Do you believe that is the case with this graph? Is there anything 
here that--as this graph shows, we have firms that are too big, far too 
big to fail. Is there anything here that is going to solve that in this 
bill? The answer is no. The only direct and effective way to address 
this is to decide, if you are, in fact, too big to fail, then there has 
to be some sort of divestiture or dissolution to bring that firm back 
down to a point where in size and scope such firm is not too big to 
fail and is not causing the kind of dramatic special risk to the 
country's economy that it would bring the economy down with it.
  That is the only direct and effective solution. Is that radical? 
Well, I have an amendment that requires that if you are determined to 
be too big to fail, then we begin a process, over 2 years, of breaking 
away those parts that make you too big to fail. Is it a radical idea? I 
do not think so.
  One-fourth of the Board of Governors of the Federal Reserve Board 
says we ought to do that. Richard Fisher, president of the Dallas Fed: 
Too big to fail is not a policy, it is a problem. Too big to fail means 
too big period. We ought to break them up.
  Federal Reserve Bank of St. Louis, James Bullard, president and chief 
executive officer: I do kind of agree that too big to fail is too big 
to exist.
  The economist, Joe Stiglitz, Nobel Prize winner: Too-big-to-fail 
banks have perverse incentives. If they gamble and win, they walk off 
with the proceeds. If they fail, taxpayers, pick up the tab.
  Alan Greenspan--I seldom, if ever, agree with Alan Greenspan, but I 
have used a quote of his to describe where we are now. He was around 
sitting on his hands for a good many years while these problems 
developed, despite the fact that he had the authority to have avoided 
them. Then he has written a book acting as if he was exploring the 
surface of Mars while all of this went on.
  But now he says: The notion that risks can be identified in a 
sufficiently timely manner to enable the liquidation of a large failing 
bank with minimum loss has proved untenable during this crisis, and I 
suspect in the future crises as well.
  Simon Johnson, professor of entrepreneurship, the Sloan School: There 
is simply no evidence, and I mean no evidence, that society gains from 
banks

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having a balance sheet larger than $100 billion.
  I do not know whether I agree or disagree with that. But his point is 
that too big to fail means too big.
  Arnold King, Cato--I seldom quote Cato on the floor of the Senate. 
But, you know, strange bed fellows: Big banks are bad for free markets. 
There is a free market case for breaking up large financial 
institutions--that our big banks are a product not of economics but of 
politics.
  The president of the Federal Reserve Bank of Kansas City, this is the 
third Fed president: I think they should be broken up. And in doing so, 
I think you will make the financial system itself more stable, more 
competitive, and I think you will have long-run benefits over our 
current system.
  We broke up Standard Oil in this country into 23 different pieces. It 
turned out the 23 pieces were more valuable than Standard Oil was. I am 
not saying just go in and break up things just for the purpose of 
breaking up. I am saying this: If there is a standard by which we judge 
that an institution is too big to fail and causes a dramatic risk to 
the economy as a whole should it fail, a moral hazard, unacceptable 
risk to the entire economy, then it seems to me like this issue of 
creating early warnings and stop signs and sirens and so on is largely 
irrelevant.
  What we need to do is do something direct and effective and something 
we all knew we should do; that is to say, if you are too big to fail, 
and judged to be so, and judged to pose those kinds of risks to our 
economy, then you must break off pieces. We would, over a 2-year 
period, require that to happen until you are not too big to fail.
  Let me show a couple of quick charts. This one shows the top 
financial institutions: The Big Get Bigger. This chart shows the same 
thing, measuring assets and liabilities: The Big Get Bigger. Much, much 
bigger. The first chart I showed today demonstrates why, if we do not 
pass the amendment I suggest, we can thumb our suspenders and crow all 
we want in every hallway in this Capitol Building, but we will have not 
done what was necessary to be done to address too big to fail. We just 
will not do it.
  So I have an amendment. I am here because I am pestering those who 
are lining up amendments to make certain I have a chance to debate and 
vote on that amendment, and that will be the test of whether this 
Congress has learned a lesson; whether, when someday a Treasury 
Secretary leans over a lectern and says: If I do not get $700 billion 
to bail out the big interests that ran this country into the ditch, our 
whole economy is going into the ditch.
  So I hope very much that we will have the opportunity to both simply 
and effectively do what is necessary to finally and thoughtfully 
address this issue of too big to fail.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Colorado.
  Mr. BENNET. Thank you, Madam President.
  I see our chairman and the ranking member over here from the Banking 
Committee on which I serve, and I want to congratulate them for their 
hard work in getting this legislation to the floor. We are finally 
doing some work around here, and we are doing it in a bipartisan way.
  I think this bill is going to improve over the course of this debate. 
It is an enormously important opportunity to safeguard our economy from 
the reckless danger that got us into this financial mess. I am hopeful 
we can wade through all this Washington wrangling and get something 
done to protect America's financial future.
  There is a shared understanding of what got us here, and that is the 
good news. Some on Wall Street took all the risk. Yet it is the 
American people who paid the price. Small businesses, homeowners, and 
working families were forced to come in and clean up this mess.
  It is our responsibility to learn the lessons from the last collapse 
to help this economy recover and to head off the kinds of problems that 
could lead to another financial crisis. In short, we have to fix this 
economy, ensuring there will never have to be another taxpayer-
sponsored bailout.
  As someone who sits on both the Agriculture and Banking Committees 
which share jurisdiction over this bill, I can assure you that this 
package reflects months of hard work and incorporates ideas and 
concepts from both political parties. We have examined the problems 
that brought us to the financial brink nearly 2 years ago, and together 
these two committee bills created a thoughtful and comprehensive plan 
to increase transparency, reduce systemic risk, and strengthen our 
commitment to protecting consumers.
  In reviewing the merits of the bill, I think it is important to 
analyze how it would have addressed so many of the problems that led to 
the financial collapse in 2008. Too often, we do not ask the question, 
What problem is it we are trying to solve, and then we get busy either 
solving problems that did not exist or creating unintended consequences 
from our work. I think we have worked hard on this legislation for this 
not to be so.
  Had this legislation been the law of the land, we would not be 
talking about that $700 billion taxpayer-funded rescue of our Nation's 
largest bank holding companies. We would have been able to see many of 
the dangerous trends develop earlier, and we would have required these 
systemically risky companies to have more capital and less debt. Had 
any of these companies failed, we would have resolved them without 
transforming them into wards of the state, like AIG.
  Second, had a strong consumer protection infrastructure existed, we 
could have stopped the subprime mess before it spiraled out of control. 
For example, subprime giant Ameriquest would have been subject to 
meaningful rulemaking and enforcement authority. And while I prefer a 
wholly independent agency, this bill represents substantial and 
meaningful progress on a consumer protection front.
  Third, had the bill's derivatives reforms been in place, it is much 
less likely--much less likely--that the Federal Government would have 
been forced to spend tens of billions of taxpayer dollars to rescue AIG 
from its own sloppiness and greed.
  In total, the plan before us represents a strong and thoughtful 
measure that rewrites the rules of the road for Wall Street. And 
through the amendment process, we can make it even better.
  For example, I think we need to ensure that certain State-chartered 
community banks that did little to contribute to the current crisis do 
not have to change their prudential regulator. In so many of our towns, 
community banks play an important role in providing credit to our local 
economies. Many of these small institutions are struggling due to this 
difficult economy, which means less available credit for families and 
small businesses. I have concerns that a change in prudential 
regulation may exert further pressure on these small banks which 
continue to serve their local communities. It is my hope we can balance 
the need to reduce regulatory arbitrage while preserving the existing 
prudential supervisory structure for some of these State-chartered 
banks.
  I also believe it is time for us to take advantage of this 
opportunity to begin to move away from the last bank bailout, the TARP. 
While there are 100 opinions in this Chamber about how effective TARP 
was, there really is a broad consensus here and in the country that it 
is time to wind down TARP, recapture what we can for taxpayers, and 
prevent banks from tapping into the Treasury going forward. That is why 
in the coming days I will be pushing bipartisan legislation that will 
do exactly that. It would use recaptured TARP funds, borrowed from our 
children--$180 billion so far and counting--for deficit reduction, and 
it would take important steps to end the TARP.
  More broadly, I also think we need to be aggressive about 
strengthening this bill to further protect consumers. I will be 
supporting amendments which do exactly that.
  When it comes to Wall Street reform, we simply cannot afford to delay 
any longer. Recently, the TARP inspector general underscored this point 
better than I could. He stated:

       [E]ven if TARP saved our financial system from driving off 
     a cliff back in 2008, absent meaningful reform, we are still 
     driving on the same winding mountain road, but this time in a 
     faster car.

  In short, bailing out companies has made the future risk to our 
financial system even worse, by creating the

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moral hazard that a financial firm that participates in risky behavior 
is going to somehow be bailed out by the government, by the taxpayer. 
This Wall Street reform package takes a strong step toward restoring 
some degree of sanity in our financial system and making that moral 
hazard a thing of the past.
  Finally, Coloradans and the American people are expecting us to act. 
I am confident we are going to succeed. Lobbyists may have been able to 
slow down Wall Street reform temporarily, but the American people want 
it, as well they should. We are getting closer and closer every day to 
sustaining a workable bill that can pass this Chamber and that we can 
eventually send to the President for his signature. We cannot allow the 
status quo to maintain its grip on our financial system. We have to 
work together and pass this groundbreaking reform package.
  I want to close, again, by thanking the chairman of the Banking 
Committee, who is here in the Chamber, for his leadership throughout 
the months, not just on this issue but on health care as well but 
particularly for sticking with this issue. I do not think we would be 
having this debate right now were it not for the work the chairman did. 
As a member of the Banking Committee, I appreciate it very much.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Madam President, before turning to my colleague from New 
York, let me say how fortunate I have been as chairman of the committee 
to have Senator Bennet as a member of our committee. I want to thank 
him immensely. He is a new member of the committee, but, again--like 
the Presiding Officer, like my other colleague from New York--I cannot 
tell you how valuable it has been having people who understand this 
issue and who bring to this Chamber a previous life rich with the 
experience of understanding these issues. So let me thank the people of 
Colorado for having the Senator here. What a difference the Senator has 
made in the consideration of this legislation.
  Some of the newest members of the committee--and I think my 
colleague, the senior Senator from New York, would acknowledge this--
some of the newest members of our committee made some of the most 
valuable contributions to this product, which is further evidence that 
you do not have to be here that long. In fact, sometimes maybe the 
shorter time you are here, you bring that kind of fresh experience from 
our States and across the country.
  So I did not want the moment to pass without expressing to Michael 
Bennet of Colorado my deep, deep appreciation. I say to the Senator, I 
thank you for your leadership, your thoughtfulness, and the 
contributions you have made not only to this product but to others 
during your tenure.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. First, Madam President, I wish to join my friend from 
Connecticut in praising Senator Bennet, who has had an amazing effect 
and a steady hand in bringing this bill to the floor. I also thank my 
colleague from Virginia, Senator Warner. The new Members have had a 
tremendous effect on this bill. This reflects the way the Senate works 
these days, and I think it is all for the better. Having their input 
and experience has been vital.
  But, Mr. Chairman, I would also say that you are full of fresh ideas 
and vim and vigor. Just because you have been around here a long time 
does not mean that----
  Mr. DODD. Thank you.
  Mr. SCHUMER. In fact, you have had the wisdom to encourage some of 
our new Members to actively participate, and confidence to do that as 
well.
  I also do not want to fail to note my colleague from New York, 
Senator Gillibrand, the Presiding Officer, who has done a fabulous job, 
too, particularly on the agriculture portion of the bill on the 
committee on which she sits.


                           Amendment No. 3826

  Madam President, I come to the floor today and rise against the 
consumer amendment posed by Senator Shelby that is before us. I come to 
the floor to speak about the need for a strong independent consumer 
watchdog. I am here to talk about the proposal put forward by some of 
my Republican colleagues to place a new consumer protection division 
within the FDIC and significantly reduce the ability of that division 
to carry out its mission.
  The amendment before us greatly weakens the bill in terms of consumer 
protections. In fact, it is not just a step backward from the bill 
before us, it is a step backward from the status quo. If we were to 
pass the amendment on the floor, consumer protections, weak as they are 
today, would be even weaker. This amendment would leave the consumer 
naked and unprotected. This amendment strips the bill of some of its 
strongest protections. Not every financial institution preys on 
consumers, but those that do would be given too free a hand if this 
amendment were to pass. I urge strong opposition to it.
  Let me explain. One of the roots of this financial crisis was, 
undoubtedly, that total failure of our consumer protection regime. 
Americans were sold products they did not understand and could not 
afford by mortgage originators eager for a fee and happy to sell those 
loans off into the great securitization machine which was given a 
virtual carte blanche by the credit rating agencies.
  After the events of the last several years, no one can argue that 
fundamental reform of our consumer protection regime is not necessary. 
No one can argue the status quo is the way to go. The status quo simply 
will not do. There is no accountability in the current system. Consumer 
protection is split among seven different regulatory agencies. For that 
reason, I was an early supporter of efforts to create a truly 
independent consumer protection agency, and I am still working with 
many of my colleagues, including Senator Jack Reed and Senator Durbin, 
to strengthen the provisions of the bill proposed by Chairman Dodd.
  One of the key authorities of any new consumer protection division or 
agency is that it must be able to adopt rules to protect consumers 
without being overruled by banking regulators who would rather allow 
banks to pad their bottom lines by fleecing consumers with hidden fees.
  Some argue that you cannot split consumer protection from safety and 
soundness. But historically, in the present setup, every time there is 
a conflict, the consumer loses. Consumers deserve an accountable 
regulator with oversight of consumer financial products as its primary 
objective, not as an afterthought.
  The Republican proposal being discussed is totally inadequate. It 
would allow the same bank regulators, who have stood in the way of 
meaningful consumer protections for years, to veto consumer protection 
rules proposed by the head of the new division.
  For example, the Comptroller of the Currency, who publicly opposed 
the Fed's new credit card rules, would, under the Shelby amendment, get 
to vote on future credit card rules. So the regulators who do not 
really care--some of them--about consumer protection would be given 
veto power.
  The division would have no examination or enforcement power over any 
bank of any size or any of its affiliates. Some of the worst actors in 
the subprime mess were bank affiliates or subsidiaries. Even worse, it 
could only do examinations of nonbank consumer finance companies if 
they ``demonstrate a pattern or practice of violations'' of consumer 
law--in other words, only after consumers have been harmed repeatedly. 
That is what one could call too little, too late. Even the Fed recently 
deleted this requirement from rules governing subprime mortgages 
because it hampered enforceability of those rules so severely.
  Even the banks want the new consumer division to be able to enforce 
its rules at nonbanks. This is amazing. Some of the most rapacious 
institutions that prey on consumers are not banks. They operate outside 
the scope of the Federal regulatory authorities. They are often 
responsible for many of the most egregious abuses and predatory lending 
practices. Many of the products provided to consumers by these nonbanks 
played a direct role in the financial crisis. And many of these 
businesses--payday lenders, rent-to-own companies--currently operate 
below the radar screen to prey on vulnerable communities. How can we 
exempt some of these payday lenders and

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rent-to-own companies? I have seen them prey on poor people in my 
State. How can we exempt them from regulation when they often are worse 
than many of the financial institutions?
  The Republican amendment would also prohibit the consumer division 
from issuing any rules ``that affect any underwriting standards'' of 
deposit institutions and their affiliates. After the crisis we just 
went through, which was in large part created by bad mortgage 
underwriting standards, I cannot believe anyone can propose this with a 
straight face because--let me repeat what it does. The consumer 
division cannot issue rules ``that affect any underwriting standards'' 
of deposit institutions. It is saying: Let's repeat the mortgage 
crisis. It makes no sense.
  If this consumer division were in place in 2008--the one proposed by 
my colleagues here--it would not have had the power to write the 
mortgage rules establishing the minimum ability to pay standards the 
Fed issued. As we know, the Fed was not an extreme watchdog in any 
     sense. I have worked long and hard in the area of consumer 
protection. I have worked with these regulators. I have seen how slowly 
they work. It took more than 10 years to get them to go along with the 
so-called Schumer box, where credit card interest rates were made clear 
and visible to prospective credit card purchasers. It worked. But why 
did it take so long? Then, when the banks came with new ways of getting 
around the rules, again, it took me forever to get the Fed to move 
because the Fed, frankly--and Chairman Bernanke to his credit admitted 
this--did not make consumer protection a high enough priority.

  So we need, in my judgment, an independent agency. That would be the 
best solution. Second best would be an agency, even if it is within the 
Fed, that is largely independent in both the rules it can promulgate 
and its enforcement. We need strong, forward-looking financial reform. 
I have always said I want the reform to be constructive, not punitive. 
But if we go through all this and fail to leave consumers better 
protected than they were before this crisis, we will have totally 
failed in our mission to serve the American people.
  I strongly urge that this amendment be rejected by a large and 
hopefully bipartisan majority.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wisconsin.
  Mr. FEINGOLD. Madam President, I am glad the Senate is finally 
considering the critically important issue of financial regulatory 
reform. Few things are as important as ensuring we never again suffer 
the kind of meltdown of the financial markets that shoved our economy 
into the worst recession since the Great Depression. I think it still 
remains to be seen if this bill will do that. While it certainly 
includes some good reforms, more needs to be done, and the track record 
of Congress in this area is, at best, checkered.
  For the last 30 years, Presidents and Congresses have consistently 
given into Wall Street lobbyists and weakened essential safeguards. As 
has been the case in so many areas, members of both political parties 
are to blame. Legislation that paved the way for the creation of 
massive Wall Street entities and removed essential protections for our 
economy passed with overwhelming bipartisan support. From the savings 
and loan crisis in the late 1980s to the more recent financial crisis 
that triggered the horrible economic downturn from which we are still 
recovering, those three decades of bipartisan blunders have been 
devastating to our Nation. The price of those blunders has been paid by 
homeowners, Main Street businesses, retirees, and millions of families 
facing an uncertain economic future.
  The impact of the recent financial crisis on the Nation's economy has 
been enormous. Millions have lost their jobs and millions more who are 
lucky enough to have a job are forced to work fewer hours than they 
want and need to work. According to a study done by the Pew Trust, the 
financial crisis caused American households an average of nearly $5,800 
in lost income. Of course, families lost a significant amount of their 
personal savings. As a nation, we lost $7.4 trillion in stock wealth 
between July 2008 and March 2009 and another $3.4 trillion in real 
estate wealth during that same time. We simply cannot afford to 
continue down the path policymakers have set over the past 30 years.
  The test for this legislation then is a simple one: Whether it will 
prevent another financial crisis. Central to that test will be how this 
bill will address too big to fail. This is a critical issue that has 
been growing for some time now as increased economic concentration in 
the financial services sector has put more and more financial assets 
under the control of fewer and fewer decisionmakers.
  Years ago, a former Senator from Wisconsin, William Proxmire, noted 
that as banking assets become more concentrated, the banking system 
itself becomes less stable, as there is greater potential for 
systemwide failures. Sadly, Senator Proxmire was absolutely right, as 
recent events have proved. Even beyond the issue of systemic stability, 
the trend toward further concentration of economic power and economic 
decisionmaking, especially in the financial sector, simply is not 
healthy for the Nation's economy.
  Banks have a very special role in our free market system: They are 
rationers of capital. When fewer and fewer banks are making more and 
more of the critical decisions about where capital is allocated, then 
there is an increased risk that many worthy enterprises will not 
receive the capital needed to grow and flourish. For years, a strength 
of the American banking system was the strong community and local 
nature of that system. Locally made decisions made by locally owned 
financial institutions--institutions whose economic prospects are tied 
to the financial health of the community they serve--have long played a 
critical role in the economic development of our Nation and especially 
for our smaller communities and rural areas.
  But we have moved away from that system. Directly as a result of 
policy changes made by Congress and regulators, banking assets are 
controlled by fewer and fewer institutions, and the diminishment of 
that locally owned and controlled capital has not benefited either 
businesses or consumers. Of course, most dramatically, taxpayers across 
the country must now realize that Senator Proxmire's warning about the 
concentration of banking assets proved to be all too prescient when 
President Bush and Congress decided to bail out those mammoth financial 
institutions rather than allowing them to fail. That was a bailout I 
strongly opposed.
  The trend toward increased concentration of capital was greatly 
accelerated in 1994 by the enactment of the Riegle-Neal Interstate 
Banking and Branching Act and especially in 1999 by the enactment of 
the Gramm-Leach-Bliley Act, which tore down the protective firewalls 
between commercial banking and Wall Street investment firms.
  Those firewalls had been established in the wake of the country's 
last great financial crisis 80 years ago by the Banking Act of 1933, 
the famous reform measure also known as the Glass-Steagall Act.
  Prior to Glass-Steagall, devastating financial panics had been a 
regular feature of our economy, but that changed with the enactment of 
that momentous legislation, which stabilized our banking system by 
implementing two key reforms. First, it established an insurance system 
for deposits, reassuring bank customers that their deposits were safe 
and, thus, forestalling bank runs. Second, it erected a firewall 
between securities underwriting and commercial banking so financial 
firms had to choose which business to be in. That firewall was a 
crucial part of establishing another protection--deposit insurance--
because it prevented banks that accepted FDIC-insured deposits from 
making these speculative bets with that money.
  The Gramm-Leach-Bliley Act tore down that firewall, as well as the 
firewall that separated insurance from Wall Street banks, and we have 
seen the disastrous results of that policy. I voted against tearing 
down the firewall that separated Main Street from the Wall Street 
banks. I did it for the same reason I voted against the Wall Street 
bailout: because I listened to the people of Wisconsin who did not want 
to give Wall Street more and more power. Wall Street was gambling with 
the money of hard-working families and too many Members of Congress 
voted to let them do it. I didn't support it before and I will not 
support it now. We

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have to get this legislation right and protect the people of Wisconsin 
and every State--protect them from something such as this ever 
happening again.
  So I was pleased to join the Senator from Washington, Ms. Cantwell, 
and the Senator from Arizona, Mr. McCain, in introducing legislation to 
correct that enormous mistake Congress made in passing Gramm-Leach-
Bliley. I look forward to supporting an amendment to this measure based 
on the Cantwell-McCain-Feingold bill.
  The measure before us seeks to make up for the lack of a protective 
firewall between the speculative investment bets made by Wall Street 
firms and the safety net-backed activities of commercial banking by 
imposing greater regulatory oversight. We have seen how creative 
financial firms can be at eluding regulation when so much profit is at 
stake. No amount of regulatory oversight can take the place of the 
legal firewall established by Glass-Steagall. So when it is offered, I 
urge my colleagues to support Senator Cantwell's amendment to restore 
that sensible protection. Rebuilding the Glass-Steagall firewall is 
essential in preventing another financial crisis.
  But even if we restore Glass-Steagall, there are additional steps we 
should take to address too big to fail in this bill. I am pleased to be 
joining the Senator from North Dakota in offering his amendment to 
address the problem directly by requiring that no financial entity be 
permitted to become so large that its failure threatens the financial 
stability of the United States. I am also looking forward to supporting 
an amendment that will be offered by the Senator from Ohio, Mr. Brown, 
and the Senator from Delaware, Mr. Kaufman, who is in the Chamber, that 
proposes bright line limits on the size of financial institutions. The 
disposition of those three proposals I have just reviewed will go a 
long way in determining my vote for the final version of this measure. 
I very much want to craft in this body a bill that can prevent the kind 
of crisis we experienced in the past, but the bill before us needs some 
work before we can legitimately make that claim.
  I thank the President and I yield the floor.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. REED. Madam President, the Republican side has submitted a 
consumer protection amendment that can be briefly summarized: Buyer 
beware because they won't help you. This flows from the very simple 
premise that they have announced from the very beginning of these 
discussions and deliberations they do not want an independent consumer 
protection agency that has the authority to make rules and enforce 
rules to protect consumers. So what they have suggested is a classic 
bait and switch. We will create an ``agency'' within the FDIC, and then 
we will deny them the power to regulate most of the financial sectors 
and institutions that affect the daily lives of Americans: payday 
lenders, car loans, all those things. They are just off the table. So 
it amounts to a gesture, not good legislative policy.
  We are working, and we have been working--and Senator Dodd has taken 
the lead--to ensure that there is real consumer protection built into 
this Wall Street reform legislation. We believe consumers need 
information to make good choices. The thrust of our efforts is to 
ensure that the agency is able to provide that information through 
simplified forms, through simple products, through those mechanisms 
that allow men and women who are engaged in raising children, keeping 
jobs, coaching Little League, to understand what they are putting their 
resources into.
  That is not what the Republican amendment is proposing to do. They 
are creating a six-person council within the FDIC with no real 
independence and even less authority, and one could question why the 
FDIC is the logical place to put in a council such as this. They would 
create an oversight agency but exempt, as I said, virtually an entire 
financial sector or sectors from oversight. It is not like a watchdog; 
it is like a lapdog. It is bureaucracy with no bite.
  The Dodd bill, in contrast, contains a very robust consumer 
protection provision. It creates a Consumer Financial Protection Bureau 
with resources--I wish to emphasize resources--and authority to 
prohibit abusive practices and deceptive financial products, ranging 
from credit card companies to mortgage brokers to banks and to others. 
For example, it would hold the credit card companies accountable and 
eliminate unfair lending practices, such as penalty fees for paying off 
your debt on time.
  One of the big efforts we are undertaking is increased transparency 
for Wall Street, and this consumer protection agency will provide that 
protection to consumers. Basic economics, Econ 101: In a competitive 
marketplace, one of the presumptions is perfect information. We have 
seen, frankly, that individuals on Wall Street have made billions of 
dollars operating on imperfect information; in fact, one could even 
suggest deliberately manipulating products so they have the information 
and the consumer doesn't.
  I think we were all taken aback when we were listening to the 
hearings conducted by Senator Levin which talked about Goldman Sachs, 
and their trader, Fabrice Tourre, described the system in rather 
evocative terms. In his words:

       More and more leverage in the system, the entire system is 
     about to crumble any moment . . . the only potential survivor 
     the fabulous Fab . . . standing in the middle of all these 
     complex, highly leveraged, exotic trades he created without 
     necessarily understanding all the implications of those 
     monstrosities.

  Well, that seems, to me, very chilling--the fact that somebody would 
admit they didn't even know the products they were selling to 
consumers--who assumed not only that they knew but also that they would 
not be deliberately misleading them. That is an example. The example 
doesn't stop on Wall Street. It extends out to Main Street, to people 
with credit arrangements, payday lenders, organizations charging huge 
interest charges, and it is designed to exploit consumers.
  The Republican proposal does little, if anything, to prevent that. I 
hope, on a bipartisan basis, as Senator Schumer suggested, we reject 
this amendment. It is, as they say in some places, all hat and no 
cattle. We have an agency, but we have no enforcement powers. We have 
an agency, but they can't enforce their rules and regulations on 
certain sectors; i.e., most of the sectors. So if we want to protect 
consumers and if we want to have efficient markets--I think one of the 
inaccurate premises that some people are suggesting is that consumer 
protection somehow is bad for business. I argue strenuously that 
consumer protection is very good for business.
  If you take care of the consumer, if they feel, and you provide, 
valued and good service--that used to be the American sort of maxim. 
That used to be the American byword for business: the consumer is 
always right; the consumer comes first.
  In the Republican legislation, the consumer comes last, not first. 
The consumer should come first. I hope this amendment will be rejected 
and that we support not only the underlying Dodd bill, but I think it 
can be improved. I commend the Senator from Connecticut who has done a 
remarkable job crafting the consumer protection agency. To accept the 
Republican amendment would be to turn our backs on consumers and reject 
essentially the old American maxim that the consumer is always right 
and the consumer comes first, and it will leave everybody in this 
country where we are today: buyer beware of the monstrosities in the 
marketplace.
  The PRESIDING OFFICER. The Senator from Delaware is recognized.
  Mr. KAUFMAN. Madam President, I also commend Chairman Dodd for his 
work on this bill. We have a good bill. I will be opposing the 
amendment presently on the Senate floor. We need a strong, independent 
consumer product finance protection agency. I have heard many different 
proposals to put the consumer product finance protection agency here, 
there, and everywhere. The problem with putting it in any institution 
like the FDIC or the Fed is that those institutions' No. 1 
responsibility is, and should be, the safety and soundness of the banks 
and financial institutions they are regulating. That is their key 
charge.
  I think the reason the Fed had a consumer product agency, which did 
not act to help consumers during the recent meltdown, was that they 
first were concerned about safety and soundness.

[[Page S3308]]

  At the same time, we have to be very careful we don't put an undue 
burden on community banks. They were not involved in what happened. We 
should make sure while we are looking out for consumers that we don't 
overregulate these local banks.
  We have a good bill. I think the too-big-to-fail part we are getting 
around to. The recent amendments on the resolution that if, in fact, 
the bank gets in trouble, we can resolve it, is a good approach. I am 
sure we will be talking about it more. It is a good approach to deal 
with the too-big part of too big to fail. We have not done enough on 
the too-big part of too big to fail.
  Let me go over a chart that shows how big these banks have become. 
This is the average assets of our major banks relative to gross 
domestic product. If you look at this chart--and I encourage comments 
from my colleague, the Senator from Ohio. If you look at this chart, 
you will see that just about the time we removed Glass-Steagall, this 
chart went absolutely through the roof.
  When you look at the concentration of the U.S. banking system, you 
see on this chart that is very similar to the first chart. It shows an 
exponential increase in concentration. This is not good for the 
country. This is not organic growth. I hear people say it is organic 
growth. This is growth from mergers. Neither chart includes the massive 
mergers that went on during 2008. This is through 2007. It doesn't show 
that Washington Mutual and Bear Stearns were consumed in JPMorgan 
Chase. It doesn't show the fact that Wachovia went into Wells Fargo, 
and Merrill Lynch went into Bank of America. It clearly shows that the 
incredible concentration just goes on.
  Alan Greenspan made a number of decisions and statements while this 
was going on about how we should proceed during the 1990s and early 
2000. He said himself that he thought self-regulation would work and 
was dismayed that it didn't. He came out with a couple statements 
recently that I was so incredibly surprised about.
  He said this:

       For years, the Federal Reserve had been concerned about the 
     ever-larger size of our financial institutions. Federal 
     research has been unable to find economies of scale in 
     banking beyond a modest-sized institution. A decade ago, 
     citing such evidence--

  By the way, moderate size, according to Andrew Haldane, the executive 
director of financial stability for the Bank of England, is $100 
billion. He said he can find no reason to have the need for economies 
of scale at banks larger than $100 billion. As you know, the present 
size of top banks are in the $2 trillion range, as high as $2 trillion.
  Continuing to quote:

       A decade ago, citing such evidence, I noted that megabanks 
     being formed by growth and consolidation are increasingly 
     complex entities that create the potential for unusually 
     large systemic risks in the national/international economy 
     should they fail. Regrettably, we did little to address the 
     problem.

  I hear people now talking about: We can't undo this. We need big 
banks to compete internationally. Alan Greenspan is saying we don't 
need these for the economies.
  Mr. BROWN of Ohio. If the Senator would yield, I thank the Senator 
for bringing out that there is such broad support, as we are seeing, 
from economists as conservative as Alan Greenspan and as progressive as 
Bob Reich, and others, who say too big to fail means simply too big. 
Our amendment will only affect the six largest banks--affect their 
size--and it will affect smaller banks in helping them be more 
competitive.
  You said something on the Senate floor yesterday that, in effect, the 
size of these banks gives them a subsidy, a roughly 75 basis point or 
three-quarters of 1 percent advantage in the capital markets. This 
amendment we have, which is gaining increasing support--we have now 10 
or 11 cosponsors to it, and we are working with people on both sides--
simply to say too big to fail is too big.
  Talk to us for a moment about how these banks get the subsidies. 
Somebody in my office said in a sense we are giving welfare to the Wall 
Street banks. Because of their size, they are getting advantage on the 
capital markets because investors, with their dollars, understand these 
banks are never going to be able to fail unless we really keep them 
from getting too big.
  Explain that Wall Street welfare that we see with these 50 literally 
trillion-dollar-plus banks, which they extract from the system.
  Mr. KAUFMAN. Sure. I don't come at this from any other area except 
how important our capital markets are. I am a market guy. I think the 
two greatest things we have are democracy and our capital markets and 
the credibility of the markets. So when I want to find out what is 
going on in a financial area, I don't do a survey of 27 people. I say: 
What is the market telling us? That is the best way. What does the 
market tell us about what is going on?
  What the market says is, if you are a big bank like one of these top 
banks--referring to the study I talked about yesterday--if you are one 
of the big banks, you get a 70 to 80 basis point advantage when you 
borrow money. You pay less than other people.
  Mr. BROWN of Ohio. So that means when one of the huge Wall Street 
banks--these six banks--is getting a three-quarters percent, roughly, 
interest rate differential--a bonus, perhaps--that means that banks in 
Delaware and Ohio that aren't so big are at a competitive disadvantage. 
I assume that also means those big banks have opportunities to get 
larger. If the playing field is not level, those toward whom it tilts 
get other advantages and grow larger and larger, making the point of 
our amendment that much stronger.

  Mr. KAUFMAN. Absolutely. Obviously, that is a key point. I am 
surprised that more of our smaller banks aren't coming forward and 
saying this isn't fair. The market says it is not fair.
  The second point is the too big to fail. You can argue that you are 
not too big to fail. But the market thinks you are, and I listen to the 
market. That is one of the important considerations. Unless people 
misunderstand--people say you want to destroy the banks, and the rest 
of that. But under our amendment, Citigroup would be reduced to the 
size it was in 2002.
  Now, were they able to compete overseas and do all the things they 
had to do then? Goldman Sachs, which is now at about $850 billion, 
under the Brown-Kaufman amendment would be down to a more reasonable 
level of just above $300 billion or around $450 billion if Goldman 
exits the bank holding company structure. You may say that is a 50-
percent decrease and that is going to hurt their opportunity. In 2003, 
they had $100 billion in assets. So all we are shrinking Goldman Sachs 
down to is 3 to 4\1/2\ times what they were in 2003.
  This is not some draconian effort. The second point we have been 
focusing on is that we also limit risk. This is not about size; we 
limit risk. I recommend everybody to read the Washington Post today--
that is where I read it--about Jimmy Cayne, former CEO of Bear Stearns. 
He testified to the Financial Crisis Inquiry Commission that, in his 
opinion, as CEO of Bear Stearns, they failed because it was leveraged 
40 times over its capital base--40 times over its capital base.
  Brown-Kaufman would cap leverage at 16 times the capital base. What 
he is basically saying is that if Brown-Kaufman had been in effect, 
Bear Stearns would not have failed.
  A lot of people have different opinions, but that is what he says. 
This is not just about size; this is about risk. What we are trying to 
do is target risk. These banks don't fail--banks are doing great now; 
profits are out the roof. You don't fail on a nice sunny day. You 
cannot sit here today and say no problem. That is why regulators don't 
do anything because, basically, banks are doing well.
  Time and again, when we had hearings before the Permanent 
Subcommittee on Investigations, we heard from Washington Mutual and 
Goldman Sachs. They said they were doing so well. How can you make them 
change? The fact that they were doing so well by turning out mortgages 
that were absolutely doomed to fail is an indication that they should 
have moved in, but the regulators didn't.
  I will not hold this out, but if you want to see what can happen 
under the worst case, look at Europe today. Look at the mess unfolding 
in Europe. Greece falters and that affects confidence in other 
countries such as Portugal, Spain, and Ireland. Europe and other banks 
have massive exposures to these countries. German and French banks 
carry a combined $119 billion in

[[Page S3309]]

exposure to Greek borrowers and more than $900 billion to Greece and 
other vulnerable Euro countries, including Ireland, Portugal, and 
Spain.
  People say: How can we compete with those big banks? Remember, we are 
only reducing Citibank to its size in 2002. How can we compete with 
Europe? Why do we want to do that? Why do we want to go in with their 
megabanks and deal with the problems they have?
  The Royal Bank of Scotland had a balance sheet basically 1\1/2\ times 
the size of the UK economy when it failed in the fall of 2008. See 
these numbers. It is 63 percent right now. Our six largest banks make 
up 63 percent of the GDP. The Royal Bank of Scotland's was 1\1/2\ times 
the size of the United Kingdom when it failed. People say the big banks 
didn't fail; it was the small banks that failed.
  I keep hearing that J.P. Morgan and Bank of America did not fail. It 
was Washington Mutual. They say there is no correlation. Megabanks, 
such as Citigroup, only survived through massive capital infusions, 
regulatory forbearance, and Federal monetary easing. Even J.P. Morgan 
has benefited from not having to write down its second lien mortgages 
and commercial real estate.
  The next thing they said when Washington Mutual failed was: How about 
that, that was a smaller bank. That was a big bank. The reason it went 
down is because we knew at the time when it failed that JPMorgan Chase 
would come in and grab it.
  I ask the question: Who is going to bail out, if something goes 
wrong, JPMorgan Chase, Bank of America, or any of these six larger 
banks? Remember, going back to Citigroup, Citigroup essentially failed 
and had to be bailed out three times in the last 30 years: in 1982 
because of the emerging market deck, 1989-1991 because of commercial 
real estate, and 2008-2009 because of residential real estate.
  Mr. BROWN of Ohio. Madam President, will the Senator yield? I 
appreciate this analysis. I hear, as we talk about the Brown-Kaufman 
amendment--and it has gotten increasing attention because an increasing 
number of people said too big to fail is too big and that if we allow 
these six banks--that chart the Senator showed originally--the largest 
six banks in the United States 15 years ago were 17 percent of our GDP 
and today they are 63 percent and growing, as Senator Kaufman 
mentioned.
  Mr. KAUFMAN. Exponentially.
  Mr. BROWN of Ohio. Look at the rate of growth. They did not grow a 
whole lot until the last 10 years, and look what happened. They are 
going to continue to grow since the Glass-Steagall repeal.
  The argument opponents of our amendment use most frequently is: We do 
not have the largest banks in the world anymore. There are larger banks 
other places. And how are our banks going to compete with these huge 
banks?
  I am intrigued by that because our banks are trillion dollar banks. I 
know there are studies that banks with assets of $300 billion and $400 
billion and $500 billion have all the economies of scale. Economies of 
scale do not work forever.
  Mr. KAUFMAN. According to Alan Greenspan.
  Mr. BROWN of Ohio. A bank that is $300 billion, $400 billion, $500 
billion has all the economies of scale as a trillion dollar bank.
  The point they make about European--we cannot compete 
internationally--it is clear from what the Senator from Delaware said, 
all of our banks, when they were smaller--smaller than the largest 
banks in the world--could compete internationally 10 years ago, and 
there is no reason they cannot compete like that today.
  I found the huge lumbering bureaucracies, whether they are a bank or 
whether they are the Center for Medicare and Medicaid Services, are not 
as flexible and nimble and cannot keep up with the market nearly as 
well if they are that big.
  The Brown-Kaufman amendment, again, does not apply to very many 
institutions. No more than five or six will be even unwound a little 
bit. We are not going to split them all up so they are small, little 
community banks. They are still clearly going to be able to compete. 
There is no question about it under the Brown-Kaufman amendment. We 
give 3 years to banks to sell off some of the assets, to spin off a 
line of business, to sell regional operations they may have in one area 
of the country to comply with this amendment.
  It is clear that as increasing numbers of people say, ``Too big to 
fail is too big,'' that if we allow these banks to keep getting bigger 
and bigger--and we see this chart where the six largest banks in total 
assets end up being 70 percent, 80 percent, 90 percent of GDP--it is 
hard for me to think that if one stumbles and is about to fail that we 
are going to let it fail, that government will let it fail because it 
will have huge repercussions because of the economic power these 
institutions have.
  Mr. KAUFMAN. We all agree the present bill is a good bill and has a 
good resolution authority that has been worked on for years. My basic 
concern is we need a little prevention in the mix.
  As I said before, when people say we cannot compete overseas, do we 
want to go where the Royal Bank of Scotland went? The Royal Bank of 
Scotland was 1\1/2\ times the UK economy when it went down. Do we want 
to get into this mix in Europe? Is this the place we want to be with 
these banks facing the problems they are going to have right now, as we 
went through this earlier? Is this the place we want to be?
  I think we go back to what Senator Dorgan was saying earlier, and I 
wish to add to that with a couple comments. Once again I quote Alan 
Greenspan. He said: ``Too big to fail, too big.'' ``Too big to fail, 
too big.''
  The idea that we should turn this over to the regulators and let the 
regulators set the rates--that is the alternative. The alternative is 
to let the regulators do it. We have good regulators now. I think that 
is fine.
  Remember several things. No. 1, the regulators did nothing. The 
regulators had the power to do most of what we are talking about. They 
did nothing in the past.
  The second thing is, we could have a new President come in and adopt 
the same policy as before that self-regulation works, hire a bunch of 
regulators to go in there, such as a number of regulators we had in our 
regulatory agencies--they were not bad people. They were smart people. 
They just basically believed self-regulation works. To quote Alan 
Greenspan for the third time in this speech, he said: ``I really 
thought self-regulation would work. I'm dismayed that it didn't.''
  We can have it come back. There are still people today who believe--
we hear it sometimes on the floor--we do not need these regulators. The 
example I use is a football game where somebody gets up and says: The 
referees keep blowing the whistle and stopping the play. Let's get the 
referees off the field and play football. That is what was going on 
around here.
  As many of my colleagues on the other side point out, there was not 
enough oversight on these regulators. But you pull the football 
referees off the field, maybe the first pileup will not be bad, but by 
the time you get to the second and third pileup, I do not want to be in 
it.
  I think we ought to go back to what our colleagues did in 1933, and 
we should regulate not for 5 years, 10 years, 15 years; we should 
regulate for generations. Much of the stuff in this bill does regulate 
for generations. We should put in the bill hardline, adopted by us to 
send a message for generations that this is not going to happen again. 
Bear Stearns is not going to be able to leverage up to 40 times their 
capital base. That is what we need to do. We need to legislate for 
generations.
  Madam President, I yield the floor.
  The PRESIDING OFFICER (Mrs. Hagan). The Senator from Tennessee.
  Mr. CORKER. Madam President, I am here to speak about the consumer 
protection title in the Dodd bill. I do want to say that while I 
disagree with my friends from Delaware and Ohio in their approach, I 
appreciate the way they have conducted themselves. I think the debate 
we have had on the floor on this bill, I say to the Senator from 
Connecticut, has been of the highest level that I can remember in a 
long time. I thank him for setting that tone. I thank my caucus for 
offering nothing but constructive amendments. People on both sides of 
the aisle have tried to do that.
  It took a while to get here, but we are on the floor. Obviously, 
there are a

[[Page S3310]]

lot of improvements people would like to make to this bill, and I think 
people are focused on doing that. I thank the Senator for setting that 
tone.
  At the same time, I do want to talk about the consumer protection 
title on which I wish to see vast improvement. I wish to see consumer 
protection take place. I think everybody in this body wishes to see 
that happen. But I believe that the consumer protection title that 
exists in this bill is one that gets back to the essence of what the 
White House has said many times, and that is: Never let a good crisis 
go to waste.
  I think the consumer protection title in this bill is a vast 
overreach. It is my hope--I know we will have a vote later today on a 
different title. If that is not successful, maybe there will be 
surgical attempts to deal with some of the problems in this title.
  For the first time in our country's history, we will be giving vast 
powers to an individual to be involved in almost every aspect of any 
type of financial transaction. Without a board, without any kind of 
check and balance, the Dodd bill creates someone heading consumer 
protection who has no one as a check and balance. This person is going 
to be able to write rules, and this person is going to be able to 
enforce those rules over our entire economy as they relate to financial 
transactions.
  I know there is a process by which if a rule is felt to be 
problematic after it is put in place--not before--after a rule is put 
in place, there is the ability of a board to actually look at those 
rules. The fact is, if a standard is set so high, it would be very 
difficult to ever overturn the rules that would be put in by this 
consumer protection agency.
  It has a vast budget. It sets its own budget, I might add. Again, 
Congress has nothing whatsoever to do with that.
  Some of the biggest problems with the consumer protection agency are 
not just that it has no checks and balance, it writes rules and 
enforces rules, it sets its own budget. On top of that, it overturns 
the way our national banking system has worked for years. Congress 
years ago decided we wanted to have a national banking system, that we 
wanted the ability of banks to operate across our country in a way that 
they had consistency, they knew under what rules they would be 
operating.
  The Dodd bill overturns that. It says there is no Federal preemption 
anymore. If States want to change laws, write laws--we could have a 
bank that operates in 50 States that has 50 different sets of 
regulations if this bill passes. That is highly problematic with banks 
that operate across our country serving companies that operate across 
our country. One can imagine a bank that tries to adhere to all of 
those States laws that might come up as a result of this bill.
  In addition, this bill then unleashes 50 attorneys general on these 
banks. That is something, again, that is not the case today. This is a 
huge overreach, and it is going to be highly disruptive to our banking 
system.
  What it is going to do, because there is no Federal preemption, is 
actually encourage general assemblies, State legislators across this 
country to become hyperactive. One of the things that State banks--not 
Federal banks, not national banks--one of the things State banks like 
about our existing laws--by the way, State banks are not these huge 
megabanks about which my friends from Delaware and Ohio were talking.
  I think State banks across the country have enjoyed--again, these are 
the smaller institutions--the fact there is something called Federal 
preemption. That has discouraged hyperactivity on behalf of State 
legislators to create laws that might be populist in nature, that might 
be done to, in essence, use our financial system for other ends.
  One of the things I think is most disruptive about this legislation 
is that--if you can imagine this--I think all of us realize what led to 
this last crisis is the fact that we had very poor underwriting of 
loans. That is the essence of this last crisis. It got spread around 
the world, the fact we had incredibly poor underwriting.
  I hope to fix that, by the way, with an amendment in a few days. I 
hope it comes up, and I hope it is adopted.
  What the Dodd bill does is give to a consumer protection agency loan 
underwriting standards. If you can imagine that. I would like for 
people in this body to think about that. A consumer protection agency 
being involved in setting underwriting standards for loans has to 
undermine the safety and soundness of our financial institutions. To 
me, that is a huge problem.

  All of us would like to see consumer protection take place. All of us 
would like to see it, I hope, take place in a way that is balanced, so 
the consumer protection laws that are put in place are put in place in 
a way that is balanced against ensuring that our financial institutions 
across this country are safe and sound; that people know they can go to 
those institutions and they are going to operate.
  I believe the Dodd bill, as it relates to consumer protection, is a 
vast overreach. I know people on the other side of the aisle have come 
up to me and said: Look, this is problematic, and if you guys can help 
us figure out a way to peel this back, we would like to be able to do 
that.
  We are going to have a chance, later today, to vote on a consumer 
protection amendment that has certainly brought this more in balance. 
There may be other ways of getting at it. I would urge the chairman to 
consider looking at ways to peel this back because I do believe that, 
again, we are going to awake in this country--if the Dodd bill passes 
in its present form--in 10 or 15 years and realize consumer protection 
has gotten out of hand; that consumer protection has been used, in many 
ways, to create social justice, if you will, in our financial system. 
To me, that is something that is very dangerous.
  Let me just add one other thing. There is a new word in this title 
that is undefined. It is a word that says they will also be looking to 
see if practices were abusive. But nobody knows what that means. Nobody 
knows what that means. Under this bill, by the way, if someone were to 
come in after the fact and find that something was ``abusive,'' it 
would negate the financial transaction that was entered into. So you 
could have a zealous consumer advocate come in and say: I am sorry, 
this loan that was made between two parties was abusive, and it would 
negate that transaction.
  This bill is a huge overreach. It obviously goes right along the 
lines of the White House saying you should never let a good crisis go 
to waste. This bill is going to be around for a long time, if it 
passes. So I hope what we can do, over the course of the next several 
days, during this time when we are having one of the most civil debates 
I think we have had in the Senate since we have been here--a high level 
of civil debate--I hope we will be able to put this back in balance.
  I know the Presiding Officer is from a State where people care a 
great deal about their financial institutions. So I hope to work with 
her and my friend from Minnesota and others to try to achieve that 
balance.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Madam President, I will respond more fully a little later 
because my colleague and friend from Minnesota is on the floor to be 
heard, but I just wish to say that a lot of work went into this bill on 
consumer protection.
  You don't have to wait 10 or 15 years to find out what can happen. We 
have watched painfully what can happen over the last several years, 
when the very people--the prudential regulators--should have been 
standing and saying: No-doc loans are wrong and dangerous. In fact, it 
was consumer groups that warned about the real estate bubble. We were 
being told everything was safe and sound because people were making 
money, and it looked like it might go on forever.
  Of course, everyone has 20/20 hindsight looking back as to what 
occurred. But had we had in place someone saying: No-doc loans, no 
downpayments, adjustable rate mortgages at fully indexed prices are 
going to cripple people's ability to meet those obligations, we 
wouldn't be in the situation we are in today. None of the seven 
agencies that have jurisdiction over consumer protection were doing 
their job very well.
  I will address more specifically the alternative idea being 
suggested, and let me also say I have never claimed our proposal on 
consumer protection is perfect. I acknowledge the word ``abusive'' does 
need to be defined, and we

[[Page S3311]]

are either talking about striking that word or defining it better. 
Deceptive and fraudulent cover the ground pretty well, but I thought 
abusive was a pretty good explanation point. Because it was abusive, in 
common language.
  So I will come back later, but I wished to acknowledge that we have a 
number of organizations that have endorsed this bill of ours, strongly 
support our committee bill, ranging from the Americans for Financial 
Reform, the Consumers Union, Center for Responsible Lending, the 
Consumer Federation of America, U.S. PIRG, Public Citizen, the National 
Consumer Law Center, Consumer Watchdog, and AARP.
  Of course, we are all familiar with the group representing older 
Americans. In fact, I ask unanimous consent to have printed in the 
Record, at this point, a letter from AARP, opposing the Shelby 
substitute on the consumer protection title.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                           American Association of


                                              Retired Persons,

                                      Washington, DC, May 6, 2010.
     Re Oppose Shelby substitute Consumer Protection title to S. 
         3217.

       Dear Senator: A key priority for AARP in the financial 
     reform legislation is strengthened consumer protection that 
     will help restore market accountability and responsibility, 
     rebuild confidence, and ensure the stability of the financial 
     markets. Surveys conducted by AARP demonstrate that Americans 
     50+, regardless of party affiliation, want Congress to act to 
     hold financial institutions accountable.
       AARP supports the creation of a Consumer Financial 
     Protection Bureau, as incorporated in S. 3217, that would 
     have as its sole mission the development and effective 
     implementation of standards that ensure that all credit 
     products offered to borrowers are safe. We have been clear 
     that such an agency should be truly independent in its 
     leadership, funding, staff and decision-making; that it 
     should have the authority to oversee all lenders and products 
     in the marketplace; and that it should have broad rulemaking, 
     enforcement and supervision powers over all types of 
     providers. We also have insisted that the states must be the 
     ``cops on the beat'' with the authority to move against 
     abusive practices that arise locally.
       Judged against this criteria, the Shelby substitute 
     Consumer Protection title fails in virtually every instance. 
     The consumer protection agency will not be independent; 
     rather the FDIC Board of Directors must approve all 
     rulemaking. Inadequate resources will cover rulemaking and 
     supervisory expenses only; there is no funding for 
     enforcement. Oversight and enforcement is extremely limited. 
     For example, the new agency will have no enforcement 
     authority over any bank or other type of depository 
     institution. Non-mortgage companies will be subject to 
     supervision only if they demonstrate a pattern or practice of 
     violating the law within the past three years. And, the bill 
     does not give the states the authority to take action where 
     necessary.
       We respectfully urge you to vote NO on the Shelby 
     substitute Consumer Protection title when it comes up for a 
     vote today. If you have questions, please feel free to call 
     me or have your staff contact Mary Wallace of our government 
     relations staff at (202) 434-3954 or [email protected].
           Sincerely,

                                              David P. Sloane,

                                            Senior Vice President,
                                Government Relations and Advocacy.

  Mr. DODD. So major groups, ones that are consumer oriented as well as 
those that watch out for older Americans--many of whom have to pay 
mortgages, are on fixed incomes--are worthy of note.
  Again, I wish to thank my colleagues for their comments and thoughts 
on this amendment, and I will address more of that later, but I will 
yield the floor.


                           Amendment No. 3808

  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. FRANKEN. Madam President, I rise to speak about the need to 
further address the problems of the credit rating agency industry. 
Senator Dodd has presented us with a very good bill that takes major 
strides in addressing many of the problems that brought our economy to 
the brink of collapse. It reins in too big to fail, brings derivatives 
out of the shadows, and creates a new consumer watchdog that will 
prioritize consumer protection over Wall Street profits.
  Senator Dodd's bill includes several provisions on credit rating 
agencies. It holds rating agencies accountable in court for being 
reckless in their duties, it requires increased disclosure, creates new 
complaint systems, and requires raters to use information beyond what 
is provided by issuers.
  These are a few of the many provisions the Dodd bill includes to 
begin to address issues with credit rating agencies, and they are all 
good. But one thing it doesn't do is get at the underlying problem--the 
conflict of interest inherent in the issuer-pays model, where the 
issuer pays the rating agency.
  To root out conflicts of interest completely, we must change the 
vested interests of each of the players. The central conflict of 
interest can be boiled down to this: The issuer has an interest in 
obtaining a high rating so it can sell its product. The credit rating 
agency has an interest in giving out a high rating so it can sell its 
service. Tom Toles, of the Washington Post, depicts the problem quite 
well in this comical cartoon.
  Here we see the rating agencies--he labels them that so you know it 
is them--giving three 10s to a figure skater--labeled Wall Street, and 
he is kind of fat there. You see he says: ``I pay their salaries.'' 
That is why he is getting three 10s--or a AAA--and yet he is a figure 
skater and he is dumping trash. We see an apple core, there is a fish 
head, skeleton, a banana. You don't want those on the ice. You just 
don't want that. That is bad. Then there is a little figure here, the 
little garbageman. It says: ``Somebody else pays to clean the ice.'' 
That, of course, is us--the taxpayers.
  I think after seeing this cartoon, if there is anyone who doesn't 
support my amendment, I don't know what to do. Anyway, this actually 
makes the point very well that the issuer is paying the rating agency 
and, hence, the AAA.
  However, the credit rating agency should have an interest in 
providing accurate ratings--unlike the triple 10s in this cartoon--so 
investors are provided with the accurate information they need to make 
investment decisions. But for the reasons I just described, there are 
very few incentives to provide accurate ratings. The market simply 
doesn't reward accurate ratings.
  The best way to fix this problem is to change the way the market 
works so it rewards accurate ratings. Once we start getting accurate 
ratings, investors can make better decisions about the products they 
are selecting for inclusion into pension funds. Having safe products in 
pension funds protects the retirement security of hard-working 
Americans.
  Let me give you an example of the perverse incentives that have been 
driving the credit rating agency industry thus far. My friend and 
colleague Senator Levin recently held a hearing in the Permanent 
Subcommittee on Investigations. His investigators released many e-mails 
from the industry that reflect the conflicts of interest that drove the 
system.
  Here is a good example. There is a rating agency employee writing to 
his own rating agency people about a group of theirs, a group within 
his rating agency.

       We are meeting with your group this week to discuss 
     adjusting criteria for rating CDO's of real estate assets 
     this week because of the ongoing threat of losing deals. Lose 
     the CDO and lose the base business.

  So here the credit rating agency is proposing to change its rating 
criteria to avoid losing business. This is exactly what was at the root 
of all these AAA-rated, subprime, mortgage-backed securities that were 
leveraged and had the CDOs on them--these exotic instruments that were 
rated AAA--and what created this entire mess. It is clear the 
incentives are to keep customers coming back, to make sure accurate 
ratings aren't driving customers into the arms of other rating 
agencies--don't want to let accuracy get in the way of more business.
  We need to change the incentives. I believe my amendment, No. 3808, 
will do that. The amendment tasks a board--a self-regulatory 
organization--with selecting a pool of qualified credit rating 
agencies. The board would then choose a system to assign, one at a 
time, one of these qualified credit rating agencies to each request for 
an initial credit rating. Issuers could no longer shop around for the 
best rating. They could, however, get a second, third or fourth rating 
from any agency they choose. But the first assigned rating would 
provide a check against the next agency inflating its rating.

[[Page S3312]]

  The amendment would require the board to consider a rating agency's 
past performance and could adjust the number of rating assignments 
based upon demonstrated accuracy. If a small rating agency began 
performing extremely well, the board could start giving it more 
assignments, breaking the oligopoly of the big three raters, which 
served us very poorly, or maybe the big three would get their act 
together under this new system.
  The point is, when the agencies are finally operating in a market in 
which accuracy is valued, they will compete on the basis of accuracy. 
When accuracy is driving growth, not preexisting relationships or 
sweetheart deals, smaller rating agencies will have an opportunity to 
compete and grow, making the industry more robust.
  So properly addressing conflicts of interest in the credit rating 
agency industry necessitates realigning the interests of rating 
agencies with the interests of investors. The way to do that is by 
promoting and rewarding accuracy. My amendment will create these 
incentives, increase accuracy, promote competition and stability, and 
restore integrity to the credit rating industry system.
  I thank my colleagues, Senator Schumer and Senator Nelson, for 
helping me lead this effort and Senators Whitehouse, Brown, Murray, 
Merkley, and Bingaman for joining us.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SHELBY. Madam President, I rise today to discuss the amendment 
that Senate Republicans are offering to greatly improve consumer 
financial protection.
  This amendment recognizes that our existing financial regulatory 
system fails to adequately provide consumer protection. Our system is 
broke, and it needs fixing.
  The recent financial crisis has revealed that our financial 
regulators were asleep at the switch and had neglected to uphold their 
basic responsibilities for consumer protection.
  Far too often, our regulators were more concerned about pleasing the 
entities they regulated than looking out for consumers. It is clear 
that we need to refocus the priorities of our financial regulators and 
ensure that consumer protection gets the attention it deserves.
  Make no mistake. Republicans want to strengthen consumer protection.
  We need to make sure that consumers get clear and understandable 
disclosure so that they can make good decisions.
  We need to make sure that regulators have sufficient authority to 
combat fraudulent practices.
  We also need to make sure that our consumer protection laws and 
regulations keep up with changes in our dynamic and innovative 
marketplace.
  Any changes to consumer protection, however, need to reflect that 
consumer protection does not stand in isolation. It is inherently 
linked with safety and soundness regulation.
  This is most dramatically illustrated by the fact that an ill-
conceived consumer protection law, such as allowing for no down 
payments, could cause banks to fail.
  Given that taxpayers are ultimately on the hook for bank failures, it 
would be irresponsible not to require regulators to consider the impact 
proposed consumer protections could have on the deposit insurance fund.
  After all, one of the most important consumer protections is a 
healthy financial system, where financial institutions are able to keep 
long-term commitments to consumers, like annuities, insurance, and 
retirement funds.
  The amendment we are proposing embodies this approach. It would put 
the FDIC in charge of writing consumer protection regulations. That 
responsibility currently rests with the Fed.
  As a prudential regulator, the FDIC has the experience necessary to 
ensure that the right balance is struck between consumer protection and 
safety and soundness.
  To raise the status of consumer protection, a new division will be 
established at the FDIC. The division will be led by a Presidentially 
appointed and Senate-confirmed director.
  The director will serve a term of 4 years and will be required to 
testify before Congress at least twice a year. This will help ensure 
that regulators are held accountable for their actions on consumer 
protection.
  In addition, this amendment does not disrupt the century and a half 
of precedent on preemption with respect to national banks.
  We should be very cautious about allowing national banks to be 
regulated by 50 different States and opening up the door to needless 
state litigation that only enriches trial lawyers and raises costs to 
consumers.
  The Republican amendment also grants the FDIC primary supervision and 
enforcement authority over large nonbank mortgage originators, and 
other financial services providers that have violated consumer 
protection statutes.
  This will give the FDIC broad authority to clamp down on the worst 
offenders of our consumer protection laws without needlessly subjecting 
law-abiding businesses to expensive regulation.
  The Republican approach to consumer protection sharply contrasts with 
the approach of the Dodd bill.
  Under the Dodd bill, the Consumer Financial Protection Bureau would 
issue rules without considering their impact on the safety and 
soundness of financial institutions.
  Need I remind my colleagues that this is the same regulatory model 
that produced the fiascos at Fannie and Freddie. In that case, HUD 
wrote rules on their housing goals and underwriting standards, while 
OFHEO regulated them for safety and soundness.
  Do we need a better example of the foolishness of divorcing consumer 
protection from safety and soundness?
  How did that regulatory model help consumers? It certainly left them 
with a huge tax bill to cover the government bailout.
  An examination of the powers and size of the bureau established by 
the Dodd bill shows further how the Republican approach differs from 
the approach advocated by the Obama administration and the Democrats.
  They start with the assumption that small busiesses are, in President 
Obama's words, ``bilking people'' and that heavyhanded regulations and 
an extensive bureaucracy are the only ways to ensure that small 
businesses do not take advantage of their consumers.
  I do not believe that the tens of thousands of small businesses--the 
florists, the retailers, the dentists, the auto dealers--that fall 
within the regulatory reach of their new bureaucracy are ``bilking'' 
people. I also know that these entities had nothing to do with the 
financial crisis.
  Unfortunately, the Dodd bill would create a massive new bureaucracy 
with unprecedented powers to regulate small businesses and consumers.
  The Consumer Financial Protection Bureau could dictate exactly what 
forms business must use, who they provide services to, and how they 
sell their products.
  Control over American businesses would shift further from 
entrepreneurs to bureaucrats in Washington.
  Perhaps the most troubling aspect of their approach is that it 
assumes that consumers need benevolent bureaucrats to make decisions 
for them. In order to make that happen, the Dodd bill authorizes the 
new consumer agency to collect any information it desires.
  Small businesses across this country fear the massive and potentially 
very intrusive new bureaucracy created under the rubric of consumer 
protection. They have every right to be afraid.
  This massive new government bureaucracy has the power to place 
individuals under oath and demand information about their personal 
financial affairs.
  The new bureaucracy is also required to report to the IRS any 
information it gets that it believes may be evidence of tax evasion.
  Why does their new bureaucracy need these incredible powers? Because 
their bill envisions the bureau analyzing and monitoring Americans' 
behavior and then issuing regulations to stop them from doing things 
the bureaucrats deem ``irrational'' or ``inappropriate.''
  Just read the writings of the Assistant Secretary of Treasury for 
Financial Institutions, one of the chief architects of this expansive 
new bureaucracy. He has written how ``regulating . . . appropriately is 
difficult and requires substantial sophistication by

[[Page S3313]]

regulators, including psychological insight.''
  Let me translate this academic jargon.
  He is saying that all-knowing regulators should be empowered to make 
decisions for consumers because benevolent regulators are the only ones 
who possess the right ``psychological'' mind set to do things 
``appropriately.''
  Think about it a minute.
  Regulators are wise and should be heeded; consumers are foolish and 
should do as they are told. That is what we are talking about here.
  The architects of this massive new bureaucracy have long argued for a 
consumer bureaucracy with the right ``culture.''
  Whether that ``culture'' focuses on consumer protection and a safe 
and sound banking system or it becomes a way for community organizers 
and groups like ACORN to grab Federal resources is left wide open.
  One of the strongest proponents for the new consumer bureaucracy has 
been Treasury's Assistant Secretary for Financial Institutions, as I 
said.
  Allow me to read into the Record a couple of quotes from a paper 
entitled ``Behaviorally Informed Financial Services Regulation'' 
coauthored by the Assistant Secretary Barr in October of 2008.
  The Secretary writes, ``Because people are fallible and easily 
misled, transparency does not always pay off. . . .''
  He writes that: ``. . . regulatory choice ought to be analyzed 
according to the market's stance towards human fallibility.''
  On regulation, he writes that: ``Product regulation would also reduce 
cognitive and emotional pressures related to potentially bad 
decisionmaking by reducing the number of choices. . . .''
  He is talking about choices in the market place. Yes, the 
administration's chief advocate believes that benevolent regulators 
need to reduce choices for the consumer so that they can be protected 
from bad decision making and their own inherent fallibility.
  He also opines on the topic of disclosures where he states that:

       [D]isclosures are geared towards influencing the intention 
     of the borrower to change his behavior; however, even if the 
     disclosure succeeds in changing the borrower's intentions, we 
     know that there is often a large gap between intention and 
     action.

  I believe that regulators need to ensure that consumers have the 
information they need to make their own decisions based on their needs 
and circumstances.
  The proponents of behavioral economics believe, however, that 
regulators need to influence peoples' intentions and change their 
behavior so that they make decisions that the regulator deems 
appropriate for them. As I have said before, this is the nanny state at 
its worst.
  Finally, he writes of a proposal on late fees charged by financial 
service providers.
  He writes:

       Under [his] proposal, firms could deter consumers from 
     paying late or going over their credit card limits with 
     whatever fees they deemed appropriate, but the bulk of such 
     fees would be placed in a public trust to be used for 
     financial education and assistance to troubled borrowers.

  The translation is that behavioral economists not only believe that 
they are best positioned to make decisions for us, but they are also 
best positioned to decide how private companies spend their money.
  Needless to say, this is a disturbing perspective, but it does reveal 
just how much the Obama administration wants to empower bureaucrats.
  We should remember that the failure of our existing regulators, 
primarily the Federal Reserve, to properly enforce consumer protections 
helped cause the crisis. Yet the Dodd bill's response is to create a 
bigger bureaucracy and hire more bureaucrats at the Fed.
  In contrast, the Republican amendment would make the changes and 
improvements that we all can agree need to be done, but would do so in 
a more focused and prudent manner.
  The expansive reach of the Dodd bill means that the new bureau is 
going to be expensive. The budget for the bureau is approximately $650 
million in new taxpayer costs, funded Argentina-style by tapping the 
central bank's money-printing powers.
  In comparison, the budget for the Office of the Comptroller of the 
Currency, our national bank regulator, is currently $750 million, and 
that agency does both consumer protection and prudential supervision.
  Under the Republican plan, industry, not taxpayers, would pay the 
costs of consumer protection.
  Despite giving the bureau a huge budget and vast powers, the Dodd 
bill fails to take any reasonable steps to hold the bureau accountable.
  The bureau receives all of its funding from the Federal Reserve, 
beyond both congressional and executive oversight.
  The bureau has complete discretion on how it spends its budget, 
allowing it to devise programs for backdoor funding of special interest 
groups like ACORN and other liberal activist groups.
  The more we learn about the Dodd bill's approach to consumer 
protection, the more I believe the Republican approach makes more sense 
and strikes the right balance.
  The Republican amendment wisely places consumer protection in a 
financial regulator, the FDIC, but enhances the status of consumer 
protection by creating a new division of consumer protection.
  It holds regulators accountable and ensures that repeat violators of 
consumer protection laws face stiffer penalties and regulation.
  The Republican amendment avoids creating costly new bureaucracies and 
imposing unnecessary costs on small businesses that had nothing to do 
with the crisis.
  We all agree that consumer protection needs to be modernized and 
given more attention by our regulators.
  I believe the Republican approach does this. And it does so without 
building the expansive and expensive bureaucracy contained in the Dodd 
bill.
  Most importantly, the Republican approach ensures that consumers are 
protected, but that they, not bureaucrats, are ultimately the ones 
making decisions for themselves.
  I have heard from productive American companies--from tractor 
manufacturers to beer brewers--from motorcycle manufacturers to public 
utilities that provide heating fuel to your home--and they strongly 
oppose this bill because it will increase their operational and risk 
management.
  I have heard small responsible business owners, who offer their 
customers the convenience of installment payments, express serious 
concerns about the potential for an out-of-control consumer bureaucracy 
that the Dodd bill creates.
  Although the bill's supporters have and will argue that the fears are 
unfounded because the bill says that merchants not engaged 
``significantly'' in offering consumer financial services are excluded 
from the new consumer regulatory bureaucracy.
  The bill does not, however, define what the word ``significantly'' 
means--leaving that to the discretion of the benevolent bureaucrats.
  The supporters of this massive new government agency trust the 
bureaucrats. I trust American small business owners.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Madam President, I congratulate the Senator from 
Alabama for his comments and for his proposal, which he described as a 
Republican proposal. Of course, what all of us hope is that it becomes 
a bipartisan proposal as our friends on the other side look carefully 
at it. That is what happened with the big bank bailout provision we 
worked on yesterday. Senator Dodd and Senator Shelby worked for a 
while, Senators Corker and Warner had worked before that, and we came 
up with a conclusion that all but five Senators agreed to. Now we have 
moved to address two of the other major deficiencies in the Dodd bill 
that we have wrapped up in one proposal here, and it is really wrapped 
up with the central issue that is before the American people.
  President Obama said in September of last year that the health care 
bill was a proxy for a larger issue about the role of government in 
Americans' lives. The President was exactly right about that, and we 
have seen the issue of government's role over and over again. I don't 
think it will change between now and the November election. In fact, 
the President said at our health care summit that is why we have 
elections, and

[[Page S3314]]

I think he is correct about that. We have seen a Washington takeover of 
banks; we have seen a Washington takeover of car companies; we have 
seen a Washington takeover of many aspects of health care; we have seen 
a gratuitous Washington takeover of student loans. In this financial 
regulation bill, instead of dealing with the high jinks of big banks, 
we are going to take over Main Street lending and, on top of it, create 
a new czar or czarina to make decisions about millions of transactions 
across America that are on Main Street.
  So what Senator Shelby's proposal offers--and we hope it receives the 
same kind of bipartisan consideration that the resolution authority or 
the big bank bailout discussion did yesterday that we finally agreed 
on--is that we would like to change this bill in two ways. Republicans 
would like to say: Let's take Main Street lending out of it. The 
Senator from Connecticut, Mr. Dodd, said it is not in there. But the 
language makes it look as if it is in there. It looks like we're about 
to start regulating your daughter's dentist bill, the plumber, and the 
store owners up and down Main Street who give you flexible credit. In 
other words, if you say: You can pay me over time--it looks as if 
Congress is going to start regulating that transaction.
  That is going to make credit harder to get because the dentist or the 
plumber or the store owner is going to say: I'm not going to fool with 
it. I don't want to be regulated by some Washington bureau, so if you 
want to buy my goods, go to the bank and get some money or get another 
credit card.
  And you know what that is going to do? That's going to slow down the 
economy. That's going to make jobs harder to create because it is going 
to make credit harder to obtain and credit harder to offer.
  Making credit harder to get is not what we need at this time. We just 
had the reports of the economic growth of our country during the first 
quarter. It was 3.2 percent. That is not very good. I can vividly 
remember flying on a helicopter with President Bush when I was 
Education Secretary in 1992, and the economic growth of the third 
quarter of the year was better than that; it was 4.2 percent. And Bill 
Clinton beat George Bush, Sr., on the ``It's the Economy, Stupid'' 
campaign. So 3.2 percent is not going to cut it for our country. Most 
economists say that if our economy continues to grow over the next 
year, through 2010, at the same rate it grew in the first quarter, the 
unemployment rate will not change. The unemployment rate will still be 
about 9 or 10 percent at the end of this year, as it is today.
  What can we do to change that? Well, we have to create an environment 
for job growth. We have done pretty good in creating job growth in 
Washington. The one place the stimulus has really worked is in 
Washington, DC. Salaries are up. Jobs are up. There are plenty of new 
jobs around here. But out across America, we are not creating enough 
new jobs, and too many of the things we are doing here make it harder 
to create new jobs.
  The health care bill makes it harder to create new jobs because it 
imposes taxes on job creators and it imposes taxes on investors. Tax 
increases make it harder to create new jobs. Running up the debt--the 
President's budget doubled the debt in 5 years and tripled it in 10 
years--makes the economy less certain and it makes it harder to create 
new jobs. And the threat of creating a czar or czarina in Washington, 
DC, and a new bureau to supervise and make Main Street lending more 
difficult and expensive makes it harder to create new jobs. We should 
take it out of the bill.
  If the Senator from Connecticut, who is one of our finest Senators, 
and is well intentioned, wants Main Street lending out of the bill, 
let's just take it out of the bill. Let's don't leave in there the 
possibility that someone might come along and interpret 
``significantly'' involved financial activities to include the plumber 
and the dentist.
  This has attracted the attention of a lot of people from Tennessee: 
community bankers, credit unions, and the National Federation of 
Independent Businesses. They are talking about office suppliers, 
jewelers, health professionals, and furniture stores who are all 
concerned with this bill. The NFIB estimates that about 50 percent of 
small businesses let you pay over time. In other words, they offer you 
credit. They make special arrangements. They say: OK, we know you don't 
have all of the cash right now. You might not want to run up your 
credit card or maybe your credit card is near the limit, so we will 
sell you whatever we have to sell you or we will provide the service 
you need. You can pay us in 6 months. You can pay us in 5 months.
  Well, under this bill, if you offer payment plans you could be 
``significantly'' involved in financial activities. Then this czar or 
czarina in Washington, DC, is going to be regulating you. You might be 
a very small business and you might not have a lot of extra money to 
fill out regulatory forms, but you are going to be filling out forms 
and suffering more regulations. And you are going to be offering less 
credit and credit will be harder to get up and down Main Street.
  If our real intention in this body on both sides of the aisle is to 
not interfere with Main Street lending, then let's actually do that. 
That is what the Republican amendment--which we hope becomes a 
bipartisan--does.
  Then there is the second big idea that is in this Republican 
amendment. So far as I am concerned--we don't need another czar. This 
bill is supposed to be about big banks, about financial high jinks on 
Wall Street, about this recession we are in, and about issues that will 
change the regulations in a sensible way that will avoid as many future 
recessions as possible and, at the same time, about creating an 
environment in which we can grow the largest number of good new jobs. 
But suddenly, we have this new Washington agency not only possibly 
regulating Main Street lending but creating an unaccountable person at 
the top to write the rules and the regulations. When I say 
``unaccountable,'' that means she or he is just over here at the Fed. 
Once confirmed by the Senate, this person has no boss. This person 
doesn't report to the President, doesn't have to come before Congress 
for appropriations, and has a steady stream of money and really 
unlimited authority. There is nothing to keep this new czarina or czar 
from writing the kinds of regulations and rules that got us into 
trouble in the first place with housing. Nothing to keep this person 
from writing rules that might encourage irresponsible home ownership. 
That is what we had before. So the Dodd bill might encourage 
irresponsible borrowing.
  So the second major idea in the Republican amendment is, let's make 
this person accountable. The President appoints a Director who is 
confirmed by the Senate, but this person would be in the Federal 
Deposit Insurance Corporation. This Director would be accountable to 
other people appointed by the President and confirmed by the Senate and 
would have to come before the Congress multiple times annually to give 
us a chance to inquire about things.
  I have come to the floor today to say we made an important step in 
the right direction when we worked on the first part of this bill 
yesterday across party lines. We addressed one of the five issues we 
need to deal with.
  The issue of, what to do with banks that are too big to fail and get 
the rest of us into trouble, has been addressed.
  But we have four more big issues to deal with here and other smaller 
issues. Two of the big issues are addressed in this Republican 
amendment. One is: let's not take over Main Street lending and make it 
harder to loan money, harder to get money, and harder to create jobs.
  No. 2 is: let's not create another czar in Washington. The last thing 
we need is another Washington takeover and another Washington czar.
  We hope our amendment will attract significant bipartisan support, 
and then we can move on to the other important questions in this 
legislation.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. CARDIN. Madam President, first, let me thank Senator Dodd for 
bringing forward a strong bill to regulate Wall Street. The bill 
provides for strict new regulations to stop Wall Street's reckless 
gambling.
  I think one needs to understand the current system and how we got to 
where we are today. We have eight Federal regulatory entities that 
oversee

[[Page S3315]]

the financial sector. Their authority is different, their powers are 
different, their ability to respond to a particular problem is 
different, and the entity that is regulated today can shop for the 
regulator they want by what they call themselves and the types of 
activities they try to define themselves as. They can shop and look for 
the regulatory entity they believe they can circumvent the easiest. 
They can escape and did escape proper supervision.
  Well, this legislation ends that practice by a clear regulatory 
framework in order to regulate all financial institutions. The 
regulatory entity that does the regulation is based upon size and 
jurisdiction. And we have the Financial Stability Oversight Board that 
provides uniformity. No more gaps in the regulatory system. And it 
provides the tools for the regulators for early intervention. That 
means we end, once and for all, too big to fail. By early intervention 
on takeovers, closing down financial institutions, requiring the sale 
of financial institutions, we can prevent the need for too big to fail. 
The risk will be on the investors, not on the taxpayers of this 
country. The Boxer amendment makes that clear.

  Tools that are needed for orderly liquidation to minimize the impact 
on the financial sector and our economy are provided in this 
legislation.
  It recognizes the need for special attention to our community 
financial institutions. They were not the cause of the financial crisis 
we went through. We know it came from Wall Street. Our community banks 
were very much vulnerable as a result of the financial collapse. We 
need to streamline the regulatory process as it relates to our 
community banks. Regulation is cost. We have to have regulation. We 
need regulation. They need regulation. But we need to make sure it is 
sensible. This bill streamlines the regulatory structure as it relates 
to our local financial institutions.
  We need strong and adequate regulation, and it provides it. We need 
to write a balance, and this legislation provides that. I might say, 
there are amendments we have already considered that I think were the 
right thing in order to make sure this balance is correct. I am sure 
there will be other amendments we will consider to make sure we get 
that balance right between adequate regulation and the cost of 
regulation to small community financial institutions.
  This legislation puts the consumer first, as it should, with a strong 
consumer bureau. Some say: Why do we need that? Isn't the current 
regulation adequate? The answer is no. All you need to look to is what 
happened in the residential mortgage marketplace. All you need to look 
at are the advertisements that were taking place just 2 years ago for 
no-doc or stated-income loans or no-down-payment loans--loans that 
provided over 100 percent of the cost. And look at the subprime lending 
in each of our communities, where home buyers who could have qualified 
for traditional home mortgages were steered into the subprime market 
because the mortgage company or the seller made more money by steering 
them into subprime loans. Well, those practices have to come to an end. 
Those housing practices sparked, as we know, the trigger for this 
recession. These practices helped create that bubble that burst and the 
damage that was caused when it did burst.
  We can take a look at the cost of this recession. The Pew Financial 
Reform Project estimated that just a slowdown in economic growth will 
cost every family in America close to $6,000. Well, that is money that 
will never be made up. We have to make sure it never happens again. The 
Federal spending, in order to prevent the economic collapse of Wall 
Street, is estimated to cost $2,000 per household. If you look at just 
the decline in real estate values, in 9 months, from July 2008 to March 
2009, the wealth lost equaled about $30,000 per household in real 
estate and over $60,000 per household in the stock market. We lost 
millions of jobs. I could go on and on. We have an obligation to make 
sure our economy and our people are protected from that type of 
financial meltdown in the future.
  This legislation properly regulates risky gambling by financial 
institutions by putting in place prohibitions and disclosures. It puts 
an end to derivatives markets that have no economic value to our 
economy. It requires disclosure on the derivatives markets, so we can 
take Justice Brandeis' advice and use sunlight as the best 
disinfectant. It provides for the Volcker rule, codifying that, by 
restricting certain types of high-risk financial activities by banks 
and bank holding companies.
  This legislation regulates credit rating companies. We know credit 
rating companies--their rating will very much affect the price of a 
security and the viability of the security.
  In this recession, many Marylanders and people from every State in 
this Nation have lost their homes, their jobs, and savings. We have a 
responsibility to act to end the reckless practices on Wall Street that 
helped plant the seeds for this recession. This legislation is a giant 
step forward.


                           Amendment No. 3732

  Madam President, I will now speak briefly about an amendment I intend 
to offer.
  I rise to urge the inclusion of amendment No. 3732 to S. 3217. This 
amendment is a critical part of the increased transparency and good 
governance we are striving to achieve in the financial industry.
  This is a bipartisan amendment that would require all foreign and 
domestic companies registered with the U.S. Securities and Exchange 
Commission, the SEC, to report in their annual report to the SEC how 
much they pay each government for access to their oil, gas, and 
minerals. Most of the world's extractive industries companies would be 
covered by this law, setting a new international standard for 
transparency, for openness.
  We have seen the devastating effects of a lack of transparency in 
this country, what happens when Wall Street is left unchecked and 
barons cloaked in secrecy make off with millions while others lose 
their homes. This is why we are addressing openness and transparency in 
the underlying legislation today. We would be remiss to create this 
sweeping reform of our financial sector without addressing the need for 
adding a new layer of transparency to a set of companies already under 
the SEC's jurisdiction--the oil, gas, and mining companies that make up 
the extractive industries.
  This amendment would create an environment of transparency to 
reassure investors, help stabilize global energy markets, and thus 
support goals of energy security.
  Current Federal Accounting Standards Board standards require reports 
of tax, royalty, and bonus payments to host governments, but the 
numbers need only be reported in aggregated categories, such as 
``production costs excluding taxes'' and ``taxes other than income.'' 
These payments are reported on a country level where a company's 
operations are very substantial, but otherwise they are reported on 
such a broad basis that a company can simply report on which continent 
it was operating. Such disclosure is not useful in determining the 
extent of a company's operations in or its ongoing financial 
arrangements with a country.
  In terms of energy security, the oil, gas, and mining revenues are 
critically important economic sectors in about 60 developing and 
transition countries which are paradoxically home to more than two-
thirds of the world's poorest people. Despite receiving billions of 
dollars per year from extractive revenue, these countries rank among 
the lowest in the world on poverty, economic growth, authoritarian 
governance, conflict, and political instability. Unaccountable 
management of natural resource revenues by foreign governments leads to 
corruption and mismanagement, which in turn creates unstable and high-
cost operating environments for multinational companies and threatens 
the security of the energy supply of the United States and other 
industrialized nations. So we are talking about in these countries 
where mineral wealth becomes a mineral curse. It becomes a source of 
revenue for corruption rather that a source of revenue for economic 
growth so a country can grow. It runs counter to our foreign policy 
objectives of good governance and economic growth for the developing 
world. Transparency will help make sure the mineral wealth goes to the 
people of that nation.
  The provisions of this amendment would apply to all oil, gas, and 
mining companies required to file periodic reports with the SEC; 
namely, 90 percent

[[Page S3316]]

of the major internationally operating oil companies and 8 out of the 
10 largest mining companies in the world--only 2 of which are U.S. 
companies. We are talking about foreign-owned companies, not U.S. 
companies, by and large. Of the top 50 largest oil and gas companies by 
proven oil reserves, 20 are national oil companies that do not usually 
operate internationally. These companies are not registered with the 
SEC or any other exchange and only operate within their own country, 
which means these national oil companies do not compete with 
internationally operating companies. Of the remaining 30 companies that 
do operate internationally, 27 would be covered by this legislation--27 
of the 30. These include Canadian, European, Russian, Chinese, 
Brazilian, and other international companies.

  We currently have a voluntary international standard to promote 
transparency. A number of countries and companies have joined the 
Extractive Industries Transparency Initiative, the EITI, an excellent 
initiative that has made tremendous strides in changing the culture of 
secrecy that surrounds the extractive industries. But too many 
countries and companies remain outside this voluntary system.
  The notion of transparency has been endorsed by the G8, the IMF, the 
World Bank, and a number of regional development banks. It is clear to 
the financial leaders of the world that transparency in natural 
resources development is key to holding government leaders accountable 
to the needs of their citizens and not just building up their personal 
offshore bank accounts.
  It is now time to create in law an international standard for 
transparency. It will only happen if the United States is in the 
leadership. The international community looks to us to be a leader on 
this issue.
  Investors need to be able to assess the risks of their investments. 
Investors need to know where, in what amount, and on what terms their 
money is being spent in what are often very high-risk operating 
environments. These environments are often poor developing countries 
that may be politically unstable, have lots of corruption, and have a 
history of civil unrest. The investor has a right to know about the 
payments. Secrecy of payments carries real bottom-line risks for 
investors.
  Creating a reporting requirement with the SEC will capture a larger 
portion of the international extractive industries corporations than 
any other single mechanism, thereby setting a global standard for 
transparency and promoting a level playing field.
  Investors should be able to know how much money is being invested up 
front in oil, gas, and mining projects. For example, oil companies 
often pay very large signature payments to secure the rights for an 
oilfield, long before the first drop of oil is produced. Such payments 
are in addition to the capital investment required. In Angola, for 
example, $500 million is not an unusual signature bonus that has to be 
paid for a single field, and a single field can cost more than $2 
billion to develop. Such costs take years for companies to recoup 
through their production-sharing arrangements with host companies. For 
this reason, it is in the interest of the investors to know the amount 
and timing of payments of high-risk operating environments.
  When a company they have invested in becomes targeted by a campaign 
of misinformation, only the transparency of their financial information 
will help the investor. Disclosure of payments is one way to address 
risk, helping companies protect themselves from false or unfair 
accusations and blame-shifting by host governments that can tarnish 
their image in the investor community and the general public.
  I urge my colleagues to join me in supporting the creation of a 
historic transparency standard that will pierce the veil of secrecy 
that fosters so much corruption and instability in resource-rich 
countries around the world.
  I thank the Presiding Officer and yield the floor.
  The PRESIDING OFFICER (Mr. Burris). The Senator from Missouri is 
recognized.
  Mr. BOND. Mr. President, Americans have sent Congress a message: 
Reform Wall Street, hold the bad actors accountable, but do not hurt 
the folks on Main Street who had nothing to do with the financial 
crisis. That is what we are debating about here in the Senate this 
week.
  Senators on both sides of the aisle agree on one thing: All of us 
want 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. But we have some disagreements on what responsible 
reform looks like.
  While we all agree on the need to reform Wall Street to protect Main 
Street, the current bill, even with amendments so far, does not, in my 
view, do the trick. We are making progress, but there is still a lot of 
work to do because, in its current form, the bill is still a massive 
government overreach, punishing Main Street, hurting families, and 
costing jobs by stifling small business and entrepreneurs.
  Today, I will highlight some of the concerns I have heard from Main 
Streets in Missouri and elsewhere and some of the amendments that have 
been filed to improve the bill.
  First, on the GSEs, none of us can deny that Fannie Mae and Freddie 
Mac were significant contributors to the financial crisis. Just like 
any real reform, to prevent a future financial crisis, we have to deal 
with Wall Street, and we must also deal with Fannie Mae and Freddie 
Mac. Unfortunately, this bill totally ignores it. It turns a blind eye 
to these government-sponsored enterprises, these GSEs which contributed 
to the financial meltdown by buying high-risk loans banks were directed 
to make to people who could not afford them.
  The irresponsible actions in the marketplace by Fannie and Freddie 
turned the American dream into the American nightmare for far too many 
families who faced foreclosure. They then devastated entire 
neighborhoods with the foreclosed homes and communities where property 
values diminished. Ultimately, it led to a national and international 
financial crisis. No one--especially those of us who are taxpayers--can 
forget what happened after Fannie and Freddie got done wreaking havoc 
on families and neighborhoods. They went belly up. That is right. Over 
a year and a half ago, the government had to take over the GSEs, 
leaving taxpayers to foot the bill.

  To make matters worse, I am sure everybody read with shock just 
yesterday when the press reported that Freddie lost $8 billion in the 
first quarter. That is a lot of work. Then they had the nerve to 
request another $10.6 billion from the American taxpayers and warned 
that this $10.6 billion is just a downpayment on the money they will 
need in the future. Is it time to call a halt? Is it time to get a 
handle on it? It is well past time.
  In case my colleagues need a reminder, this latest $8 billion Freddie 
lost is on top of the $126.9 billion Fannie and Freddie had already 
lost through the end of 2009. The Wall Street Journal today hit the 
nail on the head when they referred to Fannie and Freddie as the 
``toxic twins.'' These toxic twins are far and away the biggest losers 
in the entire financial crisis--bigger than AIG, Citigroup, and all the 
rest.
  So when we focus our anger, let's not forget our friends at Fannie 
and Freddie. You talk about doing some damage. Here is where the damage 
is. Here is where the burden comes, not just on us but on the credit 
cards of our children and grandchildren, the young people here as 
pages. They don't realize how heavy a debt burden we have already put 
in their wallets. Sorry about that, folks, but you and your generation 
and generations to come are going to be paying for it.
  Taxpayers now and taxpayers in the future will be the biggest losers, 
since according to the Congressional Budget Office's optimistic 
estimates, these toxic twins will cost the taxpayers close to $380 
billion. Even for those of us in Washington, $380 billion is a big 
number.
  After all this pain to families, neighborhoods, and taxpayers, one 
would think the oversight of Fannie and Freddie would be a top 
priority, which is why it is stunning to me that the Obama 
administration has only recently nominated someone to fill the 
critically important position of inspector general of the Federal 
Housing Finance Agency to oversee the GSEs. How can we have proper and 
effective oversight of Fannie and Freddie when the office has been 
vacant at the highest level for so long?

[[Page S3317]]

  The bottom line is, responsible reform must address Fannie Mae and 
Freddie Mac. Responsible reform would put an end to the taxpayer-funded 
bailout of Fannie and Freddie and refocus them on affordable housing. 
Senators McCain, Shelby, and Gregg have filed an amendment to protect 
taxpayers and put an end to the government bailout of Fannie and 
Freddie. In short, this amendment cuts up the Federal credit card by 
putting an end to the limitless line of credit Fannie and Freddie 
currently enjoy, compliments of us as taxpayers.
  This amendment puts an end to the conservatorship and requires each 
to operate eventually without government subsidies and on a level 
playing field with the private sector.
  Next of great importance is seed capital. It is critical in reforming 
Wall Street that we not punish Main Street and the very specific small 
business startups that are so critical to job creation. If there is one 
thing we are worrying about it is, Where are the jobs? Well, I will 
tell my colleagues where the jobs are. They are the jobs the 
entrepreneurs and the innovators and the inventors can start. 
Unfortunately, in the current form of this bill, there are provisions 
that will kill the business startups. While title IX of the Dodd bill 
has been little talked about--far too little, in my opinion--it could 
have devastating consequences. Specifically, this provision would kill 
small business startups by delaying and eliminating the availability of 
private investor seed capital, and that is essential for these startups 
to survive and grow.
  According to new regulations by the SEC, innovators and entrepreneurs 
would be subject to registering with the SEC for a 4-month review; 
thus, tying up vital venture capital needed for immediate use by new 
business. This could cripple new businesses.
  Next, the bill proposes to add a further requirement to raise the net 
worth threshold on those who can invest to $2.3 million and raise the 
annual household income to $450,000. This would disqualify two-thirds 
of current accredited investors, according to the Angel Capital 
Association.
  Small businesses and startup companies are the backbone of our 
country. They are where we are looking to get the new jobs of the 
future, and a critical role is played by angel investors in creating 
and developing new companies, small or large.
  I will confess, this is of particular concern to my State of 
Missouri, where I have been working for a long time to build an 
agricultural biotech corridor across the State. In Missouri, we have 
the research institutions, the scientific leaders, and advanced 
agricultural research and biotechnology. Research in the biotech 
industry is our best hope for a stimulus to create high-paying, skilled 
jobs in rural as well as urban Missouri and, I would say, across 
America.
  The stimulus these biotech and research companies are spurring in 
Missouri is also happening today across the Nation. According to the 
Kauffman Foundation, between 1980 and 2005, companies less than 5 years 
old accounted for all--all--the net job growth in the United States. As 
a matter of fact, that same study showed that in 2008, angel investors 
provided roughly $19 billion to help start up more than 55,000 
companies. Why would we want to limit that? The bill, if enacted, would 
deny immediate access to the capital and, if enacted, would say to 
these innovators and entrepreneurs: You are too small to succeed, too 
small to survive--not too big to fail.
  But there is good news here, and there is a bipartisan solution in 
the works. I am very thankful and grateful to Senator Dodd, who has 
agreed to work with me to fix the problem. We both want to protect 
these small business startups that are vital to job creation across the 
country. I think we are close to an agreement to fix this, and we hope 
to have a bipartisan amendment soon. I urge all my colleagues to take a 
look at it and to join us in supporting it.
  Next and finally for today, one of the biggest problems in the bill--
which I believe will undoubtedly hurt ordinary Americans who had no 
role in causing the financial crisis--is the creation of the so-called 
Consumer Financial Protection Bureau, CFPB. Those initials could, in 
the future, scare people more than all the combined deadly 10 acronyms, 
including the IRS, EPA, and SEC. This new massive supergovernment 
bureaucracy would have unprecedented authority to impose expensive 
mandates on any entities that extend credit. We are not talking about 
Goldman Sachs or big Wall Street banks. Instead, this new 
superbureaucracy could hit hard the community banker, farm lender, 
local dentist or auto dealer. The pain on Main Street will not just be 
borne by small business, but the costs will be passed on to consumers, 
the ordinary Americans the bill seeks to protect. It might even cost 
them their jobs.
  The National Federation of Independent Business, a strong voice for 
small business, stated their concern clearly when they said:

       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 potential small business 
     recovery.

  That is why I have joined with Senators McConnell, Shelby, Gregg, and 
others on an amendment to fix the problem. Instead of creating a 
brandnew superbureaucracy with unlimited authority and reach, our 
amendment would empower the FDIC to look out for consumers. This makes 
sense. The FDIC is the one that has a strong record of providing 
consumer protections. It has a record of being able to deal with 
financial institutions. It deals with the financial institutions that 
get into problems. It is in the banks. Any institution that is 
regulated by the FDIC, they are in there looking over their shoulder.
  Our amendment would create a division of consumer financial 
protection within the FDIC so they can protect consumers without adding 
burdensome and duplicative regulations. It would avoid costs being 
passed on to consumers, the very folks we are trying to protect, not 
saddle them with new costs. The amendment will ensure that the consumer 
protection division focuses on the real problems currently operating 
under the radar--the shadow banking I call it--or, as I like to say, 
the clicks, not the bricks. These are the people who have preyed on 
vulnerable Americans.
  Before the financial crisis that was brought on by bad loans, 
especially too-good-to-be-true home loans pushed on families who could 
not afford the loans, my fax and inbox were cluttered, despite my best 
spam filters, with 1 percent or no down payment loan offers. These 
offers were not regulated effectively by State regulators, the SEC, the 
Federal Reserve or the OCC. They succeeded in escaping effective 
regulation entirely, although some have later fallen to regulation by 
U.S. attorneys who filed criminal fraud suits a little bit too late in 
the game.
  Also, it is important this new division be tasked with providing 
financial literacy, as I will continue to stress. We have to improve 
consumer education in any and all areas where loans are made. While 
foreclosure counseling is important--another bipartisan program on 
which I worked with Senator Dodd in December of 2007 and in which we 
put $180 million to reach out to financial counseling groups. They are 
doing a good job trying to help counsel families in danger of losing 
their home and ways to solve the problem. Those counselors came back to 
us unanimously and pleaded with us to make available preloan counseling 
before somebody buys a home, to make sure they understand the terms and 
can afford to service the loans.
  These are just some of the things we need to do.
  Missourians and people across America are angry. They are angry bad 
actors caused the financial crisis that left many of them with a pink 
slip instead of a paycheck. They are angry Wall Street bad actors left 
them with a nightmare of foreclosure instead of the American dream of 
home ownership. They are angry government has committed trillions of 
taxpayer dollars for rescuing the financial industry when so many of 
them are still struggling to pay bills. Is it any surprise that 
Missourians and Americans across the country are skeptical about 
financial reform?
  These folks were made more skeptical when they heard and saw on TV 
and read in the paper that it is the actors on Wall Street, with whom 
the bill

[[Page S3318]]

was supposed to deal and who caused the financial crisis, who are now 
cheerleading this bill. Missourians ask me how this bill can be real 
reform when the head of the investment bank Goldman Sachs, who is 
supporting the bill, said--let me make sure you understand. This is 
from the head of the largest investment bank on Wall Street: ``The 
biggest beneficiary of reform is Wall Street itself.''
  That is a quote about the original bill.
  Missourians have asked me not to pass a bill that will bail out Wall 
Street. We need to take care of Main Street. There is no bailout for 
struggling families. We don't want anymore Wall Street bailouts. We 
need to pass a bill that reforms Wall Street and protects Main Street. 
I believe we have an opportunity to pass real, responsible, and 
bipartisan reform, if Senators of both parties will listen to the 
concerns raised by ordinary Americans who didn't cause but are paying 
for the financial crisis.
  I have heard similar concerns discussed by speakers on the other side 
of the aisle who seem to indicate we share the same concerns. I hope we 
can work together to get a good, strong reform bill that will deal with 
the problems that caused the last financial crisis, protect consumers, 
and ensure the safety and soundness of all financial institutions and 
not subject them to special interests who may have pushed for the bad 
loans that caused the last crisis.
  I thank the Chair, yield the floor, and suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. BOXER. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. BOXER. Mr. President, what is the pending business, or the 
order?
  The PRESIDING OFFICER. Amendment No. 3826, offered by Senator Shelby, 
is the pending business.
  Mrs. BOXER. Mr. President, I want to take some time to speak out 
against the Shelby amendment and urge that it be defeated. If that is 
appropriate at this time, I will use as much time as I may consume.
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. BOXER. Mr. President, this is a pivotal point in the debate on 
Wall Street reform. We never want to see what happened to this country 
happen again, where they essentially crashed the stock market. People 
had been talked into very difficult to understand and exotic subprime 
mortgages. We had such greed running rampant on Wall Street, and 
instruments were created that were even difficult for the Secretary of 
the Treasury to explain--derivatives that were so complex they were in 
about the third order.
  If we were to adopt the Shelby amendment, we would weaken this bill. 
As a matter of fact, we will weaken current law, and not only will 
consumers be hurt but they will actually lose ground--when the purpose 
of the Dodd bill--our bill--is to elevate consumers, give them 
protection from these kinds of schemes that brought our economy to its 
knees and resulted in 700,000 jobs a month being lost then, and the 
wealth of the average American, who had even a 401(k), was down 20, 30, 
40, and maybe 50 percent and, as a result of that, the lack of consumer 
confidence that followed.
  We know our economy is based on consumer confidence. Seventy percent 
of our economy is attached to consumer spending. When people see the 
stock market and their wealth going down, and see neighbors losing 
their homes and jobs, they feel threatened and they pull back, and 
rightly so. It started from deregulation on steroids on Wall Street, 
where the regulators didn't even use the powers they had to protect 
consumers. An essential part of this bill is putting a cop on the beat 
for consumers, finally. So whether you are a consumer of credit cards, 
or a consumer in terms of the housing market, or a consumer in terms of 
the stock market or the commodities market, you are finally going to 
have a watchdog.
  We know the regulators didn't care about consumers. We know that. We 
know, for example, that the Fed had the authority to intervene in the 
housing market, if they felt these subprime loans were wrong, and stop 
them. They didn't do it. We know the SEC was warned about Madoff. There 
were whistleblowers to that Ponzi scheme, and many more Ponzi schemes 
were going on. They didn't even follow the lead.
  We need to have a strong, independent consumer agency that says to 
the regulators: You are not doing your job. We are going to make sure 
you do it.
  That is what is in the bill before us. But the Shelby amendment takes 
us back. The new Consumer Financial Protection Bureau will enforce 
existing consumer protection laws--those same laws that went unenforced 
by current regulators. I gave you the example of the SEC and the Ponzi 
schemes, and of the Fed overlooking the mortgage crisis, and there are 
many others. It would also ensure clear disclosure to consumers of all 
the terms and conditions of the financial products they buy.
  Believe me, you would have to have a degree in economics and finance 
and everything else to understand some of the fine print in a credit 
card bill. People are stunned to know they are paying 20, 30-percent 
interest rates on their credit cards, because there is no clear way of 
knowing.
  In this bill, that is over. You have to know the terms and conditions 
of the financial products you buy. This bill will bring protections to 
home buyers from the kinds of exotic mortgages that led to the current 
crisis.
  Let me give you an example. People were offered mortgages at a teaser 
rate--a very low rate--and were not being told in clear terms that in a 
couple of years that teaser rate would go up and go up and go up.
  I have to say, some in the mortgage business were paid more 
commissions to put unsuspecting consumers into these exotic mortgages. 
So they pushed those mortgages. That is wrong. We need a consumer 
protection agency that notes it is wrong and puts a stop to it.
  We have a situation that weakens the current law. If you think that 
is right, if you think, for example, that consumers caused the Wall 
Street meltdown--I think you are living on another planet--vote for 
this amendment. We know who caused this crisis. We know the greed on 
Wall Street. We know even while these companies were getting bailed 
out, they were paying their people huge bonuses. The word 
``outrageous'' really can be defined by what these people did.
  If my colleagues want more of the same--I cannot understand why they 
would--but if they want more of the same, if they do not want to 
strengthen consumer protection, then vote for the Shelby amendment.
  Let's be clear. This amendment is a gutting amendment. Instead of 
creating an independent consumer watchdog, the Shelby amendment creates 
a weak sister, a weak division of the consumer protection in the FDIC. 
This new idea of Senator Shelby's, this new division of consumer 
protection, would no longer be independent. It would be under the FDIC. 
It would not have any authority to adopt any rule without the approval 
of the same bank regulators who have routinely ignored or opposed the 
needs of consumers.
  Let me repeat that. The weak consumer protection agency created in 
the Shelby amendment would have no authority to adopt any rule without 
the approval of the same bank regulators who have routinely ignored or 
opposed the needs of consumers. It even would give bank regulators a 
veto over consumer protection regulations. That is totally 
unacceptable.
  If my colleagues are for Wall Street reform, they have to vote no on 
the Shelby amendment. This is the moment of truth. Either my colleagues 
are going to stand with the people of this country who are innocent 
victims of greed on Wall Street or they are not. If they want to stand 
for the greed on Wall Street, if they want to stand for no protection 
for consumers, a weakening of the protections they already have, which 
are far too weak, vote for this amendment, and let's go forward with a 
Dodd bill which has a strong independent consumer protection agency.
  I would add that the Shelby amendment would burden the new consumer 
protection division that he has in his amendment with incredible 
procedural hurdles--hurdles that have effectively

[[Page S3319]]

prevented the FTC, that has similar rules, from writing any new rules 
protecting consumers since 1984.
  Mr. President, 1984 was an interesting year for me. It was a long 
time ago. I was a lot younger. It was before my hair turned blond. In 
that year, I was in the House of Representatives, and I was pushing the 
Federal Trade Commission to help consumers. They had too many hurdles. 
They have not done anything in all those years. Yet this is the 
template that Senator Shelby is using for this watered-down consumer 
protection division.
  I see Senator Merkley on the floor, and I am going to yield in a 
minute. He is such a leader on all these issues and such a great 
populist leader in this Senate.
  Maybe my colleagues who support this amendment think the regulators 
who allowed all of these abuses to happen under their watch, despite 
repeated warnings, did a fine job and are the best protectors of 
consumers.
  But even if those regulators have somehow had a change of heart and 
are determined to change their ways, this amendment would leave them 
with even fewer powers to protect consumers than exist under the 
current system..
  The Shelby amendment would burden the new Consumer Protection 
Division with the same incredible procedural hurdles that face the 
Federal Trade Commission--hurdles that have effectively prevented the 
FTC from writing any rules in the consumer finance area since 1984.
  In addition, the amendment would actually prohibit the proposed 
consumer division from doing any rulewriting under the FTC Act for 
payday lenders, debt collectors, foreclosure scam operators, mortgage 
brokers and other nonbank consumer finance companies.
  If the new division did somehow manage to get new rules written, the 
amendment would make sure that they could not be enforced.
  Under this amendment, the new weakened consumer division could do 
examinations of some finance companies only after consumers have been 
harmed repeatedly.
  This after-the-fact authority closes the barn door after the horse is 
out, and handcuffs regulators from protecting consumers until the harm 
is already done.
  Some of my colleagues want us to believe that the Consumer Financial 
Protection Bureau that we have proposed in our Wall Street reform bill 
would harm small businesses.
  Nothing could be further from the truth.
  Merchants, retailers, and sellers of nonfinancial goods are 
specifically excluded from the oversight of our proposed new Consumer 
Financial Protection Bureau.
  This includes retailers who provide ordinary credit to their 
customers to buy their goods.
  Even for small businesses that do sell financial products--including 
community banks and all kinds of small lenders--the Consumer Financial 
Protection Bureau will have no direct enforcement authority. 
Enforcement of rules will be handled by the current regulator or State 
attorneys general.
  I will give one more example I think is very important. I told you 
the template for Senator Shelby's new consumer protection agency is the 
FTC. I told you under those rules, the FTC has not done anything since 
1984. Let's say they were able to get new rules written. Let's say they 
were able to do that. Senator Shelby ensures that the rules they write 
could never be enforced.
  How does he do that? Because he says the only time the weakened 
consumer division could do any examinations of some financial companies 
would be after consumers have been harmed repeatedly. This is after-
the-fact authority. I have seen too many people crying because of what 
happened on Wall Street. I have seen too many people crying because 
they lost their jobs because of what happened on Wall Street. I have 
seen pictures in the paper of Americans crying because of what Bernie 
Madoff did to them and their children.
  I want this stopped. I do not want it stopped after the fact. Yes, 
thank goodness Bernie Madoff is in prison where he belongs. But it is 
very difficult to make the people whole who were harmed by that Ponzi 
scheme.
  We do not want after-the-fact authority; we want before-the-fact 
authority. We want this consumer protection agency to be on its toes, 
to intervene, to see if there is a scam going on; to see if there is a 
credit card scam that leads to 30, 40, 50 percent interest rates; to 
see if there is a scam on mortgages where people unknowingly walk into 
a mortgage where the rate goes up to 12 percent.
  At the end of the day, we know consumers were hurt hard by Ponzi 
schemes, by markets in the dark, confusing mortgage options, some 
bordering on fraud by credit card scams and worse.
  Let's take a stand in a bipartisan way and vote no on this amendment 
and support the consumer protection agency, the strong one that is in 
this bill. I can tell my colleagues, if we do that, the American people 
can take a deep breath and know that they will be protected.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon is recognized.
  Mr. MERKLEY. Mr. President, I applaud my colleague from California 
who has been an extraordinary champion of consumers throughout her 
career. She understands that the basis of a successful nation is 
successful families. That depends on them having a strong financial 
foundation. We should not measure the success of our country by the 
million-dollar bonuses or the billion-dollar quarterly profits on Wall 
Street. We should measure it by the success of our families.
  This bill is absolutely essential to restoring those financial 
foundations; whereas this amendment before us does the opposite. The 
Shelby amendment No. 3826 carves the heart out of this bill. This dog 
don't hunt. In fact, this dog doesn't bite. I don't even think this dog 
barks. For that matter, I am not so sure it is a dog. That is how bad 
the Shelby amendment is.
  The background is this: Predatory mortgages and securitization of 
those mortgages on Wall Street built a house-of-cards economy that came 
falling down last year. The predatory mortgages were done at the retail 
level, but the securitization and selling of those packages occurred on 
Wall Street. They built investments that were taken in by every major 
financial house practically in the world, and those investments, those 
securities had a 2-year fuse on them, essentially a 2-year teaser rate 
on every underlying mortgage.
  At the end of the 2 years, interest rates doubled, families could not 
make the payments, securities went bad, and we had financial firms one 
after another collapse. We had Lehman collapsing. We had Bear Stearns 
collapsing. We had Merrill Lynch collapsing. We had major problems at 
Bank of America needing a bailout, a $4 billion TARP bailout. We had 
Citibank collapsing. We had Washington Mutual collapsing--all built on 
predatory mortgage practices, every single piece. That is why consumer 
protection is so important. That is why it is at the very heart of this 
bill. And that is why we need a Federal consumer protection agency.
  I have friends back in Oregon who write to me, citizens back in 
Oregon, constituents who will say: Here is what went on, and how can 
that be fair? Let me just give an example.
  A woman from Salem wrote to me and said: I always pay my credit card 
on time, always have for years and years. But I got my credit card 
statement, and it had a late fee. So I called up the credit card 
company, and I said: How is it possible? I always mail my payment on 
this day. It should have had plenty of time to get there.
  The credit card company said: Yes, as a matter of fact, your payment 
did come on time. But you know, Madam, we are not required to post your 
payment on the day we receive it. In fact, in the contract we have, we 
can sit on your payment for 10 days and then post it, and then your 
payment is late and we get to charge you this fee. We are just 
following the rules.
  She said: How can that be fair?
  It is not fair. Everyone knows it is not fair. Let me give another 
example.
  Citizens wrote saying: Hey, I had a whole series of transactions with 
my bank, and then the bank changed the order of those transactions to 
put the biggest transaction first. It so happened that biggest 
transaction made

[[Page S3320]]

me $10 over the funds I had in the bank. I had an overdraft. By putting 
that big transaction first, it meant instead of one overdraft fee, I 
have 10 overdraft fees. Instead of only $35 for one overdraft, I owe 
$350 for an overdraft series. How can it be fair that the order of the 
transactions was changed in order to multiply the fees I owe tenfold?
  Everyone knows that is not fair. Everyone knows it. We simply need to 
have an agency that is able to say that is not OK. We do not want to 
have a process where something that is unfair goes on for 10 years or 
15 years or 20 years before there is legislation to address it.
  You cannot address a consumer product's choking hazard by doing it in 
legislation. You have to empower an agency to say: No, that part is too 
small. You cannot address lead paint by doing legislation every time 
something is painted. No, you have to have an agency that says they 
will test that paint and say lead paint is not OK.
  It is the same with consumer financial products. We need the same 
power to fix traps and tricks in real time for fairness to America's 
families so they can rebuild their financial foundations because that 
is what a strong country is, families with strong financial 
foundations, not million-dollar bonuses, not billion-dollar quarterly 
profits based on stripping funds from working Americans. It all comes 
down to the heart of it: fairness in consumer financial documents.
  Let's take a look at amendment No. 3826 and why it carves the heart 
out of this important bill for America's families, America's Main 
Street families and businesses.
  Here is what it does: First, it says virtually no one is covered. 
Let's look at the list. What is covered under the language of the 
amendment are large nonbank mortgage originators. Large nonbank 
mortgage originators do not exist anymore. So it covers firms that do 
not exist anymore. It is kind of like saying we are going to have the 
regulation of safety on cars, but it is only for cars that are powered 
by gasoline and were built before 1850. No such cars exist. All the 
other cars, the ones actually on the road, we are not going to cover 
them.
  We have a list. We have commercial banks, not covered; investment 
banks, not covered; credit card companies, not covered; car lenders, 
not covered; payday lenders, not covered; nonbanks that sell financial 
products of a whole sort, not covered.
  I think you get the picture that this amendment is meant to make sure 
nothing is covered. Then, just in case there is some little piece that 
does get covered, it says: You know what. This agency is not 
independent. It cannot write rules. It has to have everything it does 
approved by the financial world--the financial world that brought us 
all these problems, that brought us to tricks and traps, that stripped 
wealth from working Americans. They are going to decide what is 
covered.
  I echo my constituent from Salem and say: Where is the fairness in 
that?
  Mr. DURBIN. Will the Senator yield for a question?
  Mr. MERKLEY. Certainly.
  Mr. DURBIN. Let me ask the Senator: As I understand the amendment of 
the Republican Senator, it goes back to the old days when there was 
virtually no consumer financial protection. The bill we have before us 
here--that Senator Dodd and the Banking Committee brought forward--has 
the strongest consumer financial protection law in the history of the 
United States. It has an agency with independent authority to protect 
Americans, but more importantly to empower Americans to make the right 
decisions when they are taking out a mortgage, a loan for a car, a home 
loan or a student loan. What the Republicans are suggesting in the 
Shelby amendment is to go back to the old days when there was no 
protection, there was no authority.
  The argument is made about the fact that when it comes to mortgages, 
they weren't the problem, the problems were with Wall Street. But at 
the heart of the issue on Wall Street was the mortgage being signed by 
the family in Springfield, IL, and Portland, OR. So I ask the Senator: 
In your State, in your experience, as you look at this, if the 
Republicans have their way and move us back to the old days when it 
comes to this consumer empowerment, consumer protection, don't we run 
the risk of falling into another economic crisis, losing millions more 
jobs across America? Isn't that the risk we run if we go the route 
suggested by the Republican amendment?
  Mr. MERKLEY. My colleague is absolutely right. Because predatory 
mortgage practices were at the heart of this crisis that led to 
securities that blew up the economy and led to the loss of millions of 
jobs around our Nation, with an unemployment rate in my State that has 
been over 12 percent. We not only have the risk of going back there, we 
are perhaps more at risk because we have fewer larger banks. Many 
investment houses that were independent are now inside those banks, in 
a position where, if they blow up, they will blow up the banks as well.
  So unless we have this strong consumer financial protection agency, 
it is like taking this bill before us and sticking it in the shredder, 
and with it shredding the hopes and aspirations of America's working 
families to build strong finances in the future.
  Mr. DURBIN. If the Senator will yield for another question.
  Mr. MERKLEY. Yes.
  Mr. DURBIN. Is it not true that last week, on three different 
occasions, the Republicans filibustered this bill to stop us from even 
starting the debate on this bill, and it was only when we reached the 
point after the Goldman Sachs hearing--when there was this embarrassing 
testimony from executives, telling America what they were up to, and it 
all became very public--that the Republicans finally backed off their 
filibuster, backed off their delay of this legislation and let us come 
forward to debate; and that now, one of the first amendments they offer 
is to weaken this bill so the financial institutions and the banks are 
going to have more power over the economy, more power over consumers 
than this bill provides?
  Isn't that the real history of how we got to this moment in this 
debate?
  Mr. MERKLEY. My friend and colleague is absolutely correct; that, 
indeed, my colleagues across the aisle, the Republicans, voted three 
times to say they did not want to proceed to the bill, where their 
ideas would bear public scrutiny. Instead, they wanted to talk behind 
closed doors. You know what they were looking to do was not to 
strengthen this bill.
  Now that the amendment has come out and been placed before us 
publicly, we do see that it does what we feared. It is designed to take 
a knife and carve the heart out of this financial reform.
  Mr. DURBIN. I would ask the Senator from Oregon if he would yield for 
one last question.
  Now that we have been through this experience where we have lost $17 
trillion in American value in this economy--$17 trillion accounted for 
in the savings accounts of ordinary Americans in Illinois and Oregon, 
$17 trillion in businesses that failed and jobs that were lost--isn't 
it critically important that this bill from the Senate Banking 
Committee move forward, and that each amendment take this strong bill 
and make it stronger, instead of the Republican amendments, which 
clearly are designed to weaken this amendment and to open us up to the 
vulnerability of facing more job loss and more economic crisis?
  Mr. MERKLEY. Well, my colleague is absolutely correct. The failure of 
financial rules has become so obvious and had such devastating impact 
for our families--as my colleague put it, $17 trillion worth of damage. 
That means families lost their retirements, families lost their savings 
for their children to go to college, and it means families have houses 
under water, if they are lucky. For many families, it means the loss of 
a job, the loss of income, and the inability to make those mortgage 
payments, which means they are in foreclosure and have lost their dream 
at every single level. That is the damage $17 trillion did to our 
families, and that is why every amendment to the bill we have before us 
should seek to say: Here is the bill and here is how we should make it 
stronger.
  With that, Mr. President, I yield the floor.
  Mr. DODD. If my colleague would yield quickly, I appreciate everyone 
wanting to make my bill stronger. We have a pretty good bill here, but 
every

[[Page S3321]]

bill could use a little improvement, I admit.
  I want to compliment the Senator from Oregon, a member of the Banking 
Committee. He has been a very valued member of the committee. I 
mentioned earlier--I say to the majority whip--in the committee 
meetings we have had, it is by seniority, and so I have this cluster of 
new members down at the end of that committee table. The Senator from 
Illinois and I have been in that position at those tables over the 
years. But Senator Tester, Senator Merkley, and Senator Bennet kind of 
occupy those last three seats on the Banking Committee.
  I say that with great respect to all the rest around the committee. 
Those three new members on the committee have added tremendous value to 
our debates, and in particular, the Senator from Oregon has been 
wonderful in his concern about mortgages, prepayment penalties, what 
has happened to the 7 million foreclosures in our country, the 8\1/2\ 
million jobs that got lost in our Nation, why we need to address this 
issue, and why it is so critically important.
  I want to make one more point about this Shelby amendment that may be 
lost on our colleagues, and that is in our bill there is no assessment 
on a nonbank or a bank, but there are assessments in this amendment. We 
just went through the Tester-Hutchison amendment to actually lower the 
assessments on community banks. What a great irony that the next 
amendment--there will be those having supported the earlier amendment 
to reduce cost--sets assessments. In fact, it asks community banks to 
have assessments on the nonbanks out there in order to pay for their 
consumer bureau within the FDIC.
  So for those who are concerned about the burdens on community banks--
and I think it is a legitimate concern, one I think the Hutchison-
Tester amendment did a great deal to alleviate--we are going to turn 
right around on these institutions that are struggling to stay alive to 
serve their communities and add a financial burden to them. So for all 
those reasons the Senator from Oregon mentioned, plus that one, the 
Shelby amendment deserves to be defeated.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, I want to point out that you have just seen 
an example of why there isn't bipartisanship in this Chamber. You 
cannot denigrate the other party and denigrate every single thing they 
put up as an amendment and suggest there is going to be bipartisanship. 
The amendment that is before you is an attempt to correct some of the 
things that are in the bill.
  The filibuster was mentioned. Well, the filibuster bought enough time 
that Senator Dodd and Senator Shelby were able to work out the 
agreement for the amendment that has passed--a major amendment, a major 
change, a wanted change, an expected change, and a change that makes 
the bill far better. If every amendment the Republicans bring up is 
going to get the kind of treatment this amendment is getting and not 
looking for that piece in there that might make a difference, we are 
not going to have much success on this bill.
  I heard the other side mention Goldman Sachs. Goldman Sachs said they 
like this bill; one of the offenders, and they like it. That encourages 
me that it is a good bill.
  I appreciate the Senator from Oregon giving the examples of some 
things that are terrible in our economy--some of the credit card 
examples he gave. It absolutely shouldn't happen in America. I don't 
think this bill fixes it, and I will explain that in a few minutes.
  If our amendment is too open-ended, the Democratic amendment raises 
the possibility of controlling every single thing for middle America--
every single thing--and I will explain how that works. I don't think it 
was what was intended, and that is why we go through an amendment 
process, to clear up problems such as that.
  But I am going to talk today about consumer financial protection. I 
want to be clear when I speak about this protection that I am talking 
about protecting consumers from bad actors. I am talking about 
educating consumers. When I talk about consumer protection, I am not 
separating consumer protection from the health of the economy. I rise 
today to talk about what is flawed in title X--called the Consumer 
Protection Title--of the financial reform bill, and to raise awareness 
about an alternative to the current language in title X.
  I believe an alternative to this section is desperately needed 
because the Federal Government should not be involved in our daily 
lives and everyday decisions. Under the proposed consumer protection 
title, we would be opening the floodgates of government involvement. 
The Federal Government could be telling us how we can spend our money, 
how we save for the future by making decisions for us, and could truly 
limit financial markets to the point of economic decline. The Federal 
Government should not operate with the belief that it is protecting us 
from ourselves. However, that is where title X language begins to work.
  From supporters of this bill, we have heard that in order for 
consumer protection to be truly effective it needs its own independent 
agency--or bureau now--and that this Consumer Financial Protection 
Bureau should be free from outside influence. Independence from outside 
influence is a fine goal, but our government was built on using a 
system of checks and balances and this bureau would be totally 
unchecked. It would have unprecedented power and authority to write its 
own rules--no review. It would have an uncontested budget--no 
appropriation. And decisions made by the bureau would be made without 
regard to the impact those rules would have on the health of our 
economy. Where is the transparency in this power? Where is the 
accountability of this proposal? I haven't even touched on what the 
title could do to consumers' personal information or financial 
decisions.
  To achieve independence, this bureau would consolidate all financial 
protections and efforts from the various Federal Government agencies, 
all in the name of better protecting consumers. Don't get me wrong, 
there are issues needing to be addressed for consumer protection. But 
right now, each Federal agency acts as a check on its neighbor when it 
comes to consumer protection. My fear is that once this bureau has 
consolidated power, it will not stop at protecting consumers from fraud 
or deceptive practices. This agency would only be getting started.
  I am deeply troubled about the creation of this bureau because it 
would place the bureau within the jurisdiction of the Federal Reserve. 
Too many of my constituents already believe the Federal Reserve gaining 
additional power is an alarming thought. However, what is most alarming 
to me is the fact the Federal Reserve would have little authority over 
this proposed bureau. Mostly, they provide the money.
  Right now, as this bill is written, the Federal Reserve would be 
required--required--to give the bureau a designated 12 percent of their 
operating budget. The catch here is that Congress would have no 
budgetary authority and would not approve this money. And it is 
adjusted for inflation. If you are going to get a percentage of a 
budget, how do you adjust a percent for inflation? But aside from that, 
it is adjusted for inflation. It works up to be 12 percent of the 
operating budget of the Federal Reserve.
  In addition, they can even invest any of the money they do not spend. 
You will find that on page 1,073. I know it is a huge book, so I didn't 
want you to have to look through the whole thing. On page 1,074, it 
even says these aren't government funds. You know why. That way it 
doesn't cost under the scoring. Even though it will drive up the 
deficit and the debt, it doesn't count that way. It looks like a free 
program, but that is not true. So they get to keep the money and invest 
what they do not spend--I don't know of another entity that gets that 
right--and it is not considered to be government funds. That provides a 
little latitude.
  The bureau not only has an uncontested budget, but the bureau would 
be the single most powerful agency in the Federal Government. Not only 
could the bureau write their own rules for our States' businesses and 
local banks to follow, it would oversee consumer decisions, and the 
bureau would be the enforcer of their own rules. No other agency has 
that kind of unchecked power. Where is the accountability in this? 
Unchecked power

[[Page S3322]]

doesn't lend itself to accountability either.
  What is important is for the public, for the average American, to 
know this bill could protect people. But it could also go potentially 
10 steps further and take some of their decisionmaking power and 
transfer it to the Federal Government. We don't do that in America.
  For example, as the bill stands, it is so overreaching and ambiguous 
in areas that it could impact everyday purchases for most Americans. 
How would they do that? Under the rules they write that nobody takes a 
look at. There is nothing to hold this bureau in check.
  Here is how the bureau would regulate consumer financial products or 
services, as well as service providers, sweeping thousands of already 
regulated small businesses into the bureau's purview. Then you add in 
section 1027 of the bill, and it could penalize anyone who buys or 
sells something on an installment plan or it could affect any local 
small business that offers some kind of monthly payment on credit. That 
is why we are being flooded right now with people who want to be 
exempted from this bill. They are worried about not being able to 
provide their service anymore.
  Have you ever bought a car and paid for it over a few years with a 
financing plan from the dealer? Many of us probably have. This bill's 
language is so ambiguous and unclear that it looks like people who want 
to pay for a service on an installment plan or those who offer those 
plans will be penalized and regulated by the new consumer protection 
agency--I should say consumer protection superagency. Nobody has ever 
had this kind of power.
  Small business owners, regular people off the streets and from our 
States have been streaming into the congressional offices, looking for 
these exemptions that I just talked about because of this title in this 
bill. As drafted, this title is so ambiguous, so far-reaching, that 
consumers and good actors are being swept up with the bad.
  Anyone who ever paid for dental care in installments could, in the 
near future, be facing the prospect of paying for dental work upfront, 
as dentists realize they cannot afford to keep up with the new 
regulations, additional regulators or the cost of compliance with the 
bureau's demands.
  For auto dealers, where financing is hardest to come by in rural 
towns in small America, this would, in fact, be a direct hit on their 
business. Right now the financial burdens of the bureau would also be 
borne by auto dealers that direct clients to available financing but 
don't originate or authorize car loans themselves. That is pretty far-
reaching.
  Additionally, though, if a consumer purchases something on an 
installment plan, whether the loan is for a bike, a minivan, braces, an 
engagement ring, livestock or a home, if there are more than four 
installments, the government, through the bureau, would have a say in 
approving that loan.
  The bureau, also in the name of protecting us from ourselves, would 
require banks to keep and maintain records of all bank account activity 
and financial activity of their clients for at least 3 years, while 
also requiring this information be sent regularly to the bureau for 
safekeeping. I have serious concerns about our Government collecting 
information on the daily activities of our citizens and equal concerns 
about the Government approving or disapproving the financial choices of 
its citizens.
  I have just outlined why the Consumer Financial Protection Bureau is 
bad for consumers, why it is bad for small businesses and our 
communities, and why it is bad for individual consumer choices and 
freedoms. I point out all these things to you because there is an 
alternative to this bureau that is being proposed by my colleagues from 
Kentucky, Alabama, and Tennessee. This alternative proposal addresses 
each of the concerns I have just raised about accountability, 
oversight, consumer protections, consumer education, and consumer 
rights. This new proposal keeps our current regulatory infrastructure 
intact and improves on it. This alternative would not scramble all our 
current regulators in the name of a change, but, instead, has carefully 
and thoughtfully made our current system better, creating more 
effective checks and balances. The consumer protection alternative 
title would create a consumer protection division to be housed within 
the FDIC.
  The FDIC already oversees consumer deposit protection, so it is a 
logical step to place consumer protection interests here. While the new 
consumer protection division is shielded from outside influence and has 
autonomy, the division is, at the same time, prevented from wielding 
absolute power like the bureau. When rule changes or actions are 
proposed, the FDIC Board would be better able to use their regulatory 
experience to protect consumers, while at the same time ensuring safety 
and soundness are not disregarded.
  This division would still have a Presidentially appointed and Senate 
confirmed Director who serves a 4-year term in office. Instead of 
needlessly looping all kinds of small businesses into the fold for 
additional regulation, the division's mission would be of a proactive 
consumer education, ensuring consumers are able to receive timely and 
understandable information on consumer financial products. The division 
would partner with other agencies, such as the Federal Trade 
Commission, to develop guidelines for market oversight. Through these 
types of partnerships, the division would pursue fraudsters and the bad 
actors in our market. They would be developing best practices for 
overseeing nondepository mortgage originators and addressing the risk-
based supervision of our nondepository institutions.
  Very importantly, this new alternative leaves current prudent 
regulators in place for banks, savings associations, and credit unions. 
While the division would watch over the large institutions that have 
already violated consumer protection statutes, this alternative would 
provide an infrastructure with regulatory experience that would also 
meet the demands of growing consumer financial protection concerns. 
This proposal creates a balance between past regulating experience and 
the call by consumers to have more protection, without losing the 
rights to make personal financial decisions.
  I am a cosponsor of the title X alternative because I believe in its 
ability to address consumer protection without regulating consumers out 
of their rights as citizens. I am a cosponsor because I believe this 
alternative regulates the bad actors without tossing small business 
into the mix and regulating them out of business.
  It doesn't form a new agency that has to go through a whole 
rulemaking process over a period of time before we even know what they 
are doing.
  Putting this bureau under the Federal Reserve, with all the concerns 
and pressures focused on the Fed right now, is a very bad idea. Moving 
consumer protection to an unregulated, nontransparent, not accountable 
new agency that can write its own rules without review and operate 
using unchecked money is beyond my comprehension, and I think it is 
beyond the comprehension of the American people when they find out 
about it. I am not sure they are aware of it or I think there would be 
a huge hue and cry across this country. People are more concerned over 
their freedoms right now than they ever have been, and this will take 
away freedoms. You have to have the freedom to make your choices and 
even to make bad choices. But in America that is the way it works and 
Big Brother is not allowed to hang over your shoulder and decide for 
you whether you are making a good decision.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Florida is recognized.
  Mr. LeMIEUX. Mr. President, I could not have said better what my 
friend and colleague from Wyoming just talked about in terms of this 
consumer protection bill. Every Member of this body is in favor of 
consumer protection. The goal is to get it right, not to do too much 
and not to do too little.
  I think it is important for us to remember what we are trying to 
address. We are trying to address the financial market meltdown that 
happened in 2008 and the ramifications that have been so devastating to 
this economy. They were very devastating in my home State of Florida. 
But what we should do is address the problem. What we should do is try 
to make sure the

[[Page S3323]]

problem does not happen again and not use this crisis as an opportunity 
to create a huge, new, all-powerful bureau of government that is going 
to regulate orthodontists and folks who had nothing to do with this 
financial crisis.
  Let's think back about what happened. To me there are three or four 
parts of this story where you can find culpability, places where we 
should be regulating, some of which is not done in this bill. One is we 
know mortgages were given to people who should not have had mortgages--
people who had no income and no jobs. They called them ninja loans--no 
income, no jobs. There were a lot of them in my State of Florida. Why 
were they written? Many of them were written because they were written 
by mortgage brokers and banks that did not have to retain any of those 
mortgages on their books. There were no underwriting standards. They 
could just ship them off. They had no skin in the game and no 
responsibility.
  Then, on Wall Street, this huge market was created to suck in all 
these mortgages, to create these new investment vehicles that put all 
these mortgages together--mortgages that did not have the underwriting 
standards so you could make sure they were sound. In the need to create 
more and more investment instruments, they created what are called 
synthetic investment entities. Those are not even ones that held these 
actual mortgages. They were just merely a shadow that tracked them. So 
we compounded the problem into hundreds of trillions of dollars, 
betting on mortgages that should never, in many ways, have been written 
in the first place.
  Then, what was the third part of the problem? These mortgages got 
bundled into these mortgage-backed securities, sold on Wall Street, and 
the world looked to the rating agencies to stamp their approval on 
them. The Morningstars and the Moody's and the Fitches and the S&P's 
stamped their rating and said they are AAA, without understanding them, 
without evaluating them. That is another one of the culprits that 
caused this financial crash that we had that has devastated our 
economy. But for those rating agencies putting the AAA grade on these 
mortgage-backed security investments, I don't believe we would have had 
the crash that occurred. People would not have placed their confidence 
in them.
  Why did that happen? Why did these rating agencies stamp them? Why 
did so many people rely upon them? What we come to find out is these 
rating agencies are written into law. They are written into the Federal 
law as the way to determine the creditworthiness of investments. The 
FDIC abdicates its authority and allows rating agencies to be the ones 
that say something is a good investment or not. That is in the law.
  How do these rating agencies get paid? They get paid by the very 
banks that put products in front of them for them to rate. So here is a 
real easy way to understand this. We all buy Consumer Reports Magazine. 
Consumer Reports Magazine evaluates everything from toasters to 
Toyotas, but they don't take any money from the people they rate. They 
don't have advertisers. But for these rating agencies, they are paid by 
the people they rate, by the products these banks bring in front of 
them. Our law says they are the ones that are going to determine 
whether something is creditworthy.
  I wish to make sure we have, as Senator Shelby has put forward, a 
good consumer protection law in this country. But I also wish to make 
sure we are addressing the problems that caused this failure in the 
first place, and one of the ways to do that is to make sure we have 
underwriting on these mortgages so people have some skin in the game: 
You are putting a downpayment on your house, you are showing you are 
creditworthy. That is the way it always was. It is only recently that 
went away. We need to go back to that.
  That is why I join my colleagues, Senator Corker, Senator Isakson, 
Senator Gregg, on their amendment to put the underwriting back in the 
mortgage business.
  But another thing we need to do, we need to take the credit rating 
agencies and write them out of the law. They should no longer get their 
preferential treatment. No longer should the FDIC abdicate its 
responsibility to determine creditworthiness. The market should take 
care of this. If people know they can't just rely upon three or four or 
five rating agencies and they are going to have to do their evaluation 
themselves, we may prevent this problem from happening in the future 
and the next way this problem may manifest itself.
  I have filed an amendment, amendment No. 3774, which will do this. It 
will take these credit rating agencies out of law. In that way, I 
believe we can stop one of the reasons why we had this financial 
collapse. It is not just me who believes in this. On the other side of 
this building, in the House of Representatives, this same language was 
put forward in the package that was passed.
  So this should not be a Republican issue, it should not be a 
Democratic issue because the Democrats in the House supported something 
very similar to what I am proposing. This just makes common sense. 
Let's go after one of the problems that caused this financial mess.
  I would like to point to the August 21 edition of the Wall Street 
Journal. In their editorial they say:

       When the government ordains Moody's and Standard and Poor's 
     as official arbiters of risk, the damage can be catastrophic 
     because so many people rely on them.

  Well, let's no longer abdicate the government's responsibility. Let's 
no longer enshrine these rating agencies in Federal law. Let's get rid 
of one of the reasons we had this financial meltdown to start with. 
Let's not create a whole now huge consumer agency that does way too 
much, gets involved in too many things that had nothing to do with this 
financial meltdown. Let's go after the problem, solve that problem.
  I believe we can do so by passing the amendment I have introduced 
today.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from South Dakota.
  Mr. THUNE. Mr. President, I compliment my colleague from Florida. He 
has addressed an issue which is an important part of this debate; that 
is, making sure loans that get made in this country, both on the 
borrower side and the lender side, are responsible loans.
  I think the amendment he will offer is one on which we ought to have 
a debate and on which we ought to have a vote. I hope this body will 
act in a way that leads to more responsible practices, a higher level 
of responsibility, both with borrowers and lenders in this country, 
which was at the heart of why we ended up where we did.
  It is interesting to me that we continue to watch the problems we are 
experiencing in our economy. Probably by far the most important one is 
the high level of unemployment. That has become sort of a chronic 
problem. Even though the economy appears to be recovering and growing 
again, we still continue to see these very high rates of unemployment, 
certainly worse in some parts of the country than in others, but, 
nonetheless, something that we cannot tolerate.
  We ought to be attacking every single day. Everything we do ought to 
be focused on what we can do to eliminate this high level of 
unemployment, to provide incentives to small businesses to create jobs, 
to grow their businesses and expand, get the economy going again, and, 
obviously, in my view at least, the small businesses in this country 
are the economic engine of our economy. They are our job creators.
  We ought to be focused on making it easier for them to create jobs 
rather than harder. That is why I think it is ironic that almost 
everything the Congress has been doing of late makes it even more 
difficult for small businesses to do that.
  We passed a big, massive expansion of the health care entitlement in 
the Congress a while back. That is going to impose lots of new taxes, 
lots of new mandates on small businesses. It is going to raise their 
insurance premiums, which we are seeing now more and more. The CMS 
Actuary, with their recent report, suggests what we suggested all 
along; that is, this is going to drive up the cost of insurance and 
health care in this country. It is not going to drive it down, it is 
going to drive it up.
  So I think what we are going to see with small businesses across this 
country is not only a higher tax burden associated with paying for 
that, and also

[[Page S3324]]

many of the new mandates that are associated with it, but you are also 
going to see them having to deal now with higher insurance costs that 
will be associated and come with this massive health care expansion 
that was passed, not to mention the fact that, in my view, this is 
going to end up in a tremendous amount of growth in the debt in the 
outyears when we realize this is going to cost way more than it was 
anticipated, and that many of the offsets or pay-fors are probably not 
going to come to fruition.
  But that being said, it seems to me at least that having all of this 
uncertainty coming out of Washington, whether it is the implementation 
of the new health care bill, whether it is questions about a climate 
change bill that could impose a crushing new energy tax on our economy, 
questions about what is going to happen with tax rates with regard to 
dividends and capital gains and marginal income tax rates next year, 
what is going to happen with the death tax--all of this uncertainty is 
just hanging a cloud over this economy and making it very difficult for 
our small businesses to do what they do best; that is, to exercise that 
entrepreneurial spirit, to grow the economy, to create jobs.
  It is very difficult to do that when you pile more and more burdens 
and more and more costs on top of the very small businesses that we are 
hoping will lead us out of this recession. That is why I think in all 
of our efforts we ought to have a very close eye on what impact they 
are going to have on the small business sector of our economy.
  This is no exception. The debate on financial services reform is 
about some very critical issues, issues that need to be addressed, 
issues that we should be focused on: how to deal with the issue of 
systemic risk and make sure that systemically risky enterprises in this 
country, that that risk is constrained, that there is appropriate 
oversight, there is appropriate transparency.
  I think there is an important issue to be debated in terms of 
derivatives, which is a $600 trillion economy in this country that has 
been operating in the shadows. The legislation that is before us, I 
think if it is amended the right way--and I hope it will be on the 
Senate floor--will bring all of that into the light. There will be 
transparency, something that I think is desperately needed in that 
area.
  I hope this will be done in a way that does not impose new burdens on 
end users, those who are trying to legitimately hedge against higher 
commodity prices, currency rates, and interests rates and those sorts 
of things. But there is work to be done in this legislation to deal 
with the issue of systemic risk, to ensure that we take all of the 
steps we possibly can to avoid and prevent the type of economic 
collapse and meltdown we witnessed a couple of years ago.
  I think it is ironic this legislation does not encompass something 
that was at the very heart of that economic meltdown; that is, the 
issue of Freddie Mac and Fannie Mae. It is ironic to me, at least, the 
focus of this legislation is to deal with the issues that lead to the 
economic malaise that we found ourselves in and the collapse that we 
experienced a couple of years ago that would attempt to accomplish the 
objective of preventing that in the future, absent dealing with Freddie 
Mac and Fannie Mae, which was a huge contributing factor to what we 
witnessed a couple of years ago.
  So it does not include that. It does get at derivatives; it does 
address, in some fashion, the issue of too big to fail. Then it also 
addresses this issue that we are debating right now, which is the issue 
of consumer protection. I would argue this is an important part of the 
debate when it comes to the regulation of our financial markets, 
perhaps even the most important part; that is, protecting consumers.
  Having said that, I think what the recent financial crisis 
highlighted was the fact that there were a number of bad actors out 
there in the marketplace who were out for a quick profit, without 
concern for the consumer, and this consumer protection effort as part 
of this legislation is designed to correct that, or at least address 
and get at that problem.
  I strongly support some of the consumer protection ideas that have 
been put forward. There is a Republican alternative amendment that has 
been offered to the base bill. But as is typically the case in the 
Congress, instead of just dealing with the issue that needs to be 
fixed, trying to fix the issue that needs to be fixed, it seems like 
the pattern is that we try to go beyond that and fix issues that do not 
need to be fixed; in fact, in this particular case, with a whole new 
bureaucracy, creating the whole new Consumer Financial Protection 
Bureau manned with lots of new Federal Government employees with lots 
of new powers, in my view, extending a reach way beyond what should 
ever have been contemplated to deal with the important issue of 
protecting consumers in this country.
  Why do I say that? I had in my office last week a bunch of community 
bankers. I have met with credit unions. I have met with auto dealers. I 
have met with a lot of small businesses. I would argue these are not 
the types of entities that led to all of the problems we experienced. 
Those are not systemically risky entities or companies. These are hard-
working, in most cases, small businesses.
  When I sat down with my community bankers--I am not talking about big 
Wall Street banks; I am talking about Main Street banks, local banks, 
banks that are about their customers because they care about their 
customers; they are their neighbors; they are the folks they hang out 
with; their friends and their kids go to school together; these are 
people who are far removed from Wall Street--they told me about how 
this bill does not level the playing field and how they are going to be 
subject to a whole now layer of regulation they cannot afford. They 
told me stories about how they would make sure their customers are 
always satisfied and how they cannot afford to make bad loans. In these 
smaller banks in smaller communities where there is a tremendous amount 
of accountability, obviously these are not the types of banks at which 
this legislation should be targeted or directed.

  These are banks that provide capital to our farmers, our small 
business owners. In my State of South Dakota, these are the people 
who--most of my constituents would rather bank with these big, large 
chain banks that we talk about when it comes to the issue of systemic 
risk. The Democrats' bill, in its current form, places new burdens on 
these banks, costly regulation on banks that are already heavily 
regulated, that have already proved to be sound financial entities.
  I also recently sat down with some car dealers from my State, again 
small Main Street businesses in South Dakota, who have personal 
relationships with their customers. They told me how they may have to 
cut some of the services that they provide to their customers because 
of the broad authority that is granted to this brandnew agency, this 
Consumer Financial Protection Bureau.
  These business take great pride--when I say ``these,'' the auto 
dealers--in the service they provide to their friends and neighbors who 
come into their businesses to buy a car. To have bureaucrats in 
Washington, DC, looking over their shoulder does not seem like the 
right approach to me.
  I have heard the arguments that these small banks are somehow not 
going to be affected because of the $10 billion exemption, but I think 
it is important that we point out here, and that we clear up some of 
the facts on this issue. That $10 billion exemption is from enforcement 
and examination authority by the new Consumer Financial Protection 
Bureau. The new bureaucracy still has the ability to oversee every 
product and loan and transaction these small banks enter into with 
their customers.
  I have also heard the argument that section 1027 excludes many of the 
small businesses that are calling me and e-mailing me and coming to my 
office because they are concerned. However, it seems to me, once a 
small business decides to give their customers an option to pay for 
their goods or services over time, this new Consumer Financial 
Protection Bureau can come knocking on their door. What Washington 
bureaucrats are going to tell them is what is in the best interest of 
their customers in South Dakota. So you can imagine the implications of 
this type of authority. Currently, the legislation provides very few 
checks on this new bureau's broad new authorities.

[[Page S3325]]

  I want reforms to our current regulatory oversight structure. We need 
better protections for our consumers. But the bill that is before us 
creates a new bureaucracy that has a funding stream outside of 
congressional oversight with very few checks and balances, and that is 
not reform.
  What I would like to see is this bureau removed from the bill. There 
are other ways to provide better protection for consumers without 
burdening small businesses, which, as I said earlier, are the engine of 
our economy.
  Just to illustrate or to put a fine point on that, I have a letter 
from the National Federation of Independent Business, which represents 
businesses all across this country, has a very large membership, 
including many businesses in my State. They write to express their 
concerns with certain parts of the bill that are too far reaching and 
would impose major new costs on small business.
  They go on to say:

       The establishment of the Consumer Financial Protection 
     Bureau will cover many small businesses strictly because they 
     set up flexible payment arrangements with their customers.

  According to a study they did a few years back on getting paid, 
approximately 50 percent of small businesses offer special terms or 
credit-type arrangements to allow customers to pay for goods or 
services. Then they go on to describe the nature of some of those 
arrangements. But I think it is fair to say a lot of small businesses--
and car dealers are probably the most notable example. But as was said 
earlier, that could extend to furniture stores, jewelers; that could 
extend to orthodontists and dentists. People who allow their customers 
to spread out the payments over time to pay on terms and have these 
flexible types of payment arrangements would be covered by this.
  That makes no sense. At a time when we are trying to have our small 
businesses help lead us out of this recession, start creating jobs 
instead of dealing with the systemically risky entities that got us 
into this mess in the first place, we are talking about piling a whole 
new burden and lots of new costs on top of our small businesses at a 
time when they can least afford it.
  So I would hope the amendment that is being offered, the alternative 
to the Consumer Protection Financial Bureau in this bill, will be 
adopted; that my colleagues in the Senate will take steps to improve 
the way this bill treats consumer protection and in the way it treats 
small businesses under this bill.
  I, frankly, as I said earlier, would like to see this title removed 
entirely and us deal with this in a way that makes more sense; that 
does not create a whole new bureaucracy, with all kinds of new 
government employees with all kinds of new powers. There are certainly 
ways in which we can address the issue of consumer protection absent 
having to go to these great lengths and this great cost, expense to the 
taxpayer, and great new burdens imposed upon small businesses in this 
country.
  So I am one who will be supporting not only the amendment that is 
before us but other amendments that address this title in the bill. I 
have one I am working on that would exempt many of the small businesses 
that would be covered by this bill, some of which I mentioned in my 
remarks earlier. But I think this is an issue that is incredibly 
consequential in this legislation and so far removed--so far removed--
from the purpose of this bill in the first place.
  As I said earlier, we ought to fix the things that need to be fixed. 
But we should not try to fix things that do not need to be fixed, 
particularly when it calls for creating a whole new government 
bureaucracy in Washington, DC, with new government employees, at great 
additional cost and, of course, as I said earlier, at great additional 
expense to America's small businesses, which are the economic engine 
and job creators in our economy.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized.
  Mr. MENENDEZ. Mr. President, I wanted to come to the floor to talk 
about the Shelby amendment. I think we need to be 100 percent clear 
about one thing; that is, we need to pass a consumer protection bill--
not a Wall Street protection bill--with a strong independent agency 
that can aggressively defend families in all sectors of the financial 
industry. That is consumer protection.
  A weak agency that cannot defend families against commercial banks, 
investment banks, credit card companies, car dealers, payday lenders, 
and entities such as AIG, that is Wall Street protection. That is, in 
essence, what this amendment does. The fact is, the Republicans' 
proposal on this issue seems to symbolize America's worst fears about 
how the powerful operate--the powerful protecting the powerful. The 
problem isn't that families have too much protection on Wall Street; 
the problem is they have not been protected enough.
  The Shelby substitute is just the status quo. It is a cynical attempt 
to pretend they are doing consumer protection. In reality, it is meant 
to make sure there is no meaningful consumer protection at the end of 
the day. It willfully ignores the lessons we should have learned: that 
left to their own devices, there are lenders who can and will take 
advantage of consumers. That is what the marketplace--as it is right 
now--has taught us.
  We absolutely need a muscular, independent agency--however it is 
configured, wherever it is housed--one that will have full and 
comprehensive authority to develop and implement real, honest, 
proconsumer rules so they will no longer be fooled by 30 pages of fine 
print that no one except bank lawyers could possibly understand; one 
that has independent rule-writing authority and authority over banks 
and nonbanks, while maintaining strong State consumer protection laws; 
one that will stop the ongoing attempts by credit card companies to 
circumvent the rules this Senate and Congress have already enacted. 
They are already working at it.
  As Harvard Law Prof. Elizabeth Warren has noted: Thanks to product 
safety rules, you can't buy a toaster that would burn down your house. 
But you can buy a faulty mortgage that could take your house away.
  The bank regulators have been of no great help because they are 
looking out for the banks--not for us, not for you, not for 
unsuspecting families who need the full force protections of robust 
regulations implemented by a muscular agency that is on your side.
  In my view, a new independent agency would provide not only the 
comfort they need but the protection they deserve. We can argue about 
details, but I doubt there is much disagreement after what we have been 
through that Wall Street needs a watchdog, one that has jurisdiction 
over all financial products no matter who offers them, not just the 
products offered by big banks.
  Chairman Dodd has worked very hard over many months to craft the 
details of an agency that strikes the right balance. I was happy to see 
that finally our Republican colleagues were saying: We are on the Wall 
Street reform train. But now I begin to wonder--when I see amendments 
such as this--that they jumped on the train to strike the emergency 
brake on consumer protection enforcement.
  The Shelby amendment offers nothing in the way of consumer 
protection. There is no independence. The CFPB would simply be a 
division within the FDIC with no autonomy of its own. It could not even 
finalize a rule without FDIC approval. It will not have any resources. 
And that is how Republicans want it: no resources, no supervisory 
authority, no enforcement power. Guess who wins in that scenario.
  Nonmortgage companies will never be subject to supervision unless 
they have a pattern or practice of breaking the law within the past 3 
years. So what does that mean? ``Let's have a lot of people get hurt 
before we actually would say we should now give them protection.'' It 
is not my sense of how the law should operate.
  The Shelby amendment would establish the Division of Consumer 
Protection at the FDIC. It maintains, in essence, the status quo. 
Consumer protection rule writing will still be under the same 
authority, the same regulators who routinely ignored or opposed the 
needs of consumers. The amendment provides no safeguards to prevent the 
FDIC Chair or board from overriding decisions by the division director.
  The amendment would actually prohibit--prohibit--the proposed 
consumer division from doing any rule writing

[[Page S3326]]

under the Federal Trade Commission Act for payday lenders, debt 
collectors, foreclosure scam operators, mortgage brokers, and other 
nonbank consumer finance companies. It could only do examinations of 
nonbank consumer finance companies if they ``demonstrate a pattern or 
practice of violations'' of consumer law. So only after the consumer 
has been harmed repeatedly--after they have been harmed repeatedly--
could the consumer division do any examination of the business.
  This is simply saying: I am going to tell you that I am going to put 
a cop on the beat. He has no uniform, he has no equipment, and he 
cannot stop the bad guys. What a falsehood. We need to defeat this 
amendment, and we need to have a bill that ultimately gives strong 
consumer protections for millions of families in this country who have 
already faced the consequences of the system that is going on 
unregulated in a way that it allows greed and excesses to take place 
and that puts protections, yes, for Wall Street but not for Main 
Street.
  Senator Dodd has struck the right balance. We need to preserve it. I 
look forward to supporting him and opposing this amendment.
  With that, Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized.
  Mr. DODD. Mr. President, let me briefly express my gratitude to my 
great pal and friend from New Jersey, Bob Menendez, once again. We look 
around. There are 100 of us here. I do not often acknowledge these 
things, but if I had to pick one of our colleagues to be in my corner 
as an advocate, I would pick Bob Menendez every time. He is a strong 
advocate. When he is focused and passionate about a matter, as he is on 
this one, there is no better advocate in the Senate. He has been a 
great member of our committee and a great help over the last few years 
where we have worked together on a number of bills coming out of the 
committee.
  His understanding of this issue is exactly right. I say, there are 
ideas people can offer on which they can make a case that they 
strengthen our particular provision. But I say, respectfully, this is 
such a step backward, it is even hard to imagine someone could actually 
conjure up an amendment that would step us this farther away from even 
the status quo.
  I thought I might get an amendment that would strike this and leave 
the world as it is. Senator Thune made that argument, that somehow this 
is not broken, leave it alone. Yet there is not a person I know of in 
the country who does not recognize this problem all began because there 
were unscrupulous brokers, there were people willing to put ratings on 
bundled securities that were worthless, there were bankers willing to 
turn a blind eye and a deaf ear, pushing out mortgages they knew people 
could not possibly afford, luring them into it by promising them they 
could meet all their obligations.
  To suggest the system is not broken--you would almost have to have 
been living on a different planet over the last few years not to 
recognize what happened because consumers were forgotten. Safety and 
soundness, we were told, were in great shape. Institutions were making 
money. This was a very stable situation.
  We had a hearing almost 3 years ago in our committee. It was in June 
of 2007. A guy by the name of David Berenbaum from the National 
Community Reinvestment Coalition came before the committee. Let me 
quote, if I can--this is 3 years ago--from his testimony:

       For the past 5 years, community groups, consumer protection 
     groups, fair lending groups, and all of our members in the 
     National Community Reinvestment Coalition have been sounding 
     an alarm about poor underwriting--underwriting that not only 
     endangered communities, their tax bases, their municipal 
     governments, their ability to have sound services and 
     celebrate home ownership--but [underwriting that] was going 
     to impact on the safety and soundness of our banking 
     institutions themselves. Those cries for action fell on deaf 
     ears, and here we are today.

  I remember my colleague from New Jersey, almost 3 years ago--I 
remember his words--I do not have them written down in front of me, but 
I remember them very clearly. I say to the Senator, your words that day 
were: This is going to be a tsunami. It was the first time I heard 
those words used to describe the looming foreclosure crisis.
  We were told then there would be maybe 1 million, maybe 2 million 
foreclosures. Now we know the number is in excess of 7 million that 
have occurred--not to mention job loss and the like.
  The consumer people were arguing for underwriting standards. It was 
the safety and soundness regulators who were refusing to acknowledge we 
did not have underwriting standards or were refusing to acknowledge we 
needed to do something about it. So I wanted to commend my colleague.
  Mr. MENENDEZ. Mr. President, if I may ask my distinguished chairman 
to yield for a moment, the Chairman is absolutely right. As a matter of 
fact, when I made that comment that we were going to have a tsunami of 
foreclosures, the administration witnesses at the time--the previous 
administration, of course--said, with all due respect, that is an 
exaggeration.
  Mr. DODD. Right.
  Mr. MENENDEZ. I wish they had been right and we had been wrong. But I 
think the chairman hits it right on point. In the context of the rating 
agencies, they were playing coach and referee. When you are playing 
coach and referee, somehow the game does not work out quite all that 
well.
  I appreciate what the Senator done in that respect here as well.
  I think the chairman makes the case very clearly that the definition 
of insanity is doing the same thing time and time again and expecting a 
different result. If we want to see what has happened to the American 
consumer in this country continue--facing the same consequences they 
have had to face over the last couple years--then we adopt this 
amendment. But if we want to change that, then we would support the 
underlying provisions in his bill.
  I thank the Senator for his leadership.
  Mr. DODD. Mr. President, I thank the Senator.
  The last point I want to make on the amendment is, under this 
proposal, any person who is subject to one of the enumerated statutes 
could be assessed--under this bill, in section 1015(a)--and this 
amendment, by the way--talk about a bureaucracy, it is a long 
amendment--but in 1015(a), it says:

       The Chairperson shall establish, by rule, an assessment 
     schedule--

  So we are going to assess now these various institutions that are 
already burdened with assessments--

       including the assessment base and rates, applicable to 
     covered persons subject to section 1023. . . .

  I know this sounds like a lot of gibberish, but what is section 1023? 
What does it say? Section 1023 talks about nondepository institutions 
subject to consumer laws--just consumer laws. One of the complaints 
about our underlying bill--which is totally false--is that florists and 
butchers and dentists and accountants and lawyers would be subject to 
the provisions of this act. Nothing could be further from the truth, 
and the language in our bill makes it explicitly clear that you must be 
significantly involved in financial services or products. That is the 
language of our bill.
  Section 1023: Nondepository institutions subject to consumer laws 
could be levied with assessments. That is your florist, your butcher, 
your dentist, your accountant, your lawyer. So as to those who argue 
against my bill and argue for this alternative--in fact, explicitly in 
here, at least as I read this--it could very well impose assessments on 
the very people they claim are affected by our legislation.
  Again, I invite my colleagues to read it. It is not a speech I am 
reading. I am reading from the proposed amendment. That section 1023--
specifically, you can look it up in here; it is a section of the bill--
it speaks about nondepository institutions subject to consumer laws. 
And the definition, accordingly, is the very people who are not 
financial institutions, who could be levied with those assessments.
  So for all those reasons, respectfully, I would urge my colleagues to 
reject this amendment. I do not claim perfection in our underlying 
consumer protection language. We think we have a very strong bill. I am 
always anxious to hear from people who think they can make it stronger 
or better in some way. Fine. But to propose a whole new

[[Page S3327]]

regulatory structure here, with new people coming on, at great cost, 
with no power whatsoever to do anything about the very problem that 
confronts us, seems to me to be the height of what we are trying to 
avoid: creating a bureaucracy that does not do much. That, it seems to 
me, is what the American taxpayers want us to avoid.
  With that, we have completed on our side the debate against this 
amendment. Unless there is some further comment, then I would ask for 
the yeas and nays on the amendment and call for a vote.
  Mr. BYRD. Mr. President, I oppose the Shelby amendment.
  In our zeal to protect consumers from egregious banking and lending 
practices, I fear the Senate is paying too little attention to basic 
constitutional tenets.
  The Shelby amendment proposes to create a division for consumer 
financial protection within the Federal Deposit Insurance Corporation, 
FDIC, to exempt that new entity from the congressional appropriations 
process. The underlying substitute amendment proposes a similar model--
a new Bureau of Consumer Financial Protections within the Federal 
Reserve System, which would also be exempt from the congressional 
appropriations process. This is in addition to several exemptions 
proposed in the underlying substitute amendment--exemptions for the 
Securities and Exchange Commission, and for new funds for the 
Securities and Exchange Commission and exemptions for the Commodities 
and Futures Trading Commission fund to reward whistleblowers.
  I understand the desire by some to create a new consumer agency, and 
to elevate its status to that of a banking regulator but, these 
proposals--the Shelby amendment, and the underlying Democratic 
substitute--are alarming in the aggregate spending latitude they are 
recommending for one agency. The usual procedure of executive review by 
the White House budget office, and public discussion of the President's 
budget submission through hearings, testimony, questions, debate and 
amendment--would not apply to the new consumer agency under both the 
Republican and Democratic proposals. I support stronger consumer 
protections in the financial services industry, but I do not believe 
that the elected representatives of the people have to forfeit their 
constitutional oversight responsibilities in order to make that happen.
  We need to remember that the financial regulators have their 
directors appointed by presidents, and that the Congress needs to be 
able to exercise oversight. If enforcement is inadequate, or abusive, 
the people's most potent weapon to effect change is the congressional 
power of the purse.
  In the bill passed by the House of Representatives last year, the 
House proposed to create a new consumer protection agency, and to 
subject its funding--at least in part--to the annual appropriations 
process. That model is a better way of helping consumers than exempting 
the budget of the consumer protection agency from congressional review.
  Mr. SHELBY. Mr. President, it is my understanding that Chairman Dodd 
has asserted that the Shelby consumer protection substitute would lead 
to additional assessments on community banks. I want to make it clear 
for the record that this is not true.
  But before doing so, I do want to highlight that the basic thrust of 
Chairman Dodd's assertion is based on the belief that placing the 
taxpayer on the hook for the costs of regulating Goldman Sachs, 
Citigroup, and J.P. Morgan is the preferential way of proceeding.
  Again, Chairman Dodd believes that taxpayers paying the freight for 
Goldman is the way to go.
  But I want to set the record straight about my amendment. First, my 
provision ensures that any nonbanks that are subject to regulation pay 
the full cost of that regulation themselves. They get no handouts from 
the taxpayer.
  Secondly, community banks are not presently assessed by the FDIC for 
the cost of regulation, and my amendment does not provide the FDIC with 
any new authority to make such assessments.
  Funding for the new division will be provided by assessments on 
nonbank mortgage originators, the other nonbank entities that are 
subject to regulation and large banking institutions. I would point out 
that the assessments on large banks will increase considerably 
following passage of the Tester amendment, which Chairman Dodd 
supported.
  Finally, in an effort to protect deposit insurance, my amendment 
creates a separate consumer financial protection fund which will ensure 
that funds for deposit insurance and consumer protection are never 
comingled.
  Mr. President, let's be clear about the differences in the funding 
sources in the two bills. The Dodd bill uses taxpayer funds to give a 
free ride to Goldman Sachs and the other big Wall Street Banks while my 
amendment makes big banks and bad actors cover their own costs.
  The PRESIDING OFFICER (Mr. Franken). Is there a sufficient second? 
There is a sufficient second.
  The yeas and nays were ordered.
  Mr. DODD. Mr. President, before calling for the vote, I ask unanimous 
consent that the Senate now proceed to a vote with respect to the 
Shelby amendment No. 3826, with no amendment in order to the amendment 
prior to the vote; further, that the previous order with respect to the 
Sanders amendment remain in effect, and provided that after the Sanders 
amendment has been called up and reported by number, Senator McCain be 
recognized to call up an amendment relating to GSEs; that after the 
McCain amendment has been reported by number, the Senate then resume 
consideration of the Sanders amendment.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. DODD. Mr. President, again, before we get to this vote, let me 
make this appeal. We are going to have this vote, and then we will go 
to the Sanders amendment and then to the McCain amendment. Again, we 
are going to try to go back and forth and move along. The number of 
amendments now has increased to over 150. I say to my colleagues, there 
are actually more amendments on the Democratic side than the Republican 
side--not many more but more. I urge my colleagues, if you have very 
like minded amendments, it may be in your interests to combine these 
ideas in a single amendment--maybe rally around one that actually makes 
the point, to either extract from the bill or add to the bill because 
we all realize we are not going to be on this bill forever, and I want 
to accommodate as many people as I can and have the kind of discussion 
we just had on this amendment. But to do that in the timeframe we have 
is going to require cooperation and some indulgence on the part of 
people to not be demanding.
  To the extent you have an amendment up, let's try to get to it and 
have a good discussion but not too long so we give other people a 
chance to be heard as well. I make that plea to everyone involved.
  With that, I yield the floor.


                Amendment No. 3826 to Amendment No. 3739

  The PRESIDING OFFICER. The yeas and nays have been ordered.
  The question is on agreeing to the amendment.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. KYL. The following Senator is necessarily absent: the Senator 
from Utah (Mr. Bennett).
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 38, nays 61, as follows:

                      [Rollcall Vote No. 133 Leg.]

                                YEAS--38

     Alexander
     Barrasso
     Bond
     Brown (MA)
     Brownback
     Bunning
     Burr
     Chambliss
     Coburn
     Cochran
     Collins
     Corker
     Cornyn
     Crapo
     DeMint
     Ensign
     Enzi
     Graham
     Gregg
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johanns
     Kyl
     LeMieux
     Lugar
     McCain
     McConnell
     Murkowski
     Risch
     Roberts
     Sessions
     Shelby
     Thune
     Vitter
     Voinovich
     Wicker

                                NAYS--61

     Akaka
     Baucus
     Bayh
     Begich
     Bennet
     Bingaman
     Boxer
     Brown (OH)
     Burris
     Byrd
     Cantwell
     Cardin
     Carper
     Casey
     Conrad
     Dodd
     Dorgan
     Durbin

[[Page S3328]]


     Feingold
     Feinstein
     Franken
     Gillibrand
     Grassley
     Hagan
     Harkin
     Inouye
     Johnson
     Kaufman
     Kerry
     Klobuchar
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     McCaskill
     Menendez
     Merkley
     Mikulski
     Murray
     Nelson (NE)
     Nelson (FL)
     Pryor
     Reed
     Reid
     Rockefeller
     Sanders
     Schumer
     Shaheen
     Snowe
     Specter
     Stabenow
     Tester
     Udall (CO)
     Udall (NM)
     Warner
     Webb
     Whitehouse
     Wyden

                             NOT VOTING--1

       
     Bennett
       
  The amendment (No. 3826) was rejected.
  Mr. DODD. Mr. President, I move to reconsider the vote.
  Mr. SHELBY. 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 Connecticut.
  Mr. DODD. Mr. President, let me give my colleagues some idea of how 
we are going to proceed.
  Senator Sanders has the next amendment. We entered into a unanimous 
consent agreement a few minutes ago. Senator Sanders has asked for 80 
minutes to be equally divided on his amendment. We then turn to the 
McCain amendment. I am hoping we get a time agreement on that amendment 
as well.
  There are 141 amendments, about equally divided between us. I want to 
accommodate everybody as much as I can. If some people take too much 
time, it means others do not get a chance to offer their amendments.
  I make a request of my good friend Senator Shelby to inquire, before 
we get to the McCain amendment, what kind of time agreement we can have 
on his amendment. Then my intention is to go to a Democratic amendment 
and possibly a Republican amendment tonight.
  There are going to be votes tomorrow. I am letting my colleagues know 
we will have votes tomorrow. I gather Monday and Friday of next week 
are nonvote days. If we have 141 amendments and Members want to be 
heard--and I want to give them time to be heard and have good debate--
obviously we cannot go on forever.
  Mr. REID. Will my friend yield?
  Mr. DODD. I will be happy to.
  Mr. REID. Mr. President, for all the Senators here, we may have 141 
amendments, but this is not the first time we have had 141 amendments 
on a bill. I have looked at a catalog of the amendments, and a lot are 
on the same subject. What we are trying to do is find out different 
categories and not have everybody offer the same amendment.
  Our goal tonight should be to try to get rid of four amendments. If 
we could have four amendments out of the way tonight, we could look--
and I thank my friend because I told him we are going to have votes in 
the morning, or at least a vote. I can create a vote. I hope we don't 
have to start creating votes. I hope they are on amendments people want 
to debate.
  Senator Sanders has an amendment. Has he agreed to a time?
  Mr. DODD. Yes, he has.
  Mr. REID. Senator McCain, has he agreed to a time?
  Mr. SHELBY. It is on GSE. It will take a while.
  Mr. DODD. If everybody demands more time, everyone suffers. There is 
not unlimited debate. With 141 amendments equally divided between us, 
we have to provide time for people. I cannot do that if people insist 
on unlimited time or more time. We know these issues pretty well. It is 
not as if it is a new bill.
  Mr. McCONNELL. If my friend from Connecticut will yield for an 
observation, Mr. President, we may have 141 amendments, but they are 
not all equal. We are going to try to work our way through the major 
amendments in a serious way. This is a very important piece of 
legislation. The majority leader and I had a conversation earlier today 
on how to go forward. We will keep working on it in a systematic way 
and maximize a way for people to have votes on important amendments.
  Mr. DODD. I agree. I say to my friend the Republican leader, we spent 
24 hours on one amendment. We have to do better than that. I cannot 
accommodate people if we are going to spend a day on one amendment. It 
just does not work. All amendments may not be equal, but all Members 
are, and all Members deserve an opportunity to be heard.
  I appreciate the majority leader's point of trying to consolidate if 
several Members have the same idea about something. Maybe it can be 
brought together in one amendment rather than five--I say that to both 
Democrats and Republicans--as a way of moving the process along, and we 
can have a good discussion. I cannot spend 24 hours on one amendment 
and accommodate people. It just is not going to happen. That is my 
point.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SHELBY. Mr. President, we are making progress. We might not be 
making progress as quickly as some people would like. Maybe we did 
spend a lot of time on this amendment, but it is very important. We 
have debated it. I guess it has been disposed of, at least that part of 
it, now. But there are a lot of other important amendments coming up. 
We can work together and work through some of them because a lot are 
duplications to some degree, and some of them we can take. Senator Dodd 
and I can help our staffs on that. Remember, this affects all of our 
economy--everything.
  Mr. DODD. I will take advantage of the moment to say that I will be 
here all weekend. We are not going to have votes on the weekend. I will 
be here all weekend. For people who would like to have amendments and 
would like us to consider them, Senator Shelby's staff will be around 
and my staff will be around to work on their amendment to see if we can 
accommodate it, modify it, or talk about it. I will spend Saturday and 
Sunday here all day for people to go over their products so maybe we 
can expedite things next week as well.
  Mr. REID. Mr. President, if I may talk to the two managers through 
the Chair, I know how important everyone thinks their amendment is. But 
you can have half an hour on each side, an hour for an amendment. 
Someone can say quite a bit in 5 minutes. I think we are going to have 
to have some guidelines as to what we are going to do. Everyone thinks 
their amendment is the most important, and I am sure in their mind it 
is. We have to set some standard. I have been very accommodating in 
this last 24 hours because I think so much of the comanager of the 
bill, Senator Shelby. We could have moved to table his amendment a long 
time ago.
  Let's understand, there are other ways we can move forward. If 
somebody says: I need 3 hours on an amendment--there is not an 
amendment on this bill that is worth 3 hours, OK? We have had a good 
conversation.
  I hope the two managers can give us some guidelines as to what they 
expect to do tonight and tomorrow because Members have other things to 
do than listen to the three of us.
  Mr. DODD. Senator Sanders.
  The PRESIDING OFFICER. The Senator from Vermont.


                Amendment No. 3738 to Amendment No. 3739

  Mr. SANDERS. Mr. President, I call up amendment No. 3738.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Vermont [Mr. Sanders], for himself, Mr. 
     Feingold, Mr. DeMint, Mr. Leahy, Mr. McCain, Mr. Wyden, Mr. 
     Grassley, Mr. Dorgan, Mr. Vitter, Mrs. Boxer, Mr. Brownback, 
     Mr. Risch, Mr. Wicker, Mr. Graham, Mr. Hatch, and Mr. Crapo, 
     proposes an amendment numbered 3738 to amendment No. 3739.

  Mr. SANDERS. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To require the non-partisan Government Accountability Office 
   to conduct an independent audit of the Board of Governors of the 
Federal Reserve System that does not interfere with monetary policy, to 
   let the American people know the names of the recipients of over 
  $2,000,000,000,000 in taxpayer assistance from the Federal Reserve 
                    System, and for other purposes)

       On page 1525, strike line 20 and all that follows through 
     page 1528 line 3 and insert the following: ``to the taxpayers 
     of such assistance.''.

     SEC. 1152. INDEPENDENT AUDIT OF THE BOARD OF GOVERNORS.

       (a) Amendments to Section 714.--Section 714 of title 31, 
     United States Code, is amended--
       (1) in subsection (a), by striking ``the Office of the 
     Comptroller of the Currency, and the Office of Thrift 
     Supervision.'' and inserting ``and the Office of the 
     Comptroller of the Currency.'';

[[Page S3329]]

       (2) in subsection (b), by striking all after ``has 
     consented in writing.'' and inserting the following: ``Audits 
     of the Federal Reserve Board and Federal reserve banks shall 
     not include unreleased transcripts or minutes of meetings of 
     the Board of Governors or of the Federal Open Market 
     Committee. To the extent that an audit deals with individual 
     market actions, records related to such actions shall only be 
     released by the Comptroller General after 180 days have 
     elapsed following the effective date of such actions.'';
       (3) in subsection (c)(1), in the first sentence, by 
     striking ``subsection,'' and inserting ``subsection or in the 
     audits or audit reports referring or relating to the Federal 
     Reserve Board or Reserve Banks,''; and
       (4) by adding at the end the following:
       ``(f) Audit of and Report on the Federal Reserve System.--
       ``(1) In general.--An audit of the Board of Governors of 
     the Federal Reserve System and the Federal reserve banks 
     under subsection (b) shall be completed within 12 months of 
     the enactment of the Restoring American Financial Stability 
     Act of 2010.
       ``(2) Report.--
       ``(A) Required.--A report on the audit referred to in 
     paragraph (1) shall be submitted by the Comptroller General 
     to the Congress before the end of the 90-day period beginning 
     on the date on which such audit is completed and made 
     available to--
       ``(i) the Speaker of the House of Representatives;
       ``(ii) the majority and minority leaders of the House of 
     Representatives;
       ``(iii) the majority and minority leaders of the Senate;
       ``(iv) the Chairman and Ranking Member of the appropriate 
     committees and each subcommittee of jurisdiction in the House 
     of Representatives and the Senate; and
       ``(v) any other Member of Congress who requests it.
       ``(B) Contents.--The report under subparagraph (A) shall 
     include a detailed description of the findings and conclusion 
     of the Comptroller General with respect to the audit that is 
     the subject of the report.
       ``(3) Construction.--Nothing in this subsection shall be 
     construed--
       ``(A) as interference in or dictation of monetary policy to 
     the Federal Reserve System by the Congress or the Government 
     Accountability Office; or
       ``(B) to limit the ability of the Government Accountability 
     Office to perform additional audits of the Board of Governors 
     of the Federal Reserve System or of the Federal reserve 
     banks.''.

     SEC. 1153. PUBLICATION OF BOARD ACTIONS.

       (a) In General.--Notwithstanding any other provision of 
     law, the Board of Governors shall publish on its website, 
     with respect to all loans and other financial assistance it 
     has provided since December 1, 2007 under the Asset-Backed 
     Commercial Paper Money Market Mutual Fund Liquidity Facility, 
     the Term Asset-Backed Securities Loan Facility, the Primary 
     Dealer Credit Facility, the Commercial Paper Funding 
     Facility, the Term Securities Lending Facility, the Term 
     Auction Facility, the agency Mortgage-Backed Securities 
     program, foreign currency liquidity swap lines, and any other 
     program created as a result of the third undesignated 
     paragraph of section 13 of the Federal Reserve Act--
       (1) the identity of each business, individual, entity, or 
     foreign central bank to which the Board of Governors has 
     provided such assistance;
       (2) the type of financial assistance provided to that 
     business, individual, entity, or foreign central bank;
       (3) the value or amount of that financial assistance;
       (4) the date on which the financial assistance was 
     provided;
       (5) the specific terms of any repayment expected, including 
     the repayment time period, interest charges, collateral, 
     limitations on executive compensation or dividends, and other 
     material terms; and
       (6) the specific rationale for providing assistance in each 
     instance.
       (b) Timing.--The Board of Governors shall publish 
     information required by subsection (a)--
       (1) not later than 30 days after the date of enactment of 
     this Act; and
       (2) in updated form, not less frequently than once 
     annually.

  Mr. SANDERS. Mr. President, this amendment, which calls for 
transparency at the Fed, is, frankly, one of the more unusual 
amendments I have ever participated in, not so much for its content but 
for the kind of coalition that has come together around it. How often 
do you have the AFL-CIO and FreedomWorks supporting the same effort? 
How often do you have the SEIU, which is the largest trade union in 
this country, moveOn.org, which I believe has some 5 million 
progressive members, and Public Citizen striving for the same goal as 
the National Taxpayers Union or the Eagle Forum or the Conservative 
Americans for Tax Reform? There is a coalition representing tens of 
millions of grassroots activists. Some of them are progressive, some 
where I come from, some of them are conservative, but they are all 
united around a very basic principle: We need transparency at the Fed, 
and we need it now.
  I want to use this opportunity--and I thank Chairman Dodd for 
allowing me to do this--to talk about the amendment, what it does, and 
why so many diverse groups are coming together in support of it because 
you do have to ask yourself: What is bringing together some of the most 
progressive groups in the country with some of the most conservative 
groups, some of the most progressive members of the Senate with some of 
the most conservative? I also want to tell my colleagues not only what 
this amendment does but to clarify as best I can what it does not 
because there has been some distortion about this amendment, and those 
distortions are blatantly untrue. I want to touch on that also.
  The origin for this amendment came on March 3, 2009. That was the 
date that, as a member of the Budget Committee, I had the opportunity 
to ask Chairman Bernanke what I thought was a pretty simple question. 
Chairman Bernanke, obviously, is Chairman of the Fed. What I asked him 
was: Mr. Chairman, my understanding is that the Fed has lent out some 
$2 trillion to some of the largest financial institutions in this 
country. Would you please tell me and the American people who received 
that money? I thought that was a pretty simple and straightforward 
question. Mr. Bernanke said: No. Despite the fact that this was $2 
trillion in zero interest or near zero interest loans, he apparently 
believes the American people do not have a right to know who received 
that money.
  On that very same day, I introduced legislation requiring the Fed to 
put this information on its Web site, just as Congress required the 
Treasury Department to do with respect to the $700 billion TARP. And 
here we are today. Whatever one may think of TARP, one can get 
information as to who received that money, when it was paid back--the 
details. It is right there on the Internet. I believe that same 
information should be made available in terms of the Fed's zero 
interest and near zero interest loans.
  What the Fed apparently does not understand--and this is the 
important point--is that this money, these trillions of dollars, do not 
belong to the Fed; they belong to the American people. It is 
incomprehensible to me--and I think to the overwhelming majority of 
people in our country--that the Fed believes they can keep this 
information secret.
  This amendment not only requires that the Fed tell us who has 
received the $2 trillion it lent out, but, similar to the language 
incorporated in the House bill, it calls for an audit of the Fed by the 
GAO. That is it. That is what we are attempting to do with this 
amendment: transparency and a straightforward audit. Who got what when, 
on what basis, on what terms, who was at the meetings, who made the 
decisions, and taking a look at possible conflicts of interest--simple, 
factual questions that people from the State of Vermont ask me and I 
suspect people from Minnesota ask you, Mr. President, and people all 
over this country, regardless of their political persuasion, are 
asking.
  I understand this amendment may not be supported by everyone. Some 
may suggest, inaccurately, that this amendment--and I quote from a 
statement--``takes away the independence of the Federal Reserve and 
puts monetary policy into the hands of Congress.'' That is one of the 
charges being made against this amendment.
  Let me address that concern by simply reading to the Members of the 
Senate exactly what is in the amendment so that we know what we are 
talking about. I quote from page 4 of a six-page amendment. It is not a 
long amendment. It cannot be clearer than this. This is what it says:

       Nothing in this subsection shall be construed as 
     interference in or dictation of monetary policy to the 
     Federal Reserve System by the Congress or the Government 
     Accountability Office.

  If there are people who are saying: Oh, we are going to get involved 
in monetary policy; oh, we are going to be politicizing the Fed; oh, we 
are going to have, before an election, Congress telling the Fed to 
raise interest rates or to lower interest rates, that is absolutely 
inaccurate. That is not what we are doing. That is not, in my view, 
what we should be doing.

[[Page S3330]]

  We want an independent Fed. We want them to develop monetary policy. 
That is not--underline not--what this amendment does. This amendment 
does not tell the Fed when to cut short-term interest rates and when to 
raise them. It does not tell the Fed which banks to lend money to and 
which banks not to lend money to. It does not tell the Fed which 
foreign central banks they can do business with and which ones they 
cannot do business with. It does not impose any new regulations on the 
Fed, nor does it take any regulatory authority away from the Fed. Let's 
be clear about that.
  I think what the opponents of this amendment are doing is equating 
independence with secrecy, and there is a difference. At a time when 
our entire financial system almost collapsed, we cannot let the Fed 
operate in secrecy any longer. The American people have a right to 
know.

  I find it amusing that there are some people who oppose this 
amendment. As Chairman Dodd and the Presiding Officer know, we have had 
heated debates on the floor of the Senate over a $5 million amendment, 
over an $8 million provision that goes on for hours. Yet where we have 
trillions of dollars being lent out, there are some people who think 
the American people don't have a right to know who got that money. I 
think, frankly, that is absurd.
  The American people, as we hear over and over on the floor of the 
Senate, play by the rules. That is what the average American family 
does; they play by the rules. Well, what are the rules governing the 
Fed? Who makes those rules or are they just made up as they go along 
and they do not have to tell anybody about it? So I have a problem with 
that, and that is what this amendment is about.
  Here, to my mind--and these are just my issues; others may have 
different issues, and I am sure they do--are just a few of the 
questions the American people are asking and why we need a GAO audit of 
the Fed. These are just a few. Let me throw them out.
  Why was Lloyd Blankfein, the CEO of Goldman Sachs, invited to the New 
York Federal Reserve to meet with Federal officials in September of 
2008 to determine whether AIG would be bailed out or allowed to go 
bankrupt?
  When the Fed and Treasury decided to bail out AIG to the tune of $182 
billion, why did the Fed refuse to tell the American people where that 
money was going? Why did the Fed argue that this information needed to 
be kept secret ``as a matter of national security?''
  Here is the point. When AIG finally released the names of the 
counterparties receiving this assistance, how did it happen that 
Goldman Sachs received $13 billion of this money; AIG, $182 billion; 
$13 billion going to Goldman Sachs--100 cents on the dollar of a 
company that was going bankrupt and that was bailed out. How is that--
100 cents on the dollar? Not bad.
  Another question people might ask: Did Goldman Sachs use this money 
to provide $16 billion in bonuses the next year? Here you have Goldman 
Sachs getting $13 billion out of the $182 billion that AIG got, and the 
next year they are announcing $16 billion in bonuses. Did they use some 
of this money to provide those bonuses?
  A GAO audit of the Fed might help explain to the American people if 
there were any conflicts of interest surrounding this deal. I think the 
average American would say: Yes, there is a conflict of interest. You 
have a guy from Goldman Sachs sitting in the room arguing for $182 
billion. They got $182 billion; he gets $13 billion. The next year his 
company gives $16 billion in bonuses.
  Is there a conflict of interest? I think so. That is my opinion. My 
opinion isn't the important one, but that is what the GAO will be doing 
if this amendment is passed.
  Just another question out there. In 2008, it seems to me--I may be 
wrong--there was a conflict of interest at the Federal Reserve Bank of 
New York, when Stephen Friedman, the head of the New York Fed, who also 
served on the board of directors of Goldman Sachs--let's back it up. 
The head of the Fed serves on the board of Goldman Sachs, approved 
Goldman's application to become a bank holding company, giving it 
access to cheap loans from the Federal Reserve. OK. The head of the New 
York Federal Reserve, on the board of Goldman Sachs, is applying for 
Goldman Sachs to become a bank holding company to gain cheap loans from 
the Fed.
  It looks to me like there may be a conflict of interest, but what do 
I know? That is what we need a GAO report to tell us.
  Here, interestingly enough, is an article from May 9, 2009, in the 
Wall Street Journal. Let me quote briefly from that article:

       Goldman Sachs received speedy approval to become a bank 
     holding company in September of 2008. During that time, the 
     New York Fed's chairman, Stephen Friedman, sat on Goldman's 
     board and had a large holding in Goldman's stock, which, 
     because of Goldman's new status as a bank holding company, 
     was a violation of Federal Reserve policy. The New York Fed 
     asked for a waiver, which, after about 2\1/2\ months, the Fed 
     granted. While it was weighing the request, Mr. Friedman 
     bought 37,300 more Goldman shares in December. They have 
     since risen $1.7 million in value. Mr. Friedman, who once ran 
     Goldman, says none of these events involved any conflicts.

  That is the Wall Street Journal article from May 9, 2009. That is 
what Mr. Friedman says. Well, I kind of disagree with him, but I would 
like the GAO to take a look at that. Without a comprehensive GAO 
report, we have to take Mr. Friedman at his word, and I don't think we 
should. Who got what? When did they get it? On what basis and what 
terms? Who was at those meetings? Were there conflicts of interest? 
These are the kinds of questions a GAO audit of the Fed will answer.
  As a result of the bailout of Bear Stearns and AIG, the Fed--and this 
is a beauty, this is quite something--the Fed now owns credit default 
swaps--listen up on this one--betting that California, Nevada, and 
Florida will default on their debt. So the Federal Reserve stands to 
make money if California, Nevada, and Florida go bankrupt. I suspect 
that the Senators from the great States of California, Nevada, and 
Florida would be rather interested to know that if their States go 
bankrupt, the Fed makes money.
  On the surface, this looks a little absurd to me, but again, I think 
this is an issue that the GAO might be taking a look at.
  It has been reported that the Federal Reserve pressured the Bank of 
America into acquiring Merrill Lynch--making this financial institution 
even bigger and riskier--allegedly threatening to fire its CEO if the 
Bank of America backed out of this merger. When the merger went 
through, Merrill Lynch employees received $3.7 billion in bonuses. Was 
this a good deal for the American taxpayer? A GAO audit can help us 
find out.
  When the Federal Reserve provided a $29 billion loan to JPMorgan 
Chase to acquire Bear Stearns, the CEO of JPMorgan Chase, Jamie Dimon, 
served on the Board of Directors at the New York Federal Reserve. Let 
me repeat that. When the Federal Reserve provided $29 billion to 
JPMorgan Chase, the CEO of JPMorgan Chase served on the Board of 
Directors of the New York Fed. Did this represent a conflict of 
interest? I think the average American would say yes. Maybe some people 
would have a different point of view. But I think a GAO audit can help 
explain all this to the American people.
  Currently--and I think we have to appreciate this as well; we have to 
shed some light on these issues--some 35 members of the Federal 
Reserve's Board of Governors are executives at private financial 
institutions which have received nearly $120 billion in TARP funds, but 
we don't know how much these big banks received from the Fed. We know 
what they got from the TARP, not from the Fed. A GAO audit could answer 
this question.
  All of us--I believe all of us--are deeply concerned that small- and 
medium-sized businesses around this country--I know it is certainly the 
case in Vermont--are begging for affordable credit. They have the 
opportunity to expand. We are beginning to see some economic recovery, 
but they want to expand, they want to create new jobs, and they are 
finding it extremely difficult to acquire those desperately needed 
affordable loans. I find it an important issue to ask how much of the 
trillions of dollars in zero or near zero interest loans that financial 
institutions received from the Fed went out to those small businesses 
or, perhaps, as I personally believe is the

[[Page S3331]]

case, were simply invested in Federal Government bonds, earning an 
interest rate of 3 or 4 percent.
  A number of observers believe--and the GAO can help us discover--the 
Fed provided zero interest loans to a large bank, which then took that 
money and bought government bonds at 3 percent. If that was the case, 
and I suspect it was, you are looking at a huge scam--a huge scam--when 
small- and medium-sized businesses needed the money. That was the 
intention of these loans. But I don't know how much of this was 
invested in growth bonds, you don't know, and the American people don't 
know. It is time we found out.
  This amendment I am offering is virtually identical to legislation 
that I have offered on this subject that has 33 cosponsors. The 
amendment, I think, has 20, 22 Democrats and Republicans. The original 
legislation had 33 cosponsors. Just so you can get a sense of the 
diversity of ideological opinion behind this amendment, let me tell you 
the names of the people on board the legislation--not the amendment, 
the legislation: 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, Sanders, Thune, 
Vitter, Webb, Wicker, and Wyden.
  Those are people who are on the original legislation--33 cosponsors. 
As you can see, they range from some of the most progressive Members to 
some of the most conservative Members. The amendment that is now on the 
floor has, I believe, 22 cosponsors, Republicans and Democrats alike, 
and I wish to thank all of them for their support.
  The American people are asking: Can people work together? Can they 
come together on important issues? If there is an important issue that 
people with different ideological backgrounds have come together on, 
this is that one. So I wished to thank my Republican friends and my 
Democratic friends who, every other day, are fighting like cats and 
mice but on this issue have come together, and I appreciate that.
  But it is not only the Members of the Senate. In terms of progressive 
grassroots organizations, this amendment enjoys the strong support of 
the AFL-CIO; the Service Employees International Union, the single 
largest union in the country; the United Steelworkers of America; 
Public Citizen; the New American Foundation; Center for Economic 
Policy; U.S. Public Interest Research Group; Americans for Financial 
Reform, which is a coalition of over 250 consumer, employee, investor, 
community, and civil rights groups. There is a huge amount of support 
from the progressive community. It also has a huge amount of support 
from the conservative community.
  Let me read, briefly, a letter I received from the legislative 
director of the AFL-CIO. This is what he says:

       On behalf of the AFL-CIO, I am writing to urge you to 
     support the Sanders-Feingold-DeMint-Leahy-McCain-Grassley-
     Vitter-Brownback amendment to increase transparency at the 
     Federal Reserve. Working people want to know who benefitted 
     from the liquidity provided by taxpayers during the crisis 
     and this amendment will ensure that we receive this 
     information.

  I received another letter, which came from the president of the SCIU, 
the president of the United Steelworkers, the president of Public 
Citizen and many other progressive groups and this is what they say:

       Since the start of the financial crisis, the Federal 
     Reserve has dramatically changed its operating procedures. 
     Instead of simply setting interest rates to influence 
     macroeconomic conditions, it rapidly acquired a wide variety 
     of private assets and extended massive secret bailouts to 
     major financial institutions. There are still many questions 
     about the Fed's behavior in these new activities. The Federal 
     Reserve's balance sheet expanded to more than $2 trillion, 
     along with implied and implicit backstops to Wall Street 
     firms that could cost even more. Who received the money? 
     Against what collateral? On what terms and conditions? The 
     only way to find out is through a complete audit of the 
     Federal Reserve. That's why we support the amendment to 
     increase transparency at the Fed.

  That is from the SEIU, and many other unions.
  That is what some of the progressive groups, quite frankly, that I 
work with quite often have to say about this amendment. But let me 
quote from some of the conservative organizations that, frankly, I 
usually do not have very good voting records with. Very often they 
oppose what I bring forth.
  Here is the National Taxpayers Union. I don't know how many folks 
they have, but they are a big organization. This is what the National 
Taxpayers Union says:

       The National Taxpayers Union urges all Senators to vote 
     ``yes'' on S. Amendment 3738 to the financial regulatory 
     reform legislation. This amendment, introduced by Senators 
     Sanders and DeMint, would require the Government 
     Accountability Office to conduct an audit of the Federal 
     Reserve. . . .

  I like their next sentence.

       Transparency is not a Democrat or Republican issue, but 
     rather an issue of right or wrong. If the Senate insists on 
     further expanding the Fed's reach, Americans deserve to know 
     more about the workings of a government-sanctioned entity 
     whose decisions directly affect their economic livelihood. A 
     ``yes'' vote on S. amendment 3738 [this amendment] will be 
     significantly weighted as a pro-taxpayer vote in our annual 
     Rating of Congress.

  That means I may have at least a 1-percent approval vote from the 
National Taxpayers Union. I appreciate their support. That is from the 
National Taxpayers Union.
  Let me quote from another letter of support I received from a group 
of conservative organizations that includes the Americans for Tax 
Reform, the Campaign for Liberty, the Rutherford Institute, the Eagle 
forum, Freedomworks, and the Center for Fiscal Accountability--again, 
some of the more conservative groups in the country, groups that 
usually do not support my issues. This is what they say:

       We urge you to vote for Senators Sanders, Feingold, DeMint, 
     and Vitter's Federal Reserve Transparency Amendment. . . . 
     This amendment does not take away the ``independence'' of the 
     Fed. It simply requires the GAO to conduct an independent 
     audit of the Fed and requires the Fed to release the names of 
     the recipients of more than $2 trillion in taxpayer-backed 
     assistance during this latest economic crisis. Any true 
     financial reform effort will start with requiring 
     accountability from our Nation's central bank.

  Let me thank all of the conservative groups--in this case the 
Americans for Tax Reform, the Campaign for Liberty, and the others--for 
their very strong grassroots effort in supporting this amendment. It is 
an indication, again, that on certain issues progressives and 
conservatives can come together.
  Let me mention this because I think it is possible that some of the 
Members do not know this. This amendment is not a radical idea. As part 
of the budget resolution debate in April of 2009, the Senate voted 
overwhelmingly in support of this concept by a vote of 59 to 39. I 
brought that up. It was a nonbinding vote, part of the budget 
resolution, 59 to 39. So many Senators have already gone on record 
supporting that.
  Here is also an important piece of information. In the House of 
Representatives, this concept passed the House Financial Services 
Committee by a vote of 43 to 26 and was incorporated into the House 
version of the Wall Street reform bill that was approved by the House 
last December.
  Again, what we are talking about is something that was passed in the 
House, and it is in the House bill. There is a variation. We are not 
the same, to be honest, but the same concept--for a Fed audit--already 
exists in the Wall Street reform bill passed in the House.
  This concept has the support of the Speaker of the House, Nancy 
Pelosi, who has 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.
  Here is another point many people don't know. A lot of this language 
is in the House bill. A lot of this language has already been supported 
in the Senate last year as part of the budget resolution. But here is 
an important point many people do not know. Bloomberg News service did 
a very good job, and they have aggressively demanded, as a news 
organization, this information about who the Fed lent money to be made 
public. As a result of their efforts, two Federal courts--not one, two 
Federal courts--have ordered the Fed to release all the names and 
details of the recipients of more than $2 trillion in Federal Reserve 
loans since the financial crisis as a result of a Freedom of 
Information Act lawsuit.
  So Bloomberg News filed suit and two Federal courts supported

[[Page S3332]]

Bloomberg. The Fed had argued in court in opposition to Bloomberg that 
it should not have to release this information, citing, according to 
Reuters--this is what the Fed said--``an exemption that it said lets 
Federal agencies keep secret various trade secrets and commercial or 
financial information.''
  However, the U.S. Court of Appeals in New York disagreed. Here is 
what a unanimous three-judge appeals court panel wrote in their 
opinion:

       To give the Fed power to deny disclosure because it thinks 
     it best to do so would undermine the basic policy that 
     disclosure, not secrecy, is the dominant objective. If the 
     Board believes such an exemption would better serve the 
     national interest, it should ask Congress to amend the 
     statute.

  This appeals court decision upheld an earlier ruling by the Southern 
Federal District Court of New York that also ordered the Fed to release 
this information. In other words, we now have 59 Senators who, as part 
of the budget resolution, voted on this issue; 320 Members of Congress, 
the House, and two U.S. courts that have all told the Fed in no 
uncertain terms: Give us transparency. That is what we have.
  As I wind down and conclude my remarks, let me just simply say that I 
am thankful for all of the support, all the grassroots support from 
progressive and conservative groups, and from my fellow Senators. The 
American people have a right to know when trillions of their dollars 
are being spent and who gets it. The American people have a right to 
know whether there are conflicts of interest.
  I thank my colleagues--there are so many cosponsors, I will not 
mention them all--but I thank all of them.
  Let me conclude by saying I am very proud to say we have been working 
with Senator Dodd's office and some other offices.


                    Amendment No. 3738, as Modified

  I am going to ask that my amendment be modified with the changes that 
are at the desk. I am proud to say these modifications have been worked 
out with Senator Dodd and would allow the GAO to conduct a top-to-
bottom audit of all of the Federal Reserve's emergency lending 
activities since December 1, 2007. In addition, the modifications 
require the Fed to put on its Web site all of the recipients of over $2 
trillion in emergency assistance since December 1, 2007.
  The PRESIDING OFFICER (Mrs. Shaheen). The amendment is so modified.
  The amendment (No. 3738), as modified, is as follows:

       At the end of title XI, add the following:

     SEC. 1159. GAO AUDIT OF THE FEDERAL RESERVE FACILITIES; 
                   PUBLICATION OF BOARD ACTIONS.

       (a) GAO Audit.--
       (1) In general.--Notwithstanding section 714(b) of title 
     31, United States Code, or any other provision of law, the 
     Comptroller General of the United States (in this subsection 
     referred to as the ``Comptroller General'') shall conduct a 
     one-time audit of all loans and other financial assistance 
     provided during the period beginning on December 1, 2007 and 
     ending on the date of enactment of this Act by the Board of 
     Governors under the Asset-Backed Commercial Paper Money 
     Market Mutual Fund Liquidity Facility, the Term Asset-Backed 
     Securities Loan Facility, the Primary Dealer Credit Facility, 
     the Commercial Paper Funding Facility, the Term Securities 
     Lending Facility, the Term Auction Facility, Maiden Lane, 
     Maiden Lane II, Maiden Lane III, the agency Mortgage-Backed 
     Securities program, foreign currency liquidity swap lines, 
     and any other program created as a result of the third 
     undesignated paragraph of section 13 of the Federal Reserve 
     Act.
       (2) Assessments.--In conducting the audit under paragraph 
     (1), the Comptroller General shall assess--
       (A) the operational integrity, accounting, financial 
     reporting, and internal controls of the credit facility;
       (B) the effectiveness of the collateral policies 
     established for the facility in mitigating risk to the 
     relevant Federal reserve bank and taxpayers;
       (C) whether the credit facility inappropriately favors one 
     or more specific participants over other institutions 
     eligible to utilize the facility;
       (D) the policies governing the use, selection, or payment 
     of third-party contractors by or for any credit facility; and
       (E) whether there were conflicts of interest with respect 
     to the manner in which such facility was established or 
     operated.
       (3) Timing.--The audit required by this subsection shall be 
     commenced not later than 30 days after the date of enactment 
     of this Act, and shall be completed not later than 12 months 
     after that date of enactment.
       (4) Report required.--The Comptroller General shall submit 
     a report on the audit conducted under paragraph (1) to the 
     Congress not later than 12 months after the date of enactment 
     of this Act, and such report shall be made available to--
       (A) the Speaker of the House of Representatives;
       (B) the majority and minority leaders of the House of 
     Representatives;
       (C) the majority and minority leaders of the Senate;
       (D) the Chairman and Ranking Member of the Committee on 
     Banking, Housing, and Urban Affairs of the Senate and of the 
     Committee on Financial Services of the House of 
     Representatives; and
       (E) any member of Congress who requests it.
       (b) Audit of Federal Reserve Bank Governance.--
       (1) Audit.--
       (A) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Comptroller General shall complete 
     an audit of the governance of the Federal reserve bank 
     system.
       (B) Required examinations.--The audit required under 
     subparagraph (A) shall--
       (i) examine the extent to which the current system of 
     appointing Federal reserve bank directors effectively 
     represents ``the public, without discrimination on the basis 
     of race, creed, color, sex or national origin, and with due 
     but not exclusive consideration to the interests of 
     agriculture, commerce, industry, services, labor, and 
     consumers'' in the selection of bank directors, as such 
     requirement is set forth under section 4 of the Federal 
     Reserve Act;
       (ii) examine whether there are actual or potential 
     conflicts of interest created when the directors of Federal 
     reserve banks, which execute the supervisory functions of the 
     Board of Governors of the Federal Reserve System, are elected 
     by member banks;
       (iii) examine the establishment and operations of each 
     facility described in subsection (a)(1) and each Federal 
     reserve bank involved in the establishment and operations 
     thereof; and
       (iv) identify changes to selection procedures for Federal 
     reserve bank directors, or to other aspects of Federal 
     reserve bank governance, that would--

       (I) improve how the public is represented;
       (II) eliminate actual or potential conflicts of interest in 
     bank supervision;
       (III) increase the availability of information useful for 
     the formation and execution of monetary policy; or
       (IV) in other ways increase the effectiveness or efficiency 
     of reserve banks.

       (2) Report required.--A report on the audit conducted under 
     paragraph (1) shall be submitted by the Comptroller General 
     to the Congress before the end of the 90-day period beginning 
     on the date on which such audit is completed, and such report 
     shall be made available to--
       (A) the Speaker of the House of Representatives;
       (B) the majority and minority leaders of the House of 
     Representatives;
       (C) the majority and minority leaders of the Senate;
       (D) the Chairman and Ranking Member of the Committee on 
     Banking, Housing, and Urban Affairs of the Senate and of the 
     Committee on Financial Services of the House of 
     Representatives; and
       (E) any member of Congress who requests it.
       (c) Publication of Board Actions.--Notwithstanding any 
     other provision of law, the Board of Governors shall publish 
     on its website, not later than December 1, 2010, with respect 
     to all loans and other financial assistance it has provided 
     during the period beginning on December 1, 2007 and ending on 
     the date of enactment of this Act under the Asset-Backed 
     Commercial Paper Money Market Mutual Fund Liquidity Facility, 
     the Term Asset-Backed Securities Loan Facility, the Primary 
     Dealer Credit Facility, the Commercial Paper Funding 
     Facility, the Term Securities Lending Facility, the Term 
     Auction Facility, Maiden Lane, Maiden Lane II, Maiden Lane 
     III, the agency Mortgage-Backed Securities program, foreign 
     currency liquidity swap lines, and any other program created 
     as a result of the third undesignated paragraph of section 13 
     of the Federal Reserve Act--
       (1) the identity of each business, individual, entity, or 
     foreign central bank to which the Board of Governors has 
     provided such assistance;
       (2) the type of financial assistance provided to that 
     business, individual, entity, or foreign central bank;
       (3) the value or amount of that financial assistance;
       (4) the date on which the financial assistance was 
     provided;
       (5) the specific terms of any repayment expected, including 
     the repayment time period, interest charges, collateral, 
     limitations on executive compensation or dividends, and other 
     material terms; and
       (6) the specific rationale for each such facility or 
     program.

  Mr. DODD. I will just take 30 seconds. I will speak longer on this a 
little later. But let me thank our colleague from Vermont. He is a 
remarkable individual who brings great intelligence and passion to this 
cause. He does not get involved in every issue that comes up on the 
floor of the Senate. I admire that. Some believe they have to have 
something to say about everything.

[[Page S3333]]

But when Senator Sanders gets involved with something, you better 
believe he does it with a great deal of conviction and passion and 
purpose.
  I am a cosponsor of this amendment he has just modified. I think it 
is absolutely correct. On the transparency issues, there are no 
excuses. When as much American taxpayer money has been exposed as has 
been, we have the right to know where it is going and who is involved 
in it. There was a concern about whether the independence of the Fed 
would be compromised. He has guaranteed in his language that is no 
longer an issue whatsoever. I thank him for it. It is a great 
amendment.
  I know Senator Grassley wants to be heard, and I yield the floor.
  Mr. SANDERS. I thank the chairman.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Madam President, you have heard me say many times to my 
colleagues that the public's business ought to be public. I don't know 
why that does not apply to the Federal Reserve, at least on its 
regulatory activities when it gives out money. There are all kinds of 
reasons it should not apply to monetary policy. But for everything 
else, the Federal Reserve is acting at the behest of Congress through a 
law going way back to 1913 giving them certain powers. If Congress 
exercised these same powers--and under the Constitution we have the 
authority to do that--it would be the public's business; in fact, even 
more than what this amendment does. So the public's business ought to 
be public.
  With transparency, and that is what this amendment is all about, you 
get accountability--it seems to me, with what has happened over the 
last 10 years, more transparency leading to accountability. If we had 
that transparency we probably would not have had the bubble in the 
first place that broke in 2008, which brought us to this recession.
  So I rise not hesitantly but forthrightly to support the pending 
amendment by the Senator from Vermont. I appreciate all of his hard 
work on making the Federal Reserve more accountable to the people of 
this country. I am a cosponsor of his stand-alone bill, so I am glad to 
be a cosponsor of this amendment, to bring sunshine to the Fed.
  During the last 2\1/2\ years, the Fed has gone well beyond what was 
viewed as its historical authority. It has taken on more and more risk, 
in complicated and unprecedented ways. It intervened in the market to 
prop up certain firms. It intervened in the market to protect these 
firms from failing, using an unlimited source of taxpayers' dollars to, 
in effect, pick winners and losers.
  The risks they have taken will ultimately be borne by the American 
taxpayers. So in the interest of accountability, the taxpayers deserve 
to have answers on who got money and how it was spent.
  Under law, the Federal Reserve has lending authority for unusual and 
exigent circumstances. Under section 13(c) of the Federal Reserve Act, 
the Reserve can ``discount for any individual, partnership or 
corporation, notes, drafts and bills of exchange when such notes, 
drafts and bills of exchange are endorsed or otherwise secured to the 
satisfaction of the Federal Reserve bank.''
  Essentially, this means the Fed can lend to any entity or person when 
it believes there is an emergency. This is an extraordinary amount of 
power and discretion, and it should be exercised in the light of day. 
Transparency, accountability--the public's business ought to be public. 
Trillions of dollars were provided to financial institutions and 
corporations since the financial crisis began. The Fed helped rescue 
Fannie Mae and Freddie Mac. The Fed propped up Bear Stearns and AIG 
when they were on the brink of failure. They intervened in the business 
efforts of Lehman Brothers, Merrill Lynch, and Citigroup.

                          ____________________