[Congressional Record Volume 156, Number 76 (Wednesday, May 19, 2010)]
[Senate]
[Pages S3955-S3961]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      FINANCIAL REGULATORY REFORM

  Mr. FRANKEN. Mr. President, I rise today to clarify some confusion 
regarding two amendments adopted by the

[[Page S3956]]

Senate last week to the Wall Street reform bill. Some in the media have 
characterized the two amendments as conflicting, incompatible, or 
rendering one another moot, and I wish to put a quick end to that 
misunderstanding.
  To draw these conclusions means you think there is only one problem 
with the credit rating industry. In fact, there have been many problems 
with the credit rating industry, and the two amendments passed last 
week tackle two different problems. In the end, these two amendments 
can be implemented concurrently and effectively.
  My colleague from Florida offered an amendment that he stated 
``writes NRSROs out of the law.'' NRSROs are a select group of credit 
rating agencies recognized by the SEC. But in fact his amendment does 
not get rid of credit rating agencies and it does not get rid of the 
category of NRSROs. This is based on our reading of the text in our 
office, the Senate legislative counsel's office has confirmed this, and 
several academics in the field have further confirmed it. The amendment 
simply does not eliminate NRSROs. Instead, the LeMieux amendment 
eliminates provisions in Federal laws that require reliance upon 
ratings from NRSROs.
  For example, this amendment eliminates a provision that requires 
certain State-chartered banks to only buy securities with top NRSRO 
ratings. It replaces this provision with a requirement that banks may 
only acquire securities which meet ``creditworthiness standards'' 
established by the FDIC.
  The amendment also changes a provision in which the Director of the 
Federal Housing Finance Agency may hire an NRSRO to conduct a review of 
Fannie Mae, Freddie Mac, or the Federal Home Loan Bank. Under Senator 
LeMieux's amendment, the reviewer need not be an NRSRO. So while the 
amendment eliminates reliance upon NRSROs, it does not eliminate the 
NRSRO designation or eliminate credit rating agencies.
  One can argue that there are benefits to reducing overreliance on 
NRSROs. Regulators gave little thought to the types of debt held by 
banks because they were rated AAA. Perhaps the regulators should have 
looked at factors other than the AAA rating before waving through these 
volatile securities. This is all true, and the LeMieux amendment seeks 
to address it.
  But here is the problem. Here is the problem. Eliminating federally 
mandated reliance on NRSRO credit ratings doesn't change the fact that 
State laws, pension fund policies, and other private market actors will 
still explicitly rely on NRSRO ratings. Eliminating blind overreliance 
on NRSRO ratings is a respectable goal, but the amendment will not 
eliminate reliance on credit ratings entirely, nor should it.
  For example, at least 5 of the 10 largest pension funds--California 
Public Employees, California State Teachers, Texas Teachers, Wisconsin 
Investment Board, and New Jersey Retirement funds--are required by 
State law or internal policy to use NRSRO ratings. These are funds 
totaling over $\1/2\ trillion--and that is just the top 10. In fact, in 
my colleague's home State of Florida, the Local Government Surplus 
Funds Trust Fund controls $6 billion in assets from 954 local 
governments and school districts, and the fund explicitly conditions 
purchases of asset-backed securities on NRSRO credit ratings.
  In fact, 42 States, plus the District of Columbia, incorporate NRSRO 
ratings into their State laws. So NRSRO ratings are not going anywhere. 
The LeMieux amendment has absolutely no effect on those requirements. 
The simple fact is that credit rating agencies have a place in the 
market and they perform a needed function.
  Most institutional investors simply lack the capacity to perform the 
analysis that credit rating agencies perform. For many small 
institutional investors, such as a school district's pension fund, 
researching its own investments would be cost prohibitive. It needs to 
rely at least in part on credit ratings issued by a rating agency.
  Let's say we want the LeMieux amendment implemented into law as has 
been passed. After its implementation we still have the issue of States 
and pension funds and other investors relying on NRSRO ratings.
  I should say, the amendment wasn't passed into law, but it was passed 
as an amendment to this bill. So we still will have to rely on NRSRO 
ratings. But not only that, it is also very likely that Federal 
regulators will continue to use credit ratings as part of their new 
creditworthiness standards. So it is safe to say that the credit rating 
agencies will still be very much a part of the market. What is being 
done to ensure the accuracy of these ratings?
  That is where my amendment comes in. Eliminating government-mandated 
reliance on NRSRO ratings is one thing, but actually changing the way 
they play the game to eliminate conflicts of interest is entirely 
another. My amendment gets to the heart of how they play the game.
  Right now, credit rating agencies have incentives to hand out top AAA 
ratings to every product because they need to maintain their business. 
If they hand out low ratings, issuers of financial products can go shop 
around for a higher rating from a different rating agency. My amendment 
finally puts a stop to the rating shopping process and implements a 
system that would finally reward accuracy instead of grade inflation.
  The board created by my amendment--and contrary to some claims, this 
board will be a self-regulatory organization, not a part of the 
government--will create a process to assign a credit rating agency to 
provide a product's initial rating. This will eliminate the rating 
shopping process and the conflict of interest it creates. The board can 
take past performance into account in handing out further assignments 
and finally incentivize accuracy in the market.
  The amendment offered by my colleague from Florida has an admirable 
goal--to eliminate blind overreliance on credit ratings. But it does 
not go far enough and does not get to the heart of the problem. The 
heart of the problem is that the current market incentivizes inaccurate 
ratings, which contributed to the financial crisis--which was a huge 
part of the financial crisis.
  Alone, my colleague's amendment doesn't respond to the reality that 
the market will still demand credit ratings, whether the Federal 
Government mandates it or not. State laws, pension fund policies, and 
private investors will continue to exist and continue to need the 
expertise credit rating agencies can supply, if given proper 
incentives.
  Our amendments each tackle a different part of the problem, and there 
is nothing about them that would prevent them from both being 
implemented. That is why this body passed both of them. Together, these 
two amendments will both reduce the blind overreliance on credit 
ratings and ensure that the ratings demanded by the marketplace will 
finally be accurate.
  Any assertion implying that these two amendments cannot be reconciled 
or are contradictory is ill-informed. In fact, these amendments will go 
a long way in addressing the multiple problems plaguing the credit 
rating industry. Together, they will create more stability and 
certainty in our economy.
  Mr. President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Rhode Island is 
recognized.
  Mr. WHITEHOUSE. Mr. President, I wanted to share with my colleagues 
an update on where we are with the bipartisan amendment on which I have 
been working so hard. I see Senator Sanders of Vermont is here, and he 
is one of my cosponsors, as is the Presiding Officer, Senator Udall of 
New Mexico.
  The amendment, as you know, would allow States to protect their 
citizens from exorbitant interest rates that are charged by out-of-
State banks. There is a trick to this. Years ago, the Supreme Court 
made a decision saying when a bank is in one State and a consumer in 
another, the transaction between them is governed by the laws--and here 
they had to pick one State or the other--the bank's State. It didn't 
seem like a big deal at the time, but it opened a loophole that crafty 
bank lawyers figured out, and that is that you could move and 
redomicile a bank's headquarters in the State with the worst consumer 
protection laws in the country. Then, from that State, you could market 
back to other States which have consumer protections, which have 
interest rate limits honoring the tradition of usury restriction that 
was at the founding of this country and that lasted for hundreds of 
years but goes back to all our ancient religions and which is a 
constant in human civilized

[[Page S3957]]

legal codes. This overruled all of that, allowing them to sneak right 
by it because they have either gone to or perhaps even cut a deal with 
their home State to have the worst consumer protection and be able to 
take advantage of people in other States. It is the proverbial race to 
the bottom. I am confident if you called up on the Senate floor as the 
government's policy proposal the way it is right now, you would not get 
a single vote. Who would vote for the notion that the consumer 
protection policy of the country is going to be set by the worst State 
and have that be a situation in which the worst State is usually 
getting rewarded by the industry for being the worst State?

  It is a bad situation. This amendment has gotten a lot of attention. 
It has gotten a lot of support--it has bipartisan support. It is a very 
practical thing we can do for American consumers.
  This is a pretty esoteric piece of legislation in a lot of ways, this 
Wall Street reform bill. This does things like trying to rebuild the 
Glass-Steagall firewall. Until I got in the middle of this debate, I 
couldn't tell what that was. This changes the leverage limits and puts 
restrictions on what banks can do. That is pretty esoteric stuff. This 
deals with the regulation of derivatives and collateralized debt 
obligations and credit default swaps and things that nobody ever heard 
of until we were drilled into this legislation--esoteric, preventive 
stuff. But this piece of the bill, this amendment would enable all of 
us to go home and tell our constituents: You know those 30 percent 
penalty rates that your out-of-State credit card company drops you into 
if you make a mistake, if you are late in a payment, for no reason at 
all? We have done something to protect you against that--consistent 
with the traditions of our country, our laws, consistent with the 
doctrine of federalism and States rights, consistent with the Founding 
Fathers' delegation to the States, the ability to protect consumers in 
this way. We have restored the States rights. They are no longer 
trumped by an out-of-State corporation. Now they have the sovereign 
right they should to protect consumers.
  I think it is a meritorious piece of legislation. I think it is an 
amendment that deserves consideration on the floor. It is beginning to 
appear that it may not actually even get a vote, notwithstanding that 
it is pending. We may be edged right out.
  I want to explain why. People who have been watching this debate have 
seen long hours of nothing happening on this floor. There has been a 
lot of delay. There has been a lot of delay allowing us to get to 
amendments. Why is that? We are up against a time restriction on this 
bill. It is a practical time restriction. The leader needs to make sure 
we pass the supplemental Defense appropriations bill that funds our 
troops. What could be more important than, when we have troops in the 
field, overseas, serving our country, putting themselves in harm's way, 
that we provide them the resources they need to be successful? We have 
to do that.
  We have to do something to increase the strength of our economy. In 
Rhode Island we are at 12.6 percent unemployment. We have been in the 
top three States for unemployment every single month of the Obama 
administration.
  I think we are in the 28th month of severe recession. So we know how 
bad this economy is and how much more we need to do to try to bolster 
it. So we need to get to the next jobs bill, the jobs and tax extenders 
bill, to make sure we are providing the necessary support to our 
economy.
  We have to get to those things. Because of all the delay that our 
friends on the other side have built into the process we are now 
getting into the end point where we are starting to be squeezed for 
time.
  Now that we are squeezed for time, they are refusing to give time 
agreements to amendments like mine that would actually make a 
difference. They do not want to vote in favor of out-of-State 
corporations and against their home State's ability to protect their 
home State's fellow citizens. But they do want the out-of-State 
corporations to win. They don't want to vote in their favor, but they 
want them to win.
  If that is your position, the perfect thing is to delay and delay 
until it gets to be here at the end, crunch time, then take the 
amendments that worry you, the amendments that will get after the big 
banks, the amendments that will be fair to consumers, and refuse to 
give time agreements and vote agreements on those and basically run out 
the clock.
  That is the position we are in right now. It appears there is no 
willingness on the other side of the aisle to give this a vote--not 
just at a 50-vote margin, even at a 60-vote margin. They don't want to 
be on record supporting these out-of-State credit card companies that 
are gouging their own citizens. They just want them to win, and they 
figured out this way to do it.
  The only alternative is to call up the bill, what is called 
postcloture, which means I have to be technically something called 
germane. Right now we are working with the Parliamentarian to argue as 
strongly as we can that we are indeed germane. It is an open question 
whether we are indeed germane, and I hope it gets resolved in our favor 
before the bill comes up in its regular order postcloture.
  That is the situation. If people are wondering why this amendment 
does not appear to be on any list, is not going anywhere, it is because 
there is a blockade of it on the other side. They are taking advantage 
of the time crunch that they created with all the delays that led us to 
this time crunch to squeeze out the amendments where they do not want 
to vote for the big banks, they don't want to vote for the big credit 
card companies, but they do want the big banks and the big credit card 
companies to win. So it is the squeeze play at the end to try to drive 
these impactful amendments that will make a tangible, immediate 
difference in the lives of Rhode Islanders and the lives of their home 
State citizens, the ones paying that 30-plus percent interest rate that 
until very recently would be a matter to bring to the authorities of 
this country, not a matter that the Senate tried to defend. So that is 
where we are.
  I will continue to work with the Parliamentarian to make sure we are 
germane postcloture, and I will continue to argue to try to get a vote. 
But forces are arrayed against us at this point, and I want to be 
perfectly candid about it.
  I yield the floor.
  Mr. MERKLEY. Mr. President, I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BOND. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER (Mr. Begich.) Without objection, it is so 
ordered.
  Mr. BOND. Mr. President, I ask unanimous consent to speak as in 
morning business for 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BOND. Mr. President, for weeks now we have been debating the 
financial reform bill, which is being sold to the American people as 
the solution to holding Wall Street accountable for the economic crisis 
that hurt every American family and business in every community across 
the Nation.
  Unfortunately, in this current form, the so-called reform bill will 
actually punish Main Street America, the families who suffered from and 
did not cause the financial meltdown. It should be a wakeup call when 
Lloyd Blankfein of Goldman Sachs says Wall Street will be the big 
winner under this bill, and we know the people who provide jobs, 
essentially small business, and the people who provide credit to the 
rest of America are warning of dire consequences.
  Let me make this clear. This bill was meant to rein in Wall Street. 
Yet it is supported by Goldman Sachs and Citigroup. It is opposed by 
small business and community bankers. I think that tells you all you 
need to know about this bill. That is why I rise today in strong 
opposition to cloture on this bill. Yes, we made some improvements on 
the bill, and I congratulate the leadership for allowing us to have 
amendments and debate them, and I thank and I am grateful to my 
colleague from Connecticut, Senator Dodd, for working across the aisle 
to remove an onerous provision that unintentionally

[[Page S3958]]

would have killed small business startups. Senator Dodd has worked in 
good faith in a bipartisan fashion to make real changes in the bill. 
But despite the progress we have made, the provisions most destructive 
and harmful to taxpayers, families, and small business still remain.
  First, it is completely unbelievable and unacceptable that so many of 
my colleagues want to turn a blind eye to the government-sponsored 
enterprises Fannie Mae and Freddie Mac which contributed to the 
financial meltdown by buying the high-risk loans that banks were pushed 
to make to people who could not afford them.
  They were the enablers of the issuance of bad mortgages. Everyone 
here knows what I am talking about. Despite the bill's 1,400-plus 
pages, it completely ignored the 900-pound gorilla in the room. The 
need to reform Fannie Mae and Freddie Mac, or the ``toxic twins'' as I 
refer to them, is completely ignored. How can you ignore the major 
government-sponsored enterprises that were the enablers for the bad 
mortgages that brought our system and much of the world's system down?
  To add insult, Fannie Mae and Freddie Mac devastated entire 
neighborhoods and communities as property values diminished. But when 
they bought up loans and encouraged issuance of loans to people who 
could not afford them, that turned the American dream of home ownership 
into the American nightmare for far too many families.
  Fannie Mae and Freddie Mac went belly up, and now it is the very 
Americans who suffered from their irresponsible actions who are left 
footing the bill for them, because, if it were not bad enough, unless 
we act now to reform the toxic twins, over the next 10 years, Fannie 
Mae and Freddie Mac will run up hundreds of billions of dollars.
  Let me put that into perspective. Freddie Mac lost $8 billion in the 
first quarter, one quarter of this year, and an additional $10 billion 
from taxpayers, and warned that it will need more in the future. That 
comes on top of the $126 billion that Fannie Mae and Freddie Mac had 
already lost through the end of 2009.
  To make matters worse, this administration has taken off the $400 
billion credit card limit on Fannie Mae and Freddie Mac, and it is our 
credit card they took the limit off. How much more does the 
administration think Freddie Mac and Fannie Mae can lose? How much more 
are they going to force not just us as taxpayers but our children and 
grandchildren to pay to bail out these toxic twins?
  Next, a great concern I have is that this bill lumps in the good guys 
with the bad guys and treats them all the same, particularly when it 
comes to derivatives. When it comes to derivatives, this bill lumps in 
those folks who try to manage risk and control costs by making long-
term contracts with their suppliers or with their purchasers to even 
out the prices at which goods are exchanged. These are normal hedging 
contracts, and they are very different from the people who are 
speculating in the market to make a buck by shady bets with money they 
did not have or they were making insurance bets on property they did 
not own.
  I would urge my colleagues, if they have not read it, to read ``The 
Big Short'' which talks about how this whole scam unfolded with the bad 
underlying mortgages that caused the meltdown.
  I have heard some folks say, what actually does this bill mean to you 
and me? Well, it means, for instance, that utility companies may not be 
able to lock in steady rates for their customers, leaving them instead 
at the whim of the volatile market. They will have to clear all of 
their long-term contracts and pay billions of dollars to Wall Street or 
Chicago to clear the normal long-term contracts with energy suppliers 
whom they work with on a regular basis, and whose contracts never 
contributed a nickel to the volatility.
  As a matter of fact, by locking in prices, they were able to produce 
their energy at a reasonable rate. The billions of dollars these 
utility companies will be forced to cough up to Wall Street and Chicago 
will come down to each and every one of us on our utility bills. When 
the utility companies have to pay more, guess what. We, as ratepayers, 
get it in the wallet. That is where we will feel it, and that is what 
it means in every community in this country. You will be paying a 
higher cost every time you flip on the light switch, turn on the air 
conditioning, or use a computer. You will pay more for that energy.
  For family farms, the backbone, the agricultural backbone of our 
country, they will not be able to get long-term financing. That may 
force some of them to quit farming and prevent others from even getting 
started.
  Frankly, I am stunned that any Senator in good conscience would vote 
for a bill that would increase costs for every American, especially at 
a time when working families are struggling to make ends meet. What 
will this do to business? These businesses, who will be forced to pay 
higher energy costs, who will have requirements on derivatives that 
have to be cleared, may not create the jobs.
  The community bankers who make the loans that families need or that 
small businesses need may be so strapped they cannot make the loans. 
That credit will dry up. I cannot vote for a bill that creates a 
massive new superbureaucracy with unprecedented authority to impose 
government mandates and micromanage any entity that extends credit.
  We are not talking just about the Goldman Sachs and AIGs of the 
world, the ones at the center of this crisis. No, in the real world we 
are talking about this organization, this Consumer Finance Protection 
Board or Bureau, regulating the community banks, your car dealers, even 
your dentist or orthodontist who has to extend some credit to a few 
people for expensive orthodontic features.
  Don't be fooled. Any of the new costs as a result of the new mandates 
and regulations will be passed on to the consumers. The very people the 
bill was supposed to protect--you and I--will get to pay for it.
  Under this new superbureaucracy misnamed the Consumer Financial 
Protection Bureau, will safety and soundness requirements for healthy 
banks give way to a prevailing agenda of the new bureaucracy? There 
will be political appointees of the President who will be looking over 
everything as consumer protectors.
  Some of these consumer protectors were the ones who forced banks to 
make loans to people who could not afford them in the past. Will the 
safety and soundness which is key to assuring a sound banking system be 
overridden by these rules and regulations?
  These regulations can be enforced by every attorney general in the 
Nation. Attorneys general may decide it is an abusive practice if a 
community bank does not follow the mandates, the credit allocations, 
mandated to this CFPB. How would the community banks be able to operate 
if the attorneys general are suing them? This bill, regrettably, is 
much like the health care bill recently signed into law, because I fear 
that small businesses will soon learn that there are many more 
unintended consequences which have yet to be seen.
  I ask unanimous consent that at the end of my remarks, I have printed 
in the Record an article by Meredith Whitney that appeared in 
yesterday's Wall Street Journal, one of the people who foresaw this 
crisis coming, who warned of the impact on small business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. BOND. To sum up my view on this bill, if the goal here is to 
enact real reform that ensures we never have another financial crisis 
such as the one we had 18 months ago, this bill falls woefully short of 
the goal. The bill is light on reform of Wall Street and the bad 
actors, it is heavy on overreach and unintended consequences throughout 
our economy, which will affect the ability of people to get and hold 
jobs.
  It will affect the budgets of every family. My colleagues I hope will 
oppose cloture and continue to work to pass bipartisan amendments that 
will make changes to the destructive provisions I have outlined above.
  Let us not forget about the rating agencies. The book I mentioned, 
``The Big Short,'' pointed out that the brain-dead analysts at the 
ratings firms routinely put AAA ratings on some of the

[[Page S3959]]

most toxic, worthless paper, and then other people managed to buy 
insurance on those bad contracts even though they did not have any 
interest in them and made millions.
  This amendment takes out the rating agencies, but the rating agencies 
still need to be overlooked and they ought to be funded not by the 
people who issue the paper but by the people who are buying the paper.
  There is no doubt that everybody here knows we need to protect 
Americans from falling victim to another Wall Street gone wild. This is 
government gone wild. It benefits Wall Street. It harms small business, 
community bankers, your local utility company, which sends you your 
utility bill. Is that on the right track? I do not see how anybody can 
say it is.
  We do not want--and this is why this debate is so important--to 
punish the everyday Americans for a crisis they did not cause and whose 
impact they feel the burden, and our children will feel it, for years 
to come. Unless we succeed in it, the Democrats' bill will do just 
that. The cost will be paid by Main Street and by each and every one of 
us. Therefore, I urge my colleagues to oppose cloture and let us get to 
work on regulating what went bad and not messing with things that work.
  I yield the floor.

                               Exhibit 1

              [From the Wall Street Journal, May 17, 2010]

                    The Small Business Credit Crunch

                         (By Meredith Whitney)

       The next several weeks will be critically important for 
     politicians, regulators and the larger U.S. economy. First, 
     over the next week Capitol Hill will decide on potentially 
     game-changing regulatory reform that could result in the 
     unintended consequences of restricting credit and further 
     damaging small businesses.
       Second, states will approach their June fiscal year-ends 
     and, as a result of staggering budget gaps, soon announce 
     austerity measures that by my estimates will cost between one 
     million to two million jobs for state and local government 
     workers over the next 12 months.
       Typically, government hiring provides a nice tailwind at 
     this point in an economic recovery. Governments have employed 
     this tool through most downturns since 1955, so much so that 
     state and local government jobs have ballooned to 15% of 
     total U.S. employment.
       However, over the next 12 months, disappearing state and 
     local government jobs will prove to be a meaningful headwind 
     to an already fragile economic recovery. This is simply how 
     the math shakes out. Collectively, over 40 states face 
     hundreds of billions of dollars in budget gaps over the next 
     two years, and 49 states are constitutionally required to 
     balance their accounts annually. States will raise taxes, but 
     higher taxes alone will not be enough to make up for the vast 
     shortfall in state budgets. Accordingly, 42 states and the 
     District of Columbia have already articulated plans to cut 
     government jobs.
       So the burden on the private sector to create jobs becomes 
     that much more crucial. Just to maintain a steady level of 
     unemployment, the private sector will have to create one 
     million to two million jobs to offset government job losses.
       Herein lies the challenge: Small businesses, half of the 
     private sector (and the most important part as far as jobs 
     are concerned), have been heavily impacted by this credit 
     crisis. Small businesses created 64% of new jobs over the 
     past 15 years, but they have cut five million jobs since the 
     onset of this credit crisis. Large businesses, by comparison, 
     have shed three million jobs in the past two years.
       Small businesses continue to struggle to gain access to 
     credit and cannot hire in this environment. Thus, the full 
     weight of job creation falls upon large businesses. It would 
     take large businesses rehiring 100% of the three million 
     workers laid off over the past two years to make a 
     substantial change in jobless numbers. Given the productivity 
     gains enjoyed recently, it is improbable that anything near 
     this will occur.
       Unless real focus is afforded to re-engaging small 
     businesses in this country, we will have a tragic and 
     dangerous unemployment level for an extended period of time. 
     Small businesses fund themselves exactly the way consumers 
     do, with credit cards and home equity lines. Over the past 
     two years, more than $1.5 trillion in credit-card lines have 
     been cut, and those cuts are increasing by the day. Due to 
     dramatic declines in home values, home-equity lines as a 
     funding option are effectively off the table. Proposed 
     regulatory reform--specifically interest-rate caps and 
     interchange fees--will merely exacerbate the cycle of credit 
     contraction plaguing small businesses.
       If banks are not allowed to effectively price for risk, 
     they will not take the risk. Right now we need banks, and 
     particularly community banks, more than ever to step in and 
     provide liquidity to small businesses. Interest-rate caps and 
     interchange fees will more likely drive consumer credit out 
     of the market and many community banks out of business.
       Clearly, the issue of recharging the securitization market 
     as an alternative source of liquidity is one that needs to be 
     addressed over time, but politicians should not force rash 
     regulatory reforms when significant portions of our economy 
     remain fragile. The very actions designed to ``protect'' the 
     consumer, such as rate caps and interchange fees, will 
     undoubtedly take more credit away from the consumer.
       It is important now to support any and all lending 
     activities that would enable small businesses to begin hiring 
     again. If the regulatory reform passes with rate-cap and 
     interchange regulation amendments incorporated, small 
     businesses will be hurt rather than helped. Politicians and 
     regulators need to appreciate the core structural challenges 
     facing unemployment in the U.S.
       Elected officials know better than most that an employed 
     voter is better than an unemployed voter. They should improve 
     their odds of re-election and do the right thing on 
     regulatory reform.

  Mr. HATCH. Mr. President, I rise today to express my opposition to S. 
3217, the Restoring American Financial Stability Act. I am not opposed 
to financial regulatory reform, but there is precious little of that in 
this misnamed bill.
  No, real financial regulatory reform is something that should have 
been done a year ago, but, instead, Democratic leaders and the Obama 
administration opted to focus on a Washington takeover of our Nation's 
health care system.
  There are a few parts to the Restoring American Financial Stability 
Act that are worthy of support. In particular, I believe we need to 
monitor derivatives to require more capitalization and demand issuers 
maintain a stake in the game when creating and selling certain 
financial instruments. However, I think this bill is going to do more 
harm than good to our economy. It will weaken our financial system 
rather than strengthen it. Furthermore, it not only preserves the 
fragmented financial regulatory structure that is already in place but 
adds even more burdensome, costly, and misguided regulations. Before I 
list my concerns about the bill, I am going to address the specious 
accusations I have heard from the other side of the aisle that 
Republicans are being obstructionist or trying to protect the interests 
of Wall Street over those of Main Street. Give me a break.
  These accusations are not only false, they are aimed at diverting 
attention from our solutions to a bad bill by attacking our credibility 
and motivations. We are not trying to protect anyone except the 
American people who are the victims of this economic collapse.
  Let me be clear that every Senate Republican and I want financial 
regulatory reform in order to prevent a recurrence of what happened a 
couple of years ago with the collapse of our financial markets. But the 
problem with this proposal is that it not only regulates Wall Street 
but also Main Street. It goes beyond regulating large financial 
institutions that caused the problem and proposes to regulate community 
banks and credit unions, payday lenders, and other small businesses and 
almost any business that provides financing to their customers. If the 
other side is implying that we are trying to protect Wall Street 
because we have some sort of special relationship with large financial 
institutions, that is blatantly false on its face and simply not true.
  Large financial institutions contributed way more to Democrats than 
Republicans in the last election and elections before that. If anyone 
is guilty of trying to do a special favor for Wall Street, it certainly 
isn't this side. That is all I can say. If you look at the financial 
filings, it is pretty darn clear who Wall Street supported.
  If anything, I believe this bill will benefit Wall Street in the 
sense that it is something they can always get around. It would provide 
a perpetual bailout for large financial institutions. I know there is 
an argument against that, but look at the bill. It would require higher 
capitalization for many of the companies in which these institutions 
invest and place larger financial institutions at an unfair advantage 
over smaller financial institutions.
  But don't take it from me. Take it from the CEO of Goldman Sachs, 
Lloyd Blankfein, who said ``the biggest beneficiary of reform is Wall 
Street itself.'' He is a smart guy. He deserves to be the president of 
Goldman Sachs, one of

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the more important companies on Wall Street. There isn't any way they 
would not get around whatever we do today. They are the smartest people 
on Earth. So the claim that Republicans are trying to protect Wall 
Street doesn't hold very much water at all.
  Some on the other side of the aisle have claimed our objective is to 
obstruct passage of any financial regulatory reform bill. I can't agree 
with that. In fact, I cannot disagree more. Not only did a Democrat 
join Republicans in voting against proceeding to this bill, another 
Democrat who serves on the Banking Committee and has been involved in 
negotiations noted that the concerns being raised by Republicans about 
potential bailouts of large financial institutions are legitimate. He 
validated our concerns by stating that ``there are parts that need to 
be tightened.'' So at the very least, both Democrats and Republicans 
believe this bill leaves a lot of room for improvement.
  I would like to turn my attention to the substance of the bill. The 
reasons I am opposed to this legislation are because, along with many 
others, I have serious misgivings about its effectiveness, specifically 
the FDIC's orderly liquidation authority, the overregulation of the 
consumer protection agency, and the lack of reforming Freddie Mac and 
Fannie Mae. The meltdown of our financial markets highlights a major 
flaw in our financial regulatory system--the expeditious dissolution of 
a financial institution.
  I recently finished reading former Treasury Secretary Hank Paulson's 
book, ``On The Brink,'' which details the time leading up to the 
catastrophic failures and the handling of the crisis. I would like to 
read a short passage:

       Back in my temporary office on the 13th floor, a jolt of 
     fear suddenly overcame me as I thought of what lay ahead of 
     us. Lehman was as good as dead, and AIG's problems were 
     spiraling out of control. With the U.S. sinking deeper into 
     recession, the failure of a large financial institution would 
     reverberate throughout the country--and far beyond our 
     shores. It would take years for us to dig ourselves out from 
     under such a disaster.

  What I took away from this book was the enormity and complexity of 
trying to dissolve these large financial institutions before their 
assets disappeared. There is no doubt that our current system is 
incapable of handling such a complicated task. In fact, over the last 
few weeks, I not only read ``On The Brink,'' but I read ``The Ascent of 
Money.'' I read ``The Panic of 1907'' and was amazed at the correlation 
between 1907 and 2007. I read ``On The Brink'' by Hank Paulson. I read 
Sorkin's book, ``Too Big To Fail.'' Just last weekend I read the book, 
``The Big Short,'' by Michael Lewis, which is an excellent read. They 
have all been excellent reads. That is in the last few weeks.
  The Federal Deposit Insurance Corporation, or FDIC, was established 
in 1933 to insure bank deposits. It mainly deals with the common brick-
and-mortar bank that most of us use on a daily basis. It oversees 
roughly 8,000 depository institutions and $9 trillion in deposits. In 
the aftermath of the economic collapse, the FDIC administered 25 bank 
failures in 2008 and 140 in 2009. That is approximately 2 percent of 
all the banks they oversee.
  Despite such a low percentage, the FDIC's deposit insurance fund was 
nearly depleted. According to the Federal Reserve, there are 
approximately 5,000 top-tier bank holding companies with roughly $17 
trillion in assets. The top 10 largest financial institutions hold $9 
trillion in assets. The current financial regulatory reform bill 
proposes to provide the FDIC with an orderly liquidation authority to 
unwind not only depository institutions but now large financial 
institutions that pose a systemic risk to our financial system.
  With the passage of this bill, the FDIC would be responsible for 
unwinding nearly double the total number of assets. However, the 
magnitude of the task is the least of my concerns. By taking the 
resolution out of the bankruptcy courts, with all of their expertise, 
and putting it in an executive branch administrative proceeding 
conducted by politically appointed bureaucrats, we definitely lose 
transparency and accountability. It is ridiculous.
  If you would like to see a glimpse of the consequences of losing 
transparency and accountability, just look at the FDIC's behind-closed-
doors handling of Washington Mutual. During a Senate investigatory 
hearing last month, former Washington Mutual Chief Executive Kerry 
Killinger denounced the FDIC's handling of the bank failure as 
``unnecessary'' and ``unfair,'' partly because the thrift was shut out 
of hundreds of meetings and phone calls with financial industry 
executives who determined the ``winners and losers'' in the crisis.
  Our current bankruptcy courts avoid many of the problems associated 
with creating a government resolution authority and are a superior way 
of dealing with failed or failing nonbank financial firms. The 
bankruptcy courts make dissolving large institutions transparent. That 
is why we have them. They are experts at it. They know what they are 
doing. We can all watch what they are doing. We can read the pleadings. 
We can do a lot of things that bring transparency. The other way will 
not.
  That brings me to my next concern with this bill, the creation of the 
Consumer Financial Protection Agency. Of course, I think we can all 
agree we need to strengthen consumer protection within our financial 
system. But I first believe we need to ask what went wrong with the 
current system before we create yet another government agency to create 
more regulations and oversight.
  This will only make it more difficult for consumers and small 
businesses to obtain a loan, a line of credit, or a credit card. The 
entire alphabet soup of Federal Government agencies--the FDIC, OCC, 
SEC, FTC, and the Fed--all have consumer protection divisions. However, 
these divisions did not meet the standard of protection we need. 
Extracting these consumer protection arms from each of the agencies and 
putting them in a new agency is like taking the worn parts from several 
clunkers and using them to build another car. You will still have a 
clunker.
  Furthermore, think of the costs that new local banks, credit unions, 
payday lenders, and other industries that deal with credit, such as 
auto dealers and other small businesses, will incur when trying to 
comply with all these new, overly burdensome regulations.
  But the worst part of this legislation is what it is missing--reform 
of Fannie Mae and Freddie Mac. These two mortgage agencies caused the 
financial crisis by backing loans to people who couldn't afford them. 
But that certainly didn't stop Uncle Sam from bailing them out at a 
cost to taxpayers of some $145 billion. This financial abuse is swept 
under the rug because the debt is not put on our books. These 
companies, which the government now fully owns, are not considered 
government agencies and, therefore, are not included when tallying up 
our outrageous trillion-dollar deficits. I might add, that is just the 
beginning. We all know Fannie and Freddie are about to explode into all 
kinds of bigger problems, some estimate as much as $500 billion. That 
is scary. Yet we are not doing a doggone thing about it in this bill.
  We should have faced the music and done whatever we could. A lot of 
games are played with the budget.
  As I said before, I support financial regulatory reform. However, 
this bill falls short of reform and opens the way for another economic 
collapse to occur. It will unjustly protect companies that are deemed 
too big to fail by providing them preferential treatment during FDIC-
conducted liquidations. It will create costly burdens for the 99 
percent of financial institutions that did not cause the financial 
collapse, and it misses the mark by not addressing the reform of Fannie 
Mae and Freddie Mac.
  There are other reasons, but I think I will limit my remarks today to 
those few. Those few involve trillions of dollars, involve all kinds of 
future problems for our country, and I think will lead us even further 
down the path of poor economics, higher debt, higher spending, more and 
more government, and less and less control by the people.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Burris). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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