[Congressional Record Volume 156, Number 104 (Wednesday, July 14, 2010)]
[Senate]
[Pages S5801-S5803]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL REGULATORY REFORM
Mr. DURBIN. Mr. President, probably tomorrow morning, we will
consider this conference report, which is historic in its impact on
America. It is the conference report of the Banking Committees of the
House and Senate, which were charged with the responsibility to reform
the financial laws in America, to make certain that our country never
faces again what we faced a short time ago under President Bush.
We can remember that at the end of the President's term, when the
economy started to go into a tailspin. I remember it very well because
there was a special meeting called in October of 2008 of the leaders of
the House and Senate--Democratic and Republican--to meet with the
Chairman of the Federal Reserve, Ben Bernanke, and the Treasury
Secretary, Mr. Paulson, to discuss a matter of great urgency. Those
types of meetings are rare around here, and everyone was a little
nervous as we entered the room that is a few feet away from the Senate
Chamber.
These two leaders of our economy came forward and told us that we
were facing the collapse of major businesses in America. Specifically,
they pointed to the collapse of AIG. It was an insurance company--the
largest in our country. Unfortunately, they had engaged in some
practices where it had promised as an insurance policy that it would
back up commercial transactions. If they fail, AIG, the insurance
company, would come in and make the parties whole.
They overextended themselves. In so doing, as these commercial
transactions started to fail, AIG did not have sufficient reserves to
meet their promises. There was a fear that if they started this
cascading effect of failures and the inability of AIG to keep its
promise, it would result in a panic in our economy and a decline, which
would have been even more precipitous than what we had imagined.
It was at this meeting that Ben Bernanke of the Federal Reserve said
they were going to provide significant resources to AIG to help them
weather this crisis. It came as a surprise to many of us in the room,
unaware of the fact that the Federal Reserve had both the resources and
the legal authority to do that. It is an authority that had not been
exercised, to my knowledge, since it was first created almost 80 years
ago.
That was the first meeting. It was an indication of a terrible,
rocky, rough road ahead for America and ultimately for the world.
Subsequent meetings were even more alarming, as we were told by
Secretary of the Treasury Hank Paulson that unless we came up with $800
billion in what was known as the TARP fund, which would be used to
basically bail out the largest financial institutions in America,
America's economy and the global economy could collapse. I have been
involved in public life for a number of years. That is the type of
conversation you never forget. Many of us were at a loss to argue the
other side of the case that the problem was not that large or that the
response did not have to be that significant or that the strategy and
tactics were not the right ones. This was really uncharted water. We
relied on our economic leaders from the Federal Reserve and from the
Department of the Treasury to suggest what we needed to do to go
forward.
This rescue operation had some real value, I believe, in slowing down
the decline in our economy. But just a few weeks after that, the
election of the new President, Barack Obama, really gave to him and the
new administration economic challenges which no previous administration
had ever faced. When the President came to office, in the month he was
sworn in, almost 750,000 were losing their jobs. In the span of the
next 60 and 90 days, the numbers grew. The President walked into a
terrible situation, with the economy still in decline, with the TARP
program President Bush had started in process but not completed, with
unemployment reaching modern-day record levels, and with no end in
sight. He inherited the biggest deficit in the history of the United
States from President Bush. What a contrast to what President Bush
inherited 8 years before.
Yesterday, when President Obama named Jack Lew as the new head of the
Office of Management and Budget, he said Jack, who is an
extraordinarily talented public servant, is fit for the Hall of Fame. I
am sure Jack Lew, a modest man, would dispute that. The record speaks
for itself.
In his former capacity as Budget Director under President Clinton,
Jack Lew, in January of 2001, left President George W. Bush a surplus
in the Federal Treasury of $236 billion. That is an amazing legacy, to
end 8 years of President Clinton's administration with a surplus in the
Federal Treasury, the deficit coming down, Social Security getting
stronger, and to hand it off to President Bush. At that moment in time,
the accumulated debt of the United States of America from the time of
George Washington until the end of the Clinton Presidency was
approximately $5 trillion. Eight years later when President George W.
Bush left office, the accumulated debt of America had grown from $5
trillion to $12 trillion--more than doubled in an 8-year period of
time. Instead of leaving to President Obama a surplus, as President
Bush had inherited from President Clinton, he left him a $1.3 trillion
deficit. President Bush's administration, which was dedicated to
balancing the budget and conservative fiscal policy, more than doubled
the national debt that had been accumulated by America in its entire
history, and instead of leaving a surplus for incoming President Obama,
left him a gaping hole in the budget.
In that context, we have many challenges, but one of the challenges
is to make sure we never, ever again experience what happened with
these terrible decisions being made on Wall Street and the virtual
collapse or decline of the American economy, which led us into our
deficit situation, to the business losses across America, and record
levels of unemployment.
President Obama challenged us to come forward with Wall Street
reform, change the way we do business on Wall Street so we never have
to go through this again. Let's not have a repeat of this economic
disaster. I commend Chairman Chris Dodd and Chairman Barney Frank for
the extraordinary effort they put into this conference report.
More than 2 years after Bear Stearns failed, more than 18 months
since Wall Street brought America to the brink of another depression,
more than a year after President Obama provided his outline for strong
financial reform, finally Wall Street reform is coming. After 8 million
Americans--actually, more than 8 million Americans--have lost their
jobs; after more than 1.2 million Americans have lost their homes;
after the American average household has lost 20 percent of its
accumulated wealth and savings, finally Wall Street reform will help
prevent such a crisis from ever occurring again.
As we began this debate in the Senate several months ago, we were
faced with a series of challenges and questions:
[[Page S5802]]
Should we give America's consumers the strongest consumer protections
in our history or should we allow Wall Street to continue to do
business as usual, complete with the fine print, the tricks and the
traps, and the shadowy markets we have today in America?
Should we empower consumers to make informed choices for themselves
and their own economic future when it comes to mortgages, credit cards,
and student loans by forcing banks and credit card companies to offer
clear terms in plain English or should we allow Wall Street and the
predatory lenders to continue to skirt the law, knowing there is no cop
on the beat to enforce it?
Should we force the Wall Street banks to make their big gambling bets
on commodities and everything else they can dream up out in the open,
on fully transparent exchanges, or should we allow Wall Street to
continue running a multitrillion-dollar shadow casino, one nobody can
monitor, one that allowed AIG to nearly cripple the entire financial
system?
Should we protect the taxpayers so they never again are faced with
bailing out the biggest banks in America? And--let me add insult to
injury--after we put all our hard-earned tax dollars into bailing out
the big banks, they showed their gratitude by giving bonuses,
multimillion-dollar bonuses, to one another. Should we change that?
That was one of the questions facing us when we debated this
legislation.
This conference report has the right answers to those questions. The
Dodd-Frank Wall Street Reform and Consumer Protection Act accomplishes
two basic goals: It substantially reduces the risk that financial
markets will cause the economy to implode again, and it empowers
consumers and small businesses to make better financial choices.
To reduce the risk of another financial crisis, this bill strengthens
three traditional layers of oversight of financial institutions:
First, the bill improves basic bank governance so institutions are
run more carefully and more prudently. Executive pay and banking is
going to be tied more closely to long-term gains rather than massive
risk-taking, short-term thinking, and mortgages and other loans will
have to be underwritten much more carefully.
Second, the bill helps creditors and investors spot problems more
easily at banks that continue to be run poorly. That imposes an extra
layer of discipline when bank boards fall asleep at the wheel. Credit
rating agencies and the SEC will provide much better information to
investors in both the debt and equity markets than investors have
today. I might add, as chairman of the subcommittee which funds both
the Securities and Exchange Commission and the Commodity Futures
Trading Commission, we are dramatically increasing the resources for
each of those watchdog agencies to make sure they can implement the new
powers given them by this law.
Third, the bill strengthens the regulatory structure that oversees
the financial industries. That will help us identify and address
failures at these institutions that are not properly managed either by
bank leadership or by pressure from the debt and equity markets. A new
Financial Stability Oversight Council will require regulators to work
together more closely to minimize systemic risks. A new resolution
authority will give regulators tools they lacked when Lehman Brothers
was in meltdown. And risky derivatives will be brought out of the
shadows and into transparent clearinghouses and exchanges so that the
transactions can be seen rather than hidden from public scrutiny.
That is all very important, but outside Washington and New York, many
American families and small businesses are basically going to ask: That
is all well and good, Senator. What is in it for us?
The Dodd-Frank conference report will bring basic accountability and
fairness to consumers and small businesses across the Nation.
First, a new Bureau of Consumer Financial Protection will protect
consumers of financial products from the worst forms of abusive
lending.
One of the benefits of this job is we get to meet some of the most
impressive people in America. One of those persons is a woman named
Elizabeth Warren. She is a law school professor at Harvard. Several
years ago, Professor Warren came and spoke to us at one of these
weekend getaways we have to try to think beyond the pressing business
of today in longer terms. She said what we need in this country is an
agency that helps consumers have enough information so they can make
the right choices for themselves when they are making financial
decisions.
I went up to her after her remarks, and I said: Professor Warren, I
want to introduce that bill. Will you help me write it?
And she did. I introduced the earliest legislation on this issue. My
version of it has been included in this bill but changed. I think they
have improved substantially on the original bill I offered, but credit
should be given where it is due. Professor Warren inspired me to write
my bill and I know inspired many on the conference committee to follow
through and pass this legislation.
Lenders will have to compete for business based on good loans rather
than competing to dream up clever tricks in order to drain as many
dollars as possible out of borrowers' pockets.
Finally, there is going to be a cop on the beat with this consumer
financial protection agency to ensure that mortgage brokers, private
student lenders, payday lenders, banks, and credit unions provide
consumers with complete information so families can make good financial
choices. I cannot tell you how much the banking lobbyists hate this
provision. They came to my office and said: This is the worst idea
possible, to have an agency that is going to watch the documents we put
in front of our borrowers to make sure they do not include deceptive
language, tricks, and traps that could literally cost a person, a
family, the money they have saved. Fortunately, we overcame that lobby
and included this consumer financial protection agency as part of the
act. Finally, there is going to be a single voice in Washington, DC,
with the mission of helping consumers make the right decisions for
themselves.
Second, small businesses and merchants will receive relief from one
of their largest expenses over which they currently have no control--
debit card interchange fees. For most people, they never heard of it.
But ask a restaurant, a business, a grocery store in Iowa, in Illinois,
or in New Mexico what is the biggest pain in the neck they are running
into, and they will tell you that on the short list is the money they
have to pay to Visa and MasterCard and other credit card and debit card
companies every time a customer uses a card. You don't think about it,
do you, that when you hand over that credit or debit card to pay for
your restaurant bill, not only do you have an obligation to pay what
you have just charged but the restaurant is going to end up paying a
percentage of your bill to the card company.
It turns out that small businesses and merchants across America have
literally no strength, no power, no voice in determining these
interchange fees. We are becoming more and more a plastic culture. Our
young pages here in the Senate--and I think of my own children--many of
them don't carry much cash around any more. They have little plastic
debit cards and credit cards which they use when they become of age and
are eligible for them. More than half the transactions in America now
are done in plastic. As more of these transactions take place, the
merchants and businesses which honor the cards find that the
interchange fees charged by the credit card companies are virtually
uncontrollable, until this bill.
For years, Visa and MasterCard, and their big bank backers, have
unilaterally fixed prices on the fees small businesses pay every time
they accept a debit card from a customer. The two giant card networks
control 80 percent of the debit card market--that is Visa and
MasterCard. And it is no surprise that debit interchange fees have
risen, even as the price of processing the transaction has fallen. They
can impose these prices and say to the local businessperson: Take it or
leave it. Small businesses in Illinois and throughout the country have
pleaded over and over again with these card network giants: Give us
some way to reduce these costs so that we can reach profitability, hire
more people, and prosper as a business and pass on savings to
consumers.
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The conference report that we have before us will require the Federal
Reserve to ensure that Visa, MasterCard, and their big bank allies can
only charge debit interchange fees that are reasonable and proportional
to the cost of processing each transaction. It also prevents Visa and
MasterCard from engaging in certain specific anticompetitive practices.
I might add, the Department of Justice's antitrust section has
confirmed publicly, at a meeting before the Senate Judiciary Committee
a little over a month ago, that Visa and MasterCard are currently under
investigation. Finally, Visa, MasterCard, and the Wall Street banks
will face some check against their unbridled market power in the credit
and debit industries.
Finally, small businesses and merchants are going to have relief that
will lead to real savings, profitability, and reduced cost for
consumers. The Dodd-Frank Wall Street Reform and Consumer Protection
Act is a landmark bill, including the most sweeping reforms to Wall
Street since the New Deal.
Let me tell you the political reality. In the Senate, there are 41
Republican Senators. The bill I have described should be a bill
supported by both sides of the aisle. We will be fortunate to have four
or five Republicans step up and join us to pass this bill. The
overwhelming majority of Republicans will oppose this bill and side
with the banking industry.
One of the Republican leaders in the House, John Boehner of Ohio,
said we were using with this bill a nuclear weapon to kill an ant. I
don't think anybody in America believes the recession we are facing
today, with 8 million unemployed and 1.2 million losing their homes, is
an ant. It is devastating to the millions of Americans who are
unemployed and those who are losing their homes. I think this response
is a measured, thoughtful, good response to deal with it.
Why don't we have the support of more Republicans? Why won't they
step up with us and make this bipartisan? Four or five of them will
have the courage to do it, and I tip my hat to them. I am glad they are
joining us. This should be a bipartisan effort. But the others need to
explain why they do not want us to move forward with financial
regulatory reform. They have to explain why they wanted to stand for
the status quo, leave the laws as written, and run the risk of another
recession in another day, leading to millions of people losing their
jobs and businesses failing. They do not have an answer for that. Their
vote against this will be good news to the banking industry, the
special interest groups, such as credit card companies, but it
certainly doesn't face the responsibility we all have to deal with the
economic crisis facing this Nation.
On behalf of the taxpayers in Illinois and throughout the country,
who never again want to bail out big banks, I wholeheartedly support
this bill's passage. On behalf of consumers and small businesses in
Illinois and throughout the country, who want the power to make wise
financial choices, I wholeheartedly support this bill. I am going to
urge my colleagues to vote yes on this conference report so that
President Obama can sign this bill into law.
Finally, reform will have to come to Wall Street.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Burris). The Senator from Iowa.
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