[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.

[[Page S5803]]

  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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