[Congressional Record Volume 156, Number 104 (Wednesday, July 14, 2010)]
[Senate]
[Pages S5844-S5845]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      FINANCIAL REGULATORY REFORM

  Mr. VOINOVICH. Mr. President, I rise today to explain my opposition 
to the Restoring American Financial Stability Act. When the Senate 
first passed the bill in May, I opposed it and explained my reasons for 
doing so. At that time I hoped the House and Senate would make some 
changes to the bill during the conference committee to address the root 
causes of the financial crisis as well as scale back the overreaching 
powers granted to the new consumer protection bureau. Unfortunately, 
neither of these changes occurred, and I still believe the bill largely 
ignores the glaring, fundamental problems that led to our current 
fiscal catastrophe while increasing regulatory burdens on business when 
the economy is still struggling to recover. In addition, as Fareed 
Zakaria recently noted, the uncertainty created by this and other 
expansive legislation, such as health care reform and potentially cap 
and trade, is causing many businesses to refrain from new investments 
until they can understand the full implications of these measures.
  As for this legislation, it is now clear that over the past decade or 
so, specific factors played a critical role in leading our Nation into 
the financial crisis that first arrested the credit markets in 2007, 
leading to the collapse of some of our largest financial services firms 
and a stock market crash in late 2008. The resulting events produced a 
widespread foreclosure crisis and a devastating recession with massive 
job loss and sustained record unemployment, all of which continue to be 
felt by families throughout Ohio and the Nation. In response, Congress 
has taken up legislation that purports to correct what went wrong and 
restore safety, soundness, and stability to our financial markets to 
foster recovery and fortify the foundation for a strong economy.
  Why, then, do I oppose the passage of this legislation? Simply put, 
because it

[[Page S5845]]

does not get the job done. This legislation fails to address the causes 
of the financial crisis, while overreaching in its expanded regulation 
of businesses, large and small, throughout the economy. I voted to 
bring the bill to the Senate floor because I believed the American 
people wanted us to debate the issues that caused the financial 
collapse and bring forth legislation that would work to minimize the 
possibility of a future collapse, but this bill fails in too many 
respects.
  First, the bill fails to address two primary causes of the financial 
meltdown, Fannie Mae and Freddie Mac, whose push to acquire subprime 
mortgages--spurred by Congress--helped produce a real estate bubble 
that burst and sent shockwaves across global financial markets, forcing 
the U.S. economy and other global economies into a tailspin. These now-
government-owned institutions, which failed in the midst of the 
financial crisis, continue to drain taxpayers for billions of dollars. 
In May, Fannie and Freddie requested an additional $19 billion of 
taxpayer moneys to fund operations, bringing the total government 
assistance to roughly $145 billion, or an average of $7.6 billion per 
month. Moreover, the nonpartisan Congressional Budget Office recently 
estimated that over the next decade, Fannie and Freddie could cost 
taxpayers almost $400 billion. Yet these two giant, systemically risky 
institutions--whose bailouts far outsize any of those given to other 
financial institutions--are ignored in this legislation.
  Second, at the heart of this financial crisis were residential home 
loans written to borrowers who did not have the ability to pay their 
mortgages. When these borrowers defaulted on a massive scale, 
widespread investment securities based on their mortgages lost 
significant value, sending investors panicking and retreating while 
portfolios collapsed and credit froze. These loans were made in large 
part because of poor underwriting standards and a failure by many 
lenders and brokers to ensure that buyers had the means to repay their 
loans. During the Senate debate on this legislation, my colleague, 
Senator Bob Corker, offered a commonsense amendment to establish sound 
underwriting standards, including a minimum down payment, full 
documentation, and proof of income and ability of the borrower to pay 
the mortgage. Amazingly, my colleagues rejected this amendment, and 
thus virtually nothing in this legislation addresses this problem.
  Third, the new consumer protection bureau created by this bill is too 
wide in its regulatory scope, and I believe it will saddle businesses 
with new, often unnecessary burdens. The bureau is granted authority to 
reach its tentacles like an octopus into various sectors of the 
economy, and pull businesses that were not part of the problem--
including retailers, medical providers such as dentists, lawyers, 
advertising agencies, and even nonprofits--under new government 
regulation. Attempts by some of my colleagues to curtail the largely 
unchecked reach of this new regulator were mostly rejected.
  Finally, new regulations related to over-the-counter derivatives fail 
to adequately protect businesses across Ohio and other States that use 
these risk management tools. I have heard from many businesses 
concerned that they could be forced to divert capital away from job-
creating investments as a result of new clearing procedures in the 
legislation. They also complain that they may now be forced to use less 
customized derivative products, which would result in more--rather than 
less--risk. As businesses sideline more capital, they become less 
liquid; as they face more risk, they become less creditworthy, and in 
turn have less access to credit. I am fearful that these new regulatory 
burdens will serve primarily to slow any eventual economic recovery 
rather than address the underlying causes of the financial collapse. 
For example, uncertainty over these potential effects has created 
widespread concern among farmers in particular, who had nothing to do 
with the financial meltdown but could face consequences under the 
legislation.
  In sum, the Restoring American Financial Stability Act fails to 
address the root causes of the problem and overreaches in its 
regulation. I am disappointed these concerns were not resolved during 
the conference committee, and thus I will not support the bill.

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