[Congressional Record Volume 160, Number 62 (Tuesday, April 29, 2014)]
[House]
[Pages H3257-H3261]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RESTORING PROVEN FINANCING FOR AMERICAN EMPLOYERS ACT
Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 4167) to amend section 13 of the Bank Holding Company Act of
1956, known as the Volcker Rule, to exclude certain debt securities of
collateralized loan obligations from the prohibition against acquiring
or retaining an ownership interest in a hedge fund or private equity
fund, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 4167
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Restoring Proven Financing
for American Employers Act''.
SEC. 2. RULES OF CONSTRUCTION RELATING TO COLLATERALIZED LOAN
OBLIGATIONS.
Section 13(g) of the Bank Holding Company Act of 1956 (12
U.S.C. 1851(g)) is amended by adding at the end the following
new paragraphs:
``(4) Collateralized loan obligations.--
``(A) Inapplicability to certain collateralized loan
obligations.--Nothing in this section shall be construed to
require the divestiture, prior to July 21, 2017, of any debt
securities of collateralized loan obligations, if such debt
securities were issued before January 31, 2014.
``(B) Ownership interest with respect to collateralized
loan obligations.--A banking entity shall not be considered
to have an ownership interest in a collateralized loan
obligation because it acquires, has acquired, or retains a
debt security in such collateralized loan obligation if the
debt security has no indicia of ownership other than the
right of the banking entity to participate in the removal for
cause, or in the selection of a replacement after removal for
cause or resignation, of an investment manager or investment
adviser of the collateralized loan obligation.
``(C) Definitions.--For purposes of this paragraph:
``(i) Collateralized loan obligation.--The term
`collateralized loan obligation' means any issuing entity of
an asset-backed security, as defined in section 3(a)(77) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(77)),
that is comprised primarily of commercial loans.
``(ii) Removal for cause.--An investment manager or
investment adviser shall be deemed to be removed `for cause'
if the investment manager or investment adviser is removed as
a result of--
``(I) a breach of a material term of the applicable
management or advisory agreement or the agreement governing
the collateralized loan obligation;
``(II) the inability of the investment manager or
investment adviser to continue to perform its obligations
under any such agreement;
``(III) any other action or inaction by the investment
manager or investment adviser that has or could reasonably be
expected to have a materially adverse effect on the
collateralized loan obligation, if the investment manager or
investment adviser fails to cure or take reasonable steps to
cure such effect within a reasonable time; or
``(IV) a comparable event or circumstance that threatens,
or could reasonably be expected to threaten, the interests of
holders of the debt securities.''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New
Jersey (Mr. Garrett) and the gentleman from Florida (Mr. Murphy) each
will control 20 minutes.
The Chair recognizes the gentleman from New Jersey.
General Leave
Mr. GARRETT. I ask unanimous consent that all Members have 5
legislative days within which to revise and extend their remarks and
submit extraneous materials to the Record on H.R. 4167, as amended,
currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New Jersey?
There was no objection.
Mr. GARRETT. Mr. Speaker, at this point, I yield myself such time as
I may consume.
Mr. Speaker, I rise today in support of H.R. 4167, which is the
Restoring Proven Financing for American Employers Act. It was
introduced by the gentleman from Kentucky (Mr. Barr), who we will be
hearing from shortly. And I would also like to thank my good friend
from New York (Mrs. Maloney), the ranking member of the Capital Markets
Subcommittee, for her bipartisan and commonsense work on this important
issue as well.
Today we have the opportunity to correct, in a strong, bipartisan
way, an egregious example of regulatory overreach. For no reason that
has been coherently stated by anyone, the banking regulators
responsible for implementing the Volcker Rule have included provisions
in their final rule that will literally cripple the market for
collateralized loan obligations, also called CLOs.
See, at the stroke of a pen, the banking regulators are going to
wreak havoc on one of the largest and most important sources of
financing for literally hundreds of growing companies across this
country. If the CLO provisions in the Volcker Rule go forward as
planned, there will be a heavy price to pay in failed companies and
also lost jobs.
So why is the government doing this? Did CLOs do anything to cause
the financial crisis? No, they did not. Are CLOs a menace to the
stability of our financial system? No, again. Is the small proportion
of securities included in some CLO structures a national crisis that
requires such a heavy hand by the Federal Government? Of course not.
Thankfully, the bill we have today, introduced by my friend from
Kentucky (Mr. Barr), fixes this problem of the banking regulators' own
making. First, it prevents a disastrous fire sale of suddenly
impermissible legacy CLOs. Second, it narrows the Volcker rule's
absurdly broad definition of an ``ownership interest'' in a CLO.
Last month, the Financial Services Committee passed this bill on an
overwhelmingly bipartisan basis, with all but three members of the
committee voting in favor of it. The Independent Community Bankers of
America and the American Bankers Association have all voiced their
support as well.
I am sorry, though, that it has come to this. You know, time and time
again the committee has admonished the banking regulators that the CLO
provisions of Volcker were a threat to the economy and to the financial
stability that they are supposed to be protecting. Time and again,
however, the unwieldy banking regulators chose to do nothing. If they
had corrected this problem as we have been urging them to do and which
they could do, we would not be here wasting valuable legislative time
saving the CLO market from our own public servants.
Now, some have suggested that the agencies don't have the legal
authority to fix the problems. It is interesting that Federal agencies
always seem to have plenty of authority when it comes to doing
something, but when they need to fix something that they messed up,
well, suddenly they have no authority.
Perhaps the real problem is the fact that we have so many different
banking regulatory agencies in the first place. If coordinating these
agencies to avoid a regulatory train wreck is too difficult, then maybe
we need fewer agencies.
I have spoken before about the proliferation of government regulators
with authority over our financial markets. More regulators mean more
wasteful duplication of functions, more regulatory confusion, more
empire building, more bureaucratic rivalry, less accountability, and
less problem solving.
An ever increasing number of agencies with ever increasing authority
only makes our financial system more unsustainable and more arbitrary
and more unstable, and it makes it all the more likely that the heavy-
handed government will fall suddenly on some unlucky corner of the
economy.
So it is my hope that this body can come together now and support
this bipartisan piece of legislation so that we can ensure that the
market for collateralized loan obligations, CLOs, is not carelessly and
needlessly destroyed. While they may not have a high profile, CLOs
provide a valuable function that our recovering economy cannot do
without, and I urge my colleagues for that reason to support H.R. 4167.
And at this time, I will reserve the balance of my time.
Mr. MURPHY of Florida. Mr. Speaker, I yield myself such time as I may
consume.
[[Page H3258]]
Mr. Speaker, I rise in support of H.R. 4167, to create jobs and
prevent unintended consequences of the Volcker Rule, which I strongly
support.
The bill before us represents a truly bipartisan compromise that
balances the author's goal to preserve a proven financing mechanism
with democratic concerns against watering down the Volcker Rule, which
is designed to prevent banks from gambling on Wall Street with consumer
deposits, the very type of behavior that nearly took down our financial
system and gave us the Great Recession.
The truth is the Volcker Rule is not intended to capture debt. Debt
is an everyday tool of plain vanilla financial institutions. No, the
Volcker Rule is about equity ownership. We don't want banks owning
hedge funds and private equity funds, but of course we still want banks
out in the communities lending to the real economy.
I want to thank the gentleman from Kentucky and the gentlelady from
New York (Mrs. Maloney) for working together on a compromise that makes
a narrow, commonsense fix to the Volcker Rule without undermining its
core purpose: prohibiting risky proprietary trading by federally
insured banks.
I also want to recognize Chairman Hensarling and Ranking Member
Waters for the truly bipartisan way this bill came to the floor by a
vote of 53-3. I am hopeful that we will see more bipartisanship from
our committee on the business of the American people: comprehensive
community bank regulatory relief, TRIA, reauthorizing the Export-Import
Bank to help American job creators access foreign markets, and
reforming Fannie Mae and Freddie Mac to protect taxpayers without
undermining the housing market and preserving the 30-year fixed rate
mortgage for middle class families.
The bill before us would simply clarify that the right to vote to
remove a CLO manager in traditional, creditor-protective circumstances,
such as a material breach of contract, does not, by itself, convert a
debt security into an equity security under the Volcker Rule.
It would also provide narrow relief to existing CLO securities as
long as they qualify as debt under this bill. For CLOs that are not
debt securities under this bill, banks will get an additional 2 years
to divest, which will prevent a disruptive fire sale of these
securities and cost as much as $8 billion.
At this time, I will insert the text of a letter from the Independent
Community Bankers of America into the Record.
Independent Community
Bankers of America,
Washington, DC, April 28, 2014.
House of Representatives,
Washington, DC.
Dear Member of Congress: On behalf of the more than 6,500
community banks represented by ICBA, I write to express our
support for the Restoring Proven Financing for American
Employers Act (H.R. 4167), which will be considered on the
House floor this week. Introduced by Rep. Andy Barr, H.R.
4167 will allow community banks to retain debt securities of
collateralized loan obligations (CLO) issued before January
31, 2014. The Financial Services Committee reported H.R. 4167
by a nearly unanimous vote in March.
As you may know, the final Volcker Rule implementing a
provision of the Dodd-Frank Act, issued December 10, requires
banks, including community banks, to divest their holdings of
CLOs by July 2015. Though the compliance date was later
extended, this requirement could cause a significant,
immediate and permanent loss of capital for community banks
that hold these securities and are still recovering from the
financial crisis. H.R. 4167 would avert this damaging and
unanticipated outcome by repealing the divestment requirement
for CLOs issued before January 31.
ICBA urges you to support H.R. 4167. Thank you for your
consideration.
Sincerely,
Camden R. Fine,
President & CEO.
Mr. MURPHY of Florida. Once again, I would like to thank the
gentleman from Kentucky (Mr. Barr), who also is a member of the United
Solutions Caucus and is dedicated to real problem solving and saving
the partisanship for another day. He worked hard on this bill and was
willing to reach across the aisle for commonsense compromise. As a
result of this hard work, this jobs bill is on the suspension calendar
and has earned a strong bipartisan vote.
I urge my colleagues to support this legislation and reserve the
balance of my time.
Mr. GARRETT. Mr. Speaker, at this time, we are now joined by the
sponsor of the bill, the gentleman from Kentucky, who, as was
indicated, worked in a bipartisan manner to get it out of committee,
here on the floor. And I assume we are going to see a strong bipartisan
vote for it on the floor as well.
At this time, I yield such time as he may consume to the gentleman
from Kentucky (Mr. Barr).
Mr. BARR. Mr. Speaker, I thank the gentleman from New Jersey, my
friend who has, himself, shown a considerable amount of leadership on
this issue in making sure that American companies on Main Street and
all across this country have access to reliable, affordable capital to
grow their businesses and create jobs.
I also want to thank the gentleman from Florida for participating in
the discussion here today in a bipartisan manner and for his support.
And I also thank my colleagues both on this side and that side of the
aisle for their support and for recognizing that we do need to fix this
problem.
H.R. 4167, the Restoring Proven Financing for American Employers Act,
is about jobs and economic growth. It is about reliable access to
affordable credit to small, midcap, and emerging-growth companies, in
fact, some of the most dynamic and job-producing companies in America.
As the U.S. Chamber of Commerce states in its letter of support, my
legislation is necessary to ``fix the adverse impacts of the Volcker
Rule upon thousands of Main Street businesses.''
This legislation, as has been mentioned earlier, passed out of the
Financial Services Committee on a March 14 strongly bipartisan vote of
53-3. I want to thank Congresswoman Carolyn Maloney of New York for her
support and work in developing this commonsense legislation to provide
a necessary clarification of the Volcker Rule while maintaining the
original legislative intent regarding the treatment of collateralized
loan obligations.
While there are several exemptions provided in the statute included
in section 619 of the Dodd-Frank law, which authorizes the Volcker
Rule, that legislative language states:
Nothing in this section shall be construed to limit or
restrict the ability of a banking entity or nonbank financial
company supervised by the Federal Reserve Board to sell or
securitize loans in a manner otherwise permitted by law.
Nevertheless, despite this plain language in the statute, certain
asset-backed securities originally thought to be exempt by the Volcker
Rule are now subject to the covered fund definition.
So the pragmatic need to provide this defined, narrow fix is why the
legislation is endorsed by the American Bankers Association, by the
Kentucky Bankers Association, and by the small community banks around
this country, the Independent Community Bankers of America. And it is
why a small community bank in my home State of Kentucky contacted my
office in January. He alerted us to the fact that failing to fix this
problem could very well mean significant losses to that small community
bank, possible layoffs of employees, and higher borrowing rates and
fees for the customer in the local community.
So getting this issue right and fixing the problem is important to
community banks. It is important to U.S. employers and businesses on
Main Street. It is important to a whole lot of jobs that support
families in Kentucky and around this country. And here is why:
collateralized loan obligations, or CLOs, have proven to be a critical
source of funding for U.S. businesses over the last 20 years.
{time} 1300
Today, CLOs continue to provide over $300 billion in financing to
U.S. companies, including companies that are well-known to all of us in
this Chamber--Dunkin' Donuts, American Airlines, Burger King, Toys
``R'' Us, Neiman Marcus, Delta Air Lines, Goodyear Tire, and even a
mattress and bedding company in my hometown of Lexington, Kentucky,
Tempur Sealy. Yet, this valuable form of corporate finance that
supports jobs is under assault due to the regulators' implementation of
the Volcker Rule, which makes it impermissible for banks to retain or
invest in these assets.
According to the U.S. Chamber of Commerce, H.R. 4167 would ``preserve
[[Page H3259]]
this important source of financing that supports growth and job
creation throughout our economy.'' CLOs have a proven track record of
success, and they ``performed very well before, during and since the
financial crisis.''
According to the Kentucky Bankers Association, investment in CLOs is
a ``conservative addition to an existing and balanced investment
approach'' and a ``thoughtful solution to the equity problem'' that
banks face. In fact, the default rate on CLOs in the last 20 years has
been less than one-half of 1 percent.
Yet, despite this proven track record and despite this critical
source of funding for growing U.S. companies and job producers in
America, the Volcker Rule regulators require that banks divest of their
CLO holdings. The consequences will be a fire sale in the market that
will cause significant losses to banks currently holding what are known
as legacy CLOs.
Looking forward, it will increase the cost of borrowing in the future
for U.S. businesses looking to expand, grow, and create much-needed
jobs.
These warnings may sound abstract. So let me explain how this affects
a real business that employs many of my constituents in Kentucky's
Sixth Congressional District. Tempur-Pedic is a high-end mattress
bedding company, and they produce, through space-age technology, very
comfortable, high-end beds for the top of the market. But they knew
that in order to be resilient and to be growing in the future, they
needed to acquire a competitor that covered the rest of the
marketplace--the value products, the midlevel products, and a lower but
higher level form of mattress so that in the event of an economic
downturn or competitive pressures in the marketplace, they would have a
cross-section of the entire marketplace with all price points of
bedding.
So Tempur-Pedic used CLO financing, where it didn't have access to
affordable corporate bond financing, as affordable corporate bond
financing. They accessed CLO financing and closed this transaction
where they acquired a well-known company to a lot of Americans, Sealy,
and that transaction closed in March of 2013. This allowed them to
expand their business and create already in just a year's time 200 new
jobs in my district.
Thanks to CLO financing, Tempur Sealy is now a more resilient company
and better poised for growth in the future. And if Tempur Sealy sees an
opportunity to grow even more and is in need of a commercial loan, we
want to make sure that this source of affordable financing is there for
them and for all U.S. companies.
H.R. 4167 is a defined, narrow fix which clarifies that the Volcker
Rule should not be construed to require the divestiture of any debt
securities of CLOs prior to July 21, 2017, if such CLOs were issued
before January 21, 2014.
H.R. 4167 also clarifies that a bank shall not be considered to have
an ownership interest in a CLO for purposes of enforcement of the
Volcker Rule if such debt security has no indicia of ownership other
than the right to participate in removal for cause or in the selection
of a replacement investment manager or investment adviser of the CLO.
So, in sum, Mr. Speaker, this legislation is a bipartisan,
commonsense fix to a real world problem voiced by community banks and
emerging growth companies like Tempur Sealy in my own district that
will benefit these companies all around the country. So I urge a vote
in support of H.R. 4167, the Restoring Proven Financing for American
Employers Act.
Mr. GARRETT. I reserve the balance of my time.
Mr. MURPHY of Florida. Mr. Chairman, I yield as much time as he may
consume to the gentleman from Massachusetts (Mr. Capuano).
Mr. CAPUANO. I thank the gentleman for yielding.
Mr. Speaker, I am one of those three people who voted ``no.'' I do
not expect to win here today on the floor. And I want to be real clear:
I do not oppose consolidated loan obligations. I support them. They are
an important financial tool.
But that is not what this bill does. This bill allows risky CLOs.
Most CLOs would be permitted pursuant to the Volcker Rule. If they only
contained loans, they are okay. Any bank can own them to any degree.
So let's not think that somehow the Volcker Rule has killed CLOs.
They have simply said they have to be what they say they are,
collateralized loan obligations, not collateralized loan obligations
put together with all kinds of other junk. Simple. Straightforward.
There is not going to be any fire sale. The regulators have already
listened to the congressional comments, of which I was one, asking for
a delay to allow the existing CLOs that do not meet the regulation to
be held for 2 more years. There will be no fire sale. There has been no
fire sale.
As we speak, the sale of CLOs is at a historic high. The Volcker Rule
has not killed the market. They are back to almost the same levels they
were at in 2007 before the crash.
Let me be clear. I agree that CLOs did not, on their own, participate
in the '08 problems and that they do have a record of success. But
prior to 2008, most people would have said the same thing about
collateralized debt obligations. By the way, at some point, somebody
has to explain to me the difference between debt and loans, but that is
a different issue.
Collateralized loan obligations are important. They are a good,
thoughtful way to provide capital. By the way, most of them are used
for leveraged buyouts, as the example we just heard, for leveraged
buyouts. Now, you can argue whether leveraged buyouts to the extent
they happen are good or bad, but that is what they are mostly used for.
I also want to be real clear. Very, very, very few small, community
banks have any CLOs. Over 70 percent of the collateralized loan
obligations, both the ones that are allowed and disallowed, are owned
by three banks. Over 70 percent are owned by three of the largest banks
in the world. And by the way, almost all of those CLOs would be
permitted to those three large banks.
So what are we solving here? We are pretending to save some great
investment tool. It is not under threat. We are pretending that no
problems could ever happen. Those are the same discussions we had in
'05, '06, '07, and '08. All the risk that was being assumed comfortably
and successfully prior to 2008 was perfectly fine. Those regulators are
just killing America--until the crash happened, from which we are still
recovering.
All we want to do is take a look at some of the riskier aspects of
this financial aspect and simply say, whoa, it doesn't mean everybody
can't do it. It simply means regulated banks can't do it. Private
investors could still do every one of these things. Why would regulated
banks be prohibited from doing only the most risky CLOs? Because they
are protected by taxpayer dollars, because they are protected by the
FDIC, and because we, as a society, have said that bank stability is
important to the American economy.
So let's be clear: CLOs are not being killed. They are being limited
in a very small way only to target the most risky CLOs. Banks and
others have already adjusted to those limitations by reinvigorating the
CLO market in a way that has been and would be allowed under the
existing rule. But yet we have a problem.
We have a crisis that we have to solve. A handful of people will not
be allowed to risk my mother's investment. That is what we are crying
about. Well, I have heard that before, and it didn't turn out too well
in '08. A little limitation is good for the American system. And, by
the way, it is historically the system as it has been for a thousand
years.
I just want to end with a quote by Paul Volcker himself. I presume
Paul Volcker knows more about the economy and the markets than most
people in Congress. But maybe not. Maybe some people are smarter than
him. This is what he said about this bill:
This constant effort to get around the rule limiting banks'
investment in hedge funds on behalf of a few institutions who
apparently want room to resume the financing practices that
got us into trouble in the past really should end.
CLOs--straightforward and plain vanilla--are a good and important
investment tool for the American economy. They should and will be
allowed under the current rules. There should and will be time for
people to move slowly
[[Page H3260]]
and thoughtfully without a fire sale out of the handful of risky
investments that are there, and even those people who love those risky
investments will be able to do it still, just not through a subsidized
bank.
I know that I have not convinced anyone. I know that I am going to
lose this vote on the floor, and I respect it. And I hope to God that
my concerns are wrong and overblown. I hope that in a few years I come
back and I apologize to the gentleman for my concerns, that they were
overblown and unjustified. Because America will be better off if you
are right. But if you are wrong, a handful of people will make a lot of
money, but the rest of us will be dramatically and deeply hurt once
again.
Mr. MURPHY of Florida. I want to thank the gentleman from
Massachusetts for his remarks.
Mr. Speaker, I reserve the balance of my time.
Mr. GARRETT. Mr. Speaker, how much time do we have remaining?
The SPEAKER pro tempore (Mr. Amodei). The gentleman from New Jersey
has 8\1/2\ minutes remaining. The gentleman from Florida has 10 minutes
remaining.
Mr. GARRETT. I yield 4 minutes to the gentleman from Kentucky (Mr.
Barr).
Mr. BARR. Mr. Speaker, I thank the gentleman from New Jersey, and I
thank the gentleman from Massachusetts for his contribution to the
debate. It gives us an opportunity to actually analyze what exactly we
are talking about here.
We are not talking about the risky assets that were contributing
factors to the financial crisis. If this were junk, as the gentleman
from Massachusetts describes it to be, the default rate on CLOs would
have been much higher over the last 20 years. But the default rate on
CLOs over the last 20 years, including during the financial crisis, was
less than half of 1 percent. Not one of the nearly 4,000 notes rated
AAA or AA ever defaulted in CLOs.
Part of the reason for this strong, durable performance of CLOs is
because CLOs are very different from the troubled assets that fueled
the financial crisis. CLOs are distinct because, number one, they are
based on diverse assets, commercial loans that are well diversified
across the industry. These are solid, diversified loans, and they are
typically secured loans.
Secondly, there is an alignment of interest between CLO investors and
the CLO managers. The managers actually have skin in the game.
Finally, third, there are significantly greater transparency features
to CLOs and disclosure since the commercial loans here, the secured
commercial loans, are issued by companies that report financial
information on a regular basis to investors, and they are required to
provide regular financial reports with the SEC.
Now, with respect to the gentleman's claim that the CLO market is
doing just great, there is a lot of misinformation about this.
According to the Loan Syndication and Trading Association, U.S. banks
hold an estimated $70 billion of CLO notes, which would have to be
divested if we don't make the fix by July 21, 2015, and with the Fed's
change a little bit later. But even the threat of such a divestiture
roiled the CLO market in December and January before Congress took
action.
So due primarily to uncertainty around the Volcker Rule in January
2014, U.S. CLO issuance dropped nearly 90 percent from the prior year,
drying up access to credit. The only reason why the CLO market has
recovered since January is because of this bill. It is because of the
legislative action, the bipartisan efforts of this body.
Finally, I just would like to conclude by responding to the
gentleman's assertion that a little limitation is good for the system--
a little limitation is good for the system. Well, hear what a witness
at our hearing about this issue said about this little limitation:
If you have a situation where the Volcker Rule basically
impedes U.S. banks and some foreign banks from investing in
CLOs, you can see their appetite reduced by 80 percent. They
will just not participate in the CLO market.
Ultimately, that leads to our other point, in that we can see a
significant cost to financing for U.S. companies. What happens when you
see a significant cost to financing or decreased credit availability
for companies? That means these companies that have over 5 million
employees can't build new factories, they can't build new cellular
networks, they can't expand, and they can't combine and merge to
bigger, more resilient companies that can compete effectively on a
global basis. It ultimately would have a very destructive effect on
U.S. companies.
So, Mr. Speaker, in sum, I will just bring it back to my home
district. If a little limitation is good for the system, tell that to
the 200 Kentuckians who now have jobs because of this innovative source
and a responsible source of commercial credit in America.
{time} 1315
Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume.
I just want to take a moment to respond as well to the gentleman from
Massachusetts. He indicated that he is probably not going to convince
anyone who is supporting the bill. I presume I am probably not going to
convince him either, as I look over there, because he is now off the
floor; but if he is back in his office and tuning us in, let me just
make some points where he might be convinced.
He spoke about the fire sale that will not occur now under the
proposed Volcker Rule. Well, yes, it still will occur, just because you
are not saying that the sale has to occur this afternoon, but it is
going to occur at a set point in time, either 6 months from now, a year
from now, or as they are proposing, 2 years from now. In either case,
when you set a date certain for a sale, then everyone else out there
knows that this is the day that they might as well wait for; and
eventually, they will have to sell, and at that point in time, they
will engage in a fire sale.
In other words, by setting a date when you have to sell all of your
assets or whatever you have, you are basically pushing the price down
in that market.
Secondly, with regard to sales up, I guess the gentleman from
Kentucky already raised that point. Sales were going down until
Congress came together in a unique experience for Congress, which was a
bipartisan effort, and once the rest of Main Street and Wall Street saw
that Congress can actually do things together and work together in a
bipartisan manner, they did what the rest of Americans will do and
said: good thing. They said: let's get that market going back up again.
As the gentleman from Kentucky pointed out, that is exactly what
occurred.
Thirdly, the gentleman from Massachusetts admitted that the CLO
market was not the cause or any cause of the crisis that we had back in
2008, and I have not heard any testimony from anyone on any panel from
either end of the spectrum that the CLOs would be a basis for the next
crisis that inevitably will come.
Next, the gentleman from Massachusetts raised the point that
something like 70 percent of all the CLOs out there are captured by
something like three large banks or three financial institutions and
made it sound as though the smaller and midsized banks are not really
playing here.
Then you had to listen to the next thing that he said. He said that
most of those CLOs held by those would already be protected by the
current Volcker proposal out of the administration.
Well, that tells you right there that the legislation from the
gentleman from Kentucky is not addressing or not trying to solve a
problem for the three large banks. The legislation he is trying to put
forward in a bipartisan manner is, in fact, doing just as he explained
for the smaller banks, for the midsized banks, those are the ones that
we are concerned about; and we want to make sure that they are not hurt
through fire sales or further restrictions on them.
Finally, last--but maybe not least--is the fact that this bill will
not end too big to fail. Well, we know that Dodd-Frank, unfortunately,
did not end too big to fail.
Dodd-Frank did a number of things, but it did not end too big to
fail, and the way to solve that is not by nitpicking around the edges
on areas such as this that did not cause the crisis in the first place.
In fact, the authors and the proponents of Dodd-Frank understood that
when they passed Dodd-Frank--because, look, what is the language in
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Dodd-Frank when it comes to the Volcker Rule and the CLO matter that is
before us today? Did they want to have this included in the rule that
Volcker would eventually come out with? The answer is no.
The language specifically in 619 of Dodd-Frank--voted in favor of, by
the way, by the gentleman from Massachusetts--says:
Nothing in this section shall be construed to limit or
restrict the ability of a banking entity or nonbank financial
company supervised by the Federal Reserve Board to sell or
secure type loans in a manner otherwise permitted by law.
What does that sentence mean? That means that the sponsors of--and
those like the gentleman from Massachusetts who supported Dodd-Frank--
specifically put into the Dodd-Frank law the direction to the Fed and
the other regulators that they should not be doing what they are doing
right now. They should not be putting, as it says, limitations on this
type of instrument.
So for all of those reasons, if the gentleman from Massachusetts is
still watching what we are doing on the floor, perhaps we have
convinced him that he should join with the majority on both sides of
the House and not be part of the three or so who remain opposed to this
and support the legislation, H.R. 4167.
With that, I yield back the balance of my time.
Mr. MURPHY of Florida. Mr. Speaker, I would like to thank my
colleagues and the gentleman from New Jersey for their thoughtful
debate on this commonsense improvement to the Volcker Rule.
I appreciate my colleagues on the Democratic side of the aisle always
keeping the focus on preventing some of the world's largest banks from
subjecting the American people to another financial crisis.
However, I believe this bill strikes the right balance to protect the
American people and create jobs. It was reported by the Financial
Services Committee with a strong bipartisan 53-3 vote, and I urge my
colleagues to support this bill.
I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from New Jersey (Mr. Garrett) that the House suspend the
rules and pass the bill, H.R. 4167, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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