[Congressional Record (Bound Edition), Volume 153 (2007), Part 23]
[Senate]
[Pages 31534-31536]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             HOME MORTGAGES

  Mr. DORGAN. Mr. President, let me continue to talk about one other 
area of speculation because speculation with respect to the futures 
market in oil is causing significant problems. Speculation with respect 
to mortgage lending in the subprime mortgage scandal has been 
unbelievable as well, and it is causing havoc, as we know. People are 
getting fired; companies are declaring billions of dollars of losses; 
and the American people are injured as a result of it. The economy will 
not grow as fast as a result of it. Let me describe to you what I have 
learned about this issue. It is stunning because I did not know it. You 
get up in the morning, brush your teeth, shave, and watch television 
where you see these ads on television. I never thought much about them. 
I always thought they were a little goofy. They say: Do you have bad 
credit? Have you filed for bankruptcy? You can't pay your bills? You 
have bad marks on your credit rating? Come see us. We will give you 
some credit.
  We have all seen those adds. You think to yourself: Well, how can 
that work? The fact is, it does not work and cannot work. So what used 
to be a sleepy little industry getting home loans became something like 
a Roman candle with powder and a lot of flash. All of a sudden these 
companies became very fancy companies. I will mention one, Countrywide, 
the largest home mortgage lender. Here is what I have discovered as I 
began to look at what they did. They said: You know something. We will 
give you a deal on a home mortgage. You have a broker selling you a 
home mortgage getting big fees. We will give you a deal on a home 
mortgage, an adjustable rate mortgage (ARM). By the way, we have a 
mortgage, an ARM, in which you don't have to pay any principal and 
interest only, and you can pay the principal later. We have a better 
mortgage than that. We have one in which you don't have to pay any 
principal, and you pay the interest later or principal later. You don't 
even have to pay the full interest at this point. We can add the 
interest you are not paying and the principal later to the loan or 
loans with a 2-percent interest rate.
  So they disclose a monthly payment and people say: Man, that is 
something. That is a low house payment. They don't understand, of 
course, in 2 or 3 years it is going to reset, and it will reset at 
triple or quadruple the rate. In many cases, they didn't even quote the 
escrow they were going to be required to pay. So all of a sudden in 2 
or 3 years the interest rate is going to reset, and they don't have a 
ghost of a chance of paying the mortgage.
  This is all about greed, by the way--big brokers, big companies, 
mortgage companies that are fundamentally unsound. It reminds me of the 
days when they used to put sawdust in sausages, sawdust for fillers. 
People found out about it, and they were aghast.
  Here is what they did with these mortgages. They are out there 
selling bad mortgages, interest only and even less than interest only, 
subprime, selling mortgages to people who aren't going to have a ghost 
of a chance of making the payments. They are out there selling 
mortgages--not just Countrywide but others as well--which are 
advertising: Come to us if you have bad credit. We want to help you. We 
want to give you a loan. They sell these mortgages, and then they 
package them up, similar to a piece of sausage. They put subprime 
loans, bad loans in with securities. They package them up, and they 
sell them. Pretty soon a hedge fund, an investment bank, or somebody 
else buys them, and now they have a piece of sausage with sawdust that 
is called a security, which includes bad home mortgages. They don't 
even know it. Then, all of a sudden, it goes belly up because people 
can't pay their mortgages.
  Now, I am thinking to myself, where has common sense gone? What has 
happened to basic common sense? Those brokers are selling the loans and 
making big commissions. Those companies were writing the loans making 
big money and putting in prepayment penalties so they can lock people 
into bad loans. Those people, the investors who are buying the loans, 
and, yes, in some cases, those who were taking out the loans because 
they should have known better, where has common sense gone? It is 
rampant speculation.
  One more point. It relates to what I talked about with respect to oil 
futures, and it is the total lack of regulatory oversight. Don't look. 
Don't worry. It will all be fine. Well, it is not fine. These kinds of 
activities have an unbelievably tough effect on this country's economy 
and on people. Millions of people will lose their homes. We have a lot 
of work to do, but I wished to make this point: There is a need to have 
effective regulatory oversight. This administration has never believed 
in it. We saw the consequences of it with the Enron Corporation. We now 
see the consequences with respect to oil and natural gas futures 
trading and its impact on the price of oil and natural gas. We see the 
consequences of it with respect to what has happened with subprime 
lending. If this doesn't convince this administration and future 
administrations that you have to have effective regulation, then I 
don't know what does. Companies need someone looking over their 
shoulders to make sure we don't have this carnival

[[Page 31535]]

of greed take over. You have to have effective regulation. Working in 
this Congress, many of us are trying to put this back together to see 
if we can't get back to some sound common sense, some business sense, 
in terms of working in these areas.
  I wanted to at least start today by talking about the contradiction 
of what the President is asking of us and what the President is 
demanding of the Congress in a way that is completely contradictory to 
sound fiscal policy. I further wanted to talk about a couple of areas 
of speculation that both relate to lack of oversight. We need to fix 
these. We can do it, but we need to fix it and soon.
  I appreciate the patience of the majority leader.
  I yield the floor.
  Mr. REID. Mr. President, has morning business expired?
  The PRESIDING OFFICER. Yes, it has.
  Mr. REID. Mr. President, before my friend from North Dakota leaves 
the floor, I would like to direct a couple of comments through the 
Chair to my friend. First of all, I appreciate the statement made 
relating to energy. Everything you say has to be overlaid with the fact 
that we have the most oil friendly administration in the history of our 
country. Both President Bush and Vice President Cheney made their 
fortunes in oil.
  I would direct a question to my friend. It certainly appears our 
administration has lived up to being the most oil-friendly 
administration. Would my colleague agree with that?
  Mr. DORGAN. Mr. President, it has. There is no question we need oil. 
We use a lot of oil, but we need to have an energy policy that is a 
balanced policy, and my colleague, the majority leader, is working with 
all of us on an energy bill that we hope we can get by the end of this 
session that is balanced. It must include renewable energy. We will 
also use fossil fuels, as well as need more conservation and 
efficiency. Further, we must make our vehicle fleet much more 
efficient. For the first time in 27 years, I believe, the majority 
steered through this Senate an energy bill that got 65 votes, including 
for reformed CAFE standards which will make our vehicle fleet more 
efficient.
  So we have a lot to do on energy, but we have made some significant 
progress. I hope we can get that bill by the end of the year.
  Mr. REID. Mr. President, I would also say to my friend, I appreciate 
the statement on where we stand with these subprime loans. The 
financial community is crying out for help. Foreclosures help no one. 
The person who has the home loses. The entity that holds the loan loses 
significantly. It is usually about 30 to 35 percent of the value of the 
home, on average, is gone. The entity where the home is located, a 
county or a city, loses money because that home becomes--any 
foreclosure takes time. You usually have to board up the windows. It 
loses value, it loses tax dollars. Something has to be done by the 
Federal Government. What is being done by the Federal Government in its 
limited fashion is hurting.
  Around this country, one of the things that helps people who are in 
foreclosure is to have a counselor sit down and talk to them about 
alternatives they have. People are so frightened, and we have learned 
that people who get foreclosure notices don't know what to do with them 
and usually don't even respond to them, either by mail or on the 
telephone. What this administration has done for these counselors--
which, by the way, are nonprofit entities--they have cut back their 
funding by three-quarters. At a time when people need help, they cut 
back funding.
  We know President Bush doesn't like Government. He doesn't like 
Government. He has proven that from the time he ran for Congress in the 
1970s and said Social Security should be privatized, and he has lived 
up to that. He doesn't like anything to do with Government. He is a 
person who is anti-Government.
  There is a time for Government. Adam Smith, in his great book ``The 
Wealth of Nations,'' in 1776, said there is a place for Government. If 
he were writing that book today, he would talk about the need for 
Government throughout America in many different ways. One thing we need 
to do is do something with FHA, with Fannie and Freddie, which are 
organizations we set up in Congress to help people buy homes.
  I would say to my friend in the form of a question: Does my colleague 
think the Federal Government should be more active in what is going on 
than ignoring the problem?
  Mr. DORGAN. Mr. President, the majority leader is absolutely right. 
We have a role to play. The first and most important aspect is to help 
those who have been victimized by this unbelievable speculation and 
greed, and the second is to make sure it doesn't happen again. That 
requires effective regulation. So the response to this subprime loan 
issue cannot be no response or just to look the other way. It has to be 
to address those things.
  One of the points the majority leader has made is the need to rework 
some of these mortgages. The interesting thing is that, in the old days 
when you got a mortgage, you knew where you got it, and you knew who 
had it. If you had trouble, you went and worked it out with your 
lender. Nowadays, they have already sold that mortgage, so it makes it 
much more difficult. They have sold it, wrapped it into a security 
someplace, and sold it two or three times. Borrowers go to the place 
where they got the mortgage, but the company says we don't have the 
mortgage.
  So we have a lot to do. I appreciate the words of the majority 
leader. We have to help a lot of people try to get through this. We 
need to help our country's economy get through this and make sure it 
doesn't happen again.
  Mr. REID. Mr. President, one final thing before my friend leaves the 
floor. There is no one more involved in farm policy any more than the 
Senator from North Dakota. North Dakota is an agricultural State. 
Tomorrow morning we are going to have a vote on cloture on the farm 
bill. We are going to have a cloture vote. It is a very important vote. 
The question is, Are the Republicans going to kill the farm bill?
  For people who say: Well, gee whiz, we have had no opportunity to 
offer amendments--cloture on the farm bill does not stop amending the 
farm bill. Relevant amendments can be offered on the farm bill. We have 
30 hours to do that. I, of course, would allow those amendments to go 
forward. There would be no way to say: Well, we are only going to vote 
on this one. If there are germane amendments subject to the rule, they 
can be offered and they can do it postcloture. So I hope all my 
Republican friends understand this farm bill is important. People at 
home are going to be watching how we vote on this farm bill because it 
is a very important vote. Are we going to continue working on the farm 
bill or let it go? It appears to me the response from the Republicans 
is let it go. Maybe we will be able to do it some other time.
  But I ask my friend: It is true, is it not, that this is an important 
vote and there will still be amendments allowed even if cloture is 
invoked?
  Mr. DORGAN. Mr. President, the reason a cloture motion was even filed 
is we have been here a week and a half and have not even been able to 
move to the first amendment because it has been blocked. Yesterday, 
Senator Harkin offered this. He said: Well, how about if we at least 
start. The way to move on it is to start. He said: How about let's 
start with a couple of Republican amendments and a couple of Democratic 
amendments. In every case, there was an objection by the minority side 
which said no, we can't start.
  So I think the majority leader had no choice but to say let's file a 
cloture motion and try to shut off debate, but that will not shut off 
amendments that are germane postcloture. After being very discouraged, 
I really hope those of us who care about a farm program can move 
forward. Having watched this blocking of the farm bill now for a week 
and a half, I hope tomorrow morning, when we have this vote, the 
message that American farmers will get is that this Senate cares enough 
to decide that, yes, we will go to work, and we will do the farm bill.

[[Page 31536]]

  I would make one final point to the majority leader. I made the point 
yesterday. Farmers can't do what the minority in the Senate is doing. 
When it is time to milk a cow, you have to milk a cow, or the cow gets 
sore. When it is time to plant, you have to plant, or your crop will 
not grow. When it is time to harvest, you have to harvest, or the crop 
will spoil. The farmers don't have the luxury the minority has to say: 
Well, let's do nothing.
  I hope our colleagues will join us tomorrow in voting for cloture. I 
appreciate the filing of the motion by the majority leader because we 
didn't have any other choice.

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