[Congressional Record (Bound Edition), Volume 154 (2008), Part 14]
[Senate]
[Pages 19366-19370]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE ECONOMY

  Mr. REID. Mr. President, last night, just a short ways off the Senate 
Chamber, I met with Chairman Bernanke, Secretary Paulson, and others. 
The meeting came at the request of the administration. These two men 
expressed their views on the deepening economic turmoil and laid out a 
plan that has now been reported in the media this morning.
  AIG, arguably the largest insurance company in the world, was in the 
process of going bankrupt. The deadline was 8 o'clock last night. The 
board of directors met to see if they would accept the offer made by 
the Federal Government to attempt to save parts of the company. 
Obviously, the meeting ended with the board of directors approving the 
bailout. The Secretary and the Chairman promised to provide more 
details of their plans in the near future, which I believe must address 
the broader underlying structural issues in the financial markets.
  I just completed a press conference with a number of other Senators, 
and the press was asking question after question: What is the Senate 
going to do? The answer is very clear: This is a multitrillion dollar 
problem which has been ongoing for a long time. We are going to have to 
get some committee hearings underway, which is why we are not going to 
adjourn. We will be in pro forma session so committees can still meet, 
though we won't have any activities here on the floor as relates to 
these markets.
  Secretary Paulson has said this will have to take place in the next 
administration because there is so much to be determined in the 
direction we need to go. They gave every impression, these two good 
men, that they are attempting to do the best they can to understand 
America's financial institutions and the problems with them. But the 
good intentions of these two decent men cannot escape the reality that 
the Bush administration's willful neglect of oversight and an 
overzealous embrace of big business are directly responsible for the 
crisis we now face.
  The most important job of our country is to safeguard the American 
people from physical and financial harm. This was the role of the great 
Franklin Roosevelt. That is the role of any President. But it seems 
this President has focused only on protecting us from physical harm. 
The financial harm needs to be part of the duties of the President. 
When it comes to the financial sector, this means ensuring that 
institutions do not impose systematic risks on the entire system 
because of the ripple effect that can have on our economy.
  Democrats and Republicans who have served before our current 
President have all understood that providing oversight--oversight of 
everything but also of our financial sector--is not

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somehow anticapitalistic. Just the opposite--it helps capitalism 
flourish. But that all changed with George Bush and Dick Cheney. When 
they came to power, there was no more oversight. They are such devout 
followers of the top-down, big-business-first, Herbert Hoover approach 
to the economy that they see any oversight as a threat to their greed. 
They put cronies and ideologues in charge of the most critical 
agencies, including the Justice Department. Alberto Gonzales is the 
poster child of that, hiring people who only graduated from certain 
select religious universities. I repeat, they put cronies and 
ideologues in charge of our most critical regulatory agencies, who 
ensured that special interests would always come before the common 
good. They refused to exercise their regulatory authority over the 
mortgage industry, allowing massive fraud and widespread predatory 
lending.
  Now, what is predatory lending? Look it up in the dictionary. I did. 
It is the practice of preying on borrowers with deceptive, dishonest 
loan offers. This paved the way for the largest mortgage crisis in 
American history--a bigger crisis than during the Great Depression. And 
the reason for that is the great work done by President Roosevelt and 
the New Deal and the work done by President Johnson with the great 
things he did so people could buy homes. So of course more people own 
homes now than then. Republicans, though, continued to ignore the 
problem long after the extent of the plundering and pillaging of the 
mortgage market became widely known.
  I have a friend, Mr. President. I have known him a long time. We did 
work together. His name is Joe Alioto, Jr. His father was a famous 
lawyer and mayor of San Francisco. In my estimation, Joe Alioto, Jr., 
is one of the most legal scholars and the finest antitrust lawyer in 
the country--doing plaintiffs work, not defense work. He has done some 
great things to help our society. He is so concerned about what has 
happened these past 8 years. The Justice Department has not touched 
these economic conspiracies going on. They have ignored it. It has to 
change.
  Mr. President, talking about regulation, remember last Christmas? It 
started around this time, a couple weeks from now. What were people 
concerned about? Kids getting sick and dying from toys. Why? Because 80 
percent of our toys are manufactured in other places, most of them in 
China.
  We discovered, during that period of time, that the Bush 
administration, in their zealousness to do away with regulation--they 
hate oversight so much that the Consumer Product Safety Commission had 
literally one man in a cubbyhole, a windowless cubbyhole, in charge of 
testing every toy in America for the safety of our children. Our 
children were not protected by a team of engineers or by consumer 
experts but by a single employee who could do little more than to drop 
a toy from his desk on the floor to see if it would break. And that is 
the truth.
  The financial turmoil we are now seeing is a direct outcome of the 
irresponsible Bush-Cheney approach to governing--which, by the way, 
John McCain has supported every step of the way. As he said day before 
yesterday: The fundamentals of this economy are strong.
  There is a cartoon today running in the Las Vegas Sun newspaper. The 
cartoon is by syndicated columnist Mike Smith. You see all his cartoons 
in all the newspapers and magazines in the country. It shows a ship in 
the ocean. Three-quarters of it is underwater, but the caption is: The 
hull is fundamentally strong.
  This administration's fervor to favor big business has crippled the 
very big companies they sought to strengthen, and now the American 
consumer is the one hurt the most. When the history books are written, 
they will show that while Bush and Cheney were giving away the keys to 
the castle to big business, Democrats in Congress were trying to 
restore fiscal sanity.
  In 2000, Senator Paul Sarbanes of Maryland, a senior Democrat on the 
Banking Committee and one of America's all-time great Senators, 
introduced the Predatory Lending Consumer Protection Act to restrict 
abusive lending practices. The same year, Senator Schumer introduced 
the Predatory Lending Consumer Protection Act. In 2002, Senator 
Sarbanes reintroduced his bill.
  When we came with the rewrite of the bankruptcy law, Senator Durbin 
offered an amendment to say, if you have predatory lending practices 
you cannot recover that matter in Bankruptcy Court. That was defeated 
by the Republicans by one vote.
  In 2004, Senator Sarbanes and the current chairman of the Banking 
Committee, Senator Dodd, called on the Federal Reserve to take action 
on alternative mortgages. Senator Dodd called them a ``nightmare'' for 
low-income Americans--4 years ago.
  In 2005, the House of Representatives passed bipartisan legislation 
to reform the regulation of government-sponsored enterprises such as 
Fannie Mae and Freddie Mac. After passing the House 331 to 90, the 
Democratic minority in the Senate tried to pass it but were blocked by 
the White House and Senate Republicans. This was one of the many 
Republicans have put out.
  Representative Mike Oxley, one-time chairman of the House Banking 
Committee and a devout Republican, brought this legislation to the 
White House. As he put it, these are his words, the administration gave 
the legislation the ``one-finger salute.''
  In February 2008 Senate Democrats introduced the Foreclosure 
Prevention Act, which was blocked by Senate Republicans after a veto 
threat from the White House. This is one of the Republicans' 94 
filibusters in the last 20 months.
  In June 2008 the White House threatened to veto the Federal Housing 
Finance Regulatory Reform Act, which would have improved oversight of 
Fannie and Freddie. The reason for the veto threat is here. This is 
what they said--they didn't want to help communities struggling with 
foreclosed properties. That is what I said, not what they said, but 
that is what it boiled down to. They wanted the market to take care of 
it.
  If the President had signed that bill this past June, we perhaps 
could have saved billions--I won't say ``perhaps.'' We would have saved 
billions we will now have to spend to bail out Fannie and Freddie. In 
every one of these instances, Democrats saw the storm clouds gathering 
and attempted to pass legislation that could have steered our course 
away from the crisis we now face. But every time the White House and 
Senate Republicans chose to continue along their irresponsible path. 
Think about how irresponsible this is.
  Even this year, with the housing market fully in turmoil and crisis, 
Republicans broke all Senate records by filibustering the housing 
bill--not once, not twice, not three times, not four times, not five 
times, not six times--seven times. Every day the Republicans blocked us 
from finally passing housing legislation at least 9,000 Americans went 
into foreclosure. People in Pennsylvania, people in Maryland, all over 
this great country, went into foreclosure. During the Republicans' 
seven-time filibusters more than 160,000 homes went into foreclosure.
  When Republicans had a chance to help, they wanted the status quo. 
One thing has happened here the last few weeks. Republicans can no 
longer have the status quo. That is gone. They tried for almost 8 years 
to maintain the status quo, and it is not going to be the status quo 
anymore. After 8 years of a failed approach, President Bush is ready to 
leave office and have the financial nightmare given to the next 
President. President Bush's preferred candidate is a disciple of the 
Bush-Cheney school of economics. If there is any doubt about it, just 
look to the man John McCain hired to tell him what to say on this 
economy, former Senator Phil Gramm.
  This is the same Phil Gramm who pushed through legislation that 
allowed firms such as Enron to avoid regulation and destroy the life 
savings of its employees and now allows Wall Street traders today to 
bid up the price of oil without oversight, leaving us the bill to pay--
and some bill it is to pay.
  An eminent economist at the University of Texas, James Galbraith, 
said

[[Page 19368]]

Gramm was ``the most aggressive advocate of every predatory and 
rapacious element the financial sector has. . . . He's a sorcerer's 
apprentice of instability and disaster in the financial system.''
  Warren Buffett, one of the richest men in the world, called the 
result of Gramm's legislation ``weapons of mass destruction.''
  I don't know about you, but after all that has gone on in the 
financial sector, the last person I want whispering in the ear of the 
next President of the United States is the chief architect and No. 1 
cheerleader for the elimination of responsible oversight.
  My office received a call: I don't know if you should say anything 
about Senator Gramm because there was something called the Gramm-Leach-
Bliley Act that said one holding company could own more than one 
financial services company. They said you better look how you voted.
  I voted against that bill. I remember very clearly. I was the person 
handling this floor during that period of time for Senator Daschle. I 
voted against that bill. We took that matter to conference, and we 
improved the bill in conference. The main issue at that time, for we 
Democrats, was they were red-lining people. The banks would just red-
line places. They wouldn't make loans outside of a certain area.
  It happened in Pennsylvania. The Presiding Officer is aware of that. 
We spent a lot of time trying to change that. Did we get everything we 
wanted? No, we didn't. But it came back from conference, and it passed 
by an overwhelming vote. I voted against the bill. But the main point 
of that legislation is that it still allowed regulation. It didn't say 
the regulators could no longer regulate. The problem is regulators, 
during that period of time, had been asleep at the switch. They have 
not enforced what is on the books, and that should be the focus: that 
McCain's philosophy and Bush's philosophy are the same.
  I am going to continue talking about the fact this man, John McCain, 
is taking a lot of advice from a person who eminent economists and 
business people say has been a disaster for our economy.
  After 8 years of this failed approach, we have what we have. On 
Monday, with one major investment bank headed for bankruptcy, another 
sold at a bargain price to avoid the same fate, tens of thousands of 
people losing their jobs, and one of the largest insurance companies 
teetering, John McCain declared that the fundamentals of the economy 
are strong.
  The straight talk express is really in bad shape. This vehicle has 
fenders ripped off of it. There are very few seats left inside it. It 
hit another big wall on Monday, hit another big wall on Tuesday, and 
today it hit another big wall. The wall today is that John McCain said 
today--this just came out in the Associated Press--he said today the 
reason for all this stuff is lack of good regulation.
  How in the world could the straight talk express say that? I think 
that is one reason I am not sure the straight talk express is even 
running after the last three collisions. It is in very bad shape. But 
yesterday even John McCain finally acknowledged what everyone else 
already knew. I guess he no longer thought the fundamentals of the 
economy were great, as he said a day or so before that. What he said is 
the economy is broken. That is some switch, isn't it--from being sound 
fundamentally to broken? But who does McCain think broke it? Was it 
George Bush, Dick Cheney, Phil Gramm, McCain's own Republican Congress?
  The economy is not going to turn around overnight. We can't snap our 
fingers or pass a bill and expect the problems to be solved instantly. 
We were told that last night by Chairman Bernanke and Secretary 
Paulson. This whole situation is not going to be easy. It is going to 
take bipartisan cooperation. I know for certain we are not going to fix 
our economy with a candidate who only yesterday woke up and realized 
there is a problem.
  Last month, 606,000 jobs were lost. I don't know how many will be 
lost this month. I know Hewlett-Packard gave it a good start by laying 
off 25,000 people yesterday. I don't know how many people lost their 
jobs with Lehman Brothers. I don't know how many people are going to 
lose their jobs with AIG.
  I would like for once this administration to come to me with a 
problem that they would like to help us work on to help the middle 
class. They come to us all the time to bail out that big company or 
that big company or that big company or this big conglomerate. But 
where are they for emergency meetings to help people who can't afford 
gas or health insurance or can't afford to keep their kids in college?
  We are paying record prices for gas, groceries, health care. That 
didn't happen yesterday. Millions of families are losing their homes to 
foreclosure or seeing their home equity disappear. That didn't happen 
yesterday.
  Monday's McCain said our economy is strong. Tuesday's McCain said our 
economy is broken. Wednesday's McCain said it is because of lack of 
regulation. Try to figure that out. This is the straight talk express 
which is broken and in bad shape, and he can't find passengers anymore.
  Perhaps today's McCain will explain how a candidate who spent 30 
years in Washington siding with Wall Street over Main Street, who 
changed his view on the economy 180 degrees in 24 hours--I think he is 
running into himself--is prepared to lead us on the road to economic 
recovery? I don't think he is.
  The extraordinary economic challenges we now face demand leadership 
and a new approach. The Senate will continue to listen intently to any 
proposal the administration offers, but we know the real change we need 
will come only when we have a President who will act as a guardian for 
the American people--not only their physical protection but their 
fiscal protection--rather than as a guarantor for the titans of Wall 
Street.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. CARDIN. Mr. President, I thank the majority leader for his 
comments. I agree completely with him that the circumstances have 
reached a point that we need to change direction, and we need 
leadership that will move us from the policies of the past to deal with 
the economic problems that we currently confront.
  Mr. President, I ask unanimous consent I can proceed as in morning 
business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CARDIN. Mr. President, the problems we have been talking about on 
Main Street America have reached Wall Street. I have taken the 
opportunity to speak on the floor on several occasions about the fact 
that the problems homeowners were facing in losing their homes in 
foreclosure were not just the problems of those particular homeowners, 
that it affects each and every one of us, that it was a housing crisis 
in America that would affect our entire economy. I talked about the 
fact that we have an obligation to try to do something to help.
  Foreclosure rates are now at historically high levels. In August of 
this year, there were over 300,000 foreclosures in America. In my own 
State of Maryland, we have had over 3,000 foreclosures each and every 
month. Maryland is normally a quiet State. Homeowners are wondering 
whether they are going to be able to hold on to their homes. Homeowners 
have suffered from a significant reduction in property values. All 
homeowners have suffered through this. When there is a foreclosure in a 
neighborhood, it affects every house in that community.
  The real estate industry is suffering through declining home sales. 
We know the numbers are dramatically lower. We know what that means as 
far as the economy is concerned. Housing starts are at their 17-year 
low.
  We know the impact these economic conditions are having on middle-
income families. Their wages have been stagnant--in fact, in real 
terms, have fallen--and yet their needs have increased; the high cost 
of energy, the high cost of health care, the cost of trying to afford a 
college education for their children, even affording their

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food budget. So we know middle-income families are hurting. We know 
Main Street is hurting.
  But now we see that these problems have gone to Wall Street. We 
learned a few months ago about Bear Stearns and that the Government had 
to come to the rescue of Bear Stearns in order to make sure the jitters 
on Wall Street would be contained. That was followed by the Government 
coming in and standing behind Freddie Mac and Fannie Mae, putting tens 
of billions of dollars of U.S. Government potential expenditures at 
risk. This past week, we saw that Lehman Brothers, an entity that had 
survived the stock market crash of 1929, went bankrupt. Merrill Lynch 
was sold at a bargain-basement price. AIG now has Government 
involvement. This past Monday, the stock market fell by over 500 
points--the Dow Jones average--which is the largest single drop since 
the terrorist attacks of September 2001. The taxpayers are being asked 
to stand behind these financial institutions. Individuals who depended 
upon their investments for retirement or for savings have seen a large 
part of that evaporate.
  The administration says the economy is basically sound. John McCain 
says the fundamentals of our economy are strong. Well, it is the 
economic policies of this administration that have made it much more 
vulnerable. It was the former Secretary of HUD, Alphonso Jackson, who 
said, ``Let's take a hands-off approach.'' The lack of Federal 
regulation and the lack of this administration's oversight of the 
financial institutions in our country have certainly led to where we 
are today.
  Our economy is much more vulnerable because of the economic policies 
of this administration. Let me give you a few examples.
  We have seen that during the past 8 years this administration has 
taken an economy with large budget surpluses to an economy with large 
budget deficits. This administration took a national debt that was a 
little over $5 trillion and we are now approaching $10 trillion. They 
took a surplus of a couple of hundred billion dollars a year and turned 
it into a deficit of over $400 billion a year. They have grown the 
trade deficit to over $700 billion a year, costing us jobs here in 
America. They have had a policy that yielded to the oil companies this 
oil dependency where we are not energy independent, so gasoline prices 
approach $4 a gallon. The health care system has seen 6 million more 
Americans lose their health insurance and become uninsured as a result 
of the administration's policies. And the unemployment rate that was a 
little over 4 percent has grown to over 6 percent.
  Now, Congress has taken some steps in order to try to deal with this. 
Quite frankly, we could have taken those steps a little faster if it 
were not for the Republican filibusters. But we need to do a lot more. 
We have taken steps to try to help families save their homes. Yes, I 
think we should be doing more. I was listening to the assistant 
majority leader talking about ways we could do that through changes in 
the bankruptcy laws. I think we need to do that. There are things we 
can do to help homeowners save their homes.
  We can certainly do more to help families deal with the consequences 
of this economy, whether it is the high cost of energy and air-
conditioning their homes or, in the winter, heating their homes or 
whether there are other areas we can help those who are suffering 
through this economy.
  I hope our colleagues will not filibuster those opportunities so we 
can help those who have lost their jobs. I think we have a 
responsibility. That is what Government should be doing. The economy is 
not producing the jobs they need. They cannot find jobs through no 
fault of their own; it is the economic problems. That is where 
Government can help.
  We could certainly have the right regulatory and oversight system to 
deal with what is happening with our financial institutions.
  But we need to get back to basics. We need to get back to fiscal 
responsibility. You cannot cut taxes, go to war, and not pay for the 
war or pay for the tax cuts and get these huge deficits and expect our 
economy to be strong. Fiscal responsibility starts with balancing the 
budget, by recognizing that tax cuts have to be paid for and this war 
spending has to be paid for. Quite frankly, I believe the right course 
is to get our troops out of Iraq and save those dollars.
  We have to help deal with a trade policy, a trade policy that will 
give American workers a level playing field so they can compete. They 
can compete with any country in the world, with their workforce, if it 
is a level playing field. But we need an administration that is going 
to fight for environmental and labor standards so that we have that 
level playing field and that will eliminate the tax breaks we give in 
our own code for companies that take their jobs overseas. That makes no 
sense at all. We need to fight for those changes.
  We need an energy policy that will make this country truly 
independent. We need to do that not just for our economy--and we know 
the cost of energy and what has happened because of countries halfway 
around the world changing their production, and it affects the price 
here in America. It affects our economy. But we have to do it for our 
own security so we do not have to go to war because we are in danger of 
losing oil. We have to do it for our environment because global climate 
change is real. We can accomplish all three of those goals by energy 
independence and help our economy.
  But we are not going to achieve it through drilling. I know there are 
a lot of people here who want to drill. We have 3 percent of the 
world's reserves; we use 25 percent of the world's oil. You are not 
going to get energy independence through drilling. Yes, we support 
drilling where it can be done in a sensible way because we need the 
oil, certainly in the short term, but we need to develop alternative 
and renewable energy sources. That makes the most sense for this 
country. That is what we have to do. We have to use less energy.
  We can become energy independent if we set our minds to do it. I hope 
we will take this as the last wake-up call and at least enact policies 
that will truly make us energy independent. We are going to have a 
chance to do that later this week--at least move in that direction--and 
I hope my colleagues will join me in supporting that legislative 
effort.
  We have to take on the health care system. It is too costly in 
America. We spend too much money on health care. We do not have the 
results to indicate that. It is a national disgrace that we have 47 
million without health insurance in America. And each of us is paying 
for it. We are paying for it through higher taxes and through higher 
premium costs. It is time that every American has access to affordable, 
quality health care, and that means we have to deal with the 47 million 
who are uninsured. They need to have insurance.
  We need to deal with preventative health care. It saves a lot of 
money to make sure people are able to get the test and lab work 
necessary to have early intervention into diseases.
  It makes sense for us to take on the pharmaceutical manufacturers. 
Why are we paying three times what the consumers of the industrialized 
world are paying for the same medicines that are manufactured here? Our 
taxpayers are paying for that. And those of us who pay our bills are 
also paying more for pharmaceuticals than we should.
  In short, we have to get back to basics. We have to get back to 
basics. We need to change the economic policies of this administration, 
get back to fiscal responsibility, get back to energy independence, and 
get back to health care reform.
  Let's do the things that will make this Nation competitive. And if we 
do, our economy will not be as vulnerable as it is today. That is why 
what started as a mortgage problem grew into a housing crisis, grew 
into an economic problem for working families, and now it is affecting 
Wall Street. It does not make any difference whether you are an 
employee or employer, company or worker, you are being hurt badly by 
the economic policies of this administration.

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  It is time for us to work together, Democrats and Republicans. This 
is not a partisan issue. It should not be a partisan issue. Energy 
independence should not be a partisan issue. Health care reform should 
not be a partisan issue. Balancing the budget should not be a partisan 
issue. So let's work together, Democrats and Republicans. Let's help 
those who are looking to their Government in this time of need to be 
there to help them. Let's do the right thing for the people who need 
our help. But then let's rebuild our economy so we are never as 
vulnerable as we are today, so that we have the economic basis to be 
able to deal with the normal cycles in the economy without so many 
families losing their homes and so many families being wiped out on 
their savings. We can do this if we work together. I urge my colleagues 
to do this.

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