[Congressional Record (Bound Edition), Volume 154 (2008), Part 14]
[Senate]
[Pages 19656-19665]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE ECONOMY

  Mrs. McCASKILL. Mr. President, I would like to talk about what is 
going on in our economy right now. I think it is important that we 
point out a couple of things at the outset.
  First, I had the opportunity yesterday afternoon to spend some time 
with some great community bankers from my State. They said something to 
me that really resonated, and that is: I don't think we have done 
enough to tell America the difference between deposit banks and 
investment banks. There are a whole lot of folks I represent right now 
who are nervous. My sister caught her mother-in-law with cash in her 
pillowcase this week.
  The reason they are nervous is, frankly, a lot of them don't 
understand that the problems caused here were not because of deposit 
banks. Deposit banks are highly regulated. Deposit banks have both 
State government and Federal Government looking over their shoulders 
every single day. Deposit banks are fine in the United States of 
America--partly because of appropriate regulation and oversight by 
State and Federal Governments. And they are insured. Every account in 
America that is in a deposit bank is insured by the Federal Government 
for up to $100,000.
  In fairness to all those great community banks and the banks in my 
State that have used sound business practices, that have not let greed 
be their watchword, that have served their communities well, let me 
reassure all the people who bank at those great banks that they can 
take a sigh of relief today because the problem we have in our economy 
is not with deposit banks.
  Let's step back and see what has happened. There are three things 
that have happened. No. 1 was massive deregulation of exotic financial 
instruments in investment banks and insurance companies. No. 2, there 
was a huge amount of greed. And, No. 3, no one was watching out for the 
taxpayers.
  I heard my colleague from Georgia talk about short selling and naked 
short selling and saying we need to tell them to enforce the law.
  Think about that for a minute. We need to tell somebody to enforce 
the law as it relates to trading? I heard just an hour ago that today 
the SEC is going to enforce naked short selling rules. Naked short 
selling--it would take longer to explain than I have this morning, but 
suffice it to say, it is wrong and bad because when you are hedging, 
when you are long selling and short selling, you need to take delivery. 
That is how this works. There are rules against naked short selling, 
but they were not enforced.
  They are enforcing it today. Why wasn't it enforced last week? Why 
weren't the rules enforced the week before? Why weren't the rules 
enforced last year? They didn't want to. It is pretty simple. Nobody 
wanted to enforce the rules. Why not? Because the titans of Wall Street 
were in charge. The titans of Wall Street have had their way with this 
White House.
  Facts are stubborn. If the law is on the books and this 
administration is not enforcing it, they need to explain to the 
American public why the taxpayers are now on the hook for hundreds of 
billions of dollars because these guys didn't think it was important to 
enforce the rules against their friends.
  Credit default swaps is another exotic financial instrument that came 
in vogue after the massive deregulation of this administration. It was 
made possible by the deregulators.
  Here is the thing that is killing me--it is just killing me. All of 
the folks who have been screaming: Deregulation, get government off our 
backs, evil government off our backs, big bad government off our backs, 
deregulate, deregulate, deregulate--in the last 24 hours there has 
been--do you remember the transformer toys that went

[[Page 19657]]

from an animal to a massive machine? We have transformers around here. 
These massive deregulation advocates all of a sudden say: We have to 
enforce rules on Wall Street. We have to regulate.
  Come on. Do you think we are dumb? You can't transform overnight from 
a big bad deregulator to I am now the cop on the beat; I'll take care 
of Wall Street. It is not honest. Be principled. If you are a 
deregulator and you want to live with these consequences, you want to 
say to the American people: Hey, when we deregulate, this is the risk. 
This is the risk we are taking with your money.
  They are going after the status quo. Many of my friends on the other 
side of the aisle, they are fighting the status quo. Guess what. They 
created it. This was their plan. It didn't work. It didn't grow our 
economy. It didn't create our jobs. American families, for the first 
time in our history, have gone down in terms of their average income. 
For the first time in our history America is not growing. Our 
prosperity is not growing.
  Senator Phil Gramm marshaled through the bill that allowed investment 
banks and insurance companies to run wild. I have Missouri families who 
have lost jobs. I have a lot of autoworkers who are losing their jobs 
in Missouri. One of the things that is hard--one of Senator McCain's 
economic advisers, Senator Gramm, did this massive deregulation. We 
have another one who was a CEO of a major corporation who walked away 
from a company with $42 million in her pocket. Because she did well? 
Because she got that company to the stratosphere? No. She was fired. 
The board of directors fired her and then gave her a $42 million 
payday.
  I have to tell you, in Missouri that doesn't compute. It just doesn't 
compute. When you lose your job because you haven't done a good job, 
you should not get paid for it. I know I am offended at the notion that 
any of this taxpayer money is going to go to multimillion-dollar 
payouts to anybody who ran any of these companies. It is one of the 
things we have to pay very close attention to because now that taxpayer 
money is on the line, we have to make sure it is spent appropriately.
  CEO salaries are out of control in this country, and it is not a 
matter of being competitive. It is not that we have to pay our CEOs so 
much more because everybody else is. Right now in America a CEO is 
making 40 times the average worker's salary. Do you know what it is in 
Japan, one of our competitors? Ten times. It is only ten times.
  I want to mention Social Security because my colleague from Georgia 
mentioned Social Security. I want everyone to dwell just a minute on 
this notion. At the same time Senator McCain, Senator Gramm, and many 
others were saying deregulate, deregulate, what else were they saying? 
The future of Social Security depends on privatization. Privatization 
of Social Security was our ticket to the promised land for stability in 
the Social Security Program. Think about that today. Think about what 
that means today, yesterday, Monday. Think about the consequences. We 
need to realize we have to learn from our mistakes. We have to fix what 
is broken and, for gosh sakes, we cannot talk about privatizing Social 
Security on Wall Street right now. I am hopeful this will be a wake-up 
call to all those people who advocate the privatization of Social 
Security.
  They say: Deregulate, get government off our backs, free market, lax 
enforcement, big government, bad government, deregulate, deregulate, 
get government off our backs, big government, bad government--until 
their friends get in trouble. Do we have a free market with oil? No, we 
don't have a free market for oil. We subsidize oil companies. Do we 
have a free market for the pharmaceutical companies? No, Medicare D was 
a huge profit subsidy for drug companies in this country. Do we have a 
free market for Wall Street? No, we are rushing in to save them.
  When their friends get in trouble, who comes to the rescue? Who comes 
to the rescue when trouble arrives at the doorstep? The taxpayers of 
the United States of America, and that, in fact, is the rub.
  What we have to have is reasonable regulation. We have to enforce our 
laws--both our competitive laws and our regulatory laws--and we have to 
make sure now that we watch the taxpayer money and make sure not a dime 
of it goes to a payout to anybody who doesn't deserve it.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Missouri.
  Mr. BOND. Mr. President, I rise today to speak about the American 
economy. I think most of us are talking about it. Most everybody is 
thinking about it. With the financial markets in turmoil, the 
confidence of investors and consumers across my home State of Missouri, 
the Nation, and the globe is being challenged. Most of the media focus 
is on the struggles in Wall Street. My concern is for American 
families, anxious about their security, the security of their savings, 
their retirement, their assets, and their pensions.
  I was disappointed to see that Leader Reid, just a day or so ago, 
said no one knows what to do at the moment. There are steps taken in an 
emergency matter. The fire department in this matter has been the 
Federal Reserve and the Treasury. We will look at and evaluate their 
judgment, but it appears they have at least stemmed the tide at this 
point.
  But there are a lot of things that we ought to be talking about doing 
now. There are changes that need to be made. There are changes that 
need to be made in regulation, there are changes that need to be made 
by legislation, there are changes that need to be made in attitudes.
  If you want to get into the blame game, I assure you there is plenty 
of blame to go around. This concept, the original concept of 
government-sponsored enterprises, well, that is one that certainly got 
off the track. My colleagues on both sides of the aisle sponsored GSEs. 
But they got themselves trapped way out in financial derivative 
speculation and got outside their charter. The regulation was 
inadequate. There are some of us who called for a strong regulator. 
Others who were defending the GSEs said: No, no, no, we like having an 
ineffective regulator. There are a lot of examples of that. But this is 
not the time to point fingers. The American people want solutions 
because these are serious and difficult times for everyone. As I said, 
families are worried about their personal finances and savings.
  American families are already struggling with the housing crisis as 
well as high energy prices, which lead to food and other cost 
increases, as well as health care and education. Those have to be 
foremost in our minds. I understand. I have listened to the people in 
my State. I have heard their concerns.
  These families need to know that the country's leaders take their 
concerns seriously and are working together to make the right response 
to this crisis. We have to instill confidence in the public that our 
actions are also driven by the best interests of taxpayers so they and 
future generations are not saddled with debts driven by unnecessary 
bailouts and that Government has a plan to avert similar future crises. 
To instill confidence, we must show true leadership and, I would hope, 
put aside the politics of blame and partisanship. We have had enough of 
that already. The American people have had too much of that. Enough. 
That ought to be it. Leadership should be about bringing people 
together and coming up with real solutions driven by the best interests 
of our families and country.
  Leadership is needed now more than ever. I call for my colleagues in 
the Senate, the House, the administration, the SEC, the Federal 
Reserve, and others in the public and in the private sector to come 
together to share ideas and discuss them.
  Let me share some of the ideas I laid out in a letter I sent out 
yesterday to Treasury Secretary Henry Paulson, SEC Chairman Chris Cox, 
Federal Reserve Chairman Ben Bernanke, and the House and Senate 
chairmen and ranking members of the Banking Committee, because 
everybody needs to be in it.

[[Page 19658]]

  First, we must all recognize that America's financial system is 
struggling under the weight of greed, laced with regulatory loopholes, 
and compromised by complexity. Only fundamental reform of those 
excesses will prevent abuse from returning. We need reform to provide 
greater oversight, transparency, and accountability so that our 
economy, housing system, and consumers are adequately protected. The 
status quo is clearly unacceptable, and taxpayer-funded bailouts are 
not the answer. It is time that we reform our antiquated regulatory 
system to close loopholes to prevent the same type of problems we are 
currently experiencing, by taking a number of actions to address our 
regulatory system, ensure better market stability, and protect 
consumers.
  Regulation needs to be carefully considered because there are very 
strong arguments that some of the problems today where some of the 
major institutions were put in a trap are the result of the post-Enron 
wave of trying to make everything bad illegal. Mark-to-market 
accounting was one of the things that has been instituted well 
depending upon how you apply it when you are in a meltdown. Right now, 
the value of a house covered by a mortgage may have declined 10 to 20 
percent. But if nobody is buying that mortgage, if there is no market 
today for that mortgage, it might be marked to zero--to zero--when, in 
fact, the real value is probably no less than 75 or 80 percent. That 
puts a hit on the balance sheets, and that has repercussions throughout 
the system. That may be part of the cause. We need to look at that.
  We need to see if excessive regulation in mark to market has put 
businesses at risk that should not be at risk, that should not be 
pushed into bankruptcy. Just as the Sarbanes-Oxley bill, designed to 
curb excesses--which were actually punished under existing law--has 
driven many of our financial institutions offshore, we have to be 
concerned about what the impacts of the regulations are. But I firmly 
believe that corporations must be held accountable for their bad 
decisions.
  Similarly, we must find a way to prevent the use of golden parachutes 
to reward executives for their failed leadership. I think we were all 
outraged to hear the golden parachutes that were going to be given to 
the leaders of the GSEs who had been responsible for their institutions 
being wiped out essentially and put into conservatorship. I do not want 
a single taxpayer dollar going to pay them bonuses. If a baseball 
manager does a bad job, he gets fired. When we have a bad job being 
done by a financial institution head, the taxpayers sure ought not be 
called on to give that executive millions of dollars in a golden 
parachute.
  But we also must find a way to restore personal responsibility in 
society. Responsible investors have an obligation not to enter into 
investments they do not understand. Responsible private citizens have 
an obligation not to take on debt they cannot afford.
  Mortgage brokers should no longer receive special treatment allowing 
them to escape regulation and licensing requirements standard for 
brokers of other financial products. The Treasury's Regulatory 
Blueprint issued last March contains many positive recommendations, 
such as the creation of a new Federal commission, the Mortgage 
Origination Commission, which I support. I plan to introduce 
legislation to establish the Mortgage Origination Commission.
  The Federal Government must step up its efforts in financial literacy 
and education, and pre- and post-purchase housing counseling. Most 
borrowers made responsible decisions in selecting appropriate financing 
vehicles for purchasing their homes and other major assets. 
Unfortunately, a large number of borrowers either knowingly or 
unknowingly agreed to loans that were detrimental to their families and 
their credit.
  Mr. President, I stand ready to work with my colleagues here in the 
Senate on working on real solutions so that our Nation has confidence 
that we are here for them.
  We have talked about the American dream. There are some who, in the 
name of the American dream, have pushed home ownership on people who 
could not afford it. Clearly, home ownership is part of the American 
dream, and in assisting families and individuals, we should do all we 
can to achieve that. I have worked for that as lead appropriator on 
housing on this side of the aisle for many years.
  However, we have seen that American dream become the American 
nightmare when people have been given too-good-to-be-true offers for 
mortgages and asked to take on mortgages that consume all of their 
available income.
  Well, I will tell you something, having a little experience in owning 
homes. Along with home ownership comes some potential financial 
responsibilities. A couple of weeks ago, we had to have our basement 
pumped out. That costs a lot of money. In the winter, I have had 
furnaces go down, or if we have a family emergency, that may make the 
mortgage payments unaffordable. We must ensure that, to the greatest 
extent possible, people understand that the benefits of home ownership 
are balanced against the risks and the costs to the homeowner, the 
neighbors, the communities, and even the financial marketplaces. Home 
ownership must be promoted, not on the basis of getting the number of 
homeowners up to an arbitrary level but in a responsible manner 
focusing on the best interests of families and not on investors or 
others pushing mortgages.
  You can live in rental housing until you have the funds to buy a 
house. I have lived in rental housing. Many people live in rental 
housing. Before you decide to buy a home, if you are not financially 
well experienced, there are a lot of good counseling concerns around 
that can help you determine if you can buy a home and help you 
determine how much you can afford to pay and what kind of mortgage you 
can afford to take on.
  I worked with Senator Dodd last year to get $180 million for 
counseling for homeowners facing foreclosure. Well, that is working, 
and we are seeing a tremendous need for that counseling. I have visited 
with homeowners being counseled by housing counselors, with housing 
advocates, with community leaders, local officials who are worried 
about their communities going down, and the one thing every one of 
those people say is: We need counseling not just at the time of 
possible foreclosure but before they purchase the house so they do not 
get in the crack of foreclosure.
  Well, I think we have to strengthen the oversight, the regulatory 
oversight of the housing finance market. The creation of a new 
regulator with more expansive powers to oversee the two mortgage 
government-sponsored enterprises, Fannie Mae and Freddie Mac, if they 
continue to exist, was a long overdue and necessary step.
  While the importance of making this legislative change cannot be 
understated, I emphasize the critical need to ensure that the new 
regulator not repeat the same mistakes made by its predecessor. That 
regulator did not examine, did not look at the practices, did not call 
attention to the practices that the GSEs were engaged in, which may 
have provided some short-term profits to their shareholders and 
certainly healthy returns for their executives, but they failed to 
identity and said that these were sound operations.
  Mr. President, I ask unanimous consent to have the letter I referred 
to earlier printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                               September 17, 2008.
     Hon. Henry Paulson, Jr.,
     Secretary,
     Department of the Treasury.
     Hon. Ben Bernanke,
      Chairman, Board of Governors,
      The Federal Reserve.
     Hon. Chris Cox,
     Chairman,
     Securities and Exchange Commission.
       Dear Secretary Paulson, Chairman Bernanke, and Chairman 
     Cox: America's financial system is groaning under the weight 
     of greed, laced with regulatory loopholes, and compromised by 
     complexity. Only fundamental reform of these excesses will 
     prevent abuse from occurring again. Thank you all for your 
     leadership in these uncertain times.

[[Page 19659]]

     As a long-time participant in housing policy and oversight 
     issues, I offer my assistance in the hard work of reform that 
     is too often left undone after the crisis recedes.
       This week's turmoil in the financial market is the latest 
     in a series of events that has shaken the confidence of 
     investors and consumers throughout the nation and the world. 
     While the media focuses on the struggles of Wall Street, my 
     concern is for American families anxious about the security 
     of their savings, retirement, assets, and pensions. These 
     American families--already struggling with a housing crisis 
     and high gas, food, health care and education costs--must be 
     foremost in our minds as we address the credit crisis. Our 
     actions must be driven by the best interests of the taxpayers 
     so that they and future generations are not saddled with 
     debts driven by unnecessary bailouts. The public must know 
     their government has a plan to avert similar future crises.
       Any reform must provide greater oversight, transparency, 
     and accountability so that our economy, housing system, and 
     consumers are adequately protected. The status quo is 
     unacceptable. Taxpayer-funded bailouts are not the answer. 
     Loopholes in our antiquated regulatory system must be closed 
     to prevent the same type of problems that we are currently 
     experiencing.


                 Corporate and Personal Responsibility

       Excessive greed and abuse call for greater accountability 
     at all levels of government and private life. We must end the 
     troubling cycle of rewarding corporate failure with taxpayer-
     funded bailouts. Corporations must be held accountable for 
     their bad decisions. Executives should not be rewarded with 
     golden parachutes for their failed leadership. We must also 
     restore a sense of personal responsibility in society. 
     Investors have an obligation not to enter into investments 
     they do not understand. Private citizens have an obligation 
     not to take on debt they cannot afford.


                      Stronger Regulator Oversight

       We must strengthen regulatory oversight of the housing 
     finance market. The creation of a new regulator with more 
     expansive powers to oversee the two mortgage government-
     sponsored enterprises--Fannie Mae and Freddie Mac--was a long 
     overdue and necessary step. We must also ensure that the new 
     regulator--the Federal Housing Finance Agency (FHFA)--not 
     repeat the same mistakes made by its predecessor--the Office 
     of Federal Housing Enterprise Oversight (OFHEO). It is 
     critical that FHFA have adequately-skilled staff and strong, 
     competent leadership. OFHEO leadership delayed issuing risk-
     based capital standards and consistently stated that the 
     enterprises' financial condition was healthy, and adequately 
     capitalized to continue meeting America's housing needs. They 
     were wrong on all counts.


                 Oversight of All Mortgage Originators

       In addition, I support Treasury Secretary Paulson's efforts 
     to address gaps in mortgage origination oversight. The 
     mortgage brokers who originated many of the subprime and Alt-
     A loans that are major sources of the housing crisis were not 
     subject to adequate federal oversight. Mortgage brokers 
     should no longer receive special treatment allowing them to 
     escape the regulation and licensing requirements standard for 
     brokers of other financial products. The Treasury's 
     Regulatory Blueprint issued last March contains many positive 
     recommendations, such as the creation of a new federal 
     commission (the Mortgage Origination Commission). I will 
     introduce legislation shortly to establish the Mortgage 
     Origination Commission and ask for your support in moving 
     this legislation through the Congress.


                Eliminating Abusive Short-Sale Practices

       Excessive speculation that asset prices will fall, or 
     ``short-selling,'' is artificially destroying the value of 
     investments and companies. Actions to consider curtailing 
     short-selling abuse include reinstating the ``uptick'' rule 
     and protections on short sales. The uptick rule was 
     established back in 1929 to provide stability to the 
     marketplace. The SEC eliminated the uptick rule last year. 
     Some experts believe that the elimination of this rule has 
     contributed to the volatility in the stock market and the 
     record levels of shorting. Accordingly, the SEC should 
     reexamine its decision and reinstate this important rule. The 
     SEC is now in the process of finalizing two rules to 
     strengthen protections against short-selling. They should 
     finalize these rules as quickly as possible and strongly 
     enforce regulation of ``naked short sellers.'' Other experts 
     believe that mark-to-market accounting regulations need to be 
     reviewed to see if they have been inappropriately applied. I 
     urge you to review mark-to-market and to recommend any needed 
     changes. We must also increase oversight of hedge funds to 
     assure transparency, accountability, and avoidance of abusive 
     practices.


              Consumer Confidence and Financial Education

       The Federal government must step up its efforts in 
     financial literacy and education, and pre- and post-purchase 
     housing counseling. Traditionally, borrowers have made 
     responsible decisions in selecting appropriate financing 
     vehicles for purchasing their homes and other major assets. 
     Unfortunately, in recent years a large number of borrowers 
     either knowingly or unknowingly agreed to loans that were 
     detrimental to their families and their credit. To address 
     this problem, I recommend that you aggressively promote 
     financial literacy and homeownership counseling to consumers 
     and promote greater transparency in the loan process by 
     reforming the Real Estate Settlement Procedures Act (RESPA).
       Confidence in our financial markets is being severely 
     challenged during these difficult times. As the Federal 
     government's financial leaders, your commitment to address 
     the regulatory structure and educate consumers will be 
     critical not only to guide our nation out of this economic 
     downturn, but to mitigate future crises. While regulatory 
     reform and additional resources for counseling and financial 
     literacy are needed, we should also rethink our policy 
     emphasis on homeownership. Homeownership is the linchpin of 
     the American Dream. Assisting families and individuals 
     achieve that dream should continue. However, we must ensure 
     that the dream does not become a nightmare. Housing policy 
     must be re-examined so that the benefits of homeownership are 
     appropriately balanced against its risks and costs to 
     homeowners, neighbors, communities, and the financial 
     markets. Homeownership must be promoted not on the basis of 
     increasing the homeownership rate to an arbitrary level, but 
     in a responsible manner that focuses on the best interests of 
     the individual and family, and not on investors.
       The leadership you have shown during this financial crisis 
     is commendable. Now we must work together to bring about 
     further reform to financial and housing markets. Thank you in 
     advance for considering my suggestions. I look forward to 
     working with each of you to restore Americans' trust in their 
     financial institutions and in their government.
           Sincerely,
                                              Christopher S. Bond,
                                                     U.S. Senator.

  The PRESIDING OFFICER (Mr. Brown.) The Senator from Rhode Island is 
recognized.
  Mr. WHITEHOUSE. Mr. President, as we speak, people are losing their 
jobs, losing their homes, and often losing the hope that their 
situation will improve anytime soon. According to many, the worst may 
yet be ahead of us. For the first time in generations, we Americans can 
no longer promise our children they will be better off than we are. 
That prospect strikes at the very heart of the American dream.
  In less than 2 months, Americans will elect a new President who will 
inherit an economy indelibly marked by the negligent and incompetent 
decisionmaking of the Bush administration. No matter what one 
Presidential candidate may think, the fundamentals of our economy are 
far from strong. Our economy is off the rails. I believe it is 
important to take a few minutes to consider how it got dragged off the 
rails and, more importantly, what must now be done to restore 
Americans' faith in our economy and put our country back on more solid 
fiscal ground.
  President Bush's successor, whoever he may be, will confront four 
serious problems: an out-of-control financial market, a staggering 
Federal debt, a looming crisis in health care costs, and an increase in 
Social Security obligations.
  For the past 8 years, the Bush administration has preached over the 
financial markets a gospel of uncontrolled deregulation. Simply leave 
the banks and the financiers and the lenders to their own devices, they 
said, and all will be well.
  Well, all is not well. Markets are places where people come to make 
money; they do not come for altruistic motives. And some are clever 
enough when they come to those markets to try to rig or game the market 
in their favor, to gain monopoly power, to hide information, to cheat, 
to create special advantage--in short, to find a way to gull the 
suckers. Markets need to be defended against that age-old risk. Markets 
have to operate honestly, transparently, and reliably. That is where 
regulation comes in. That is how markets are defended against crooks 
and schemers. That is why we have an FTC, an SEC, a CFTC, a FERC, to 
keep markets honest. Special interests constantly seek special 
advantages, and it is the regulators' job to push back. In that 
constant struggle of the special interests against the regulators, the 
Bush administration always took the side of the special interests. They 
have systematically undercut the regulators in their efforts to keep 
markets safe. And now here we are.

[[Page 19660]]

  Senator McCain has been against the regulators, even back to the 
savings and loan scandals of the 1980s. The schemers, the manipulators, 
the Enrons, the subprime mortgage packagers, the oil market 
speculators, the credit default swap artists--they all found a friend 
in the Bush administration. They all found an ally in the Bush-McCain 
policies of deregulation. And now here we are.
  Under an administration that cared more about protecting big 
investors than protecting consumers, one might expect that at least the 
stock market would have thrived. But after 225 percent growth during 
President Clinton's 8 years in office, the stock market now hovers just 
about where it stood in 2001, when President Bush took office. Instead 
of growing by leaps and bounds, as we in America have come to expect, 
under the Bush administration, our economy stood still. I ask my 
colleagues: Would investors prefer 225 percent growth and then paying a 
responsible capital gains tax, or would they prefer having big fights 
about what the capital gains tax rate should be while nobody makes any 
money? There is a lesson here. Bad economic policy is not cured by 
mindless tax cuts. Anybody in their right mind would rather be here 
than here, if they are in the market.
  The month George Bush became President, the Congressional Budget 
Office, the nonpartisan accounting arm of Congress, projected we would 
see surpluses straight through the decade. These budget surpluses, the 
product of President Clinton's responsible governing, were projected to 
be enough to completely wipe out our national debt by 2009--to 
completely wipe out the national debt by 2009. Instead of maintaining 
the surpluses and paying down the national debt, President Bush chose 
tax cuts for the wealthiest Americans, a war he wouldn't pay for, and 
bad economic policies to amass a mountain of debt that he will leave to 
the next generation.
  This chart shows the difference between the budget left by President 
Clinton and the one President Bush created. The difference between the 
two lines, this red area, is the measure of the cost of the Bush 
Presidency. The difference between the surpluses left by President 
Clinton and the deficits run by President Bush and his Republican 
enablers in Congress is a staggering $7.7 trillion. Perhaps the more 
tangible number is $260 billion, the interest we will have to pay next 
year on this Bush debt, $260 billion in interest, much of it to foreign 
nations such as China and Saudi Arabia that do not have our best 
interests at heart. If we could have used that $260 billion that we now 
need to pay interest on the Bush debt for other national priorities, 
here is what we do could have done: fixed almost every unsound bridge, 
doubled enrollment in Head Start to help kids get ready for school, 
doubled all Pell grants to help kids get access to college, and 
provided every American with health insurance--all of it. That is how 
big $260 billion is, and that is what we are blowing on the Bush debt.
  The nonpartisan Congressional Budget Office recently estimated that 
the national debt will go up by another $2.5 trillion over the next 
decade. The next administration is going to have to figure out how to 
deal with that mountain of debt. I think we need a Bush debt repayment 
authority to study the possibility of bringing the Bush debt off 
budget, to handle it responsibly, to remind the American public what 
this Presidency has cost them, to pay the Bush debt down responsibly 
over time. But we must do something.
  In addition, as the baby boom generation reaches retirement, we also 
face a tidal wave of health care costs that threatens to drown the 
Treasury and force unthinkable choices about health care for the 
citizenry. According to an analysis conducted by the nonpartisan 
Government Accountability Office, we have $34 trillion in unfunded 
future Medicare liabilities alone. That is unsustainable. And the 
longer we wait to reform the system, the worse it will become. 
President Bush has wasted the better part of a decade standing idly by 
as this problem exploded, as health care costs grew and opportunities 
for reform came and went. Time is not on our side. The need is 
pressing, and we have spent 8 years making no progress at all.
  I have said over and over on many occasions in this Chamber that our 
health care system needs fundamental change. I will not pursue that 
point at this juncture, but let me say, our health care system is 
itself broken. It delivers unsatisfactory results at vast expense, and 
we need to fix it.
  As we prepare for a new administration, we need to prepare for the 
wave of health care costs coming at us. Systemic reforms--a health IT 
infrastructure, payment reform, major quality improvements--must be at 
the heart of that effort.
  Finally, the next administration must grapple with the challenges of 
Social Security. As with all these issues, the choice of President will 
make all the difference. Senator Obama will ensure that Social Security 
remains a strong bedrock of retirement security for generations to 
come. But Senator John McCain supports privatizing Social Security, 
putting it in the stock market. This is an important point. Senator 
McCain and his Republican allies prefer to invest seniors' Social 
Security funds in the stock market that just dropped by 500 points the 
day before yesterday and another 450 points yesterday, the very same 
stock market that stagnated through the entire Bush Presidency while 
costs and prices rose by double digits. That is not a solution. That is 
more of the same problems.
  As for the blame game, which I have heard a bit about on the floor 
this morning, it is bad enough that bad economic policy caused this 
preventable disaster. It is worse if we should fail to learn its 
lessons. I can understand why the proponents of the economic theories 
that brought us here don't want that talked about, but it would be 
wrong and irresponsible not to learn from this disaster. It was 
preventable. We made mistakes. It was economic folly that brought us 
here and regulatory irresponsibility. To now allow that entire lesson 
to pass would be an added shame for our country.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Michigan.
  Ms. STABENOW. Mr. President, I thank my friend from New Hampshire, 
Senator Judd Gregg, for allowing me to speak, rather than going back 
and forth. I ask unanimous consent that he be recognized following my 
remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. STABENOW. Mr. President, I rise to discuss the recent collapse in 
the financial markets and the Republican economic policies that have 
brought us to this point.
  On Monday, Lehman Brothers filed for the largest bankruptcy in 
American history. This collapse will hurt hardworking Americans' 
ability to access credit and could deteriorate their pension plans. For 
example, the city of Detroit's general retirement system that had 
invested in the bank could lose up to $25 million.
  Can you imagine what would have happened if Social Security had been 
privatized?
  This failure occurs as Bank of America announced that it was buying 
Merrill Lynch and the Federal Reserve announced it was taking over the 
world's largest insurer, AIG, for the staggering cost of $85 billion. 
Washington Mutual is still struggling to survive their investments tied 
to the mortgage market.
  As a result of these events, the Dow Jones dropped more than 500 
points on Monday--the biggest drop since September 11, and Wednesday it 
dropped almost 450 points.
  These announcements come as middle-class families face the highest 
unemployment rate in 5 years, record home foreclosures, and 
skyrocketing gas and grocery prices.
  Despite these conditions, our colleague, Senator McCain responded 
that ``the fundamentals of our economy are strong.'' I would like him 
to tell that to the 84,000 Americans who lost their jobs, or the 91,000 
families who lost their homes last month, or the 605,000 Americans who 
have lost their job since January.
  And now, Senator McCain's solution is to create a commission to study 
the problem. Middle-class families don't

[[Page 19661]]

need a study to tell them that we're in an economic crisis.
  They see it every day when they try to fill up their gas tanks or put 
food on the table.
  They have known it for the past 8 years, as they have watched jobs 
sent overseas and their pensions disappear.
  Unlike Senator McCain's economic adviser, Phil Gramm, middle-class 
families don't need a study to tell them that this isn't a ``mental 
recession.'' What they need are real economic solutions and not 4 more 
years of the same failed economic policies.
  So one of the question I know Michigan families have is, how did we 
get here? Unfortunately, these failed policies go back for some time.
  One example can be seen under the Republican Congress, when McCain's 
former economic adviser Senator Phil Gramm slipped a provision known as 
the ``Enron loophole'' into the 11,000-page appropriations bill on a 
Friday night before recess.
  This provision allowed financial institutions to trade an unlimited 
amount of energy commodities on dark, over-the-counter markets that are 
beyond the jurisdiction of the Commodities Futures Trading Commission.
  Only now, with Democrats in the majority, are we seeing any 
accountability as we closed the Enron loophole. However, trading on the 
bilateral swaps markets and the electronic trading facilities are still 
conducted on these dark markets with no transparency or regulation.
  The Commodities Futures Trading Commission only has the power to get 
information on these markets on an ad hoc basis so speculative 
investors continue to pour money into the markets without any 
oversight.
  Yet Republicans continue to oppose providing more authority and 
resources to the CFTC.
  Authority that would allow necessary regulation of our commodities 
markets and protection against manipulative behavior that could 
influence the price of food and gas for every American.
  This just reiterates the failed philosophy of President Bush, John 
McCain and Republican economics that believe in less oversight, less 
accountability--more greed--at the expense of American families.
  Nowhere is this seen clearer than what is happening in the housing 
market-- the root of our current crisis. The lack of regulation and 
oversight by the Bush administration allowed for predatory lending to 
flourish.
  In 1994, Congress gave the Federal Reserve the authority to prohibit 
these unfair and deceptive lending practices. The Fed waited 14 years 
before implementing regulations.
  Senators Schumer, Sarbanes, and Dodd introduced legislation to 
protect homeowners from predatory lending. No Republicans cosponsored 
these bills.
  Then in 2004, despite warnings, the Fed actually promoted 
nontraditional mortgages over fixed-rate mortgages, resulting in the 
skyrocketing use of ARM and subprime mortgages.
  In 2006, regulators finally finalized rules over nontraditional 
mortgage products, but it did not apply to subprime mortgages.
  The Democratic-led Congress held oversight hearings, spoke out time 
and time again, and yet the administration still sat back and did 
nothing.
  In 2007, the Treasury was still downplaying the subprime crisis by 
explaining that it was ``largely contained'' and admitting they ``could 
have done more sooner.''
  The Republican philosophy of no public accountability and unlimited 
greed created markets where these risky mortgages, that they promoted, 
were packaged and sold as complex debt securities without any 
oversight. Then, without any regulation, credit rating agencies were 
allowed to inflate the value of these complex securities and assign 
triple-A ratings despite their inherent risks.
  Greed continued to fuel the vicious cycle until our financial 
industry was completely entangled in these risky securities.
  When homeowners defaulted on their loans, it sent ripple effects 
throughout the entire economy, bringing down the large banks that had 
invested in the mortgage market, such as Bear Stearns and Lehman 
Brothers.
  Time and time again, Democrats have tried to enact changes, but every 
attempt has been blocked by Republicans.
  In 2005, the House of Representatives passed a bill that would have 
created a new regulator to oversee government sponsored enterprises--
providing the authority to set capital requirements and limit portfolio 
size.
  When I was on the Banking Committee, we worked to enact this 
legislation, but we were blocked by the Bush administration.
  This session Democrats introduced legislation to strengthen 
regulation over government sponsored enterprises, to keep families in 
their homes and help communities struggling with foreclosures.
  Republicans opposed this legislation and, while more families lost 
their homes to foreclosures, they continued to block the bill for 
months.
  Only after Fannie and Freddie reached the point of crisis did the 
administration finally lift their opposition, further highlighting the 
inherent problems with the Bush/McCain economic philosophy--it is 
always too little too late.
  Now while Republicans have let the markets ``work it out,'' small 
businesses and families are faced with tightening credit markets, job 
losses, increased foreclosures and a loss of confidence in our economy.
  Each of these examples shows the fundamental failures of the Bush/
McCain economic policies. Policies that are based on greed as a 
national virtue and high profits at any cost. Policies that send 
American jobs overseas while increasing tax breaks for big oil.
  Our economy cannot take another 4 years of this failed policy; 
American families cannot take another 4 years. Out country can do 
better. It is time for a change.
  We are in a very important discussion right now, not only about what 
we need to do together to move our country forward, but it is important 
to talk about how we got here, because how we got here matters. 
Critiquing the philosophy that got us here matters, if we are not going 
to repeat it in the future. When we sum it up, when I look at what I 
call ``Republican economics 101,'' it is more deregulation. We heard it 
again today. I heard it from one of my colleagues today, the problem 
with all of this is that we need more deregulation, more deregulation. 
Lack of accountability, I call it, lack of transparency. More home 
foreclosures have come from Republican economics 101, more jobs lost, 
more tax breaks for the wealthy. That seems to be the answer to 
everything: Lose your job, let's have another tax cut for the wealthy. 
Lose your house, let's have another tax cut for the wealthy. Can't pay 
for gas at the pump? How about another tax cut for the wealthy. 
Financial markets exploding? Let's have another tax cut for the 
wealthy. That seems to be the mantra of the Republican economics 101 
theme. More excessive profits for oil companies which have translated 
into $5 at the pump.
  The bottom line is, we don't want more of the same. That is why it 
does matter how we got here. We do not want more of the same. The 
American people cannot take more of the same. Enough is enough. That is 
certainly what the people in Michigan are saying.
  Let me specifically speak to what has occurred this week. On Monday, 
Lehman Brothers filed for the largest bankruptcy in American history. 
This collapse will hurt the people of Michigan, hard-working Americans' 
ability to access credit, and could very well deteriorate pension 
plans. For example, we heard yesterday the city of Detroit's general 
retirement system that has invested in the bank could lose as much as 
$25 million. I am sure that is only one example. Imagine what would 
have happened if President Bush had succeeded, with John McCain's 
support, in privatizing Social Security. I will never forget what 
happened after Enron, when I had former employees come in to me who had 
lost everything, trusted the company, invested in the company, lost 
everything. They said: Thank God for Social Security. It is the only 
thing I have left.

[[Page 19662]]

  Imagine if the Republican philosophy of privatizing had happened. One 
of the things I am most proud about in working with our Democratic 
leadership and our majority is we were totally together in blocking the 
President from proceeding. It was one of the most important 
achievements as a Democratic majority, stopping the President, John 
McCain, and others who wanted to privatize Social Security. We now know 
that the failure of Lehman Brothers occurred as Bank of America 
announced it was buying Merrill Lynch and the Federal Reserve announced 
it was taking over the world's largest insurer, AIG, for the staggering 
cost of $85 billion. Washington Mutual is still struggling to survive 
their investments tied to the mortgage market. As a result, we have all 
seen the Dow Jones drop more than 500 points on Monday, the biggest 
drop since September 11, 2001. Wednesday it dropped almost 450 points.
  Most importantly is how this affects families, how it affects middle-
class Americans who are working hard every day. They are playing by the 
rules. They expect our Government to enforce the rules and enforce 
accountability. They are being hit with the highest unemployment rate 
in 5 years. It went up again yesterday, unbelievably, to now in 
Michigan an 8.9 percent unemployment rate. That doesn't count people 
who have been unemployed so long they are not a part of the system 
anymore, or the people who are working one job, two jobs, three jobs, 
part-time jobs trying to hold it all together, hoping maybe one of them 
will have health insurance, maybe just one of them, for their families.
  We have seen record home foreclosures for families, skyrocketing gas 
and grocery prices. These are the consequences of the reckless policies 
I am most concerned about.
  Despite these conditions, our colleague John McCain responded--and he 
said it more than once; 16, 17 times at least that I know of--the 
fundamentals of the economy are strong. He is now saying that he meant 
the American people, the American worker. I know the American worker is 
strong and productive and hard-working. But we all know that is not 
what was meant by that comment, the fundamentals of the economy are 
strong. He and Herbert Hoover share those comments, the gilded age of 
the 1920s, when the wealthy got wealthier and wealthier and wealthier, 
until the system crashed and a great Democratic leader, Franklin Delano 
Roosevelt, came into office and put the American people first, put 
people back to work and created Social Security and began to rebuild 
the country. We are at one of those times where we need that kind of 
leader to rebuild for the American people and create jobs and put 
people back to work.
  I would like Senator McCain and others who believe the fundamentals 
of the economy are strong to tell that to 84,000 Americans who lost 
their jobs or the 91,000 families who lost their homes last month, or 
605,000 people who lost their jobs since January, 605,000 good-paying 
American jobs and counting since January.
  Now we hear the solution is to create a commission or to study the 
problem. That is what we need, to study the problem. We know what the 
problem is. The problem is, we need to get people back to work. We need 
to stop this failed Republican philosophy that has made the rich 
richer, while picking the pockets of every middle-class American and 
making those in poverty find more and more desperation every day. We 
know what is happening. We don't need an economic study to tell us that 
Phil Gramm, a former colleague of mine, chairman of the Banking 
Committee, was wrong when he said it is a mental recession. We are not 
making this up. We certainly are not a nation of whiners.
  So the question is, how did we get here? Unfortunately, this does 
relate to failed policies. One example was under the Republican 
Congress when Senator McCain's former economic adviser and friend, 
Senator Phil Gramm, slipped a provision called the Enron loophole into 
an 11,000-page appropriations bill on a Friday night before a recess. 
That provision allowed financial institutions to trade an unlimited 
amount of energy commodities in the dark in over-the-counter markets 
that are beyond the jurisdiction of the Commodity Futures Trading 
Commission. Only now, with our Democratic majority, have we begun to 
get accountability back because we have closed that Enron loophole.
  However, trading on the bilateral swaps markets, the complicated 
financial markets, the electronic trading facilities are still being 
conducted in the dark with no transparency, no regulation, no 
accountability for investors, no accountability for the American 
people. The Commodity Futures Trading Commission only has the power to 
get information on these markets on an ad hoc basis. So speculative 
investors continue to pour money into markets without any oversight.
  Yet Republicans continue to oppose more authority and resources to 
the CFTC. We have a bill on the Senate floor right now, a speculation 
bill to stop speculation, that includes providing more authority and 
resources to the CFTC, and it has been filibustered by Republican 
colleagues.
  This just reiterates the failed philosophy of this President, 
President Bush, of John McCain, and Republican economics that believes 
in less oversight, less accountability, and more greed at the expense 
of the American people.
  Mr. President, we have had enough. Nowhere is it seen more clearly 
than in the housing market, which is the root of the crisis. The lack 
of regulation and accountability by the Bush administration has allowed 
predatory lending to flourish. It is important to note that clear back 
to 1994, Congress gave the Federal Reserve the authority to prohibit 
these unfair, deceptive lending practices, and they waited 14 years to 
implement this authority--14 years.
  Mr. President, I know my time has come to a close, so I will not go 
through all of the other things that have happened--the times the 
Democrats have proposed legislation, the warnings we have given, the 
fact we have tried over and over and over again to pass housing 
legislation.
  I was here on the floor of the Senate when a Republican colleague 
talked about the fact that we finally passed housing legislation. But 
do you know what? We took way too long. The bottom line is this: We 
have been trying time and time again to enact changes, to bring 
accountability on behalf of the American people, and we have been 
blocked over and over again. It is important the American people 
understand we can do better than these failed Republican policies. It 
is time for a change.
  Thank you, Mr. President.
  The PRESIDING OFFICER. The Senator's time has expired.
  The senior Senator from New Hampshire is recognized.
  Mr. GREGG. Mr. President, obviously, I rise to express some 
differences of opinion with the prior two speakers, but I want to speak 
more generally on the issue of where we stand relative to the financial 
markets. But if ``doing better'' is to follow the proposals of Senator 
Obama, which have been estimated by a very legitimate estimating source 
to include over $300 billion of new spending annually on new programs 
that are unpaid for, I do not think that is doing better. If ``doing 
better'' is to follow a path where we raise taxes on the American 
people, especially small businesses, I do not think that is doing 
better.
  If ``doing better'' means you approach an issue which is as deep and 
as significant as what we confront today in the financial markets with 
a lot of partisan rhetoric about the failure of the Bush administration 
to make the stock markets function correctly, when this Congress has 
been controlled by the Democratic Party for 2 years and had more than 
ample opportunity to address the restructuring of the regulatory 
entities, and, in fact, proposals were made to restructure Fannie Mae 
and Freddie Mac, which were rejected by Members from the other side of 
the aisle, by legitimate leadership on our side of the aisle on that 
issue, that is not better.
  The Nation today confronts a very significant fiscal issue. The 
finance houses of New York are in disarray, the

[[Page 19663]]

credit markets are locked down, and the American people and the world 
generally are very concerned about their assets and how they are 
protected and whether they are going to be able to continue to be 
liquid and viable.
  It is not constructive for the Senator from Rhode Island to come to 
the floor and start pointing to the Clinton years as showing a huge 
run-up in the stock market and the Bush years as showing a flat stock 
market, and in the process ignoring the Internet bubble of the late 
1990s, which drove the stock market down radically in 2001 and led us 
into a recession. That run-up occurred under the Clinton years and, 
obviously, they benefited from that, and the Bush years, regrettably, 
got socked with a recession.
  That is not constructive. It is not constructive to put charts up 
that claim an economic recovery has not occurred since the Internet 
bubble burst and the 9/11 attacks occurred. In fact, over the last 6 
years, Federal revenues were up until about 5 months ago when we hit 
this significant economic slowdown. Federal revenues had reached 
historic highs. We had seen 3 years of the greatest increase in Federal 
revenues in the history of this country as a result of tax law that 
encouraged entrepreneurship, encouraged people to do things which are 
taxable.
  Job creation was pretty significant too. Over 8.5 million jobs were 
created over that time period. Yes, jobs have been lost, and that is 
not good, in the last few months. But to put that in the context of a 
partisan atmosphere which says this is all the functioning of an 
administration, when Congress controls the purse strings and Congress 
controls a large part of the policy and Congress is controlled by the 
Democratic Party, is inappropriate, in my opinion.
  Furthermore, if you want to look for culprits, the real culprit of 
this economic disorientation we are going through is that credit was 
made too easy for too long and, basically, borrowing became an 
inexpensive event, almost a zero-cost game because of the interest 
rates which the Fed maintained over a long period of time at such a low 
level--the Federal funds rate--and, as a result, these dead instruments 
which were written on real estate were written in a way that basically 
neither looked at the underlying asset or equity value to support that 
debt instrument nor looked at the fact in the outyears--as those 
instruments required reasonable return through interest increases--
whether the borrower could support them. So we have had this huge 
dislocation, this meltdown in the subprime market, which is being 
followed on by other real estate instruments.
  So it is not constructive, and it is certainly a reflection of a lack 
of leadership when the only answer on the other side of the aisle is to 
come forward and start claiming they are pure and this side or the 
President is not, when, in fact, there is more than enough blame to go 
around as to how we got into this situation.
  The Federal Reserve deserves a lot of that. We in the Congress 
deserve a lot of it for not doing our job in oversight. And, obviously, 
the administration deserves a lot of it. But it is not unilateral in 
its placement, to say the least.
  So how do we get out of this? Well, I think, first off, we ought to 
acknowledge that an aggressive effort is being made by the Treasury 
Secretary and by the Chairman of the Fed to try to control the damage. 
When they have seen entities such as Freddie Mac and Fannie Mae or 
entities such as AIG--whose failure would have a systemic effect which 
would roll through the financial markets of the country, destabilizing 
not only those businesses but also banks down the road and, in the end, 
Main Street, and cost Main Street jobs, and cause tremendous disruption 
on Main Street--they have stepped in and stepped in aggressively. I 
respect what they have done, and I have supported what they have done.
  The markets have also, basically, to some degree, reflected the fact 
that at least in the Fannie Mae and Freddie Mac area, this was the 
right action. They still have not digested the AIG issue.
  While we are on the AIG issue, I think it is important to point out 
that we have heard the statement that it is an outrage that $85 billion 
is going to be put in to basically take over this insurance company--
the largest in the country. Well, first off, that money does not come 
from the Federal Treasury. It comes from the Federal Reserve. The only 
way it is going to appear on our books, on the Federal Government's 
books relative to the budget of the United States is if the Federal 
Reserve pays us less in profit than they annually pay us--and they 
annually pay us about $25 billion--because of the cost of that action.
  Secondly, what the Federal Reserve did was not bail out AIG. They 
wiped out, for all intents and purposes, the stockholders. All you need 
to do is look at the primary stockholder in that company, whose net 
worth dropped by $5.8 billion--which is the report I saw yesterday--as 
a result of this action. That is a pretty deep loss: a $5.8 billion 
individual loss. In addition, it is likely the senior debt will lose 
their position, and it will be wiped out. What will happen is that the 
parts of that company are going to be sold off in an orderly way, and 
it is very likely a large part, if not all, of that $85 billion will be 
recovered and the Federal Reserve won't end up with any cost on its 
books and may actually make some money on this action. But in the 
process, more importantly, they will have done an orderly unwinding of 
that company so you do not have a meltdown of that company, which would 
lead to a downstream, catastrophic event for literally hundreds of 
banks in this country--small banks, especially--that have used the AIG 
insurance to basically solidify the capital on their books. If those 
banks fail--and they might well have failed if AIG had gone down in an 
implosion--then Main Street would be affected and jobs would be lost 
and people would be dramatically impacted.
  So this was an effort to pay some money now up front in order to 
avoid big damage down the road. In my opinion, it was an effort that 
had to be taken. But for Members of the other side of the aisle to come 
here and start pounding their chests about how outrageous it is that 
$85 billion is being spent in this manner, either they do not 
understand the issue and understand what happened here or they are 
misrepresenting the issue and in a way that is truly not constructive 
to settling the markets or to getting a resolution that will be 
positive.
  We still have an issue, and it is fairly significant. The issue is 
that the underlying credit in the mortgaged area--mortgage-backed 
securities--is locked up. It is virtually impossible to move these 
securities off the books because nobody knows the value of these 
securities. As a result, the marketplace is not working correctly and 
you cannot move money and you cannot make loans and you cannot get 
economic activity and thus you cannot create jobs. The engine of our 
economy has always been our real estate industry.
  So we as a government have to be thinking about how we should address 
that. It may take some significant creativity. I respect the chairman 
of the Banking Committee in the House who has openly said maybe we 
should take another look at something like the Resolution Trust 
Corporation which we had in the 1990s. This may be the type of vehicle 
we have to take a look at. But to accomplish that, we have to have a 
mature approach. We have to have an approach that is not a juvenile, 
partisan attack coming from the other side on initiatives which might 
constructively resolve this or at least should be debated in an 
atmosphere where there is some sort of seriousness about the debate 
besides hyperbole and political advantage trying to be scored.
  I am willing to acknowledge and openly acknowledge that I respect the 
fact that Congressman Frank has put this concept on the table. It would 
be nice if somebody on the other side of the aisle who had spoken 
today--and I did not hear anybody--had come forward and said they 
respected the fact that the Secretary of the Treasury had been willing 
to take some aggressive action to try to stabilize Fannie Mae

[[Page 19664]]

and Freddie Mac and AIG for the betterment of this country and our 
economy, but all we are hearing is hyperbole, unfortunately. It is time 
we had some adult reflection on this around here. Yes, it is an 
election year.
  Mr. President, I ask unanimous consent for an additional minute.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GREGG. Yes, it is an election year, and we know it is a 
Presidential year. We know everybody is trying to score points. What we 
are dealing with here is so big and so important to every American--
basically, the fiscal solvency of our Main Streets and the fiscal 
solvency of the banks that support Main Street--that we can't allow 
ourselves--or we should not allow ourselves--to devolve into this type 
of hyperbole and partisanship. It would be nice if people around here 
would be willing to sit down and acknowledge that there are thoughtful 
ideas coming at this and there are creative ideas, but they are also 
going to be controversial; and that in the atmosphere of high 
partisanship, which I have heard this morning on this floor, we are not 
going to be able to discuss intelligently thoughtful, creative, and 
bold ideas because they are going to be savaged by petty partisanship.
  We have a job before us as a Congress. Clearly, the Secretary of the 
Treasury is engaged and the Chairman of the Fed is engaged, and I hope 
the Congress will get engaged fairly soon, as well, in a substantive 
and positive way.
  I yield the floor.
  The PRESIDING OFFICER. The junior Senator from Florida is recognized.
  Mr. MARTINEZ. Mr. President, I ask unanimous consent to speak for up 
to 20 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. MARTINEZ. Mr. President, I thank my colleague from New Hampshire. 
His remarks are right on point. I appreciate the tenor of what he is 
saying, and I thank him very much for his mature and sober judgment.
  This is a moment when we should be talking about solutions. This is a 
serious moment in America. We have hit a very serious financial crisis 
in this country. The fact is--well, this morning, I was speaking to a 
group of bankers, a group of business people, and their concern is 
heightened. What they are seeking is for Government to, first of all, 
try to provide a backdrop of assurance to the American people. One of 
the gentlemen I was speaking with was saying his office is getting 
deluged with phone calls from concerned investors who are wondering if 
their lifetime of savings is going to be eroded and go away. So what 
should we do at a moment such as this? Should we heighten the level of 
tension and crisis or should we talk in mature, serious tones about the 
need to come together as Americans first, Republicans and Democrats 
second--as Americans first--to try to find solutions?
  I have seen a lot of finger-pointing. I have heard a lot of blame 
assessing. Much of it I find as logical as blaming President Bush for 
hurricanes, and sometimes I wonder when that will begin to occur.
  Obviously, there have been things that have been done that have not 
been right. Maybe now we recognize and we can all come together around 
the idea that we do need a new regulatory framework for our Nation's 
financial institutions. We have been going on the same ones that were 
existing since the Great Depression and days after that. So this has 
now focused our attention on the need for finding ways in which we can 
find a way of better regulating financial institutions so we can avoid 
systemic risk--systemic risk--a risk to the financial system.
  For those who are playing the partisan game, the big charge seems to 
be that somehow this administration was against regulation. Well, not 
to take the other side and become partisan, but let me try to set the 
record straight a little bit and talk about what happened. I was a part 
of this administration for the first 3 years of it. During that time, I 
and other members of the administration, including the then Secretary 
of the Treasury, Secretary Snow, and others made a mighty effort to try 
to get the Congress's attention to begin the process of regulating 
Fannie Mae and Freddie Mac. Now, anyone who looked at that situation--
and it was part of my responsibility as HUD Secretary to partially 
regulate those entities--knew I did not have the authority to regulate 
them; that the laws were written in such a way that it made it 
impossible to have an effective regulator over these two giant and 
growing entities, and their growth has been dramatic, or was dramatic, 
from the time after I left HUD until the time of their collapse and 
Government intervention took place. They continued to grow 
tremendously.
  It is very clear there were efforts by Republicans to try to regulate 
these entities and there was equally strong and better constructed 
efforts by Democrats to not regulate them and to allow Fannie and 
Freddie to continue business as usual. Finally, this year, we came 
together--and I commend Chairman Dodd and Chairman Frank for leading 
both committees of the House and Senate so we could come together in a 
bipartisan effort to regulate these two entities. Now, if I had had it 
my way, that regulator would have been stronger and even more capable 
than the one we put in place, but thank goodness we did act and we 
created a regulatory scheme. It was a little late to save them because 
by then the horse was out of the barn. Had we regulated them back in 
2003, when I testified before the Banking Committee of the Senate, the 
Financial Services Committee of the House, maybe we could have begun a 
new regulatory scheme then, and we could have today perhaps been in a 
position where those entities would not have had the problems that they 
ran into. Our efforts were not taken very seriously at the time, and 
the record is pretty clear about who was in favor of regulation and who 
was absolutely dead set against it.
  The fact is it does no good for us to today, in the midst of this 
enormous crisis, to be sitting around finger-pointing and trying to 
score points. The bottom line is we have a problem ahead of us, and the 
best thing we can do is to utilize sober judgment to try to come 
together, as I said, as Americans--not Republicans, not Democrats but 
Members of the Congress, Members of the Senate who have taken an oath 
of office--to try to do the right thing by the people whom we 
represent. How can we address this problem? What can we do? In fact, it 
may not be that there is much we can do. This is not a governmental 
problem at this moment in time. There is a need for us to look and see 
what the future of Fannie Mae and Freddie Mac is going to be. Do they 
belong as a half private, half governmental agency? Does it make any 
real sense for them to be partially beholden to their shareholders and 
partially beholden to the taxpayers? I am not sure it does. So we will 
need to legislate on that issue in a serious manner as to what the 
future of those entities should be.
  Here is one suggestion I would make today as to how we might begin to 
ameliorate the problem and how we might begin to work together, 
bipartisanly, to try to find an answer. I believe, from talking to 
people in the financial world, that one of the serious needs of today's 
problem, that would begin to ease all these problems, is for us to 
begin to look to ending the enormous surplus of unsold homes. The fact 
is people are not buying houses. The fact is there is an oversupply. 
The fact is supply and demand is out of whack. So perhaps we could, 
through tax credits, encourage people to buy homes, to purchase homes, 
providing them with essentially a tax credit that would encourage them, 
through the tax system, to purchase a home at this moment in time. If 
the inventory were to be drawn down, if we had fewer unsold homes 
sitting in the market, it would make it much easier for the marketplace 
to then begin to find a bottom--a price floor--that could then begin to 
ease the burden on all these financial institutions that are holding 
paper that today is not worth what they thought it would be.
  I wish to shift subjects, but before I do, I would make a call that 
we try to temper a little bit our desire to score a

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point today on the backs of the American people who are frightened and 
who are concerned--and rightfully so--about a very difficult problem 
and try to, rather than finger-point, join hands; rather than finger-
point, let's put our hands together, Republicans and Democrats, to work 
together toward a solution, toward some honest-to-goodness effort. That 
is what the American people expect of us. That is why they sent us 
here, to work together to solve problems; not to try to assess blame 
and not to try to score political points.

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