[Congressional Record (Bound Edition), Volume 154 (2008), Part 14]
[Senate]
[Pages 19885-19889]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            ECONOMIC BAILOUT

  Ms. MIKULSKI. Mr. President, I want to speak about this bailout we 
have been asked to do. Starting last week, we were told by the powers 
that be in the Bush administration we needed to do a $700 billion 
bailout to stabilize our economy.
  When we heard that, Americans became scared. People who save for 
their retirement, those who have been faithful in paying their 
mortgage, those who have worked hard to pay for college, are wondering 
what is going on. People who have worked hard and played by the rules 
are wondering, are they being asked to bail out those who did not? 
Americans are mad as hell and they want to know what about them. They 
watched Wall Street executives pay themselves lavish salaries. They 
watched them do irresponsible lending practices. They watched them do 
casino gambling on risky investment mechanisms. And now those very same 
Americans who worked hard and played by the rules, were prudent 
investors, prudent savers, prudent citizens, are asked to pay the bill 
for those who did not.
  Now, it is for those people that I know the Government must do 
something. We must protect our economy and we must protect our way of 
life and we must protect our middle class. Sure, the economy is in a 
crisis. And, yes, we do have a credit crisis. Wall Street did make very 
bad decisions. But now they are asking Main Street to pay the bill. We 
must act to restore our confidence in our economy. I agree, we must act 
promptly. But this Senator will not be stampeded into voting for this 
Bush administration bill.
  So far during the last 7 years, every time there is a crisis, they 
generate fear and they generate bad ideas. Do you remember after the 
horrific days of 9/11 when we all came to the floor and pledged our 
patriotism? I said, we needed to put politics aside because we needed 
to be the red, white, and blue party. Well, they took advantage of 
that. And in that process we passed something like the PATRIOT Act, 
allowing our Government to act with undue secrecy with no parameters. 
We created the dysfunctional Department of Homeland Security.
  Now we are being asked to deal with the fiscal crisis and the 
financial crisis. I am concerned we are going to create a fiscal FEMA. 
We must act with resolve, but we cannot be a rubberstamp for the 
administration's proposal. This proposal gives sweeping authority to 
those who were asleep at the switch in the first place.
  Remember the Fed? Remember the maestro at the Fed who plunged down 
interest rates, and now helped create the housing bubble? Then there is 
the Treasury. There is the Secretary of the Treasury. A couple of 
months ago he said, no problem--like our President ``fundamentally 
sound.''
  Then a couple of months later they said, oh, there is a problem. And 
we have lurched from one bailout to another: Bear Stearns, the 
insurance company, oh, no, not to Lehman, then after that failed, so we 
have gone from ``no problem'' to lurching around, to now $700 billion 
and a blank check.
  We have seen those George Bush plans before. Now this one is a three-
page bill. It gives the Secretary of the Treasury unlimited power to 
intervene in our financial markets without any review by Congress, 
agencies, or courts. They make the Secretary of the Treasury a 
financial czar, a financial potentate, because it says: Give us a blank 
check with no balances.
  Well, I say: No checks without balances. Even the President of the 
United States of America has to come to us to declare war. I believe 
the Secretary of the Treasury should be accountable to the Congress and 
to whether mechanisms--if he is going to intervene with $700 billion in 
his pocket. I say no regulations without any safeguards. No way. No 
blank check. There must be regulations. There best be safeguards. If 
they do not want regulation, no way. If they do not want safeguards, no 
way.
  We are in uncharted waters, so we need to ask tough questions. First, 
how do we know it will work? What guarantees are there it will work? 
Could this bankrupt our Treasury because it has no parameters? Could it 
cause runaway inflation, further eroding our economy? What are the 
safeguards?
  Also, who is going to benefit? Is it going to be the same Wall Street 
go-go guy, the same Wall Street casino types who are going to benefit 
now? Whatever we do, we have to insist that those who created this 
scandal do not benefit from the bailout: no golden parachutes.
  Let them feel the hard landing that my constituents faced when they 
were laid off at Bethlehem Steel. Let them feel the hard landing of 
what it is like to have your mortgage foreclosed upon. Let them feel 
the hard landing my constituents are facing right now. We do not need 
to subsidize bad behavior.
  Now George Bush said he was the first MBA President. Well, hello, I 
do not have confidence in this administration. Remember, this was the 
same crowd that brought us Katrina, FEMA, and ``hey, you are doing a 
good job, Brownie.''
  Well, is this what we are now supposed to say to those who are 
managing our finances? I don't think so.
  We also have to prudently ask ourselves, are there better 
alternatives? Let me be clear: I do believe we need to act promptly but 
with safeguards. We need to act with resolve, but we need to have 
regulation and even retribution. If we have stabilization, which I 
believe we must do, we must also have reform. We are all looking at the 
administration's plan, but I want everyone to know where I stand. At a 
minimum, the plan must, first, be limited and temporary. It cannot be 
open-ended. There also must be a plan for those who have had those hard 
landings on Main Street. We need to put people first, to keep people in 
their homes, those who have had some of the most significant mortgage 
payment challenges, no golden parachutes that reward top executives for 
their excesses, their recklessness, and their sheer stupidity and 
greed, no blank checks. There must be accountability and oversight. 
Rescue does require reform, regulation, and a strong possibility of 
retribution. It must be transparent. I am for prompt action, but I will 
not be stampeded the way I have been stampeded in this institution by 
this administration in the past.
  We need to make sure we do it right. That means not handing over a 
blank check or getting rid of the balances. We have to ask tough 
questions and be sure we have the right principles. If not, then the 
taxpayers will be on the hook. If we make the wrong decisions, 
taxpayers will be on the hook not only for Wall Street's bad decisions, 
but I don't want to set this up for Government's bad decisions. We need 
to get Government back on the side of the people who need it. We need 
to put the public good over private profits. This means we need to take 
a look at a 21st century regulatory system. I am tired of seeing this 
laxity where what emerges when we deregulate is the emergence of sharks 
and whales. Either way, the minnows get swallowed up. We don't want our 
economy to sink, and I think it is time to swim. But when we do, we 
need to make sure we are asking the right questions. We need to fight 
for the middle class. We need to fight for the people who go by the 
rules. We need to have a legislative framework that rewards those who 
did their very best and might be having a temporary spill.
  I look forward to hearing more about this plan, but right now I need 
to know more. I need to be reassured more, and I need to be absolutely 
sure that those who created the crisis don't benefit from it and we 
don't leave the middle class with all of the responsibility.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Cardin). The Senator from Virginia.
  Mr. WEBB. Mr. President, I begin by complimenting the senior Senator 
from Maryland on her statement. I know many of us on this side of the 
aisle are going to be asking a lot of the same questions. We have the 
same sense of urgency about helping the country while at the same time 
we protect the people who have had no voice and no power, as this 
proposal was put

[[Page 19886]]

together. I was with our colleagues on this side of the aisle during 
the conference call on Friday when this situation was explained. I have 
a number of the same types of questions as those raised by the senior 
Senator from Maryland. This is why I rise today.
  This is a very complicated issue, and we are being asked to resolve 
it on a tight time-line. The American people want some reassurance. 
They do want us to represent them and do something about the systemic 
flaws that allowed this debacle to occur, not simply to vote on a 
mechanical fix, but to address the issues and policies that allowed 
this massive financial crisis to emerge.
  Americans are also interested, as the senior Senator from Maryland 
pointed out, in preventing those who benefitted and contributed to the 
problem, from unjustly enriching themselves.
  We are seeing in this proposal the possibility of a huge transfer of 
power to the executive branch--not simply to the executive branch, to 
one official in the executive branch--with very few strings attached. 
This individual, whose career I respect, spent that career in the 
markets. Now, we are going to empower this individual and the 
Department of the Treasury to get directly involved in the stock market 
in a discretionary way that has very little precedent in our history. 
At the same time, there are potential conflicts of interest that are 
unavoidable and will need to be examined.
  However we sort out this problem over the next several days or 
longer, there are a couple of areas where I believe that without the 
right type of guarantees, it will be very difficult for me personally 
to vote in favor of the proposal that came from the administration.
  First, we must put regulation and accountability back into the 
system. It is inarguable that the regulatory structure now in place has 
not protected either our financial system or the American taxpayer. The 
administration is asking for unprecedented rescue, and that rescue 
cannot come without fixing the system.
  Second and equally important, there should be guarantees in any 
legislation that address the issue of executive compensation. I have 
been speaking about this issue for many years. I mentioned this in 
every single meeting I had when I was campaigning for the Senate. It is 
not inaccurate to say that executive compensation in American business 
today is wildly out of sync with our history, and with other countries 
in the world. When I graduated from college, the average corporate CEO 
made 20 times what the average worker made. Today the average CEO makes 
400 times what the average worker makes. This is not a global 
phenomenon; this is an American phenomenon. If you go to Japan, whose 
economic system works quite well in terms of the health of its economy 
and its balance of trade, the average corporate CEO makes 10 times what 
the average worker makes. Again, ours make 400 times. If you look at 
Germany, which has one of the highest balances of trade in the world, 
totaling $280 billion last year, the average corporate CEO makes 11 
times what the average worker makes. Yet presently, our corporate CEOs 
make 400 times.
  The principles should be clear. If, in solving the problem, we are 
going to take tax money from Americans, many of whom do not own stock, 
then the executives involved should get a Federal salary. This issue 
was raised with Mr. Paulson over the weekend.
  I have an article that came from today's Financial Times, in which he 
said the Treasury Department fears that if we reduced executive 
compensation, it would ``undermine banks' willingness to take part'' in 
the program because it would be punitive in nature. I must say, I have 
a hard time figuring that out. We were told on Friday that we are in a 
crisis that, and that if we do not resolve it within the next week or 
so, it is going to undermine the entire banking system around the 
world, the entire global financial system. Yet we are told that if we 
ask these corporate CEOs to take a salary in line with what Federal 
officials receive, they won't participate. What are they saying? We 
have a crisis that is going to affect us all; we are all going to have 
to take some sort of a hit. It is certainly punitive to the American 
taxpayers, who did not participate in these decisions, and who did not 
receive any of the profits. How is it punitive to an individual to say: 
All right, if we are bailing you out, you reduce your pay. We are 
giving you Federal tax dollars. You take Federal pay until this is 
solved. You make the American taxpayer whole. We will make you whole. 
If you increase the profitability, as you say you will be able to do, 
then you can increase your compensation commensurately.
  The legislation we are considering must have a provision in it that 
creates fairness for the people who are going to foot the bill. We are 
sent here, those of us who believe in the traditional precepts of the 
Democratic Party, to make sure that the health of society is measured 
not at the top, not at the apex, but at the base, by the well-being of 
the people who are doing the hard work of our society. It is our 
mission, it is our duty, to look after their needs.
  If we can't get to the bottom of this by the end of this week, as 
some seem to be worrying about, maybe we need to take another week. 
Maybe we need to stay with this until we can get it done. When you are 
betting $700 billion to a trillion dollars, we need to figure out a 
formula we are all comfortable with.
  I yield the floor.
  The PRESIDING OFFICER. The assistant majority leader.
  Mr. DURBIN. I thank the Senator from Virginia for his comments. I 
know when he spoke in response to the State of the Union a little over 
a year ago, he raised the issue of executive compensation. If I am not 
mistaken, he made the point that the average worker, in the course of a 
year's work, made what the average executive makes in a day. Maybe it 
was even more of a contrast. But it is a clear indication of how things 
have gotten completely out of line. I ask the Senator from Virginia if 
he could recount what that comparison was between pay for CEOs and the 
pay for workers?
  Mr. WEBB. The Senator from Illinois is correct. I mentioned earlier 
that executive compensation in our country is wildly out of control, in 
terms of our own history and in terms of what is going on in the rest 
of the world. I do not believe it is punitive or unreasonable to ask 
for a fair measure when tax dollars are being used to help bail these 
companies out. When the Senator from Illinois and I were finishing 
college, the average corporate CEO made 20 times what the average 
worker makes. Today it is 400 times. If we take that multiple and apply 
it to what I was saying in response to the State of the Union address a 
year and a half ago, in one year the average worker in this country 
makes what his boss makes in one day. There is plenty of room to be 
fair to the system and fair to the individuals who are asking for the 
bailout, but ultimately we must be fair to the taxpayers who are asked 
to dig down in their pockets and help us straighten out this problem.
  Mr. DURBIN. I have been in on these meetings, and some were historic 
and ominous. Secretary Paulson, Chairman Bernanke of the Federal 
Reserve, and Chairman Cox of the SEC came to us last Thursday night to 
discuss what we faced. They were using words such as ``meltdown'' and 
``collapse,'' talking about the very severe economic crisis which we 
are facing. Certainly, the events of the last few weeks and months back 
up the concern.
  When we raised the question of executive compensation, though, the 
push back from the administration was: Listen, don't mess with the 
salaries of these CEOs, even if their banks are failing because they 
may not do business with the Government. They may not let the taxpayers 
bail them out if we restrict their annual bonuses and restrict their 
golden parachutes.
  I struggle with this concept, I say to the Senator from Virginia. Is 
the administration suggesting they would rather see their banks fail, 
would rather see their hedge funds fail, their mortgage operations fail 
than not receive their annual bonus? Is that the argument that is being 
made to us?

[[Page 19887]]

  I do not know if the Senator from Virginia can recall any other 
aspects of public or private life where we pay such rich rewards for 
incompetency. Where the businesses fail, it seems these executives take 
away the most money. In the Financial Times or in the Wall Street 
Journal this morning--one of these publications--they talked about 
Barclays riding to the rescue of part of Lehman Brothers. They said, 
incidentally, just before Lehman Brothers went belly up, they brought 
in $2.5 billion for executive compensation and bonuses, momentarily 
before they were about to go out of business. That is unconscionable.
  Now we are asking the taxpayers to come in with hard-earned tax 
dollars to rescue these companies and subsidize the compensation of 
executives so they do not have any interruption in their annual bonuses 
or any interruption in their parachutes and rewards? There has been an 
interruption in the lives of most taxpayers.
  I say to the Senator from Virginia, is there a parallel here of a 
similar example that I am missing?
  Mr. WEBB. I say to the Senator from Illinois, I also heard Secretary 
Paulson say something similar in the conference call in which we were 
participating on Friday, and I find his comments very puzzling--I am 
not violating confidentiality because Secretary Paulson said it at 
least three times over the weekend on different television shows. When 
he was asked, on the one hand, whether this is a crisis that threatens 
to undermine all of the financial markets within a few days, and on the 
other, if it would be punitive to ask the executives to take a pay hit. 
And, in fact, Secretary Paulson indicated that some of these banks 
might not participate if they are asked to do that.
  I would suggest there are plenty of competent officials who may have 
lost their jobs over the past few weeks who could step in if these 
particular individuals do not think this is a good formula. What I was 
saying in concept is, if you take in a Federal dollar to bail yourself 
out, you ought to get a Federal salary until the taxpayer is made 
whole.
  If you show managerial skills to pull us out of this, such that the 
assets you are requiring us to purchase improve in value, then, you 
could get some commensurate compensation because this is compensation 
for actual performance.
  Mr. DURBIN. So you are saying pay for performance, in other words, 
instead of pay for title or pay for past performance. That is a radical 
concept, but most workers in America would be able to identify with 
that. That is kind of what they face when they go to work.
  Mr. WEBB. I would say to the Senator from Illinois, very quickly, 
when we use the word ``punitive,'' we should keep in mind that there 
are many people in this country who are teaching school or out driving 
a truck who are going to have to pay more taxes for this, but who have 
not had the benefit, in many cases, of even owning stock. They are 
going to have to pay a penalty for the malfeasance that has brought us 
to this situation.
  If the administration and Secretary Paulson and others truly want to 
solve this problem--and I think they do--then they ought to be able to 
yield on this point simply because of the logic of it.
  Mr. DURBIN. I might say to the Senator from Virginia, the $700 
billion represents roughly about $2,000 of indebtedness for every man, 
woman, and child in America to make up for the mistakes of these banks.
  There is another thing that troubles me. There is great potential for 
conflicts of interest because decisions have to be made by the 
Secretary of the Treasury under his proposal about where the Federal 
taxpayers will step in with their money and buy illiquid assets; in 
other words, buy the mistakes, the mortgage securities, for example. 
Those decisions will have a direct impact on the survival of 
institutions and on the jobs of the people who are affected by those.
  We want to make sure there is no conflict of interest, that the 
decisions are made by those who have no skin in the game, no investment 
in the decision, and it has to be at least subject to some review. 
There is no one in this country, thank goodness, above the law, and yet 
in the proposal given to us by the Treasury Department, there is no 
judicial or administrative review of decisions being made about where 
the $700 billion is going to be invested. We are being asked--in a 
hurry--to get this done in a hurry, to give more authority to this 
administration, specifically to this Secretary of the Treasury, a man 
whom I respect, but to give more authority to him than anyone has ever 
had in the history of the United States, and to say that his actions 
are not subject to review by any court, any administrative body, when 
there is such a great potential for conflict of interest. That concerns 
me.
  Mr. WEBB. I say to the Senator from Illinois, first, I wholly agree 
with you on that point. I mentioned in my comments a little while ago 
about the potential for conflict of interest. This is the continuation 
of a trend that disturbs me greatly, that is the movement of power 
toward the executive branch.
  I was a committee counsel in the U.S. Congress 30 years ago. If you 
examine the balance between the executive branch and the legislative 
branch over those 30 years, it has steadily, particularly since 9/11, 
moved toward the executive branch. This is another example of that 
movement.
  I would make one other point. I and a number of other people, Senator 
Bayh among them, have been very worried about sovereign wealth funds. I 
have talked about them and have been able to participate in some 
hearings on other committees about a foreign government directly 
investing in our economy. One of the points I made several times is 
that the U.S. Government has never directly invested in a discretionary 
manner in our markets.
  So we are seeing two different trends that are disturbing and that we 
should be thinking about. One is, if we do transfer this amount of 
authority to the Secretary of Treasury, the Federal Government, on a 
discretionary basis--one individual, on a discretionary basis--is going 
to invest in parts of the economy. All this in their own discretion, 
decided without review, as the Senator from Illinois mentioned. That is 
a kind of a sovereign wealth fund in our own country, but with the bad 
assets.
  The second trend we are now seeing is the movement, particularly from 
the Government of China over the last 10 days, of massive investments 
from a country that on one level is potentially a great strategic 
adversary, and certainly an economic competitor, directly into our 
economy. There is a 49-percent purchase proposal for Morgan Stanley 
from the sovereign wealth fund of the Chinese Government.
  So there are many pieces in motion. We have the gravest duty to sort 
them out. I congratulate the Senator from Illinois for his comments.
  Mr. DURBIN. I thank the Senator from Virginia.
  There are so many questions that have been raised by this proposal 
from the administration. I have to say at the outset, for those of us 
who have been here a number of years, this has an eerie resemblance to 
something I have seen before. It was on the floor of this Senate 6 
years ago when we were told by this administration in October, before 
an election, that we had to give to the President of the United States 
the authority to invade Iraq. Oh, he did not say he was going to do it. 
He just needed the authority to invade Iraq because of weapons of mass 
destruction.
  Of course, the pressure was building on Members of Congress: Do 
something. Saddam Hussein may have nuclear weapons. Condoleezza Rice 
talked about mushroom-shaped clouds. It was in that environment and 
atmosphere that the President said: Give me the authority; I will make 
the decision about whether we should invade Iraq.
  The pressure was on. Some of us were up for reelection at the time. I 
can recall going to editorial boards in Chicago, and I can tell you, I 
lost their endorsements because I said there is something that concerns 
me about this. We are delegating so much power to this President. It is 
far easier to get in a war than it is to get out of one.

[[Page 19888]]

  Here we are 6 years later. We are still in it. Mr. President, 4,183-
plus American lives have been given in this conflict, 20,000, 30,000 
have returned with serious wounds and injuries--amputations, paralysis, 
traumatic brain injury. I cannot tell you how much money we have spent 
there. It is almost as much as the President is asking now for the 
banks, maybe more.
  We are being told again, as we approach another election: Give the 
authority to the administration, to the President, and step aside; in 
their wisdom, they will handle it. I worry about that. As I said, I 
respect Henry Paulson. I really do. I do not think he is a politician 
at heart. I think he is a patriot, a citizen who wants to do the best 
for his country. But his actions have to be put in a constitutional 
context. We have the balance of powers in this country because that is 
what America is. It is not because of what this current crop of 
politicians dreamed up. It is what the Founding Fathers said we are all 
about. We do not want to give too much power to any branch of 
Government. We want other branches to be involved.
  A proposal is coming from this administration now, a few weeks before 
the election, with ominous clouds gathering over the financial 
institutions of America, and we are being told: Trust us. Trust us to 
give to the Secretary of the Treasury the authority to take $700 
billion and to buy assets in banks without the review of any court or 
any administrative body.
  I do not see in here the protections against conflict of interest. 
Why should I worry about conflicts of interest? Have we had any 
conflicts of interest with the war in Iraq? Let me think for a moment. 
Does the word ``Halliburton'' spring to mind, these no-bid contracts 
for billions of dollars that shortchanged our troops and our taxpayers? 
Excuse me if I am cynical and skeptical, but I have seen this movie, 
and I don't like the ending. The taxpayers pay too much money. The 
troops do not get protection. Halliburton gets billions of dollars in 
contracts.
  So should I be concerned that there is going to be one person in the 
administration or a handful allocating $700 billion without anybody 
looking over their shoulder? Yes, I am concerned.
  Then there is a question about the banks we are going to help. This 
started out about the American economy and American financial 
institutions, and now it has become something larger. At the last 
minute, the Treasury Department said: Oh, we are going to help foreign 
banks too. Really? Foreign banks? I want to know more about that. I 
want to know how much we are going to get into this in terms of these 
foreign banks. A lot of these questions have to be asked and answered 
before any of us in good conscience can vote for this.
  But that is the reality of what we face. Just in case people are 
keeping score, things have changed in the United States of America in 
the last several weeks. Some of it was lost on the business pages, and 
some of it most people did not focus on. But I have tried to study it a 
little more closely with this $700 billion request.
  To put this into perspective, the debt of the U.S. Government is $5.4 
trillion. In the combined history of the United States of America, all 
of the money we have had to borrow to keep this Government moving over 
and above what we raised in taxes comes to $5.4 trillion. That debt, 
incidentally, has gone up dramatically, a record-breaking pace under 
the Bush administration. We are now facing, this year, a $480 billion 
deficit--I am sorry, I think it is $407 billion, but it will be $480 
billion next year, a record-breaking deficit.
  So to put that in perspective, this is our mortgage, America, $5.4 
trillion and growing. It is a mortgage we will pay as long as we are 
alive, and so will our kids and so will their kids. That is the 
starting point. What has happened recently?
  Almost 2 weeks ago, the decision was made that we would assume 
liability--the Federal Government would assume the liability, a second 
mortgage, if you will--for Fannie Mae and Freddie Mac. Now, this is a 
government-sponsored entity which basically guarantees 50 percent of 
all the mortgages in America. So now our second mortgage is, we are 
stepping in--not the shareholders of the companies, the taxpayers are 
stepping in to guarantee the solvency of Fannie Mae and Freddie Mac. 
There was not much else we could do, I will be honest with you. We 
reached a terrible point where there were not many alternatives.
  How much liability is involved in Fannie Mae and Freddie Mac? Well, 
it will be easy to remember. It is exactly the same liability as 
America's national debt: $5.4 trillion. The second mortgage on America 
is the same as the first mortgage. Now, don't get me wrong. Behind 
Fannie Mae and Freddie Mac is a lot of property--homes, businesses, 
real estate. So it isn't as if there isn't collateral involved, but we 
are on the hook for $5.4 trillion. That is not the end of the story. 
The story goes on.
  We decided that people who have mutual funds--my family has done that 
too--and have taken cash and put it into money market mutual funds--
everybody knows what I am talking about; it is not the CD at the bank 
at the corner where Uncle Sam stands and says: We are going to protect 
you via the Federal Deposit Insurance Corporation, but it is the money 
market mutual fund where you move money out of your stocks, out of your 
mutual funds, put it into your money market mutual funds because it 
makes a little bit better than what they are paying at the bank. It 
turns out they are in trouble. They are in such trouble now that we are 
going to have to step in for the mutual funds and provide a money 
market guarantee on the mutual funds. OK, we have our national debt and 
we have our secondary mortgage--Fannie Mae and Freddie Mac--$5.4 
trillion more, and now we are stepping in to guarantee money market 
mutual funds. How much could that be? Well, it is much smaller than the 
other two. It is $3.4 trillion. Stay tuned, sharpen your pencil, there 
is more to follow because we are being asked now to come up with $700 
billion to buy illiquid assets. What is that? Something nobody wants to 
buy. We are going to buy them.
  Do we have to do this and try to stop the seizure of the credit 
institutions of America? We may have no choice, but I think it is 
reasonable to ask a few questions. Just as we should have asked more 
questions about weapons of mass destruction 6 years ago before we found 
ourselves in this war, we need to ask questions today about where this 
is leading, and we need some protection for the taxpayers of this 
country.
  I walked down LaSalle Street on Friday. It is a great street in 
Chicago, lined with banks and big office buildings. A lot of people 
came and said hi, but a lot of them came to me and said: Are you going 
to do this, $700 billion for bailing out these banks? I said: I don't 
know. At the end of the day, I don't know. I want to see what the 
administration comes back with. Right now we have a concept. I want to 
see a proposal.
  I thought to myself as I walked along there and had a little press 
conference with a bunch of folks who walked by on the sidewalk 
listening: These are the folks who are going to pay for this idea. 
These are the taxpayers who are going to have to come up with the money 
for this--for all of this. None of these taxpayers got a notice about 
the annual bonus checks at these major companies that are going under. 
They didn't receive any of that. They didn't get a parachute either. 
They are the taxpayers. Unfortunately, it will be a bigger tax bill 
because of this.
  What has happened is a fundamental failure of a philosophy that has 
been tested and tried for the last 10 years or so that says the 
Government ought to get out of the way, no questions asked, and don't 
diminish the dynamic aspect of this economy with overregulation. That, 
to me, is something we need to take a second look at.
  Incidentally, my staff has told me the national debt is over $10 
trillion. I misspoke on the primary mortgage. I got the wrong figures 
out of the paper today, and I want the record to reflect it: The 
primary mortgage is over $10 trillion, and Fannie Mae and Freddie Mac 
is an additional $5.3 trillion in liabilities, as I said earlier. That 
shows

[[Page 19889]]

you the amount of debt that is involved.
  So the fundamental failure of the philosophy is this belief that 
somehow we, as taxpayers, have a responsibility to rescue but not a 
responsibility to regulate. That is not right. If the full faith and 
credit of the United States of America is going to come to the rescue 
of these private institutions, we have an obligation in Government to 
the taxpayers of this country to ask the hard questions in advance, 
before the disaster arrives. We should have been asking these questions 
a long time ago. We should have asked them about the predatory lending 
practices of major credit institutions. We have had several votes on 
the floor of the Senate on that issue. We should have been asking about 
how this money was being loaned--the circumstances.
  I guess there is not much sympathy for people facing foreclosure in 
America today. A lot of us might be inclined to think: These poor 
souls, they should have been a little more careful, until you take the 
time to meet some of them. Some of them got carried away. Don't get me 
wrong. I can't have a lot of sympathy for them. They made big mistakes 
trying to make big money, but some of these folks were conned. They 
signed up for mortgages full of tricks and traps that ended up 
exploding in their faces and now they are going to lose their homes.
  At the end of the day, this crisis started with a housing catastrophe 
and disaster and continues because of it. It is up to us now to decide 
what we are going to do about it. We can rescue the folks at the top--
that is what is being proposed--but we need to do a lot more than that. 
I think we need to set up a mechanism for those who are about to lose 
their homes to be protected.
  Here is an interesting thing. If you face bankruptcy today and you 
have seven or eight homes and go into the bankruptcy court, they can 
renegotiate the terms of all your mortgages, except one. They cannot 
renegotiate the terms of the mortgage on your home. Why? If they can 
renegotiate the terms on my vacation home, my farm, my ranch, my 
property in some other place, why not my home? There is no good 
explanation. The fact that the bankruptcy court cannot renegotiate 
leads us, sadly, to the point where banking institutions and credit 
lenders and the others are not renegotiating terms. They would rather 
see people fail and face foreclosure. I think we have to do something 
to make sure the bankruptcy courts have that option. I think there 
should be incentives for those lending institutions to try hard to keep 
people in their homes.
  Mr. President, 340,000 Americans were foreclosed on in the month of 
August. It is a record-breaking number. Not since the Great Depression 
have we seen that percentage of homeowners facing that kind of 
liability. So we have to keep the taxpayers in mind when we read this 
proposal of the Treasury. We have to keep homeowners in mind, and we 
ought to keep accountability in mind. At the end of the day, there is 
no branch of this Government above the law. When it comes to $700 
billion in taxpayers' dollars and money--and hard-earned money, I might 
add--they are not above the law.
  One last point I wish to make. Senator McCain has made a name for 
himself in the Senate, calling himself a leading deregulator. He has 
been opposed to regulation. In fact, he teamed up with Senator Phil 
Gramm of Texas, who was his inspiration for years, and they voted 
together on many issues: to deregulate, get the Government out of the 
economy. Let a thousand flowers bloom. Let's let these forces of 
capitalism go to work. I am not going to diminish the power of the 
entrepreneurial spirit and the forces of capitalism, but they can get 
carried away. We saw it happen with the savings and loan crisis and we 
have seen it happen with the subprime mortgage crisis. We have seen it 
before. It might happen again if we don't learn a lesson.
  I am disappointed that Senator McCain in the past took that position. 
I am troubled that, in a recent article in Contingencies magazine, he 
said about our health care market:

       Opening up the health insurance market to more vigorous 
     nationwide competition, as we have done over the last decade 
     in banking, would provide more choices of innovative products 
     less burdened by the worst excesses of State-based 
     regulation.

  I don't know when Senator McCain wrote that. It couldn't have been 
recently because I have to tell my colleagues that if he is promising 
for the health insurance market what we now face in the banking market 
after deregulation, God help American families. I couldn't disagree 
more with Senator McCain's position on deregulation when it came to 
banking, and now his position on deregulation when it comes to health 
insurance companies.
  If the Government doesn't set the rules, the insurance companies 
will. How would you like to throw yourself on the mercy of that 
insurance company adjuster, when it is your health or the health of one 
of your kids on the line? Insurers compete with one another, trying to 
avoid costly patients and avoid paying for procedures. We hear about it 
almost every day. According to Senator McCain, let a thousand flowers 
bloom. Let the market work. The market works pretty well if you are 
young and healthy or wealthy. It doesn't work very well if you are 
older, have a history of illness, and don't have much of an income. 
That is why we need sensible regulation.
  This idea that we are going to move away from employer-based health 
insurance, as Senator McCain has said--well, I am sure there are some 
people who buy into that. Put each one of the customers in America out 
on their own buying health insurance instead of buying through pools 
where they work, and we know what will happen. The sickest people will 
have the toughest time finding insurance and paying for it. That isn't 
how it should work. We learned that, I am afraid, the hard way, and 
Senator McCain is stuck on that. I think he is wrong. I think we need a 
health insurance program in America which gives us all a fighting 
chance. Unfortunately, Senator McCain's approach does not. So we have 
to make sure that when it comes to banking or health insurance, Senator 
McCain's approach is not going to be our approach. This idea of 
deregulation may at one time have had wide subscription, but today it 
does not. We have to move forward with the concept that there is an 
appropriate role for Government--not to go too far but to provide 
enough protection, disclosure, transparency, and accountability to make 
sure we don't find ourselves in the crisis we find today with our 
banking institutions.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Minnesota is recognized.
  Ms. KLOBUCHAR. Mr. President, first of all, I wish to thank the 
Senator from Illinois for his leadership. He has been an advocate for a 
long time for changing the way this administration has allowed these 
agencies to decay and to not be regulated--not just our financial 
market but our consumer market and the market for oil and other things. 
I thank the Senator from Illinois for his leadership and his 
farsightedness during these last few years.

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