[Congressional Record (Bound Edition), Volume 154 (2008), Part 14]
[Senate]
[Pages 19897-19898]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            FINANCIAL CRISIS

  Ms. KLOBUCHAR. Mr. President, I stand here today to highlight my 
grave concerns about our financial system and the American economy--a 
disaster that has been building for months and, in fact, years and last 
week quickly hit the breaking point.
  The latest crisis seemed to come so suddenly, it moved so fast, it 
spread so far, and went straight to the heart of the global financial 
system. There is no doubt we are seeing now the biggest financial 
challenge since the Great Depression, and we are also witnessing the 
most remarkable degree of Government involvement into our financial 
system since the 1930s.
  It is truly remarkable. Consider the list: Bear Stearns, Fannie Mae, 
Freddie Mac, Lehman Brothers, Merrill Lynch, and AIG. These names used 
to be confined to the business pages. Now they are at the top of the 
front pages.
  I have strong feelings about what happened here. During the past 8 
years, the financial and economic policies of this administration have 
been off course. They have not managed or led the economy in a 
responsible manner.
  We have gone from a large budget surplus, left by the Clinton 
administration, to an even larger budget deficit. This administration 
has been reckless in how it managed Government's finances, and it has 
been reckless in how it managed its responsibility to ensure a strong, 
stable financial system.
  This administration acted as if the rules don't apply anymore. With 
loopholes here and there, they don't use the regulations. It permitted 
the large financial institutions to run amok, to turn the economy into 
a gambling hall, playing with funny money. Finally, in the 11th hour, 
the house managers, Bernanke and Paulson, have been asked to step in to 
shut down the game.
  It is hard to exaggerate the magnitude of what has happened. As 
financial journalist Steven Pearlstein observed last week:

       This is what a Category 4 financial crisis looks like. 
     Giant blue-chip financial institutions swept away in a matter 
     of days. Banks refusing to lend to other banks. Russia 
     closing its stock market to stop the panicked selling. Gold 
     soaring $70 in a single trading session. Developing 
     countries' currencies in a free fall. Money-market funds 
     warning they might not be able to return every dollar 
     invested. Daily swings of three, four, five hundred points in 
     the Dow Jones Industrial Average.
       It's a painful reminder that, when you strip away all the 
     complexity and trappings from the magnificent new global 
     infrastructure, finance is still a confidence game--and once 
     the confidence goes, there's no telling when the selling will 
     stop.

  In some respects, it may look as if all the action is in New York or 
Washington or London or Tokyo. But we know the consequences are being 
felt everywhere. This is a broad-based financial crisis. Everyone is 
affected. If you are trying to buy or sell a home, you are affected. If 
you are trying to refinance your home, you are affected. If you are 
trying to get a student loan for tuition, you are affected. If you are 
a small business owner trying to extend your credit line, you are 
affected. If you are a farmer trying to buy a new tractor, you are 
affected. Maybe the only people in America not affected are those who 
kept their money in mattresses, and we know that is not the answer.
  Look at what has happened to the middle class in the last 8 years: 
wages down an average of $2,000 a year. Expenses up $4,400 a year. That 
is a net loss of $6,400 a year. That doesn't include people with 
babies, and childcare, and afterschool care, and the added expenses for 
college--$6,400 a year. We need solutions and we need them now.
  Secretary Paulson has presented his proposal, and I believe we need 
to change that proposal. I believe there is more we need to do.
  First, I believe, in the long term, we need a comprehensive plan, 
including both a short-term rescue strategy and a long-term approach 
for economic recovery and rebuilding.
  Secondly, we must minimize, as much as possible, the cost to American 
taxpayers. Private companies that get themselves into deep trouble 
should not get a free bailout on the backs of America's middle class.
  Third, this plan can't be limited to helping Wall Street. We must 
help the middle class. We must save Main Street from the mistakes of 
Wall Street, and we must address head on the underlying issue of the 
housing market and foreclosure crisis. That means providing protection 
and support to struggling homeowners and restoring confidence in the 
residential real estate market.
  Finally, if this plan proposes that the Federal Government come to 
the rescue of private financial institutions, then the Government must 
secure greater oversight of how these companies conduct their business 
going forward. For companies that receive assistance, there should be a 
limit placed on dividends. Key executives should have a look-back 
placed in their compensation package, and there should be

[[Page 19898]]

a prohibiting of these golden parachutes. I cannot tell you how angry 
this makes me. Look at Lehman Brothers and their CEO, Richard Fuld. He 
earned about $45 million. This amounts to roughly $17,000 an hour--
$17,000 an hour that he earned. Basically, their firm has been 
obliterated.
  Last year, CEOs of large public companies averaged 340 more times the 
pay of the average workers. As Warren Buffet once said--and this is 
from an article by Nicholas Christopher in the New York Times:

       In judging whether corporate America is serious about 
     reforming itself, CEO pay remains the acid test.

  As he said in this article, it is a test that corporate America is 
failing.
  People can make their money, I suppose, but once we start, as 
taxpayers in the U.S. Government, buying their assets and backing up 
their assets and bearing the risk, asking taxpayers to do that, then we 
have something to say about this executive compensation, and we must 
say it in any type of a rescue plan.
  We also have to make sure going forward that the appropriate 
financial regulations are in place, that these loopholes are closed. 
There should be changes in corporate governments to improve the 
independence of corporate boards and reduce reckless behavior. There 
should be limits on speculative behavior.
  I know everybody is focused a lot on Wall Street. But I have to tell 
you what is happening on Main Street. In my State of Minnesota, the 
unemployment rate is at its highest in 22 years. Minnesota's second 
quarter growth in personal income is only 1 percent--the 49th lowest in 
the country. Even that 1-percent increase is more than wiped out by 
inflation.
  Home values in the Twin Cities area dropped nearly 14 percent in the 
second quarter of this year compared to last year. Heating costs this 
winter are expected to increase by double digits. The latest forecast 
shows that the cost of natural gas is expected to be 17 percent higher 
than it was last winter. Prices for fuel oil are expected to be 23 
percent higher.
  The American people still have faith in our Nation. They know our 
country and our economy still have great potential. We have the talent, 
the resources, the know-how, the entrepreneurial spirit, and a passion 
for innovation. The public is still bullish on America, even though 
Merrill Lynch may not be.
  Although our immediate and urgent goal must be to stabilize the 
financial system and restore confidence, we also must spend this week 
asking those tough questions and making sure we have some answers and 
making sure the proposals that go through the Congress include those 
limits I talked about on executive pay. If we are going to be asking 
taxpayers in this country to bear any of this risk, they must include a 
long-term plan for better financial regulation of these companies. They 
must include a focus not just on Wall Street but also on Main Street.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Ms. Stabenow). Without objection, it is so 
ordered.

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