[Congressional Record (Bound Edition), Volume 154 (2008), Part 18]
[Senate]
[Pages 24310-24312]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE ECONOMY

  Mr. DORGAN. Mr. President, today there has been much discussion once 
again here on the floor of the Senate and certainly in the news and in 
various other venues, I am sure at the Secretary of the Treasury's 
office, about the economy and what is happening in this country.
  One only has to look at the stock market--today it moved down very 
quickly and very aggressively once again; it has happened many times in 
recent days. There are very serious problems. But it is not just the 
stock market that reflects those problems. It is perhaps if you were 
sitting in a home tonight or last night or last week or last month to 
hear someone come home from work to stay to the spouse: Honey, I have 
lost my job. And 1.2 million people did that in the last 10 months, 
half of them in the last quarter. There were 240,000 last month who 
came home and said: I have lost my job.
  No, not because they are bad workers; because people are being laid 
off. This economy is in a recession. It appears to be a very deep 
recession, with a great deal of trouble coming from a range of 
activities that went way beyond the pale.
  The subprime loan scandal, an almost unbelievable economy that was 
providing substantial additional benefits and salaries and bonuses to 
people at the top of the economic ladder. It is almost unbelievable 
what has happened with the reckless behavior with respect to some of 
the financial firms in this country. The result is that the amount of 
leverage and the development of a house of cards built on an illusion 
of assets has caused a collapse, and it is affecting virtually every 
corner of this country.
  Tonight there are people who will ask the question: What has happened 
to my retirement account? What about my 401(k) account? What about my 
individual retirement account? How far has it gone down? How much have 
I lost? What will it mean to my retirement? How much longer will I have 
to work?
  I have been on this floor plenty of times talking about what has 
caused all of this. If you do not think about it and talk about it and 
take steps to correct it, it will happen again.
  The only way the American people will have confidence about the 
future is if they believe we are taking steps to correct that which 
caused this problem. I have talked about the companies that started 
this mess, the brokers, the mortgage companies, the folks who buy and 
sell securities, the hedge funds, those who trade in derivatives such 
as credit default swaps. I have talked about all of them. All of them 
made massive amounts of money. Do you know the highest income earner in 
the country last year earned $3.7 billion? One person. That is $10 
million a day. If the spouse said: How did it go today? That person had 
to say, pretty well, I made $10 million. That day and every day.
  That is unbelievable to me. It is an example of what has been 
happening at the top. Massive bonuses and salaries; everybody making 
money hand over fist by creating this financial house of cards. It 
collapses and injures everybody in this country, and a whole lot of 
folks are thrown out of work.
  The source? Subprime loans, companies saying to people: Hey, how 
about a loan? You do not have to pay even the principal at all. You do 
not have to pay all of the interest. You have bad credit, you cannot 
get any credit, you have been bankrupt, you are a slow payer, you do 
not pay your bills, but it does not matter. Come to us.
  That was the advertising. Is it any wonder that all of this 
collapsed? And as they put all of those bad loans together, they 
securitized them and chopped them all and sold them as securities. They 
securitize everything these days. They sold them as securities and 
moved them around the country and around the world.
  All of a sudden we have a bunch of firms that decided, hey, these are 
pretty good-paying securities. They have a big return. We are going to 
buy some of

[[Page 24311]]

these. So they bought them all up. And now guess what. They have got 
all of these rotten assets in their portfolio, and it is pulling them 
all under and causing a massive problem.
  So here we sit with a collapse of a financial system, names that are 
household names, the biggest firms in the country going belly up, 
getting bailed out.
  The Treasury Secretary comes to us and says: I need $700 billion on 
an emergency basis in 3 days, and if not, the sky is going to fall in. 
So the Secretary does not get it in 3 days or with a 3-page bill, but 
he gets it in a couple of weeks.
  Now he has $700 billion, but he does not know what he wants to do it 
with it. He said: I need it and I need it urgently right now because I 
want to buy toxic assets and I want to get these toxic assets off the 
balance sheets of these companies.
  Well, he got the money. Then he said: You know what, that is not 
right either. I do not want to buy toxic assets. What I want to do is 
provide money, capital, to big banks. He takes $125 billion and aimed 
it at nine banks, some of whom did not want it. The problem was, it was 
the biggest gift in the world. There were no strings attached. Can you 
imagine taking $125 billion and saying to nine big banks: You take this 
money, and, by the way, I will not require you to expand your lending. 
That is the reason I am giving it to you, but I will not require it. I 
will have no prohibition on you using it for bonuses. Go right ahead. 
And, by the way, my agency is also going to encourage you to merge 
because we like bigger banks; merging will be beneficial, we are told. 
Is it any wonder people do not have confidence? Is it any wonder people 
are not inspired by this? This is not a consistent, well-managed 
approach to deal with a crisis, in my judgment. I know it is easy to be 
critical, but it is hard not to be critical of something that seems so 
random in terms of policy.
  Now, I sat with a banker in North Dakota recently at a table. I said 
to him, a small town banker: Do you have money to lend? I said: They 
say the credit markets are frozen. Do you have money to lend?
  Oh, yes, he said. He said: If somebody comes in, I have got money to 
lend them, because he did business the old-fashioned way. He said: I 
take deposits and I make loans. But when I make loans, I make sure 
those to whom I lend the money are going to have a reasonable 
opportunity and are able to repay the money.
  That is business the old-fashioned way. He said: I did not get 
involved in all of those reckless practices. I did not buy those 
securitized notes with subprime loans. I did not do all of that.
  Well, the biggest financial companies in this country did. They were 
like hogs in a corn crib, buying and selling, making lots of money, 
everybody is wading in cash. Now they are up to their necks in trouble, 
and the Treasury Secretary says if we do not bail them out, the whole 
economy is going to collapse. So this bailout occurs without any 
conditions at all.
  Did anybody say, with these hundreds of billions of dollars--and by 
the way, it is not really hundreds of billions. If you take a look at 
what Treasury and the Federal Reserve Board have done, it is somewhere 
between $2 and $3 trillion that has been pledged to those big firms. 
Not many people know that. And you cannot get all of the details. But 
the Federal Reserve Board opened up its window, first time in history, 
to say: We will do direct lending with investment banks whose assets 
are not insured by the Federal Government. First time in history. So we 
have around $2 to $3 trillion out there extended on behalf of the 
American people with some of these companies that were engaged in 
unbelievably reckless practices and behavior.
  The issue, it seems to me, is what did the Treasury Secretary require 
of these companies that got this massive amount of money? What did the 
Federal Reserve Board require of these companies? The answer is 
nothing. No restrictions. No restrictions on bonuses. We now read that 
somewhere around $20 to $30 billion of bonuses will be paid in the next 
month or two. Any restrictions on parking the corporate jets? No. Any 
restrictions on income at all? No. No restrictions at all. No strings 
attached.
  Now, there is a great discussion here on the floor of the Senate and 
in this town about bailing out the automobile industry. That proposal 
is $25 billion, about 4 percent of the $700 billion. As far as I am 
concerned, the automobile industry has plenty to answer for. But if we 
are talking about a potential loss of 3 to 5 million additional jobs if 
that industry goes belly up, at a time when this economy is in such 
desperate condition, putting 3 to 5 million additional people out of 
work would, I think, be devastating to this economy.
  So that is a very important consideration. But I am not about to 
propose bailing out anybody unless there are tough restrictions and 
conditions. I know those executives from Detroit got a pretty tough 
time, and should have, yesterday. They flew here in their private jets, 
making about $20 million a year, saying: We need help from the American 
taxpayer.
  Look, if we are going to lose 3 to 5 million jobs, I want to help for 
a couple of reasons. No. 1, I don't want millions more people out of 
work that would further jeopardize this economy. No. 2, I want to 
retain a strong manufacturing base. Part of that is the automobile 
industry. You don't long remain a strong world economic power unless 
you have a strong manufacturing base. But I am not about to support a 
bailout for anybody unless there are strong, tough, and rigorous 
conditions. Park those corporate jets, 24 roundtrip flights from 
Detroit to Washington, DC, and they flew in corporate jets, making $20 
million a year, saying: Give us a little help. Where is the self-
sacrifice?
  I am not just talking on the part of that industry. They were singled 
out yesterday, and I am not excusing them. They got what they deserved 
in the House hearing. But did anybody ask the question, when the 
Treasury Secretary was ladling money around by the hundreds of billions 
of dollars or the Federal Reserve Board was ladling money around to the 
point of $2 to $3 trillion, did anybody say to those biggest financial 
firms: By the way, here are some restrictions. Maybe you ought to park 
your airplanes. Maybe you ought to be concerned about these 
unbelievable incomes. Talk about $20 million a year for people running 
an automobile company, we are not talking about $20 million when we 
talk about some of these hedge funds. We are talking about an average 
of the top 25 hedge funds, somewhere around $700 million a year. Did 
anybody impose conditions on them? No. Should they have? You darn right 
they should have. If the automobile industry wants help from the 
American people and this Congress to preserve 3 to 5 million jobs, then 
they are going to have to be responsible to adhere to significant 
restrictions.
  Those restrictions ought to be rigorous and tough. There must be 
independent oversight on anything that is given to that industry, or 
other industries for that matter. They ought to agree to a prohibition 
on dividend payments so that money going to those companies isn't going 
to go out in dividends. That would make no sense. There ought to be 
prohibited golden parachutes for executives as well as executive 
bonuses during the duration of the loan. Again, I say park those 
corporate jets. How about announcing that you are willing to take $1 a 
year for the sake of trying to repair what is wrong with your company 
and trying to put that company back on track?
  I understand it wasn't their fault that sales dropped 30 percent. 
They are victims, as are all Americans, of this economic crisis. It is 
not their fault that sales dropped 30 percent. So if they need some 
help to save 3 to 5 million jobs, I think most Americans would say: 
Let's save those jobs. But most Americans would also ask the question: 
Where is the self-sacrifice on the part of those folks who are running 
these companies? Let's see a little and let's hear a little self-
sacrifice from people who say: I will own up to this. I will put 
something significant on the table in terms of trying to turn this

[[Page 24312]]

economy and these companies we run around.
  Let me finally say, there are a whole lot of folks across the country 
who are doing business the right way, Main Street businesses, community 
banks. They come to work in the morning. They turn the key. They open 
the lock on that door. They are at risk. They are just trying to make a 
living. Yet they, too, are victims, not because they got engaged in the 
kind of behavior in which some of the biggest companies in this country 
were engaged. Some of the biggest financial companies were engaged in 
reckless behavior. When the Financial Modernization Act passed the U.S. 
House of Representatives and the Senate nine years ago, an act that was 
a devastating piece of legislation that led us down this path to a 
financial collapse, I said back then when I voted against it--and I was 
one of eight Senators to vote no--I said: If you want to gamble, go to 
Las Vegas. No, instead they were allowed to gamble by creating holding 
companies and merging bank enterprises with securities and with real 
estate and other risks.
  We knew you shouldn't do that. We learned it in the Great Depression. 
It caused the closure of massive numbers of banks. Some of my 
colleagues brought a bill to the Congress and got almost everybody to 
agree to it that said: These lessons are old-fashioned. Let's let these 
financial institutions merge and fuse together risky things with 
banking, securities, and real estate. What an unbelievably ignorant 
thing to do. We had learned that lesson before and forgot it.
  Guess what. From that day on we began to see the kind of inherent 
risk established in financial enterprises that someday most of us 
believed would create the house of cards that would collapse. And it 
has. Now the question is, how do we put this back together?
  Let me say this: If I didn't have great hope for the future of this 
country, I would hardly be able to get up and go to work, but I think 
this is a resilient, wonderful place. We have made very big mistakes. A 
lot of people have made very big mistakes, perhaps all of us. But this 
country is a great place. Think about what America has been through: 
the Civil War, the Great Depression, beating back the forces of fascism 
and nazism. We have done so much in this country to prevail. This 
generation of Americans is not about to lose. This generation of 
Americans, too, will prevail. But it is going to require all of the 
effort of every one of us.
  This isn't about politics. It is certainly not about Republicans and 
Democrats. It is about creating good public policy that gives the 
American people confidence and hope in the future. That is what will 
get us out of this rut. Those who caused the financial wreckage, who 
drove this economy into the ditch, are not going to get us out. It is 
good public policy by thoughtful people that will begin mirroring what 
happens on Main Streets and community banks all across the country, 
doing business the right way. When that happens, we will put this 
country back on track. I hope that is sooner rather than later. I hope 
the American people do not lose hope because we believe, all of us 
believe, in the great promise of this country.
  It is true that we face great challenges, but we are turning a page. 
We will have a new Congress. We will have a new President and a new 
determination to try to fix what is wrong and put this country on a 
better path.
  I yield the floor.

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