[Congressional Record (Bound Edition), Volume 155 (2009), Part 14]
[House]
[Page 18473]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              {time}  1100
 FINANCIAL REGULATORY REFORM UNDER THE GROWING FED: A RECIPE FOR TOTAL 
                           GOVERNMENT CONTROL

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Florida (Mr. Stearns) for 5 minutes.
  Mr. STEARNS. Mr. Speaker, I rise this morning to address the critical 
issue of regulatory reform in our financial markets. In 1912, a year 
before he became President, Woodrow Wilson ominously stated ``waiting 
to be solved lurks the great question of banking reform.'' So here we 
are almost 100 years later, and we are facing the same lurking 
question.
  The Treasury Department recently issued an 85-page white paper 
containing five main objectives for reforming or financial markets. 
Although a few of these objectives may sound good on paper, the devil 
is always in the details. A closer look at this new plan reveals a 
fundamental change to our financial system and economy that will stifle 
the innovation and competition fostered by the traditional American 
free enterprise system, giving way to a future of Big Government 
propping up all companies that are ``too big to fail.''
  Specifically, the Obama financial regulatory reform plan calls for 
ceding the Federal Reserve a vast amount of additional authority with 
the power to create new requirements for capital and liquidity and for 
any firm ``whose combination of size, leverage, and interconnectedness 
could pose a threat to financial stability if it fails.'' The Fed, 
which has failed in the past as a regulator, will be allowed to oversee 
almost all aspects of any financial company in the United States and 
its foreign affiliates. Specifically, the Fed will be able to regulate, 
lend to and close down companies not normally under their control if 
they deem them to be a danger to the economy.
  My colleagues, this is total government control. Additionally, the 
Treasury will be given more powers as well, such as the ability to 
appoint a conservator or receiver to ``stabilize'' any large financial 
firm that is failing, any large financial firm. This will be done in 
lieu of bankruptcy proceedings, and the result will almost certainly 
lead to those ``too big to fail'' institutions, backed by the United 
States Government, having the upper hand in the market, particularly 
when it comes to raising funds, and smaller competitors will be forced 
out down the line. Thus, we are destined for an economy dominated by 
what essentially are government-backed entities, like the Fannie Maes 
and Freddie Macs.
  Big government backed by an all-powerful Federal Reserve isn't the 
answer to our financial problems. We cannot erode the components of our 
free market economy because we are afraid to let the market work. It 
will devastate the innovation and competition that has traditionally 
driven the American economy.
  Another issue worth mentioning when discussing regulatory reform of 
financial markets is the issue of transparency and possible conflicts 
of interest. Bill Gross of Pimco, a private financial institution that 
manages the world's largest mutual fund, is heavily involved in the 
mortgage securities market and is an open proponent of the Treasury's 
public-private investment program. Interestingly, in the spring of 
2008, Pimco actually presented a plan in Washington, D.C. for a public-
private partnership, very similar to the plan that Geithner came out 
with this year. Pimco is now hoping to be one of the companies that the 
Treasury picks to help buy up some of the $1.25 trillion in mortgage 
bonds that have sank big institutions like Bank of America and 
Citicorp.
  In addition, the Federal Reserve has also looked to Pimco to 
specifically ask for advice on which banks needed more taxpayer TARP 
funds to stay afloat. Pimco's close relationship with the Treasury and 
the Fed should not allow it to be the beneficiary of billions of 
dollars gained through Federal contracts and preferential investment 
opportunities, particularly with Geithner's public-private investment 
program he has proposed.
  Mr. Speaker, a free market is an economic system in which 
individuals, rather than the government, make the majority decisions 
regarding economic activities. In a free-market economy, the 
government's function is limited, and it should act in a way as an 
umpire and issue regulatory procedures. The Obama financial regulatory 
reform plan will move us away from our free-market system and towards a 
future where the free market is negated by government over-involvement 
in the private financial sector. We are moving toward a system of 
permanent interdependence of big companies' reliance on big government. 
This is fundamentally un-American, and the long-term consequences of 
such a plan are dire.
  Let's not make Washington, D.C. the bailout capital of the world for 
every private company in America. Let those companies suffer the 
consequences for their risky actions. Instead, let's be good stewards 
of taxpayer dollars, keeping in mind that more regulation doesn't mean 
better regulation and a powerful Federal Reserve isn't the answer to 
all of our financial problems.

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