[Congressional Record (Bound Edition), Volume 155 (2009), Part 19]
[House]
[Pages 25686-25688]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        A TALE OF TWO COUNTRIES

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
  Ms. KAPTUR. Madam Speaker, Fortune magazine reported on October 20, 
2009, a title story, ``Big Banks, Take Your Money and Run.''
  The New York Times today reported, ``As Wall Street has returned to 
business as usual, industry power has become even more concentrated 
among relatively few firms.''
  A handful of mammoth banks has brought our Nation, our credit system 
and our economy to its knees. Some call them ``too big to fail.'' One 
must ask:
  Why should a few big players have so much power that they can force 
taxpayer bailouts for themselves, can shut off credit and can hold the 
reins of our economy in their hands?
  A handful of firms are gobbling up our money and are killing off 
smaller banking institutions. Congress and this administration are just 
letting them do it. My friends, such concentration of financial power 
is dangerous to our country.
  A few Wall Street firms are on the fast track to controlling all 
banking in this country. Rather than address this by breaking up these 
banks, some in Washington say they just want to regulate them better. 
If you believe that, you haven't paid any attention over this last 
year.
  The biggest banks are getting bigger. In fact, a year ago, the 
biggest ones controlled 30 percent of the deposits in the country, 
according to Fortune magazine. Now they're up to 37 percent, and 
they're growing even faster. Here are their names: Bank of America, 
Wells Fargo, JPMorgan Chase, Citigroup, and PNC. PNC practically has 
price control power over western Pennsylvania and eastern Ohio right 
now.
  These firms have already shown us that regulations mean nothing to 
them. They invent loopholes before Washington has even thought of them. 
Why wouldn't they again? Not all of their activities were by the book 
either. Fraud is rampant. Yet we cannot

[[Page 25687]]

even get a grip on fraud because there are not enough FBI agents to 
look into mortgage, corporate and securities fraud. We need 1,000 FBI 
agents, not a few hundred, to untangle what has really been going on.
  Americans have a right to be angry about being cheated out of their 
money, their homes and their jobs; but how long will Congress and the 
administration tiptoe around the power grab? Wall Street goes right on, 
seizing all they can get their hands on, and they are holding onto the 
money so tightly they're not lending it. They're buying up one another 
and the smaller banks, rewarding themselves quite handsomely.
  There is a clear solution: Break them up. It's overdue. The Governor 
of the Bank of England says to break them up. Why not? Why are we 
protecting Wall Street's bad boys?
  Another terrible precedent: rewarding more hazard rather than 
preventing it. We've been there before, and look where it got us now. 
This brings to mind Charles Dickens' 19th-century English masterpiece, 
``A Tale of Two Cities,'' except this is the United States, and it is 
the 21st century, and it is a tale not of two cities but of two 
countries.
  There is one country where the giant banks are making so much money 
that they are setting aside enough to pay each worker in their 
investment banking division a bonus of $353,834. That country is Wall 
Street. The other country, where I come from--Toledo, Ohio and places 
like it--is where the median household annual income is not even one-
tenth of what they get as bonuses. Our median income is $35,216. That's 
not even one-tenth as much as JPMorgan Chase is setting aside just for 
bonuses for its investment banking employees.
  In one country, banks make themselves too big to fail. They privatize 
their profits and they socialize the losses. In the other country, 
which I represent, families, which are too small to matter, lose their 
jobs to globalization and their homes to foreclosure.
  In the other country, where I live, the unemployment rate exceeds 13 
percent. Housing values have fallen more than 10 percent in a single 
year, and foreclosures are up 94 percent. The mortgage workouts 
Congress promised with all of those bills that were rushed through here 
are just an illusion. They're not happening.
  There is something really wrong with this picture. There is something 
really wrong with our economy.
  Even one of the Wall Street analysts picked up on it. He was quoted 
by the AP as saying, ``Wall Street is picking up quite smartly while 
Main Street continues to suffer.'' Do you mean someone up there has 
finally noticed?
  Madam Speaker, there is a solution here: Break them up. It's long 
overdue.

                [From the New York Times, Oct. 26, 2009]

           Trying To Rein In ``Too Big To Fail'' Institutions

                          (By Stephen LaBaton)

       Washington.--Congress and the Obama administration are 
     about to take up one of the most fundamental issues stemming 
     from the near collapse of the financial system last year--how 
     to deal with institutions that are so big that the government 
     has no choice but to rescue them when they get in trouble.
       A senior administration official said on Sunday that after 
     extensive consultations with Treasury Department officials, 
     Representative Barney Frank, the chairman of the House 
     Financial Services Committee, would introduce legislation as 
     early as this week. The measure would make it easier for the 
     government to seize control of troubled financial 
     institutions, throw out management, wipe out the shareholders 
     and change the terms of existing loans held by the 
     institution.
       The official said the Treasury secretary, Timothy F. 
     Geithner, was planning to endorse the changes in testimony 
     before the House Financial Services Committee on Thursday.
       The White House plan as outlined so far would already make 
     it much more costly to be a large financial company whose 
     failure would put the financial system and the economy at 
     risk. It would force such institutions to hold more money in 
     reserve and make it harder for them to borrow too heavily 
     against their assets.
       Setting up the equivalent of living wills for corporations, 
     that plan would require that they come up with their own 
     procedure to be disentangled in the event of a crisis, a plan 
     that administration officials say ought to be made public in 
     advance.
       ``These changes will impose market discipline on the 
     largest and most interconnected companies,'' said Michael S. 
     Barr, assistant Treasury secretary for financial 
     institutions. One of the biggest changes the plan would make, 
     he said, is that instead of being controlled by creditors, 
     the process is controlled by the government.
       Some regulators and economists in recent weeks have 
     suggested that the administration's plan does not go far 
     enough. They say that the government should consider breaking 
     up the biggest banks and investment firms long before they 
     fail, or at least impose strict limits on their trading 
     activities--steps that the administration continues to 
     reject.
       Mr. Frank, Democrat of Massachusetts, said his committee 
     would now take up more aggressive legislation on the topic, 
     even as lawmakers and regulators continue working on other 
     problems highlighted by the financial crisis, including 
     overseeing executive pay, protecting consumers and regulating 
     the trading of derivatives.
       Illustrative of the mood of fear and anger over the huge 
     taxpayer bailouts was Mr. Frank's recent observation that 
     critics of the administration's health care proposal had 
     misdirected their concerns Congress would not be adopting 
     death panels for infirm people but for troubled companies.
       The administration and its Congressional allies are trying, 
     in essence, to graft the process used to resolve the troubles 
     of smaller commercial banks onto both large banking 
     conglomerates and nonbanking financial institutions whose 
     troubles could threaten to undermine the markets.
       That resolution process gives the government far more 
     sweeping authority over the institution and imposes major 
     burdens on lenders to the companies that they would not 
     ordinarily face when companies go into bankruptcy instead of 
     facing a takeover by the government.
       Deep-seated voter anger over the bailouts of companies like 
     the American International Group, Citigroup and Bank of 
     America has fed the fears of lawmakers that any other changes 
     in the regulatory system must include the imposition of more 
     onerous conditions on those financial institutions whose 
     troubles could pose problems for the markets.
       Some economists believe the mammoth size of some 
     institutions is a threat to the financial system at large. 
     Because these companies know the government could not allow 
     them to fail, the argument goes, they are more inclined to 
     take big risks.
       Also, under the current regulatory structure, the 
     government has limited power to step in quickly to resolve 
     problems at nonbank financial institutions that operate like 
     the failed investment banks Lehman Brothers and Bear Stearns, 
     and like the giant insurer A.I.G.
       As Wall Street has returned to business as usual, industry 
     power has become even more concentrated among relatively few 
     firms, thus intensifying the debate over how to minimize the 
     risks to the system.
       Some experts, including Mervyn King, governor of the Bank 
     of England, and Paul A. Volcker, the former chairman of the 
     Federal Reserve, have proposed drastic steps to force the 
     nation's largest financial institutions to shed their riskier 
     affiliates.
       In a speech last week, Mr. King said policy makers should 
     consider breaking up the largest banks and, in effect, 
     restore the Depression-era barriers between investment and 
     commercial banks.
       ``There are those who claim that such proposals are 
     impractical. It is hard to see why,'' Mr. King said. ``What 
     does seem impractical, however, are the current arrangements. 
     Anyone who proposed giving government guarantees to retail 
     depositors and other creditors, and then suggested that such 
     funding could be used to finance highly risky and speculative 
     activities, would be thought rather unworldly. But that is 
     where we now are.''
       The prevailing view in Washington, however, is more 
     restrained. Daniel K. Tarullo, an appointee of President 
     Obama's, last week dismissed the idea of breaking up big 
     banks as ``more a provocative idea than a proposal.''
       At a meeting Friday at the Federal Reserve Bank of Boston, 
     the Federal Reserve chairman, Ben S. Bernanke, said in 
     response to a question by a former Bank of England deputy 
     governor that he would prefer ``a more subtle approach 
     without losing the economic benefit of multifunction, 
     international firms.''
       Republican and Democratic lawmakers generally agree that 
     the ``too big to fail'' policy of taxpayer bailouts for the 
     giants of finance needs to be curtailed. But the fine print--
     how to reduce the policy and moral hazards it has 
     encouraged--has provoked fears on Wall Street.
       Even before Mr. Frank unveils his latest proposals, 
     industry executives and lawyers say its approach could make 
     it unnecessarily more expensive for them to do business 
     during less turbulent times.
       ``Of course you want to set up a system where an 
     institution dreads the day it happens because management gets 
     whacked, shareholders get whacked and the board gets 
     whacked,'' said Edward L. Yingling, president of the American 
     Bankers Association.

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     ``But you don't want to create a system that raises great 
     uncertainty and changes what institutions, risk management 
     executives and lawyers are used to.''
       T. Timothy Ryan, the president of the Securities Industry 
     and Financial Markets Association, said the market crisis 
     exposed that ``there was a failure in the statutory framework 
     for the resolution of large, interconnected firms and 
     everyone knows that.'' But he added that many institutions on 
     Wall Street were concerned that the administration's plan 
     would remove many of the bankruptcy protections given to 
     lenders of large institutions.
                                  ____


                   [From CNNMoney.com, Oct. 20, 2009]

                   Big Banks Take Your Money and Run


 the titans that survived last year's tumult have gathered deposits by 
   the bushel. but they have shown less of a knack for lending it out

                            (By Colin Barr)

       New York.--A river of cash has flowed into the biggest 
     banks over the past year. But for borrowers, it has been more 
     of a meandering stream.
       Deposits at the top five bank holding companies soared 29% 
     in the year ended June 30, according to the Federal Deposit 
     Insurance Corp.
       Yet only one of those banks--PNC (PNC, Fortune 500) of 
     Pittsburgh--boosted its lending by the same magnitude, 
     according to midyear data from regulatory filings.
       At Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, 
     Fortune 500) and Wells Fargo (WFC, Fortune 500), loan growth 
     trailed deposit growth by a wide margin.
       And Citigroup (C, Fortune 500), the bank that has received 
     the most federal aid since the market meltdown of September 
     2008, reported a decrease in lending despite an increasing 
     pool of deposits.
       All told, the five biggest deposit-taking banks added $852 
     billion in core deposits over the past year--essentially 
     checking and savings accounts of less than $100,000.
       Over the same period, their loan portfolios rose by just 
     $564 billion.
       This is noteworthy because these five banks received more 
     than $100 billion in direct taxpayer assistance via the 
     Troubled Asset Relief Program (TARP)--a program that was set 
     up to replenish the depleted capital levels of banks and 
     allow them to boost lending to consumers and small 
     businesses.
       Some fear the lending gap could hamper chances of an 
     economic recovery.
       Federal Reserve governor Daniel Tarullo told Congress this 
     month that commercial bank lending has declined through most 
     of 2009, ``with particularly severe consequences for small- 
     and medium-sized businesses, which are much more dependent on 
     banks than on the public capital markets that can be accessed 
     by larger corporations.''
       Of course, the slower loan growth is hardly a shocker. Loan 
     demand naturally drops off during a recession, as consumers 
     and businesses pay down debt and build cash reserves.
       The latest Fed senior loan officer opinion survey cited 
     weaker demand for all sorts of loans--particularly industrial 
     loans and commercial real estate loans.
       JPMorgan Chase spokesman Tom Kelly ``said that's why the 
     bank's loan growth lagged its deposit growth.
       ``We continue to lend, but what happened in the market and 
     the economy last year really spooked a lot of people. So they 
     started parking cash at banks,'' he said.
       Banks have also been reluctant to lend since they have been 
     taking big hits as existing loans go sour as well.
       Commercial net loan charge-offs hit 2.06% in the second 
     quarter--their highest level since the government started 
     tracking the data in 1988, according to the Federal Financial 
     Institutions Examination Council.
       Still, evidence that the banks are sitting on cash won't 
     sit well with the growing chorus of bailout critics.
       Big banks have come under fire for resisting plans to 
     reduce the risk of another financial sector meltdown and for 
     handing out huge pay packages at a time when jobs are 
     disappearing.
       Last week's disclosure that Goldman Sachs (GS, Fortune 500) 
     has set aside $16.7 billion for employee pay this year 
     inflamed critics who question why bankers should reap the 
     fruits of unlimited taxpayer support while the unemployment 
     rate is at a 26-year high.
       Many of the deposit gains came after big banks took over 
     weakened competitors during last year's crisis.
       JPMorgan Chase bought Washington Mutual after the Seattle-
     based savings and loan became the nation's largest bank 
     failure.
       Bank of America bought Countrywide and Merrill Lynch, both 
     of which owned banks that were among the top 20 in deposits 
     before their acquisition. BofA didn't immediately return a 
     call seeking comment.
       Wells Fargo and PNC both bulked up by buying bigger but 
     deeply troubled rivals. Wells acquired Wachovia after it 
     suffered a deposit run, while PNC purchased National City 
     after its request for TARP funding was denied. PNC didn't 
     comment.
       ``We are in fact lending to creditworthy customers,'' said 
     Wells spokeswoman Julia Tunis Bernard. She said Wells 
     extended $471 billion in new loan commitments between October 
     2008 and the end of the second quarter--some 19 times the 
     bank's TARP take.
       Even Citi, which sat out last fall's frenzied game of 
     banking musical chairs, still posted double-digit deposit 
     growth as Americans fled other investments for the safety of 
     federally insured banks. Citi didn't reply to a request for 
     comment.
       The top five firms--dubbed too-big-to-fail, or TBTF, for 
     their implicit government support--now control 37% of the 
     nation's deposits.
       That's well above their average from earlier this decade, 
     reviving questions about the risks of a financial system 
     that's even more concentrated than the one that imploded last 
     fall.
       ``The TBTF problem has not only moved beyond the banking 
     system, it has become much too costly for taxpayers and the 
     U.S. economy,'' University of Massachusetts researcher Jane 
     D'Arista wrote in an August paper.

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