[Congressional Record (Bound Edition), Volume 155 (2009), Part 23]
[House]
[Pages 31362-31377]
[From the U.S. Government Publishing Office, www.gpo.gov]




         WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2009

  The SPEAKER pro tempore (Mr. Himes). Pursuant to House Resolution 964 
and rule XVIII, the Chair declares the House in the Committee of the 
Whole House on the State of the Union for the further consideration of 
the bill, H.R. 4173.

                              {time}  0916


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the further consideration of 
the bill (H.R. 4173) to provide for financial regulatory reform, to 
protect consumers and investors, to enhance Federal understanding of 
insurance issues, to regulate the over-the-counter derivatives markets, 
and for other purposes, with Ms. Edwards of Maryland in the chair.
  The Clerk read the title of the bill.
  The Acting CHAIR. When the Committee of the Whole rose on Thursday, 
December 10, 2009, amendments en bloc offered by the gentleman from 
Massachusetts (Mr. Frank) had been disposed of.


                 Amendment No. 15 Offered by Mr. Cohen

  The Acting CHAIR. It is now in order to consider amendment No. 15 
printed in House Report 111-370.
  Mr. COHEN. Madam Chair, I rise to offer the amendment to the body 
that is at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 15 offered by Mr. Cohen:
       Page 1126, line 6, strike ``subsections'' and insert 
     ``subsection''.
       Page 1126, strike lines 15 through 25.

  The Acting CHAIR. Pursuant to House Resolution 964, the gentleman 
from Tennessee (Mr. Cohen) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from Tennessee.
  Mr. COHEN. I yield myself as much time as I may consume.
  I want to thank Chairman Frank for working with me to include this 
language in the Wall Street Reform and Consumer Protection Act of 2009.
  This amendment would strip a provision permitting the Securities and 
Exchange Commission to delegate regulation of investment advisers to 
the Financial Industry Regulatory Authority.
  In its present form, the bill would give FINRA sweeping rule-making 
authority over investment advisers which has been under the sole domain 
of the governmental regulatory agencies. This far-reaching provision 
would extend FINRA's jurisdiction to Federally registered investment 
advisory firms that manage almost 80 percent of all advisory firms' 
assets under management.
  FINRA does not have the necessary expertise or experience with 
investment advisers or the Investment Advisers Act to do the job, and 
the SEC is best positioned to oversee the investment advisers under the 
Investment Advisers Act.
  There is inherent conflict of interest in having a self-regulatory 
group that funds this agency and has always been on the side of broker 
dealers. We cannot afford to outsource key regulating functions to 
self-regulating organizations that act solely in the best interest of 
their clients.
  In a speech earlier this year, SEC Commissioner Luis Aguilar noted 
his opposition to establishing a self-regulatory organization for 
investment advisers because the ``SEC should not outsource its 
mission'' and because the SEC ``is the only securities regulator with 
the necessary experience in dealing with a principles-based regime.''
  I'm concerned that the high level of investor protection provided 
under the Advisers Act fiduciary duty would be diminished if FINRA were 
to obtain the additional authority. We should not expend the authority 
of FINRA to the investment advisory profession.
  Again, I urge the passage of this amendment which would keep the SEC 
as the proper, independent regulator of investment advisers.
  I reserve the balance of my time.
  Mr. BACHUS. I rise to claim the time in opposition.
  The Acting CHAIR. The gentleman from Alabama is recognized for 5 
minutes.
  Mr. BACHUS. Let me say to the gentleman from Tennessee, let me 
explain the purpose behind the provision which your amendment seeks to 
strike. And I say that I would be glad to work with the chairman and 
with the Member at this time, striking the provision that I inserted in 
the committee that you objected to, and won't ask for a recorded vote.
  So let me explain the background behind this amendment, and I think 
if we can all work together, I think we can make investors safer and 
make a better system.
  If the body will recall, and the chairman, on December 12 of last 
year, about a year ago, Bernie Madoff was arrested for committing the 
largest financial fraud in the history of the country. It was a 
tremendous scam--a $65 million Ponzi scheme which defrauded nonprofits, 
universities, and pension funds, and wiped out the savings of literally 
tens of thousands of families and citizens.
  Now, to do this, Bernie Madoff operated two separate entities: one 
was a broker dealer and one was an investment adviser. The fraud 
occurred with the investor adviser. That is where the fraud occurred.
  The investment adviser was registered with the SEC. The investment 
adviser, Madoff's investor adviser, was subject to examination by the 
SEC, but I would point out to the chairman of the full committee and 
the gentleman from Tennessee they never examined the investor adviser. 
They never examined it.
  Madoff operated a broker-dealer in the same premises and under the 
same name. And it was examined, was subject to examination by the SEC 
and by FINRA. I was saying let FINRA go ahead and examine the 
investment advisers, these dual operations where you have both. FINRA 
inspected the broker-dealer at least every other year, but the fraud 
didn't occur there; it occurred in the investment adviser.
  FINRA lacked the authority to go in and examine the investor adviser. 
They couldn't examine it. And my provision I put in the committee said 
let them be able to, as they examine the broker-dealer, let them go in 
and look at the books of the investment adviser if you're operating a 
dual operation. Had they had the right, they would have gone in and 
they would have discovered this fraud. The SEC, which had the right, 
never did it.
  Now, as I said earlier, maybe there's another solution. The SEC has 
said we don't want FINRA taking over our jurisdiction. What I'd like to 
say is, let's make sure the SEC starts doing their job. Let's make sure 
that they start examining these investment advisers. Someone needs to. 
The average investment adviser is only examined once every 10 years. 
Bernie Madoff's investment adviser was never examined. It's the kind of 
gap in regulation that causes disasters. It causes scams, it causes 
Bernie Madoffs of the world to get along for decades.
  That is why I introduced this amendment, the provision, which we're 
now striking.
  Now, going forward, we at least need to look at this. We need to know 
that there are 500 or 600 of these investment advisers and broker-
dealers, dual operations. And we need to make clear that the SEC, 
somewhere, that they have the authority to examine both investment 
advisers and broker-dealers. If they want to perform that mission--and 
I know one thing the chairman has done; he has added more money for the 
SEC. I think that is part of the answer,

[[Page 31363]]

but I think this committee, the Congress, as we go forward, needs to 
make sure they do their job. And there was a monumental failure of the 
SEC, and if they don't do their job or we find they don't and they have 
the resources, let's give it to someone else.
  I yield back the remainder of my time.
  Mr. COHEN. I want to thank the gentleman for working with us on the 
amendment, and I'd like to yield as much time as he needs to the 
chairman of the full committee, the gentleman from Massachusetts (Mr. 
Frank).
  Mr. FRANK of Massachusetts. I thank both of my colleagues. And the 
ranking member is exactly right in the concerns he has expressed, and 
that is why at the committee, the chairman of the subcommittee--Mr. 
Kanjorski and I tentatively agreed to this--we later heard some 
questions raised, in particular, someone I think for whom we all had an 
amount of respect, Denise Floyd Crawford, who's the longtime Texas 
securities administrator who really goes back four or five Texas 
administrations in a bipartisan way. And on behalf of the North 
American Securities Administration Association, she raised some 
concerns. And they were worried that this might, at some point, be too 
much of a delegation and therefore--and I appreciate the gentleman's 
comments--we agree with him that we do want to--our goal is to buff up 
investor protection.
  Clearly, there's a role for FINRA. I think we may have gone a little 
too far in what we accepted in committee. But we're not talking about 
getting rid of it altogether. So I appreciate the reasonableness of 
what the gentleman from Alabama has said. It will be our role next 
year, if this bill passes, to monitor the SEC. I look forward to 
oversight hearings to make sure they're using their authority. And 
particularly, how best to allow the SEC to draw on the resources of 
FINRA will be high on our agenda.
  Mr. BACHUS. Will the gentleman yield?
  Mr. FRANK. Yes.
  Mr. BACHUS. I appreciate that, and I think that is a logical solution 
to that. And at this time I will support the gentleman's amendment to 
strike the provision. And as I said when I brought this provision up, I 
wanted to highlight the fact that this is how Bernie Madoff, you know, 
he got away with operating these two operations on the same premises, 
and we need to do the--the regulators need to do a better job, someone, 
of being able to look across those operations.
  Mr. COHEN. I would just like to thank again the gentleman from 
Alabama. I know it's difficult for him to work with us on this because 
he is the champion of the SEC, the Crimson Tide of Alabama.
  With that, I would like to urge passage of the amendment.
  I yield back the remainder of the time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from Tennessee (Mr. Cohen).
  The amendment was agreed to.


                 Amendment No. 16 Offered by Mr. Peters

  The Acting CHAIR. It is now in order to consider amendment No. 16 
printed in House Report 111-370.
  Mr. PETERS. I have an amendment at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 16 offered by Mr. Peters:
       Page 402, after line 18, insert the following subparagraph:
       (E) Additional authorized assessments.--The Corporation is 
     authorized to conduct risk-based assessments on financial 
     companies in such amount and manner and subject to terms and 
     conditions that the Corporation determines, with the 
     concurrence of the Secretary of the Treasury and the Federal 
     Reserve Board, are necessary to pay any shortfall in the 
     Troubled Asset Relief Program established by the Emergency 
     Economic Stabilization Act of 2008 that would add to the 
     deficit or national debt, as identified by the Director of 
     the Office of Management and Budget, in consultation with the 
     Director of the Congressional Budget Office pursuant to 
     section 134 of such Act (12 U.S.C. Sec. 5239).

  The Acting CHAIRMAN. Pursuant to House Resolution 964, the gentleman 
from Michigan (Mr. Peters) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from Michigan.
  Mr. PETERS. I yield myself such time as I may consume.
  Today we are debating legislation that will end the ``too big to 
fail'' doctrine and provide a mechanism for ensuring that in the 
future, taxpayers will not be asked to foot the bill to clean up Wall 
Street's mistakes. My amendment improves this legislation by ensuring 
that taxpayers are not asked to foot the bill for Wall Street's past 
mistakes as well.
  My amendment will firmly establish that the financial industry--not 
taxpayers--will be responsible for making up any TARP shortfalls, and 
the TARP program will not add to our deficits or our national debt.

                              {time}  0930

  Section 134 of the Emergency Economic Stabilization Act of 2008 
requires the President to identify a mechanism for recovering any 
shortfalls in TARP funds after 5 years so as not to increase the budget 
deficit or national debt. However, the mechanism for recouping any 
shortfall is not identified.
  H.R. 4173 already empowers the FDIC to make risk-based assessments on 
the Nation's largest and most systemically risky financial institutions 
that will be used to create a Systemic Dissolution Fund used to seize 
and unwind any failed nonbank financial institution in the future, 
ensuring that there will be no more ad hoc bailouts of too-big-to-fail 
institutions.
  My amendment would give the FDIC authority to make additional 
assessments to these same large firms, whose excessive risk-taking 
caused the current financial crisis, and use those assessments to pay 
off any TARP shortfalls and ensure that the taxpayers are made whole.
  My amendment gives the American taxpayer certainty that all TARP 
funds will be recouped from the large financial companies that caused 
this financial crisis. It will allow Congress to show that we have a 
plan in place for the recoupment of any shortfall, consistent with the 
promises made during the debate over the Emergency Economic 
Stabilization Act. It will also ensure that the American public 
understands that we are not turning the page on TARP, but instead we 
have a clear and decisive plan for making sure that taxpayers are made 
whole.
  Madam Chair, I reserve the balance of my time.
  Mr. HENSARLING. I rise to claim time in opposition.
  The Acting CHAIR. The gentleman from Texas is recognized for 5 
minutes.
  Mr. HENSARLING. I yield myself as much time as I may consume. I rise 
in opposition to the gentleman's amendment.
  If this body really cares about protecting the taxpayer against 
losses in TARP, they will have an opportunity to show it later today, 
and that is, vote to end the TARP program. Now we could have a debate 
about what TARP was, but the more relevant debate is what TARP is. And 
today, TARP is nothing more than $700 billion of walking-around money 
for the administration. It's a $700 billion revolving bailout fund to 
advance the administration's political, social and economic agenda.
  And if you're concerned about protecting the taxpayer, why would you 
have a provision that further raids TARP for yet more taxpayer-funded 
foreclosure mitigation programs which have proven to be abject 
failures? You spend more taxpayer money on these programs, and 
foreclosure rates continue to climb and climb and climb. So if you're 
really serious about protecting taxpayers, put your vote where your 
sentiment is and vote later today to simply end the TARP program and 
end the bailouts. But given that the whole reason for being for this 
bill is a perpetual Wall Street bailout, I suspect, unfortunately, that 
will not occur.
  The second point I would make, Madam Chair, is some of the companies 
that received funds under the capital purchase program have now repaid 
them back with interest. So now we

[[Page 31364]]

are in the position to tax companies that have proven successful and 
paid back their funds, tax them for failing companies that didn't pay 
back theirs. Chrysler and GM received funds under TARP and Ford didn't. 
So under this, I suppose that we could assess Ford a tax to pay for 
losses the taxpayers will incur on GM and Chrysler. And we know that GM 
and Chrysler were defined as ``financial institutions'' under the TARP 
statute; therefore, Ford could be taxed under the gentleman's 
amendment. Is that smart? Is that fair? The answer is no.
  This is yet another tax to go on capital. You can't have capitalism 
without capital. And so we have a $150 billion tax for the revolving 
bailout fund; we have an unlimited tax by the new czar to ban and 
ration consumer credit products that could touch small businesses 
throughout our Nation. Every time you increase the cost of taxes on 
capital, you get less lending, you get less credit, more expensive 
credit. And less credit is fewer jobs.
  I would think at a time when our Nation has the highest unemployment 
rate in a generation that this is an institution that would be trying 
to create more jobs, trying to create more capital, trying to have 
small businesses access pools of capital, and all we do is see more 
legislation and more amendments to make capital less available and more 
expensive to our small businesses.
  This amendment must be rejected.
  I reserve the balance of my time.
  Mr. PETERS. Madam Chair, I would like to yield 1\1/2\ minutes to the 
gentleman from Michigan (Mr. Schauer).
  Mr. SCHAUER. Madam Chair, I rise in strong support of the Peters of 
Michigan amendment and the underlying legislation to reform our 
financial regulatory system.
  For many years, we were told that what is good for Wall Street is 
good for Main Street, that the benefits are somehow supposed to trickle 
down. But the only thing the people of Michigan have seen is their 
hopes and dreams trickle out of reach. Wall Street's collapse has left 
my State with a 15 percent unemployment rate.
  Last fall, Wall Street said they needed to borrow $700 billion from 
taxpayers to paper over their losses. Michiganders were forced to open 
up their wallets to support big Wall Street banks. Unfortunately, these 
big banks have decided to stop lending to Michigan homeowners and 
Michigan businesses. Employers can't get loans they need to bring 
people back to work.
  This week, the Treasury said that TARP has performed better than 
expected, but they still expect to lose taxpayer dollars. We still do 
not have a guarantee that the bailed-out financial industry will 
actually repay taxpayers for their loans.
  Mr. Peters has offered an excellent amendment to ensure American 
taxpayers will get their money back and that those that created this 
mess will pick up the tab. This amendment enables the FDIC to make 
additional assessments on the Nation's largest, most systemically risky 
financial institutions to pay back this TARP money. This amendment 
finally puts in place a plan for Wall Street to pay back its loan. This 
is common sense. Those institutions responsible for the collapse should 
at least be forced to repay their loans.
  Mr. HENSARLING. I continue to reserve my time.
  Mr. PETERS. Madam Chair, I would like to yield 1\1/2\ minutes to the 
gentleman from Virginia (Mr. Connolly).
  Mr. CONNOLLY of Virginia. Madam Chair, with today's action, the House 
will enact the most significant reform of our Nation's financial system 
since the Great Depression. These are not decisions we take lightly, 
but the prolonged recession and the near collapse of the financial 
market in the fall of 2008 have compelled us to respond.
  It will also end the era of taxpayer-funded bailouts. Madam 
Chairwoman, this amendment offered by my friend and colleague, Mr. 
Peters of Michigan, seeks to build on this legislation and will 
authorize the FDIC to make further assessments on the financial 
industry to ensure every penny of the TARP loans made to the banks is 
repaid and help reduce our Nation's debt and burden on the taxpayers.
  I urge adoption of the amendment, Madam Chairwoman.
  Mr. HENSARLING. I continue to reserve.
  The Acting CHAIR. The gentleman from Michigan has 30 seconds 
remaining.
  Mr. PETERS. Madam Chair, the amendment before us is a commonsense 
attempt to make sure that we recoup to the taxpayers the money that has 
been loaned to the financial industry. The gentleman from Texas 
mentions we should just end TARP, but that doesn't relieve us of the 
fact that we've got $140 billion that needs to be paid back so that 
it's not a liability on the taxpayers.
  This is a way in which we can recoup the money from the financial 
institutions, the very institutions that were responsible for bringing 
this financial meltdown to our country and the problems that have 
impacted my State and States all across this country. This is a 
commonsense approach, and I urge adoption.
  The Acting CHAIR. The time of the gentleman has expired.
  Mr. HENSARLING. Madam Chair, what is common sense is to terminate 
TARP--stop it before it can spend again. And I hear all this wonderful 
rhetoric about, well, somehow we are going to tax Wall Street for all 
of this. But look at the TARP program. Look at the taxpayer-funded 
foreclosure mitigation plans, all of which have been abject failures, 
where the taxpayer receives zero--zero--of his money back.
  And so this, again, is just one more way to assess a greater tax, a 
greater cost on capital when small businesses have seen their credit 
lines shrunk, withdrawn. Jobs are being lost all over the Nation. And 
so here is one more idea to, frankly, keep TARP going. And, again, if 
people want to put their vote where their sentiment is, they will have 
an opportunity to do it later today. It's a fundamental difference 
between the two approaches; and that is, our friends on the other side 
of the aisle still want a perpetual bailout.
  As I have said earlier, if there was truth in advertising, the bill 
before us would be named the ``Permanent Wall Street Bailout and 
Increase Job Losses Through Credit Rationing Act of 2009.''
  The best way to protect the taxpayer is to end TARP and stop the grab 
for other programs, not to increase taxes, yet again, on capital that 
is vitally needed for our small businesses in order to create more 
jobs.
  The Acting CHAIR. All time has expired.
  The question is on the amendment offered by the gentleman from 
Michigan (Mr. Peters).
  The question was taken; and the Acting Chair announced that the ayes 
appeared to have it.
  Mr. HENSARLING. Madam Chair, I demand a recorded vote.
  The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Michigan 
will be postponed.


                  Amendment No. 17 Offered by Mr. Watt

  The Acting CHAIR. It is now in order to consider amendment No. 17 
printed in House Report 111-370.
  Mr. WATT. I rise to offer the amendment.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 17 offered by Mr. Watt:
       Page 772, strike line 12 and all that follows through page 
     773, line 22, and insert the following:
       (1) In general.--The Director and the Agency may not 
     exercise any rulemaking, supervisory, enforcement, or any 
     other authority, including authority to order assessments, 
     over a motor vehicle dealer that is primarily engaged in the 
     sale and servicing of motor vehicles, the leasing and 
     servicing of motor vehicles, or both.
       (2) Certain activities excepted.--Paragraph (1) shall not 
     apply to--
       (A) any motor vehicle dealer to the extent that such motor 
     vehicle dealer engages in any financial activity other than 
     extending credit or leasing exclusively for the purpose of 
     enabling a consumer to purchase, lease, rent, repair, 
     refurbish, maintain, or service a motor vehicle from that 
     motor vehicle dealer; or
       (B) any credit transaction involving a person who operates 
     a line of business that involves the extension of retail 
     credit or retail

[[Page 31365]]

     leases involving motor vehicles, and in which--
       (i) the extension of retail credit or retail leases is 
     provided directly to consumers; and
       (ii) the contracts governing such extensions of retail 
     credit or retail leases are not assigned to a third party 
     finance or leasing source, except on a de minimis basis.

  The Acting CHAIR. Pursuant to House Resolution 964, the gentleman 
from North Carolina (Mr. Watt) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from North Carolina.
  Mr. WATT. Madam Chair, I yield myself 3\1/2\ minutes.
  Madam Chair, let me say at the outset it is my intention at the end 
of a short discussion to ask unanimous consent to withdraw the 
amendment, but I thought it would be enlightening to colleagues and to 
whoever else might be listening at this time in the morning to talk 
about some of the practical problems that you have even when there's 
broad agreement on an issue.
  And I will describe the process. Both Mr. Campbell, who is a member 
of the committee, and I agree that automobile dealers ought to be 
exempt in their primary duties from the CFPA, the Consumer Financial 
Protection Agency supervision and what have you. There was broad 
bipartisan and philosophical agreement on that general proposition in 
the committee when Mr. Campbell offered his amendment, and there was 
broad agreement that there were some practical problems with the way 
the amendment was written; and the chairman delegated to me and to Mr. 
Campbell the responsibility to try to find the right language. We set 
about trying to do that, and we have been diligently trying to do that.
  Then the practical problems intervened. Other people get their 
fingers in the pot and suggest different issues that need to be 
resolved. Mr. Campbell and I, on a Friday night, with him in California 
and me in North Carolina on our cell phones, have a conversation, and 
we are right at the verge of reaching an agreement, we think, and we 
are quibbling about words. Then he gets called away to the USC football 
game the next day, and I get called away the following day to the 
Carolina Panthers football game. And then we are right up against the 
deadline.
  Then we find out that the chairman has offered a manager's amendment 
that deals with part of the problem, but not all of it. We both 
submitted amendments to the Rules Committee. Mr. Campbell withdraws his 
amendment, mine is still standing, and we are still talking about the 
amendment.
  And then the automobile dealers, because they don't like my 
amendment, decide that they need to lobby against it and make it sound 
as if I'm opposed to what I was in favor of all along.

                              {time}  0945

  So we've been at this for a long time.
  And finally, yesterday, Mr. Campbell and I sat down and talked again 
and decided that we should not allow the perfect to be the enemy of the 
good. What we have in the bill with the manager's amendment 
substantially advances the process. We are not the end of the process 
anyway. The Senate is going to have to deal with this. And both of us 
are still intent on the philosophy that automobile dealers ought to be 
exempt from CFPA. We agree on that. And so here we are, and we thought 
it would be helpful to have this dialogue.
  With that, I reserve the balance of my time.
  Mr. CAMPBELL. Madam Chair, I rise to claim the time in opposition.
  The Acting CHAIR. The gentleman from California is recognized for 5 
minutes.
  Mr. CAMPBELL. I yield myself such time as I may consume.
  You know, maybe I shouldn't have gone to that USC football game 
because they lost, and so that was rather depressing. I don't know how 
the Carolina Panthers did, but----
  Mr. WATT. They lost, too.
  Mr. CAMPBELL. They lost, too. All right. Well, then, both of us 
didn't have a particularly good weekend.
  But as the gentleman from North Carolina (Mr. Watt) described, we've 
had discussions on this thing, and he has been very helpful and worked 
very constructively on this. In fact, the language that is in the bill 
now reflects a number of suggestions that the gentleman from North 
Carolina made which clarified some things that were, frankly, confusing 
and conflicting in the bill. So I appreciate Mr. Watt's constructive 
work on this and all that he has done with this.
  And yes, he's right, sometimes these things get very complicated and 
you sit down and you try and figure out, well, what exactly does this 
say and are we saying the right thing? But I think we now have reached 
agreement that what is in the bill is the right thing.
  There is broad agreement, as the gentleman from North Carolina 
suggested, with myself, with him, and broad agreement in this House 
that automobile dealers, in the normal course of their business, do not 
lend money and are not financial institutions and should not be subject 
to the additional regulation of the CFPA. If, however, they do lend 
money and act like financial institutions, then they will be subject. 
That is what this bill says. It is the right thing to say, and I think 
we have reached a good conclusion on this.
  I thank the gentleman from North Carolina very much for his very good 
and constructive work on this.
  Madam Chair, I reserve the balance of my time.
  Mr. WATT. Madam Chair, I yield 1 minute to the Chair of the 
committee.
  Mr. FRANK of Massachusetts. Madam Chair, I am very appreciative that 
two of the most constructive members of the committee, the gentleman 
from North Carolina and the gentleman from California, have been 
working together on this.
  We have a mix here of policy difference, but then also some technical 
questions. Clearly, there was a difference on whether or not auto 
dealers should get some kind of exemption. The majority of the 
committee felt that the auto dealer situation was such--I would think 
particularly because of the stresses they have unfairly been recently 
subjected to by the chaos of the auto industry--that they did deserve 
some.
  Once that question was resolved--I was in the minority on that, but 
it was resolved that they did--there were then technical issues about 
how to work it out. I am very pleased that two of our most thoughtful 
members are continuing a collaboration on this.
  The manager's amendment had some improvement in this situation that 
was mutually agreed to, and there is room, I believe, for further 
conversation and refinement. And so I just want to express, first, my 
appreciation, and secondly, my willingness, to the extent my role as 
Chair of the committee would be relevant, to try to effectuate what 
they work out.
  Mr. CAMPBELL. Madam Chair, I continue to reserve.
  Mr. WATT. Madam Chair, I will just say in closing that one of the 
other wonderful things that has come out of this is that prior to this, 
Mr. Campbell and I had never really had an opportunity to roll up our 
sleeves and work on issues together. It has been a joy to work with 
him, and he has been very constructive.
  I want to just reserve myself enough time to ask unanimous consent to 
withdraw the amendment, but I don't want to do that before he has the 
last word.
  Mr. CAMPBELL. And I have enjoyed working with you as well. I am glad 
that we are able to be where we are on this and look forward to working 
in the future as the bill moves forward.
  Madam Chair, I yield back the balance of my time.
  Mr. WATT. Madam Chair, I ask unanimous consent to withdraw the 
amendment.
  The Acting CHAIR. Without objection, the amendment is withdrawn.
  There was no objection.


               Amendment No. 18 Offered by Mr. Kanjorski

  The Acting CHAIR. It is now in order to consider amendment No. 18 
printed in House Report 111-370.
  Mr. KANJORSKI. I have an amendment at the desk as the designee of the 
gentleman from Massachusetts.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:


[[Page 31366]]

       Amendment No. 18 offered by Mr. Kanjorski:
       Strike section 6005 and redesignate the subsequent sections 
     in subtitle B of title V and conform the table of contents in 
     section 2 accordingly.

  The Acting CHAIR. Pursuant to House Resolution 964, the gentleman 
from Pennsylvania (Mr. Kanjorski) and a Member opposed each will 
control 5 minutes.
  The Chair recognizes the gentleman from Pennsylvania.
  Mr. KANJORSKI. Madam Chair, I rise in support of this amendment.
  Nationally Recognized Statistical Rating Organizations are those 
credit rating agencies that are registered with the Securities and 
Exchange Commission and, therefore, regulated. Most often, the phrase 
is shortened to its initials, NRSRO; however, in formal contracts and 
statutes, the words are spelled out and each word matters. 
Unfortunately, an amendment to change one of these words was 
inadvertently accepted during the markup. We switched out the word 
``recognized'' for the word ``registered.'' If enacted into law, such a 
change would put thousands of contracts in default and upset numerous 
Federal and State laws, rules, and regulations.
  Although well intended, such a seemingly minuscule change could have 
disastrous unintended consequences. We must not put contracts in 
default or undermine other laws and regulations. Therefore, I urge my 
colleagues to support this amendment and reinstate the correct word in 
this important legislation.
  I reserve the balance of my time.
  Mr. GARRETT of New Jersey. Madam Chair, I rise to claim time in 
opposition.
  The Acting CHAIR. The gentleman is recognized for 5 minutes.
  Mr. GARRETT of New Jersey. I yield myself 4 minutes.
  I thank the gentleman from Pennsylvania for his amendment, but more 
than that, I should say I thank the gentleman for addressing this 
larger issue of CRAs for a number of months. I have claimed time in 
opposition just on the amendment because I think we can probably work 
this out in a different way.
  The gentleman and I worked for a long time trying to address the 
issue of the credit rating agencies because both of us realize that 
when you lay out the reasons why we are in this financial mess that 
we're in right now, we may disagree on this point or that point as to 
exactly how we got here, but both of us, I believe, came to the 
conclusion that CRAs played a huge, huge part to bring us to where we 
are today with this financial mess. And the reason it did was because 
so many people failed to exercise what we would call proper market 
discipline when they made their investments, whether that was a small 
investor, a middle-size investor, or even the so-called 
``knowledgeable'' investors on Wall Street failed to use what, in 
normal times, they would inherently have inside of them to say, What is 
the proper decisionmaking that I should make before I make this 
investment or that investment? What risks should I take here or there? 
And why was that, though, is the question.
  Well, we looked at a whole bunch of things and we tried to come up 
with changes to the regulations of CRAs, the credit rating agencies, 
and we made a lot of changes that were improvements. But I think we 
came down to one point, that there was too much reliance upon credit 
rating agencies. Just because a CRA came out and said that on this 
particular security or this particular financial product that was rated 
AAA, regardless of what was actually in the package, regardless of the 
fact that maybe it was just a compilation of subprime mortgages with no 
likelihood whatsoever that they would ever be paid off, they got the 
AAA's seal of approval, and people invested in it. And, of course, the 
rest is history.
  We look at it, one of the reasons why we think they got the seal of 
approval and then why investors looked at that and said that was okay 
was because they had the seal of approval from the Federal Government. 
The CRAs were listed as NRSROs, Nationally Recognized Statistical 
Rating Organizations. So the investor, large or small, sophisticated or 
not, said, Well, if the Federal Government is going to put its 
imprimatur on these organizations, on these CRAs by saying they are 
nationally recognized, if the Federal Government is going to put its 
stamp of approval, let's say their Good Housekeeping Seal of Approval 
on these entities, then they must be okay and the decisions they are 
making must be okay. So that is what led to their decisions.
  That is why, in committee, Ranking Member Bachus proposed a change to 
this. He changed it from ``nationally recognized'' to ``nationally 
registered,'' merely that these entities were registered. No seal of 
approval, no stamp of the Good Housekeeping Seal of Approval, just that 
they had gone through the motions and had simply registered with the 
government as being a nationally registered statistical rating 
organization. That is why I think it made good sense to take away that 
seal of approval, and that is why I also believe that this legislation, 
this amendment in committee passed in a bipartisan manner out of 
committee.
  Now, I recognize that I am actually on the floor now, oddly enough, 
defending the actions of the committee here to a change. And I 
understand the potential problems, but I would suggest that perhaps 
other things could be done other than just stripping this out and going 
back to the way it was before. I would suggest that we leave it as 
``nationally registered statistical rating organizations,'' and as we 
go forward through the process, if we find--maybe it's minutia, maybe 
it's not, as far as some States' regulations or other Federal 
regulations that refer to this. I bet you there is a better, simpler 
way to just correspond this back for existing contracts and what have 
you, and I would look forward to working with the chairman and the 
other committee's chairman to solve those problems in the future.
  Mr. KANJORSKI. Madam Chair, I yield such time as he may require to 
the chairman.
  Mr. FRANK of Massachusetts. First, I would say to my friend from New 
Jersey, I very much agree with what he said about credit rating 
agencies. For the record, I would like to make an assertion I know he 
agrees with, that when he talks about our agreement on the CRAs and the 
role of the CRAs, we are talking about the credit rating agencies, not 
the Community Reinvestment Act, the other CRA with which we deal. 
Sometimes people don't pay full attention, so I don't want to get 
anybody too agitated.
  Yes, he is exactly right. He and I, in fact, collaborated on the 
legislation to remove the statutory assertion. And I think he is also 
correct, we fully agree--I think there is virtually unanimity on it--
with the purpose he articulated, tell the average investor to pay 
attention on your own, don't rely on the rating agencies, don't 
subcontract your judgment to them.
  Frankly, I am frustrated. I would hope that people out in the economy 
would take advantage of the full legal rights they have to create some 
buy side rating agencies. I think that would be very helpful. We 
checked. There are no obstacles to doing it. I had some frustration 
that we weren't able to do more. I think we have done as much as 
anybody could think of. I've seen some newspaper articles that said, 
Why didn't you do more? But they were, not surprisingly, absent of any 
suggestion. So, yes, I think it would be better if we had buy side 
rating agencies. In the interim, we have at least told people, use your 
own judgment.
  But as the gentleman acknowledged--and I think we can work this out--
going forward, the problem we got was from a number of States and 
private institutions that have imbedded in their statutes the old 
language. And I am pleased the gentleman said let's work together. I 
think it would mean meeting with various State agencies and the pension 
funds to see if there is some legislative fix we could adopt short of 
going back to the old name, because I agree with him as to the purpose 
of changing the name so that we can alleviate this problem there.
  So with that, I would be willing to say there is no need for the 
amendment, given that we have an agreement. We will ask our hardworking 
and

[[Page 31367]]

very creative staffs that can often work very well together to meet 
with those who have raised this issue to see if there is something else 
we could do that would meet their concern so they wouldn't have to all 
amend their statutes, et cetera. And with that, I think we have come to 
a conceptual agreement. And as is often the case, we, the Members, will 
come to a conceptual agreement and the staff will do all the hard work 
of making it a reality.
  Mr. KANJORSKI. Madam Chair, I reserve the balance of my time.
  The Acting CHAIR. The gentleman from New Jersey has 1 minute 
remaining.
  Mr. GARRETT of New Jersey. I appreciate the chairman's comments and 
look forward to seeing how this can be dealt with if this bill 
eventually does pass and goes over to the Senate and into the 
conference.
  Mr. FRANK of Massachusetts. Would the gentleman yield?
  Mr. GARRETT of New Jersey. Yes.
  Mr. FRANK of Massachusetts. I would just say no one can dictate to 
anyone, but if there were to be a ``no'' on the voice vote, I think 
that would be a reasonable end to this particular discussion and we 
could then continue on the level we talked about.

                              {time}  1000

  Mr. GARRETT of New Jersey. There is that comment, and also there is 
the understanding that we are not talking about the other CRA. 
Although, if we could make a UC, and if we could put that as being a 
cause--no, I guess we can't do that. That's a bridge too far.
  I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from Pennsylvania (Mr. Kanjorski).
  The amendment was rejected.


                Amendment No. 19 Offered by Mr. Marshall

  The Acting CHAIR. It is now in order to consider amendment No. 19 
printed in House Report 111-370.
  Mr. MARSHALL. I rise as the designee of the gentleman from Michigan 
(Mr. Conyers).
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 19 offered by Mr. Marshall:
       At the end of the bill, insert the following (and make such 
     technical and conforming changes as may be appropriate):

             TITLE VII--PREVENTION OF MORTGAGE FORECLOSURES

           Subtitle A--Modification of Residential Mortgages

     SEC. 9001. DEFINITION.

       Section 101 of title 11, United States Code, is amended by 
     inserting after paragraph (43) the following (and make such 
     technical and conforming changes as may be appropriate):
       ``(43A) The term `qualified loan modification' means a loan 
     modification agreement made in accordance with the guidelines 
     of the Obama Administration's Homeowner Affordability and 
     Stability Plan as implemented March 4, 2009, that--
       ``(A) reduces the debtor's payment (including principal and 
     interest, and payments for real estate taxes, hazard 
     insurance, mortgage insurance premium, homeowners' 
     association dues, ground rent, and special assessments) on a 
     loan secured by a senior security interest in the principal 
     residence of the debtor, to a percentage of the debtor's 
     income in accordance with such guidelines, without any period 
     of negative amortization or under which the aggregate amount 
     of the regular periodic payments would not fully amortize the 
     outstanding principal amount of such loan;
       ``(B) requires no fees or charges to be paid by the debtor 
     in order to obtain such modification; and
       ``(C) permits the debtor to continue to make payments under 
     the modification agreement notwithstanding the filing of a 
     case under this title, as if such case had not been filed.''.

     SEC. 9002. ELIGIBILITY FOR RELIEF.

       Section 109 of title 11, United States Code, is amended--
       (1) by adding at the end of subsection (e) the following: 
     ``For purposes of this subsection, the computation of debts 
     shall not include the secured or unsecured portions of--
       ``(1) debts secured by the debtor's principal residence if 
     the value of such residence as of the date of the order for 
     relief under chapter 13 is less than the applicable maximum 
     amount of noncontingent, liquidated, secured debts specified 
     in this subsection; or
       ``(2) debts secured or formerly secured by what was the 
     debtor's principal residence that was sold in foreclosure or 
     that the debtor surrendered to the creditor if the value of 
     such real property as of the date of the order for relief 
     under chapter 13 was less than the applicable maximum amount 
     of noncontingent, liquidated, secured debts specified in this 
     subsection.'', and
       (2) by adding at the end of subsection (h) the following:
       ``(5) Notwithstanding the 180-day period specified in 
     paragraph (1), with respect to a debtor in a case under 
     chapter 13 who submits to the court a certification that the 
     debtor has received notice that the holder of a claim secured 
     by the debtor's principal residence may commence a 
     foreclosure on the debtor's principal residence, the 
     requirements of paragraph (1) shall be considered to be 
     satisfied if the debtor satisfies such requirements not later 
     than the expiration of the 30-day period beginning on the 
     date of the filing of the petition.''.

     SEC. 9003. PROHIBITING CLAIMS ARISING FROM VIOLATIONS OF THE 
                   TRUTH IN LENDING ACT.

       Section 502(b) of title 11, United States Code, is 
     amended--
       (1) in paragraph (8) by striking ``or'' at the end,
       (2) in paragraph (9) by striking the period at the end and 
     inserting ``; or'', and
       (3) by adding at the end the following:
       ``(10) the claim for a loan secured by a security interest 
     in the debtor's principal residence is subject to a remedy 
     for rescission under the Truth in Lending Act notwithstanding 
     the prior entry of a foreclosure judgment, except that 
     nothing in this paragraph shall be construed to modify, 
     impair, or supersede any other right of the debtor.''.

     SEC. 9004. AUTHORITY TO MODIFY CERTAIN MORTGAGES.

       Section 1322 of title 11, United States Code, is amended--
       (1) in subsection (b)--
       (A) by redesignating paragraph (11) as paragraph (12),
       (B) in paragraph (10) by striking ``and'' at the end, and
       (C) by inserting after paragraph (10) the following:
       ``(11) notwithstanding paragraph (2), with respect to a 
     claim for a loan originated before the effective date of this 
     paragraph and secured by a security interest in the debtor's 
     principal residence that is the subject of a notice that a 
     foreclosure may be commenced with respect to such loan, 
     modify the rights of the holder of such claim (and the rights 
     of the holder of any claim secured by a subordinate security 
     interest in such residence)--
       ``(A) by providing for payment of the amount of the allowed 
     secured claim as determined under section 506(a)(1);
       ``(B) if any applicable rate of interest is adjustable 
     under the terms of such loan by prohibiting, reducing, or 
     delaying adjustments to such rate of interest applicable on 
     and after the date of filing of the plan;
       ``(C) by modifying the terms and conditions of such loan--
       ``(i) to extend the repayment period for a period that is 
     no longer than the longer of 40 years (reduced by the period 
     for which such loan has been outstanding) or the remaining 
     term of such loan, beginning on the date of the order for 
     relief under this chapter; and
       ``(ii) to provide for the payment of interest accruing 
     after the date of the order for relief under this chapter at 
     a fixed annual rate equal to the currently applicable average 
     prime offer rate as of the date of the order for relief under 
     this chapter, corresponding to the repayment term determined 
     under the preceding paragraph, as published by the Federal 
     Financial Institutions Examination Council in its table 
     entitled `Average Prime Offer Rates--Fixed', plus a 
     reasonable premium for risk; and
       ``(D) by providing for payments of such modified loan 
     directly to the holder of the claim or, at the discretion of 
     the court, through the trustee during the term of the plan; 
     and'', and
       (2) by adding at the end the following:
       ``(g) A claim may be reduced under subsection (b)(11)(A) 
     only on the condition that if the debtor sells the principal 
     residence securing such claim, before completing all payments 
     under the plan (or, if applicable, before receiving a 
     discharge under section 1328(b)) and receives net proceeds 
     from the sale of such residence, then the debtor agrees to 
     pay to such holder not later than 15 days after receiving 
     such proceeds--
       ``(1) if such residence is sold in the 1st year occurring 
     after the effective date of the plan, 90 percent of the 
     amount of the difference between the sales price and the 
     amount of such claim as originally determined under 
     subsection (b)(11) (plus costs of sale and improvements), but 
     not to exceed the unpaid amount of the allowed secured claim 
     determined as if such claim had not been reduced under such 
     subsection;
       ``(2) if such residence is sold in the 2d year occurring 
     after the effective date of the plan, 70 percent of the 
     amount of the difference between the sales price and the 
     amount of such claim as originally determined under 
     subsection (b)(11) (plus costs of sale and improvements), but 
     not to exceed the unpaid amount of the allowed secured claim 
     determined as if such claim had not been reduced under such 
     subsection;
       ``(3) if such residence is sold in the 3d year occurring 
     after the effective date of the plan, 50 percent of the 
     amount of the difference between the sales price and the 
     amount of such

[[Page 31368]]

     claim as originally determined under subsection (b)(11) (plus 
     costs of sale and improvements), but not to exceed the unpaid 
     amount of the allowed secured claim determined as if such 
     claim had not been reduced under such subsection;
       ``(4) if such residence is sold in the 4th year occurring 
     after the effective date of the plan, 30 percent of the 
     amount of the difference between the sales price and the 
     amount of such claim as originally determined under 
     subsection (b)(11) (plus costs of sale and improvements), but 
     not to exceed the unpaid amount of the allowed secured claim 
     determined as if such claim had not been reduced under such 
     subsection; and
       ``(5) if such residence is sold in the 5th year occurring 
     after the effective date of the plan, 10 percent of the 
     amount of the difference between the sales price and the 
     amount of such claim as originally determined under 
     subsection (b)(11) (plus costs of sale and improvements), but 
     not to exceed the unpaid amount of the allowed secured claim 
     determined as if such claim had not been reduced under such 
     subsection.
       ``(h) With respect to a claim of the kind described in 
     subsection (b)(11), the plan may not contain a modification 
     under the authority of subsection (b)(11)--
       ``(1) in a case commenced under this chapter after the 
     expiration of the 30-day period beginning on the effective 
     date of this subsection, unless--
       ``(A) the debtor certifies that the debtor--
       ``(i) not less than 30 days before the commencement of the 
     case, contacted the holder of such claim (or the entity 
     collecting payments on behalf of such holder) regarding 
     modification of the loan that is the subject of such claim;
       ``(ii) provided the holder of the claim (or the entity 
     collecting payments on behalf of such holder) a written 
     statement of the debtor's current income, expenses, and debt 
     substantially conforming with the schedules required under 
     section 521(a) or such other form as is promulgated by the 
     Judicial Conference of the United States for such purpose; 
     and
       ``(iii) considered any qualified loan modification offered 
     to the debtor by the holder of the claim (or the entity 
     collecting payments on behalf of such holder); or
       ``(B) a foreclosure sale is scheduled to occur on a date in 
     the 30-day period beginning on the date the case is 
     commenced;
       ``(2) in any other case pending under this chapter, unless 
     the debtor certifies that the debtor attempted to contact the 
     holder of such claim (or the entity collecting payments on 
     behalf of such holder) regarding modification of the loan 
     that is the subject of such claim, before--
       ``(A) filing a plan under section 1321 that contains a 
     modification under the authority of subsection (b)(11); or
       ``(B) modifying a plan under section 1323 or 1329 to 
     contain a modification under the authority of subsection 
     (b)(11).
       ``(i) In determining the holder's allowed secured claim 
     under section 506(a)(1) for purposes of subsection 
     (b)(11)(A), the value of the debtor's principal residence 
     shall be the fair market value of such residence on the date 
     such value is determined and, if the issue of value is 
     contested, the court shall determine such value in accordance 
     with the appraisal rules used by the Federal Housing 
     Administration.''.

     SEC. 9005. COMBATING EXCESSIVE FEES.

       Section 1322(c) of title 11, United States Code, is 
     amended--
       (1) in paragraph (1) by striking ``and'' at the end,
       (2) in paragraph (2) by striking the period at the end and 
     inserting a semicolon, and
       (3) by adding at the end the following:
       ``(3) the debtor, the debtor's property, and property of 
     the estate are not liable for a fee, cost, or charge that is 
     incurred while the case is pending and arises from a debt 
     that is secured by the debtor's principal residence except to 
     the extent that--
       ``(A) the holder of the claim for such debt files with the 
     court and serves on the trustee, the debtor, and the debtor's 
     attorney (annually or, in order to permit filing consistent 
     with clause (ii), at such more frequent periodicity as the 
     court determines necessary) notice of such fee, cost, or 
     charge before the earlier of--
       ``(i) 1 year after such fee, cost, or charge is incurred; 
     or
       ``(ii) 60 days before the closing of the case; and
       ``(B) such fee, cost, or charge--
       ``(i) is lawful under applicable nonbankruptcy law, 
     reasonable, and provided for in the applicable security 
     agreement; and
       ``(ii) is secured by property the value of which is greater 
     than the amount of such claim, including such fee, cost, or 
     charge;
       ``(4) the failure of a party to give notice described in 
     paragraph (3) shall be deemed a waiver of any claim for fees, 
     costs, or charges described in paragraph (3) for all 
     purposes, and any attempt to collect such fees, costs, or 
     charges shall constitute a violation of section 524(a)(2) or, 
     if the violation occurs before the date of discharge, of 
     section 362(a); and
       ``(5) a plan may provide for the waiver of any prepayment 
     penalty on a claim secured by the debtor's principal 
     residence.''.

     SEC. 9006. CONFIRMATION OF PLAN.

       (a) Section 1325(a) of title 11, United States Code, is 
     amended--
       (1) in the matter preceding paragraph (1) strike 
     ``subsection (b)'' and insert ``subsections (b) and (d)''.
       (2) in paragraph (5)--
       (A) by inserting ``except as otherwise provided in section 
     1322(b)(11),'' after ``(5)'', and
       (B) in subparagraph (B)(iii)(I) by inserting ``(including 
     payments of a claim modified under section 1322(b)(11))'' 
     after ``payments'' the 1st place it appears,
       (3) in paragraph (8) by striking ``and'' at the end,
       (4) in paragraph (9) by striking the period at the end and 
     inserting a semicolon, and
       (5) by inserting after paragraph (9) the following:
       ``(10) notwithstanding subclause (I) of paragraph 
     (5)(B)(i), whenever the plan modifies a claim in accordance 
     with section 1322(b)(11), the holder of a claim whose rights 
     are modified pursuant to section 1322(b)(11) shall retain the 
     lien until the later of--
       ``(A) the payment of such holder's allowed secured claim; 
     or
       ``(B) completion of all payments under the plan (or, if 
     applicable, receipt of a discharge under section 1328(b)); 
     and
       ``(11) whenever the plan modifies a claim in accordance 
     with section 1322(b)(11), the court finds that such 
     modification is in good faith (Lack of good faith exists if 
     the debtor has no need for relief under this paragraph 
     because the debtor can pay all of his or her debts and any 
     future payment increases on such debts without difficulty for 
     the foreseeable future, including the positive amortization 
     of mortgage debt. In determining whether a reduction of the 
     principal amount of the loan resulting from a modification 
     made under the authority of section 1322(b)(11) is made in 
     good faith, the court shall consider whether the holder of 
     such claim (or the entity collecting payments on behalf of 
     such holder) has offered to the debtor a qualified loan 
     modification that would enable the debtor to pay such debts 
     and such loan without reducing such principal amount.) and 
     does not find that the debtor has been convicted of obtaining 
     by actual fraud the extension, renewal, or refinancing of 
     credit that gives rise to a modified claim.''.
       (b) Section 1325 of title 11, United States Code, is 
     amended by adding at the end the following (and make such 
     technical and conforming changes as may be appropriate):
       ``(d) Notwithstanding section 1322(b)(11)(C)(ii), the 
     court, on request of the debtor or the holder of a claim 
     secured by a senior security interest in the debtor's 
     principal residence, may confirm a plan proposing a reduction 
     in the interest rate on the loan secured by such security 
     interest and that does not reduce the principal, provided the 
     total monthly mortgage payment is reduced to a percentage of 
     the debtor's income in accordance with the guidelines of the 
     Obama Administration's Homeowner Affordability and Stability 
     Plan as implemented March 4, 2009, if, taking into account 
     the debtor's financial situation, after allowance of expenses 
     that would be permitted for a debtor under this chapter 
     subject to paragraph (3) of subsection (b), regardless of 
     whether the debtor is otherwise subject to such paragraph, 
     and taking into account additional debts and fees that are to 
     be paid in this chapter and thereafter, the debtor would be 
     able to prevent foreclosure and pay a fully amortizing 30-
     year loan at such reduced interest rate without such 
     reduction in principal.''.

     SEC. 9007. DISCHARGE.

       Section 1328(a) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(other than payments to holders of 
     claims whose rights are modified under section 1322(b)(11))'' 
     after ``paid'', and
       (2) in paragraph (1) by inserting ``or, to the extent of 
     the unpaid portion of an allowed secured claim, provided for 
     in section 1322(b)(11)'' after ``1322(b)(5)''.

     SEC. 9008. STANDING TRUSTEE FEES.

       (a) Amendment to Title 28.--Section 586(e)(1)(B)(i) of 
     title 28, United States Code, is amended--
       (1) by inserting ``(I) except as provided in subparagraph 
     (II)'' after ``(i)'',
       (2) by striking ``or'' at the end and inserting ``and'', 
     and
       (3) by adding at the end the following:
       ``(II) 4 percent with respect to payments received under 
     section 1322(b)(11) of title 11 by the individual as a result 
     of the operation of section 1322(b)(11)(D) of title 11, 
     unless the bankruptcy court waives all fees with respect to 
     such payments based on a determination that such individual 
     has income less than 150 percent of the official poverty line 
     (as defined by the Office of Management and Budget, and 
     revised annually in accordance with section 673(2) of the 
     Omnibus Budget Reconciliation Act of 1981) applicable to a 
     family of the size involved and payment of such fees would 
     render the debtor's plan infeasible.''.
       (b) Conforming Provision.--The amendments made by this 
     section shall apply to any trustee to whom the provisions of 
     section 302(d)(3) of the Bankruptcy Judges, United States 
     Trustees, and Family Farmer Bankruptcy Act of 1986 (Public 
     Law 99-554; 100 Stat. 3121) apply.

[[Page 31369]]



     SEC. 9009. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

       (a) Effective Date.--Except as provided in subsection (b), 
     this subtitle and the amendments made by this subtitle shall 
     take effect on the date of the enactment of this Act.
       (b) Application of Amendments.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this subtitle shall apply with respect to 
     cases commenced under title 11 of the United States Code 
     before, on, or after the date of the enactment of this Act.
       (2) Limitation.--Paragraph (1) shall not apply with respect 
     to cases closed under title 11 of the United States Code as 
     of the date of the enactment of this Act that are neither 
     pending on appeal in, nor appealable to, any court of the 
     United States.

     SEC. 9010. GAO STUDY.

       The Comptroller General shall carry out a study, and submit 
     to the Committee on the Judiciary of the House of 
     Representatives and the Committee on the Judiciary of the 
     Senate, not later than 2 years after the date of the 
     enactment of this Act a report containing--
       (1) the results of such study of--
       (A) the number of debtors who filed, during the 1-year 
     period beginning on the date of the enactment of this Act, 
     cases under chapter 13 of title 11 of the United States Code 
     for the purpose of restructuring their principal residence 
     mortgages,
       (B) the number of mortgages restructured under the 
     amendments made by this subtitle that subsequently resulted 
     in default and foreclosure,
       (C) a comparison between the effectiveness of mortgages 
     restructured under non-judicial voluntary mortgage 
     modification programs and mortgages restructured under the 
     amendments made by this subtitle,
       (D) the number of cases presented to the bankruptcy courts 
     where mortgages were restructured under the amendments made 
     by this subtitle that were appealed,
       (E) the number of cases presented to the bankruptcy courts 
     where mortgages were restructured under the amendments made 
     by this subtitle that were overturned on appeal, and
       (F) the number of bankruptcy judges disciplined as a result 
     of actions taken to restructure mortgages under the 
     amendments made by this subtitle, and
       (2) a recommendation as to whether such amendments should 
     be amended to include a sunset clause.

     SEC. 9011. REPORT TO CONGRESS.

       Not later than 18 months after the date of the enactment of 
     this Act, the Comptroller General, in consultation with the 
     Federal Housing Administration, shall submit to the Congress, 
     a report containing--
       (1) a comprehensive review of the effects of the amendments 
     made by this subtitle on bankruptcy courts,
       (2) a survey of whether the program should limit the types 
     of homeowners eligible for the program, and
       (3) a recommendation on whether such amendments should 
     remain in effect.

          Subtitle B--Related Mortgage Modification Provisions

     SEC. 9021. ADJUSTMENTS AS A RESULT OF MODIFICATION IN 
                   BANKRUPTCY OF HOUSING LOANS GUARANTEED BY THE 
                   DEPARTMENT OF VETERANS AFFAIRS.

       (a) In General.--Section 3732 of title 38, United States 
     Code, is amended--
       (1) in subsection (a)--
       (A) by redesignating paragraph (2) as subparagraph (A) of 
     paragraph (2), and
       (2) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) In the event that a housing loan guaranteed under 
     this chapter is modified under the authority provided under 
     section 1322(b) of title 11, United States Code, the 
     Secretary may pay the holder of the obligation the unpaid 
     balance of the obligation due as of the date of the filing of 
     the petition under title 11, United States Code, plus accrued 
     interest, but only upon the assignment, transfer, and 
     delivery to the Secretary (in a form and manner satisfactory 
     to the Secretary) of all rights, interest, claims, evidence, 
     and records with respect to the housing loan.''.
       (b) Maturity of Housing Loans.--Paragraph (1) of section 
     (d) of section 3703 of title 38, United States Code, is 
     amended by inserting ``at the time of origination'' after 
     ``loan''.
       (c) Implementation.--The Secretary of Veterans Affairs may 
     implement the amendments made by this section through notice, 
     procedure notice, or administrative notice.

     SEC. 9022. PAYMENT OF FHA MORTGAGE INSURANCE BENEFITS.

       (a) In General.--Subsection (a) of section 204 of the 
     National Housing Act (12 U.S.C. 1710(a)) is amended--
       (1) in paragraph (1), by adding at the end the following 
     new subparagraph:
       ``(E) Modification of mortgage in bankruptcy.--
       ``(i) Authority.--If an order is entered under the 
     authority provided under section 1322(b) of title 11, United 
     States Code, that (a) determines the amount of an allowed 
     secured claim under a mortgage in accordance with section 
     506(a)(1) of title 11, United States Code, and the amount of 
     such allowed secured claim is less than the amount due under 
     the mortgage as of the date of the filing of the petition 
     under title 11, United States Code, or (b) reduces the 
     interest to be paid under a mortgage in accordance with 
     section 1325 of such title, the Secretary may pay insurance 
     benefits for the mortgage as follows:

       ``(I) Full payment and assignment.--The Secretary may pay 
     the insurance benefits for the mortgage, but only upon the 
     assignment, transfer, and delivery to the Secretary of all 
     rights, interest, claims, evidence, and records with respect 
     to the mortgage specified in clauses (i) through (iv) of 
     paragraph (1)(A). The insurance benefits shall be paid in the 
     amount equal to the original principal obligation of the 
     mortgage (with such additions and deductions as the Secretary 
     determines are appropriate) which was unpaid upon the date of 
     the filing of by the mortgagor of the petition under title 11 
     of the United States Code. Nothing in this Act may be 
     construed to prevent the Secretary from providing insurance 
     under this title for a mortgage that has previously been 
     assigned to the Secretary under this subclause. The decision 
     of whether to utilize the authority under this subclause for 
     payment and assignment shall be at the election of the 
     mortgagee, subject to such terms and conditions as the 
     Secretary may establish.
       ``(II) Assignment of unsecured claim.--The Secretary may 
     make a partial payment of the insurance benefits for any 
     unsecured claim under the mortgage, but only upon the 
     assignment to the Secretary of any unsecured claim of the 
     mortgagee against the mortgagor or others arising out of such 
     order. Such assignment shall be deemed valid irrespective of 
     whether such claim has been or will be discharged under title 
     11 of the United States Code. The insurance benefits shall be 
     paid in the amount specified in subclause (I) of this clause, 
     as such amount is reduced by the amount of the allowed 
     secured claim. Such allowed secured claim shall continue to 
     be insured under section 203.
       ``(III) Interest payments.--The Secretary may make periodic 
     payments, or a one-time payment, of insurance benefits for 
     interest payments that are reduced pursuant to such order, as 
     determined by the Secretary, but only upon assignment to the 
     Secretary of all rights and interest related to such 
     payments.

       ``(ii) Delivery of evidence of entry of order.--
     Notwithstanding any other provision of this paragraph, no 
     insurance benefits may be paid pursuant to this subparagraph 
     for a mortgage before delivery to the Secretary of evidence 
     of the entry of the order issued pursuant to title 11, United 
     States Code, in a form satisfactory to the Secretary.'';
       (2) in paragraph (5), in the matter preceding subparagraph 
     (A), by inserting after ``section 520, and'' the following: 
     ``, except as provided in paragraph (1)(E),''; and
       (3) by adding at the end the following new paragraph:
       ``(10) Loan modification program.--
       ``(A) Authority.--The Secretary may carry out a program 
     solely to encourage loan modifications for eligible 
     delinquent mortgages through the payment of insurance 
     benefits and assignment of the mortgage to the Secretary and 
     the subsequent modification of the terms of the mortgage 
     according to a loan modification approved by the mortgagee.
       ``(B) Payment of benefits and assignment.--Under the 
     program under this paragraph, the Secretary may pay insurance 
     benefits for a mortgage, in the amount determined in 
     accordance with paragraph (5)(A), without reduction for any 
     amounts modified, but only upon the assignment, transfer, and 
     delivery to the Secretary of all rights, interest, claims, 
     evidence, and records with respect to the mortgage specified 
     in clauses (i) through (iv) of paragraph (1)(A).
       ``(C) Disposition.--After modification of a mortgage 
     pursuant to this paragraph, the Secretary may provide 
     insurance under this title for the mortgage. The Secretary 
     may subsequently--
       ``(i) re-assign the mortgage to the mortgagee under terms 
     and conditions as are agreed to by the mortgagee and the 
     Secretary;
       ``(ii) act as a Government National Mortgage Association 
     issuer, or contract with an entity for such purpose, in order 
     to pool the mortgage into a Government National Mortgage 
     Association security; or
       ``(iii) re-sell the mortgage in accordance with any program 
     that has been established for purchase by the Federal 
     Government of mortgages insured under this title, and the 
     Secretary may coordinate standards for interest rate 
     reductions available for loan modification with interest 
     rates established for such purchase.
       ``(D) Loan servicing.--In carrying out the program under 
     this section, the Secretary may require the existing servicer 
     of a mortgage assigned to the Secretary under the program to 
     continue servicing the mortgage as an agent of the Secretary 
     during the period that the Secretary acquires and holds the 
     mortgage for the purpose of modifying the terms of the 
     mortgage. If the mortgage is resold pursuant to subparagraph 
     (C)(iii), the Secretary may provide for the existing servicer 
     to continue to service the mortgage or may engage another 
     entity to service the mortgage.''.

[[Page 31370]]

       (b) Amendment to Partial Claim Authority.--Paragraph (1) of 
     section 230(b) of the National Housing Act (12 U.S.C. 
     1715u(b)(1)) is amended by striking ``12 of the monthly 
     mortgage payments'' and inserting ``30 percent of the unpaid 
     principal balance of the mortgage''.
       (c) Implementation.--The Secretary of Housing and Urban 
     Development may implement the amendments made by this section 
     through notice or mortgagee letter.

     SEC. 9023. ADJUSTMENTS AS RESULT OF MODIFICATION OF RURAL 
                   SINGLE FAMILY HOUSING LOANS IN BANKRUPTCY.

       (a) Guaranteed Rural Housing Loans.--Subsection (h) of 
     section 502 of the Housing Act of 1949 (42 U.S.C. 1472(h)) is 
     amended--
       (1) in paragraph (7)--
       (A) in subparagraph (A), by inserting before the period at 
     the end the following: ``, unless the maturity date of the 
     loan is modified in a bankruptcy proceeding or at the 
     discretion of the Secretary''; and
       (B) in subparagraph (B), by inserting before the semicolon 
     the following: ``, unless such rate is modified in a 
     bankruptcy proceeding'';
       (2) by redesignating paragraphs (13) and (14) as paragraphs 
     (14) and (15), respectively; and
       (3) by inserting after paragraph (12) the following new 
     paragraph:
       ``(13) Payment of guarantee.--In addition to all other 
     authorities to pay a guarantee claim, the Secretary may also 
     pay the guaranteed portion of any losses incurred by the 
     holder of a note or the servicer resulting from a 
     modification of a note by a bankruptcy proceeding.''.
       (b) Insured Rural Housing Loans.--Subsection (j) of section 
     517 of the Housing Act of 1949 (42 U.S.C. 1487(j)) is 
     amended--
       (1) by redesignating paragraphs (2) through (7) as 
     paragraphs (3) through (8), respectively; and
       (2) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) to pay for losses incurred by holders or servicers in 
     the event of a modification pursuant to a bankruptcy 
     proceeding;''.
       (c) Implementation.--The Secretary of Agriculture may 
     implement the amendments made by this section through notice, 
     procedure notice, or administrative notice.

  The Acting CHAIR. Pursuant to House Resolution 964, the gentleman 
from Georgia (Mr. Marshall) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from Georgia.
  Mr. MARSHALL. Madam Chair, this is an amendment which is identical to 
a bill passed by the House earlier this year, in March. The bill 
permits what is referred to as ``cramdown'' in chapter 13 with regard 
to private home mortgages. It is intended to address this foreclosure 
crisis without taxpayers having to put money into the deal. It 
essentially forces the parties to deal with their problems without 
having vacancies and foreclosures in our neighborhoods.
  In that sense, it helps all lenders with real estate portfolios. It 
helps the individuals whose homes might be foreclosed upon. It actually 
helps the creditors, who are forced into the chapter 13 process 
because, in almost every instance, their portfolios are improved by not 
having as many houses in foreclosure, and in almost every instance, 
they get better deals in the chapter 13 process than they would in the 
normal foreclosure process.
  We should have done this long ago. It would have helped the housing 
crisis and, consequently, the economy of the country.
  I compliment Mr. Miller from North Carolina. This was originally his 
bill. He has been pushing this for several years. I also compliment Ms. 
Zoe Lofgren from California, who couldn't be here today because of 
family matters, because she has been a real stalwart in moving this 
forward.
  I reserve the balance of my time.
  Mr. GOODLATTE. I rise to claim time in opposition.
  The Acting CHAIR. The gentleman from Virginia is recognized for 5 
minutes.
  Mr. GOODLATTE. Madam Chair, I yield 1 minute to the gentleman from 
Texas (Mr. Smith), the ranking member of the Judiciary Committee.
  Mr. SMITH of Texas. I thank the gentleman from Virginia (Mr. 
Goodlatte), the deputy ranking member of the Judiciary Committee, for 
yielding me time.
  Madam Chairwoman, those who confront mortgage foreclosures are 
understandably in difficult situations, but this bankruptcy amendment 
will only lead to a worse situation for everyone.
  The number one cause of foreclosures today is job loss. The number 
two cause is homes which are mortgaged for more than they are worth. 
Sending homeowners with these problems into chapter 13 bankruptcy is no 
solution at all. The jobless do not have the steady incomes that are 
required to file for a chapter 13 bankruptcy, and those who bet wrong 
on a rising housing market should honor the mortgages for which they 
have freely contracted.
  Allowing bankruptcy courts to cram down mortgage principal will only 
lead to higher interest rates and tougher mortgage terms for all future 
homeowners.
  Why should those who have done nothing wrong have to pay that price?
  Mr. MARSHALL. I yield myself such time as I may consume.
  Madam Chair, let me just make a couple of observations. If, in fact, 
you are jobless and don't have income, you are not eligible for chapter 
13. Consequently, you won't be able to cram down. It is those who do 
have jobs and who do have income who could survive if they had the 
opportunity to restructure their debt. They would be eligible. It's 
only those folks.
  As far as increasing the cost of credit is concerned, this bill 
provides that it is retroactive. It doesn't apply to future credit. 
Many, many experts have looked at this and have concluded that it will 
not increase the cost of future credit.
  I reserve the balance of my time.
  Mr. GOODLATTE. Madam Chair, I recognize myself for 2 minutes.
  First, I will say that the gentleman from Georgia may assert that 
this will benefit creditors, but I know a few creditors who extend home 
mortgage loans who favor this legislation.
  Our country has fallen into a serious economic recession, a recession 
that has been worsened by the foreclosure crisis. Until we address the 
rising number of foreclosures, it will be difficult for the economy to 
recover. Unfortunately, this bankruptcy amendment, which I don't think 
belongs in this legislation to begin with, not only fails to solve the 
foreclosure crisis, but it also will make the crisis deeper, longer, 
and wider.
  Allowing bankruptcy courts to modify home mortgages will have adverse 
consequences for all while providing little real relief to distressed 
borrowers. Bankruptcy cramdowns will invariably lead to higher interest 
rates and to less generous borrowing terms for future borrowers. The 
gentleman may claim that it won't affect future borrowers, but the fact 
of the matter is, if this can be done now for this purpose, the 
advocates of this legislation will likely, in the future, see this made 
a permanent provision in our bankruptcy laws. It will have the effect 
of causing interest rates to go up and of causing credit to be less 
available.
  Unemployment has been a driving factor behind most foreclosures, but 
because individuals without regular incomes may not file for bankruptcy 
under chapter 13, cramdown will do nothing for those most in need of 
relief--the unemployed. Additionally, many borrowers walk away from 
their homes, not because they can't afford their monthly payments, but 
because their homes are mortgaged for more than they are worth. These 
borrowers should live with the responsibility of their decisions and 
not receive bailouts from bankruptcy courts.
  Furthermore, we must not forget that cramdown will not only impact 
lenders but investors as well. These investors often include pension 
funds, which represent the retirement savings of millions. We should 
not pass the cost of irresponsible borrowing and lending off on current 
and future retirees.
  The Acting CHAIR. The time of the gentleman has expired.
  Mr. GOODLATTE. I yield myself an additional 30 seconds.
  Madam Chair, there is no reason to allow mortgage cramdown, with its 
attendant high cost, considering it will produce only modest results at 
best.
  If we pass this amendment, what message does it send to the 90 
percent of homeowners who are making their payments on time? How can we 
ask them to foot the bill for their neighbors' mortgages? What do 
homeowners think when they pay back the full

[[Page 31371]]

amount of the principal they owe while others receive a government 
reduction in principal?
  We do need to do everything we can to help solve the foreclosure 
crisis, but we must avoid measures like cramdown, which punishes the 
successful, taxes the responsible, and holds no one accountable.
  I reserve the balance of my time.
  Mr. MARSHALL. I yield myself such time as I may consume.
  Madam Chair, to other homeowners, we should say that your home values 
won't decline as rapidly, because there won't be as many vacancies. We 
are not asking you to put a dime into the deal. No taxpayer dollars go 
into the deal at all. To those who cannot afford chapter 13, obviously, 
some other remedy is called for than this; but for those who can afford 
a chapter 13, you are helping everybody by filing a chapter 13.
  Having spent years in this business, creditors will not be harmed, 
and the cost of credit will not go up. That is particularly true 
because, in this bill, it only applies to existing mortgages. It 
doesn't apply to future mortgages, so it is widely conceded that the 
cost of credit will not go up. This is truly a win-win.
  I was originally opposed. I've been in this business for a long time. 
I had a change of heart. The change of heart focuses on the crisis that 
we are in right now. You can go to my Web site. On the front page of 
the Web site, those who are interested will find a detailed explanation 
of why this is absolutely the right thing to do.
  With that, it seems to me I've responded to everything that the 
gentleman from Virginia has said.
  I reserve the balance of my time.
  The Acting CHAIR. The gentleman from Virginia has 1\1/2\ minutes 
remaining.
  Mr. GOODLATTE. Madam Chair, I yield 1\1/2\ minutes to the gentleman 
from California (Mr. Daniel E. Lungren), a member of the committee.
  Mr. DANIEL E. LUNGREN of California. Madam Chair, this is a prime 
example of good intentions resulting in bad policy.
  My area is one of the areas hit as badly as any with respect to 
foreclosures. We have not cleared the market yet. We are in deep, deep 
shape. The last thing we need is to increase the level of uncertainty 
within the mortgage market, and that's what it does. It may be limited 
by its terms, but if we do it now, we can do it again.
  Some people ask, Why would we not allow cramdown for residential 
housing?
  Looking at this with a case in previous years, Supreme Court Justice 
Stevens said, The favorable treatment of residential mortgages was 
intended to encourage the flow of capital into the home lending market.
  That is why this exists in the bankruptcy code today, precisely 
because it allows more people access to purchasing homes, and premiums 
are not as high as they otherwise would be precisely because you cannot 
allow cramdown in bankruptcy proceedings now. That's the sole substance 
of the reason we have this.
  We are going to reverse this as a matter of public policy. It is 
going to create greater uncertainty and thereby increase the premiums 
in the future for everybody else, and it will deny access to the 
housing market for those we seek to help.
  Mr. MARSHALL. I yield myself such time as I may consume.
  Madam Chair, I will simply repeat:
  Since this is only applicable to existing mortgages, it will have no 
effect on the cost of future mortgages. The beauty of it is we will 
have fewer foreclosures.
  So, to the gentleman from California and to those in California who 
are in neighborhoods which are really struggling with this phenomenon 
of housing prices collapsing because of all of the vacancies, all of 
those folks will be helped by this without putting a single dime of 
taxpayer dollars in the deal. It seems to me that is a complete 
justification for doing this. We should have done it long ago.
  I reserve the balance of my time.
  The Acting CHAIR. The gentleman from Virginia has no time remaining, 
and the gentleman from Georgia has 1\1/2\ minutes remaining.
  Mr. MARSHALL. Madam Chair, there is a thing called the ``tragedy of 
the commons.'' It is a theoretical concept that applies in this 
particular case. It refers to the opening of common areas for grazing. 
Then those who have sheep come in and overgraze that area, and the 
effect is not that everybody gets wealthier; it's that everybody gets 
poorer.
  As an individual creditor, I am not interested in having somebody 
fool around with me in bankruptcy court or something like that. Yet, 
combined, creditors are advantaged by having fewer foreclosures on the 
market in a situation like this. Having represented an awful lot of 
banks, having spent an awful lot of my life as a bankruptcy lawyer, law 
professor, and commercial litigator, I am absolutely convinced that I 
was wrong to initially reject this concept. We should have done it a 
couple of years ago.
  If we apply it now, we will catch what appears to be an ongoing wave 
of foreclosures. It will help the individuals who can rescue their 
homes. It will lessen the number of foreclosures, consequently helping 
all other homeowners. No taxpayer dollars are involved, and creditors 
are assisted by this with no threat whatsoever to an increase in 
mortgage prices.
  We passed this before. We should pass it again. It is appropriate to 
this particular piece of legislation because the work we are doing 
right now is prompted as a result of the credit crisis that was caused 
initially by housing issues. So housing should be addressed as part of 
fixing the overall financial situation.
  Mr. LUCAS. Madam Chair, this amendment will most certainly not help 
those who it is designed to help. It will drive up the cost of loans, 
limit the number of loans that can be made, raise interest rates, and 
increase opportunities for abuse in the bankruptcy system.
  I want to focus the House on another important problem that has not 
been discussed: how the bankruptcy laws and the accounting rules and 
treatments combine to do potentially substantial and lasting damage to 
the financial system.
  Under existing accounting rules, any bankruptcy loss may be 
considered an indication of impairment. The term that is used by 
accountants is ``other than temporarily impaired,'' or ``OTTI.'' I want 
to make sure that the House understands the consequences of this 
problem in the real world. Even if a company took a small bankruptcy 
loss on one of the residential mortgage-backed securities, RMBS, that 
it owns, the amount of loss that would be recognized in that company's 
income statement is a full writedown to deeply depressed market values, 
not just the amount deemed to be a bankruptcy. Any loss of principal, 
current or future, requires this treatment no matter what term is used 
to describe the loss. If a judge can adjust principal, then a 
significant detrimental impact to the company will automatically 
follow.
  The House must clearly understand that the losses which would be 
recognized by financial institutions in this situation are far greater 
than the amount of the bankruptcy losses. Any RMBS holder will have to 
record these losses in the same manner, and so the threat of bankruptcy 
``cramdowns'' casts a huge shadow across the entire financial services 
industry. For example, if a company owns $5 million in RMBS with a 
current market value of $2,500,000, and there is a bankruptcy loss per 
the judge of $50,000 economic loss to the preferred RMBS traunch, the 
required financial statement loss under existing accounting rules would 
be $2,500,000. In this example, accounting rules require booking the 
financial statement loss at 50 times the actual economic loss.
  This is a stark, but true, statement of the horrific impact that 
existing accounting rules are likely to have on the financial services 
industry in the event this legislation becomes law. It would only take 
a few of these kinds of losses to destroy the current year operating 
positions of any company and greatly impact its overall capital 
position.
  This means that the cramdown amendment the House considers today 
carries with it a virus that threatens to consume significant parts of 
the financial services industry, particularly any company that is a 
significant holder of RMBS. The majority either does not understand, or 
has chosen not to deal with, this significant and looming problem. 
Likewise, there is a lack of understanding about the major role that 
accounting rules and treatments play in it, I earnestly hope that our 
colleagues in the other body will address this issue squarely,

[[Page 31372]]

and understand that cramdown without accounting reform and strict 
limitations on the discretion of bankruptcy judges has the potential to 
create significant and unanticipated collateral damage to our financial 
system, as well as loss of credibility with financial services industry 
customers and widespread negative ratings from all rating agencies.
  Ms. FUDGE. Madam Chair, one in seven mortgages in the United States 
is now either delinquent or in foreclosure. This is an all time high. 
By the close of this year, there will be nearly 3 million homes lost to 
foreclosure.
  This amendment gives homeowners a chance to save their homes. It 
would allow bankruptcy courts to extend repayment timelines, lower 
excessive interest rates, and modify mortgages.
  It will protect hard-working and honest Americans struggling to keep 
their homes. As I've witnessed firsthand in my own district, the 
relentless tide of foreclosures has a crippling and destabilizing 
effect on the community.
  I urge my colleagues to support this amendment.
  Mr. ROYCE. Madam Chair, I rise in opposition to this amendment.
  Let me briefly read a quote on this issue from Supreme Court Justice 
John Paul Stevens--who tends to be a left-leaning member of the Court. 
In 1993, Justice Stevens said:

       At first blush it seems somewhat strange that the 
     Bankruptcy Code should provide less protection to an 
     individual's interest in retaining possession of his or her 
     home than of other assets . . . [but] favorable treatment of 
     residential mortgages was intended to encourage the flow of 
     capital into the home lending market.

  As Justice Stevens indicates--there is a reason why the bankruptcy 
code does not treat residential mortgages like it treats credit cards 
or auto loans. We want to ensure investment certainty and encourage the 
flow of capital into this market.
  The government makes up the secondary mortgage market right now--
there is no private market.
  As our housing market continues to struggle through one of the worst 
shocks in our nation's history, certainty and investment security is 
essential to a recovery. This amendment prevents that.
  I encourage my colleagues to oppose the amendment.
  Mr. CONYERS. Madam Chair, I rise in support of this commonsense 
amendment to give struggling homeowners a fair chance to keep their 
homes when it makes economic sense.
  I am joined today by a diverse bipartisan group of cosponsors, 
including Mike Turner, Zoe Lofgren, Jim Marshall, Maxine Waters, Steve 
Cohen, Brad Miller, Bill Delahunt, Jerry Nadler, and Marcia Fudge.
  This is the same provision the House approved in March as a key 
component of H.R. 1106, the ``Helping Families Save Their Homes Act.''
  As the House considers financial regulatory reform legislation today, 
we should not forget the problem that started it all--the cataclysm of 
home mortgage foreclosures.
  These foreclosures have pulled the rug out from under our economy, 
devastating families, neighborhoods, and local governments. And 
unfortunately, the end to this toxic cycle is nowhere in sight.
  In Wayne County, Michigan, which includes Detroit, there are almost 
200 foreclosure-related actions every day, even worse than the 138 
foreclosures a day back in July.
  According to recent data, 14 percent of American homeowners were in 
foreclosure or had fallen behind in their mortgage payments--up from 10 
percent in 2008.
  This Wednesday, the Congressional Oversight Panel for TARP released a 
report in which it projected that there could be up to 13 million 
foreclosures over the next 5 years.
  We have not seen foreclosure numbers like these since the Great 
Depression.
  This amendment will help provide meaningful relief to struggling 
homeowners, by giving bankruptcy courts the authority to make fair 
modifications to mortgages, giving families a decent chance to come to 
terms with their lender on workable payment terms.
  The amendment would allow the courts to extend repayment periods, 
reduce excessive interest rates and fees, and adjust the principal 
balance of the mortgage to a home's present-day market value.
  The amendment also grants authority to the Department of Veterans 
Affairs, the Federal Housing Administration, and the Rural Housing 
Service to support fair modification of mortgages, by continuing to 
honor Federal guarantees for them after they are modified.
  This is imminently fair to mortgage lenders. They will still get 
everything they could reasonably hope to obtain if the home is 
foreclosed on and sold--more, in fact--and without forcing the family 
out of house and home.
  True, the lenders will not get every dime they might theoretically 
get on the mortgage paper they now hold. But that is a dangerous pipe 
dream. And the prospect of rational modification in the courts should 
serve as a reality check, and help create a healthy incentive for more 
meaningful voluntary modifications to be done outside of court.
  As it is now, lenders and servicers simply do not have enough of an 
incentive to modify mortgages in a meaningful and realistic way. It is 
too easy for them to hide their heads in the sand until the damage is 
done. Voluntary mortgage modification programs, by themselves, simply 
haven't worked.
  There is also a matter of basic equity here. Mortgages on second and 
third homes and investment properties can all be modified in the 
courts, as can virtually any other secured claim, including claims 
secured by yachts, private jets, and commercial real estate worth many 
millions of dollars.
  It is unfathomable to me that a working family does not have the same 
opportunity to save its home.
  I thank the chairman of the Financial Services Committee, Barney 
Frank, for his support on this important issue.
  I also want to thank all of my cosponsors on this amendment--Mike 
Turner, Zoe Lofgren, Jim Marshall, Maxine Waters, Steve Cohen, Brad 
Miller, Bill Delahunt, Jerry Nadler, and Marcia Fudge.
  In the midst of our response to the widespread damage large Wall 
Street financial institutions caused by their recklessness--including 
the drain of hundreds of billions of taxpayer dollars to bail them 
out--we also have a moral obligation to help average working families 
who are struggling to save their homes.
  Mr. NADLER of New York. Madam Chair, I rise in strong support of this 
amendment to H.R. 4173, which I sponsored along with Congressman 
Marshall, Judiciary Committee Chairman Conyers, and many other of my 
distinguished colleagues.
  This amendment would help millions of Americans across the Nation and 
correct a glaring anomaly in our current law. If you are a family 
farmer, if you are a real estate speculator, or if you own 5 or 20 or 
50 homes, for example, you are allowed to use bankruptcy to modify your 
mortgage. The only exception is the family home. Our amendment would 
change that and allow bankruptcy judges to modify mortgages for people 
facing imminent foreclosure.
  Millions of Americans have lost their homes due to foreclosure and 
millions more are at risk of doing so. In fact, there were 937,840 
foreclosure filings in the third quarter of 2009. This was up 23 
percent from one year ago. It is time we helped these families, just as 
we have helped large banks and other financial institutions.
  Now, in the past we have heard from lenders that this kind of change 
will increase borrowing costs for everyone else. Of course, this is the 
same industry that in 2005 told us that making bankruptcy more onerous 
would reduce people's interest costs by $400 per year on their credit 
cards. Nothing of the sort happened.
  And we tried an alternative--the voluntary modification route. 
Unfortunately, it has not helped the vast majority of distressed 
homeowners.
  As of November 30, only 4 percent of struggling homeowners in the 
Treasury Department's Home Affordable Modification Program received 
permanent loan modifications--31,382 out of 728,000. This week, the 
Financial Services Committee heard testimony that this program is 
``destined to fail'' because it does not address negative equity.
  The Congressional Budget Office estimates that one million households 
could benefit from this measure, with no additional cost to taxpayers.
  So, it is time to take the next step. It is time to give homeowners 
the same rights as everyone else, and let them modify their mortgages 
in bankruptcy. It is time to help average citizens stay in their homes, 
just like we have helped big financial institutions.
  I strongly urge all Members to support this amendment.
  The Acting CHAIR. The gentleman's time has expired.
  The question is on the amendment offered by the gentleman from 
Georgia (Mr. Marshall).
  The question was taken; and the Acting Chair announced that the ayes 
appeared to have it.
  Mr. GOODLATTE. Madam Chairman, I demand a recorded vote.
  The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Georgia will 
be postponed.

[[Page 31373]]



                              {time}  1015


         Amendment No. 26 Offered by Mr. Garrett of New Jersey

  The Acting CHAIR. It is now in order to consider amendment No. 26 
printed in House Report 111-370.
  Mr. GARRETT of New Jersey. Madam Chair, I have an amendment at the 
desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 26 offered by Mr. Garrett of New Jersey:
       Page 1041, beginning on line 15, strike paragraph (5) and 
     insert the following:

       (5) in subsection (e), by striking paragraph (1) and 
     inserting the following new paragraph (1):
       ``(1) Voluntary withdrawal.--A nationally recognized 
     statistical rating organization may, upon such terms and 
     conditions as the Commission may establish as necessary in 
     the public interest or for the protection of investors, 
     withdraw from registration by furnishing a written notice of 
     withdrawal to the Commission, provided that such nationally 
     recognized statistical rating organization certifies that it 
     received less than $250,000,000 during its last full fiscal 
     year in net revenue for providing credit ratings on 
     securities and money market instruments issued in the United 
     States.'';

  The Acting CHAIR. Pursuant to House Resolution 964, the gentleman 
from New Jersey (Mr. Garrett) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from New Jersey.
  Mr. GARRETT of New Jersey. Madam Chair, I was just at the microphone 
a moment ago and speaking about the recognition that I think we have 
from both sides of the aisle that the CRAs, credit rating agencies, 
were part and parcel to the causes of the financial situation that we 
find ourselves in right now.
  During the time, I raised two out of probably three significant 
points on this and what we try to need to do when it comes to reform. I 
mentioned the fact that we need to reduce investors' reliance upon 
rating agencies. I mentioned, also, that we need to encourage investor 
due diligence, which sort of goes with it, if you are going to reduce 
reliance and they have to be more due diligent.
  The third point I didn't raise was that we need to have increased 
competition between the credit rating agencies. Unfortunately, if you 
look at the bill before us, actually, title V of the bill includes a 
number of provisions that will basically exacerbate the current 
problems within the industry and, as I said on the floor yesterday, 
that actually make it harder, make it more difficult for investors to 
actually get the information that they need in order to make those 
decisions that they have to before they invest.
  If you go back a couple of years, actually, if you go back 3 years, 
we passed the credit rating agency reform legislation--and it was about 
3 years ago. The main focus of that reform back then was to do what? It 
was to try to increase competition between the various rating agencies. 
There are only about three major ones, but we were going to try to make 
smaller ones to get into the market with more competition. Maybe we 
could eliminate some of the problems I have already stated.
  That was just 3 years ago, and the reason then that I voted just a 
short time ago this year against the legislation that came out of 
committee, that was going to try to reform the CRAs, was because it did 
the exact opposite. It would basically decrease the competition in the 
industry. I think we need more competition.
  The reason that the legislation that came out of the committee, I 
thought, would decrease competition is because, well, it would have 
imposed a whole bunch of new liability on the CRAs, and it would just 
basically discourage them to get into the industry at all. That's maybe 
one of the reasons why in the committee's language there was a 
provision in it that says we are not going to let you out. Once you are 
an NRSRO, once you are registered, or recognized I should say, we are 
not going to let you out of it. They realize with all of this 
additional registration, with all this additional liability, no one 
would want to be a CRA anymore.
  The amendment that we have before us recognizes that problem, that we 
want to have competition, but if you have all of these additional 
rules, regulations, and liabilities on them, they are all going to 
flee. We believe that we can come to a proverbial middle ground on 
this. That is to say, allow those CRAs, credit rating agencies that are 
of the smaller size, that is net revenues of $250 million or less in a 
year, to be able to retain the ability to deregister. That's what the 
legislation does before us.
  With that, I will reserve the balance of my time.
  Mr. KANJORSKI. I claim the time in opposition.
  The Acting CHAIR. The gentleman from Pennsylvania is recognized for 5 
minutes.
  Mr. KANJORSKI. Madam Chairman, under current law, credit rating 
agencies operate under a voluntary system of registration with the 
United States Securities and Exchange Commission. We changed that with 
a provision in the manager's amendment that would require all rating 
agencies with appropriate exemptions to register with the Commission.
  The gentleman from New Jersey's amendment inserts a voluntary 
withdrawal from registration with the Commission for those rating 
agencies who earn less than $250 million of net revenue. This amendment 
would have the effect of allowing the smallest of rating agencies, now 
registered as Nationally Recognized Statistical Rating Organizations, 
to opt out of the system at some time in the future.
  The proposal would also maintain the close supervision of the largest 
rating agencies, the ones most likely to issue the ratings used by 
investors.
  Based on that, Madam Chairman, I have no opposition to this 
amendment.
  I yield back the balance of my time.
  Mr. GARRETT of New Jersey. I will just close by saying that I thank 
the gentleman for his support of the legislation, or no opposition to 
the amendment. I appreciate the very many, many months of working 
together on this issue and other issues as well.
  I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from New Jersey (Mr. Garrett).
  The amendment was agreed to.
  The Acting CHAIR. The Chair understands that amendments 29, 30, and 
31 will not be offered.


               Amendment No. 32 Offered by Ms. Schakowsky

  The Acting CHAIR. It is now in order to consider amendment No. 32 
printed in House Report 111-370.
  Ms. SCHAKOWSKY. Madam Chairman, I have an amendment at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 32 offered by Ms. Schakowsky:
       Page 825, after line 12, insert the following new section:

     SEC. 4413. TREATMENT OF REVERSE MORTGAGES.

       (a) In General.--The Director shall examine the practices 
     of covered persons in connection with any reverse mortgage 
     transaction (as defined in section 103(bb) of the Truth in 
     Lending Act (15 U.S.C. 1602)) and shall prescribe regulations 
     identifying any acts or practices as unlawful, unfair, 
     deceptive, or abusive in connection with a reverse mortgage 
     transaction or the offering of a reverse mortgage.
       (b) Regulations.--In prescribing regulations under 
     subsection (a), the Director shall ensure that such 
     regulations shall--
       (1) include requirements for--
       (A) the purpose of preventing unlawful, unfair, deceptive 
     or abusive acts and practices in connection with a reverse 
     mortgage transaction; and
       (B) the purpose of providing timely, appropriate, and 
     effective disclosure to consumers in connection with a 
     reverse mortgage transaction that are consistent with 
     requirements prescribed by the Director in connection with 
     other consumer mortgage products or services under this 
     title;
       (2) with respect to the requirements under paragraph (1), 
     be consistent with requirements prescribed by the Director in 
     connection with other consumer mortgage products or services 
     under this title; and
       (3) provide for an integrated disclosure standard and model 
     disclosures for reverse mortgage transactions, consistent 
     with section 4302(d), that combines the relevant disclosures 
     required under the Truth in Lending

[[Page 31374]]

     Act (15 U.S.C. 1601 et seq.) and the Real Estate Settlement 
     Procedures Act, with the disclosures required to be provided 
     to consumers for Home Equity Conversion Mortgages under 
     section 255 of the National Housing Act.
       (c) Consultation.--In connection with the issuance of any 
     regulations under this section, the Director shall consult 
     with the Federal banking agencies, State bank supervisors, 
     the Federal Trade Commission, and the Department of Housing 
     and Urban Development, as appropriate, to ensure that any 
     proposed regulation--
       (1) imposes substantially similar requirements on all 
     covered persons; and
       (2) is consistent with prudential, consumer protection, 
     civil rights, market or systemic objectives administered by 
     such agencies or supervisors.
       (d) Deadline for Rulemaking.--The Director shall commence 
     the rulemaking required under subsection (a) not later than 
     12 months after the date of the enactment of this Act.

  The Acting CHAIR. Pursuant to House Resolution 964, the gentlewoman 
from Illinois (Ms. Schakowsky) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentlewoman from Illinois.
  Ms. SCHAKOWSKY. Madam Chairman, I yield myself as much time as I may 
consume.
  I want to thank Representative Titus for joining me in offering this 
important amendment to make sure that the new Consumer Financial 
Protection Agency has authority to regulate reverse mortgages. It is a 
proposal that is supported by the AARP.
  Reverse mortgages are unique mortgage products that allow homeowners 
over age 62 to borrow against their homes to receive either cash or a 
line of credit. The loan is paid back when the homeowner dies or sells 
the home. In the past 3 years, more than 335,000 federally insured 
reverse mortgages have been issued to seniors.
  Unfortunately, all is not well in the reverse mortgage market. An 
October report by the National Consumer Law Center found many of the 
abusive practices that were common in the subprime lending market 
before its collapse are also common in reverse mortgage transactions. 
Those practices include high fees, incentives for brokers that are 
harmful to borrowers, and lenders steering consumers to products that 
are more costly than necessary. Also, securitization, as in the 
subprime market, is becoming more common for reverse mortgages.
  Unfortunately, the complexity of the loans and the age of the typical 
borrower have made the reverse mortgage market ripe for scam artists. 
We have to make sure that seniors who use reverse mortgages are 
protected against unlawful and unfair practices.
  The amendment I am offering seeks to correct an oversight in the CFPA 
provisions of the bill. The bill, as written, gives the CFPA authority 
over a number of consumer statutes, but a majority of reverse mortgages 
today are FHA insured home equity conversion mortgages, which are 
primarily regulated by HUD under the National Housing Act statute. 
Therefore, as currently written, reverse mortgages may not clearly fall 
within the CFPA's authority.
  My amendment would clarify that the CFPA director has oversight and 
regulatory authority over lenders and brokers that issue reverse 
mortgages and directs the agency to consult with HUD as it develops 
regulations.
  My amendment would also require CFPA to begin a rulemaking within 1 
year of the bill's enactment in order to develop regulations that will 
make sure that reverse mortgage transactions are not unfair, deceptive, 
or abusive.
  I urge my colleagues to support this amendment.
  I reserve the balance of my time.
  Mr. GARRETT of New Jersey. I claim time in opposition.
  The Acting CHAIR. The gentleman is recognized for 5 minutes.
  Mr. GARRETT of New Jersey. I yield myself 3 minutes.
  Madam Chair, I guess here is an example of the old saying, ``Here we 
go again.'' The CFPA, an entity that we have already discussed both 
today and yesterday, is an idea of contracting consumer choice, putting 
limitations on the consumers' ability to buy products that they need 
and want, and all the time, but at the same time, causing a cost to the 
overall system of credit and jobs in this country.
  The additional cost to the CFPA has already been examined by outside 
organizations and has been seen to have a negative impact for this 
country to grow ourselves out of the economic morass that we find 
ourselves in today.
  Experts have said, and we have yet to hear anyone from the other side 
of the aisle refute these studies, nor, for that matter, when we asked 
the other side of the aisle earlier, from the gentleman from North 
Carolina, I believe, do they have any studies to refute these or to 
present the case that actually would go in the opposite direction, they 
said no or had no answer.
  Experts have shown that the CFPA alone would add a cost of credit to 
the system between 1.25 or 1.4 to 1.6, as I always say, about 1.5 
percentage points to the cost of credit in this country. What does that 
mean? Even in the case of reverse mortgages, I guess it would apply 
that you would say that the cost of your credit, if you have a 6 
percent loan now would go up to around 7, 7.5 percent. Just the act of 
borrowing will be made harder by the cost of the underlying bill.
  Now we see here with this amendment, if the CFPA was not omnipotent 
enough with their power to reach in basically every single corner of 
the economy of this country, now we are going to let them go even a 
little built further.
  Now I say all that with the understanding that reverse mortgages 
sometimes in the past have a history in certain cases--not all, 
certainly--of causing problems for our seniors, and that is certainly 
something that regulators need to and have the ability to take a look 
at. But this certainly is not the answer. This is crafted in such a way 
that would broaden the CFPA powers and hurt credit.
  One other point on this as well. When you are hurting the credit 
markets of this country, you are also hurting the opportunity to grow 
this economy with regard to jobs. I think that same study, as well, 
gave us a number around 4.3 percent reduction in the increase of jobs. 
What does that mean to you and me? Well, with unemployment around 10 
percent, that means that we could be looking at an additional million 
people in this country who will not be able to get jobs.
  How does that help seniors? Seniors who may be working or not 
working, seniors who have people or other people in their families that 
are working, how does it help any senior or help anyone in this country 
if we are going to put more impediments and roadblocks in the way to 
this country growing again, to getting credit down again and getting 
unemployment back down from the 10 percent that we find ourselves in 
today?
  I stand opposed to this amendment and opposed to putting additional 
powers in the Federal Government and the CFPA and within the 
authorities that they have already.
  I reserve the balance of my time.
  Ms. SCHAKOWSKY. May I inquire how many minutes I have left?
  The Acting CHAIR. The gentlewoman from Illinois has 2\1/2\ minutes 
remaining.
  Ms. SCHAKOWSKY. At this time I would like to yield 1 minute to the 
chairman of the committee, Barney Frank.
  Mr. FRANK of Massachusetts. Madam Chair, we keep hearing about these 
studies. They were commissioned by organizations ideologically opposed 
to this. Surprise, surprise, they got back the answers they wanted. I 
haven't seen them. No one has produced them. They are not worth 
anything. They are simply quantifications of ideology which are 
entitled to no weight.
  I understand that there are people who do not like consumer 
regulation. What we learn is that in its absence, abuses can 
proliferate that become systemic problems, but it's especially relevant 
when we are dealing with the elderly.
  We know there are people who preyed on older people. There are people 
eligible for this program in their eighties who had lives of hard work 
that did not

[[Page 31375]]

include sophisticated involvement with financial instruments. There 
have been problems of abuse.
  We, in fact, adopted, I think, without any opposition, a piece of 
legislation that said you cannot be the one that sells somebody a 
reverse mortgage and then becomes his or her investment adviser, 
because of abuses. Protecting the elderly against abuse shouldn't be 
controversial.
  Mr. GARRETT of New Jersey. Does the gentlewoman have other speakers?
  Ms. SCHAKOWSKY. I do.
  Mr. GARRETT of New Jersey. I reserve the balance of my time.
  Ms. SCHAKOWSKY. Madam Chairman, I yield now to the gentlewoman from 
Nevada (Ms. Titus) for the balance of my time.
  Ms. TITUS. Madam Chairman, every day seniors are targeted by lending 
agencies through mailings, phone calls, and TV ads offering reverse 
mortgages with promises of free money to finance trips, new cars, and 
gifts in their golden years. While a reverse mortgage may be an 
appropriate product for some seniors, it's a complex financial 
instrument which is being aggressively marketed to our most vulnerable 
in society.
  Accordingly, many seniors today find themselves in financial hardship 
due to unfair and unclear agreements, along with excessive fees that 
come as a result of reverse mortgages. They have learned the hard way 
that the reality of a reverse mortgage is not always as advertised, and 
now they face severe financial consequences in what is supposed to be 
their golden years.
  The amendment that we are offering today provides needed safeguards 
for our Nation's seniors by requiring that the new Consumer Financial 
Protection Agency oversee the reverse mortgage industry to ensure 
seniors are not exposed to unfair and deceptive practices.
  Protecting our seniors from unfair and unclear financial products is 
long overdue. Reverse mortgages need to be clearly and closely 
monitored and regulated in an effort to ensure seniors don't lose their 
home and equity that they have built up through a lifetime of hard 
work.
  I am confident that the amendment, which has the endorsement of AARP, 
will offer appropriate flexibility and protections for our seniors.
  I want to thank my colleague, Representative Schakowsky, and also the 
chairman of the committee, for working with me on this important issue.
  I urge my colleagues to support the amendment.

                              {time}  1030

  Mr. GARRETT of New Jersey. Madam Chair, I yield myself just 20 
seconds.
  To the chairman's comment with regard to our study, which, as he 
said, is simply a quantification of ideology, whenever he has an issue 
like that, I just think that that is an abandonment of originality 
because any time that we have a study or what have you, he just refers 
back to ideology.
  We would always ask the other side of the aisle, ideological or 
otherwise, we would be happy to see any study to support anything that 
is in this bill that will actually not harm our economy nor create 
hardships for the creation of jobs nor create hardships for creating 
increases to credit. We would like it, ideological or otherwise.
  Madam Speaker, I yield the balance of my time to the gentleman from 
Texas (Mr. Hensarling), a man not of ideology alone but a man of facts 
and figures, a man on the right side of the issue.
  Mr. HENSARLING. I thank the gentleman for yielding.
  Simply because you are a senior, you shouldn't have to give up your 
freedom. You shouldn't have to give up your economic liberty.
  There are so many reasons to oppose the underlying legislation. It 
creates a permanent Wall Street bailout authority. At a time where the 
economic policies of this Congress, of this administration have 
produced the highest unemployment rate in a generation, they propose 
legislation that will make credit more expensive, less available, and 
crush jobs. But now we have an amendment that goes to increase the 
power of the unelected czar to ban, to ban and ration credit.
  You know, ultimately, the American people in the land of the free 
ought to be able to be free to choose the financial products that they 
think are best for them. The way to best protect American citizens is 
with competitive markets that are vigorously enforced for force and 
fraud but not to take away their essential freedom.
  Quit protecting Americans from themselves. Quit assaulting the 
economic liberties of Americans, especially seniors, in tough economic 
times who need the money to survive.
  We should reject this amendment, reject the job loss, reject the 
bailout, reject the assault on liberty.
  The Acting CHAIR. The question is on the amendment offered by the 
gentlewoman from Illinois (Ms. Schakowsky).
  The question was taken; and the Acting Chair announced that the ayes 
appeared to have it.
  Mr. HENSARLING. Madam Chairman, I demand a recorded vote.
  The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentlewoman from Illinois 
will be postponed.


                 Amendment No. 33 Offered by Ms. Kilroy

  The Acting CHAIR. It is now in order to consider amendment No. 33 
printed in House Report 111-370.
  Ms. KILROY. Madam Chair, I have an amendment at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

  Amendment No. 33 offered by Ms. Kilroy:
       Page 289, line 10, insert ``only'' after ``Fund''.

  The Acting CHAIR. Pursuant to House Resolution 964, the gentlewoman 
from Ohio (Ms. Kilroy) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentlewoman from Ohio.
  Ms. KILROY. Madam Chair, I yield myself such time as I may consume.
  It's been a little over a year since the weight of predatory lending, 
credit default swaps, murky accounting, and risky bets finally gave way 
and the American taxpayer was forced to bail out Wall Street and the 
same financial institutions that set our Nation's economy into the 
worst crisis since the Depression.
  The greed and recklessness of Wall Street has cost Main Street 
dearly. Millions of jobs, hard-earned life savings were lost, and today 
American families are still recovering.
  We know that we need to take action so that American taxpayers are 
not put in that position again. And over the past year, Chairman Frank 
has held countless hearings, markups, and meetings to help bring to the 
floor today the most sweeping reform of our Nation's financial 
regulatory system since the New Deal, and he has done so in a 
transparent and equitable manner.
  H.R. 4173, the Wall Street Reform and Consumer Protection Act of 
2009, will restore and strengthen our Nation's financial system and 
provide Americans the confidence that there are rules in place that 
work for them and protect them, not protect the big banks and hedge 
funds and mortgage industry, that there will be the oversight, the 
regulation that should keep this kind of crisis from happening again, 
that should see an end to the risky practices that led to the taxpayer 
bailout of Wall Street.
  But it will also end the ``too big to fail'' problem by implementing 
a mechanism for the orderly and controlled liquidation of a failed 
financial institution. And it's very clear that this is going to be 
funded by the financial institutions themselves. Not by another 
bailout, not by the taxpayers, no more TARP.
  But sometimes increased clarity and added emphasis is called for. By 
adding one word only to the language regarding the use of assessments, 
we promise and we reassure our taxpayers that they will not be bailing 
out Wall Street again. The dissolution fund will only be funded by 
those financial institutions and their assessments, not our hardworking 
taxpayers from our cities and towns and farms.

[[Page 31376]]

  I urge passage of this amendment.
  Madam Chair, I reserve the balance of my time.
  Mr. HENSARLING. Madam Chair, I rise to claim the time in opposition 
to the amendment.
  The Acting CHAIR. The gentleman from Texas is recognized for 5 
minutes.
  Mr. HENSARLING. Madam Chair, I yield myself such time as I may 
consume.
  I was very heartened to hear the gentlewoman from Ohio say, quote, 
``no more TARP.'' She'll have an opportunity to vote that way later 
this afternoon. I hope that many of her colleagues on that side of the 
aisle will follow her example and put their votes where their sentiment 
is because, indeed, the motion to recommit today will be to end the 
TARP program. So I look forward to having great support on the other 
side of the aisle for that motion to recommit.
  The particular amendment before us, though, is one that continues to 
try to perpetuate the myth that somehow taxpayers will not be called 
upon for a bailout.
  Why do you have a bailout fund? You have a bailout fund to bail 
somebody out. And if for some reason you actually thought that 
taxpayers were not going to be on the hook, well, $150 billion imposed 
upon those who form capital, capital intermediaries, are going to make 
capital more expensive, less available, choke off more credit to small 
businesses, and increase the double-digit unemployment rate that the 
Nation now has under this administration in this Congress's economic 
policies.
  How many more jobs have to be lost? We need to open up credit, not 
close credit.
  Second of all, the people who are telling us, oh, don't worry Mr. 
Taxpayer, Mrs. Taxpayer, you're never going to be called upon to come 
and bail out these institutions yet again; we've solved that problem.
  Madam Chair, these are the very same people who told us that the 
taxpayer would never be called upon to bail out the government-
sponsored enterprises. Yet a trillion dollars of taxpayer exposure 
liability later, they were wrong. They've told us that about Social 
Security--going bankrupt; Medicare--going bankrupt; National Flood 
Insurance Program, never going to need taxpayer money--insolvent. And 
the list goes on and on and on.
  Now, Madam Chair, I know they mean well. I know they believe it when 
they say it. But with history as my guide, it is not a credible 
statement for those on the other side of the aisle to make.
  So what are we left with? We are left with a perpetual Wall Street 
bailout bill. We are left with a bill that will crush job creation at a 
time when our Nation needs to be creating jobs. We have a bill that 
assaults the fundamental economic liberties of every American citizen, 
who now has to receive the permission of their government before they 
can put a credit card in their wallet or get a mortgage for their home.
  The best way to end TARP is to end TARP. And every Member of this 
body will have the opportunity to do it later this afternoon.
  Madam Chair, I reserve the balance of my time.
  Ms. KILROY. Madam Chair, I yield 2 minutes to the gentleman from 
Massachusetts (Mr. Frank), chairman of our committee.
  Mr. FRANK of Massachusetts. The gentleman from Texas really doesn't 
have anything to say against this amendment, but his instinct overcomes 
that, so he has to say negative things. Among them, though, the most 
outlandish is his continued effort to blame unemployment on President 
Obama.
  President Obama inherited from President Bush a very serious 
recession. It turns out now the worst since the Great Depression. And 
it was begun officially by those who certified, the nonpartisan 
entities that do that, in December of 2007, after many years of 
Republican rule both in the House and the Senate and in the White 
House. Unemployment is decreasing now, and you don't go from very bad 
to perfect. But this effort to evade responsibility for the Republican 
policies that caused this recession is, as I said, one of the great 
examples of blame shifting.
  I have to say again we suffered a great disease outbreak on January 
21, 2009. Mass amnesia hit the Republican Party. The huge deficit, the 
lack of regulation that had brought about our financial collapse, the 
millions of jobs lost. The administration with the worst job record 
recently is the Bush administration. And the Obama recovery is slower 
than I wish it would be, but it is clearly on the upswing.
  Secondly, the gentleman, to win his partisan points, will lash out at 
anything. Social Security, he announces now, is going bankrupt. Social 
Security, credited with all the money paid in, is sound for another 25 
years or more. Frightening older people by the false claim that Social 
Security is going bankrupt is an example of partisanship run riot.
  What we also have is this reluctance to accept the fact that we have 
language that says nothing here can go to perpetuate these 
institutions. He's right. Fannie Mae and Freddie Mac, which the 
Republican Party----
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Ms. KILROY. I yield 30 seconds to the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. In the 12 years of congressional 
Republican rule, they didn't do a thing about Fannie and Freddie. We 
did pass the bill the Bush administration asked us for in 2007. It was 
too late. But learning from that, we have language here that did not 
previously exist that bans the use of taxpayer funds, that bans the use 
of any funds to keep an institution going.
  So, yes, unlike the Republicans, who did nothing about Fannie and 
Freddie in that 12 years, never passed a piece of legislation, we 
passed a piece of legislation and it was too late, but we've learned 
from it. And there is binding language here that directly contradicts 
everything the gentleman from Texas says, but he is not easily fazed by 
that language.
  Mr. HENSARLING. Madam Chair, well, if mass amnesia has affected this 
side of the aisle, apparently it infected that side of the aisle, too.
  I might kindly remind the distinguished chairman of the Financial 
Services Committee, since he points out 2007 is the year that the 
financial crisis started, it happens to coincide with the year that the 
Democrats took control of the United States Congress as well.
  Mr. FRANK of Massachusetts. Will the gentleman yield?
  Mr. HENSARLING. I would be happy to yield to the distinguished 
chairman.
  Mr. FRANK of Massachusetts. Is the gentleman seriously advancing the 
argument that it was because the Democrats took over in 2007 that that 
was why we had a recession?
  Mr. HENSARLING. Reclaiming my time, I'm simply pointing out if the 
gentleman is trying to make associations, there may be an association 
to be made there as well.
  What I am asserting is that the economic policies either enacted or 
threatened by this Congress and this administration are keeping a 
recovery from happening. This is an economy that, through any historic 
standard whatsoever, should have already recovered.
  But first we have the stimulus program, which we were told would keep 
us at 8 percent unemployment. Now we know we have double-digit 
unemployment, 3.6 million jobs lost since the stimulus program was 
passed.

                              {time}  1045

  We have the $600 billion energy tax passed in the House hanging over 
the economy. We have the over $1 trillion nationalization of our health 
care system hanging over the economy. And now this is the fourth leg of 
the stool, and that is a perpetual Wall Street bailout and a further 
job loss through credit contraction act of 2009. It is the fourth leg 
of the economic policies that are preventing jobs from being created.
  What do we have to show for the economic policies of this 
administration? That is the first trillion-dollar deficit in our 
Nation's history. We have an economic plan that will triple the 
national debt. Nothing would do more to

[[Page 31377]]

create jobs than to defeat this bill, let TARP expire, and show the 
Nation that we will pay off this unconscionable debt.
  The Acting CHAIR. All time has expired.
  The question is on the amendment offered by the gentlewoman from Ohio 
(Ms. Kilroy).
  The amendment was agreed to.
  The Acting CHAIR. The Committee will rise informally.
  The Speaker pro tempore (Mr. Driehaus) assumed the chair.

                          ____________________