[Congressional Record (Bound Edition), Volume 155 (2009), Part 6]
[Senate]
[Pages 6887-6888]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE ECONOMY

  Mr. ISAKSON. Mr. President, first of all, I wish to commend the 
distinguished Senator from New Hampshire. As a Member of the Senate, 
there are many people I look to for wisdom and knowledge, and Judd 
Gregg is one of them. In my hometown of Atlanta, GA, there is another 
person I look to for wisdom and knowledge, and that is my barber, 
Tommy.
  I got a haircut, as you can probably tell, on Saturday. I was at 
Tommy's Barbershop on West Paces Ferry Road and Northside Drive in 
Atlanta. While in that barbershop, I talked to a real estate broker, a 
stock broker, a pension fund manager, and a good old, average, everyday 
American retiree trying to figure out how he is going to make it on 
what the markets have done to him in the last year or so.
  It is ironic--and I had no plan to make this speech behind Judd 
Gregg--but they talked to me about only two things. The first one was 
debt because last Saturday was just a week after the announcement of a 
$3.6 trillion budget, a 20-percent increase; an increase in taxes and 
concern because at a time of economic peril America is bearing more and 
more and more.
  The other thing is what I rise to talk about today. We have looked 
into the mirror to look for the enemy, but we have avoided looking at 
ourselves. For a second I wish to talk through regulatory policy. I am 
talking about both administrations: the end of the Bush administration 
and the beginning of the Obama administration. I think we have been 
missing the mark. I wish to share some real-life stories about real-
life Georgians that indicate where mark-to-market accounting is going 
in the United States of America, the businesses of the United States of 
America, and the people of the United States of America.
  Some of my colleagues have watched television and watched the AFLAC 
duck commercials. I think they are the best commercials on television. 
I also think AFLAC is one of the finest companies in the United States 
of America. When we consider AFLAC and Dan

[[Page 6888]]

Amos, the CEO of AFLAC, he put in stockholder consent and stockholder 
advice on his compensation and repealed his own golden parachute. All 
of those things we all complain about CEOs doing, he did it right. But 
stock has plummeted in AFLAC. Do you know why? Because of the FASB 
rules on mark to market, his core asset base, which is long-term 
assets, held to maturity, to protect against insurance commitments 
AFLAC has made, are now being marked to market, meaning assets worth 
something are being marked worth nothing.
  So the stock has gone down because the evaluators say the footings on 
the asset side of the ledger sheet aren't looking as good because of 
the mark to market. Let me explain the best I can what that really 
means.
  Mortgage-backed securities are one investment a lot of life companies 
and other industries bought to put on their asset sheet to offset 
obligations they have off into the future because those securities have 
maturities corresponding with the maturities of the loans embedded 
within them of anywhere from 7 to 30 years. When the subprime market 
started failing last year, Merrill Lynch, in a crisis mode last July, 
sold its subprime securities to get rid of them; it financed the sale 
and sold them for 22 cents on the dollar. Under the FASB rules, assets 
worth 70 or 80 or 90 percent were marked down to 22 percent. That 
lowered the asset side of the ledger and made the stability of the 
company look--and I underline that word ``look''--worse, when, in fact, 
those assets, held to maturity, would not be anywhere near the value.
  Here is a good example of that: Let's just say I bought a mortgage-
backed security, a subprime mortgage-backed security, backed 100 
percent by 30-year mortgage loans made in the State of Nevada--every 
one a subprime loan. Nevada has the highest foreclosure rate of any 
State on subprime paper. Seventy percent of those loans in Nevada today 
are paying right on time; 30 percent are in default. Yet, because of 
mark to market, that security is not marked at 70 percent, which it is 
performing at, but at zero because at a given point in time today you 
can't sell it. It is being held by the institution as an offsetting 
asset to a liability over a term of maturity.
  At Tommy's Barber Shop, I ran into a pension fund man and an 
insurance guy, and they said: Why in the world don't we look for 
accounting on mark to market like we looked at the pension crisis in 
2004?
  We have short memories in the Senate. In 2004, because of the 
declining stock market in 2001 and 2002, there were a number of defined 
benefit plans in America that underfunded. Because of the accounting 
rules that were being enforced at the time, those institutions were 
asked to write checks to fully fund the pension funds when, in fact, 
not everybody is going to retire the same day but over a number of 
years.
  What did we do in the Congress? With Senators Kennedy, Enzi, myself, 
and others, we passed the Pension Protection and Reform Act. We said: 
If your pension fund's corpus becomes underfunded, if you cannot meet 
your obligation, we will let you smooth that investment, or amortize 
it, over 4 to 6 years. In the case of Delta, which was in trouble at 
the time, they had a $900 million shortfall in their pension fund. But 
because of smoothing, instead of having to put $900 million in in 1 
year, they did $150 million over 6 years. Delta is the most profitable 
airline in the United States today. They would not exist today had it 
not been for the smoothing.
  The ACTING PRESIDENT pro tempore. The time for morning business has 
expired.
  Mr. ISAKSON. Mr. President, I ask unanimous consent for another 
minute.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. ISAKSON. Mr. President, in conclusion, I hope everyone will visit 
their ``Tommy's Barber Shop'' and look at what we are doing that may 
have the unintended consequences of exacerbating the economic problem 
for the average American today and for Tommy the barber.
  I yield the floor.

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