[Congressional Record (Bound Edition), Volume 155 (2009), Part 9]
[Senate]
[Pages 11266-11276]
[From the U.S. Government Publishing Office, www.gpo.gov]




        HELPING FAMILIES SAVE THEIR HOMES ACT OF 2009--Continued

  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Madam President, I will yield to my colleague from Missouri 
for comments, and I ask unanimous consent to be recognized after she 
speaks to make opening remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Missouri.
  Mrs. McCASKILL. I ask unanimous consent to speak for 5 minutes in 
morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                        immigration enforcement

  Mrs. McCASKILL. Madam President, sometimes change comes quietly. 
Sometimes it comes with a big bang. Today change came quietly. I want 
to make sure everyone realizes the change that occurred.
  For 3 years I have been talking about the problem of illegal 
immigration and what has caused this problem to flourish. I have been 
talking about the problem of the magnet of jobs that has drawn people 
over the border without documentation because they are trying to feed 
their families and the fact that no one was doing anything about 
employer enforcement.
  When I got to Washington and I asked the head of immigration 
enforcement how many employers have been held accountable for knowingly 
hiring illegal immigrants, how many have been arrested, she could not 
even tell me. They didn't even keep the statistics. Think about that 
for a minute. They didn't keep the statistics of how many employers 
were held accountable for knowingly hiring illegal immigrants. I began 
pounding on immigration and customs enforcement about this, talking to 
them about basic investigative techniques.
  In Missouri right now there are hundreds of employers that are 
breaking the rules knowingly. They are hiring people, paying them under 
the table, cash on Fridays. They are bringing pickup trucks from Mexico 
full of people, stuffing them all in an apartment. The vast majority of 
the business people are doing it right. They are trying to play by the 
rules, doing the very best job they can. But there is a chunk of 
employers out there that knew they were not going to get caught, knew 
nobody cared if they did, and they knowingly violated the law.

[[Page 11267]]

  I asked the new head of immigration enforcement if that was going to 
change. I asked the new Secretary of Homeland Security if that was 
going to change. Today they announced a new policy. Finally, they have 
a set of guidelines going to everyone in the country about how we are 
going to prioritize going after those employers that knowingly hire 
illegal immigrants. We finally are going to get to the magnet. This is 
a crime we can deter.
  If you think somebody is going to put you in jail for saying: Hey, I 
didn't care if you have papers or not, I can pay you cheaper; work you 
harder. I don't care if you are illegal or not; I don't want to know. 
In fact, bring your friends--if you don't think those people being held 
accountable is going to make a difference, then you don't understand 
law enforcement.
  Today I am proud to say change came. The new guidelines require that, 
in fact, instead of working off tips, they are now going to embrace 
basic investigation. They will use undercover. They will use 
informants. They will use all kinds of documentation they can look at 
in terms of paper documentation. They will enlist the support and 
cooperation, ahead of workplace enforcement, of local law enforcement 
agencies, including the Justice Department. They have decided it is a 
new day in immigration enforcement and that we will get at the root of 
the problem.
  I support E-Verify and I support giving employers all the tools we 
can to do the best job they can in hiring legal workers. But for those 
employers that don't care, that are doing it on purpose and knowingly 
doing it, we need to come down on them and come down hard.
  This administration has figured it out. I congratulate the Secretary 
of Homeland Security for these new policies. I stand in full support, 
and I know most of my colleagues do also. We finally will do something 
about illegal immigration when we shut down the magnet.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Let me inquire, Madam President, if I may, of my colleague: 
Do you want to offer the amendment at this juncture or do you want to 
make some comments on it?
  Mr. CORKER. Madam President, I do not want to make any comments. I 
just want to call it up.
  Mr. DODD. Why not go ahead and do that.
  Mr. CORKER. OK. I thank my friend from Connecticut.
  The PRESIDING OFFICER. The Senator from Tennessee.


                Amendment No. 1019 To Amendment No. 1018

  Mr. CORKER. Madam President, I ask unanimous consent to call up 
amendment No. 1019.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report.
  The assistant legislative clerk read as follows:

       The Senator from Tennessee [Mr. Corker] proposes an 
     amendment numbered 1019 to amendment No. 1018.

  Mr. DODD. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

        (Purpose: To address safe harbor for certain servicers)

       On page 17, strike line 1 and all that follows through page 
     18, line 4 and insert the following:
       ``(1) to the extent that the servicer owes a duty to 
     investors or other parties to maximize the net present value 
     of such mortgages, the duty shall be construed to apply to 
     all such investors or group of investors; and
       ``(2) the servicer shall be deemed to have satisfied the 
     duty set forth in paragraph (1) if, before December 31, 2012, 
     the servicer implements a qualified loss mitigation plan that 
     meets the following criteria:
       ``(A) Default on the payment of such mortgage has occurred, 
     is imminent, or is reasonably foreseeable, as such terms are 
     defined by guidelines issued by the Secretary of the Treasury 
     or his designee under the Emergency Economic Stabilization 
     Act of 2008.
       ``(B) The mortgagor occupies the property securing the 
     mortgage as his or her principal residence.
       ``(C) The servicer reasonably determined, in good faith, 
     consistent with the guidelines issued by the Secretary of the 
     Treasury or his designee, that the application of such 
     qualified loss mitigation plan to a mortgage or class of 
     mortgages will likely provide an anticipated recovery on the 
     outstanding principal mortgage debt that will exceed the 
     anticipated recovery through foreclosures or other 
     resolution.

  Mr. DODD. Madam President, I thank my colleague from Tennessee. Let 
me--since we are across the room from each other--invite you and your 
staff to meet with our staff and talk about the amendment since we are 
not sure what it is. But let's see if we can reach some accommodation.
  Mr. CORKER. Madam President, I have a sense the merits of this 
amendment are so great that it will be accepted universally.
  Mr. DODD. Madam President, I would expect nothing less from the 
Senator from Tennessee.
  Mr. CORKER. I thank the Senator very much.
  Mr. DODD. Madam President, let me first of all thank our colleague 
from Illinois. I know he did not prevail in his amendment dealing with 
the bankruptcy provisions, but I commend him for his efforts over the 
last number of weeks, I know in serious negotiations with others, to 
try to achieve an accommodation. That did not happen. I regret that was 
the case because I think that was one meaningful way to try to avoid 
some of the foreclosure problems we see in the country. So I am sorry 
that did not prevail.
  Madam President, I wish to spend a few minutes, if I may, briefly 
describing the substitute amendment I have offered on behalf of myself 
and Senator Shelby that is before us and will be now open for 
amendment--as the Senator from Tennessee has his amendment, and I know 
my colleague from Louisiana also has at least one--maybe two 
amendments--to offer on this bill as well.
  Let me say to others, we would urge, if you have amendments, to let 
us know what they are. I also say to my colleagues this is a bill that, 
while it is going to be helpful to consumers and helpful to homeowners 
in trying to deal with the underlying problems, it is being sought 
after primarily by the financial institutions, the banks across the 
country, dealing with the FDIC, the insurance limits, among other 
matters. So it is very important to them, and Senator Shelby and I 
recently worked this out to move forward.
  But I want to say to my colleagues, there were other matters that are 
important as well. If this gets bogged down for days on end, the leader 
has indicated to me he will pull this bill down and we will maybe deal 
with it next fall. So to those out there who have an interest in what 
we have worked on here, I urge them to communicate with people that it 
is important we try to get this done fairly quickly.
  We spent a lot of time on it. I think it is a good bill. It is a 
balanced bill. Senator Shelby and I worked hard on these matters with 
our committee members. So this substitute is bipartisan, and we hope 
our colleagues will respect that and let this not become a vehicle for 
an awful lot of other issues for which I do not question the 
motivations or the sincerity of those who might offer amendments, but 
this is not going to become a vehicle for all these other ideas that do 
not relate to the underlying purpose of this bill.
  As we all know, and I have mentioned before, we have a staggering 
number of foreclosures in the country. Some 9,000 to 10,000 homeowners, 
before this evening is out, will receive a default or action notice. If 
current trends continue, two-thirds of those people will lose their 
home. So of the 10,000 today who will receive that default or action 
notice, two-thirds of them will probably lose their home unless some 
action is taken. In all, some 3.4 million homes are expected to go into 
foreclosure this year alone--between 8 and 12 million homeowners over 
the next several years. Those are breathtaking numbers when you 
consider the damage to families, to neighborhoods, and to communities 
across our Nation.
  According to industry figures, by the end of last year, 20 percent of 
all mortgage loans were already under water--1 in 5--that is, the cost 
of the mortgage

[[Page 11268]]

exceeded the value of the home. Those are stunning numbers: One out of 
every five homeowners owed more on their mortgage than the home was 
worth.
  In my home State of Connecticut, the problem is very serious and 
spreading. The Center for Responsible Lending projects that some 17,000 
homes in my State of Connecticut will go into foreclosure in 2009--
nearly 60,000 over the next 4 years.
  I recently invited HUD Secretary Shaun Donovan to my State. We 
visited Bridgeport, CT, which alone has some 5,200 subprime mortgages--
many already in foreclosure. Joan Carty, the CEO of the Housing 
Development Fund, a housing nonprofit group in Bridgeport, CT, showed 
the Secretary and me a series of maps of the city of Bridgeport. She 
had in those maps the locations of each subprime loan and each 
foreclosure. It literally looked like a cancer spreading across the 
body politic of that city.
  We visited New Haven, CT, where we saw how property values for homes 
located within an eighth of a mile of a foreclosed home dropped by an 
average of $5,000 the day of that action or default. And as we saw 
across Hartford, CT, where home prices have sunk almost 8 percent in 
the last year alone, it does not take long before the epidemic affects 
whole cities.
  In fact, this crisis could even result in a net loss in home 
ownership rates for African Americans, wiping out a generation of hard 
work and gains in wealth.
  The people I have met who are losing their homes are not statistics. 
They are grandmothers on fixed incomes who trusted a mortgage broker 
who put them in adjustable rate mortgages with exploding payments. 
Their incomes were not going to ever adjust to a level where they could 
afford the fully indexed price of that mortgage. But their mortgages 
adjusted, and the brokers knew these borrowers were headed for trouble.
  I have met working parents who lost a job or are facing a health care 
crisis. Fifty percent of the foreclosures are related to a health care 
crisis in that family--not acquiring an automobile you cannot afford or 
a big-screen television, as some have been suggesting. Fifty percent 
are related to a health care crisis. One victim of predatory lending I 
met in Hartford, CT, tests children for lead poisoning for a living.
  These are good people, decent Americans, many of whom were taken 
advantage of, often by deceptive practices. In fact, the Wall Street 
Journal reported that 61 percent of those in subprime mortgages could 
have qualified for prime mortgages but were urged or pushed into 
riskier mortgages by lenders and brokers who knew better. Why did they 
do so? Because those brokers and lenders made more money by putting 
these unsuspecting borrowers into riskier, higher priced mortgages.
  So we have an obligation, I think as a body, to do everything we can 
to get this right. That is not to excuse irresponsible behavior. I am 
not suggesting such. But in matter after matter, this was not a matter 
of irresponsibility; it was either deceptive practices or conditions 
which forced a family--through a job loss or a health care crisis or 
others--to be put at risk of losing their home. This effort is to get 
this right not only for the families but even, in a larger sense, for 
the economy as a whole, which hinges on our ability to put a stop to 
these foreclosures.
  Protecting families and our economy was what motivated me 2 years 
ago--this month, in fact--when I convened a Homeowners Preservation 
Summit, at which leaders and servicers agreed to a set of principles. 
This was in the spring of 2007, 2 years ago. We met, and they committed 
themselves to a series of principles to making their best efforts to 
reduce foreclosures through loan modifications.
  To say there was a total failure by the industry to follow through on 
that agreement would be a vast understatement.
  Thankfully, even if lenders, servicers, and the previous 
administration failed to understand the magnitude or the severity of 
the crisis and the obligation to act, there has been no such problem 
with the current administration, I am pleased to report. In putting 
forward a $275 billion plan, the Obama administration clearly 
understands that we cannot get our economy back on track until we stop 
the tidal wave of foreclosures sweeping across our country.
  The underlying legislation Senator Shelby and I have offered gives 
them the tools to do that as effectively as possible by expanding the 
ability of FHA, the Federal Housing Administration, and Rural Housing--
and I have mentioned cities. But I want to point out, rural housing is 
also suffering from foreclosures; this is not just an urban problem. 
This affects rural States. I know the Presiding Officer and my friend 
from Louisiana will testify to this: In their rural communities, 
foreclosures are not limited to the larger cities in their States but 
it also affects rural people as well. That point needs to be made.
  The underlying legislation gives them the tools to do that as 
effectively as possible by expanding the ability of FHA and Rural 
Housing to do loan modifications, by creating more enforcement tools 
for FHA, the Federal Housing Administration, to drop lenders who break 
FHA rules, by expanding access to the HOPE for Homeowners Program, and 
by providing safe harbor for servicers who modify a loan consistent 
with the Obama plan or refinance a borrower into a HOPE for Homeowners 
loan.
  It is disheartening that even as more and more homeowners have fallen 
behind on their loans, the response of loan servicers has been so 
inadequate. We have heard over and over that the reason servicers are 
hesitant to use the tools we have given them is that they fear they 
will be sued for violating pooling and servicing agreements.
  You would think that from an investor's point of view, reduced 
interest payments from modified loans would be better than no interest 
payments from defaulted loans. Unfortunately, you would be wrong in 
that. The mortgage-backed securities market in which so many of these 
loans are tied up is--not to put too fine a point on it--a mess. These 
mortgages have been sliced and diced into thousands of pieces, with 
securities sold off to different investors all over the globe. These 
investors have different interests in the loan pools--some rated 
triple-A, others have more risky segments. Untangling this complex mess 
of competing interests has been nearly impossible. One direct solution 
to this problem would have been the bankruptcy amendment offered by 
Senator Durbin. That failed.
  Another, which we provide for in this amendment, is to make 
modifications more likely by ensuring that servicers who provide 
modifications consistent with the administration's plan get the benefit 
of safe harbor from needless lawsuits.
  Our colleague from Florida, Mel Martinez, is the author of this 
provision. This, again, is a bipartisan proposal. Senator Martinez, I 
think, will come to the floor and address the issue in greater detail. 
Senator Martinez is a former Secretary of HUD under the Bush 
administration and brings a wealth of knowledge to these debates and 
discussions. It was his contribution on the safe harbor provision which 
caused it to be included in this legislation.
  Another provision, which we provide for in this amendment Senator 
Shelby and I have offered, is to make modifications more likely by 
ensuring that servicers who provide modifications, consistent with the 
administration's plan, get the benefit of safe harbor from needless 
lawsuits. I mentioned that. To ensure more servicers take advantage of 
the HOPE for Homeowners legislation we created last summer, those 
refinances are covered as well. Indeed, the legislation also 
streamlines the HOPE for Homeowners program. My colleagues will recall 
we adopted that last summer. We all hoped it would be a great source of 
modification for these mortgages. And, candidly, it ended up being a 
lot less than we hoped for. As the author of those provisions, it was a 
complicated proposal. There were a lot of fingerprints on it to try to 
get it out of the Congress. Unfortunately, I think we made it far more 
complicated than we needed to.
  Our bill today is designed to streamline that program and to make it 
more

[[Page 11269]]

workable for families across the country. The truth is, despite the 
efforts of Senator Shelby, myself, and others, the HOPE program has not 
worked to date--in large part because of servicers' steadfast refusal 
to accept reasonable settlements for second mortgages, which belong to 
about half of all at-risk mortgage holders.
  This is a problem the administration recognizes, with its recently 
announced Second Lien Program, which will make it easier for borrowers 
to modify or refinance their loans under the HOPE for Homeowners 
program.
  With this legislation, we make the program far more user-friendly for 
borrowers and servicers alike by lowering fees and streamlining 
borrower certification requirements. In addition, we allow for 
incentive payments to servicers and originators to participate in the 
program, while giving the HUD Secretary limited discretion to determine 
who reaps the benefits of any future appreciation on that home.
  For all these reasons, it is time for the banks, I believe, to step 
to the plate.
  Consider for a moment all that we are doing to prevent foreclosures 
and restart lending in this legislation alone, this substitute.
  As I said, we are offering banks a safe harbor to do modifications 
and refinancing.
  To free up credit, we increase permanent borrowing authority for the 
Federal Deposit Insurance Corporation and the National Credit Union 
Administration to $100 billion and $6 billion respectively. On a 
temporary basis, we increase that authority to five times those 
amounts. Chairman Sheila Bair has said those levels will allow the FDIC 
to reduce the special assessments on banks by as much as 50 percent, 
making credit more available in our communities. According to the 
Independent Community Bankers Association, which strongly supports this 
legislation--and I thank them for it--this will increase lending by 
some $75 billion.
  In addition, Senator Shelby and I extend for 4 years--to December 31, 
2013--the increase in deposit insurance limits from $100,000 to 
$250,000. We initially did this in the Emergency Economic Stabilization 
Act. However, in that legislation we increased the limit only through 
this year.
  For 75 years, deposit insurance has been a stabilizing force during 
some of our Nation's most troubling economic times. This increase will 
prove especially helpful for smaller financial institutions today, 
particularly our community banks across the country, which derive 85 to 
90 percent of their funding from deposits.
  The increase from $100,000 to $250,000 goes a long way toward 
eliminating uncertainty in the system. If you are planning for your 
retirement and buy a 3-year certificate of deposit at a bank for 
$150,000, you want to know your investment will be safe after 2009 
comes to a close. This is to say nothing of the many other programs and 
capital injections already in place to protect and sustain them in our 
credit markets.
  I would be remiss if I did not take a moment to commend our majority 
leader, Senator Harry Reid, for a very important contribution he has 
made to this legislation. Section 103 of this bill authorizes an 
additional $127.5 million, on top of other amounts that may be 
authorized, for foreclosure counseling and outreach efforts targeted to 
the areas that are the hardest hit by foreclosures. In addition, the 
provision provides for funding to increase public awareness such as 
through advertising, including Spanish language advertising, to try to 
steer people away from foreclosure and other financial scams that 
proliferate in hard times such as these.
  Ultimately, this legislation by itself, of course, will not turn this 
Nation's economy around, but it will be a contribution, and a positive 
one, both to a healthier banking system and, more importantly, to more 
stable home ownership. There is no silver bullet--I know my colleagues 
know that--when it comes to solving our financial crisis, but each step 
such as this that we take brings us closer to seeing this come to an 
end, these most troubling economic times for our country. So by 
providing additional stability and certainty within the banking system, 
by providing assurances and help in rural housing as well as urban 
housing, by providing additional support for these efforts with the 
HOPE for Homeowners Act, this legislation goes a long way to 
contributing to that stability and that certainty.
  Again, I am very pleased to have as my partner in this, as we have on 
many occasions, my colleague from Alabama, the former chairman of the 
committee, Senator Richard Shelby, along with the members of my 
committee who have worked very hard on these matters as well. As I said 
at the outset, I regret the Durbin amendment is not part of this, but 
my colleagues have expressed their views on it and that is why it is no 
longer on this bill.
  I know my colleagues have other ideas they wish to offer to this 
bill. I will include them if I can. If there is some reason I can't, I 
will explain why. If we can reach some compromise, I will try to do 
that as well. This is the background of this substitute proposal that 
Senator Shelby and I are offering. Again, I wish to move quickly if we 
can on this. I think it would be an important message to send to the 
financial sector of our communities that we are stepping to the plate. 
These are matters that have been before us for some weeks now. They 
have been waiting patiently for us to move on these matters. We have a 
chance to do that. That is not to say that other people have ideas that 
don't have merit, but we have to make decisions about whether to move 
forward, and my hope is that we will, either by this evening or 
tomorrow. What better way to conclude this week than to conclude this 
bill and send a message to the citizens of this country that the Senate 
of the United States has moved to rise to the challenge of this crisis.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Louisiana.


                Amendment No. 1016 to Amendment No. 1018

  Mr. VITTER. Madam President, I ask unanimous consent to set aside the 
pending amendment and to call up Vitter amendment No. 1016 to the 
underlying bill.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Louisiana [Mr. Vitter] proposes an 
     amendment numbered 1016.

  Mr. VITTER. Madam President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To authorize and remove impediments to the repayment of funds 
    received under the Troubled Asset Relief Program, and for other 
                               purposes)

       At the appropriate place, insert the following:

     SEC. __. REPAYMENT OF TARP FUNDS.

       Section 111(g) of the Emergency Economic Stabilization Act 
     of 2008 (12 U.S.C. 5221(g)) is amended--
       (1) by striking ``Subject to'' and inserting the following:
       ``(1) Repayment permitted.--Subject to'';
       (2) by inserting ``if, subsequent to such repayment, the 
     TARP recipient is well capitalized (as determined by the 
     appropriate Federal banking agency having supervisory 
     authority over the TARP recipient)'' after ``waiting 
     period,'';
       (3) by striking ``, and when such assistance is repaid, the 
     Secretary shall liquidate warrants associated with such 
     assistance at the current market price''; and
       (4) by adding at the end the following:
       ``(2) No repayment precondition for warrants.--A TARP 
     recipient that exercises the repayment authority under 
     paragraph (1) shall not be required to repurchase warrants 
     from the Federal Government as a condition of repayment of 
     assistance provided under the TARP. The Secretary shall, at 
     the request of the relevant TARP recipient, repay the 
     proceeds of warrants repurchased before the date of enactment 
     of this paragraph.''.

  Mr. VITTER. Madam President, this amendment is very simple. In fact, 
it is identical to an amendment I offered to a different bill last week 
which unfortunately we did not get to vote on because cloture was 
passed.
  This amendment says that under the TARP, if a bank wants to repay its 
TARP money that it has taken from

[[Page 11270]]

the taxpayer, with all of the penalties and interests that are 
relevant, it can do that immediately whenever it wants, as long as it 
remains perfectly sound and meets all of the liquidity, safety, and 
soundness requirements that the normal regulators impose on those sorts 
of institutions. I think that is very commonsensical and 
straightforward. If a bank wants to repay with interest, why shouldn't 
it be able to leave the program? That is the guarantee and the promise 
that was made to banks when TARP was originally instituted. Yet several 
banks are trying to do that now and are getting a different story: No, 
no, no, no. This isn't your decision alone. This is our decision, the 
Government's decision, even if it doesn't impact the safety and 
soundness of your institution.
  Several folks in this institution mirror the concerns of citizens 
around the country. We are very concerned about the Federal Government 
getting ever more involved in the business of private business and 
institutions, in particular, of banks and financial institutions. This 
is a steady trend that began last September, and it is a very steady 
trend that the Government is becoming first a junior partner and 
seemingly a senior partner in more and more significant institutions in 
our private market. Now we see that it is expanding beyond banks and 
financial institutions into auto companies, insurance companies, and 
who knows what next.
  Certainly, with all of these legitimate concerns we have about that 
trend, it should be an established principle of the TARP that if a bank 
wants to repay the money fully with interest and if that repayment does 
not impact its safety and soundness, if they meet all of the liquidity 
requirements put on them by the Federal regulators, they should be able 
to do that. Yet they are not. They have not been able to do that. Some 
have. I am very proud to say that IberiaBank, headquartered in 
Lafayette, LA, was the first bank to apply for repayment and to 
actually give all of its TARP money back. I am very happy to say that 
was successfully done. They were followed by six other smaller or 
regional banks: the Bank of Maine, Bancorp, Old National Bancorp, 
Signature Bank, Sun Bancorp, Shore Bancshares, and Centra Financial 
Holding, Inc. All of those banks followed Iberia's lead and gave that 
money back.
  But more recently, unfortunately, the Federal Government has been 
singing a different tune and has said, Wait, wait. You can't decide 
this on your own. We are your new partner and we get to decide this, 
and we are going to decide it on our criteria, even if it is a 
perfectly reasonable and safe thing to do with regard to your liquidity 
and your safety and soundness. That exemplifies what so many of us are 
concerned about, about expanding government authority.
  Let me quote directly from Secretary Geithner. The Wall Street 
Journal reported an interview recently where he:

     indicated that the health of individual banks won't be the 
     sole criteria for whether financial firms will be allowed to 
     repay bailout funds.

  He also testified before Congress in the last few weeks and the 
bottom line of his testimony was: Stay tuned. We will give you 
guidelines on how to repay TARP funds in the future. We are not there 
yet, and we are not--we are certainly not willing to allow banks to 
make that decision. We are going to make that decision.
  I have to say it sort of reminds me of the analogy of businesses that 
are infiltrated by the mob and they have as their new senior partner 
the mafia, and all of a sudden, if they want to get out, it is no 
longer their choice. Their new big brother partner is going to make the 
calls and is going to decide: No, no, no. We have our claws into you. 
That is not changing anytime soon.
  Is that the new rule we want to establish for private market 
capitalism? Is that the amount of power and authority we want to give 
to the Federal Government over private institutions in the private 
sector? Even when they can repay the money and remain perfectly liquid, 
perfectly solvent, meeting all of the relevant safety and soundness 
criteria, do we want to say no, no, no, big brother government says no. 
We know best.
  I am very disturbed by this policy that my amendment is counterpoised 
to. It does suggest that big government knows best and that big 
government is going to make the call, apart from the interests of that 
particular private firm. If that firm meets liquidity requirements, 
meets all the safety and soundness regulations in sight, then they 
should be able to do whatever the heck they want to determine their own 
future, and that includes repaying their TARP money to the government.
  I urge all of my colleagues to support this commonsense, reasonable, 
pro-free market amendment.


                Amendment No. 1017 to Amendment No. 1018

  Madam President, at this point I ask unanimous consent to set aside 
that amendment and call up the Vitter amendment No. 1017 to the 
underlying bill.
  The PRESIDING OFFICER. Is there objection?
  Mr. DODD. Madam President, reserving the right to object, let me say 
I am going to have to object at some point because we have too long a 
stack here. This is not aimed at my colleague from Louisiana, but I 
want to be careful and check with leadership as to how many amendments 
we can lay aside in terms of what their plans are for this evening and 
for tomorrow. I won't object to this particular one, but I want to use 
a moment here to express to my colleague that at some point we will 
have to put some limitation on this so we can start to grapple with the 
amendments before us.
  I thank the Senator.
  The PRESIDING OFFICER. Without objection, the clerk will report.
  The bill clerk read as follows:

       The Senator from the Louisiana [Mr. Vitter] proposes an 
     amendment numbered 1017.

  Mr. VITTER. Madam President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To provide that the primary and foundational responsibility 
    of the Federal Housing Administration shall be to safeguard and 
              preserve the solvency of the Administration)

       At the appropriate place, insert the following:

     SEC. __. DUTIES OF THE FHA.

       (a) Duty to Maintain Solvency.--Notwithstanding any other 
     provision of law or of this Act, the primary and foundational 
     responsibility of the Federal Housing Administration shall be 
     to safeguard and preserve the solvency of the Administration.
       (b) Suspension of Activities.--If in the determination of 
     the Commissioner of the Federal Housing Administration, any 
     existing Federal requirement, program, or law, or any 
     amendment to such requirement, program, or law made by this 
     Act, threatens the solvency of the Administration or makes 
     the Administration reasonably likely to need a credit subsidy 
     from Congress, the Commissioner shall--
       (1) temporary suspend any such requirement, program, or 
     law; and
       (2) recommend legislation to the appropriate congressional 
     committees to address such solvency issues.

  Mr. VITTER. Madam President, I thank the distinguished chairman for 
his comments and for his forbearance. I will be very brief on this 
amendment, which goes directly to the bill and is very germane.
  This amendment, again, is very simple and very straightforward but I 
also think very important. It would require that the Federal Housing 
Administration recognize as its first duty to maintain its own 
solvency. If the provisions of the underlying bill or any other 
existing requirement cause the FHA to be reasonably likely to need a 
credit subsidy from Congress, then it shall require the Commissioner, 
No. 1, to temporarily suspend any program that is threatening the 
solvency of the FHA; and No. 2, to recommend legislation to Congress to 
address those solvency issues.
  I commend the motives of the distinguished chairman and others with 
regard to this bill. Clearly, they are trying to help homeowners in 
dire need, and there sure as heck are many of them around the country, 
including my State. But as we walk down this path, I think we all want 
to be careful that we don't create a new crisis, a new solvency crisis 
at the FHA. I believe we need to be very aware of that so we

[[Page 11271]]

don't create another crisis there as congressional and other action has 
in the past at Fannie Mae, Freddie Mac, and elsewhere.
  Recently, on April 23 at a nomination hearing for Mr. David Stevens, 
who is the designate for housing and Federal Housing commissioner, the 
person whom President Obama has chosen to run the FHA, I asked how he 
viewed the health of the FHA mortgage insurance fund and if he 
anticipated having to ask Congress for a credit subsidy. His answer on 
April 23 was:

       At the present time, the FHA fund is solvent and meets 
     actuarial requirements. Maintaining that solvency would be a 
     top priority for me.

  I am glad to hear that it is solvent as of now but, quite frankly, I 
don't want that solvency to be a top priority for him; I think it 
should be the top priority for him. I think we should be very cautious 
about expanding programs under the FHA if it could lead to a crisis of 
solvency there which could be a further rattling of the financial 
markets, just as similar crises have been in the past.
  Unfortunately, there are significant signs that the FHA is a ticking 
timebomb now. According to the Mortgage Bankers Association National 
Delinquency Survey, for the fourth quarter of 2009 seasonally adjusted 
delinquency rate, 13.73 percent of FHA loans would present an increase 
of 81 basis points from the third quarter of 2008.
  Similarly, in a report from J.P. Morgan Securities issued in January 
of this year, it says 70 percent of Ginnie Mae borrowers, those who are 
FHA borrowers and VA borrowers, would be underwater if home prices drop 
another 10 percent.
  On March 8 of this year, a Washington Post investigation led many 
observers to view the FHA as a ticking timebomb. The article reports:

       There has been a spike in quick defaults that seem to 
     follow the pattern that preceded the collapse of the subprime 
     market as some of the same flawed lending practices that 
     contributed to the mortgage crisis are now eroding one of the 
     main Federal agencies charged with addressing it.

  Of course they were talking about the FHA.
  According to the same article:

       More than 9,200 of the loans insured by the FHA in the past 
     2 years have gone into default after no or only one payment.

  So already we see very troubling signs.
  On top of that, this bill, in some ways, erodes the stability of the 
FHA. It does things such as say that an individual receiving assistance 
under this program must verify their income, providing income tax 
return information but reducing the upfront fee for the program from 3 
percent to 2 percent. It reduces the annual fee from 1.5 percent to 1 
percent, and it adds incentives with $1,000 for each loan for folks to 
enter and service the program.
  So I am concerned, No. 1, that the FHA right now shows real signs of 
a possible future crisis, and No. 2, that this bill could 
unintentionally be making that worse and making that day come quicker.
  I am not proposing we scrap the provisions of the bill, but my 
amendment would simply say that the first duty of the FHA is to 
maintain solvency, and secondly, if the provisions of this bill or any 
other requirement causes the FHA to be reasonably likely to need a 
credit subsidy from Congress, the Commissioner has the power to, No. 1, 
temporarily suspend that program, and No. 2, recommend legislation to 
Congress to address the solvency problem.
  Let's not let the FHA be the next chapter in terms of this financial 
crisis. Let's not repeat the kinds of mistakes we have seen in other 
Federal Government or related entities. Let's be careful to avoid that, 
which would be an enormous rattling of the financial system and which 
would cause an enormous drop in confidence.
  With that, Madam President, I thank the Chair and the chairman for 
his forbearance, I yield the floor, and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. CHAMBLISS. Madam President, I ask unanimous consent that the 
order for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CHAMBLISS. Madam President, I ask unanimous consent to speak as 
in morning business for up to 15 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                          Release of DOJ Memos

  Mr. CHAMBLISS. Madam President, I rise today to express my 
disappointment with the Obama administration's decision to publicize 
the memorandums from the Office of Legal Counsel at the Department of 
Justice. The four memos released by the administration examine whether 
the CIA's enhanced interrogation techniques would violate U.S. statutes 
or international agreements prohibiting torture.
  It is important to note that all four memos determined that the 
techniques did not violate U.S. constitutional or international law or 
U.S. criminal law. It is disappointing that the White House released to 
the public these highly sensitive memos. There is simply no productive 
or meaningful purpose in their release.
  The memos describe in detail the CIA's interrogation program, the 
specific techniques that were used, psychological evaluations of 
detainees, and even detailed descriptions of some of the detainees 
themselves. All of this information raises questions about how 
seriously the President believes in protecting our national security as 
well as the confidentiality of legal counsel and the privacy of 
individuals. I believe the only reason the Obama administration chose 
to release these memos was for perceived political gain, and I also 
believe, based upon what I have heard in my home State, that the 
political gain has backlashed.
  I think if Americans read these memos for themselves, they will agree 
that after the 9/11 attacks, the CIA program was necessary to detect 
and prevent additional American deaths. The program was designed to 
exploit information held by only the most senior, hardened, and 
dangerous al-Qaida figures who had perishable information about the 
attack's planning.
  Since its inception in early 2002, fewer than 100 individuals were 
held in this program, which had significant safeguards, including 
detailed assessments to determine that the detainees were senior 
members of al-Qaida--not mere foot soldiers--who likely had actionable 
intelligence on terrorist threats and who posed a significant threat to 
U.S. interests before the CIA could detain them.
  Out of the 100 or so detainees the CIA has held, only 3 were 
subjected to the most serious, yet legal, interrogation techniques. 
Those three were Khalid Shaikh Mohammed, the mastermind of the 
September 11 attacks, whose deadly plan resulted in the murder of some 
3,000 innocent Americans; secondly, Abu Zubaydah, a senior member of 
al-Qaida, whom the CIA assessed to be the third or fourth ranking 
member of the terrorist group and who had been involved in aspects of 
every al-Qaida attack against America; and thirdly, Abd al-Rahim al-
Nashiri, a key al-Qaida operational planner. Information obtained from 
these three detainees saved American lives by disrupting al-Qaida 
attacks and led to the capture or arrest of even more terrorists. These 
detainees, who have been in the inner circle of al-Qaida and who have 
occupied some of the most important positions in that group's 
hierarchy, held information that simply could not have been obtained 
from any other source.
  In fact, the memos reveal some of the invaluable information we have 
gained from the CIA program. This includes prevention of numerous 
terrorist attacks, such as the west coast airliner plot, which sought 
to replicate the hijacking of airplanes and crash them into buildings 
on the west coast of the United States.
  One memo describes the discovery of this plot by stating:

       The interrogation of KSM--

  Which is Khalid Shaikh Mohammed--

     --once enhanced techniques were employed, led to the 
     discovery of a KSM plot, the ``Second Wave,'' to use East 
     Asian operatives to crash a hijacked airliner into a building 
     in Los Angeles.

  The same memo describes how interrogations provided information on 
two

[[Page 11272]]

operatives who planned to build and detonate a dirty bomb in the 
Washington, DC, area. There is no doubt that the disruption of these 
attacks has saved American lives.
  CIA detainees have also confirmed that al-Qaida continues to operate 
against the United States and its allies. Just recently, a statement 
from none other than the Director of National Intelligence, Dennis 
Blair, acknowledged that the high-value information came from this same 
CIA interrogation program and that al-Qaida continues to plan attacks 
against America.
  As a member of the Senate Intelligence Committee, I have seen CIA 
assessments on the value of information the United States has gained 
from interrogations as well as intelligence on the continuing resolve 
of al-Qaida to attack the United States and to attack its citizens. 
However, much of this information remains classified, so only half of 
the story is being told. It is important that Americans have an 
opportunity to see what they were protected from as a result of the CIA 
interrogations--interrogations that were not only effective but were 
deemed by the Justice Department not to be torture under U.S. and 
international law.
  The CIA's High Value Terrorist Detainee Program was a crucial pillar 
of U.S. counterterrorism efforts and was the largest source of insight 
into al-Qaida for the United States and its allies. Now, as a result of 
the release of these memos, the program is the largest source of 
information on U.S. operations to al-Qaida and our other enemies.
  The administration claims it released these memos in an effort to be 
transparent, but the only transparency it has provided is to al-Qaida. 
The group now knows the outer boundaries of what the United States is 
capable of doing and that we are no longer using these methods or any 
others for interrogation.
  Our enemies--traditional enemies and terrorists--now know that some 
interrogation methods were 100 percent effective on our own soldiers 
when used in what is called SERE training. I can only imagine how 
delighted our enemies are to learn how to gain secrets from our 
soldiers. However, I am sure our enemies will not have the same 
safeguards, medical and otherwise, in place when they conduct 
interrogations on our men and women in uniform who might be captured.
  While giving transparency to al-Qaida and our other enemies, the 
release of these memos will deprive this administration and all future 
Presidents from receiving candid advice from Justice Department 
lawyers.
  The Office of Legal Counsel is supposed to provide the President and 
the executive branch with thorough and frank legal analysis on a 
variety of topics. If these talented attorneys have to worry that their 
confidential and often classified legal advice is going to be released 
to the public and could result in their prosecution, I guarantee you 
they will not be able to offer the most straightforward opinions and 
alternative legal analysis necessary to guide policy. Instead, policy 
will now guide these lawyers' advice.
  Finally, it is disingenuous for Members of Congress to say they were 
unaware of the CIA program. From its inception, CIA lawyers repeatedly 
obtained legal guidance regarding the program from the Department of 
Justice, as one can see from the four classified memos released and 
from other unclassified memos previously released. The CIA briefed 
congressional leaders early on about the details of the program and the 
specific interrogation techniques that could be used.
  As a member of the Senate Intelligence Committee, I was aware that 
the CIA was holding high-valued detainees and was gaining extraordinary 
insight into al-Qaida's structure and operations. Also, information 
about the program was leaked to the public and press. Reports about it 
started to circulate as early as 2005. Yet Congress continued to fund 
the program for several years afterward.
  In fact, as the vice chairman of the Senate Intelligence Committee 
noted, the fiscal year 2007 intelligence authorization bill included 
language which specifically acknowledged that the CIA's program had 
been important in collecting valuable intelligence on al-Qaida 
operatives and associates and on planned terrorist attacks against the 
United States and our allies.
  This bill was voted out of the Senate Intelligence Committee 
unanimously by a 15-to-0 rollcall vote. I hope that in the future this 
administration places more emphasis on protecting our national security 
rather than on placating critics of the rules the United States used to 
prevent another attack on our domestic soil.
  Madam President, I yield the floor and suggest the absence of a 
quorum. I am sorry, I did not see the Senator from South Carolina. I do 
not suggest a quorum call.
  The PRESIDING OFFICER. The Senator from South Carolina.


                           Amendment No. 1026

  Mr. DeMINT. Madam President, in a moment I would like to bring up an 
amendment, but in deference to Senator Dodd, I wish to wait for him to 
be back on the floor. In the meantime, I would like to explain 
amendment No. 1026 and talk about it briefly until the Senator returns.
  We are all well aware of the bailout bill that was passed last 
October. It had one purpose, at least as that purpose was described to 
us, and that was to purchase what they called toxic assets that were 
clogging up the credit system. That $700 billion was then used in other 
ways, and I believe unconstitutionally, to loan money to banks, 
insurers, auto companies, and to actually turn those loans into 
preferred stock, in some cases.
  It now appears the administration is going to take this a little bit 
further. We have seen the hiring and firing of executives. We have seen 
the Government, in effect, break contracts that were established in the 
private sector. We see the Government continuing to use this TARP money 
to gain more and more control over private sector industries, 
particularly the financial industries.
  The administration appears now to have a plan that would swap this 
loan money in the form of preferred stock for common stock, which means 
we not only own but we have voting rights and, in some cases, 
controlling interests in General Motors. My amendment addresses 
specifically financial institutions, but we are talking about 
financial, auto companies, and other aspects of our economy using this 
TARP money in ways that were totally different than we ever imagined.
  My amendment addresses specifically banks. It would prohibit the 
Federal Government from converting preferred stock to common stock and 
basically taking ownership and control of banks across the Nation.
  Many banks that participated in the TARP funds suggest they were 
pressured to take it when they did not need it. Many banks now say they 
would like to give it back, and they are not allowed to give it back. 
We need to back the Federal Government out of our private sector 
financial system and set up a good system of laws and regulations so it 
can work in a way that is transparent, honest, and good for the 
American people. But we don't need the Federal Government to own our 
banks and to try to run the day-to-day business in our banks, just like 
we do not need the Federal Government to own General Motors and to run 
General Motors.
  My amendment would address, specifically, the financial institutions 
in our country and prohibit the use of TARP funds to be translated into 
common stock ownership and voting rights.
  Madam President, I yield the floor and suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. DeMINT. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DeMINT. Madam President, I would like to bring up amendment No. 
1026.

[[Page 11273]]


  Mr. DODD. Madam President, it will take unanimous consent to 
temporarily lay aside the pending amendment; is that correct?
  The PRESIDING OFFICER. That is correct.
  Mr. DODD. Madam President, reserving the right to object, I say 
respectfully to my colleague and friend from South Carolina, a member 
of the Banking Committee, reluctantly I will object to that request at 
this point. We have amendments pending, and I will explain, as I did to 
him, the detail. At this very moment, I respectfully and reluctantly 
object to temporarily laying aside the pending amendment.
  The PRESIDING OFFICER. Objection is heard.
  Mr. DeMINT. I thank the Senator and yield the floor.
  Mr. DODD. Madam President, as I said a moment ago, we already have a 
lot of amendments filed on this bill. I can tell my colleagues and 
those who are following this debate, this bill is critically important 
to our financial institutions. They have been waiting weeks for this 
bill that Senator Shelby and I put together. I am not, in any way, 
suggesting the amendments being offered are not motivated by the best 
of intentions, but the net effect of it is to virtually bring down this 
bill. I say to my colleagues, I know they are hearing from others 
across the country who have been waiting for this bill to come up, to 
be considered, and moved along. There is no way we can spend the amount 
of days now that may be confronting us with the list of amendments to 
go forward.
  The leadership--and I agree with them on this--needs some clarity. If 
I am going to be faced with a stack of amendments being offered, then I 
am going to have to, as the leadership said, take this bill down and 
maybe in the fall at some future date get back to it, if at all.
  That is a tragedy and unfortunate because it is an important matter. 
It is widely supported across the country. It is essential in many ways 
we get it done. I wish for my colleagues to know it is not aimed at any 
particular amendment. It is not suggested their amendments are not well 
motivated. But when you load up a bill such as this with that many 
amendments, it makes it impossible to get the job done.
  I objected to laying aside the pending amendment because we have 
several amendments now pending. We will try, over the coming day or so, 
to see if we can resolve some of those amendments, maybe accept some. I 
have to speak with, of course, my colleague from Alabama, Senator 
Shelby, to see if there is agreement on some of the matters or some 
modification to make them acceptable.
  I suggest to my colleagues, any additional people coming over to 
temporarily lay aside the pending amendments, that I will object to 
doing that until we get clarity and try to clear out the underbrush to 
determine whether we bring down the bill, which I will do, or to get a 
reasonable number of these amendments which we can handle to go 
forward. One or the other.
  For those who are following this debate, the possibility of this bill 
being taken down is very real. I hope those who are interested in this 
bill will notify their respective Members who wish to offer amendments 
and suggest there may be a better time for those amendments to be 
offered.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. MERKLEY. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER (Mr. Begich). Without objection, it is so 
ordered.
  Mr. MERKLEY. Mr. President, tonight I rise to speak on the Dodd-
Shelby legislation and specifically on my amendment, No. 1015, which is 
at the desk.
  First, I commend my chairman, the distinguished Senator from 
Connecticut, for his work on this legislation. This legislation will 
take important steps in addressing the very heart of our economic 
crisis, the housing market. But we can do more.
  Tonight I rise to offer an amendment that will put an end to the 
deceptive and unfair mortgage practices that played a pivotal role in 
steering American families into accepting risky and unsustainable 
mortgages. As I have discussed before, two key factors drew families 
into unsustainable mortgages and paved the way for this recession. 
First, steering payments were paid to brokers who enticed unsuspecting 
borrowers into deceptive and expensive mortgages. These secret bonus 
payments, called yield spread premiums, turned home mortgages into a 
scam.
  A family would go to a mortgage broker for advice in getting the best 
possible loan. The family would trust the broker to give good advice 
because, quite frankly, they were paying the broker for that advice. 
But what the borrower did not realize was that the broker would earn 
thousands of bonus dollars from the lender if the broker could convince 
the homeowner to take out a high-priced mortgage such as one with an 
exploding interest rate rather than a plain vanilla 30-year fixed-rate 
mortgage.
  Prepayment penalties added insult to injury. After the homeowner 
realized he or she had been steered into an unsustainable mortgage, the 
homeowner soon discovered that a large prepayment penalty made it too 
costly for them to refinance into a lower cost loan. The homeowner was 
locked into a destructive mortgage. This scam had tremendous impact.
  A study for the Wall Street Journal found that 61 percent of the 
subprime loans originated in 2006 went to families who qualified for 
prime loans, meaning that millions of American families were placed at 
risk. This is simply wrong--a publicly regulated process designed to 
create a relationship of trust between families and brokers but that 
leaves borrowers unaware of payments that place them in expensive and 
destructive mortgages.
  I call my colleagues' attention to a New York Times editorial 
published on April 10 entitled ``Predatory Brokers,'' which highlighted 
this problem. The editorial pointed out a study by the Center for 
Responsible Lending that found that subprime borrowers who used a 
broker actually fared worse than those who went directly to lenders. 
Those borrowers paid $17,000 to $43,000 more for every $100,000 they 
borrowed. That is outrageous.
  The Times concluded:

       The first step must be to outlaw the kickbacks that lenders 
     pay brokers for steering clients into costlier loans.

  The editorial went on:

       The most clearly unethical form of payment is the so-called 
     yield-spread premium.

  It is difficult to overestimate the damage that has been done by 
these expensive loans and secret steering payments. An estimated 20,000 
Oregon families will lose their homes to foreclosure in 2009. 
Nationwide, an estimated 2 million families will lose their homes this 
year, and the total of foreclosed families is predicted to reach 9 
million by 2012.
  These practices didn't only hurt families on Main Street, they were 
also the prime enablers for the propagation of destructive subprime 
collateralized debt obligations, or CDOs, that have now brought Wall 
Street to its knees. Had these procedures been banned--steering 
payments, prepayment penalties--Wall Street would not have been able to 
engineer the tremendous bubble on the backs of unsuspecting homeowners 
and, accordingly, would not have had the billions in write-downs that 
caused this credit crisis and sent our economy into a terrible 
recession.
  The problem is simple and the solution is simple. The costs of doing 
nothing are tremendous both for homeowners and for the financial 
system. By banning steering payments and prepayment penalties, this 
amendment will restore transparency to the mortgage lending process and 
help make home ownership a stable investment for families once again.
  The time has come for us to make sure that secret steering payments 
and paralyzing prepayment penalties never again haunt American 
families.

[[Page 11274]]

  I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, I want to begin by commending our colleague 
from Oregon for this proposal. We have had a chance to talk about it, 
and he is exactly right. He described it more adequately as to what 
happened, what goes on, what went on, that contributed so much to the 
overall economic mess we are in today. This is where it all began. This 
was not a natural disaster that occurred like Katrina, an act of God. 
These were intentional decisions made by people to abuse purchasers, 
borrowers, luring them into financial situations where they were fully 
aware that borrower could never meet the fully indexed cost of that 
mortgage as it matured.
  In fact, I recall one of the early hearings we held in 2007, the Web 
site of the brokers. The first piece of advice to a broker was: 
Convince the borrower that you are their financial adviser.
  Not that you were their financial adviser, but to convince them that 
you are so that you can then engage them in such a way as to convince 
them to enter arrangements that they could hardly afford. As we now 
know from a number of different studies, somewhere between 60 and 65 
percent of the people who ended up with subprime mortgages actually 
qualified for conventional mortgages.
  For those who may not understand the differentiation, the cost of a 
conventional mortgage is substantially less than a subprime mortgage.
  The Presiding Officer, the Senator from Alaska, spent a good part of 
his career in this business, so he knows firsthand how all of this 
works and appreciates the proposal by our colleague from Oregon. Yield 
spread premiums were one of the key causes of the current crisis 
because these premiums create incentives for brokers to upsell 
borrowers; in other words, to convince them and to draw them into 
arrangements that would be more costly because that is how they got 
paid. It was nothing more complicated than that. You got a better fee 
if you could convince someone, talk them into a situation that cost the 
borrower more. The borrower could never meet those obligations, 
particularly people on fixed incomes.
  One of the first witnesses I ever called before the committee as 
chairman in 2007 was a woman from Chicago whose husband had passed 
away. She worked for 30 or 40 years, had retired, was living in a home 
that she and her husband had bought years before, had $3,000 of 
consumer debt. A broker convinced her that she needed to refinance that 
home to meet that obligation. Of course, the fully indexed cost of that 
mortgage blew through her fixed income as a retiree. She came very 
close to losing the home. We stepped in. The bank stepped up, was 
embarrassed by what it had done. She ended up keeping the home but only 
because, candidly, she was a witness before a Senate committee. Had she 
been out there in Chicago without any other recognition or notoriety, I 
am not sure she would have fared as well as she did when she achieved 
some notoriety in appearing before the committee.
  The bank in question was sitting at the table next to her, so they 
decided to work it out in her case. But literally hundreds of thousands 
of people across the country were not so fortunate. Again, they were 
lured into these arrangements our colleague has talked about.
  I thank him for his amendment. We have had a lot of discussions about 
this matter. In the last Congress we put together a whole bill on 
predatory lending, and yield spread premiums was one of the key 
provisions.
  What I would like to suggest, if he would be amenable, this is a 
matter that needs to be revived. We had a hearing almost 2 years ago 
now so it has gotten a little dated in terms of the information. As 
chair of the committee, I would like to ask him, as a new member, 
whether he would be willing to chair a hearing on the subject matter of 
predatory lending, including yield spread premiums, and arrange that in 
the coming weeks. My intention would be that as we move forward to deal 
with the modernization of financial regulations, that this is an area 
we will want to include as part of our consideration of that larger 
bill.
  I, for one, would look forward to some specific ideas that we could 
use to address this kind of problem. I thank him for bringing the 
matter to our attention this evening. I look forward to working with 
him on this matter as well.
  Mr. MERKLEY. Mr. President, I deeply respect and appreciate the fact 
that the chairman has done so much to bring public attention to these 
important issues over the past several years. I would be delighted and 
honored to have the opportunity to assist with hearings as described on 
predatory lending and to refresh this conversation about how we, as a 
Congress, can reach out and assist working Americans to make sure that 
in the future they will not find that the dream of home ownership is 
turned into a nightmare, as it has been through steering payments, 
through prepayment penalties for so many in the near past. I would be 
deeply honored.
  Mr. DODD. I thank our colleague. He is, obviously, very knowledgable 
about this area, as is the Presiding Officer. It is tremendously 
important in this body. My two colleagues are relatively new Members, 
but believe me, they could not be here at a more opportune time with 
their backgrounds and experiences for this debate and discussion.
  As a senior Member, I welcome their presence in the Senate. I look 
forward to working with our colleague from Oregon and to include his 
idea as part of a larger bill on predatory lending.
  Mr. MERKLEY. I thank the Senator from Connecticut.
  Mr. DODD. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. THUNE. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. THUNE. Mr. President, I ask unanimous consent to call up 
amendment No. 1025 to the pending bill, and I ask that amendment be 
made pending.
  The PRESIDING OFFICER. Is there objection?
  The Senator from Connecticut.
  Mr. DODD. Mr. President, reserving the right to object--and I said to 
my friend, this is not a personal matter--we are trying to get a finite 
list of the amendments and get time agreements on all of them. I have 
had to object to other amendments being offered--laying aside 
temporarily the pending amendments--both on the minority side as well 
as the majority side. It is with reluctance, I say to my friend, that I 
will have to object.
  My hope would be that he would let us have the amendment and the 
arguments, and so forth, so we could take a look at it--Senator Shelby 
and I. If we could agree in some way or work on something together so 
we could possibly accommodate him or give him a clear indication of 
some time so we can debate it and discuss it and go forward, that is my 
intention.
  With that, Mr. President, I object.
  The PRESIDING OFFICER. Objection is heard.
  Mr. THUNE. Mr. President, if I might speak to the amendment for a few 
moments.
  I offered a similar amendment last week to the fraud recovery bill 
and was told at the time--and, of course, cloture ultimately was 
invoked on that bill, and I was told it was not germane. So it fell 
postcloture.
  In order to make it germane to this underlying bill--in fact, I was 
told at the time last week, when I brought it up, it would be germane 
to the housing bill, which would be considered next. So I decided I 
would offer this amendment again. But running into the same sort of 
question about whether this amendment would be germane postcloture, I 
have adapted the amendment so it is germane to the underlying bill.
  I will tell you, I would have preferred keeping it in its original 
form because, essentially, it would have taken TARP moneys repaid to 
the Federal Treasury

[[Page 11275]]

by lending institutions and applied them to debt reduction. That was 
the amendment in the form it was in last week when I offered it to the 
fraud recovery bill. I still think that is a good, sound idea: As TARP 
funds are paid back into the Federal Treasury, rather than being 
recycled or used on some other Government program, we apply it to debt 
reduction.
  Lord knows we are spending and borrowing enormous amounts of money. 
The least we could do when these moneys are paid back is put them 
toward paying down the Federal debt so we are not handing this 
enormous--enormous--bill to our children and grandchildren.
  But, as I said before, in order to get this amendment in a form that 
it would be germane postcloture, I have revised it. I will describe it 
in a minute. But I wish to start by saying, on October 7, 2008, we all 
know Congress passed the Troubled Asset Relief Program, or TARP, as 
part of the Emergency Economic Stabilization Act. It authorized $700 
billion for the purchase of toxic assets from banks, with a goal of 
restoring liquidity to the financial sector and restarting the flow of 
credit in our markets.
  The Department of Treasury, however, without consultation with 
Congress, changed the purpose of TARP and began injecting capital into 
financial institutions through a program called the Capital Purchase 
Program, or CPP, rather than purchasing toxic assets.
  Financial lending was not increased with the implementation of the 
CPP and the expenditure of $218 billion of TARP funds, despite the goal 
of the program.
  Those receiving funds through CPP are now faced with additional 
restrictions related to accepting those funds. A number of community 
banks and large financial institutions have expressed their desire to 
return those CPP funds to the Department of Treasury. Treasury has, in 
fact, begun the process of accepting receipt of these funds. However, 
because of the financial stress test Treasury is currently conducting, 
it is possible Treasury will restrict some banks from returning funds 
they received from the CPP.
  I mentioned last week when I offered the amendment to the fraud 
recovery bill that there were banks I was aware of that were not able 
at the time to return funds to the Treasury. They were told they 
couldn't. They had money from the TARP, they were banks that were in 
good financial standing, and they wanted to pay back that TARP money 
and couldn't do it. I believe now, at least, the Treasury is working 
with a number of banks to try and receive some of these monies that the 
banks want to pay back, but it is entirely possible, because of these 
stress tests, that some banks will be restricted from returning funds 
they received from the CPP.
  In his testimony before the TARP congressional oversight panel on 
April 21, 2009, Secretary Geithner stated that Treasury estimates 
$134.6 billion of TARP funds are still available. What is interesting 
about that number is that in that figure, he includes $25 billion they 
expect to receive back from banks under CPP. Geithner also stated he 
believes that $25 billion is a conservative number and that private 
analysts, of course, are predicting that more--much more--is going to 
be returned. But the important point is that of the $134.6 billion that 
Treasury Secretary Geithner referred to in terms of TARP funds that 
will be available, $25 billion of that is in the form of payments they 
expect to receive back from banks under the CPP.
  So my point is there is money coming in, and rather than using that 
to pay down the debt, which I think many of us assumed was going to be 
the use of those funds if they came back in, that they are sort of 
planning on, it looks like, recycling back into TARP or, perhaps--I 
hope not but perhaps--using them for some other purpose.
  Section 120 of the Emergency Economic Stabilization Act terminates 
the authority for TARP funds on December 31, 2009, and the Secretary 
can request an extension to that deadline not later than 2 years after 
enactment, which would be October of 2010. But keep in mind, that 
restriction only applies to Treasury's issuance of new loans and does 
not cover the reuse of previously issued assistance that was returned 
to the Treasury. So there is no prohibition on the Treasury using these 
recycled TARP funds.
  The TARP Reduction Priority Act, which is the subject of my 
amendment, reduces TARP authority by any amount returned by a financial 
institution to Treasury. So instead of having TARP monies that are 
returned from the banks back into the Treasury applied to debt 
reduction, what I do now with this amendment--in order to have it fit 
within the confines of this bill and to remain germane should, in fact, 
cloture be invoked--is reduce the TARP authority by whatever amount is 
returned by a financial institution to the Treasury. In other words, 
the TARP amount--the amount that would be available for lending under 
TARP--as it is paid back, monies come back from the banks, the TARP 
lending amount is reduced commensurate with the amount that is 
returned, so that those monies cannot be recycled. Once they have been 
out there and returned by the banks, they can't be recycled and reused 
or put to some other purpose.
  Let me also say that until the December 31, 2009 expiration date, and 
possibly longer--again, if the Secretary is granted an extension--that 
without this legislation, Treasury can continue to use TARP funds, 
including those repaid in any manner they see fit. It is certainly not 
what Members of Congress envisioned when this legislation passed last 
year. These are taxpayer dollars. They should not become a 
discretionary slush fund for the administration. Under the 
Constitution, Congress controls the power of the purse, and I, as do 
many Members of Congress and others around the country, have major 
concerns regarding the Treasury's handling of TARP funding. If the new 
administration, the Obama administration, or the Treasury Department 
believes it needs additional funding to address problems in the 
financial sector, they should come to Congress for that authority.
  Inspector General Neil Barofsky stated in his quarterly report to 
Congress that there are 12 separate programs being funded under TARP 
involving up to $3 trillion of government and public funds. Amazingly, 
that is the equivalent amount of the size of the entire Federal budget. 
It certainly wasn't what Congress was told the funding would be used 
for.
  Mr. Barofsky also mentioned in his April 4, 2009 CBO report--he 
estimated that TARP would cost the Federal Government $356 billion, 
meaning that the Treasury will only be able to recover $344 billion or 
approximately 49 percent of the $700 billion that was originally 
allocated by the Congress.
  When this program was initially pitched to Congress--and my 
colleagues in the Senate should remember--Secretary Paulson at the time 
argued that the Government would end up making money once those toxic 
assets were sold after the economy recovered. Clearly, this is no 
longer the case. Barofsky's report spans 247 pages. It says the very 
character of the bailout program makes it:

       Inherently vulnerable to fraud, waste, and abuse, including 
     significant issues related to conflicts of interfacing fund 
     managers, inclusion between participants, and vulnerabilities 
     to money laundering.

  So again, the point of the amendment is very simple; it is very 
straightforward. All I am trying to do is to make sure the TARP funds, 
as they come back in, when they are repaid by banks, are not recycled, 
they are not reused, they are not put into some program which the 
inspector general says in his report is inherently vulnerable to fraud, 
waste, and abuse; that it actually be used to reduce the amount of the 
TARP authority. It is the best solution we could come up with short of 
applying those repaid funds to deficit or to debt reduction which, as I 
said, was the original form of this amendment, but under the rules of 
the Senate, to make sure it is germane, this is the approach we have 
selected. I think it accomplishes the same purpose. It makes certain 
that the monies that

[[Page 11276]]

come back in, that are paid back by banks that have received TARP funds 
are not reused, reallocated, put into some other purpose or some other 
fund, but it actually is reducing the amount of TARP authority that is 
available to be used and, therefore, protecting taxpayer interests and 
taxpayer dollars that were extended under this program in the first 
place.
  So I hope my colleagues, when they are making final determinations 
about which amendments are going to be on the so-called list--and it 
seems to me, at least, that on a bill such as this, a housing bill, it 
ought to be wide open to amendments and we ought to be able to get 
votes on some of these amendments but evidently the leaders on the 
other side have concluded they are going to limit those amendments and 
try to come up with some finite list--I hope they will include this 
amendment on that list. I think it makes sense. It is perfectly fitting 
with the purpose of the underlying bill, which is a housing bill.
  TARP funds, of course, were supposed to deal with the credit crisis, 
the housing crisis, and I would hope this amendment would be one that 
the other side, as they make those decisions about which amendments are 
going to be allowed to be debated and voted on with respect to the base 
bill, that this amendment will be on that list. I think it makes a lot 
of sense.
  I hope some of the other amendments my colleagues have offered also 
will be allowed to be voted on. I think that is the way the Senate is 
intended to work and to function. All Members of the Senate are 
supposed to be able to come to the floor and offer amendments and have 
those amendments debated and voted upon. It seems to me that sort of 
arbitrarily putting in place a construct that limits amendments and 
picks and chooses ones that get voted on does not represent the 
heritage and the tradition of this body. I hope my colleagues who are 
managing the bill on the floor will decide what I think is in the best 
interests of this institution, and that is that these amendments all be 
offered, be debated, and be voted on, and I hope this certainly is the 
case with the amendment I put before the Senate right now.
  With that, I yield back the balance of my time and I hope this 
amendment can be made pending and get voted on whenever we get back on 
the underlying bill.
  Mr. GRASSLEY. Mr. President, it is no secret that I have worked for 
decades to bring greater transparency and accountability to all facets 
of government operations. If there is one thing that I have learned 
over those years it is that you cannot achieve the goal of greater 
transparency and accountability without access to information.
  During this financial crisis, we hear daily about the need for many 
more billions in Federal funds to save this bank or that financial 
firm. In response to the crisis the Treasury Department is buying 
stakes in banks and other companies. That program is known as the 
Troubled Asset Relief Program or TARP. It is costing the American 
taxpayer nearly three quarters of a trillion dollars. Transparency and 
accountability has never been more important than with a program that 
big.
  In an effort to provide some accountability to the American people 
for TARP funds, the Government Accountability Office, GAO, the 
investigative arm of Congress, was required by legislation to conduct 
oversight of the TARP program.
  The GAO's mission is to look at the overall performance of the 
initiative and its impact on the financial system. The GAO is also 
required to prepare regular reports for Congress.
  However, GAO cannot do its job effectively without access to 
information about how the funds are used. This should be obvious. 
Unfortunately, however, the bill that created the TARP and told GAO to 
oversee it, did not give them the authority to access books and records 
of the private firms that receive TARP money.
  In January, Senator Baucus and I introduced a bill, S. 340, to 
provide the GAO the ability to access the books and records of firms 
who received money from the TARP. Senator Snowe is also a cosponsor of 
the bill, known as the TARP Enhancement Act. Unfortunately, my 
colleagues on the Banking Committee have not yet taken any action on 
the bill.
  Amendment No. 1020 is simply the text of S. 340. It would ensure that 
companies that receive assistance from the American taxpayer are 
required to cooperate with requests for information from the Government 
Accountability Office about how they used taxpayer money.
  The GAO is supposed to be the ``eyes and ears'' of Congress. Well it 
can't do that job wearing blinders and ear plugs. So I urge my 
colleagues to support amendment No. 1020, to ensure that GAO has access 
to TARP recipients' books and records.
  Mr. President, in March the Finance Committee held a hearing on the 
progress and oversight of the Troubled Assets Relief Program, TARP. At 
that hearing, we heard testimony from acting Comptroller General, the 
head of the Government Accountability Office, GAO. He testified that in 
addition to the problem that S. 340 is intended to fix, there is 
another major gap in GAO's access to information about the TARP. It is 
not just firms that take taxpayer money who can say ``no'' to GAO's 
requests for information. The Federal Reserve can too.
  The GAO is prohibited by law from auditing the the Federal Reserve. 
Perhaps that restriction was defensible back when the Federal Reserve 
focused on monetary policy. However, today it is routinely exercising 
extraordinary emergency powers to subsidize financial firms far above 
the levels Congress is willing to authorize through legislation. The 
Federal Reserve is taking on more and more risk in complicated and 
unprecedented ways. That risk is ultimately borne by the American 
taxpayer, but the elected representatives of the taxpayers have not had 
a say in the Federal Reserve's activities or even a reasonable level of 
transparency to make sure we understand how much risk taxpayers are on 
the hook for.
  The GAO testified at our hearing that the Federal Reserve is heavily 
involved in two new TARP programs announced since March of this year. 
It is also responsible for managing huge portfolios of troubled assets 
it took on in the bailouts of Bear Stearns and AIG. According to GAO 
testimony, as of March 27, 2009, Treasury has announced initiatives 
that are projected to use $590.4 billion of the $700 billion in TARP 
funds authorized by Congress. However, the projected assistance in 
these initiatives by the Federal Reserve could be up to $2.9 trillion 
by GAO estimates. In addition, the Federal Reserve has a variety of 
other facilities it has established to address the financial crisis 
adding up to another $1.5 trillion.
  Despite these enormous numbers, there is a statutory limitation 
prohibiting GAO from examining the Federal Reserve. That provision is 
now in direct conflict with the mission that Congress gave GAO to 
monitor and report on the TARP.
  Amendment No. 1021 would fix this conflict by allowing the GAO to 
provide Congress a complete and independent view of all the TARP 
programs, including those with Federal Reserve involvement, such as the 
Term Asset Loan Facility, TALF, and the Public Private Investment 
Partnership, PPIP. It would also allow the GAO to examine other 
extraordinary Federal Reserve actions, such as its acceptance of risky 
assets from Bear Stearns and AIG.
  I urge my colleagues to support amendment No. 1021. Let's not give 
GAO an important mission to do with a blindfold on. Let's take off the 
blindfold and let the professionals at GAO take a good hard look on 
behalf of the American people at what the Federal Reserve is doing.

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