[Congressional Record (Bound Edition), Volume 156 (2010), Part 4]
[Senate]
[Pages 5724-5740]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           EXECUTIVE SESSION

                                 ______
                                 

  NOMINATION OF LAEL BRAINARD TO BE AN UNDER SECRETARY OF THE TREASURY

  The ACTING PRESIDENT pro tempore. The Senate will now proceed to 
executive session to consider the following nomination, which the clerk 
will report.
  The legislative clerk read the nomination of Lael Brainard, of the 
District of Columbia, to be an Under Secretary of the Treasury.
  The ACTING PRESIDENT pro tempore. The Senator from Iowa is 
recognized.
  Mr. DORGAN. If the Senator from Iowa will yield, Mr. President, I ask 
unanimous consent that I be recognized following the presentation by 
the Senator from Iowa.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I want to speak on the nomination of the 
person just announced. In the process, I am going to speak about some 
other people who have similar issues.
  Tax collection is meant to reflect shared benefits and appeal to 
equality as a fundamental value. However, to paraphrase George Orwell, 
some people are more equal than others.
  More specifically, several recent Presidential nominees have 
apparently set themselves above the typical American citizen in the 
lack of importance they place on complying with their tax obligations. 
This certainly seems to be the case with Dr. Brainard, nominated to be 
Under Secretary of the Treasury for International Affairs.
  As a nominee, Dr. Brainard was treated the same as any other nominee 
to come through the Finance Committee in the 9 years I have been either 
chairman or ranking member. For the past 9 years, and likely much 
longer, the Finance Committee has vetted all Presidential nominees 
referred to the committee, and that vetting includes a tax review. The 
tax review of Dr. Brainard uncovered three basic issues. These issues 
have been described in much detail in a bipartisan Finance Committee 
memo released November 18, 2009. I also discussed them in a statement 
that was printed in the Congressional Record December 23 of last year.
  Those seeking to criticize the Finance Committee's vetting process 
are quick to mention the length of time Dr. Brainard has been a 
nominee. She was nominated March 23, 2009, and her hearing was held on 
November 20, 2009. The reason for the passage of nearly 8 months was 
that the nominee persisted in being evasive and nonresponsive to very 
basic questions arising from the routine review of tax returns. There 
are still questions that were not clearly or consistently answered 
despite multiple rounds of questions. Other questions necessitated 
multiple answers as new information came to light.
  For example, the committee learned on October 12, 2009, nearly 7 
months after the nomination, that the nominee failed to timely pay 2008 
property taxes for Rappahannock County, VA, and

[[Page 5725]]

that the nominee was delinquent while the tax vetting was going on. I 
have said this before. But the reason the review of Dr. Brainard took 
several months was that she was not forthcoming in her answers. As the 
committee memo details, some of her answers contradicted each other.
  I ask those who are critical of the committee's treatment of this 
nominee if there are some things it is okay to be evasive about to the 
Congress of the United States. Is there a point where Congress should 
accept vague and unclear statements and decide it is not some sort of 
big deal?
  Supporters of the nominee find themselves in the position of having 
to distort the facts in order to make their case. They say Dr. 
Brainard's tax problems involved small amounts of money and some 
mistakes, such as late payment of property taxes, and it could happen 
to anyone. While these statements may be true, they do not deal with 
the nominee's real problem which, as I have said, is her unwillingness 
to fully and completely answer questions from the Finance Committee.
  The Finance Committee's vetting process has uncovered tax 
irregularities with many past and current Presidential appointees. What 
the committee requires is that the nominee acknowledge and fix these 
irregularities.
  Unless these tax issues involve substantial dollar amounts, or there 
is information suggesting the nominee deliberately avoided fulfilling 
their tax liabilities, this information is not made public and the 
nominee is allowed to move forward. The Finance Committee is not trying 
to embarrass people for making simple mistakes, and neither the 
committee nor this Senator benefits from a lengthy vetting process.
  In the case of nominees where difficulties arise to the point where 
our committee must release information publicly, the committee 
completes its review so that all information is released all at once 
and the nominee is allowed to review information to be released by the 
committee before the committee ever would release it, so that the 
nominee would know exactly where we are coming from.
  Dr. Brainard was allowed to review the Finance Committee memo before 
it was released, and if she had withdrawn her nomination, that 
information would have remained confidential. It would not have been 
out there for anybody to know anything about. But we are moving forward 
with this nomination; hence, any sort of information is public.
  Dr. Brainard is the third senior Treasury Department nominee either 
the Finance Committee or this Senator has taken issue with. Secretary 
Geithner's failure to pay his self-employment taxes as an International 
Monetary Fund employee is well known.
  Just a few weeks ago, Jeffrey Goldstein was recess-appointed to the 
post of Under Secretary for Domestic Finance. While I do not believe 
Dr. Goldstein failed to satisfy his tax liabilities, I do have 
questions regarding offshore activities a private equity fund engaged 
in while Dr. Goldstein was a managing director.
  I was in the process of asking more questions as to the business 
purpose of these activities and was prepared to let the nominee advance 
toward confirmation once these questions were answered. Dr. Goldstein 
was absolved of the need to respond to my questions by the recess 
appointment made under law by President Obama. Dr. Brainard and 
Secretary Geithner both had personal issues the committee released 
information on in a bipartisan way, and I have unresolved questions 
regarding offshore activities engaged in by Dr. Goldstein's previous 
employer.
  As concerned as I am with the issues involving this specific nominee, 
I am even more concerned by the reaction by some to the information 
released by the Finance Committee on this and other recent nominees.
  Dr. Brainard was the fifth nominee of the current administration to 
run into personal tax issues during the Finance Committee's vetting 
process. With the exception of one nominee, who voluntarily withdrew 
his nomination, all of these nominees were confirmed, or will be 
confirmed, as I expect Dr. Brainard to be confirmed. It is not clear 
that the Finance Committee vetting of nominees has served a useful 
purpose and information released by the Finance Committee on 
problematic issues surrounding nominees doesn't seem to have decreased 
support for their confirmations.
  I am not saying that every nominee who runs into trouble should be 
automatically rejected. I myself voted for one of the five nominees I 
just mentioned. However, it does not appear that the information 
released by the committee on nominees in this current Congress is given 
much consideration.
  The issues involving Dr. Brainard should have no bearing on political 
parties, issue positions, or who is friends with whom. The only basic 
issues should be that everyone needs to pay their taxes as required by 
law, and the nominee should be fully responsive to the Congress. In 
looking at the first of these issues, the nominee showed that she was 
deficient in the second. For the reasons I have laid out here and in 
earlier statements, I will vote against this nominee.
  However, I do plan to vote for cloture, and I want to explain that. 
Despite my own opposition to the nominee, I don't want to prevent other 
Senators from considering the nominee, and I am not attempting to 
prevent the nominee from receiving an up-or-down vote.
  I hope other Senators consider the information the Finance Committee 
has released and will consider what I have said and will come to their 
own decision as to which way to vote.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from North Dakota is 
recognized.
  Mr. DORGAN. We are in executive session, is that correct?
  The ACTING PRESIDENT pro tempore. That is correct.
  Mr. DORGAN. Mr. President, I have the Executive Calendar of the 
Senate in front of me. It is on every desk. It has the pending 
nominations that have yet to be acted upon by the Senate.
  I note that there are a large number of nominations that have been 
made on which there are holds. There is delay, there is stalling, and 
you wonder--here is a May 20, 2009 nomination, reported out of the 
Homeland Security Committee of Marisa Dameo, of the District of 
Columbia, to be an Associate Judge of the Superior Court of the 
District of Columbia. That was reported out in May of last year.
  Here is one for John Sullivan, of Maryland, to be a member of the 
Federal Elections Commission, which was reported out last June and is 
still pending.
  Here is one for Stuart Gordon, to be an Associate Judge of the 
Superior Court of the District of Columbia, which was reported out on 
July 29 of last year and is still pending.
  I am going to read a rather lengthy list in a bit. These are 
nominations that have been stalled, delayed, held up. There are, I 
think, nearly 100 of them on the Executive Calendar, which is on 
everyone's desk.
  I specifically want to talk about one, and then I am going to 
propound a unanimous consent request. The one is about GEN Michael 
Walsh. I know General Walsh. I have known him for a long time. He is 
the commander of the Mississippi Valley Division of the Corps of 
Engineers. He has been to war for his country. He is a one-star 
general. He served 30 years in uniform for this country.
  He has been nominated to receive his second star to be a major 
general. That request to receive a second star for General Walsh went 
through the relevant committee, the Armed Services Committee of the 
Senate, chaired by Senator Levin, and the ranking member is Senator 
McCain. The nomination was unanimously reported out by the committee, 
by all Republicans and all Democrats. It is a nomination supported by 
Senator Levin and Senator McCain, the chairman and the ranking member. 
Yet that nomination was sent to the floor of the Senate nearly 6 months 
ago and has yet to be acted upon because there is a hold on it.
  I have spoken on this issue before--last week. We have a Member of 
the

[[Page 5726]]

Senate who has said to the Corps of Engineers: I am going to stop this 
general's promotion to major general until the Corps of Engineers does 
the following things that I demand from the Corps of Engineers in my 
home State of Louisiana. This is Senator Vitter from Louisiana.
  I did say to Senator Vitter--I would not come and speak of another 
Senator without first telling him I was going to do that. I told 
Senator Vitter I was going to be critical on the floor of the Senate of 
what he was doing to General Walsh--a patriot, someone who has served 
30 years for his country in the U.S. Army, someone who has gone to war 
for his country, someone who has had a unanimous vote in the Armed 
Services Committee to become major general.
  After all of these months, his promotion has not yet moved. Why? 
Because of one U.S. Senator demanding something this general cannot do. 
This general executes policy; he does not make policy. The demands by 
Senator Vitter in two letters that he has sent to the Corps and the 
response from the Corps of Engineers are four letters I put in the 
Senate Record last week.
  It is unbelievable that the career of a distinguished general in the 
U.S. Army is handled this way by one Member of the Senate. It is unfair 
to him. It is unfair to the Army, in my judgment. And it is the last 
thing in the world we ought to be doing--singling out one person and 
putting their career and their advancement on hold, prohibiting this 
one-star general from receiving a second star because one person in the 
Senate is demanding the agency for which this general works do things 
that the agency says it cannot do in any event.
  I am going to ask unanimous consent, and then I want to say a few 
more words about it.


      Unanimous Consent Request--Nomination of BG Michael J. Walsh

  I ask unanimous consent--and I have notified the minority--that the 
Senate proceed to Executive Calendar No. 526, the nomination of BG 
Michael J. Walsh to be major general; that the nomination be confirmed 
and the motion to reconsider be laid upon the table; that no further 
motions be in order; and that the President be immediately notified of 
the Senate's action.
  The ACTING PRESIDENT pro tempore. Is there objection?
  Mr. GRASSLEY. Reserving the right to object.
  The ACTING PRESIDENT pro tempore. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I wish to make very clear that I do not 
oppose this nominee, and I say to Senator Dorgan that I have no problem 
with what he is doing. I have been asked on the part of Senator Vitter 
to object, so I must object.
  The ACTING PRESIDENT pro tempore. Objection is heard.
  Mr. DORGAN. Mr. President, I understand the Senator from Iowa is 
acting on behalf of another Senator. I must say I think it is incumbent 
on the other Senator to be here and make this objection himself. I know 
the rules do not require that, but I think the rules at this point are 
derelict in terms of this circumstance.
  We have a general in the U.S. Army who has served this country well 
whose career is now on hold. It is on hold because one person is 
demanding that the Corps of Engineers do certain projects for New 
Orleans and the State of Louisiana. In any event, this general cannot 
do them.
  I chair the subcommittee that funds the energy and the water 
programs. As the chairman of the subcommittee that funds all of the 
water programs, I can tell the Presiding Officer that billions and 
billions of dollars have been sent to Louisiana and to New Orleans. I 
have supported all of that because they were hit with a devastating 
hurricane called Katrina. It caused dramatic injury to life and limb. 
No area of the country has been hit harder.
  I include myself among all of those who say we have a responsibility 
and have begun to meet that responsibility in the most significant way 
that has been done for any State in this Nation at any time. I have 
been proud to do that. But what the Senator from Louisiana, Mr. Vitter, 
is demanding from the Corps of Engineers in a number of cases the Corps 
cannot legally do and in other cases the Corps will not do because the 
Appropriations Committee has already voted against it in a recorded 
vote.
  To hold up the nomination to major general of a distinguished Army 
general for all of these months because one Senator is upset is 
horribly unfair to this general, Michael Walsh. I know him. I like him. 
He deserves his second star. The Armed Services Committee unanimously 
has said he deserves a second star. He does not have it. Now many 
months later, month after month, one Member of this Senate, Senator 
Vitter, has decided to extract from the career of this officer some 
penalty because he will not do something he cannot do. It is 
unbelievable to me.
  I say to my colleague, if he wishes to object, I will come tomorrow. 
I will set a time. I wish he would come to the floor and object to my 
request and tell us why he believes this general can do that which the 
general does not have the authority to do. If he finally understands 
that this general cannot do what Senator Vitter wishes him to do, I 
hope Senator Vitter will stand aside and decide not to interrupt the 
fine career of this great military general.
  I will not speak more about this, but I will come to the floor 
tomorrow, and I will notify his office when I am going to be here. I 
hope perhaps he will not have others come and object for him. Perhaps 
he would bother to come to the floor and explain to this general, 
explain to the U.S. Army and the American people why this general, 
having served 30 years and served in wartime, is not able to get his 
second star and has had to wait month after month and more. It is 
unfair, it is wrong, and it needs to be corrected.
  Let me again say that I believe 93 to 100--I am not sure of the 
number today; last week, it was 93; all of these nominations: Winslow 
Lorenzo Sargeant to be Chief Counsel for Advocacy of the Small Business 
Administration, reported out of the committee on September 16 last 
year, not acted on; Brian Hayes, National Labor Relations Board, 
reported out October 21 last year--the list goes on and on.
  I guess it is a strategy--not just on this but virtually on 
everything--to object. In fact, there was one person on this list who 
is coincidentally from my State. That person was a nominee for the 
General Services Administration. Her name was Martha Johnson. Martha 
Johnson was nominated to be the head of GSA. GSA is the Federal agency 
that manages more property than any agency in the world. It manages all 
of the Federal property. One Senator put a hold on Martha Johnson's 
nomination. The result was there was not someone to run the General 
Services Administration for almost a year; I believe it was 10 months. 
Then, when we finally invoked cloture after great length, the vote on 
this nomination was 96 to 0. Not even the person who put the hold on 
for almost a year voted no. Everybody voted yes. The result was a 
Federal agency that desperately needed leadership did not have 
leadership for almost a year. Why? Because one Senator said: I am going 
to put a hold on this nomination because of some building someplace. 
They were upset about something. The result is that everybody pays. All 
the American taxpayers pay because we did not have the leadership in an 
agency that desperately needed the leadership. That is just an example.
  It has been so unbelievably disappointing to see what is going on in 
the Chamber with all of these issues. I am almost inclined to think we 
should go through one by one and have 93 unanimous consent requests. 
Perhaps I will do that tomorrow or the next day. I know others will as 
well.
  I guess if you object to everything, including having government work 
the way it is supposed to work, effectively and efficiently on behalf 
of the taxpayers in these agencies that need leadership--I do not quite 
understand why you come to the Senate if you believe the only answer is 
no. It does not need to be someone who decides the only answer is no in 
every circumstance.

[[Page 5727]]

  Mr. President, I ask unanimous consent to speak for 5 minutes in 
morning business.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.


                      Financial Regulatory Reform

  Mr. DORGAN. Mr. President, this morning I was looking at something I 
have had on my desk for a long while. I was thinking about words and 
words that matter because there have been a lot of words recently about 
the issue of financial reform or Wall Street reform, how it is done, 
when it is done, whether it is done. I was thinking about the use of 
words and that words do not mean what they used to mean.
  I went back, because I have kept this on my desk for a long time, to 
something that was sent out widely across the country. It was from 
something called GOPAC. It was kind of the start or at least the 
genesis of the collapse of comity and the use of good language and so 
on. This was sent out widely around the country to several thousand 
people. It said: We have heard all these candidates across the country 
say: I wish I could speak like Newt--meaning Newt Gingrich. I wish I 
could speak like Newt.
  Then it said in the language that it sent out to people: You can 
speak like Newt Gingrich. It said: We have actually done a lot of work 
developing polling on contrasting words, and if you would like to speak 
like Newt Gingrich, here is some help for you.
  Here are words. Then they sent this out. It says:

       Apply these words to your opponent, to their record, to 
     their proposals, their party.

  They have a long list of words: sick, lie, betray, traitors, 
pathetic, threaten, corruption, punish, corrupt, cheat, steal, abuse of 
power. Use these words when you describe your opponents.
  They said: Here are the positive words you should use when you talk 
about yourself: pro-flag, pro-children, pro-environment, liberty, 
principal, pioneer, truth, moral, courage, family. And the list goes 
on.
  I thought when I received this a long while ago how unbelievably 
pathetic it was that there were merchants of destructive politics 
marketing this trash around the country. Yet they were and have for a 
long time. It is the case that they use pollsters to do this, to tell 
everyone what kinds of words exist that will motivate both negatively 
and describe your opponents--sick, pathetic, lie, betray--and what 
words would positively motivate your supporters. I was thinking about 
that, and I dug that out just because in recent days and weeks we have 
seen examples of language that matters and instructions by people of 
how to use language, even though it does not apply, to describe your 
position.
  I was interested in seeing the results of a pollster who described 
the way to attack financial reform. Again, it was not in the same way 
of the GOPAC polling to find the most destructive way you could 
describe something, but it was similar in the sense of, how would you 
construct something, notwithstanding the facts--how would you construct 
something to make an impression about something no matter what the 
facts might be.
  This is from some polling work that was done. It says:

       Frankly, the single best way to kill any legislation is to 
     link it to the big bank bailout.

  The words that would matter are these: No matter what the 
circumstances are, the single best way to kill any legislation is to 
link it to the big bank bailout. Words that work: ``taxpayer-funded 
bailouts,'' ``reward bad behavior,'' ``taxpayers should not be held 
responsible,'' ``if a business is going to fail, no matter how big, let 
it fail.'' If these words sound familiar, it is because you have heard 
them all on the floor of the Senate in recent days and you have heard 
them on television a lot in recent days. It is the issue of, how do you 
develop language that motivates people, notwithstanding the set of 
facts.
  ``It is not reform''--again quoting from the polling work--``it's the 
stop big bank bailout bill.'' That is important. This is not a reform 
bill; it is to stop the big bank bailout.
  What we have here is the battle of polling. How can you describe 
words that work, language that works, notwithstanding the set of facts 
you might be discussing?
  Ultimately, if we are going to effectively deal with Wall Street 
reform, reforming our financial system, it is not going to be with a 
battle of pollsters; it is not going to be regurgitating what one 
reads--here is how you motivate someone using these words. It is going 
to be that we think through what happened and then understand what do 
we do to make sure this cannot and does not happen again.
  We hear a lot of talk about the need for bipartisanship. I would love 
to see that. I would love to see bipartisanship on specifically the 
kinds of remedies that have teeth, that are effective, and that are 
going to prohibit that which has happened to this country from ever 
happening again. That will not be done, in my judgment, by deciding to 
step back a ways and use a light touch. I am for the right touch; I am 
not for a light touch. I have seen the light touch for a decade now, or 
at least a substantial portion of the last decade.
  We have had agencies, the SEC, and others in a deep Rip Van Winkle 
sleep. In fact, we had people come to the SEC who noticed what some 
folks were doing to bilk taxpayers and investors and nobody did 
anything. I was here when new regulators came to town and said: You 
know what. We are going to be willfully blind for a while. It is a new 
day.
  The fact is, regulation is not a four-letter word. The free market 
system works, but it works when there is a referee. The referees with 
the striped shirts and whistles are needed to call the fouls because 
there are fouls from time to time in the free market system. That is 
why we have regulatory capability and authority.
  So the question of what kind of financial reform or Wall Street 
reform is developed is not going to be about the language of financial 
reform--which is what this is about, a document that has been 
distributed and that I heard quoted many times now in recent days. It 
is not going to be about the language but about the specific set of 
policies that will prevent what happened to this country from ever 
happening again.
  I will come and talk about some of that, but I did want to say I was 
thinking about the issue of the use of words, and I find it pretty 
interesting to listen to the use of specific words and to listen to the 
menu of the language of financial reform that comes from the pollsters 
and then comes straight out of the mouths of others very quickly.
  Mr. President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Tennessee.
  Mr. CORKER. Mr. President, I ask unanimous consent to speak as in 
morning business.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.


                            Financial Reform

  Mr. CORKER. Mr. President, I thank my friend from North Dakota, 
because I, too, for what it is worth, have been very distressed about 
the conversations around financial reform. I don't think either side of 
the aisle deserves a badge of honor as it relates to the way this has 
been discussed. I agree with him that this is something way beyond 
using poll-tested language and should, in fact, be dealt with in a 
serious manner. So although I didn't hear all the Senator's comments, I 
agree with him that we ought to deal with this in a serious way.
  Mr. President, you and I have had a number of conversations over the 
last weekend regarding financial reform. We have had a lot of 
conversations over the last year regarding financial reform. As I have 
watched the public discussions over the last several days, I have been 
greatly distressed. As a matter of fact, I spoke this morning to a 
large number of businessmen in Nashville, TN, and, candidly, became so 
angry thinking about the way this debate has evolved that I had to 
think about coming here today and controlling that and using that in a 
productive way.
  I have noticed throughout the day that maybe the rhetoric has changed 
a

[[Page 5728]]

little, and I know that my friend and colleague from Virginia and my 
friend and colleague from Connecticut had a press conference earlier 
today to talk about some of the issues that are being talked about 
rhetorically. Let's face it, what is happening right now--and it is 
unfortunate for the American people--is that both sides of the aisle 
are trying to herd up folks with language that in many ways I don't 
think does justice to this issue, which is very important, is very 
difficult, and something that is very much needed in our country.
  There has been a lot of discussion about this funding mechanism--this 
$50 billion bailout fund, if you will. Those are someone else's words, 
by the way, not mine. The American people are probably tuning in, and 
in some cases they are wondering how we are jumping into the middle of 
this on the Senate floor without a lot of free dialogue.
  The fact is, we have a financial reg bill that I hope comes before us 
soon that will deal with orderly liquidation so that when a large 
institution fails, it actually fails. I think that is what the American 
people would like to see happen. So there has to be a mechanism in 
place.
  If a firm is systematically important to our country, there needs to 
be the tools in place to make sure it actually goes out of business. I 
don't think people in Tennessee like seeing that when a community bank 
fails it actually goes out of business, but when a large Wall Street 
firm fails we prop it up.
  I wish the Senator from Virginia, who happens to be presiding, were 
on the floor so we could have a colloquy on this because the fact is, 
this is something that needs to be dealt with in legislation. We need 
to know we have a process where we deal with derivatives and we don't 
have a lot of people building up a lot of bad money, instead of doing 
it on a daily basis and they end up in a situation where there are huge 
obligations. We need to deal with some of the issues of consumer 
protection.
  So, Mr. President, there has been a lot of discussion about how we 
create something called debtor-in-possession financing, so that when 
the FDIC comes in and seizes one of these large firms that fails, it 
has the money to keep the lights on and to make payroll and those kinds 
of things while it is selling off the assets of the firm.
  The fund that has been discussed in this bill--and that is going to 
be changed, I know, and I am fine with that and think that is perfectly 
good--but this fund that has been set up is anything but a bailout. It 
has been set up in essence to provide upfront funding by the industry 
so that when these companies are seized, there is money available to 
make payroll and to wind it down while the pieces are being sold off.
  Now, a lot of people have said this is a Republican idea. There is no 
question this is something that Sheila Bair has proposed. The FDIC 
wants to see a prefund. The Treasury would like to see a postfund; they 
would like to see it come after the fact.
  At this point I want to digress for one second and say I hope the 
reason that Treasury wants a postfund is not because, in lieu of having 
a prefund of $50 billion from these large institutions, they want to 
see a bank taxed. As a matter of fact, I am going to be surprised if 
after Republicans argue against a prefund and it is changed, and the 
administration comes back and Chairman Dodd comes back and we end up 
with postfunding--both of which do the same thing, I might add, and 
both of them work--but it will be interesting to see whether that 
argument basically leads to Treasury then having the ability to come 
back and do a bank tax. I think at the end of the day that is something 
they have been wanting to achieve.
  So it is interesting how this debate is evolving. But let me go back 
to this prefund. At the end of the day, I think what all of us would 
like to see happen is to see these institutions go out of business. So 
do we put the money upfront to take them out of business or do we put 
it up on the back end where, in essence, what is happening is we are 
borrowing money from the taxpayers?
  Would we rather the industry put up the money so the taxpayers are 
not at risk or would we rather that not happen and during a downtime, 
when it is procyclical, we actually get the firms to put up the money 
after the fact?
  I think both of those, by the way, are nice arguments to have, and I 
think they should have been debated in the committee, and we can debate 
it on the Senate floor. But at the end of the day, to make the total 
debate about whether it is pre or post--neither of which are central to 
the argument because both work--it really doesn't matter. Either way we 
have to have some moneys available as working capital to shut down a 
firm. We can borrow it from the taxpayers, although I don't know if the 
taxpayers would like that very much. We can do it after the fact, as I 
have said, or we can put it in upfront by the industry. Either way it 
is going to be paid back by industry.
  I will say that in the Dodd bill today there is postfunding; that if 
there are any shortfalls the industry will pay that back. So, again, it 
is kind of a debate that ends up being silly. The fact is, I know it is 
going to be changed. The essence of the bill, though, is the fact that 
we want to make sure these firms unwind and they go out of business.
  Let me just talk about some of the arguments that are being made: 
Prefunding of resolution creates a system where certain participants 
are effectively designated as a protected class as a result of them 
paying into the fund.
  I think that is ludicrous. That is a ludicrous argument. Now, what we 
could do, if it would make everybody happy, is instead of getting large 
firms to pay, we could get community banks to pay too. I don't think 
there would be many people who would be interested in that, but if we 
want to get everybody in the country and get the community banks in 
Tennessee--I am not interested in that, and I don't think the Senator 
from Virginia is interested in that--but if we want to do that, we can 
ensure nobody is part of the protected class. So I find that to be a 
ludicrous argument.
  There is another argument: This allows such firms competitive funding 
advantage over smaller institutions such as community banks.
  So, in other words, if we are saying these large firms, if they fail, 
are going to go out of business, and it is going to be more painful 
than bankruptcy, that somehow they are protected or have a competitive 
advantage, I find that to be kind of ludicrous, and I hope that 
argument is not used again. It probably will be, but I hope it would 
not.
  Here is one I read recently: The fund is a signal to credit markets 
that the U.S. Government stands ready to prop up, bail out, and 
insulate large financial firms. Now that is an interesting one. The 
fact is, we are talking about orderly liquidation.
  The existence of the fund allows managers of large financial 
institutions to conduct riskier practices, therefore counterparties 
will not feel obliged to perform due diligence because, in the event of 
stress, there is such a financial slush fund available to bail out 
unsecured and short-term creditors.
  You have to be kidding me. That is absolutely the opposite of what is 
intended.
  Now, let me say this before somebody tunes out. I think this bill has 
problems, and I think there are issues that need to be resolved around 
orderly liquidation. The Senator from Virginia and I both know what 
they are, and there are some flexibilities that have been granted to 
the FDIC, to the Federal Reserve, and others that need to be tightened. 
There are some words that instead of saying ``shall'' say ``may.'' That 
is a very important word when you are telling an agency what they have 
to do or what they ``may'' do. So there is much in this bill that needs 
to be fixed.
  I want to say that as the Dodd bill sits today, I could not vote for 
it. I absolutely cannot support the bill. But what concerns me is the 
rhetoric that is being used to talk about something that is very 
important to our country, and it is being used on both sides, I might 
add.
  On one side they are saying the Republicans want to protect Wall 
Street firms. Well, I can tell you this: I think

[[Page 5729]]

there are very few Republicans who do not want to see financial 
regulation take place. I think there are very few Republicans who don't 
want to see it done the right way. Candidly, I think most Republicans 
and Democrats are listening to community bankers. They are not 
listening to Wall Street. That would be my guess.
  So that rhetoric, to me, is off base. The rhetoric on my side of the 
aisle saying this orderly liquidation title basically keeps ``too big 
to fail'' in place, the central pieces of it, is not true. Are there 
some things around the edges that need to be fixed? Yes. My sense is, 
as I have said on the Senate floor, we can fix those in about 5 minutes 
if we just sit down and do it. I do not understand why the rhetoric has 
gotten to where it is. I would like to see us pass a bill that makes 
sense.
  The kind of thing we should be talking about is not the fact that 
this is a bailout fund. By the way, whether it is ``pre'' or ``post,'' 
that debate doesn't matter to me. The fact is, we have to have some 
debtor-in-possession financing available to wind these firms down, sell 
off the assets, make sure the stockholders are absolute toast, make 
sure unsecured creditors are toast, make sure it is so painful that 
nobody ever wants to go through this. We absolutely need to do that. 
The American people need to know we in Congress are not going to prop 
up a failed institution, that they are going to live the same life in 
capitalism that everybody else has to live. People in Tennessee, when 
they fail, they fail.
  The kind of thing we ought to be talking about and have been talking 
about and I think can solve is that I think we ought to have more 
judicial involvement in the process. We ought to improve the bankruptcy 
process so that these large institutions have a more viable route 
through bankruptcy.
  I think we ought to deal with the disparate treatment of similarly 
situated creditors. The fact is, the way the ``post'' funding in this 
bill is now set up, we do not. If a creditor receives more money than 
they should, that money is not recouped. We know how to fix that. I 
know the Senator from Virginia and I both know how to fix that.
  Those are the kinds of things we need to be talking about.
  Creditor prioritization--there is no question that right now in the 
bill, certain creditors can be treated differently by the FDIC than 
others.
  We need to be looking at bankruptcy stacks so that people understand 
how much they are going to be paid back, and they are going to be in 
the same order they anticipate being in.
  We need to be tightening the definition of a financial firm. Right 
now in the bill, the way it reads, an auto company could end up being 
part of this. Right now, it is not tight enough. An auto company may be 
a stretch, but something other than a financial firm could be dealt 
with, the way the language is now reading. And certainly for sure 
Fannie and Freddie need to be treated the same as any other financial 
firm.
  We need to have a solvency test to make sure regulators--that does 
not allow regulators the flexibility to protect firms in crisis.
  We need to make sure there is a duration. In other words, if the FDIC 
comes in and has to take over, after due process--three keys being 
turned--take over one of these firms that has posed systemic risk, we 
need to know there is an end date. I know the Senator from Virginia and 
I absolutely agree that conservatorship should not be on the table. 
This is only a receivership and those firms should go out of business, 
and that, no doubt, should be language added. It is not in there right 
now.
  There are a number of things like this. I could go on and on. I am 
probably boring much of the watching audience, if there is any, with 
some of these technical issues, but those are the kinds of things we in 
this body ought to be talking about. They are important. They matter. 
But to use up time with rhetoric that, in essence, is used to sort of 
brand something in a way that really isn't the way it is, to me, is not 
productive. I did not come here to do that.
  Again, I think both sides of the aisle tried to cast the characters 
in certain ways. It is this herd process that happens around here. 
Everybody wants to get everybody on the same team. What we do is we use 
rhetoric that charges people up and gets everybody on the same team. I 
do not like that process. I do not want to be a part of that process.
  I have joined with other Republicans to try to make sure this bill 
gets in the middle of the road. I have done that on the basis that both 
sides are going to deal in good faith.
  I know the Senator from Virginia knows we went through a process with 
this bill where we voted it out of committee in 21 minutes--a 1,336-
page bill we voted out of committee in 21 minutes with no amendments. 
The stated goal was to make sure that both sides did not harden against 
each other and that we could negotiate a bill before it came to the 
floor--came to the floor--we would negotiate a bipartisan bill. That is 
why it was stated that we did that. How can responsible Senators, 23 
Senators, all of whom have problems with this bill--how can you vote 
something out of committee in 21 minutes with no amendments unless you 
know that a negotiation process is going to take place afterward to 
create a bipartisan bill? Nobody in their right mind would have agreed 
to do that.
  What I would say to my friends on the other side of the aisle and 
what I would say to the folks at the other end of Pennsylvania Avenue, 
who seem to be turning up the rhetoric--I take it as a commitment from 
my friends on the other side of the aisle that we are going to 
negotiate a bipartisan bill and we are going to do it in good faith. 
But I also expect the same on my side of the aisle, that we are going 
to negotiate in good faith to get a bill and that before it comes to 
the floor the major template pieces will be worked out, the issues 
around consumers, the issues around orderly liquidation, and the issues 
around consumer protection.
  As I have mentioned, there are a number of issues we need to debate 
here on the floor that, to me, are outside the realm of the template 
itself. I hope this body--I know the Senator from Virginia and I have 
worked together a great deal. I know we both came from a world that was 
different from this. I have become greatly distressed. I get distressed 
at both sides of the aisle when we have an important issue such as this 
and we turn it into sound bites.
  I hope, again, over the next several days--this bill has been through 
so many iterations. Everybody who has worked on it understands what is 
in it. Everybody understands what the points are on which we disagree. 
As a matter of fact, if we do not end up with a bipartisan bill, it is 
not going to be over philosophical issues, it is going to be over the 
fact that the two sides just decided they didn't want to do it. It is 
going to be over the fact that it takes both sides.
  The fact is, the White House can make an issue out of this. I know 
things are not going particularly well in the polling areas. I know my 
friend from North Dakota talked about polling data and testing things 
and all that. I realize things are not going particularly well. Maybe 
this financial reform bill can be something that changes that. Maybe if 
you push the bill as far to the left as you can and you dare 
Republicans to vote against it, maybe that is a good thing. That is not 
what I came here to do. I do not think that is what the Senator from 
Virginia came here to do. I know that if Republicans brand this bill as 
prolonging too big to fail--that is what we are doing--then we might be 
able to keep the bill from passing that way too.
  I hope all of us will sit down and do what we came here to do, and 
that is to create good policy for the American people.
  I am very distressed about where we are today. What I hope is 
happening is that this is just a bunch of buzz and that our committee 
staffs and the chairman and ranking member are actually sitting down, 
having serious discussions, and that very soon we are going to come 
forth with a bill that is bipartisan, where we can debate it on

[[Page 5730]]

the edges and end up passing legislation that stands the test of time.
  I hope that bill will deal with the very core issues that got us into 
this crisis. And we can castigate all kinds of people. There is enough 
blame to go around. You almost couldn't find a regulator, a credit 
rating agency, a firm, management that was not in some way involved in 
helping create this crisis. There is a lot of blame to go around. But I 
hope the bill, at the end of the day, will also address, as I have 
stated every time I have come to the floor on this bill, the whole 
issue of underwriting; the fact that at the end of the day, at the 
bottom of this, whether you read what happened supposedly with Goldman 
on Friday, you read about these synthetic CDOs where they were not even 
really underwriting mortgages there--in reality, they were just doing 
something that reflected what certain mortgages would do--at the end of 
the day, it still was about the fact that in this country, we wrote a 
bunch of mortgages that couldn't be paid back. You can talk about this 
all you want, but the underwriting, the bad loans that were written, at 
the end of the day, are what created much of this crisis. Candidly, I 
don't think much of this bill addresses that. I hope we will address 
that more fully before this bill comes to the floor.
  With that, I think I have taken up my allotted time. I thank the 
Members of this body for their patience. I hope we will do the work 
that needs to be done here. As I mentioned, at this point I don't think 
either side of the aisle deserves a badge of honor, but I hope over the 
next several days that will change. I hope our rhetoric will be 
tempered. I hope our discussions will center around those things that 
really matter and will not be used to basically get people in the 
public off on rabbit trails or try to herd our teams together.
  Mr. President, I look forward to working with you as we try to 
complete this bill.
  I yield the floor.
  Mr. BAUCUS. Mr. President, I would like to return to the nomination 
of Dr. Lael Brainard.
  Today, at long last, the Senate is considering the nomination of Dr. 
Lael Brainard to be Under Secretary of Treasury for International 
Affairs.
  President Obama nominated Dr. Brainard more than a year ago, in March 
of 2009. After an extensive vetting process, the Finance Committee held 
a hearing on her nomination in November of last year. And the Finance 
Committee favorably reported her nomination with a bipartisan majority 
in December of last year.
  The path to her Senate confirmation has been neither short nor easy. 
But throughout this process, Dr. Brainard has demonstrated persistence 
and determination.
  These vital qualities supported her well as a nominee. And these 
qualities will support her well as she assumes her responsibilities as 
Under Secretary of Treasury.
  The world economy is emerging from a deep economic recession. America 
must lead the way to recovery. And we must do so by creating jobs, 
reducing unemployment, and encouraging smart, balanced growth here at 
home.
  But the health of the global economy does not rest on our shoulders 
alone. In fact, the recent financial crisis has demonstrated how 
interconnected our world is.
  The world's many national economies have the potential to rise 
together. And they have the potential to fall together, as well.
  To ensure a stable, prosperous economic future, countries must work 
together to support balanced economic growth. No country can rely 
solely on export-driven growth, just as no country can rely solely on 
its domestic consumption.
  But this economic rebalancing will not happen overnight. The global 
economic downturn has been powerful because of its persistence. And we 
must be just as persistent and determined in our efforts to overcome 
the effects of this crisis.
  As Under Secretary of Treasury for International Affairs, Dr. 
Brainard will lead our bilateral and multilateral efforts on these 
issues. She will work with key trading partners such as China and the 
European Union. And she must help to guide our country from an economic 
recovery to economic growth.
  Dr. Brainard has demonstrated that she has the knowledge, skills, and 
abilities to confront the tasks that lie ahead. She is brilliant and 
hard-working.
  She has shown the tenacity and doggedness necessary to be successful 
as Under Secretary for International Affairs. And she has revealed that 
she has the persistence and determination to address the vital issues 
facing America and the global economy today.
  I might add, I worked with Dr. Brainard during the Clinton 
administration. A very key question is, What would the U.S. economic 
relation be with China? Up to that point, America had annual extensions 
of MFN for China. They were contentious. They caused more problems than 
they solved, and I spent some time with the President and others in the 
Clinton White House and then later worked with Dr. Brainard as we moved 
away from these annual extensions of MFN and more toward PNTR with 
China.
  It was a hallmark change in United States-China economic relations. I 
think this worked out very well for our country's best interests. I 
must say it has also helped China. We pursued that objective, in part, 
because that meant China could then be a member of the WTO, and once 
China became a member of the WTO--that is, the World Trade 
Organization--that would help China live up to world standards that 
other countries were living up to under WTO.
  Again, Dr. Brainard, throughout this confirmation process, has shown 
her dedication to serving the Treasury Department, the President, and 
the American people. I am confident--and I am confident because she has 
had deep experience and she is very talented; she is very good--I am 
confident she is up to the task for which she has been nominated.
  I urge the Senate to approve her nomination.
  I now ask unanimous consent that the assistant majority leader, the 
Senator from Illinois, be recognized to speak on whatever topic he 
chooses.
  The PRESIDING OFFICER (Mr. Kaufman). Without objection, it is so 
ordered.
  The Senator from Illinois.
  Mr. DURBIN. I ask unanimous consent to speak for 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. I thank the chairman of the Finance Committee.
  This is the Executive Calendar. It contains the names of the 
nominations the President of the United States has sent to the Senate 
for confirmation. It is an orderly process, a historic process. It has 
happened thousands and thousands of times. Very few times do we have a 
lot of controversy associated with these names. If there is a 
controversy, ultimately there is a vote--a debate, and then a vote.
  But now there is a new approach being used by the minority side. That 
approach is to basically use one of three options: stall, stop, and 
kill. What they are trying to do, for the 104 nominations sent by 
President Obama, is to hold them on the calendar as long as possible so 
it is difficult for him to organize his administration and move 
forward.
  There are some key positions. The one the Senator from Montana spoke 
of is the nominee for Under Secretary of the Treasury for International 
Affairs. We are concerned about the state of the American economy, our 
competition in the world, how we stack up against countries such as 
China.
  There is an allegation, which I think is valid, that the Chinese are 
manipulating their currency so they continue to take jobs away from the 
United States. It gives them too big a competitive advantage. Here is 
the Under Secretary for International Affairs who would be tasked with 
looking into that issue to try to help American businesses, small and 
large, and to save American jobs and this nomination now sits on the 
calendar with 103 others.

[[Page 5731]]

  What you find is that of those 104 nominations, most of them went 
through the committees on their way to the Senate floor with unanimous 
votes or overwhelming majority votes. There is no controversy 
associated with it.
  Mr. DORGAN. Would the Senator yield for a question?
  Mr. DURBIN. I would be happy to yield.
  Mr. DORGAN. Mr. President, I wonder if the Senator from Illinois 
knows who has a hold on that nomination.
  Mr. DURBIN. I do not know. Does the Senator know?
  Mr. DORGAN. No, I do not. The reason I asked the question is these 
holds are, in some cases, anonymous. I spoke earlier today about a hold 
on a promotion for one of the generals in the Army to be a major 
general that has now been held up for nearly 6 or 7 months by Senator 
Vitter.
  I use his name because I told him I was going to because he is 
demanding of this general something the general cannot do. I mean, that 
is an example. We happen to know where that hold is from.
  But of these other 100-plus nominations, they sit here, day after 
day, month after month, and someone has put a hold on them for some 
reason. If I might mention one other, the woman who was to head the 
GSA, that was vacant for nearly a year because of a hold of one 
Senator, and when we finally got around to voting for her, it was 94 to 
zero.
  The Senator who held her up for a year even voted for her. That is 
the kind of game that is being played. It is unfair.
  Mr. DURBIN. I agree with the Senator from North Dakota. I would say 
to those Senators who have holds on nominees: Come to the floor and 
explain to the American people why you believe these people should not 
be serving in our government. If you think there is something wrong 
with them, if you think they are unqualified or there is some issue 
involving their character or integrity, do you not owe it to these 
nominees to step forward and say so?
  I have held some nominees in the past but was open and public about 
it for a specific purpose. Recently, under the Bush administration, I 
was looking for a report from the Department of Justice. The report was 
sent. The hold was lifted as quickly as it was sent. Those things I 
understand.
  But to hold these people indefinitely in anonymous holds, secret 
holds, and never state the reason why is fundamentally unfair. It is 
unfair to the nominee who has gone through this process of FBI checks, 
background checks, poring through income tax returns, questions about 
their personal and private lives most Americans would not want to face.
  They finally get through the nomination process, the President sends 
their name, and now they are being held up on the calendar 
indefinitely, 104 different people. I think we owe it to them, we owe 
it to the President and to the country to do this in an honest, orderly 
way.
  During the course of this week, Members of the Senate are going to 
come to the floor and ask to move these nominees forward. I hope those 
on the other side who have the courage to hold them will have the 
courage to stand and explain why. That, I think, is critical.


                            Financial Reform

  There is another issue involving a hold, which goes to a much larger 
issue. We will have a bill before us soon, reported from the Banking 
Committee, that is long overdue. This bill is Wall Street reform. Our 
country has been through one of the toughest economic downturns in 
modern memory. For 80 years, we have never seen anything like what we 
are going through now.
  Some 8 to 14 million Americans have lost their jobs, $17 trillion in 
value was taken out of the country. Virtually every one of us with a 
savings account or retirement account knows what that meant. We lost 
value in things, our nest eggs, the money we put away for our future.
  We know businesses failed, way too many of them. We know a lot of 
people lost in that process, losing their jobs, losing retirement 
income, losing their health insurance. Investors lost when the stock 
market went down to about 6,500 on the Dow Jones average. It is now 
back up in the 10,900 or 11,000 range. But with all that downturn in 
the economy, people stood back and said: What happened? What did we do 
wrong?
  Well, mistakes were made. Many mistakes were made in Washington. I 
will concede that point. But a lot of mistakes were made on Wall Street 
with the biggest financial institutions. The worst part of it was, when 
these financial institutions were about to take a dive and go down, 
where did they turn? The American Treasury, the taxpayers of this 
country.
  They said, under the Bush administration: We need a bailout, $700 
billion in taxpayer money to Wall Street to overcome the mistakes we 
made and keep our banks afloat and insurance companies, in some cases, 
because of the big problems we have, problems many times of their own 
creation.
  They received the money. Many of us had a stark choice. We were told 
by the Secretary of the Treasury and the Chairman of the Federal 
Reserve: If you do not send this money up to Wall Street and these 
banks and insurance companies go down, the economy will follow them, 
not just in America but globally.
  So we voted for this bailout money. I did not want to do it. But I 
thought it was a responsible thing to do. Well, it turns out some of 
these banks and other institutions are paying back the money, with 
interest. The taxpayers are okay; but, by and large, a lot of others 
are not. We have to ask ourselves: Do we want to run through this 
script again? Do we want to see this movie happen next year or the year 
after?
  The obvious answer is no. So the Banking Committee sat down and said: 
Let's rewrite the rules. If they are going to act like a bank and be 
protected like a bank, they should have the oversight of a bank. If 
they want to loan money on a bad loan, and they do not have a reserve, 
do not ask the taxpayers to stand and make up the difference. That is 
part of what we are doing with this financial reform bill, to try to 
create the rules and oversight from organizations and agencies in 
Washington to make sure the taxpayers do not end up footing the bill 
again.
  Secondly, this whole world of derivatives, which I thought was 
explained very ably by the Secretary of the Treasury over the weekend, 
is basically either an insurance policy that someone buys to make sure, 
if they are entering into a contract on a premise that they are going 
to make some money and they do not make money, they are protected--or 
it is a basic bet. They are basically betting on something that is 
going to occur, even if they do not have a personal interest in it.
  Well, these derivatives got out of hand, so out of hand that there 
was a lot of gaming that went on. We try to clean this up. I, of 
course, am partial to the Chicago model, where in the Board of Trade 
and Mercantile Exchange we have had transparency and open-market 
dealing in derivatives for decades. I think that is the answer. Let's 
put this all out in front of the public so they know exactly what is 
going on. Stop the backroom deals on Wall Street.
  The third thing is to create a consumer protection agency so average 
consumers across America have a fighting chance when banks and credit 
card companies dream up new ways to fleece us. It happens with 
regularity. We know it does. So this agency would be there to make sure 
these financial institutions are honest with consumers.
  We do have agencies of government that make sure the toasters you buy 
do not explode in your kitchen. You expect as much, do you not, that 
some agency is going to make sure that product is safe? What about your 
mortgage? Should you not have the same peace of mind that when you walk 
out of the closing, you have not fallen into some trick or trap that is 
going to catch up with you later on?
  Well, that is what we did. The Banking Committee had this financial 
regulatory reform bill. Senator Dodd of

[[Page 5732]]

Connecticut went to Senator Shelby of Alabama, the ranking Republican, 
and said: Let's make it bipartisan. He worked with Senator Shelby for 
several months, and ultimately Senator Shelby said: We cannot reach an 
agreement.
  Then he sat down, Senator Dodd did, with Senator Corker of Tennessee, 
who just spoke. Senator Corker is a man I respect very much. They tried 
to work together. They spent about a month at it. It led to nothing. So 
Senator Dodd said: Well, at this point, we ought to move it to 
committee. Let's have the amendment process. Let's find out what this 
bill is going to look like. Let's have a debate. It was brought to the 
Banking Committee with over 400 amendments pending. The Republicans 
decided, at the committee, they would not offer one amendment to the 
bill.
  Instead, the Republican ranking member said: Just vote it in or out. 
They voted, partisan rollcall. Democrats voted it out. It is now on the 
floor and will be up next in consideration.
  The Republican minority leader, Senator McConnell of Kentucky, comes 
to the floor last week and says: We are going to oppose the bill 
because it is another taxpayer bailout. He fails to mention that what 
has been built into the bill, with Republican input, is not a taxpayer 
bailout at all. It is says to the banks, which would be protected: You 
have to create your own liquidation fund so if you get in trouble, the 
taxpayers do not end up holding the bag.
  This has to be bankers' money, not taxpayers' money. So if there is 
any bailout, it is a bailout of, by, and for bankers, for their 
institutions, so the taxpayers do not end up holding the bag, again.
  So Senator McConnell's characterization of what this bill does is not 
accurate. It charges up people to hear about another bailout, as we 
would expect. But it does not tell the story. Then comes a decision by 
the Republicans, 41 of them, to sign a letter to say they oppose this 
bill. They did not participate in creating it, they oppose it.
  One of the Republican Senators said: That means we are going to vote 
against your even bringing it up. We are going to start a filibuster 
against this bill to try to stop it.
  Well, I would ask my Republican colleagues, all 41 of them, to pause 
and reflect for a moment. When Senator McConnell was selling to his 
Republican caucus tickets on this ``pleasure cruise'' to end financial 
reform, to end this reform of Wall Street, there were pretty calm seas. 
But last Friday something happened that changed the picture.
  The Securities and Exchange Commission filed a civil action against 
Goldman Sachs and said they had been engaged in conduct which was 
literally reprehensible. They were basically misleading the people who 
were investing in their investment products and steering the business 
for an outcome.
  It truly was the worst, at least the allegations of the complaint, 
are the worst in corporate greed at the Wall Street level. I would urge 
my colleagues on the Republican side to think twice about the letter 
you signed that said you do not want to be part of a reform effort. 
Most of America is fed up with what is going on, on Wall Street.
  This latest action by the SEC is clear evidence of the problems. 
Those who signed the letter for this pleasure cruise trip have come 
onto some rough seas now with this SEC action. I would think, if they 
look closely at that ticket that they have for this pleasure cruise 
with Wall Street, they will find they are on the SS Titanic. They are 
about to hit an iceberg because the American people are fed up with 
what has happened on Wall Street: Taking taxpayers' money for a 
bailout, using the money for bonuses for CEOs who made these boneheaded 
mistakes, taking it out on investors and savers across America, and 
then saying to Congress: Whatever you do, our friends in Congress, do 
not let them change the laws and make it more difficult.
  Well, the American people want us to have laws that will protect them 
in their investments, in their savings, that will guarantee 
transparency. They do not want us to continue down this path where we 
are allowing the financial institutions on Wall Street to engage in 
practices that are ultimately going to harm the economy. We do not want 
to see a rerun of this recession.
  We need to move to this financial regulatory reform bill after we 
consider nominations, and I hope--I hope--a few of the Republican 
Senators who are genuinely committed to reform will not get on a 
pleasure cruise with Wall Street. We would rather have them roll up 
their sleeves and join us, going to work to bring real reform.
  Mr. President, I yield the floor.
  Mr. NELSON of Florida. Mr. President, will the Senator yield for a 
question?
  Mr. DURBIN. I would be happy to yield.
  Mr. NELSON of Florida. Would the Senator believe the latest iteration 
of objection by the other side to this Wall Street reform effort is 
what I heard this morning: that they now say this legislation should 
not be rushed through the Senate?
  My question to the distinguished assistant majority leader is, How 
many months have we been working, and working in a bipartisan fashion, 
on this legislation?
  Mr. DURBIN. I can say, to my knowledge, 6, 8 months--maybe longer--
this has been in the process. It passed over in the House of 
Representatives. It came over here, and I know it has been under active 
consideration. We did have health care reform going. But I know Senator 
Dodd and the Banking Committee, at least for the last several months, 
have been working with the Republicans trying to engage them in this 
process. So to say this is being sprung on them without notice I do not 
think is accurate.
  Mr. NELSON of Florida. Does it seem to the Senator--Mr. President, if 
I may continue a question--does it seem to the Senator there is 
something eerily symmetrical here in the way there is always the cry 
that it is being rushed through the Senate Chamber? Did we hear echoes 
of that over the course of the last year with regard to health care 
legislation?
  Mr. DURBIN. In response through the Chair to the Senator from 
Florida, after the Senate in the HELP Committee adopted 150 Republican 
amendments to the health care bill, every single Republican on the 
committee voted against it. And you know what happened--the same, of 
course--in the Senate Finance Committee. And then the complaints were 
made that after 14 months of active consideration of this measure, we 
were somehow rushing it through.
  It is the same story. It is the same script being played over and 
over. As I said--I do not know if the Senator from Florida was on the 
floor--the basic policy on the other side of the aisle is stall, stop, 
and kill. And this approach--saying no to everything, refusing to 
engage in even writing a bill--is not serving our Nation. There are 
things we need to do, and this is one of them.
  Mr. NELSON of Florida. Mr. President, I ask unanimous consent to 
speak for up to 15 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. NELSON of Florida. Mr. President, I want to speak on this 
legislation as well, this legislation we are finding is strongly 
opposed by the Wall Street banks, which have fared so very well at 
taxpayers' expense and now do not want any kind of legislation that 
will call on them to have any kind of transparency and checks and 
balances on what has been an intolerable situation.
  If this motion to proceed to the financial reform bill fails, 
obviously, it is going to be the American taxpayer who is going to 
suffer. When we get around to considering the motion to proceed, if it 
is denied, it will be a vote in favor of keeping the status quo. It 
will be a vote in favor of $700 billion bailouts, reckless financial 
risk taking, and all the other problems that come with our current 
financial regulatory system.
  Is anybody satisfied with what we have been through over the past 
couple of years? I do not think a vast majority

[[Page 5733]]

of the American people are satisfied. To the contrary, I think they are 
outraged as to what they have seen on Wall Street and thus the need for 
Wall Street regulatory reform.
  Last week, I had spoken on the need to reform compensation practices 
on Wall Street. I have put forth a specific proposal that would tie 
future tax deductions for huge executive compensation at big financial 
institutions to the adoption of responsible performance-oriented 
compensation standards. What I have suggested are standards that have 
been developed already by the Federal Reserve System and the Financial 
Stability Board, which is the council of major central banks.
  Some financial institutions have already begun to implement these 
standards. But we need them to apply to all those major financial 
institutions. It only takes one reckless and irresponsible institution 
to wreak havoc on our financial system. So by requiring the very 
largest banks to tie the pay of their highest paid executives to the 
long-term performance of that financial institution is sound, 
responsible reform we should be able to agree on. Remember, it has 
already been adopted by the Federal Reserve Board and the Financial 
Stability Board, which is the council of major central banks.
  But today I want to address another important aspect of financial 
reform that is related to this complicated thing called derivatives 
regulation and energy speculation. Let's take derivatives. It is 
arcane. It is abstract. It is something folks do not understand. It is 
very difficult to understand. In essence, some of the examples I am 
going to give are--you can think of it as an insurance policy, a 
derivative. It is a derivation of normal financial instruments. Some 
derivatives provide companies with legitimate backup insurance. It is a 
way to hedge against the risk in the marketplace.
  But the market for derivatives has gotten out of control. Many of 
those derivatives today are simply bets--basically gambling bets--
between banks that do little if anything to benefit the Nation's 
economy. They help create financially speculative bubbles that increase 
prices, whether it is the prices at the gas pump or in the checkout 
line in the supermarket, but also the experience we have had that 
increases the prices in our housing market.
  In the area of derivatives regulation, the Banking Committee bill 
creates some commonsense safeguards to improve accountability and 
transparency. Over the last two decades, much of the activity on Wall 
Street has moved away from traditional investment banking and asset 
management and into this speculation on derivatives trading. For 
example, in the 10-year period between 1998 and 2008, the value of 
outstanding derivatives grew from less than $100 trillion to nearly 
$600 trillion.
  They can play an important function in managing risk, whether it is 
an interest rate, foreign exchange, or energy price risks. But when you 
allow investors to leverage all of their investment, derivatives allow 
speculators to take on much more risk with much less capital.
  Because the trading of derivatives is largely conducted in 
unregulated, over-the-counter markets, the reckless speculative 
positions taken by companies such as AIG and others nearly brought down 
the financial system. Because derivatives are used to speculate on all 
types of goods--not just securities--they can have significant 
consequences in other parts of the economy.
  In early 2008, we saw the price of oil hit stratospheric heights, 
largely because of excessive speculation in oil and energy derivatives. 
There are a number of us in the Senate who have worked to close the so-
called Enron loophole and clarify that energy derivatives should be 
traded on a regulated exchange and treated like other commodity 
derivatives.
  The financial reform bill that is coming to the floor addresses 
problems in the derivatives marketplace by requiring that derivatives 
be traded through clearinghouses and public exchanges. It authorizes 
the Commodity Futures Trading Commission to establish speculative 
position limits on the amount of exposure that any one investor can 
take. For example, if you are going to be buying and selling these 
things on the exchanges, the person buying it--instead of turning right 
around and trading it--is going to have to buy and keep and hold a 
certain percentage of the acquisition.
  These are important first steps. But the bill coming here from the 
committee should do more to protect the taxpayers, and it should do 
more to stop the excessive speculation that can drive up prices. Take, 
for example, gas prices. I am going to be offering an amendment to do 
just that. It is going to require that regulators set hard caps on the 
positions taken by energy traders. In other words, there would be only 
a certain amount they could buy of all that particular speculative 
product.
  My amendment would eliminate the loopholes in the bill that will come 
to the floor that would allow these unwarranted exemptions from those 
limits. The amendment would require these limits be put in place by a 
date later this year.
  I am concerned the committee bill coming to the floor retains current 
rules in the Bankruptcy Code that give the so-called counterparties in 
derivative contracts special, preferred treatment when a firm becomes 
insolvent. This special treatment ensures that Wall Street banks and 
other large traders are put at the front of the line over an insolvent 
firm's customers.
  I want to give you an example. It was most apparent in late 2008 when 
billions of taxpayer dollars were given to AIG, which was deemed too 
large to fail. Then those taxpayer dollars in the bailout, through the 
TARP funds, actually flowed through to counterparties, which were 
people who had bought these derivatives like insurance policies, and 
they paid them off.
  Goldman Sachs received $13 billion from the taxpayers through the 
Federal bailout of AIG. Do you think that goes over well on American 
Main Street, when they see Wall Street having the Federal Government 
saving a firm like AIG and then it turns around and pays off on those 
speculative derivatives--in this case, to Goldman Sachs for $13 
billion? That does not go over very well, and it is not fair.
  We simply need to eliminate the special treatment Wall Street banks 
and other financial firms that hold large derivative positions receive 
in the bankruptcy and liquidation process.
  I am going to offer an amendment to clarify that those derivative 
counterparties--such as that insurance policy for which I gave the 
example where AIG paid off Goldman Sachs--those kinds of speculative 
ventures are never again going to jump to the front of the line in the 
bankruptcy process--ahead of whom? Ahead of taxpayers and customers and 
other creditors.
  It is time for us to move ahead with financial reform. So when we get 
around to whether we are even going to take up this bill, a vote 
against the motion to proceed to get to the bill is a vote against 
reform. It is a vote in favor of continued bailouts. The Banking 
Committee has produced a strong committee bill, and I hope here on the 
floor, with amendments, we will make it even stronger. I hope our 
colleagues will join us in this effort.
  Mr. President, I yield the floor and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mrs. FEINSTEIN. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. FEINSTEIN. Mr. President, what is the pending business?
  The PRESIDING OFFICER. We are in executive session.
  Mrs. FEINSTEIN. I will speak on the nominee at this time.
  I come to the floor to support the nomination of Dr. Lael Brainard to 
be the next Under Secretary of the Treasury for International Affairs.
  Before I proceed, let me say I have known Lael Brainard for some 
time. We participated together in a strategy group held by the Aspen 
Institute, I think, for more than a decade now. I found her to be very 
incisive and bright. Additionally, in the course of her work at the 
Brookings Institution's Global Economy and Development Program she has 
worked with my

[[Page 5734]]

husband over a period of some 6 years now. He has gotten to know her 
well as well.
  On March 23, 2009, President Obama nominated Dr. Brainard to be the 
Under Secretary of the Treasury for International Affairs. This is an 
especially important position in the executive branch, and never more 
so than during this very critical time for the domestic and global 
economies. Yet her nomination has languished for more than a year--
another casualty of obstructionist behavior, I believe, from our 
colleagues across the aisle.
  The Under Secretary position for which Dr. Brainard has been 
nominated focuses on three primary objectives: First, fostering U.S. 
economic prosperity by pursuing international policies and programs 
that help strengthen and grow our very own economy, create job 
opportunities for Americans, and keep global markets open for American 
exports; second, ensuring U.S. economic stability by promoting the 
American economy and working to prevent and mitigate financial 
instability abroad; third, strengthening U.S. economic security by 
supporting the administration's foreign engagement through the 
multilateral development banks to manage global challenges.
  The Treasury Department needs a qualified person such as Dr. Brainard 
in this vital leadership position--especially at a time when the 
Department is continuing its efforts to ensure economic growth, engage 
China on economic issues, and advance our global recovery agenda 
following the financial crisis.
  As a matter of fact, the Secretary of the Treasury himself has called 
about this position simply to say how important it is that she get 
confirmed at this time. I had the privilege to talk to Senator Kyl 
about it yesterday by phone, and I am hopeful this confirmation will 
take place this evening without further delay.
  Let me speak for a few moments on her track record of service. I see 
her as a devoted public servant, someone who has spent most of her 
career serving our people. She has held several senior positions in the 
administration and in the nonprofit and academic sectors, including 
Deputy National Economic Adviser for President Clinton; Vice President 
and Founding Director of the Brookings Institution's Global Economy and 
Development Program, which is where my husband has worked with her for 
the 6 years, as I mentioned; and associate professor of applied 
economics at MIT's Sloan School.
  She has also served as a White House fellow and a National Science 
Foundation fellow, among numerous other professional achievements.
  In short, she is eminently qualified for this senior administration 
position for which she has been nominated.
  Despite these excellent qualifications and her impressive resume, 
however, her nomination has languished in the Senate for more than a 
year. It is time to get it done this afternoon.
  Dr. Brainard was nominated by President Obama on March 23 of last 
year. She was favorably reported by our colleagues in the Senate 
Finance Committee in December of last year. However, a hold was placed 
on her nomination, as well as that of two other senior Treasury 
nominees.
  Many questions have been raised about her personal income tax 
returns, business partnerships, and the hiring of household employees, 
all of which are done jointly with her husband, Kurt Campbell. Mr. 
Campbell--whom I have also known because he participated in the same 
Aspen Strategy Group for more than a decade--is currently the Assistant 
Secretary of State for East Asian and Pacific Affairs, a position to 
which he was unanimously confirmed on June 25, 2009. So the same 
questions were asked of him as were asked of Lael Brainard.
  She has responded to questions in multiple rounds from majority and 
minority staff. She has answered every question asked of her and 
provided hundreds of pages of submissions in a forthcoming, honest, and 
direct manner. Clearly, at some point, there were some differences of 
opinion for some Members, but that has been settled, to the best of my 
knowledge. She submitted the same paperwork about taxes and the hiring 
of household employees as Mr. Campbell did during his confirmation, and 
during that time neither the Foreign Relations Committee nor any Member 
of the full Senate raised any concerns regarding this information.
  As the United States is entering a particularly intense period of 
international engagements this spring and summer, I believe Dr. 
Brainard's confirmation is essential to ensuring effective U.S. policy 
coordination and implementation.
  I wish to point out that she has broad bipartisan support, as well as 
the support of a multitude of nongovernmental organizations and 
businesses. She is supported by the U.S. Chamber of Commerce, the 
Business Roundtable, U.S. Council on International Business, Business 
Council for International Understanding, Council of the Americas, 
Coalition of Service Industries, the Emergency Committee for American 
Trade, the National Foreign Trade Council, and the National Association 
of Manufacturers.
  In my opinion, she is a woman of strong common sense, integrity, 
credibility, and sound judgment. She is exceptionally well qualified, 
and I urge my colleagues to approve her nomination without further 
delay.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REED. 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. REED. Mr. President, I rise today in support of the nomination of 
Lael Brainard to be Under Secretary of the Treasury for International 
Affairs.
  I know Lael personally. She is a renowned expert in international 
economics, a dedicated public servant, and is highly qualified for this 
important position. I had the privilege of working with her when she 
was a member of the Clinton administration as Deputy Assistant to the 
President for International Economics. Then she went on to be a vice 
president and founding director of the Brookings Institution's Global 
Economy and Development Program and then an associate professor of 
applied economics at MIT's Sloan School.
  She has extraordinary credentials and experience, but she is also, in 
addition to that, someone who has a wide ranging interest in 
international economics, international affairs, and international 
security policy.
  She is someone I have known for many years, someone I respect 
immensely for her judgment, her maturity, and her dedication to not 
only the country but also to ensuring that our policy reflects our 
highest ideals, as well as advances our cause around the world.
  She has been nominated for a very critical position. International 
economics is no longer a secondary concern. It is of primary concern, 
if it ever was a secondary concern. We are now approaching a time when 
our relationships with the world's economies are no longer one of the 
strong versus the many smaller economies. We are in a very competitive 
global economy, and we need this type of representation in the 
Department of the Treasury. We have to engage China, and no one is more 
thoughtful and better prepared to do that than Lael.
  We have to stabilize this economy through this financial crisis which 
we are seeing not just in terms of private markets but the situation in 
Greece, the issues of sovereign debt. All of these cry out for an 
individual in the Department of Treasury who is not only well versed 
but also in place to do the work. Again, I can find no higher qualified 
candidate than Lael.
  We have to expand export opportunities. The President has rightly 
called upon this country not only to begin to grow again but to direct 
our growth away from domestic consumption to export. We need someone in 
the international arena fighting for us, the United States. We need an 
individual who is responsible and accountable for that effort. Again, I 
cannot think of a

[[Page 5735]]

more experienced, more dedicated, and more qualified individual than 
Lael.
  We have been waiting, the Department of Treasury has been waiting, 
Lael Brainard has been waiting, since December 2009 for confirmation. 
That is a long time to put a high priority issue on the back burner.
  What is ironic is it appears no one is challenging her experience, 
her credentials, her demeanor, her temperament--anything. She is 
collateral damage, if you will, in another dispute which is not one of 
the most significant and commendable parts of the process here. We all 
have issues with individual candidates, but after those issues are well 
ventilated and since December 2009--that is a long time--we have to 
take it to a vote up or down. I urge that her nomination move forward 
this evening. She is extraordinarily qualified, and she is someone who 
can take on the extraordinary challenges of this job.
  Frankly, right now we have wasted months and months through this 
process where we could have had the very best person available focus on 
the international competitiveness of the United States, and I think our 
constituents demand it.
  Mr. KERRY. Mr. President, I urge my colleagues to support the 
nomination of Dr. Lael Brainard to be Under Secretary of the Treasury 
for International Affairs. This is a vital role and it is important 
that we fill this position during this time of immense global 
challenges. The filling of this position is long overdue. Dr. Brainard 
is highly qualified and we are fortunate that a candidate of her 
quality is willing to serve.
  The Under Secretary for International Affairs is critical to the 
administration's efforts to engage China on economic issues, stabilize 
the global economy following the financial crisis, expand export 
opportunities, and pursue reforms and effective U.S. investments in the 
multilateral developments banks.
  Dr. Brainard attended Wesleyan University before receiving a Master's 
and Doctorate in Economics from Harvard University. She is the 
recipient of a White House Fellowship and Council on Foreign Relations 
Fellowship. During the Clinton administration, Dr. Brainard served as 
Deputy National Economic Adviser and chair of the Deputy Secretaries 
Committee on International Economics. Prior to joining the Clinton 
administration, she was an associate professor at the MIT Sloan School. 
She currently serves as vice president and founding director of the 
Global Economy and Development Program at the Brookings Institution.
  During her tenure with the Clinton administration, Dr. Brainard faced 
global economic challenges, including the Asian finance crisis, the 
Mexican financial crisis, and China's entry to the World Trade 
Organization. She helped shape the 2000 G8 Development Summit that for 
the first time included leaders of the poorest nations and laid 
foundations for the Global Fund to fight AIDS, TB, and malaria.
  Over the years, Dr. Brainard has written extensively on international 
economic issues. In recent years, she has focused on the links between 
U.S. competitiveness and climate change policy. As we address climate 
changes issues, it will be helpful to have someone with her knowledge 
as part of our team.
  President Obama nominated Dr. Brainard back in March and I appreciate 
her patience with the process. I look forward to working with Dr. 
Brainard to address the international economic challenges that we face.
  Mr. LEAHY. Mr. President, the majority leader has taken a significant 
step to address the crisis created by Senate Republican obstruction of 
President Obama's highly qualified nominations and the Senate's advice 
and consent responsibilities. Regrettably, Republican obstruction has 
made it necessary for the majority leader to file cloture to bring an 
end to Republican filibusters and allow the Senate to consider at least 
some of the long-stalled nominations languishing on the Senate's 
Executive Calendar.
  In a dramatic departure from the Senate's traditional practice of 
prompt and routine consideration of noncontroversial nominations, 
Senate Republicans have refused for month after month to join 
agreements to consider, debate and vote on nominations. Their practices 
have obstructed Senate action and led to the backlog of over 80 
nominations now stalled before the Senate, awaiting final action. The 
American people should understand that these are all nominations 
favorably reported by the committees of jurisdiction. Most are 
nominations that were reported without opposition or with a small 
minority of negative votes. Regrettably, this has been an ongoing 
Republican strategy and practice during President Obama's presidency.
  Twenty-five of those stalled nominations are to fill vacancies in the 
Federal courts. They have been waiting for Senate action since being 
favorably reported by the Senate Judiciary Committee as long ago as 
last November. Those 25 judicial nominations are more than the 18 
Federal circuit and district court nominees that Republicans have 
allowed the Senate to consider and act upon during President Obama's 
administration.
  To put this in perspective, by this date during George W. Bush's 
Presidency, the Senate had confirmed 45 Federal circuit and district 
court judges. President Obama began sending the Senate judicial 
nominations 2 months earlier than President Bush did, and still only 18 
Federal circuit and district court confirmations have been allowed. If 
we had acted on the additional 25 judicial nominations reported 
favorably by the Senate Judiciary Committee but on which Senate 
Republicans are preventing Senate action, we would have made comparable 
progress. As it stands we are 60 percent behind what we achieved by 
this time in President Bush's first term.
  Republicans continue to stand in the way of these nominations, 
despite vacancies that have skyrocketed to over 100, more than 40 of 
which are ``judicial emergencies.'' Caseloads and backlogs continue to 
grow while vacancies are left open longer and longer. On this date in 
President Bush's first term, the Senate had confirmed 45 Federal 
district and circuit court judges; there were just 7 judicial 
nominations on the calendar, and all 7 were confirmed within 12 days. 
That was normal order for the Democratic Senate majority considering 
President Bush's nominations. Circuit court nominations by this date in 
his first term waited an average of less than a week to be confirmed. 
By contrast, currently stalled by Senate Republicans are circuit court 
nominees reported back in November and December of last year. The seven 
circuit court nominees the Senate has been allowed to consider so far 
have waited an average of 124 days reported to be considered and 
confirmed after being favorably--more than 4 months compared to less 
than 1 week for President Bush's nominees--and those delays are 
increasing.
  In the 17 months in 2001 and 2002 that I chaired the Judiciary 
Committee, the Senate confirmed 100 of President Bush's judicial 
nominations. In stark contrast, to date, the Senate has only been 
allowed to act on 18 circuit and district court nominations. Twenty-two 
of the 25 nominations pending on the calendar have been pending for 
more than a month. Eighteen were reported by the Judiciary Committee 
without dissent--without a single negative vote from any Republican 
member. Still they wait.
  Republican obstruction has the Senate on a sorry pace to confirm 
fewer than 30 judicial nominees during this Congress. Last year, only 
12 circuit and district court judges were confirmed. The lowest total 
in more than 50 years. We have to do far more to address this growing 
crisis of unfilled judicial vacancies.
  It has been almost 5 months since I began publicly urging the Senate 
Republican leadership to abandon its strategy of obstruction and delay 
of the President's judicial nominees. But we have not considered a 
judicial nomination since March 17, when we finally confirmed the 
nomination of Rogeriee Thompson of Rhode Island to the First Circuit. 
Even though Judge Thompson had two decades of experience on her

[[Page 5736]]

State's courts, and her nomination was reported by the Senate Judiciary 
Committee without a single dissenting vote, it stalled on the Senate 
Executive Calendar for nearly 2 months before she was unanimously 
confirmed, 98-0. There was no reason or explanation given by Senate 
Republicans for their unwillingness to proceed earlier.
  Before that vote, the majority leader was required to file cloture on 
the nomination of Barbara Keenan of Virginia to the Fourth Circuit. 
Judge Keenan's nomination was stalled for 4 months. After the time 
consuming process of cloture, her nomination was approved 99 to zero. 
There was no reason or explanation given by Senate Republicans for 
their unwillingness to proceed earlier or for the filibuster of that 
nominee either.
  Similarly, there has yet to be an explanation for why the majority 
leader was required to file cloture to consider the nominations of 
Judge Thomas Vanaskie to the Third Circuit and Judge Denny Chin to the 
Second Circuit, both widely respected, long-serving district court 
judges. Judge Vanaskie has served for more than 15 years on the Middle 
District of Pennsylvania, and Judge Chin has served for 16 years on the 
Southern District of New York. Both nominees have mainstream records, 
and both were reported by the Judiciary Committee last year with 
bipartisan support. Judge Chin, who was the first Asian Pacific 
American appointed as a Federal district court judge outside the Ninth 
Circuit, and who, if confirmed, would be the only active Asian-Pacific 
American judge to serve on a Federal appellate court, was reported by 
the committee unanimously.
  The majority leader has also filed cloture to end the extended 
Republican effort to prevent Senate consideration of the nomination of 
Professor Chris Schroeder to lead the Office of Legal Policy at the 
Justice Department. Professor Schroeder was first nominated by 
President Obama on June 4, 2009. He appeared before the Senate 
Judiciary Committee last June, and was reported favorably in July by 
voice vote, with no dissent. His nomination then languished on the 
Senate's Executive Calendar for nearly 5 months, with not a single 
explanation of the delay. Then, as the year drew to a close, Republican 
Senators objected to carrying over Professor Schroeder's nomination 
into the new session, and it was returned to the President without 
action, forcing the process to begin all over again. President Obama 
renominated Professor Schroeder early this year, and his nomination was 
reconsidered and rereported by the Judiciary Committee with Republican 
support. A scholar and public servant who has served with distinction 
on the staff of the Senate Judiciary Committee and in the Justice 
Department, Professor Schroeder has support across the political 
spectrum.
  Democrats treated President Bush's nominations to run the Office of 
Legal Policy much more fairly than Republicans are treating President 
Obama's nominee, confirming all four nominees to lead that office 
quickly. We confirmed President Bush's first nominee to that post by a 
vote of 96 to 1 just 1 month after he was nominated, and only a week 
after his nomination was reported by the Judiciary Committee. In 
contrast, Professor Schroeder's nomination has been pending since last 
June and will require cloture to be invoked before the Senate can 
finally have an up-or-down vote.
  The majority leader has also filed cloture to end the obstruction of 
the longest-pending judicial nomination on the Executive Calendar, that 
of Marisa Demeo to the District of Columbia Superior Court. Her 
nomination has been blocked since it was reported by the Homeland 
Security and Governmental Affairs Committee in May 2009. This sort of 
obstruction of a DC Superior Court nomination is unprecedented. These 
nominations for 15-year terms on the District's trial court are not 
usually controversial. The nomination of Magistrate Judge Demeo, an 
experienced former prosecutor and Justice Department veteran who is the 
second Hispanic woman nominated to this court, is one I strongly 
support. I know Judge Demeo and have known her for years. The chief 
judge of the Superior Court, Lee Satterfield, has written several times 
to the majority and minority leaders about the ``dire situation'' 
created by vacancies on that court for administration of justice in 
Washington, DC, our Nation's Capital. As usual, the cost of Republican 
obstruction is borne by the American people.
  Not long after President Obama was sworn in, Senate Republicans 
signaled their strategy of obstruction, threatening to filibuster his 
nominations before he had made a single one, in their letter of March 
2, 2009. The stated basis for their threat was to ensure consultation 
with home State Senators. President Obama has consulted with home state 
Senators of both parties, yet Senate Republicans filibustered the very 
first of President Obama's judicial nominations, the nomination of 
Judge David Hamilton of Indiana to the Seventh Circuit, despite such 
consultation. The Senate had to invoke cloture to consider Judge 
Hamilton's nomination, even though he was a well-respected district 
court judge supported of Senator Lugar, the longest-serving Republican 
in the Senate, with whom President Obama consulted before making the 
nomination.
  Senate Republicans have ratcheted up their bad practices from the 
1990s when they pocket filibustered more than 60 of President Clinton's 
judicial nominations, creating a vacancies crisis on the Federal bench.
  Democrats did not do the same to President Bush's nominees. I 
followed through on my commitment to treat them more fairly. I worked 
hard in 2001 and 2002, even after the 9/11 attacks and the anthrax 
attacks, holding hearings, including during Senate recess periods, in 
order to swiftly consider President Bush's nominees. That is why the 
Senate confirmed 100 of his judicial nominees by the end of 2002. 
Democrats only refused to rubber stamp a handful of the most extreme, 
ideological and divisive of President Bush's nominees.
  During the Bush Presidency Senate Republicans contended that 
filibusters of judicial nominations were ``unconstitutional.'' Now that 
President Obama is in the White House, Senate Republicans have 
filibustered the nomination of Judge David Hamilton, and Judge Barbara 
Keenan, who was then confirmed unanimously. The same Republican 
Senators who recently threatened to blow up the Senate unless every 
nominee received an up-or-down vote are now engaged in another attempt 
to abuse the rules of the Senate and undermine the democratic process. 
Republican Senators who just a few years ago insisted that ``elections 
have consequences'' have now made the use of filibusters, holds, and 
excessive procedural delays the new normal in the Senate. They seem 
intent on continuing their destructive practices.
  It is regrettable that the majority leader has to file cloture on 
these mainstream nominations today, just to allow the Senate to hold 
the up-or-down votes that Republican Senators once demanded for the 
most extreme and ideological nominees of a Republican President. I 
thank him for doing so, and look forward to the confirmation of these 
nominees.
  I yield the floor. 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. INOUYE. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                             Cloture Motion

  The cloture motion having been presented under rule XXII, the Chair 
directs the clerk to read the motion to invoke cloture.
  The assistant legislative clerk read as follows:

                             Cloture Motion

       We, the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     hereby move to bring to a close debate on the nomination of 
     Lael Brainard, of the District of Columbia, to be an Under 
     Secretary of the Treasury.
         Harry Reid, Patrick J. Leahy, Sheldon Whitehouse, Joseph 
           I. Lieberman, Sherrod Brown, Richard J. Durbin, Daniel 
           K. Inouye, Tom Harkin, Amy Klobuchar, Roland W. Burris, 
           John D. Rockefeller, IV, Jon Tester, Christopher J. 
           Dodd, Byron L. Dorgan, Al

[[Page 5737]]

           Franken, Claire McCaskill, Benjamin L. Cardin.

  The PRESIDING OFFICER. By unanimous consent the mandatory quorum call 
has been waived. The question is, Is it the sense of the Senate that 
debate on the nomination of Lael Brainard, of the District of Columbia, 
to be an Under Secretary of the Treasury shall be brought to close?
  The yeas and nays are mandatory under the rule. The clerk will call 
the roll.
  The assistant legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from California (Mrs. Boxer) 
and the Senator from Iowa (Mr. Harkin) are necessarily absent.
  Mr. KYL. The following Senators are necessarily absent: the Senator 
from Utah (Mr. Bennett), the Senator from Georgia (Mr. Chambliss), the 
Senator from Oklahoma (Mr. Coburn), and the Senator from Texas (Mrs. 
Hutchison).
  The PRESIDING OFFICER (Mrs. Shaheen). Are there any other Senators in 
the Chamber desiring to vote?
  The yeas and nays resulted--yeas 84, nays 10, as follows:

                      [Rollcall Vote No. 118 Ex.]

                                YEAS--84

     Akaka
     Alexander
     Baucus
     Bayh
     Begich
     Bennet
     Bingaman
     Bond
     Brown (MA)
     Brown (OH)
     Burr
     Burris
     Byrd
     Cantwell
     Cardin
     Carper
     Casey
     Cochran
     Collins
     Conrad
     Corker
     Crapo
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Franken
     Gillibrand
     Graham
     Grassley
     Gregg
     Hagan
     Hatch
     Inouye
     Isakson
     Johanns
     Johnson
     Kaufman
     Kerry
     Klobuchar
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     LeMieux
     Levin
     Lieberman
     Lincoln
     Lugar
     McCain
     McCaskill
     McConnell
     Menendez
     Merkley
     Mikulski
     Murkowski
     Murray
     Nelson (NE)
     Nelson (FL)
     Pryor
     Reed
     Reid
     Risch
     Rockefeller
     Sanders
     Schumer
     Sessions
     Shaheen
     Shelby
     Snowe
     Specter
     Stabenow
     Tester
     Thune
     Udall (CO)
     Udall (NM)
     Voinovich
     Warner
     Webb
     Whitehouse
     Wicker
     Wyden

                                NAYS--10

     Barrasso
     Brownback
     Bunning
     Cornyn
     DeMint
     Ensign
     Enzi
     Inhofe
     Roberts
     Vitter

                             NOT VOTING--6

     Bennett
     Boxer
     Chambliss
     Coburn
     Harkin
     Hutchison
  The PRESIDING OFFICER. On this vote, the yeas are 84, the nays are 
10. Three-fifths of the Senators duly chosen and sworn having voted in 
the affirmative, the motion is agreed to.
  Mr. NELSON of Florida. Madam President, 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. KAUFMAN. 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. KAUFMAN. Madam President, I ask unanimous consent to speak as in 
morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                      Rule of Law and Wall Street

  Mr. KAUFMAN. Madam President, as we continue to learn more facts from 
various investigations into the 2008 financial meltdown, a certain 
picture is becoming increasingly clear. Like a jigsaw puzzle slowly 
taking shape, we can begin to see the outlines of many of the causes of 
the crisis--and the solutions they demand. In my view, it is a picture 
of Wall Street banks and institutions that have grown too large and 
complex and that suffer from irreconcilable conflicts between the 
services they provide for their customers and the transactions they 
engage in for themselves. It is also a picture of management that 
either knew about the lack of financial controls and outright fraud at 
the very core of these institutions or was grossly incompetent because 
it did not. And the picture includes regulators who failed miserably as 
well, due to malfeasance or incompetence or some combination of both.
  Until Congress breaks these gigantic institutions into manageably 
sized banks and draws hard, clear lines for regulators to ensure that 
effective controls remain in place, we will have done neither that 
which is necessary to restore the rule of law on Wall Street nor that 
which will ensure that another financial crisis does not soon happen 
again.
  What have we learned in just the past 5 weeks?
  On March 15, I came to the Senate floor to discuss the bankruptcy 
examiner's report on Lehman Brothers and said, as many of us have 
suspected all along, that there was fraud--fraud--at the heart of the 
financial crisis. The examiner's report exposed the so-called Repo 105 
transactions and what appears to have been outright fraud by Lehman 
Brothers, its management, and its accounting firm, which all conspired 
to hide $50 billion in liabilities at quarter's end to ``window dress'' 
its balance sheet and mislead investors. And this practice does not 
appear to be unique to Lehman Brothers.
  I went further and noted that questions were being raised in Europe 
about whether Goldman Sachs had an improper conflict of interest when 
it underwrote billions of Euros in bonds for Greece. The questions 
being raised include whether some of these bond-offering documents 
disclosed the true nature of these swaps to investors and, if not, 
whether the failure to do so was material.
  Last week, we learned about more alleged fraud at the heart of the 
financial crisis. On Friday, the Securities and Exchange Commission 
filed charges against Goldman Sachs and one of its traders for alleged 
fraud in the structuring and marketing of collateralized debt 
obligations tied to subprime mortgages. Goldman allegedly defrauded 
investors by failing to disclose conflicts of interest in the design 
and structure of these collateralized debt obligations. The SEC says 
this alleged fraud cost investors more than $1 billion.
  While I will not prejudge the merits of the case, the SEC's complaint 
alleges that Goldman Sachs failed to disclose to investors vital 
information about the CDO, in particular the role that a major hedge 
fund played in the portfolio selection process and that the hedge fund 
had taken a short position against the CDO.
  Robert Khuzami, Director of the SEC Division of Enforcement, said:

       Goldman wrongly permitted a client that was betting against 
     the mortgage market to heavily influence which mortgage 
     securities to include in an investment portfolio, while 
     telling other investors that the securities were selected by 
     an independent, objective third party.

  Kenneth Lench, chief of the SEC's Structured and New Products Unit, 
added:

       The SEC continues to investigate the practices of 
     investment banks and others involved in the securitization of 
     complex financial products tied to the U.S. housing market as 
     it was beginning to show signs of distress.

  Goldman Sachs has denied any wrongdoing and has said it will defend 
the transaction.
  This particular case involving Goldman Sachs was almost certainly not 
unique. Instead, it was emblematic of problems that occurred throughout 
the securitization market.
  Late last month, Bob Ivry and Jody Shenn of Bloomberg News wrote 
about the conflicts of interest present in the management of CDOs, a 
topic also discussed at length in Michael Lewis's book ``The Big 
Short.'' The SEC should pursue other instances of conflicts of interest 
in the CDO market that led to a failure to disclose material 
information.
  Last year, Senators Leahy, Grassley, and I, along with many others in 
the Congress, worked to pass the bipartisan Fraud Enforcement and 
Recovery Act so that our law enforcement officials would have 
additional resources to target and uncover any financial fraud that was 
a cause of the great financial crisis. However long it takes, whatever 
resources the SEC needs, Congress should continue to back the SEC and 
the Justice Department in their efforts to uncover and prosecute 
wrongdoing.
  I applaud SEC Chairman Mary Schapiro and especially Rob Khuzami and 
the team he has reshaped in the Enforcement Division. They deserve our 
steadfast support as the leadership

[[Page 5738]]

of the SEC continues its historic mission of revitalizing that 
institution and making it clear to all on Wall Street that there is a 
new cop on the beat.
  Also last week, our colleague, chairman Carl Levin, ranking member 
Tom Coburn, and the staff of the Permanent Subcommittee on 
Investigations began a series of hearings on the causes of the 
financial crisis. It is a testament to the professionalism and 
dedication of Chairman Levin that he has brought the subcommittee's 
resources to bear in such an effective and thorough manner. I also 
commend ranking member Tom Coburn for his dedication and effort as a 
partner in this effort. Chairman Levin and the subcommittee staff 
deserve credit and our deep appreciation for the work they have put 
into this series of hearings on Wall Street and the financial crisis.
  Since November 2008, subcommittee investigators have gathered 
millions--millions--of pages of documents, conducted over 100 
interviews and depositions, and consulted with dozens of experts. It is 
truly a mammoth undertaking, and the fruits of their labor were evident 
in last week's two hearings on Washington Mutual Bank. I look forward 
to the subcommittee's remaining two hearings on this subject, including 
this Friday's hearing on the role of the credit rating agencies. I 
commend this hearing to all my colleagues.
  The Levin hearings deserve comparison to the legendary Pecora 
investigations of the 1930s, which were held by the Senate Committee on 
Banking and Currency to investigate the causes of the Wall Street crash 
of 1929. The name refers to the fourth and final chief counsel for the 
investigation, Ferdinand Pecora, an assistant district attorney for New 
York County. As chief counsel, Pecora personally examined many high-
profile witnesses who included some of the Nation's most influential 
bankers and stockbrokers. The investigation uncovered a wide range of 
abusive practices on the part of banks and bank affiliates. These 
included a variety of conflicts of interest, such as the underwriting 
of unsound securities in order to pay off bad bank loans as well as 
``pool operations'' to support the price of bank stocks.
  The Pecora hearings galvanized broad public support for new banking 
and securities laws. As a result of the Pecora investigation's 
findings, the Congress passed the Glass-Steagall Banking Act of 1933 to 
separate commercial and investment banking; the Securities Act of 1933 
to set penalties for filing false information about stock offerings; 
and the Securities Exchange Act of 1934, which formed the Securities 
and Exchange Commission, to regulate the stock exchanges. Thanks to the 
legacy of the Pecora Commission hearings and subsequent legislation, 
the American financial institution rested on a sound regulatory 
foundation for over half a century; that is, until we began the folly 
of dismantling it.
  The Levin hearings have shined a much needed spotlight on the role of 
potential outright fraud by financial actors as well as the 
incompetence and complicity of bank regulators in the financial crisis. 
There is no better example of the danger that fraud and lax regulation 
poses to our financial system than the collapse of Washington Mutual 
Bank, known as WaMu.
  Far too often, the failure of institutions such as Washington Mutual 
is blamed on high-risk business strategies. It kind of sounds all 
right, doesn't it? While such strategies are clearly part of the 
problem, they should not be used to mask other causes such as fraud and 
malfeasance which played a significant role in the collapse of WaMu. 
Evidence developed by the subcommittee demonstrates that WaMu officials 
tolerated, if not outright encouraged, fraud as a byproduct of 
promoting a dramatic expansion of loan volume.
  The most blatant example of WaMu's culture of fraud was its 
widespread use of what are called stated income loans. Stated income 
loans is a practice of lending qualified borrowers loans without 
independent verification of what they state their income is. Listen to 
this. This is unbelievable. Approximately 90 percent of WaMu's home 
equity loans, 73 percent of its option ARMs, and 50 percent of its 
subprime loans were stated income loans. You go to the bank, you walk 
in, they say: Ted, what is your income? You say what it is, and that is 
it. Based on that, you can get 90 percent of WaMu's home equity loans, 
73 percent of its option ARMs, and 50 percent of its subprime loans--
stated income loans. As Treasury Department inspector general Eric 
Thorson said last week, WaMu's predominant mix of stated income loans 
created a ``target rich environment'' for fraud.
  Because WaMu made these stated income loans with the intent to resell 
them into the secondary market, there was less concern whether 
borrowers would ever be able to repay them. WaMu created a compensation 
system that rewarded employees with higher commissions for selling the 
very riskiest of loans. In 2005, WaMu adopted what it called its high-
risk lending strategy because those loans were so profitable. In order 
to implement this strategy, it coached its sales branch to embrace 
``the power of yes.'' The message was clear. As one industry analyst 
has said: ``If you were alive, they would give you a loan . . . if you 
were dead, they would give you a loan.''
  That this culture led to fraud on a massive scale should have 
surprised no one. An internal review by one southern California loan 
officer revealed that 83 percent of loans contained instances of 
confirmed fraud. In another office, 58 percent of loans were considered 
to be fraudulent. What did WaMu management do when it became clear that 
fraud rates were rising as house prices began to fall? What did they 
do? Rather than curb its reckless business practices, it decided to try 
to sell a higher proportion of these risky, fraud-tainted mortgages 
into the secondary market, thereby locking in a profit for itself even 
as it spread further contagion into our capital markets.
  In order for WaMu and institutions similar to it to sell these low-
quality loans to the secondary market, they need a AAA rating from 
credit rating agencies. So what did these institutions do? They gamed 
the system and manipulated the agencies by engaging in a practice 
called barbelling. Apparently, the credit rating agencies did not 
examine individual FICO scores when rating mortgage-backed securities 
and instead relied on average FICO scores. As revealed at the hearing 
by a WaMu risk officer and detailed in Michael Lewis's book ``The Big 
Short,'' lenders could create the requisite average score by pairing 
loans whose borrowers had relatively high scores with borrowers whose 
scores were far lower and would normally warrant a loan, which is the 
reason why it is called barbelling. So if the raters wanted an average 
FICO score of 615, a lender could compare scores of 680 with scores of 
550, even though borrowers with scores of 550 were almost certain to 
default on the loan. This barbell effect satisfied the rating agencies, 
even though half the loans, in many cases, had little chance of 
success. At the hearing, WaMu's CEO, Kerry Killinger, effectively 
admitted to barbelling by saying ``I don't have the barbell numbers in 
front of me.''
  To make matters worse, WaMu scored high FICO scores by seeking out 
borrowers with short credit histories. Such borrowers often have high 
FICO scores, even though they have not demonstrated the ability to take 
on and pay off large debts over time. These borrowers are called ``thin 
file'' borrowers. According to a report in the New York Times, WaMu 
encouraged thin file loans, even circulating a flier to sales agents 
that said ``a thin file is a good file.'' The book ``The Big Short'' 
even discusses a Mexican strawberry picker with an income of $14,000 
and no English who was ostensibly given a $724,000 mortgage on the 
basis of his thin file.
  Plainly, the Office of Thrift Supervision failed miserably in its 
responsibility to regulate WaMu and to protect the public from the 
consequences of WaMu's excessive and unwarranted risk-taking, including 
the toleration of widespread fraud. Although WaMu comprised fully 25 
percent of OTS's regulatory portfolio, OTS adopted a

[[Page 5739]]

laissez faire regulatory attitude at WaMu. Although line bank examiners 
identified the high prevalence of fraud and weak internal controls at 
WaMu, OTS did virtually nothing to address the situation. In fact, OTS 
advocated for WaMu, among other regulators, and even actively thwarted 
an FDIC investigation into WaMu during 2007 and 2008. The complete 
abdication of regulatory responsibility by OTS may find sad explanation 
in the fact that OTS was dependent on WaMu's user fees for 12 to 15 
percent of its budget.
  The regulatory failures at OTS were not unique. The overall 
regulatory environment at the time was extremely deferential to the 
market based on the widespread but faulty assumption that markets can 
and will effectively self-regulate. Self-regulate. At last Friday's 
hearing, the testimony of the inspector general at the Department of 
the Treasury was particularly noteworthy. He said bank regulators:

     . . . hesitate to take any action, whether it's because they 
     get too close after so many years or they're just hesitant or 
     maybe the amount of fees enter into it . . . I don't know. 
     But whatever it is, this is not unique to WaMu and it is not 
     unique to OTS.

  Let me repeat. It was the conclusion of our Treasury Department's 
inspector general that the failure of regulators to harness the lawless 
nature of conflicted institutions was not unique to Washington Mutual 
or to the Office of Thrift Supervision.
  I have said it before and I will say it again: It is time we return 
the rule of law to Wall Street, where it has been seriously eroded by 
the deregulatory mindset that captured our regulatory agencies over the 
past 30 years. We became enamored of the view that self-regulation was 
adequate, that enlightened self-interest would motivate counterparties 
to undertake stronger and better forms of due diligence than any 
regulator could perform, and that market fundamentalism would lead to 
the best outcomes for the most people. Some people even say that today. 
They say transparency and vigorous oversight by outside accountants is 
supposed to help our financial system--keep our financial system 
credible and sound. The allure of deregulation led us instead to the 
biggest financial crisis since 1929 and to former Federal Reserve 
Chairman Alan Greenspan's frank admission that he was ``deeply 
dismayed'' that the premise of enlightened self-interest had failed to 
work. Now we are learning, not surprisingly, that fraud and lawlessness 
were key ingredients in the collapse as well.
  As we turn to financial regulatory reform, we must remember that 
effective regulation requires not only motivated and competent 
regulators but also clear lines drawn by Congress. Based on what we 
have learned, what must we do?
  First, we must undo the damage done by decades of deregulation. That 
damage includes financial institutions that are too big to manage and 
too big to regulate--as former FDIC Chairman Bill Isaac has called 
them: too big to manage, too big to regulate. It also includes a Wild 
West attitude on Wall Street, in which conflict of interests are 
rampant and lead to fraudulent behavior as well as colossal failures by 
accountants and lawyers who misunderstand or disregard their role as 
gatekeepers. The rule of law depends, in part, on having manageably 
sized institutions, participants interested in following the law, and 
gatekeepers motivated by more than a paycheck from their clients.
  That is why I believe we must separate commercial banking from 
investment banking activities, restoring a modern version of the Glass-
Steagall Act to end the conflicts of interest at the heart of the 
financial speculation undertaken by mega banks that are too big to 
fail. We further should limit the size of bank and nonbank 
institutions, something Senator Sherrod Brown and I proposed in 
legislation we intend to introduce this Wednesday. Otherwise, we will 
continue to bear these mega banks' claims that they are merely market 
makers and no one who deals with them should trust whether the very 
creator of a financial product they sell is secretly betting against 
its success.
  Second, we must help regulators and other gatekeepers not only by 
demanding transparency but also by providing clear, enforceable rules 
of the road wherever possible. One clear lesson of the Goldman 
allegations is, we need greater transparency and disclosure of 
counterparty positions in the over-the-counter derivatives market. We 
should mandate that derivatives are traded on an exchange or at least 
essentially cleared. The rare exemption should carry with it a 
reporting requirement so that all counterparties understand the 
positions being taken by other clients of the dealer firm.
  Clearly, we need to fix a broken securitization market. No market, 
regardless of how sophisticated its participants, can function without 
proper transparency and disclosure. While I am pleased that the current 
reform bill would direct the SEC to issue rules requiring greater 
disclosure regarding the underlying loans in an asset-backed security, 
I believe we must go further still. Requirements for disclosure should 
not merely begin and end at issuance. Instead, disclosure should be 
automated, standardized, and updated on a timely basis. This will 
provide investors with relevant information on the performance of the 
loans, their compliance with relevant laws--fraudulent origination, for 
example, is generally uncovered after the fact--and the replacement of 
new collateral. This information should empower investors and 
countervail the malfeasance of issuers looking to adversely select 
dodgy collateral that they are also shorting on the side. Moreover, 
such real-time monitoring by investors would also have beneficial 
effects further up the securitization supply chain. If originators know 
they can't get away with selling fraudulent or poorly underwritten 
loans, they will also be forced to improve their standards.
  While not a silver bullet, I am also generally supportive of 
requirements that those who originate and securitize loans retain risk 
by keeping some percentage on their very own balance sheets. WaMu, for 
example, developed, in Senator Levin's words, a ``conveyor belt'' that 
originated, packaged, and dumped toxic mortgage products downstream to 
unsuspecting investors. Their lack of ``skin in the game'' allowed them 
to make a mockery of the originate-to-distribute model. While Bear 
Stearns, Lehman Brothers, and other firms faltered due to their 
excessive retention of risk, this basic requirement will better align 
the interests of originators and securitizers with those of investors.
  Moreover, a clear lesson of the Levin hearings is that Congress must 
ban the widespread issuance of stated income loans.
  I understand Senator Levin is developing further reform proposals 
based on his conclusions from the hearings.
  Third, we must concentrate law enforcement and regulatory resources 
on restoring the rule of law to Wall Street. We must treat financial 
crimes with the same gravity as other crimes because the price of 
inaction and a failure to deter future misconduct is enormous. That is 
why I'm pleased the SEC is turning the page on its recent history and 
sending a message throughout Wall Street: fraud will not pay.
  Madam President, last week's revelations about Washington Mutual and 
Goldman Sachs reinforce what I've been saying for some time. 
Deregulation was based on the view that rational actors would operate 
in their own self-interest within a framework of law. But even with the 
most rigorous regulators, it is impossible to trace the financial self-
interest of convoluted financial conglomerates, much less constrict 
their behavior before it runs afoul of the law. WaMu made loans they 
knew could not be paid back. Goldman Sachs allegedly permitted clients 
to take secret positions against the very financial products that it 
had created.
  The picture being revealed by the jigsaw puzzle of multiple 
investigations is now emerging clearly in my eyes. These financial 
institutions are too big and conflicted to manage, too big and 
conflicted to regulate, and too big to fail. Even Alan Greenspan has 
said about our current predicament: ``If they're too big to fail, 
they're too big.''
  Our country took a giant step backwards during the last financial 
crisis,

[[Page 5740]]

upending the dream of home ownership for millions of Americans, and 
throwing millions of people out of work as well. The credibility of our 
markets, one of the pillars of our economic success, was badly damaged. 
It must be restored. There must be structural and substantive change to 
Wall Street, where bankers must resume their central role of 
efficiently allocating capital, not taking bets in opaque markets that 
no one can understand.
  The solution is clear. We must split up our largest financial 
institutions into more manageable entities; we must separate their 
component parts so they are no longer inherently conflicted and so they 
can be properly regulated. Only then, if necessary, can they be allowed 
to fail without sending our entire economy to the precipice of 
disaster.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DURBIN. 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. DURBIN. Madam President, I ask unanimous consent that any recess, 
adjournment, or period of morning business count postcloture; that 
following a period of morning business on Tuesday, April 20, the Senate 
resume executive session, and that the time until 12 noon be equally 
divided and controlled between Senators Baucus and Grassley or their 
designees, with Senator Bunning controlling 15 minutes of the time 
under the control of Senator Grassley; that at 12 noon, all postcloture 
time be considered expired, and the Senate then proceed to a vote on 
confirmation of the nomination of Lael Brainard to be Under Secretary 
of the Treasure; that upon confirmation, the motion to reconsider be 
considered made and laid upon the table, and no further motions be in 
order; that the President be immediately notified of the Senate's 
action; that the Senate then stand in recess until 2:15 p.m.; that upon 
reconvening at 2:15 p.m., the Senate proceed to Calendar No. 165, the 
nomination of Marisa Demeo, to be associate judge of the DC Superior 
Court; that there be up to 6 hours of debate with respect to the 
nomination, with the time equally divided and controlled between the 
leaders or their designees; that upon the use or yielding back of time, 
the Senate proceed to vote on confirmation of the nomination; that upon 
confirmation the motion to reconsider be considered made and laid upon 
the table; no further motions to be in order and the President be 
immediately notified of the Senate's action; that the cloture motion 
with respect to the nomination be withdrawn; that upon confirmation of 
the Demeo nomination, the Senate then proceed to Calendar No. 333, the 
nomination of Stuart Nash to be an associate judge of the DC Superior 
Court, and immediately vote on confirmation of the nomination; that 
upon confirmation, the motion to reconsider be considered made and laid 
upon the table, and the President be immediately notified of the 
Senate's action with respect to Calendar No. 333.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.

                          ____________________