[Congressional Record (Bound Edition), Volume 156 (2010), Part 4]
[House]
[Pages 5812-5813]
[From the U.S. Government Publishing Office, www.gpo.gov]




  SENATE REGULATORY REFORM LEGISLATION INCLUDES PERMANENT, UNLIMITED 
                           BAILOUT AUTHORITY

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
California (Mr. Sherman) for 5 minutes.
  Mr. SHERMAN. Mr. Speaker, I rise to comment on the regulatory reform 
bill pending before the Senate.
  Senator Dodd has brought a bill that will provide for consumer 
protection, higher capital requirements, and the regulation of 
derivatives. We need all that. But we have to ask the question, does 
the Senate draft increase or decrease the statutory authority of the 
executive branch to bail out Wall Street giants and their creditors and 
counterparties?
  Unfortunately, the current draft of the Senate bill increases bailout 
authority. It provides, first, in Section 210, for the use of taxpayer 
money when an insolvent institution is to be liquidated in order to 
protect the counterparties and the creditors of that institution.
  Now, Senator McConnell has gone even further in the pro-bailout 
direction. He has criticized the fact that the Senate bill has a $50 
billion advance fund collected from Wall Street which would be used 
before any amounts would be borrowed from the taxpayer. So Mr. 
McConnell says do away with the fund but he barely comments on the 
taxpayer borrowing. The results will be that the Federal Government, 
when it liquidates one of these Wall Street giants, will be borrowing 
the first dollar from the taxpayer.
  We certainly don't need a circumstance where we are lending money in 
order to bail out the creditors and counterparties of giant and 
improvident financial institutions and we haven't even collected any of 
that money in advance. The House bill provides strict dollar limits on 
the amount that can be borrowed from the Treasury and sunsets this 
borrowing authority in 2013.
  Section 1155 of the Senate bill allows the executive branch to put 
unlimited taxpayer dollars at risk in order to guarantee the 
obligations of solvent banks. Now, the Senate bill does say that you 
can have this resolution of disapproval come before the Congress, but a 
resolution of disapproval is a phony device designed to give the 
illusion of congressional control. What it says is that in order to 
stop a hundred billion dollar transfer of our taxpayer money to Wall 
Street, you would need a vote in the House and a vote in the Senate; 
then it would be vetoed by the executive branch; then even if you had 
an overwhelming vote in the House, as long as 34 Senators were in favor 
of the bailout, the bailout would go forward. A resolution of 
disapproval is the illusion of congressional control. Instead, we 
should follow the House approach by putting a dollar limit on this 
emergency financial stabilization, and we should sunset all authority 
under it in the year 2013.

                              {time}  1245

  Just as important is the existing Section 13-3 of the Federal Reserve 
Act. Since 1935, the Federal Reserve has had the power, and this is 
enormous, to lend any amount of money to just about anybody so long as 
they think they have adequate security.
  Now, the Fed has already used this statutory authority to lend 
upwards of $2 trillion. So if we're against bailouts, we've got to ask, 
what limits does the Senate bill place on Section 13-3 authority? It 
provides only some minimal limits, requiring that that authority be 
used not to bail out just one company on Wall Street, but to be 
systemwide.
  Instead, the Senate can learn from the House bill to put dollar 
restrictions on this authority, and to provide that the security must 
be so good that we have a 99 percent likelihood of repayment.
  Even better yet, we ought to simply repeal Section 13-3.
  Finally, ``too big to fail'' is too big to exist. In the House bill, 
we authorize

[[Page 5813]]

the regulators to break up institutions that are too big to fail. The 
Senate, I believe, has basically ignored this House provision. They 
should not only embrace it, they should go much further. They should 
require the break-up of any institutions whose liabilities to American 
persons exceeds 1 percent of the U.S. GDP.
  There is no reason that a bank has to be over $140 billion in size. 
And if they are, they ought to be at least as smart as an amoeba. When 
an amoeba gets too big, it divides itself into two separate cells. 
Banks can do the same.
  In conclusion, the people of this country want to give the executive 
branch the power to nail Wall Street firms, to require regulations of 
derivatives, higher capital requirements, and to liquidate them when 
they get themselves into trouble and pose a risk to the entire economy.
  But the American people don't want to bail. So let's provide nail 
authority without bail authority.

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