[Congressional Record (Bound Edition), Volume 156 (2010), Part 5]
[Senate]
[Pages 5888-5889]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      FINANCIAL REGULATORY REFORM

  Mr. REED. Mr. President, I am here today not only to salute these 
great Americans but also to talk about the urgency of bringing the 
issue of Wall Street reform to the Senate for open debate and final 
passage. We have weathered and witnessed the worst financial crisis in 
the history of the country. We have seen wealth, trillions of dollars 
of wealth, evaporate because of this financial crisis. To hear people 
now talking about, well, this is not a good bill--the question is not 
whether we should delay further or go forward. The question is going 
forward with purpose, amending the bill on the floor, if necessary, in 
an open and transparent way so the American public can see we are 
moving forward on perhaps their No. 1 priority related to the economy, 
and economic recovery and financial reform are integrated key elements. 
We cannot have long-run economic success without fundamental financial 
reform.
  We are here today essentially to urge that the anticipated vote on 
Monday to proceed to the bill be affirmed overwhelmingly to send a 
message to the American people we are on the job for them, we are doing 
the work we have to do. We have to deal with a complex and significant 
legislative measure--but we have to do it now. The time for discussion, 
the time for consideration privately, has passed. Now we have to act.
  I think we have to act because we should recognize the status quo is 
unacceptable. Those on the other side who have been saying: Not now, 
not now, not now, essentially are defending the status quo. We have to 
ask several questions. Who does the status quo favor? It favors the 
remaining big banks and other financial institutions. We have seen, 
over the last several days, that these banks are reporting record 
profits, mostly based on trading. Here is another irony. Because of the 
system we have today, we are in desperate need of economic activity at 
the local level, the infusion of capital, lending--all those things. 
Where are the banks making their huge profits? On trading, essentially 
taking their money and other people's money and not investing in new 
productive capacity, but betting on financial products. That is not, in 
my view, what we should be doing at this moment. We have to recognize 
that if we do nothing, the banks will continue to operate as they have.
  That, I think, has to be corrected. The second question is, what 
activities are protected by the status quo? I will tell you. Exotic 
derivative trading. We saw this week where the Securities and Exchange 
Commission has made allegations against Goldman Sachs. Now, that will 
be determined in a court of law.
  However, the complexity of the transaction engaged in by Goldman and 
others, the creation of a synthetic collateralized debt obligation, to 
translate, was essentially picking out some representative mortgage 
funds and then betting on them. Somebody took the side that said they 
would still pay; some would take the side that they would default.
  What did that add to our economic capacity? In fact, one of the 
ironies of this whole crisis is there was such a proliferation of these 
toxic mortgage bonds that they no longer could sell them at a profit, 
so they started essentially creating virtual or synthetic securities.
  Again, what has it added to the economic productivity of the United 
States? Not much. In fact, some would argue nothing at all. We have to 
have a financial sector which performs one of the essential functions 
of any financial sector, the allocation of capital to productive uses: 
highways, buildings, education support, all of those things that not 
only return a profit to the investors but also build up our economic 
capacity and build up our wealth over the long term.
  Other activities that will be protected by the status quo include not 
only derivatives trading, but dark pools of capital, huge private 
equity funds that are shadowy in terms of their investment strategy, 
even to regulators, and the credit rating agencies. They are continuing 
to operate, and, frankly, we have to say their performance in the last 
several years was disappointing, and that is being very diplomatic. But 
they will continue to operate as they have in the past because we will 
not get the reform that is so necessary.
  Of course, the Wall Street salary structure, the incentive 
compensation, also will continue to be unaffected. So for all of these 
activities, if you are comfortable with them, then vote against the 
motion to proceed on Monday evening. If you are uncomfortable with 
them, if you do not want to see the remaining banks continue to operate 
as they have, then you have to vote, in my view, to move forward to 
debate this bill and engage on this issue.
  Now, the third question we have to ask is, what does the status quo 
do for consumers and taxpayers? The answer is very little, if anything 
at all. We saw in this whole situation consumers who were in some cases 
misled. In some cases it was obvious they could not afford the credit 
arrangement they were signing on to, but the incentive on the other 
side was not to look behind the veneer of the borrower but simply to 
get the loan closed and then sell it off for securitization profits.
  We have to change those incentives, and if we do not proceed to this 
legislation, we do not have a chance of doing that. So we have to move 
forward. Some have claimed, the Republican leader and others, that this 
is just a partisan exercise. It has not been a partisan exercise. We 
have been, under the

[[Page 5889]]

leadership of Chairman Dodd, engaged in this effort for months and 
months and months.
  Some people might have forgotten around here, but we started the 
markup of the financial reform bill November 19 of last year. We had a 
bill. Senator Dodd brought it to the committee. We started opening 
statements, and then everyone said: We have not had time enough to do 
this. We want more discussion.
  Senator Dodd, even with the urgency of moving on this measure, said: 
Fine. I respect my colleagues. I respect the process. We will stop. We 
will start talking.
  Well, the negotiations went on and on and on. It was clear there was 
no sense of urgency on the other side to move to a decisive vote. Then 
he engaged other Members. Senator Corker and others entered the 
discussion. I have been discussing derivatives in a very thoughtful way 
with Senator Gregg for months. But we have reached the point now where 
we have to take deliberate action and make some decisions.
  We have to move to the floor, to debate and votes and final passage. 
This is something we have to continue to move forward. The way to move 
forward is to vote on the motion to proceed on Monday evening.
  We have heard claims that this is a bailout bill, which I think would 
be a huge shock to many of my colleagues on the committee who have been 
working on this for months and months, Senator Corker and Senator 
Warner particularly, who crafted many of the provisions in this area.
  The reality is, if we do nothing, which is the effect of voting 
against the cloture motion--if we do nothing, we could have a crisis 
next week. Greek sovereign debt--there is huge turmoil in Europe about 
Greek bonds, the ability of the Greek Government to pay, the need for 
support. If those talks collapse and suddenly throughout the financial 
system there is a rush away from sovereign debt, not just Greek debt 
but other countries, what will happen? We do not quite know, I suspect, 
who is holding all of this debt and what are the systemic effects. We 
have to be prepared for something like that.
  The notion that this crisis has passed and we can go about our merry 
way without dealing with these issues is naive. The way to deal with it 
is to establish a resolution mechanism. Senator Warner and Senator 
Corker have done a remarkable job of crafting one. One of the questions 
they struggled with the most is who is going to pay for the resolution.
  Frankly, they stepped up to the plate today and said: Let's put the 
banks on the line for the first $50 billion. That makes sense to me 
because it is clear who is going to pay: not the taxpayer but the 
banks. But, in any case, we cannot engage in this discussion of the 
mechanism and how it will finally come out until we bring the bill to 
the floor, debate it, and vote upon amendments or changes. That is what 
we have to do. But this legislation is clearly not a bailout for the 
banks. If it was, they would be supporting it.
  Frankly, all the newspapers I read suggest the intense lobbying 
effort against the bill is by the banks, which, coincidentally, seems 
to favor the position of those who do not want to proceed to the bill. 
So I think we are in a situation where we have to proceed forward. As I 
said, if we do not move forward, we are going to have a significant 
issue of confidence by the American people and others in the stability 
of our financial system. These are complex, intricate issues. They 
require debate and discussion. I do not think anyone should be 
presumptuous enough to stand here and say: We know exactly what to do, 
and we are going to do it without the consent and without the input of 
all of our colleagues. But that consent and input comes, ultimately, on 
the Senate floor through debate, discussion, and voting.
  Now, again, where are we if we do not take up this measure next week? 
Well, the $600 trillion market in derivatives will remain opaque, 
complex, confusing, and a potential vulnerability for our financial 
system. I say $600 trillion because when we talk about derivatives 
markets, billions are--you know, that is a rounding error. It is 
trillions of dollars, and a miscalculation, a mistake, a misjudgment in 
that market has huge consequences.
  The big banks who sell complex, toxic instruments to pension plans, 
essentially taking savings and trading them, gambling with them, in 
some respects, they will continue to do that. They will not only take 
pension savings, but they will take municipalities' money in fancy bond 
arrangements that the municipalities never needed.
  All of these things will continue.
  Unregulated mortgage lenders will continue to go out and operate 
under the originate-and-sell model, which has led to so many problems. 
Payday lenders that are charging, in some cases, 900 percent interest 
will continue to be unregulated. Credit card companies, even after our 
efforts with the credit card legislation, will continue to try to 
circumvent the rules to maximize their profit.
  The bottom line is, the people who benefit from delay, from taking 
the course of action of delay and denial, I would say, because this 
urge to suggest this is a bailout bill is denying the facts of the 
bill, will be financial institutions and not consumers and not 
taxpayers.
  So, as a result, I would urge all of my colleagues on Monday to vote 
to proceed to this bill. Again, we have to ask three questions. This 
will be decided on Monday evening. The status quo favors the banks. If 
you want to favor the banks, then vote against cloture. The status quo 
operates to allow all sorts of arcane and exotic activities which we 
know have posed significant threats to our financial system.
  If you want these activities to continue unimproved, uncorrected, 
vote against cloture. The status quo disfavors consumers and taxpayers. 
So if you want to see them continue to be on the short side of the 
sale, vote against cloture. I would urge we vote for cloture, we move 
forward to debate real ideas about how to improve our financial system, 
protect consumers, and strengthen our economy.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Maryland.

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