[Congressional Record (Bound Edition), Volume 156 (2010), Part 5]
[Senate]
[Pages 5893-5895]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      FINANCIAL REGULATORY REFORM

  Mrs. HUTCHISON. Mr. President, I rise today to speak on financial 
regulatory reform. During the current economic downturn, we have seen 
far too many Americans lose their jobs, homes, and their savings. 
Today, 15 million of our citizens are still out of work, and national 
unemployment continues to hover near 10 percent.
  It is this uncertain climate in which we consider financial reform 
legislation. The crisis is going to remain in the forefront of our 
national consciousness for years to come, mainly due to the immense 
government intervention that was pushed through over the past year and 
a half, attempting to stabilize our frozen credit markets but instead 
accumulating massive debt that threatens to harm our economy much worse 
than the original problems.
  The current legislation continues the government's failed ``too big 
to fail'' policy. Too big to fail perverts free market capitalism and 
suggests that entities can privatize their profits, yet socialize their 
risks, and taxpayers foot the bill. The American taxpayer should not be 
forced to pay the gambling debts of risky bets made by large financial 
institutions.
  Republicans and Democrats alike agree that we must end too big to 
fail, but the bill that is being proposed does not do that. Chairman 
Dodd's bill provides both the FDIC and the Treasury Department 
emergency authority to provide broad debt guarantees in times of 
``economic distress'' to ``struggling firms.'' As written, it is 
foreseeable that the FDIC or Treasury could step in to prop up a firm 
under any circumstance, all without seeking to resolve and unwind the 
firm.
  The chairman's bill authorizes continued emergency lending authority 
for the Federal Reserve, but conceivably only for large banks. Under 
the Dodd bill, the Federal Reserve would retain supervisory authority 
over bank holding companies with assets over $50 billion. The Federal 
Reserve supervision essentially predesignates the firms that are too 
big to fail. These banks would have the implicit backing of the 
government and the taxpayers and, with it, the competitive advantage, 
giving it access to cheaper credit from lenders expecting to be made 
whole. This puts our Nation's community and independent banks at a 
severe competitive disadvantage.
  I will offer an amendment, if this bill comes to the floor, to permit 
community banks to remain under the supervision of the Federal Reserve. 
If the Fed supervises only the largest firms, it will gear monetary 
policy toward these large financial institutions, effectively leaving 
out the voice and real-time experience of community bankers in my State 
and across the country.
  While the large financial institutions were making bad bets on 
subprime mortgage markets, community banks were making home and 
business loans to local customers. Local community banks provide the 
lending and deposit services for our Nation's small businesses so they 
can operate, invest, create jobs, and drive our economy. It is this 
business lending that will help create jobs and grow our economy.
  Tom Hoenig, President of the Federal Reserve Bank of Kansas City, 
said recently that our Nation's largest banks would be well served to 
take lessons from our community banks. Why? Because community banks 
have been committed to providing the credit and services needed for 
small business. They know their customers, and they can make good, 
solid loans that are supportable.
  In Texas, Richard Fisher, President of the Dallas Federal Reserve 
Bank, said the provision in the bill would leave the Dallas Federal 
Reserve jurisdiction with only one or two bank holding companies, down 
from 36 member banks, for $74 billion in assets that he now has 
supervisory authority over. The Fed should know the needs and the 
economic conditions throughout the country, not just New York and 
Washington, DC.
  It is precisely the ability to foster bottom-up growth through small 
businesses that sets community banks apart from other financial 
institutions. Unlike the big financial institutions we see in the 
headlines for bailouts and bonuses, community banks don't have a 
systemic risk to our financial system and they are not identified as 
primary contributors to our latest crisis.
  However, community banks would soon be subjected to a considerable 
amount of new costs and regulatory burdens as a result of this 
legislation. Community banks are already regulated. They are well 
regulated. Adding additional layers of Federal bureaucracy with 
limitless authority would be a burden that would only serve to hamper 
the ability of community banks to effectively provide depository and 
lending services to America's consumers and small businesses.
  Community banks should not be punished as a result of this 
legislation. We should preserve and enhance our dual banking system, 
not impose additional Federal regulations that stifle their ability to 
serve their communities.
  I am also concerned about the direction of the regulation of over-
the-

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counter derivatives. In the wake of the collapse of the mortgage market 
where the use of derivatives and even derivatives of derivatives helped 
cause great losses to banks and nearly brought our economy to its 
knees, it is important that Federal regulators have a greater 
understanding of this derivatives market. We have Members on both sides 
of the aisle who are negotiating these terms. Republicans and Democrats 
have the same goal. We want to end too big to fail. We want to end 
bailouts. We want to assure that our community banks still have the 
capability to serve Main Street customers.
  The bill before us that is not being brought to the floor because it 
did not have any input from the Republican side does not achieve those 
goals. So we are now meeting in small groups. We are meeting with the 
Secretary of the Treasury and others within the administration to try 
to come to terms that would do the right thing and meet the goal that 
we all agree is the goal. That is what is going on right now in the 
Senate.
  It is my great hope--and I see my colleague from Tennessee who is 
also on the Banking Committee with me, and he too is a part of the 
negotiations and wants to bring this bill to the floor--we can do 
something good for our economy. Passing the bill or letting it come to 
the floor and roll out of here in its present form would not achieve 
that objective. So I welcome my colleague from Tennessee, who has been 
a major player in this debate. He has been a major reason that we are 
coming to a point at which I think we can have a successful bipartisan 
bill.
  I will say that our chairman and ranking member, Chairman Dodd and 
Senator Shelby, have been meeting for weeks to try to come to terms. So 
I think everyone is sincere at this point that we want a bipartisan 
bill. Financial regulation is not political. The consequences of 
passing a bad bill are huge for our country, for every American. We can 
do this.
  I welcome the comments of my colleague from Tennessee and I look 
forward to his continuing leadership so we can have a bill that will 
help the consumers in our country, stabilize our economy and, most of 
all, will bring the unemployment rate down from 10 percent so that more 
Americans can go to work.
  Thank you, Mr. President, and I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Tennessee.
  Mr. CORKER. Mr. President, typically when we come to the floor to 
speak, we don't like to wait for another Senator who wants to speak; we 
want to speak and go back to what we were doing, but today I am so glad 
I had the opportunity to hear the remarks of the Senator from Texas.
  Both of the Federal Reserve leaders in Kansas City and Dallas have 
added tremendously to this debate. No one has been more of a supporter 
for community banks than the Senator from Texas. I could not agree more 
with everything the Senator said regarding the Fed keeping community 
banks. My sense is that by the time the bill comes to the floor, it 
will either have that in it, or let me say to my colleague right now 
that I will cosponsor the amendment the Senator brings forth, because I 
think the Senator is absolutely right, that the Federal Reserve should 
keep the smaller State-chartered Fed members. The fact is this 
rearranging the deck chairs serves no purpose, so I could not agree 
more.
  I also agree with the Senator regarding derivatives. I notice the 
Senator from Texas has a microphone if she wishes to comment. I am 
going to speak based on what the Senator said on derivatives, but if it 
is OK, I would like the Senator from Texas to be able to respond.
  Mrs. HUTCHISON. Mr. President, I appreciate the remarks of the 
Senator from Tennessee and, of course, I welcome his cosponsorship of 
the amendment. It is essential. I couldn't support this bill if we shut 
the Fed off from Tennessee and Texas and California. Then we might as 
well all move to New York.
  New York doesn't want any more people, I am sure. They are well 
populated. But most of all, I want to make sure that the Main Street 
bankers and the small businesses of all of our States are known to the 
Fed, and the way they are known to the Fed, of course, as the Senator 
knows, is that their local Federal Reserve bank knows their issues and 
problems and needs, because they have the ability to serve those banks, 
which is not allowed in the bill before us.
  I thank the Senator from Tennessee for his leadership. I look forward 
to coming up with something we can all support.
  Mr. CORKER. Mr. President, that brings me back to where I want to be. 
The fact is, there are a lot of people coming to the floor and a lot of 
things are being said in the press. First, I think we are going to end 
up with a bipartisan bill before the actual vote to proceed takes 
place. I believe that is being led by Senators Dodd and Shelby. They 
are the point people. You cannot have eight negotiators. I believe that 
is where we are headed. So when I hear a lot of the rhetoric on the 
floor and other places, I think it is just rhetoric; but at the end of 
the day, I think we will end up with a solid bipartisan bill. I hope it 
is one I can support. Obviously, I am giving input on that.
  That leads me to this. There have been folks who have come to the 
floor talking about the Republicans supporting Wall Street by not 
supporting the Dodd bill in its present form. That is ridiculous. What 
is happening--some reporter made comments yesterday about Republicans 
and that I slammed the Dodd bill. That is not true. I was emphatic 
about two things: One, Republicans are not representing Wall Street. 
Candidly, when I look at the bill--and my friend from Delaware will 
actually agree with this--there is not much in this bill that is very 
offensive to Wall Street, to be candid.
  This bill focuses on three topics. What I have said to my colleagues 
is this: Whenever we have regulations, the big guys get bigger, right? 
The small guys are the ones who bear the brunt of regulation. What we 
are all trying to do, as Senator Hutchison laid out, on our side of the 
aisle is make sure this legislation deals appropriately with community 
bankers and manufacturers in Iowa, Texas, and other places. In fact, 
there are issues with the bill that we need to work out.
  Candidly, to say that Republicans are representing Wall Street could 
not be further from the truth. There is not much in this bill that is 
very offensive to Wall Street, to be candid. I am not saying we should 
go out of our way to be offensive, but anybody who looks at what this 
bill says would know there is not much in the bill that is that 
offensive. The fact is, we are putting derivatives on clearinghouses, 
which I hope happens. I think that is a good thing. I think we need to 
get as much of that done as possible, where if somebody's money is bad, 
they have to put money up that day. It alleviates some of the systemic 
risk. We deal with resolving a firm that fails. I think that is 
appropriate.
  Hopefully, we will get consumer protection back into the middle of 
the road. By the way, that is a section of the bill that, if it is not 
handled properly, won't affect the JPMorgans and Citigroups and Banks 
of America. It will affect community bankers. All we are trying to do 
on our side--and this is what I was emphatic about yesterday--is trying 
to make sure this bill is in balance. I think we can do that.
  Look, there is not much in this bill that is particularly offensive 
to Wall Street. To say that those of us who want to get it right for 
everybody else in the country are defending Wall Street was way off the 
mark, not true.
  Second, there are many things in the bill that are good. There are 
some things that aren't so good that I think are being worked out right 
now. That is typically what happens when we have a bipartisan 
discussion. Each side brings their particular strengths to a bill. We 
all represent different points of view and, when we work together, we 
end up with a good bill.
  One of the things that troubles me--and I was very emphatic about it 
yesterday, and will be again today and tomorrow, as I have been for a 
long time--is that this bill doesn't even deal with underwriting. At 
the end of the

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day, at the bottom of this upside down pyramid, the crisis began 
because we had a lot of mortgages in this country that should have 
never been written in the first place. Then we had firms that were way 
overleveraged that were doing that. Then we spread the pain through 
$600 trillion in notional value around the world. It started with the 
fact that a lot of loans were written that should not have been 
written. I don't think this bill even addresses that. I think that is a 
little bit of an issue.
  If we come to the floor with a template that deals with consumer 
protection, systemic risk, and derivatives, I hope my colleagues on the 
other side of the aisle will join in with many Members on this side of 
the aisle to correct that. At the end of the day, if we continue to 
write loans that should not be written, and we continue to securitize 
them, and if we continue to spread them around the world, we have not 
done much in this legislation. So I have been emphatic about that, and 
I have wanted these two pieces of the legislation to balance as it 
relates to the rest of the country, making sure our underwriting is 
done appropriately. Do I believe those are things that are important? 
Yes. Do I think we are going to address those? I hope so on the 
underwriting, but I am not sure. I cannot tell if people are willing to 
make sure that Americans across this country have to live in a 
semidisciplined way as it relates to mortgages. I hope we get there 
because I think it is important.
  In closing, in spite of all the rhetoric about bailouts and not 
bailouts and Wall Street and not Wall Street, I think what is happening 
in rooms and offices around the Hill is that negotiations are taking 
place that will get us to a place where we at least have a template, a 
piece of legislation that can be embraced in the beginning in a 
bipartisan way, and then what I hope will happen--I know my friend from 
Delaware will be highly engaged in this, because he has been focused on 
this for a long time--what I hope happens, after we get the base 
template together, is that we have a vigorous debate on the floor about 
where we need to go from there. There are other pieces--I would 
consider them to be central--but I am OK with legislation coming to the 
floor where we have a balance between resolution, derivatives, and 
consumer protection. Then let's go from there and have the kind of 
debate I think our country would love to see us have in public, focused 
not on rhetoric--because we have plenty of substance on this issue--but 
on substance, and let's do something that will stand the test of time. 
I think we are going to do that. As a matter of fact--and I know my 
time is up--I think this bill has the opportunity in the next few days, 
and once we begin debate on the floor, which I hope will happen in a 
bipartisan way--I think this bill is potentially the beginning of us 
being able to function in an appropriate way in this body. That is what 
I hope happens.
  That is why for weeks and months I have been saying that I think at 
the end of the day we are going to end up with a bipartisan bill. I 
hope it has some important elements in it, such as the ones I 
mentioned, that will allow me to support it. Whether that happens--and 
I hope it happens--or not, I hope we have a vigorous debate and end up 
with a good product.
  I yield the floor.

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