[Congressional Record (Bound Edition), Volume 156 (2010), Part 5]
[Senate]
[Pages 6494-6496]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      FINANCIAL REGULATORY REFORM

  Mrs. BOXER. Mr. President, this is good news we just received that 
our Republican colleagues have decided to allow us to proceed to the 
debate on the Wall Street reform bill. I was, frankly, confused as to 
why they were objecting. But in any event, without going through that, 
I am very pleased they have backed down in terms of their objection 
because we want to get to this bill.
  Many of us have ways we feel it can be made stronger. I bet there 
will be some amendments to make it weaker. And that is what the process 
is all about. The most important thing for the American people to know 
tonight is that an issue of critical importance is moving forward in 
the Senate.
  I think it is important for us to remember the real reasons as to why 
we are taking up this bill. Even though it is painful to review the 
dark times of 2008, when our economy and the world economy were really 
on the brink, I believe it is important for us to do that review.
  I asked my staff to put together some of the headlines from those 
days. We are going to go through a couple of charts and I will read a 
few of them, because we need to remember what it was like in those dark 
moments in our history.
  Here is a picture of a Wall Street trader and he is under a headline 
that says ``Black Monday.'' It was at a moment when the first bailout 
happened. It says, ``Bailout Fails, Stock Drop Most In History.'' Then 
we look at this one: ``Where Do We Go From Here?'' ``NASDAQ: The 
Biggest Fall Since Dot.com Crash.'' ``Dow Down 778.'' ``Time'' 
magazine, ``Wall Street's Latest Downfall: Madoff Charged With Fraud.'' 
``Feds' Rescue Plan: The Bailout To End All Bailouts.'' ``Jobs, Wages, 
Nowhere Near Rock Bottom Yet.'' ``Credit Crunch Continues As Lending 
Rates Climb.'' ``U.S. Consumer Sentiment Decreases To A 28-Year Low.'' 
``U.S. Loses 533,000 Jobs In The Biggest Drop Since 1974.''
  That is one chart, and I have one other, just to remind us where we 
were. San Jose Mercury News: ``Foreclosure Wave: San Jose Fights To 
Protect Neighborhoods.'' ``Carnage Continues: 524,000 Jobs Lost.'' 
``Wall Street Employees Set To Get $145 billion.'' That is in bonuses 
during all of this. ``Economy In Crisis,'' ``Foreclosure,'' ``Lehman 
Files For Bankruptcy,'' ``Merrill Sold,'' ``AIG Seeks Cash.'' We know 
all about that. ``What now?'' ``The Dow Falls 777,'' ``Economy On The 
Brink.'' ``U.S. Pension Insurer Lost Billions In The Market.'' 
``Housing Prices Take Biggest Dive Since 1991.'' ``U.S. Drafts Sweeping 
Plan To Fight Crisis As Turmoil Worsens In Credit Markets.'' And here 
is one: ``Full Of Doubts, U.S. Shoppers Cut Spending.''
  I read these headlines to my colleagues to bring back those dark, 
dark, dark days and why we are here today trying to make sure it never 
happens again. If we don't learn from history, we are doomed to repeat 
it, and we have learned and we are ready to make sure this never 
happens again.
  Those dark times came because we allowed Wall Street to engage in 
unregulated and unsupervised gambling. I have to say I am an economics 
major. That goes back quite a bit of time. Many years ago, before any 
of these kinds of exotic instruments were created, I worked on Wall 
Street as a stockbroker. I can tell my colleagues that every time the 
President of the United States would sneeze and the market went down a 
few points, I worried. I can just imagine how I would have felt if I 
would have had clients in this kind of situation where there was no 
control.
  A shadow banking system grew up that fueled an unsustainable housing 
bubble. From 2001 to 2007, the issuance of toxic private mortgage-
backed securities increased by over 400 percent. These securities were 
rated by credit rating agencies--the credit rating agencies that were 
supposed to be tellers of the truth. They are supposed to say to the 
consumer, uh-oh--I sound like my grandchild who says uh-oh--that is 
what they are supposed to say: Don't buy those securities because they 
are not good. But these credit agencies, rating agencies such as 
Moody's and Standard & Poor's, frankly, acted as though they were in 
the pockets of the issuers who paid them. In other words, they gave a 
good answer. If you wanted to issue securities--I don't care whether it 
is Goldman or anybody else--you go to these fellows, you pay them, and 
they tell you something good. What went wrong? That is a disaster. 
Where is the fiduciary responsibility in any of these relationships?
  The unregulated over-the-counter derivatives market also grew by over 
400 percent to a value greater than the entire U.S. economy. The 
unregulated over-the-counter derivatives market grew by over 400 
percent to a value greater than the entire United States economy. Wall 
Street institutions critical to our economy purposely created complex 
paper instruments that had no real value. In these hearings Senator 
Levin is holding, we see what happened when one company--Goldman--
knew--and I can't use the words they used because it would be improper 
on the floor--they knew a product they were selling was just plain junk 
and they sold it to their customers, to their clients. One of the 
people said in an e-mail: Wow, think of all the orphans and the widows 
we are hurting. That sounds to me like the Enron scandal where we had 
traders doing the same thing when energy prices went through the roof.
  In 2007 and in the first part of 2008, the house of cards began to 
collapse, because backing up these new complex instruments Wall Street 
created were these exotic loans that consumers could never repay unless 
housing prices continued to soar to unrealistic levels. So they created 
these instruments that were backed by these mortgages that were doomed 
to fail unless the economy continued to shoot like a star straight up 
and the housing market went up. The housing bubble began to deflate, 
and think about all of these derivatives and all of these exotic 
securities that were based on housing. Mortgage lenders and financial 
institutions began to fail; first Countrywide, then Bear Stearns. The 
Federal Reserve had to intervene behind the scenes to try and keep 
credit flowing. Remember, in a capitalist society, in our economy, we 
have to have credit flowing. Credit,

[[Page 6495]]

that is what the small businesses need. That is what governments need, 
overnight credit. The State of California couldn't even get overnight 
credit. The worst crisis hit in September 2008--the worst since the 
1929 Great Depression.
  Listen to this: Over just 3 days, September 13, 14, and 15, three 
major financial institutions failed--Lehman, AIG, and Merrill Lynch. 
Oh, my God, the shock in the country. Regulators were unprepared. They 
had no warning. Panic spread from this Wall Street debacle as banks 
lost confidence in the solvency of the financial system and they 
refused to lend. Credit was frozen. Consumers started to withdraw their 
money from failing money market funds, and some of them found out that 
they weren't insured, the money markets. We had to actually create 
insurance.
  The stock market dropped 25 percent in September alone, part of a 
larger 50-percent drop from 2008 to 2009. Trillions of dollars in 
pensions and savings wealth were lost. Without the tools to handle the 
crisis, the Bush administration was forced to approach us for direct 
taxpayer assistance. I will never forget the day when the Republican 
Treasury Secretary Hank Paulson looked me in the eye, along with all of 
my colleagues, and said capitalism was on the brink of collapse. I will 
tell my colleagues, I asked him a number of questions that day about 
the role that credit default swaps played in this, and derivatives, and 
to be totally candid, he didn't have an answer. He was so concerned 
about staving off this collapse.
  It was too late. It was too late to stop Wall Street's crisis from 
impacting the rest of our economy. Business lending plummeted. I know 
the Presiding Officer knows that small businesses have created 64 
percent of all of the new jobs in the last 15 years. When those good, 
strong businesses couldn't get credit, some of them couldn't keep the 
doors open. I can tell my colleagues that none of them expanded. They 
couldn't. They didn't have the capital. Retail spending fell by 14 
percent, driven by historic declines in consumer confidence, and 
because consumer spending accounts for 70 percent of our economy, this 
was another disaster on another disaster on another disaster.
  As the recession fueled by the financial crisis spread, job losses 
exploded to 750,000 a month, the highest ever recorded. Some 8.4 
million jobs were lost in 2008 and 2009. In my own home State of 
California, almost 1 out of every 10 jobs was lost--1 out of every 10 
jobs. To put a human face on that and think about those families in 
that situation where not only did they lose a lot of their net worth in 
the stock market which was going down, down, down, they were losing the 
value of their home, and then they lost their job, and it exacerbated 
the problem. Unemployment rose above 10 percent for the first time in 
28 years. In my State it is over 12 percent today. Even though we are 
now creating jobs in California and in the country, they are not at a 
fast enough pace as more people come into the jobs market. We had a 
situation where almost one out of every five Americans who wanted to 
work was underemployed.
  I don't see how anyone who knows this history--and all you had to do 
was wake up and read the paper or, if you didn't do that, put on the TV 
or, if you didn't do that, look at your Internet or, if you didn't do 
that, listen to the radio. And if you were without all that, you could 
have listened to what we were debating here, and there were probably 
not too many people doing that. So how could we ever for one second 
deny the need for the Dodd bill, which reflects the President's Wall 
Street reform bill, even for a minute? I can't imagine anyone living 
through this crisis could ever doubt the need to do the bill that we, 
thank goodness, are on right now.
  The bill directly addresses the problems that led to the crisis. It 
gives regulators the tools they need to prevent a crisis in the future 
without ever turning to taxpayers.
  I am going to quickly go through the provisions of the Dodd bill. I 
am going to go through six provisions.
  First, the bill ends taxpayer bailouts. The bill guarantees taxpayers 
will never again be forced to bail out Wall Street firms. Failing 
companies will be liquidated. Any losses will be absorbed by companies 
and the financial sector, not taxpayers.
  That is a jobs bill.
  By the way, when I heard my colleagues on the other side say they 
didn't think this is true, I went up to Senator Dodd and I talked to 
the administration. I said I am going to offer an amendment that says 
this in plain English; will you accept it? They did. So we will have 
that amendment accepted.
  If anybody ever says to you this bill is about giving more taxpayer 
funds to bail out Wall Street, you can say: Excuse me, you are looking 
at the wrong bill.
  Second, it puts a cop on the beat for consumers. The bill creates the 
consumer financial protection bureau, which will have the sole job of 
protecting the American consumers from the kind of deceptive and 
abusive financial practices that fueled the crisis. It will also look 
out for credit cards and other things.
  We will finally have disclosure in these dark markets. Remember, I 
talked about these toxic assets--assets made up of slices of mortgages, 
many of which had no value. They were in the dark. Now these dark 
markets are over, derivatives markets will be open, and the shadow 
banking system will be over--over. No more darkness but transparency, 
openness, and the rest that goes with it.
  Here is what the Dodd bill does. It curbs risky behavior on Wall 
Street. It says, essentially, no more gambling. There will be strict 
new capital and borrowing requirements, so you cannot go out and 
superleverage. You have to be able to have some balance in your bank. 
There will be an early warning system to prevent a future crisis. There 
will be a financial stability oversight council to focus on problems 
before they lead to a crisis.
  As a last resort, the regulators can break up a company that is too 
big to fail. Too big to fail is over. If anyone tells you it is not 
over, they have not read the bill, because this bill completely and 
clearly says if a company is too big to fail, the regulators can break 
it up. We will see protection against securities market scams.
  The bill mandates management improvements and increased funding for 
the SEC. A new office in SEC will be created to look at credit rating 
agencies. Remember, I mentioned that, the credit rating agencies were 
just giving AAA ratings to junk. No more. They will have someone 
looking over their shoulders. That is very important.
  I want to put the headlines back up. Clearly, this bill does what we 
need to do. The bill stops taxpayer bailouts, and if ever there was a 
time to agree on one thing, it would be that.
  Again, to eliminate all doubt, I proposed an amendment to Senator 
Dodd, which he is in agreement with and the President's people are in 
agreement with, to make it clear that failing firms cannot be bailed 
out. It is very clear because it says it in this amendment. It cannot 
keep a company alive, on life support, and it cannot stop it from 
failing. When it is liquidated, the cost of that liquidation will be 
paid for by Wall Street firms.
  I am excited about the fact that we are finally moving to this bill. 
By the way, the last sentence in the Boxer amendment is very short on 
this page:

       Taxpayers shall bear no losses from the exercise of any 
     authority under the title.

  So if anyone says to you this bill isn't clear, I have to say they 
are making it up because it is very clear. Senator Dodd would never 
have accepted this amendment if it wasn't in concert with the bill.
  Again, I know that many colleagues have ideas for changing the bill. 
That is why we are here. My Republican friends decided not to make any 
amendments in committee, so this is their opportunity to do so. I look 
forward to seeing their ideas. I say that with sincerity. A lot of 
Republican amendments were included in the health care bill, and that 
is good. We want to see some of their ideas to strengthen this bill 
because, as Senator Dodd has said many times, no Senator

[[Page 6496]]

has a corner on wisdom. We have to work together, and we can get our 
best ideas by working together.
  I am going to work with anyone on either side of the aisle who has 
the goal of protecting the American taxpayers and has the goal of 
protecting the American economy from future crises. I will vote for a 
couple of colleagues' amendments to strengthen this bill. I am looking 
forward to that.
  Let's not oppose this bill on the grounds that to do nothing is 
better, because, clearly, to do nothing will lead us back to this road 
of getting up in the morning and shaking in our boots about what is 
happening with unemployment and with the loss of our pension funds. It 
is extraordinary to go back, just to 2007, not that long ago, when this 
all started. We have to commit ourselves to never having it happen 
again.
  Now is the time for Wall Street reform. I am very pleased at this 
change of heart on the other side. I was ready to spend the evening 
here, and I am happy that I can actually go home to my family tonight. 
As much as I enjoy my colleagues' company, I would prefer to be with my 
family, my grandkids, my husband, and not have to spend the night here. 
But I was prepared to spend the weekend here or whatever it took 
because once in a while an opportunity for reform comes along. It did 
with health care. We are in an era of reform, and we have to keep doing 
it. It is all expressed right here on this chart. We know what will 
happen if we keep this going. Deregulation on steroids didn't work. We 
need sensible regulations, sensible rules of the road.
  We want everyone to prosper, but we don't want to see gambling lead 
to the pain and suffering that is still going on throughout this 
country. Thank you very much.
  I yield the floor.

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