[Congressional Record (Bound Edition), Volume 156 (2010), Part 5]
[Senate]
[Pages 6991-6995]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      FINANCIAL REGULATORY REFORM

  Mr. BROWN of Ohio. Madam President, we all agree our financial system 
should never again be on the brink of total collapse. We all agree we 
must never again allow Americans to fall victim to the unconscionable 
recklessness and unbridled greed we have seen over the last decade. No 
longer should a no-show regulatory attitude rob Americans of their 
jobs, of their homes, of their retirement savings, of their credit 
ratings, and the list goes on and on. We all agree American taxpayers 
should never again have to foot the bill for bailouts to the very firms 
whose cowboy attitudes got us into this mess in the first place.
  So how do we put a stop to the madness that left our economy in a 
shambles? We stop it in its tracks. That means hard decisions. It means 
decisive action. It means doing more than taking action when we 
recognize the symptoms of collapse. It doesn't mean waiting until it is 
too late and too many people suffer. It means eliminating the 
ingredients of collapse.
  Chairman Dodd's bill is strong. It sets the stage for recognizing 
trouble, and it helps use regulatory tools to reverse it.
  Senator Kaufman and I think we owe it to the American people to take 
one more significant step. We need to take action now so trouble never 
has the chance to brew. That means taking on the financial institutions 
that are too big to fail and doing that now and doing that in this 
bill.
  Former FDIC Chair William Isaac said these institutions are ``too big 
to manage and too big to regulate.'' Senator Kaufman and I want to do 
more than monitor banks that must be bailed out if they gamble 
themselves into a corner. We want to put a hard limit on the size of 
these behemoth banks so they don't control so much of our economy that, 
come crisis time, we have to save them; we have to bail them out to 
save the economy. We want to limit their size so they can't back 
taxpayers into a corner, where it is either help them or hurt 
ourselves. We don't want that obsequent choice. We think that should be 
a concern whether it comes through acquisition or organic growth. 
Certainly, risk is the biggest problem, but size is almost as big a 
problem, and together they can spell disaster. Our measure only affects 
the six largest megabanks.
  As this chart shows--and I have cited it often in recent weeks--the 
assets of these six banks, the assets of the largest six banks in the 
United States 15 years ago was 17 percent of gross domestic product. 
The total assets of the six largest banks today are 63 percent of gross 
domestic product. Seventeen percent of gross domestic product 15 years 
ago, six largest banks, 63 percent of gross domestic product today. 
These banks have $9 trillion--that is $9,000 billion--in assets.
  Research shows that a bank's size stops providing benefits to its 
customers once it reaches approximately $100 billion. So we can get all 
the economies of scale in a bank with $100 billion--$100,000 million. 
Those are large banks, $100 billion banks. You can get the economies of 
scale with $100 billion banks. You don't need a $1\1/2\ trillion bank.
  I have heard some argue that smaller banks are actually less stable 
than larger banks. Evidence shows, though, that larger banks actually 
exhibit greater risk due to the higher volatility of their assets and 
their activities. Look what happened in the last 2 years. The simplest, 
most effective way to manage this risk is to spread it out, to have 
several modestly sized institutions instead of a few giant ones. But 
the risk in the financial system is clearly collecting in a few 
gigantic banks.
  This chart shows the industry concentration in top bank holding 
companies. When Gramm-Leach-Bliley passed in 1999, the five biggest 
banks had 38 percent of the assets of the financial industry. Today 
they hold 52 percent. So we can add up all the community

[[Page 6992]]

banks in my State--and there are dozens and dozens of them and they 
serve the communities well--you can add up all the regional banks in my 
State; you can add up KeyBank and Fifth Third and Huntington and 1st 
Mariner--all the regional banks--and when we do that all over the 
country, these five banks still have most of the assets. Five banks 
have 52 percent of the assets.
  I know some people think it is too late--the horses are out of the 
barn--and we can't go back to a time when we had a group of 15 modestly 
sized banks, as opposed to 6 gargantuan banks. We allowed big financial 
firms to merge into giant ones, and that led to a $4 trillion bailout. 
In the last few decades, the banking industry has become so 
concentrated it no longer functions as a competitive market. Since 
1990, the 20 largest financial firms have increased their control of 
banking assets. They once controlled 35 percent. They now control 70 
percent. Some firms are now 30 percent, 40 percent, in some cases, 
larger than they had been before the crisis.
  So what does it mean? We are twiddling our thumbs as Wall Street, 
once again, places our Nation at risk.
  Former Fed Chairman Alan Greenspan said:

       In 1911, we broke up Standard Oil. So what happened? The 
     individual parts became more valuable than the whole. Maybe 
     that's what we need to do.

  This is Alan Greenspan, who clearly has never come down on this side 
on issues such as this.
  President Franklin Roosevelt investigated and imposed structural 
regulations on utilities through the Public Utility Holding Company of 
1935. That worked for the prosperity of business, and it worked for the 
prosperity of the country as a whole.
  In 1984, the court split AT&T into a group of regional Bells. That 
worked for business. That worked for the country as a whole.
  In all these cases, size was detrimental to the marketplace. Now 
these megabanks have grown so large they control the fate of our 
economy.
  The large banks have effectively become huge securities and 
derivatives trading operations grafted on top of commercial banks. 
Right now they are using their trading businesses, and they are 
neglecting their lending businesses. Ask people in Hanover. Ask people 
in Mansfield. Ask people in Toledo or Shelby, OH. Ask small businesses, 
and they will tell you they simply can't get the credit they need for 
manufacturing and other kinds of small businesses.
  These large banks have too often put a virtual freeze on lending to 
small businesses, despite receiving a taxpayer bailout. Three of the 
largest banks slashed their SBA lending by 86 percent from 2008 to 
2009. In Ohio, SBA-backed loans went from 4,200 in 2007 to 2,100--cut 
in half--in 2009.
  I have heard from manufacturers and entrepreneurs, from energy 
startups and mom-and-pop operations, from small business owners to the 
local corner store operator, all part of the middle class who are 
struggling to get the credit they need to hire their workers.
  Our amendment simply says too big to fail is too big.
  We are going to call up the amendment sometime this week. Senator 
Kaufman is one of many cosponsors who played a major role in crafting 
this legislation.
  I yield to Senator Kaufman.
  Mr. KAUFMAN. I thank the Senator. I think Senator Brown has given a 
presentation that is perfect and that explains this. I am just going to 
make a few points. I gave a speech on the floor yesterday, if anybody 
is interested in more detail.
  Let's look at some charts that kind of take what Senator Brown says 
and slices and dices it in a slightly different way.
  This is the average assets relative to gross domestic product of U.S. 
commercial banks. Would anybody like to guess when Glass-Steagall was 
repealed? How about right about here. I don't know if my colleagues 
have seen the charts. One of the reasons I thought there was a housing 
bubble is, if you look at the charts on the housing industry in 
America, the price of housing in this country from 1990 until about 
2003 was just like that and then it went right through the roof. This 
is a very bad sign in anything. The fact that our banks are operating 
this thing is truly scary.
  Let me show my colleagues another chart. This is average assets 
relative to GDP. This is the concentration of the U.S. banking system. 
Does that chart look familiar? Let me tell my colleagues the worst 
thing about this. This does not include what we did during the 
meltdown, when we took Washington Mutual and pushed it into JPMorgan 
Chase, when we took Merrill Lynch and pushed it into Bank of America, 
and when we took Wachovia and pushed it into Wells Fargo. That doesn't 
even include this. We can only imagine where this line would be now. I 
have to get the chart updated. This is incredible. Of course, the red 
line is when we passed Glass-Steagall.
  So the clear indicator is Glass Steagall. In 1929, we had a credit 
meltdown in this country. Our forbears on this very floor said we have 
to do something about it. We have to pass laws, not go back to the 
regulators who didn't serve us well over the last 8 years--no, no. We 
have to pass laws. So we passed Glass-Steagall that not only said you 
can't be a commercial bank and an investment bank under the same roof--
which, when I was in school, we learned was one of the basics for our 
success and why we went 60 years without a bank panic, which we had all 
through the 19th century and right up to 1929.
  We should not have investment banks and commercial banks under the 
same roof. Commercial banks should be there to protect the small 
investor, the small depositor, make sure it is safe, and that is why we 
gave it guaranteed FDIC insurance. We never thought we would have FDIC 
insurance for an organization that had investment banking in it.
  Commercial banking should be a low-risk, basically low-return 
business. That is what we wanted. That is what the vast majority of 
Americans have at their local bank. It should not be included under the 
same roof as an investment banking operation that is high risk, high 
return. We could have had this argument 5 years ago, and I would have 
said: Oh, that is a good argument. Let's talk about it. Let's see what 
happened and how we got to where we are.
  The other sentiment we hear, just to expound on some of the points 
made by my colleague from Ohio: We can't break up the banks. You don't 
understand, Ted. We need these banks to compete internationally.
  Let me get one thing straight. Do my colleagues know what we are 
going to do under our bill if Brown-Kaufman passes? We are going to ask 
Citigroup to go back to what they were in 2003. Was Citigroup competing 
internationally in 2003? I think they were. So we are not saying we are 
going to take them apart. All we are trying to do is get them back to 
what they were.
  Goldman Sachs. The balance sheet of an investment bank such as 
Goldman Sachs will be scaled down from $850 billion to a more 
reasonable level of above $300 billion or around $450 billion. That 
sounds pretty draconian, right? We are asking them to go from $850 
billion down to $450 billion. Would anybody like to guess what Goldman 
Sachs' assets were in 2003? Would you believe $100 billion? We are 
allowing them to grow to 3\1/2\ to 4 times the size they were in 2003.
  One of the people who didn't do real well during this last crisis was 
Alan Greenspan. He is the one who said self-regulation works. He said a 
whole lot of other things, but he said two very important things 
regarding where we are right now. One of them is the quote Senator 
Brown used: Too big to fail is too big. This is Alan Greenspan. This is 
not some populist in bib overalls, with a pitchfork in the middle of 
the streets raising his hands. This is Alan Greenspan.
  I have to read this. You have to believe this. The next time somebody 
tells you we need these banks to compete and they need economies of 
scale, listen to what Alan Greenspan says:

       For years the Federal Reserve had been concerned about the 
     ever larger size of our financial institutions.


[[Page 6993]]


  Alan Greenspan:

       Federal Reserve research has been unable to find economies 
     of scale in banking beyond a modest-sized institution.

  There is a fellow named Andrew Haldane, who is the executive director 
of the Bank of England. Do my colleagues know what he says the size is? 
He says $100 billion. That is what Haldane says. I commend everybody to 
read his report. It is very good. Just realize right now we have banks 
in this country that are $2 trillion and Haldane says $100 billion. 
Greenspan says we can't find economies of scale beyond a modest-sized 
institution.
  Alan Greenspan:

       A decade ago, citing such evidence, I noted that megabanks 
     being formed by growth and consolidation are increasingly 
     complex entities that create the potential for unusually 
     large systemic risks in the national and international 
     economy should they fail.

  That is exactly what Senator Brown and I have been saying and what a 
number of us have been saying about where we are. But this is Alan 
Greenspan:

       Regrettably, we did little to address the problem.

  I just hope 2 years from now--I will not be here--somebody on the 
floor will not be saying: Regrettably, in 2010, we did little to 
address this problem.
  This seems, to me, to be so incredibly complex but at the same time 
so incredibly simple. I just ask my colleagues, every time someone says 
something about the Brown-Kaufman bill, Maria Cantwell and John 
McCain's bill or the bill being offered by Senator Levin and Senator 
Merkley, ask this question when they start laying out the problems: Are 
our banks too big, No. 1; and No. 2, are they too big to fail?
  I thank the Chair.
  Mr. BROWN of Ohio. Madam President, I thank the Senator from 
Delaware.
  It is so clear, first of all, that the Dodd bill is a huge step, a 
good step, a solid bill in reforming Wall Street.
  It is what we ought to do. There will be three or four major chances. 
One of them is the amendment Senator Kaufman and I are working on. 
There will be three or four major votes coming up to strengthen the 
bill. There will be efforts--particularly from my colleagues on the 
other side of the aisle--to weaken the bill. There are clearly many 
people in this institution who want to do the work of Wall Street, and 
Wall Street has always been their benefactor. The big banks are their 
allies. They may do their bidding on the Senate floor. There will be 
efforts to strengthen the bill, such as Merkley-Levin, and some of the 
work we do with derivatives.
  Let me close and put a bit of a human face on this. This is technical 
stuff. When you look at these charts that we put up and what happened 
with the size of these banks--again, I cite this number that astounds 
me every time I think about it: Only 15 years ago, the largest 6 banks 
in the country had assets of 17 percent of GDP. Today, it is 63 percent 
of GDP--some $9 trillion. Those are astounding numbers.
  Let me shift and put a bit of a human face on what this means. I want 
to share two quick letters, one from someone in Columbus, and one in 
Lorain. Joann, from Franklin County, says this:

       As a small family-owned business owner, I'm trying to find 
     help to keep our business open. Our 20 employees and their 
     families count on us to continue operating. They will end up 
     unemployed and looking for work if we can't keep money 
     flowing.

  They cannot get the kind of credit they need from these banks.

       My neighbor had to close her business; she cut prices, 
     selling everything she could. Now she works two part-time 
     jobs. The building her store was in sits empty. Banks didn't 
     help her either.
       The banking industry is responsible for the economic crash. 
     They should be assisting businessowners. Keeping us in 
     business means jobs. Shutting us down is not helping the 
     economy recover.

  Senator Kaufman and I don't want retribution from the banks. We want 
the banks to pull their load and start treating small businesses and 
consumers more fairly. They should be assisting businesses.
  Barbara, from Lorain County, west of Cleveland, says this:

       Please stand up for the working folk of the middle class. 
     As a law-abiding taxpayer, I believe that it is time for 
     fiscal integrity of the U.S. bankers.
       We are holding on to our jobs and homes by a thread. There 
     are also many people in Lorain County out of work and 
     businesses continue to close their doors.
       I'm sure that there is no one single, simple solution, but 
     holding the bankers responsible for what happened in our 
     financial [industry and our country], but it is necessary to 
     help remedy the financial crisis that most of us are in.
       Please support law-abiding people by demanding integrity of 
     the banking industry. We are depending on you.

  There are many people in my State of Ohio, and also in Dover and 
Wilmington, DE, in the banking industry. When institutions get this 
large--when six institutions have this kind of economic power in our 
system, we know that even someone as conservative as Alan Greenspan 
says that is a problem for our economy, risk is a big problem, size is 
a problem. This amendment will affect only the six largest banks in the 
country. They will operate better and more efficiently, and probably 
more profitably, if they are a little bit smaller. This addresses that 
issue.
  Mr. KAUFMAN. Madam President, I have a comment. I see common cause 
here with the other side of the aisle. When I talk to colleagues on the 
other side of the aisle, it is not just the small businesses, it is the 
small banks that get hurt by these massive banks. I am a market guy. I 
am a free market guy. It is one of the things that made this country 
great. There are two things, democracy and our capital markets. We 
almost lost our capital markets in 2008. We cannot afford to risk that 
again. I look to the markets to tell me. Do people think these six 
banks are too big to fail? What does the market say? Not me or some 
industry. See what the market says about too big to fail.
  Dean Baker and Travis McArthur, of the Center for Economic and Policy 
Research, compared the borrowing costs of the 18 largest banks, all of 
which have over $100 billion in assets, to smaller banks, which make up 
the vast majority of banks in America. They estimated that the effect 
of government subsidy, because of the implicit guarantee that they are 
too big to fail--and this is what the market says, not me or Senator 
Brown--guess what. It results in a 70-to 80-basis point borrowing 
advantage for smaller banks, resulting in lower borrowing costs, 
equaling approximately $34 billion over smaller banks. Right now these 
big banks, because the market says they are too big to fail, don't 
worry, ABC down on the corner, they give them a rate. But when it comes 
to the 6 big banks, they give them 70 to 80 basis points less because 
they know they can fail.
  The ACTING PRESIDENT pro tempore. The 20 minutes of the two Senators 
has expired.
  Mr. KAUFMAN. I thank the Chair.
  Mr. BROWN of Ohio. We yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Illinois is 
recognized.
  Mr. DURBIN. Madam President, I thank my colleagues for raising this 
important issue pending on the floor of the Senate, this major piece of 
legislation, the Financial Stability Act. Of all the many amendments 
that will be offered, this is clearly a game changer. I am supportive 
of this amendment even though I know some of my friends in the banking 
industry won't be happy with it. They are talking about dealing with 
the concentration of wealth and of economic power to a level that can 
literally bring the economy down. That is what we went through, leading 
into this recession. That is what led to massive taxpayer bailout and 
that is what the Brown-Kaufman amendment addresses foursquare. I 
commend them for their leadership on the amendment.


                              Immigration

  I want to speak to an issue that is timely in light of recent news 
events. Ninety-nine years ago, a boat pulled into the harbor in 
Baltimore, MD, which came over as a passenger ship from Germany. Down 
the gangplank walked three individuals--my grandmother, my uncle, my 
aunt, and my mother, who was 2 years old, in the

[[Page 6994]]

arms of my grandmother. They had come from Lithuania to the United 
States. When they arrived, none of them spoke English. My grandmother 
carried a slip of paper with her, which had the words ``East St. Louis, 
Illinois'' written on them, because she knew that is where her husband 
was and that was her destination. I cannot imagine how they navigated 
themselves onto a train to East St. Louis to meet my grandfather, but 
they did it. I am sure there were people standing by that gangplank in 
Baltimore watching these foreigners coming in, saying: Oh, my God, not 
more of those people.
  It has been a natural reaction in this Nation of immigrants that we 
look at newcomers as perhaps new problems. Those who are here and lucky 
enough to be in America have historically been critical of new 
immigration. That is nothing new in American history.
  But what has happened in Arizona in the last several weeks has taken 
this to a different level. The passage of the law in Arizona, in my 
mind, is not only unjust but unconstitutional. The Arizona law requires 
police officers to check the immigration status of any individual if 
they have ``reasonable suspicion'' that he or she is an undocumented 
immigrant. How will police determine whether there is reasonable 
suspicion that someone is undocumented? The law doesn't tell them. Law 
enforcement experts say it is likely that they are going to look for 
those who appear to be Hispanic.
  Under this law, any undocumented immigrant can be arrested and 
charged with a State crime solely on the basis of their immigration 
status, and it is a crime for a legal immigrant to fail to carry their 
documents at all times. One out of three people legally living in 
Arizona are Hispanic. We understand the anxiety they have over a law 
that would at least lead to the suspicion that they may be illegal and 
be challenged as they go about their daily business in a perfectly 
legal way.
  Here is what the Arizona Daily Star newspaper said about the new law:

       The measure would turn legal residents into police targets, 
     as well as those who are here illegally. It would foment 
     racial profiling of Hispanics.

  Phil Gordon, mayor of Phoenix, the largest city in the State, said 
this of the new Arizona law, signed by Governor Brewer:

       It unconstitutionally co-opts our police force to enforce 
     immigration laws that are the rightful jurisdiction of the 
     Federal Government.

  Here is the reality: There are 450,000 undocumented immigrants in 
Arizona. Law enforcement clearly doesn't have the time to stop, 
prosecute, or remove anything near that number. Making undocumented 
immigrants into criminals will simply drive many of them farther into 
the shadows. When we look at this law, I also like to look at it from 
the viewpoint of those in law enforcement in Arizona. I have read their 
quotes. They feel this is an unnecessary, at least an indefensible, 
burden being placed on them. I have read that one chief of police in a 
small town in Arizona said: I am not going to be going out and stopping 
people on the streets and seeing if they are gathering on the street 
corner. My job is to fight crime. I thought that is why they hired me. 
If I want to keep this community safe, I cannot spend a lot of time 
checking the papers of people walking down the street.
  In 2005, there was a law passed in the House of Representatives known 
as the Sensenbrenner amendment, which was a step in the wrong direction 
as well. It made it a felony for anybody to provide services or 
assistance to undocumented immigrants. I have some friends in Chicago 
who run a home for battered women. It is in the Pilsen neighborhood, 
which is a Hispanic neighborhood. They literally ran the risk of being 
charged with a Federal felony by allowing somebody to come through 
their door, a woman who had been beaten by her husband, perhaps 
carrying a child, offering them any help or protection made them 
unfortunately subject to being arrested under the Sensenbrenner 
amendment. I offered an amendment on the floor of the Senate to remove 
this and even in a Republican-controlled Senate, I was successful. My 
colleagues believed, as I did, that this went too far.
  I believe the Arizona law goes too far. This is not the first time 
that we have gone too far and have moved back to a more moderate 
position. In 1982, there was a Texas law passed that said elementary 
schools could refuse entry to undocumented children.
  In the landmark Supreme Court decision of Plyler v. Doe, the Supreme 
Court struck down that Texas law. At the time, Chief Justice John 
Roberts was a lawyer in the Justice Department, and he criticized the 
Justice Department for not supporting the Texas law.
  It has been 23 years since Plyler v. Doe was decided. As a result, 
millions of children have received an education and become citizens. 
They are doctors, soldiers, policemen, and others who contribute to our 
society every day. Imagine what would have happened if that Texas law 
had been allowed to stand and was the law of the land. I asked John 
Roberts, during his confirmation hearing to the Supreme Court, if that 
law that was struck down was settled law in America. He would not 
answer. It leaves some question on what would happen if this law comes 
before his Court.
  Arizona faces serious law enforcement challenges. There is 
intolerable violence on Arizona's border with Mexico because of drug 
cartels. The reality is, it is the American appetite for narcotics that 
is fueling the drug war in Mexico. It is American money and guns 
flowing south of the border that has created the situation, and we need 
to be more honest about it as well. But it is a fact, and it is 
dangerous. I can understand why the people of Arizona would feel some 
trepidation and real concern about that.
  Last month, Robert Krentz, an Arizona rancher, was murdered near the 
border with Mexico. To say violence is not part of the scene in Arizona 
is unrealistic and unfair.
  In March of 2009, I held a hearing in the Senate Judiciary Committee 
on Mexican drug cartels. I invited Terry Goddard, Arizona's attorney 
general, to testify about the situation in Arizona. He told me this:

       Sophisticated, violent, highly organized criminals . . . 
     are smuggling drugs, human beings, guns, and money across the 
     border and are using unimaginable violence to protect and 
     grow the criminal enterprise. Law enforcement officers in the 
     State of Arizona have been on the front lines of the efforts 
     to combat one of the most serious organized crime threats of 
     the 21st century.

  If the Arizona law is wrong, what is the right answer? I think, in 
the framework of the bill that we brought before Members of the Senate, 
considered last week, there are three elements to it. First, we have to 
do everything in our power to police our border, make sure we have the 
right technology and people, and that we are doing everything to stop 
the flow of illegal immigration into the United States. Those who say 
``seal the border first'' are setting an impossible standard. Imagine, 
if we set a standard that said seal Interstate 95 so that no vehicle 
passing over that interstate will be carrying illegal narcotics or 
guns. Well, there are tens of thousands of vehicles and people passing 
legally between the U.S. and Mexico every day, and amidst this legal 
flow is an illegal flow. We need to find a way to reduce that.
  The second part of that bill, the framework, would say that the lure 
of America is the lure of jobs. Let us establish a Social Security card 
with biometric identification so that it clearly shows whether a person 
is legal. I think that is a step in the right direction.
  Third is to deal not with amnesty but setting up a process where they 
would have to work their way and prove their way into legal status. It 
will never be automatic. It would not be unconditional.
  The trouble we have is that many of those who say the Federal laws 
have broken down and we do not have a good immigration law are 
unwilling to stand up and join us in writing a new law.
  I invite all of my friends on the other side of the aisle to join 
with the Democrats in writing a good immigration law. Doing nothing is 
not an option. It invites more laws such as those in Arizona which, 
unfortunately, are going to

[[Page 6995]]

have results which I do not think are consistent with our values in 
this country.
  I urge my colleagues to join me in supporting the framework. I hope 
they will also consider cosponsoring the DREAM Act, a bill which I 
introduced many years ago--and Senator Dick Lugar is my cosponsor--
which says those brought to America--undocumented, who finish school, 
no criminal record, who are willing to finish 2 years of college and 
serve in our military--will have a chance to become legal in the United 
States of America. It is a step in the right direction. It was not a 
step 99 years ago when my 2-year-old mother came to this country. Thank 
goodness she did. Thank goodness I am here today to tell the story.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Tennessee.
  Mr. ALEXANDER. Madam President, are we in morning business?
  The ACTING PRESIDENT pro tempore. Yes.

                          ____________________