[Congressional Record (Bound Edition), Volume 156 (2010), Part 5]
[Senate]
[Pages 6999-7000]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      FINANCIAL REGULATORY REFORM

  Mr. CORKER. Mr. President, before my time to speak today, there were 
some comments made by the junior Senator from Delaware, but before 
getting to that, I did want to mention that I hope very soon the 
administration will work closely--and I am sure they will because I 
know they are very understanding of what has happened in Tennessee--
with those who are dealing with the obvious disaster underway in our 
State. We have people who have lost their lives, people who have lost 
their homes, and people who have lost their life's work. I appreciate 
so much the work our Governor has underway, and the many mayors, 
especially the mayor of Nashville but also mayors across our State. I 
appreciate the response all of them have given in coming to the aid of 
our citizens there. Again, I know this administration will begin to 
work very closely with them in that same regard, and I thank them in 
advance.
  But I came to speak specifically today about the comments of my 
friend from Delaware regarding the fact that because large institutions 
in this country have a funding advantage over some of the smaller 
institutions, we ought to break them up.
  I certainly have concerns about some of the situations we get 
ourselves into when a large institution gets into trouble. I don't 
think that having 100 Senators here on the floor arbitrarily deciding 
what size a financial institution ought to be or when it should be 
broken up is necessarily the right approach. What I do think is a 
better approach--and I think this bill attempts to do this but doesn't 
quite get it right--is to ensure that if an institution fails, it 
actually fails; the shareholders of the company know they are going to 
be out of their entire investment; the creditors know what is going to 
happen. The bill attempts to do that, and my sense is that Senator 
Shelby and Senator Dodd are working together--and I think may actually 
have come to an agreement--on a way to close some of the loopholes that 
exist in this bill.
  What I would suggest to my friend from Delaware is just to support 
those efforts because I think if that occurs--and my sense is it will, 
based on the conversations I have had--what will happen very quickly is 
the credit rating agencies in this country--and they have already 
indicated this to be the case, not that they have been stellar, 
certainly in these last couple of years or the last 4 years--many of 
them are beginning to look at these large institutions in a different 
way because they believe we may pass legislation here on the floor that 
says that if they fail, they actually go out of business. That creates 
a situation where that moral hazard doesn't exist; where people, in 
essence, loan money or give credit or invest in these larger 
institutions at rates that are less than what might be the case for 
smaller institutions.
  The best way we can sort of level the playing field is to ensure that 
if a big company fails, it fails. Again, I think we are on the verge of 
getting that solved. There will be many people on my side of the 
aisle--and by the way, I respect this position very much--who think the 
only way to do that is through bankruptcy, and they are talking about 
either an 11(f) section of the code or a section 14 of the Bankruptcy 
Code, where highly complex financial holding companies would go into 
bankruptcy if they fail. By the way, I think we should do everything we 
can to strengthen that.
  At the same time, I think--certainly in the interim, anyway--we need 
a resolution mechanism so that we know that if a large company fails, 
we have a mechanism to liquidate it. It may be that you need both 
tools. Maybe you let the resolution provision sunset after the 
bankruptcy laws are completed and fixed in such a way that it works for 
a large, highly complex bank holding company.
  But, again, what I would say to my friend, the Senator from Delaware, 
is--and I certainly love his passion on this issue--the best way we can 
get that level playing field is to ensure these large institutions fail 
when they fail, and that will change that funding level he is talking 
about. As a matter of fact, we are given regulators in this bill, if it 
passes in its form right now.
  I sure hope we make lots of changes because I cannot support the bill 
as it is today. But the bill actually addresses capital levels. As 
institutions become larger and more risky, additional capital 
requirements are required, which automatically drives up the cost of 
funding. There is a section Senator Warner and I worked on called 
contingent capital, where the regulators can actually cause these 
institutions to have contingent capital, where if a creditor has loaned 
money to an institution and this institution gets in trouble, that 
turns to equity, so it is a buffer. Again, I think the cost of that is 
going to be more expensive than most credit that would be given to an 
institution such as this.
  So, again, I think the best way to deal with organizations that are 
large in this country is to deal with the many tools that exist in this 
bill that need to be improved, no doubt, and hopefully, over the course 
of the next 2 weeks, will be improved. But that is a much better 
solution than just arbitrarily having 100 Senators saying: Well, if you 
are X part of our GDP, you have to be taken down to size.
  I wish to reiterate, as I did last week on the floor, that our 
country has by far the largest gross domestic product in the world. We 
dwarf everybody. Yet we have no banks in the top 5 in the world; we 
have 2 banks in the top 15. So I am not sure that as we work on 
globalization and as we hope to ship goods and deal with people around 
the world, that our best solution is to handicap the ability of our 
companies that work in that way and create great jobs in this country 
shipping goods across the world. I am not sure it is in our best 
interest to look at arbitrarily deciding what size a financial holding 
company should be.
  Mr. President, I appreciate being able to speak to this issue. I do 
hope over the course of the next couple of weeks that we can make 
significant changes in the consumer title. I am hearing from people all 
across the State of Tennessee--ordinary citizens who wake up daily and 
who do things that are outside the financial sphere, at least they 
believe they are--who are very concerned about the reach of our 
consumer protection agency as it is outlined in this bill; the fact 
that it is unfettered, that there is no board in any way to control it, 
the fact that there is no Federal preemption, the fact that there will 
be 50 State attorneys general now dealing with our national banks, the 
fact that this consumer entity has the ability to be involved in 
underwriting loans. You can imagine some of the problems that have 
occurred through CRA recently. Think about this: It would be CRA on 
steroids.
  So those are some issues I do think we need to address in this bill 
and I hope we will address in this bill. And I hope we will realize 
that this country

[[Page 7000]]

has an overexpansive government that reaches out unnecessarily into 
their lives.
  In closing, again, I applaud the efforts the Senator from Connecticut 
and the Senator from Alabama have underway to fix this resolution title 
in such a way that we all know that if a firm fails, it is going to go 
out of business. I think that will adequately address the concerns the 
junior Senator from Delaware brought up earlier about these big firms, 
in some cases, having funding advantages. I think once the public 
understands these firms can go out of business, just like any other 
entity, that will change. I think we are already seeing that through 
early indications with credit rating agencies and others that are 
looking at these entities.
  Mr. President, I yield the floor.

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