[Congressional Record (Bound Edition), Volume 156 (2010), Part 5]
[House]
[Pages 7082-7086]
[From the U.S. Government Publishing Office, www.gpo.gov]




            THE IMPACT OF THE GREAT 2008 FINANCIAL COLLAPSE

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2009, the gentleman from California (Mr. Garamendi) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. GARAMENDI. Madam Speaker, tonight, it is really important that 
America comes to understand how the great collapse of 2008 occurred and 
what its impact has been. I think they have a pretty good idea as to 
what the impact is. We see it back home. We see it from our 
constituents and from our own families as they face layoffs and as they 
face losing their homes and their mortgages that they are no longer 
able to afford.
  How did all of this happen?
  We want to discuss this tonight, and we want to discuss the effect 
that it is having on our constituents. At the same time, we want to 
talk about what we are going to do about it. How are we going to set 
straight the financial institutions of America?
  We know that the collapse was largely caused by some extraordinary 
shenanigans on Wall Street. Shenanigans never should have been allowed 
to be played, but they were due to a lack of regulation on the part of 
the SEC and of others and due to an attitude that occurred during the 
2000-2008 period of ``anything goes.'' The free market would somehow 
regulate itself. Well, it didn't. It actually put this Nation and the 
entire world on the edge of total collapse.
  Joining me tonight are my colleagues from California and from Ohio. I 
would like to start with Congresswoman Speier. I was going to introduce 
Congresswoman Speier as the senate chairman of the California 
legislature's committee on banking and financial matters where she has 
gained extraordinary knowledge about the banking industry. She is going 
to share with us tonight her new position on the House Financial 
Services Committee.
  Congresswoman Speier.
  Ms. SPEIER. Thank you to my very good friend and colleague from 
California (Mr. Garamendi).
  You know, as you were talking about the shenanigans, what we heard 
last week from the Senate Permanent Subcommittee on Investigations was 
deeply troubling to all of us, and the chairman, Senator Levin, did an 
outstanding job in focusing in on what was really going on at Goldman 
Sachs. So we started last week here on our House floor looking at 
Goldman Sachs' principles that they have espoused and that are on their 
Web site. We started ticking off what some of their principles were and 
then what some of their emails from some of their employees suggested 
they were really up to.
  Tonight, I thought that we would just focus on one principle, at 
least for my part. One of their principles is: We stress creativity and 
imagination in everything we do. This is the top one up here.
  While recognizing that the old ways may still be the best way, we 
constantly strive to find a better solution to a client's problems. We 
pride ourselves on having pioneered many of the practices and 
techniques that have become standard in the industry.
  Now, an email from the vice president of Goldman Sachs, Fabrice 
Tourre, said: Standing in the middle of all of these complex, highly 
leveraged exotic trades he created without necessarily understanding 
all of the implications of those monstrosities, it's like a little 
Frankenstein turning against his own inventor.
  Mr. Tourre called his Frankenstein creation a product of pure 
intellectual masturbation--the type of thing which you invent telling 
yourself, Well, what if we created a thing which had no purpose, which 
is absolutely conceptual and highly theoretical and which nobody knows 
how to price?
  Mr. GARAMENDI. Is that the creativity that Goldman Sachs so prided 
itself on, creating something that was unpriceable, that nobody could 
figure out what it was and, therefore, it could not price it? But what 
did they do with this Frankenstein that was created?
  Ms. SPEIER. Well, this is what is kind of interesting about it. These 
are some of the Frankensteins that they were creating.
  Here is a tower, as they refer to it--the Soundview Home Loan Trust. 
If you look at the bottom there, at that little yellow tranche as they 
refer to it, there was, you know, some pretty bad stuff. These were 
mortgages that were poorly rated.
  Mr. GARAMENDI. So, this was the packaging of the mortgages that were

[[Page 7083]]

being sold to people who couldn't afford to pay their mortgages?
  Ms. SPEIER. These were the mortgages that were then packaged and then 
sold to investors because, of course, they were grade A, and they would 
make them a lot of money. What happened here is they took this one 
tranche, and then they brought it over here. Now they are B grade.
  So how do you take something that is a B grade and make it investment 
quality?
  Mr. GARAMENDI. By lying? By defrauding somebody?
  Ms. SPEIER. By being creative.
  This is what Goldman Sachs did, and it was really well-described in a 
book by Michael Lewis, called ``The Big Short,'' in which he writes: In 
the process, Goldman Sachs created a security so opaque and complex 
that it would remain forever misunderstood by investors and rating 
agencies--the synthetic subprime mortgage bond-backed CDOs, or 
collateralized debt obligations.
  He goes on to write: Triple B-rated bonds were harder to sell than 
triple A--no surprise--but there were huge sums of money to be made if 
you could somehow get them rerated as triple A, thereby lowering their 
perceived risk, however dishonestly or artificially.
  So what did they do?
  Goldman Sachs then went to the rating agency and said, Now, how is it 
that you rate these particular tranches? They found out. It was really 
a rating that went on by just looking at FICO scores. So the mortgages 
were not looked at based on whether they were no-doc loans or whether 
there was adequate income. They were rated based on a homeowner's 
mortgage FICO score.

                              {time}  2000

  So if you could somehow bump up the FICO score on these mortgages, 
you could turn a BBB into a AAA. And that's what they did. So then they 
went out and they sold the Abacus one that we heard about last week 
where John Paulson said he wanted to short all of them; so he put 
together the worst of the worst, and then Goldman made $15 million for 
actually servicing that particular instrument. Then Goldman went out 
and sold garbage to an unsuspecting American public. Oh, but they were 
sophisticated buyers, so therefore they knew what they were getting 
into. And that's the creativity of Goldman Sachs.
  Mr. GARAMENDI. So what Goldman Sachs was doing was essentially a very 
dishonest, disreputable, and quite possibly fraudulent scheme to rip 
off some investors somewhere. They may have been sophisticated, they 
may not have. But they were told that this was not a B-rated product 
but rather an A-rated product because Standard and Poor's, perhaps 
playing a game, and part of the game with Goldman, had reevaluated that 
particular tranche, that package of mortgages, and said now they are an 
A because we've taken a look at the FICO score of some of the 
underlying mortgage people who had taken out the loan.
  So from the whole thing, where is the honesty in the business? Where 
is the element of good faith to the customer? Was Paulson the customer 
on one side of the deal, or was it the investor on the other side of 
the deal? And where is the good faith obligation that Goldman surely 
must have had?
  Ms. SPEIER. And you know who bought a lot of Abacus, who was on the 
other side of the trade with Paulson who shorted them, so who was 
buying Abacus? You won't be surprised to hear AIG, will you?
  Mr. GARAMENDI. AIG. Now, they received almost $200 billion of 
taxpayer money?
  Ms. SPEIER. One hundred and eighty billion dollars, yes.
  Mr. GARAMENDI. Now, when AIG got that money from the taxpayers in the 
TARP bailout, the Wall Street bailout, what did they do with that 
money? Did they give it to the homeowner that was going to lose their 
home, or did they give it to Goldman?
  Ms. SPEIER. Well, interestingly enough, Goldman had purchased credit 
default swaps from AIG, and, of course, they were repaid in full by the 
taxpayers of this country, $12 billion worth, the highest recipient of 
money from those CDS's.
  Mr. GARAMENDI. I think that book is misnamed, ``The Great Short.'' I 
think probably ``The Great Fraud'' would be a better name for the whole 
thing.
  Ms. SPEIER. I just want to show you one last chart.
  So this is the creativity of Goldman Sachs, creating these products, 
knowing they were bad, selling them off. And many of them were what are 
called synthetic CDOs. So they didn't actually have the mortgages on 
them. They were like a side bet on that tower we had seen in that 
earlier chart. But look at what happened to all of them. They were all, 
at one point or another, a percent of the tower that was, in fact, 
AAA--71 percent, 77 percent, 72 percent, 70 percent, 80 percent. But 
look what happened to them in the end. They all turned to junk. So they 
were rated improperly, so you can ding the rating agencies. They were 
manipulated by Goldman Sachs. And this is the kind of creativity on 
Wall Street that makes us proud.
  Mr. GARAMENDI. Well, there certainly ought to be a law. And we're 
going to spend a few moments talking about the law. But first I would 
like to turn to our colleague from the great State of Ohio.
  Please.
  Ms. KILROY. Thank you very much for yielding.
  I am pleased to join my colleagues on the floor this evening. And, of 
course, I work with Congresswoman Speier on the Financial Services 
Committee. And she very aptly talked about what was going on at Goldman 
and the effect that it has had on our economy. But this is not a case 
of just one bad company. We, unfortunately, had a culture all across 
Wall Street that allowed things like this to happen. And recently I 
asked Chairman Frank if we could take a look at some of the practices 
of Lehman Brothers. And we did. We had a hearing on Lehman Brothers. We 
both participated in that hearing. Because Lehman Brothers gambled with 
the hard-earned money, the pension funds of countless Americans. 
Certainly people from Ohio, people from California's pensions, people 
from Colorado's pensions had been invested in Lehman products, and 
Lehman Brothers did not tell those investors or other investors that 
they were so over-leveraged that their financial picture was pretty 
bleak. Instead, they tried to disguise what was really going on at 
Lehman by this tricky accounting practice where they moved some of the 
problems off the balance sheet at the time when their quarterly report 
was due.
  If you look at the quarterly report, you would not get the real story 
from Lehman because of this practice called Repo 105. They did this 
very deliberately. And they had become, like Goldman, very leveraged 
into the subprime mortgage market, the Alt-A mortgage market, and even 
came up with this product called an Alt-B. And Lehman Brothers, which 
is an investment house, did not have the same level of regulation that, 
say, a community bank in one of our localities would have if they were 
engaging in mortgage practices. Nobody was watching them. The SEC 
wasn't watching enough, and investors and advisors who maybe would be 
sophisticated investors who could look at a balance sheet, they weren't 
getting the right picture either because of this on- and off-balance 
sheet practice of disguising the true financial picture. When Lehman 
did this, when they gambled in the subprime market, when they 
increased, bought more, bought more, bought more to try to make up for 
the losses and tried to hide what was really going on, they hurt not 
just the sophisticated investor; they hurt hardworking Americans.
  I asked for some public records. One of our pension funds told us 
that they took an actual loss of over $100 million as a result of this 
between December of 2007 and September of 2008. Over $100 million. 
That's just one. I'm getting information from the other public pension 
funds in Ohio. And this isn't right that they are allowed to gamble and 
not listen to the alarms that were sounded in their own company by the 
risk managers or the fixed asset manager. Instead, those people who 
were

[[Page 7084]]

trying to tell the truth were forced out. And it's that same story: 
Everything's just fine, don't look over here at what's on the off-
balance sheet accounting tricks and give a different picture to the 
world.
  We need to hold the Lehman Brothers and the Goldmans to account, and 
it is time to really talk about real financial reform, real Wall Street 
reform so that they are not allowed to hurt hardworking Americans and 
put their life savings in jeopardy again.
  Mr. GARAMENDI. I know that the two of you both on the Financial 
Services Committee spent most of last year, 2009, working on a major 
reform that actually passed the House in December. Now, I had the good 
fortune of being elected in November, arriving here just in time to 
vote for the health care bill and to take some credit by voting for the 
reform that the two of you and the other members of the committee 
brought to the House floor. It was a very, very significant reform and 
dealt with many of the underlying issues that both of you have 
discussed.
  Let's spend just a few moments talking about some of the critical 
elements of that reform bill. As I recall, there was a Consumer 
Protection Agency in the reform bill, and there were also some 
definitions about the kinds of things that the banks could engage in. 
And in most recent days, we've seen the Senate wrestling with this 
issue. We saw the Republicans trying to stop the Senate from enacting a 
reform bill by Senator Dodd. Well, they tried for a few days, for a 
couple of weeks, and ultimately the American public following the 
Goldman Sachs hearing in the Senate said enough, and the Republican 
effort to stop the bill collapsed, and now that's moving along. So 
we're in the final stages, I believe, of passing a very significant 
reform of Wall Street so that we can focus on Main Street rather than 
on the excesses of Wall Street, bringing the money back to Main Street, 
to local banks making loans, and Wall Street getting its comeuppance.
  So would you share with us some of your thoughts about the reforms.
  Ms. SPEIER. The interesting thing is the Consumer Financial 
Protection Agency, which now on the Senate side is being billed as a 
bureau within the Fed, was really the brainchild of Professor Elizabeth 
Warren from Harvard Law School. And she likened it to the Consumer 
Product Safety Commission, which we have. I mean you buy a toaster. 
It's warranted to operate, not to electrocute you. And yet we have 
nothing of the same nature to protect us as consumers from fraudulent 
techniques that are being used by credit card companies, by mortgage 
brokers.
  This one chart that showed this CDO, this was $38 million. It was 
actually sold and resold 30 times, 30 times, and created losses of over 
$280 million.
  Now, derivatives haven't been regulated in this country because 
Congress passed a law in 2000 prohibiting Congress from regulating 
derivatives. It was part of the financial services industry wish list, 
and none of us were there at the time.
  Mr. GARAMENDI. The three of us will not take credit for that bill.
  Ms. SPEIER. No, we won't.
  Mr. GARAMENDI. We were not in Congress when they passed that terrible 
piece of legislation.
  Ms. SPEIER. But imagine to allow these kinds of complex 
instrumentalities to be in the marketplace and not be regulated. That's 
what will be regulated as we move forward with financial reform. There 
will be a protection agency for consumers that will help us understand, 
hopefully--as I understand it, a credit card statement form contract 
was 1 page and 700 words in 1985. Today it's something like 30 pages. 
The Consumer Financial Protection Bureau will provide greater 
assistance to Main Street.
  Mr. GARAMENDI. Well----
  Ms. KILROY. I think it's really important when you take a look at 
what went on in Wall Street after Bear Stearns collapsed. The SEC and 
the New York Fed went into these major Wall Street investment houses 
and were there trying to look things over but either didn't have the 
statutory authority or the expertise to really take a look at these 
mortgage instruments or really take the kind of action that would have 
protected consumers, and even not waited until you got to a situation 
with Bear Stearns but had gone in there much earlier and looked at it 
from the eyes of the consumer. Not how it's doing for Wall Street 
traders but what is its impact on consumers, the subprime mortgage 
solicitations and all the things that went on around this. It's so 
important, I think, that we do have a Consumer Protection Agency as 
part of Wall Street reform.
  Mr. GARAMENDI. And part of that Consumer Protection Agency focuses 
directly on the mortgage market out there and deals with those mortgage 
companies that were selling subprime mortgage opportunities to people 
that had really no ability to pay it back. So those people may have 
invested whatever money they had in a home, and when it came time for 
the resetting of the interest rates, they couldn't afford it. They lost 
their investment. They lost their home. They may have also lost their 
job because of the collapse of the mortgage industry and the housing 
industry, and so 8 million Americans were out of work. And as both of 
you have very, very well described, the situation in which those 
Americans that may still have their job may very well have lost a good 
portion of their pension either directly through Lehman Brothers' 
collapse or through the crash of the stock market.

                              {time}  2015

  The combination wiped out 401(k)s. The word around was they no longer 
were 401(k)s, they had become 201(k)s.
  So we really need to have that consumer protection agency in place to 
monitor Wall Street, to monitor the mortgage lending markets out there, 
to make sure those products are appropriate for individuals. Without 
it, we are going to go right back into the same kind of problem that 
nearly took down this country's economy and the world economy.
  Ms. Speier, it looks as though you want to add another element to 
this discussion about what the law should be.
  Ms. SPEIER. The interesting element of the subprime market was that 
those who were selling the product, the originators of the loans, 
weren't holding on to any of the instrument. They had no skin in the 
game. It was sold off to Wall Street, where they put them in these 
tranches and then sold them off again and again.
  One of the things that is required in this new bill is that you will 
have to have some skin in the game, that you will have to have 
reserves, that you cannot leverage, like we have seen happen over the 
last couple of years.
  But the interesting thing about the subprime market that just came to 
light, the industry also realized these people weren't equipped. If you 
were a $14,000 a year gardener in East L.A., you couldn't afford a 
$700,000 home. But since there was no documentation, since it was going 
to be sold, and after the teaser rate was no longer available to you, 
you were going to come back and refinance that loan again, so the fees 
to the originator, to the bank, would be generated again. So there was 
this huge churning that was going on in the industry as well.
  Mr. GARAMENDI. So ultimately we wound up with a situation in which 
the financial industry had set up a scheme to sell mortgages to people 
who couldn't possibly pay those mortgages over time. They were often 
sold with teaser rates, low interest rates for a year or two, and then 
it reset to a much higher rate so the payments would be impossible to 
make at that point.
  Then they took those products, those individual mortgages, put them 
all together and repackaged them into this magnificent tower of----
  Ms. SPEIER. Tower of shame.
  Mr. GARAMENDI. We have to find a good adjective, but the tower of 
shame. Then they took individual pieces of those products, took them 
out and repackaged them----
  Ms. SPEIER. As a side bet. As a side bet. So they stayed in this 
tower, but they took them out in a manner that allowed you to just bet 
for and against them, and as long as there was someone on the sell side 
and someone on the buy side, it was fine with Wall Street.

[[Page 7085]]


  Mr. GARAMENDI. So on the buy side, they would be giving information 
that was inaccurate, that Standard & Poor's, the rating industries of 
the world would go out and use some, I don't know, gimmick to re-rate 
this tranche, this piece of that tower, re-rate it as though it was 
more valuable and more secure than it really was. So we really had a 
cabal here, and that is why the regulation of Wall Street is so 
critically important to us as individuals, in our homes, in our 
ordinary life, in our ability to keep a job.
  It is also important for the financial system of America. Banking is 
crucial to the economy, and when you get a banking industry that is 
playing financial games rather than simply making loans, we are going 
to find ourselves in trouble. The creativity of Goldman Sachs, we now 
know from the hearings. We also know that other major banks and 
mortgage lending companies were playing similar games.
  So that is what we are trying to do as Democrats, is to rein in Wall 
Street, to set new rules in place that will force the banks to be 
banks; not to play risky financial games, but rather to do the everyday 
lending, taking deposits, making a loan that is sound, and making those 
loans on Wall Street.
  What is happening in Ohio? What do you see from your constituents in 
Ohio about Main Street? Is Main Street a place where the banks are 
making loans?
  Ms. KILROY. I hear from so many of my constituents, people in 
business, people who are developers, that the ability to obtain capital 
and then to expand their business, to hire more people, just isn't 
there. They are not being able to get the loans. It is really important 
to get that moving again so we can get our Main Street economy, our 
real economy, going again.
  Too much of the money is somewhere else in the pipeline. We need to 
get it out there to Main Street. I know several of us are working on a 
number of bills and issues to help expand Small Business Administration 
loans and others, but we need to get the banks in a position where they 
are doing the kind of lending that helps small business and mortgages 
that make sense, because there is the right kind of documentation, down 
payment, and other finances are in order.
  Mr. GARAMENDI. The statistics are really frightening in what has 
happened with Wall Street. If you take a look, what is really happening 
is Wall Street is not making loans, and many of the small banks, the 
community banks, don't have the capital to make the loans, so the 
capital is being tied up in these huge banks. So what we are really 
looking to do as part of this reform is to push the capital down to the 
local banks, down to the Main Street banks, so that they can make loans 
to people.
  However, if you take a look at the large banks, the leading United 
States banks in 2009, they reduced the number of loans that they made 
by 7.4 percent. It was the steepest drop in lending by the large banks 
since 1942, and that was the beginning of World War II.
  The 22 firms that received the most bailout money, this is the Wall 
Street bailout money, cut small business loans by $12 billion in 2009. 
Meanwhile, and this was the point you were making a moment ago, the top 
38 largest financial firms gave out $145 billion in record pay to their 
employees in 2009. That was an 18 percent increase from 2008, which was 
also a very high year.
  So what is happening here is that Wall Street's philosophy seems to 
be all about greed for them and poverty for the rest of the Nation. 
That has got to end. What we need is this reform of Wall Street. We 
need to put in place very clear rules: No more games with derivatives. 
If you are a banker, you are a banker. You are not a loan shark on the 
street selling a bad loan. You are a banker. You are to take deposits. 
You are to make loans that are sound and secure, and make those loans 
on Main Street, not to another Wall Street shark.
  So what we want to do is take the derivatives out of the banking 
business. If somebody wants to play the games of a gambler, they are 
not going to gamble with taxpayers money. They are not going to gamble 
with depositors money. They are going to have to do that separate and 
apart from banking.
  Fortunately, the Senate bill seems to be moving in that direction. So 
when it passes the Senate and comes back to the House in a conference 
committee, I really want to see derivatives out of the banking 
business. Let them be handled by Wall Street firms that are not banks. 
If they want to play the game, let them play the game there. I think 
that will make a difference back in Main Street, back in Concord and 
Walnut Creek in my district.
  Ms. KILROY. If the gentleman will yield, I agree that we really need 
to have strong regulation of derivatives and, of course, make them much 
more transparent. But the point you have made just now about the Wall 
Street pay is interesting. One of the things that I think infuriates 
people is when they see they are being hurt, jobs have been lost, shops 
have closed up, and yet they see the people that are responsible for 
taking our economy to the brink of disaster are getting that kind of a 
reward.
  Also we need to see the corporate boards and the corporate 
shareholders take some more responsibility for what their corporations 
are doing. I think some of them want to do that. One of the things I 
would like to see happen is that shareholders get some kind of a say, 
some kind of an up-or-down vote on this kind of compensation. And not 
only do they get to vote, but I think when you have shareholders that 
may be hedge funds or pension funds or mutual funds, that they need to 
disclose also how their proxies are being exercised in these decisions 
about pay.
  Mr. GARAMENDI. You mentioned the issue of Wall Street pay. The 
numbers are really astounding. In 2007, before the collapse, Wall 
Street paid out $137 billion to its employees. In 2008, in the midst of 
the great collapse, they actually reduced it. They went down to $123 
billion. But in 2009, while unemployment in America was hovering well 
over 10 percent, and in California 12 percent, in 2009, the Wall Street 
fat cats paid themselves $145 billion.
  I believe a lot of that money was our taxpayer money that we put in 
Wall Street to shore up the banks, and instead of making loans to Main 
Street, to the contractor, to the fellow that wanted to manufacture 
more ladders, that wanted to improve his business and hire people, 
instead of making loans to them, it appears to me that they took the 
money that was used to bail out Wall Street, to stabilize the economy 
and stabilize the banks, they took that money and they put it in their 
own pockets. That is reprehensible.
  There was a bill here circulating, it hasn't passed, but I think it 
ought to pass, where these Wall Street bonuses, of which this $145 
billion is part of, I think it ought to be taxed. I think about an 80 
or 90 percent tax on those bonuses in which they used our taxpayer 
money, that we ought to get that money back, and we ought to take that 
money back and put it into the local banks so that their financial 
situation is shored up so that they can make loans to the businesses in 
our communities, and tell Wall Street, folks, the big ripoff is over. 
The big short is over. The big fraud is over. There is going to be a 
law. There is going to be a tough law regulating Wall Street, reining 
in the excesses of those fat cats on Wall Street who came to the U.S. 
Senate with such arrogance that somehow they were the kings of the 
world, that they were the financial managers of the world and they 
could create out of nothing.
  Wasn't there an Aesop's fable about spinning gold from wool? Maybe 
that is what those characters were doing. They were creating something 
that had the appearance of value, but actually had no value, and it 
nearly cost us the American and the world economy. It also cost some 10 
percent, almost 11 percent of every working man and woman in this 
country, their job.
  That is reprehensible. And it is time for Congress, it is time for 
the Senate--excuse me, Congress did its thing back in December--it is 
time for the Senate to pass a strong bill, send it back, let's get this 
thing done, and let's rein in Wall Street.

[[Page 7086]]


  Ms. KILROY. I absolutely agree with you. I voted for the House bill. 
I supported the House bill. I would welcome an even stronger bill in 
the Senate if they would pass something along those lines to make sure 
that the excesses of Wall Street are reined in, that there is 
appropriate regulation, that these exotic products don't bring our 
economy down again, that there is accountability, and if somebody, some 
big house gets in economic difficulty, that it is not in the position 
where the government and the taxpayers have to rush in and bail them 
out.
  We need to make very clear that there is not going to be a taxpayer-
funded bailout, and that there needs to be the kind of resolution 
authority or some kind of orderly method to protect the rest of the 
economy from a company that has gotten into trouble.
  Mr. GARAMENDI. There is something I learned long ago at the 
University of California when I was taking an economics class, and that 
was the American private system of the economy was dependent upon 
competition, and that laws were put in place more than a century ago to 
eliminate concentration so that there are many, many players in the 
marketplace.
  It seems as though we have forgotten, or at least the Republican 
administration in 2000 to 2008, forgot that one of the key ingredients 
in a free market system is many, many competitors.

                              {time}  2030

  But what happened during the decade of the nineties and 2000-2008 was 
a concentration in the banking industry so that now just a handful of 
companies, huge megabanks, control an enormous proportion of the 
American economy. And there's a proposal that has now been made by the 
Senator from, I believe, Delaware to limit all financial institutions 
to no more than 10 percent of the financial market, so that when they 
get to 10 percent, they can no longer grow. They would have to shed the 
business and, in that way, keep many, many players in the business. So 
there would be good competition and, simultaneously, create a situation 
in which no one bank would be too big to fail, thereby eliminating the 
need for a taxpayer bailout.
  I kind of like that idea. It goes back to something I learned many, 
many years ago in an economics class about the role of competition and 
the need for many, many players in the marketplace. We'll see what 
happens with that, but financial regulation law in its final form has 
to deal with this issue of too big to fail. I don't want, you don't 
want, I don't believe the American public want to see another financial 
bailout with our taxpayer money going to Wall Street so they can fatten 
their wallets on our hard-earned money. So we'll see what happens here. 
We know things are coming back.
  But let's not end this discussion in a down mood. If we take a look 
at where the American economy is going, these lines here in the red are 
the Bush years, and this is the unemployment rate actually growing 
during the final years of the Bush period so that we were losing about 
800,000 jobs a quarter in the final quarter of the Bush period. Now, 
when Obama came in, we see the beginning of the turnaround with the 
unemployment--monthly unemployment statistics changing so that, yes, 
the first month of the Obama administration, in January, February, it 
was the same as the last month of the Bush administration. But now we 
see a steady decrease in the number of people losing their jobs.
  This is a result of three things happening. The first is the Wall 
Street turnaround, the Obama administration getting control of Wall 
Street in the early months of 2009, followed by a very courageous 
action taken by Congress, which was called the American Recovery Act. 
The stimulus bill. That began to put people back to work or keep people 
employed. I know that in California it was an extremely important piece 
of the puzzle of keeping our schools open, keeping teachers in place, 
and then preventing further erosion of the economy. So as that began to 
take hold, we began to see the number of people losing their jobs on a 
month-to-month basis declining so that now, in the last month, we are 
actually seeing the number of people employed rising--getting jobs, 
rising.
  We still have an extraordinarily high unemployment rate. We are not 
even close to being home yet. So we've got a lot of work to do. Part of 
that work is to make sure that Wall Street doesn't ever again put at 
risk the job of a family, put at risk home mortgages, put at risk the 
American economy and, indeed, the international economy. So that's 
where we are headed. We've got some more work to do.
  Ms. KILROY. We do have more work to do.
  Mr. GARAMENDI. If you would like to wrap this up from the perspective 
of Ohio, one of the States hardest hit for many, many years now, but a 
State that's coming back with leadership such as yours.
  Ms. KILROY. You're correct that things are improving and also correct 
that we're not out of the woods yet. The Recovery Act in Ohio, as in 
your State, helped keep teachers; police cadets were able to get 
another class going in the city of Columbus, Ohio; keep firefighters on 
the job, keep teachers teaching in schools.
  We also put money in the pockets of hardworking Americans with the 
biggest tax cut in our history to make sure that middle-class families 
benefited from that Recovery Act. People who were unemployed or on food 
stamps also got a raise--not the kind of raise that Wall Street gets, 
but they got a raise. We know that that money goes directly back into 
the local economies. That helps build that path to economic recovery.
  We'll continue to focus on jobs, on our economy, and on holding Wall 
Street accountable, and passing a strong Wall Street regulation bill. I 
look forward to working with you on that.
  Mr. GARAMENDI. Well, there's been some very good work done, but the 
job is not finished. We're seeing a stabilization of the American 
economy. We've got a long, long way to go. One major piece of that is 
the work that is now going on in the U.S. Senate. I beg them to send us 
back here to Congress a very strong regulatory bill on Wall Street. 
Rein in the excesses. Provide the transparency so that everyone can see 
exactly what the product is and how the game is being played. Push the 
derivatives out of the bank business so that that's all separate; the 
collateralized debt obligations, transparent. Regulate it. Regulate the 
derivatives, and make sure that we never get back into this again.
  Maybe in the next month or so we will finish this critical piece of 
work. It's, hopefully, going to be done with the support of the 
Republicans. We know that for a long time they tried to stall it here 
in Congress, but, fortunately, the Democrats were able to put our bill 
out, send it over to the Senate. Now, with the Republicans in the 
Senate backing away from their support of Wall Street, hopefully, we'll 
get that bill over here; we'll finish this job and do what is 
absolutely necessary for the American economy and, indeed, for the 
world's economy.
  So, with that, let's let this night pass and we'll get back to work 
tomorrow morning.

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