[Congressional Record (Bound Edition), Volume 156 (2010), Part 6]
[Senate]
[Pages 7487-7539]
[From the U.S. Government Publishing Office, www.gpo.gov]




     RESTORING AMERICAN FINANCIAL STABILITY ACT OF 2010--Continued

  The PRESIDING OFFICER. The Senator form North Dakota is recognized.
  Mr. DORGAN. Madam President, I will join my colleague from 
Connecticut in opposing the amendment on the floor if it weakens the 
underlying bill, but I do not come to speak about that proposal at the 
moment. I wanted to speak about an amendment I have discussed 
previously on the issue of too big to fail.
  There is much yet to do on this subject of too big to fail. I recall, 
in a room just steps from here, on a Friday, I believe it was, the 
Treasury Secretary leaning over the lectern in a very stern way saying 
to the caucus that I was involved in, if within 3 days a three-page 
bill granting $700 billion to the Secretary of the Treasury, with which 
to provide funds to stabilize some of the biggest financial 
institutions in the country, if that did not come about, our economy 
could very well collapse completely.
  I remember that moment and remember thinking that it was pretty 
bizarre that our country got to that point: that all of a sudden 1 day, 
after being told month after month that the economy was strong, the 
economy was in good shape, that there were some ripples and hiccups 
here and there, but things were on course and we had confidence in the 
strength of the economy, that we were now being told the economy may 
well collapse in days unless the Congress comes up with $700 billion.
  Why was that the case? Because institutions that were so large in 
this country, at the top of the financial industry, were so important 
to the economy that their failure could very well result in failure of 
the entire American economy. That is what is called too big to fail.
  Let me show a chart that shows the six largest financial institutions 
in the country and what has happened to them since 1995. This is their 
growth as a percentage of GDP. It shows that they are getting larger 
and larger and larger and much larger. Even during this period of near 
collapse, the same institutions that were judged too large to fail and 
judged to represent a grave risk to the entire economy have gotten 
larger than just too big to fail.
  We had a vote yesterday, but that cannot be the end of this 
discussion about how to address too big to fail. The vote yesterday was 
rather Byzantine, as far as I was concerned. I was not someone who was 
a big fan of the $50 billion to be pre-funded for resolution of too-
big-to-fail companies. But having said that, to decide that the $50 
billion, which would come from the very institutions that are too big 
to fail, should be abolished, and that the funds instead would come 
from the FDIC, which are initially funds from the American taxpayer, 
made no sense to me. Then suggesting that it will be all right because 
the FDIC will be repaid with the sale of assets--oh, really? Well, 
firms that are too big to fail that are going to get in trouble in the 
future are not going to have very many assets. They are going to be in 
trouble because of dramatic amounts of overleverage, leverage that goes 
far beyond their ability to continue to do business. And when the firm 
comes tumbling down, I fail to see where assets are going to exist in 
substantial quantity to repay the taxpayer.
  But that was yesterday. I did not support that. That was yesterday. 
This issue of creating a circumstance of early warning on too-big-to-
fail firms is not satisfactory to me. The only way to resolve too big 
to fail is to abolish too big to fail. I mean abolish too big to fail. 
That means having firms that are not too big to fail, that will not 
cause a moral hazard or a grave risk to the entire economy should they 
fail.
  Do you believe that is the case with this graph? Is there anything 
here that--as this graph shows, we have firms that are too big, far too 
big to fail. Is there anything here that is going to solve that in this 
bill? The answer is no. The only direct and effective way to address 
this is to decide, if you are, in fact, too big to fail, then there has 
to be some sort of divestiture or dissolution to bring that firm back 
down to a point where in size and scope such firm is not too big to 
fail and is not causing the kind of dramatic special risk to the 
country's economy that it would bring the economy down with it.
  That is the only direct and effective solution. Is that radical? 
Well, I have an amendment that requires that if you are determined to 
be too big to fail, then we begin a process, over 2 years, of breaking 
away those parts that make you too big to fail. Is it a radical idea? I 
do not think so.
  One-fourth of the Board of Governors of the Federal Reserve Board 
says we ought to do that. Richard Fisher, president of the Dallas Fed: 
Too big to fail is not a policy, it is a problem. Too big to fail means 
too big period. We ought to break them up.
  Federal Reserve Bank of St. Louis, James Bullard, president and chief 
executive officer: I do kind of agree that too big to fail is too big 
to exist.
  The economist, Joe Stiglitz, Nobel Prize winner: Too-big-to-fail 
banks have perverse incentives. If they gamble and win, they walk off 
with the proceeds. If they fail, taxpayers, pick up the tab.
  Alan Greenspan--I seldom, if ever, agree with Alan Greenspan, but I 
have

[[Page 7488]]

used a quote of his to describe where we are now. He was around sitting 
on his hands for a good many years while these problems developed, 
despite the fact that he had the authority to have avoided them. Then 
he has written a book acting as if he was exploring the surface of Mars 
while all of this went on.
  But now he says: The notion that risks can be identified in a 
sufficiently timely manner to enable the liquidation of a large failing 
bank with minimum loss has proved untenable during this crisis, and I 
suspect in the future crises as well.
  Simon Johnson, professor of entrepreneurship, the Sloan School: There 
is simply no evidence, and I mean no evidence, that society gains from 
banks having a balance sheet larger than $100 billion.
  I do not know whether I agree or disagree with that. But his point is 
that too big to fail means too big.
  Arnold King, Cato--I seldom quote Cato on the floor of the Senate. 
But, you know, strange bed fellows: Big banks are bad for free markets. 
There is a free market case for breaking up large financial 
institutions--that our big banks are a product not of economics but of 
politics.
  The president of the Federal Reserve Bank of Kansas City, this is the 
third Fed president: I think they should be broken up. And in doing so, 
I think you will make the financial system itself more stable, more 
competitive, and I think you will have long-run benefits over our 
current system.
  We broke up Standard Oil in this country into 23 different pieces. It 
turned out the 23 pieces were more valuable than Standard Oil was. I am 
not saying just go in and break up things just for the purpose of 
breaking up. I am saying this: If there is a standard by which we judge 
that an institution is too big to fail and causes a dramatic risk to 
the economy as a whole should it fail, a moral hazard, unacceptable 
risk to the entire economy, then it seems to me like this issue of 
creating early warnings and stop signs and sirens and so on is largely 
irrelevant.
  What we need to do is do something direct and effective and something 
we all knew we should do; that is to say, if you are too big to fail, 
and judged to be so, and judged to pose those kinds of risks to our 
economy, then you must break off pieces. We would, over a 2-year 
period, require that to happen until you are not too big to fail.
  Let me show a couple of quick charts. This one shows the top 
financial institutions: The Big Get Bigger. This chart shows the same 
thing, measuring assets and liabilities: The Big Get Bigger. Much, much 
bigger. The first chart I showed today demonstrates why, if we do not 
pass the amendment I suggest, we can thumb our suspenders and crow all 
we want in every hallway in this Capitol Building, but we will have not 
done what was necessary to be done to address too big to fail. We just 
will not do it.
  So I have an amendment. I am here because I am pestering those who 
are lining up amendments to make certain I have a chance to debate and 
vote on that amendment, and that will be the test of whether this 
Congress has learned a lesson; whether, when someday a Treasury 
Secretary leans over a lectern and says: If I do not get $700 billion 
to bail out the big interests that ran this country into the ditch, our 
whole economy is going into the ditch.
  So I hope very much that we will have the opportunity to both simply 
and effectively do what is necessary to finally and thoughtfully 
address this issue of too big to fail.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Colorado.
  Mr. BENNET. Thank you, Madam President.
  I see our chairman and the ranking member over here from the Banking 
Committee on which I serve, and I want to congratulate them for their 
hard work in getting this legislation to the floor. We are finally 
doing some work around here, and we are doing it in a bipartisan way.
  I think this bill is going to improve over the course of this debate. 
It is an enormously important opportunity to safeguard our economy from 
the reckless danger that got us into this financial mess. I am hopeful 
we can wade through all this Washington wrangling and get something 
done to protect America's financial future.
  There is a shared understanding of what got us here, and that is the 
good news. Some on Wall Street took all the risk. Yet it is the 
American people who paid the price. Small businesses, homeowners, and 
working families were forced to come in and clean up this mess.
  It is our responsibility to learn the lessons from the last collapse 
to help this economy recover and to head off the kinds of problems that 
could lead to another financial crisis. In short, we have to fix this 
economy, ensuring there will never have to be another taxpayer-
sponsored bailout.
  As someone who sits on both the Agriculture and Banking Committees 
which share jurisdiction over this bill, I can assure you that this 
package reflects months of hard work and incorporates ideas and 
concepts from both political parties. We have examined the problems 
that brought us to the financial brink nearly 2 years ago, and together 
these two committee bills created a thoughtful and comprehensive plan 
to increase transparency, reduce systemic risk, and strengthen our 
commitment to protecting consumers.
  In reviewing the merits of the bill, I think it is important to 
analyze how it would have addressed so many of the problems that led to 
the financial collapse in 2008. Too often, we do not ask the question, 
What problem is it we are trying to solve, and then we get busy either 
solving problems that did not exist or creating unintended consequences 
from our work. I think we have worked hard on this legislation for this 
not to be so.
  Had this legislation been the law of the land, we would not be 
talking about that $700 billion taxpayer-funded rescue of our Nation's 
largest bank holding companies. We would have been able to see many of 
the dangerous trends develop earlier, and we would have required these 
systemically risky companies to have more capital and less debt. Had 
any of these companies failed, we would have resolved them without 
transforming them into wards of the state, like AIG.
  Second, had a strong consumer protection infrastructure existed, we 
could have stopped the subprime mess before it spiraled out of control. 
For example, subprime giant Ameriquest would have been subject to 
meaningful rulemaking and enforcement authority. And while I prefer a 
wholly independent agency, this bill represents substantial and 
meaningful progress on a consumer protection front.
  Third, had the bill's derivatives reforms been in place, it is much 
less likely--much less likely--that the Federal Government would have 
been forced to spend tens of billions of taxpayer dollars to rescue AIG 
from its own sloppiness and greed.
  In total, the plan before us represents a strong and thoughtful 
measure that rewrites the rules of the road for Wall Street. And 
through the amendment process, we can make it even better.
  For example, I think we need to ensure that certain State-chartered 
community banks that did little to contribute to the current crisis do 
not have to change their prudential regulator. In so many of our towns, 
community banks play an important role in providing credit to our local 
economies. Many of these small institutions are struggling due to this 
difficult economy, which means less available credit for families and 
small businesses. I have concerns that a change in prudential 
regulation may exert further pressure on these small banks which 
continue to serve their local communities. It is my hope we can balance 
the need to reduce regulatory arbitrage while preserving the existing 
prudential supervisory structure for some of these State-chartered 
banks.
  I also believe it is time for us to take advantage of this 
opportunity to begin to move away from the last bank bailout, the TARP. 
While there are 100 opinions in this Chamber about how effective TARP 
was, there really is a broad consensus here and in the country that it 
is time to wind down TARP,

[[Page 7489]]

recapture what we can for taxpayers, and prevent banks from tapping 
into the Treasury going forward. That is why in the coming days I will 
be pushing bipartisan legislation that will do exactly that. It would 
use recaptured TARP funds, borrowed from our children--$180 billion so 
far and counting--for deficit reduction, and it would take important 
steps to end the TARP.
  More broadly, I also think we need to be aggressive about 
strengthening this bill to further protect consumers. I will be 
supporting amendments which do exactly that.
  When it comes to Wall Street reform, we simply cannot afford to delay 
any longer. Recently, the TARP inspector general underscored this point 
better than I could. He stated:

       [E]ven if TARP saved our financial system from driving off 
     a cliff back in 2008, absent meaningful reform, we are still 
     driving on the same winding mountain road, but this time in a 
     faster car.

  In short, bailing out companies has made the future risk to our 
financial system even worse, by creating the moral hazard that a 
financial firm that participates in risky behavior is going to somehow 
be bailed out by the government, by the taxpayer. This Wall Street 
reform package takes a strong step toward restoring some degree of 
sanity in our financial system and making that moral hazard a thing of 
the past.
  Finally, Coloradans and the American people are expecting us to act. 
I am confident we are going to succeed. Lobbyists may have been able to 
slow down Wall Street reform temporarily, but the American people want 
it, as well they should. We are getting closer and closer every day to 
sustaining a workable bill that can pass this Chamber and that we can 
eventually send to the President for his signature. We cannot allow the 
status quo to maintain its grip on our financial system. We have to 
work together and pass this groundbreaking reform package.
  I want to close, again, by thanking the chairman of the Banking 
Committee, who is here in the Chamber, for his leadership throughout 
the months, not just on this issue but on health care as well but 
particularly for sticking with this issue. I do not think we would be 
having this debate right now were it not for the work the chairman did. 
As a member of the Banking Committee, I appreciate it very much.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Madam President, before turning to my colleague from New 
York, let me say how fortunate I have been as chairman of the committee 
to have Senator Bennet as a member of our committee. I want to thank 
him immensely. He is a new member of the committee, but, again--like 
the Presiding Officer, like my other colleague from New York--I cannot 
tell you how valuable it has been having people who understand this 
issue and who bring to this Chamber a previous life rich with the 
experience of understanding these issues. So let me thank the people of 
Colorado for having the Senator here. What a difference the Senator has 
made in the consideration of this legislation.
  Some of the newest members of the committee--and I think my 
colleague, the senior Senator from New York, would acknowledge this--
some of the newest members of our committee made some of the most 
valuable contributions to this product, which is further evidence that 
you do not have to be here that long. In fact, sometimes maybe the 
shorter time you are here, you bring that kind of fresh experience from 
our States and across the country.
  So I did not want the moment to pass without expressing to Michael 
Bennet of Colorado my deep, deep appreciation. I say to the Senator, I 
thank you for your leadership, your thoughtfulness, and the 
contributions you have made not only to this product but to others 
during your tenure.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. First, Madam President, I wish to join my friend from 
Connecticut in praising Senator Bennet, who has had an amazing effect 
and a steady hand in bringing this bill to the floor. I also thank my 
colleague from Virginia, Senator Warner. The new Members have had a 
tremendous effect on this bill. This reflects the way the Senate works 
these days, and I think it is all for the better. Having their input 
and experience has been vital.
  But, Mr. Chairman, I would also say that you are full of fresh ideas 
and vim and vigor. Just because you have been around here a long time 
does not mean that----
  Mr. DODD. Thank you.
  Mr. SCHUMER. In fact, you have had the wisdom to encourage some of 
our new Members to actively participate, and confidence to do that as 
well.
  I also do not want to fail to note my colleague from New York, 
Senator Gillibrand, the Presiding Officer, who has done a fabulous job, 
too, particularly on the agriculture portion of the bill on the 
committee on which she sits.


                           Amendment No. 3826

  Madam President, I come to the floor today and rise against the 
consumer amendment posed by Senator Shelby that is before us. I come to 
the floor to speak about the need for a strong independent consumer 
watchdog. I am here to talk about the proposal put forward by some of 
my Republican colleagues to place a new consumer protection division 
within the FDIC and significantly reduce the ability of that division 
to carry out its mission.
  The amendment before us greatly weakens the bill in terms of consumer 
protections. In fact, it is not just a step backward from the bill 
before us, it is a step backward from the status quo. If we were to 
pass the amendment on the floor, consumer protections, weak as they are 
today, would be even weaker. This amendment would leave the consumer 
naked and unprotected. This amendment strips the bill of some of its 
strongest protections. Not every financial institution preys on 
consumers, but those that do would be given too free a hand if this 
amendment were to pass. I urge strong opposition to it.
  Let me explain. One of the roots of this financial crisis was, 
undoubtedly, that total failure of our consumer protection regime. 
Americans were sold products they did not understand and could not 
afford by mortgage originators eager for a fee and happy to sell those 
loans off into the great securitization machine which was given a 
virtual carte blanche by the credit rating agencies.
  After the events of the last several years, no one can argue that 
fundamental reform of our consumer protection regime is not necessary. 
No one can argue the status quo is the way to go. The status quo simply 
will not do. There is no accountability in the current system. Consumer 
protection is split among seven different regulatory agencies. For that 
reason, I was an early supporter of efforts to create a truly 
independent consumer protection agency, and I am still working with 
many of my colleagues, including Senator Jack Reed and Senator Durbin, 
to strengthen the provisions of the bill proposed by Chairman Dodd.
  One of the key authorities of any new consumer protection division or 
agency is that it must be able to adopt rules to protect consumers 
without being overruled by banking regulators who would rather allow 
banks to pad their bottom lines by fleecing consumers with hidden fees.
  Some argue that you cannot split consumer protection from safety and 
soundness. But historically, in the present setup, every time there is 
a conflict, the consumer loses. Consumers deserve an accountable 
regulator with oversight of consumer financial products as its primary 
objective, not as an afterthought.
  The Republican proposal being discussed is totally inadequate. It 
would allow the same bank regulators, who have stood in the way of 
meaningful consumer protections for years, to veto consumer protection 
rules proposed by the head of the new division.
  For example, the Comptroller of the Currency, who publicly opposed 
the Fed's new credit card rules, would, under the Shelby amendment, get 
to vote on future credit card rules. So the regulators who do not 
really care--

[[Page 7490]]

some of them--about consumer protection would be given veto power.
  The division would have no examination or enforcement power over any 
bank of any size or any of its affiliates. Some of the worst actors in 
the subprime mess were bank affiliates or subsidiaries. Even worse, it 
could only do examinations of nonbank consumer finance companies if 
they ``demonstrate a pattern or practice of violations'' of consumer 
law--in other words, only after consumers have been harmed repeatedly. 
That is what one could call too little, too late. Even the Fed recently 
deleted this requirement from rules governing subprime mortgages 
because it hampered enforceability of those rules so severely.
  Even the banks want the new consumer division to be able to enforce 
its rules at nonbanks. This is amazing. Some of the most rapacious 
institutions that prey on consumers are not banks. They operate outside 
the scope of the Federal regulatory authorities. They are often 
responsible for many of the most egregious abuses and predatory lending 
practices. Many of the products provided to consumers by these nonbanks 
played a direct role in the financial crisis. And many of these 
businesses--payday lenders, rent-to-own companies--currently operate 
below the radar screen to prey on vulnerable communities. How can we 
exempt some of these payday lenders and rent-to-own companies? I have 
seen them prey on poor people in my State. How can we exempt them from 
regulation when they often are worse than many of the financial 
institutions?
  The Republican amendment would also prohibit the consumer division 
from issuing any rules ``that affect any underwriting standards'' of 
deposit institutions and their affiliates. After the crisis we just 
went through, which was in large part created by bad mortgage 
underwriting standards, I cannot believe anyone can propose this with a 
straight face because--let me repeat what it does. The consumer 
division cannot issue rules ``that affect any underwriting standards'' 
of deposit institutions. It is saying: Let's repeat the mortgage 
crisis. It makes no sense.
  If this consumer division were in place in 2008--the one proposed by 
my colleagues here--it would not have had the power to write the 
mortgage rules establishing the minimum ability to pay standards the 
Fed issued. As we know, the Fed was not an extreme watchdog in any 
sense. I have worked long and hard in the area of consumer protection. 
I have worked with these regulators. I have seen how slowly they work. 
It took more than 10 years to get them to go along with the so-called 
Schumer box, where credit card interest rates were made clear and 
visible to prospective credit card purchasers. It worked. But why did 
it take so long? Then, when the banks came with new ways of getting 
around the rules, again, it took me forever to get the Fed to move 
because the Fed, frankly--and Chairman Bernanke to his credit admitted 
this--did not make consumer protection a high enough priority.

  So we need, in my judgment, an independent agency. That would be the 
best solution. Second best would be an agency, even if it is within the 
Fed, that is largely independent in both the rules it can promulgate 
and its enforcement. We need strong, forward-looking financial reform. 
I have always said I want the reform to be constructive, not punitive. 
But if we go through all this and fail to leave consumers better 
protected than they were before this crisis, we will have totally 
failed in our mission to serve the American people.
  I strongly urge that this amendment be rejected by a large and 
hopefully bipartisan majority.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wisconsin.
  Mr. FEINGOLD. Madam President, I am glad the Senate is finally 
considering the critically important issue of financial regulatory 
reform. Few things are as important as ensuring we never again suffer 
the kind of meltdown of the financial markets that shoved our economy 
into the worst recession since the Great Depression. I think it still 
remains to be seen if this bill will do that. While it certainly 
includes some good reforms, more needs to be done, and the track record 
of Congress in this area is, at best, checkered.
  For the last 30 years, Presidents and Congresses have consistently 
given into Wall Street lobbyists and weakened essential safeguards. As 
has been the case in so many areas, members of both political parties 
are to blame. Legislation that paved the way for the creation of 
massive Wall Street entities and removed essential protections for our 
economy passed with overwhelming bipartisan support. From the savings 
and loan crisis in the late 1980s to the more recent financial crisis 
that triggered the horrible economic downturn from which we are still 
recovering, those three decades of bipartisan blunders have been 
devastating to our Nation. The price of those blunders has been paid by 
homeowners, Main Street businesses, retirees, and millions of families 
facing an uncertain economic future.
  The impact of the recent financial crisis on the Nation's economy has 
been enormous. Millions have lost their jobs and millions more who are 
lucky enough to have a job are forced to work fewer hours than they 
want and need to work. According to a study done by the Pew Trust, the 
financial crisis caused American households an average of nearly $5,800 
in lost income. Of course, families lost a significant amount of their 
personal savings. As a nation, we lost $7.4 trillion in stock wealth 
between July 2008 and March 2009 and another $3.4 trillion in real 
estate wealth during that same time. We simply cannot afford to 
continue down the path policymakers have set over the past 30 years.
  The test for this legislation then is a simple one: Whether it will 
prevent another financial crisis. Central to that test will be how this 
bill will address too big to fail. This is a critical issue that has 
been growing for some time now as increased economic concentration in 
the financial services sector has put more and more financial assets 
under the control of fewer and fewer decisionmakers.
  Years ago, a former Senator from Wisconsin, William Proxmire, noted 
that as banking assets become more concentrated, the banking system 
itself becomes less stable, as there is greater potential for 
systemwide failures. Sadly, Senator Proxmire was absolutely right, as 
recent events have proved. Even beyond the issue of systemic stability, 
the trend toward further concentration of economic power and economic 
decisionmaking, especially in the financial sector, simply is not 
healthy for the Nation's economy.
  Banks have a very special role in our free market system: They are 
rationers of capital. When fewer and fewer banks are making more and 
more of the critical decisions about where capital is allocated, then 
there is an increased risk that many worthy enterprises will not 
receive the capital needed to grow and flourish. For years, a strength 
of the American banking system was the strong community and local 
nature of that system. Locally made decisions made by locally owned 
financial institutions--institutions whose economic prospects are tied 
to the financial health of the community they serve--have long played a 
critical role in the economic development of our Nation and especially 
for our smaller communities and rural areas.
  But we have moved away from that system. Directly as a result of 
policy changes made by Congress and regulators, banking assets are 
controlled by fewer and fewer institutions, and the diminishment of 
that locally owned and controlled capital has not benefited either 
businesses or consumers. Of course, most dramatically, taxpayers across 
the country must now realize that Senator Proxmire's warning about the 
concentration of banking assets proved to be all too prescient when 
President Bush and Congress decided to bail out those mammoth financial 
institutions rather than allowing them to fail. That was a bailout I 
strongly opposed.
  The trend toward increased concentration of capital was greatly 
accelerated in 1994 by the enactment of the Riegle-Neal Interstate 
Banking and Branching Act and especially in 1999 by

[[Page 7491]]

the enactment of the Gramm-Leach-Bliley Act, which tore down the 
protective firewalls between commercial banking and Wall Street 
investment firms.
  Those firewalls had been established in the wake of the country's 
last great financial crisis 80 years ago by the Banking Act of 1933, 
the famous reform measure also known as the Glass-Steagall Act.
  Prior to Glass-Steagall, devastating financial panics had been a 
regular feature of our economy, but that changed with the enactment of 
that momentous legislation, which stabilized our banking system by 
implementing two key reforms. First, it established an insurance system 
for deposits, reassuring bank customers that their deposits were safe 
and, thus, forestalling bank runs. Second, it erected a firewall 
between securities underwriting and commercial banking so financial 
firms had to choose which business to be in. That firewall was a 
crucial part of establishing another protection--deposit insurance--
because it prevented banks that accepted FDIC-insured deposits from 
making these speculative bets with that money.
  The Gramm-Leach-Bliley Act tore down that firewall, as well as the 
firewall that separated insurance from Wall Street banks, and we have 
seen the disastrous results of that policy. I voted against tearing 
down the firewall that separated Main Street from the Wall Street 
banks. I did it for the same reason I voted against the Wall Street 
bailout: because I listened to the people of Wisconsin who did not want 
to give Wall Street more and more power. Wall Street was gambling with 
the money of hard-working families and too many Members of Congress 
voted to let them do it. I didn't support it before and I will not 
support it now. We have to get this legislation right and protect the 
people of Wisconsin and every State--protect them from something such 
as this ever happening again.
  So I was pleased to join the Senator from Washington, Ms. Cantwell, 
and the Senator from Arizona, Mr. McCain, in introducing legislation to 
correct that enormous mistake Congress made in passing Gramm-Leach-
Bliley. I look forward to supporting an amendment to this measure based 
on the Cantwell-McCain-Feingold bill.
  The measure before us seeks to make up for the lack of a protective 
firewall between the speculative investment bets made by Wall Street 
firms and the safety net-backed activities of commercial banking by 
imposing greater regulatory oversight. We have seen how creative 
financial firms can be at eluding regulation when so much profit is at 
stake. No amount of regulatory oversight can take the place of the 
legal firewall established by Glass-Steagall. So when it is offered, I 
urge my colleagues to support Senator Cantwell's amendment to restore 
that sensible protection. Rebuilding the Glass-Steagall firewall is 
essential in preventing another financial crisis.
  But even if we restore Glass-Steagall, there are additional steps we 
should take to address too big to fail in this bill. I am pleased to be 
joining the Senator from North Dakota in offering his amendment to 
address the problem directly by requiring that no financial entity be 
permitted to become so large that its failure threatens the financial 
stability of the United States. I am also looking forward to supporting 
an amendment that will be offered by the Senator from Ohio, Mr. Brown, 
and the Senator from Delaware, Mr. Kaufman, who is in the Chamber, that 
proposes bright line limits on the size of financial institutions. The 
disposition of those three proposals I have just reviewed will go a 
long way in determining my vote for the final version of this measure. 
I very much want to craft in this body a bill that can prevent the kind 
of crisis we experienced in the past, but the bill before us needs some 
work before we can legitimately make that claim.
  I thank the President and I yield the floor.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. REED. Madam President, the Republican side has submitted a 
consumer protection amendment that can be briefly summarized: Buyer 
beware because they won't help you. This flows from the very simple 
premise that they have announced from the very beginning of these 
discussions and deliberations they do not want an independent consumer 
protection agency that has the authority to make rules and enforce 
rules to protect consumers. So what they have suggested is a classic 
bait and switch. We will create an ``agency'' within the FDIC, and then 
we will deny them the power to regulate most of the financial sectors 
and institutions that affect the daily lives of Americans: payday 
lenders, car loans, all those things. They are just off the table. So 
it amounts to a gesture, not good legislative policy.
  We are working, and we have been working--and Senator Dodd has taken 
the lead--to ensure that there is real consumer protection built into 
this Wall Street reform legislation. We believe consumers need 
information to make good choices. The thrust of our efforts is to 
ensure that the agency is able to provide that information through 
simplified forms, through simple products, through those mechanisms 
that allow men and women who are engaged in raising children, keeping 
jobs, coaching Little League, to understand what they are putting their 
resources into.
  That is not what the Republican amendment is proposing to do. They 
are creating a six-person council within the FDIC with no real 
independence and even less authority, and one could question why the 
FDIC is the logical place to put in a council such as this. They would 
create an oversight agency but exempt, as I said, virtually an entire 
financial sector or sectors from oversight. It is not like a watchdog; 
it is like a lapdog. It is bureaucracy with no bite.
  The Dodd bill, in contrast, contains a very robust consumer 
protection provision. It creates a Consumer Financial Protection Bureau 
with resources--I wish to emphasize resources--and authority to 
prohibit abusive practices and deceptive financial products, ranging 
from credit card companies to mortgage brokers to banks and to others. 
For example, it would hold the credit card companies accountable and 
eliminate unfair lending practices, such as penalty fees for paying off 
your debt on time.
  One of the big efforts we are undertaking is increased transparency 
for Wall Street, and this consumer protection agency will provide that 
protection to consumers. Basic economics, Econ 101: In a competitive 
marketplace, one of the presumptions is perfect information. We have 
seen, frankly, that individuals on Wall Street have made billions of 
dollars operating on imperfect information; in fact, one could even 
suggest deliberately manipulating products so they have the information 
and the consumer doesn't.
  I think we were all taken aback when we were listening to the 
hearings conducted by Senator Levin which talked about Goldman Sachs, 
and their trader, Fabrice Tourre, described the system in rather 
evocative terms. In his words:

       More and more leverage in the system, the entire system is 
     about to crumble any moment . . . the only potential survivor 
     the fabulous Fab . . . standing in the middle of all these 
     complex, highly leveraged, exotic trades he created without 
     necessarily understanding all the implications of those 
     monstrosities.

  Well, that seems, to me, very chilling--the fact that somebody would 
admit they didn't even know the products they were selling to 
consumers--who assumed not only that they knew but also that they would 
not be deliberately misleading them. That is an example. The example 
doesn't stop on Wall Street. It extends out to Main Street, to people 
with credit arrangements, payday lenders, organizations charging huge 
interest charges, and it is designed to exploit consumers.
  The Republican proposal does little, if anything, to prevent that. I 
hope, on a bipartisan basis, as Senator Schumer suggested, we reject 
this amendment. It is, as they say in some places, all hat and no 
cattle. We have an agency, but we have no enforcement powers. We have 
an agency, but they can't enforce their rules and regulations on 
certain sectors; i.e., most of the sectors. So if

[[Page 7492]]

we want to protect consumers and if we want to have efficient markets--
I think one of the inaccurate premises that some people are suggesting 
is that consumer protection somehow is bad for business. I argue 
strenuously that consumer protection is very good for business.
  If you take care of the consumer, if they feel, and you provide, 
valued and good service--that used to be the American sort of maxim. 
That used to be the American byword for business: the consumer is 
always right; the consumer comes first.
  In the Republican legislation, the consumer comes last, not first. 
The consumer should come first. I hope this amendment will be rejected 
and that we support not only the underlying Dodd bill, but I think it 
can be improved. I commend the Senator from Connecticut who has done a 
remarkable job crafting the consumer protection agency. To accept the 
Republican amendment would be to turn our backs on consumers and reject 
essentially the old American maxim that the consumer is always right 
and the consumer comes first, and it will leave everybody in this 
country where we are today: buyer beware of the monstrosities in the 
marketplace.
  The PRESIDING OFFICER. The Senator from Delaware is recognized.
  Mr. KAUFMAN. Madam President, I also commend Chairman Dodd for his 
work on this bill. We have a good bill. I will be opposing the 
amendment presently on the Senate floor. We need a strong, independent 
consumer product finance protection agency. I have heard many different 
proposals to put the consumer product finance protection agency here, 
there, and everywhere. The problem with putting it in any institution 
like the FDIC or the Fed is that those institutions' No. 1 
responsibility is, and should be, the safety and soundness of the banks 
and financial institutions they are regulating. That is their key 
charge.
  I think the reason the Fed had a consumer product agency, which did 
not act to help consumers during the recent meltdown, was that they 
first were concerned about safety and soundness.
  At the same time, we have to be very careful we don't put an undue 
burden on community banks. They were not involved in what happened. We 
should make sure while we are looking out for consumers that we don't 
overregulate these local banks.
  We have a good bill. I think the too-big-to-fail part we are getting 
around to. The recent amendments on the resolution that if, in fact, 
the bank gets in trouble, we can resolve it, is a good approach. I am 
sure we will be talking about it more. It is a good approach to deal 
with the too-big part of too big to fail. We have not done enough on 
the too-big part of too big to fail.
  Let me go over a chart that shows how big these banks have become. 
This is the average assets of our major banks relative to gross 
domestic product. If you look at this chart--and I encourage comments 
from my colleague, the Senator from Ohio. If you look at this chart, 
you will see that just about the time we removed Glass-Steagall, this 
chart went absolutely through the roof.
  When you look at the concentration of the U.S. banking system, you 
see on this chart that is very similar to the first chart. It shows an 
exponential increase in concentration. This is not good for the 
country. This is not organic growth. I hear people say it is organic 
growth. This is growth from mergers. Neither chart includes the massive 
mergers that went on during 2008. This is through 2007. It doesn't show 
that Washington Mutual and Bear Stearns were consumed in JPMorgan 
Chase. It doesn't show the fact that Wachovia went into Wells Fargo, 
and Merrill Lynch went into Bank of America. It clearly shows that the 
incredible concentration just goes on.
  Alan Greenspan made a number of decisions and statements while this 
was going on about how we should proceed during the 1990s and early 
2000. He said himself that he thought self-regulation would work and 
was dismayed that it didn't. He came out with a couple statements 
recently that I was so incredibly surprised about.
  He said this:

       For years, the Federal Reserve had been concerned about the 
     ever-larger size of our financial institutions. Federal 
     research has been unable to find economies of scale in 
     banking beyond a modest-sized institution. A decade ago, 
     citing such evidence--

  By the way, moderate size, according to Andrew Haldane, the executive 
director of financial stability for the Bank of England, is $100 
billion. He said he can find no reason to have the need for economies 
of scale at banks larger than $100 billion. As you know, the present 
size of top banks are in the $2 trillion range, as high as $2 trillion.
  Continuing to quote:

       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/international economy 
     should they fail. Regrettably, we did little to address the 
     problem.

  I hear people now talking about: We can't undo this. We need big 
banks to compete internationally. Alan Greenspan is saying we don't 
need these for the economies.
  Mr. BROWN of Ohio. If the Senator would yield, I thank the Senator 
for bringing out that there is such broad support, as we are seeing, 
from economists as conservative as Alan Greenspan and as progressive as 
Bob Reich, and others, who say too big to fail means simply too big. 
Our amendment will only affect the six largest banks--affect their 
size--and it will affect smaller banks in helping them be more 
competitive.
  You said something on the Senate floor yesterday that, in effect, the 
size of these banks gives them a subsidy, a roughly 75 basis point or 
three-quarters of 1 percent advantage in the capital markets. This 
amendment we have, which is gaining increasing support--we have now 10 
or 11 cosponsors to it, and we are working with people on both sides--
simply to say too big to fail is too big.
  Talk to us for a moment about how these banks get the subsidies. 
Somebody in my office said in a sense we are giving welfare to the Wall 
Street banks. Because of their size, they are getting advantage on the 
capital markets because investors, with their dollars, understand these 
banks are never going to be able to fail unless we really keep them 
from getting too big.
  Explain that Wall Street welfare that we see with these 50 literally 
trillion-dollar-plus banks, which they extract from the system.
  Mr. KAUFMAN. Sure. I don't come at this from any other area except 
how important our capital markets are. I am a market guy. I think the 
two greatest things we have are democracy and our capital markets and 
the credibility of the markets. So when I want to find out what is 
going on in a financial area, I don't do a survey of 27 people. I say: 
What is the market telling us? That is the best way. What does the 
market tell us about what is going on?
  What the market says is, if you are a big bank like one of these top 
banks--referring to the study I talked about yesterday--if you are one 
of the big banks, you get a 70 to 80 basis point advantage when you 
borrow money. You pay less than other people.
  Mr. BROWN of Ohio. So that means when one of the huge Wall Street 
banks--these six banks--is getting a three-quarters percent, roughly, 
interest rate differential--a bonus, perhaps--that means that banks in 
Delaware and Ohio that aren't so big are at a competitive disadvantage. 
I assume that also means those big banks have opportunities to get 
larger. If the playing field is not level, those toward whom it tilts 
get other advantages and grow larger and larger, making the point of 
our amendment that much stronger.
  Mr. KAUFMAN. Absolutely. Obviously, that is a key point. I am 
surprised that more of our smaller banks aren't coming forward and 
saying this isn't fair. The market says it is not fair.
  The second point is the too big to fail. You can argue that you are 
not too big to fail. But the market thinks you are, and I listen to the 
market. That is one of the important considerations. Unless people 
misunderstand--

[[Page 7493]]

people say you want to destroy the banks, and the rest of that. But 
under our amendment, Citigroup would be reduced to the size it was in 
2002.
  Now, were they able to compete overseas and do all the things they 
had to do then? Goldman Sachs, which is now at about $850 billion, 
under the Brown-Kaufman amendment would be down to a more reasonable 
level of just above $300 billion or around $450 billion if Goldman 
exits the bank holding company structure. You may say that is a 50-
percent decrease and that is going to hurt their opportunity. In 2003, 
they had $100 billion in assets. So all we are shrinking Goldman Sachs 
down to is 3 to 4\1/2\ times what they were in 2003.
  This is not some draconian effort. The second point we have been 
focusing on is that we also limit risk. This is not about size; we 
limit risk. I recommend everybody to read the Washington Post today--
that is where I read it--about Jimmy Cayne, former CEO of Bear Stearns. 
He testified to the Financial Crisis Inquiry Commission that, in his 
opinion, as CEO of Bear Stearns, they failed because it was leveraged 
40 times over its capital base--40 times over its capital base.
  Brown-Kaufman would cap leverage at 16 times the capital base. What 
he is basically saying is that if Brown-Kaufman had been in effect, 
Bear Stearns would not have failed.
  A lot of people have different opinions, but that is what he says. 
This is not just about size; this is about risk. What we are trying to 
do is target risk. These banks don't fail--banks are doing great now; 
profits are out the roof. You don't fail on a nice sunny day. You 
cannot sit here today and say no problem. That is why regulators don't 
do anything because, basically, banks are doing well.
  Time and again, when we had hearings before the Permanent 
Subcommittee on Investigations, we heard from Washington Mutual and 
Goldman Sachs. They said they were doing so well. How can you make them 
change? The fact that they were doing so well by turning out mortgages 
that were absolutely doomed to fail is an indication that they should 
have moved in, but the regulators didn't.
  I will not hold this out, but if you want to see what can happen 
under the worst case, look at Europe today. Look at the mess unfolding 
in Europe. Greece falters and that affects confidence in other 
countries such as Portugal, Spain, and Ireland. Europe and other banks 
have massive exposures to these countries. German and French banks 
carry a combined $119 billion in exposure to Greek borrowers and more 
than $900 billion to Greece and other vulnerable Euro countries, 
including Ireland, Portugal, and Spain.
  People say: How can we compete with those big banks? Remember, we are 
only reducing Citibank to its size in 2002. How can we compete with 
Europe? Why do we want to do that? Why do we want to go in with their 
megabanks and deal with the problems they have?
  The Royal Bank of Scotland had a balance sheet basically 1\1/2\ times 
the size of the UK economy when it failed in the fall of 2008. See 
these numbers. It is 63 percent right now. Our six largest banks make 
up 63 percent of the GDP. The Royal Bank of Scotland's was 1\1/2\ times 
the size of the United Kingdom when it failed. People say the big banks 
didn't fail; it was the small banks that failed.
  I keep hearing that J.P. Morgan and Bank of America did not fail. It 
was Washington Mutual. They say there is no correlation. Megabanks, 
such as Citigroup, only survived through massive capital infusions, 
regulatory forbearance, and Federal monetary easing. Even J.P. Morgan 
has benefited from not having to write down its second lien mortgages 
and commercial real estate.
  The next thing they said when Washington Mutual failed was: How about 
that, that was a smaller bank. That was a big bank. The reason it went 
down is because we knew at the time when it failed that JPMorgan Chase 
would come in and grab it.
  I ask the question: Who is going to bail out, if something goes 
wrong, JPMorgan Chase, Bank of America, or any of these six larger 
banks? Remember, going back to Citigroup, Citigroup essentially failed 
and had to be bailed out three times in the last 30 years: in 1982 
because of the emerging market deck, 1989-1991 because of commercial 
real estate, and 2008-2009 because of residential real estate.
  Mr. BROWN of Ohio. Madam President, will the Senator yield? I 
appreciate this analysis. I hear, as we talk about the Brown-Kaufman 
amendment--and it has gotten increasing attention because an increasing 
number of people said too big to fail is too big and that if we allow 
these six banks--that chart the Senator showed originally--the largest 
six banks in the United States 15 years ago were 17 percent of our GDP 
and today they are 63 percent and growing, as Senator Kaufman 
mentioned.
  Mr. KAUFMAN. Exponentially.
  Mr. BROWN of Ohio. Look at the rate of growth. They did not grow a 
whole lot until the last 10 years, and look what happened. They are 
going to continue to grow since the Glass-Steagall repeal.
  The argument opponents of our amendment use most frequently is: We do 
not have the largest banks in the world anymore. There are larger banks 
other places. And how are our banks going to compete with these huge 
banks?
  I am intrigued by that because our banks are trillion dollar banks. I 
know there are studies that banks with assets of $300 billion and $400 
billion and $500 billion have all the economies of scale. Economies of 
scale do not work forever.
  Mr. KAUFMAN. According to Alan Greenspan.
  Mr. BROWN of Ohio. A bank that is $300 billion, $400 billion, $500 
billion has all the economies of scale as a trillion dollar bank.
  The point they make about European--we cannot compete 
internationally--it is clear from what the Senator from Delaware said, 
all of our banks, when they were smaller--smaller than the largest 
banks in the world--could compete internationally 10 years ago, and 
there is no reason they cannot compete like that today.
  I found the huge lumbering bureaucracies, whether they are a bank or 
whether they are the Center for Medicare and Medicaid Services, are not 
as flexible and nimble and cannot keep up with the market nearly as 
well if they are that big.
  The Brown-Kaufman amendment, again, does not apply to very many 
institutions. No more than five or six will be even unwound a little 
bit. We are not going to split them all up so they are small, little 
community banks. They are still clearly going to be able to compete. 
There is no question about it under the Brown-Kaufman amendment. We 
give 3 years to banks to sell off some of the assets, to spin off a 
line of business, to sell regional operations they may have in one area 
of the country to comply with this amendment.
  It is clear that as increasing numbers of people say, ``Too big to 
fail is too big,'' that if we allow these banks to keep getting bigger 
and bigger--and we see this chart where the six largest banks in total 
assets end up being 70 percent, 80 percent, 90 percent of GDP--it is 
hard for me to think that if one stumbles and is about to fail that we 
are going to let it fail, that government will let it fail because it 
will have huge repercussions because of the economic power these 
institutions have.
  Mr. KAUFMAN. We all agree the present bill is a good bill and has a 
good resolution authority that has been worked on for years. My basic 
concern is we need a little prevention in the mix.
  As I said before, when people say we cannot compete overseas, do we 
want to go where the Royal Bank of Scotland went? The Royal Bank of 
Scotland was 1\1/2\ times the UK economy when it went down. Do we want 
to get into this mix in Europe? Is this the place we want to be with 
these banks facing the problems they are going to have right now, as we 
went through this earlier? Is this the place we want to be?
  I think we go back to what Senator Dorgan was saying earlier, and I 
wish to add to that with a couple comments.

[[Page 7494]]

Once again I quote Alan Greenspan. He said: ``Too big to fail, too 
big.'' ``Too big to fail, too big.''
  The idea that we should turn this over to the regulators and let the 
regulators set the rates--that is the alternative. The alternative is 
to let the regulators do it. We have good regulators now. I think that 
is fine.
  Remember several things. No. 1, the regulators did nothing. The 
regulators had the power to do most of what we are talking about. They 
did nothing in the past.
  The second thing is, we could have a new President come in and adopt 
the same policy as before that self-regulation works, hire a bunch of 
regulators to go in there, such as a number of regulators we had in our 
regulatory agencies--they were not bad people. They were smart people. 
They just basically believed self-regulation works. To quote Alan 
Greenspan for the third time in this speech, he said: ``I really 
thought self-regulation would work. I'm dismayed that it didn't.''
  We can have it come back. There are still people today who believe--
we hear it sometimes on the floor--we do not need these regulators. The 
example I use is a football game where somebody gets up and says: The 
referees keep blowing the whistle and stopping the play. Let's get the 
referees off the field and play football. That is what was going on 
around here.
  As many of my colleagues on the other side point out, there was not 
enough oversight on these regulators. But you pull the football 
referees off the field, maybe the first pileup will not be bad, but by 
the time you get to the second and third pileup, I do not want to be in 
it.
  I think we ought to go back to what our colleagues did in 1933, and 
we should regulate not for 5 years, 10 years, 15 years; we should 
regulate for generations. Much of the stuff in this bill does regulate 
for generations. We should put in the bill hardline, adopted by us to 
send a message for generations that this is not going to happen again. 
Bear Stearns is not going to be able to leverage up to 40 times their 
capital base. That is what we need to do. We need to legislate for 
generations.
  Madam President, I yield the floor.
  The PRESIDING OFFICER (Mrs. Hagan). The Senator from Tennessee.
  Mr. CORKER. Madam President, I am here to speak about the consumer 
protection title in the Dodd bill. I do want to say that while I 
disagree with my friends from Delaware and Ohio in their approach, I 
appreciate the way they have conducted themselves. I think the debate 
we have had on the floor on this bill, I say to the Senator from 
Connecticut, has been of the highest level that I can remember in a 
long time. I thank him for setting that tone. I thank my caucus for 
offering nothing but constructive amendments. People on both sides of 
the aisle have tried to do that.
  It took a while to get here, but we are on the floor. Obviously, 
there are a lot of improvements people would like to make to this bill, 
and I think people are focused on doing that. I thank the Senator for 
setting that tone.
  At the same time, I do want to talk about the consumer protection 
title on which I wish to see vast improvement. I wish to see consumer 
protection take place. I think everybody in this body wishes to see 
that happen. But I believe that the consumer protection title that 
exists in this bill is one that gets back to the essence of what the 
White House has said many times, and that is: Never let a good crisis 
go to waste.
  I think the consumer protection title in this bill is a vast 
overreach. It is my hope--I know we will have a vote later today on a 
different title. If that is not successful, maybe there will be 
surgical attempts to deal with some of the problems in this title.
  For the first time in our country's history, we will be giving vast 
powers to an individual to be involved in almost every aspect of any 
type of financial transaction. Without a board, without any kind of 
check and balance, the Dodd bill creates someone heading consumer 
protection who has no one as a check and balance. This person is going 
to be able to write rules, and this person is going to be able to 
enforce those rules over our entire economy as they relate to financial 
transactions.
  I know there is a process by which if a rule is felt to be 
problematic after it is put in place--not before--after a rule is put 
in place, there is the ability of a board to actually look at those 
rules. The fact is, if a standard is set so high, it would be very 
difficult to ever overturn the rules that would be put in by this 
consumer protection agency.
  It has a vast budget. It sets its own budget, I might add. Again, 
Congress has nothing whatsoever to do with that.
  Some of the biggest problems with the consumer protection agency are 
not just that it has no checks and balance, it writes rules and 
enforces rules, it sets its own budget. On top of that, it overturns 
the way our national banking system has worked for years. Congress 
years ago decided we wanted to have a national banking system, that we 
wanted the ability of banks to operate across our country in a way that 
they had consistency, they knew under what rules they would be 
operating.
  The Dodd bill overturns that. It says there is no Federal preemption 
anymore. If States want to change laws, write laws--we could have a 
bank that operates in 50 States that has 50 different sets of 
regulations if this bill passes. That is highly problematic with banks 
that operate across our country serving companies that operate across 
our country. One can imagine a bank that tries to adhere to all of 
those States laws that might come up as a result of this bill.
  In addition, this bill then unleashes 50 attorneys general on these 
banks. That is something, again, that is not the case today. This is a 
huge overreach, and it is going to be highly disruptive to our banking 
system.
  What it is going to do, because there is no Federal preemption, is 
actually encourage general assemblies, State legislators across this 
country to become hyperactive. One of the things that State banks--not 
Federal banks, not national banks--one of the things State banks like 
about our existing laws--by the way, State banks are not these huge 
megabanks about which my friends from Delaware and Ohio were talking.
  I think State banks across the country have enjoyed--again, these are 
the smaller institutions--the fact there is something called Federal 
preemption. That has discouraged hyperactivity on behalf of State 
legislators to create laws that might be populist in nature, that might 
be done to, in essence, use our financial system for other ends.
  One of the things I think is most disruptive about this legislation 
is that--if you can imagine this--I think all of us realize what led to 
this last crisis is the fact that we had very poor underwriting of 
loans. That is the essence of this last crisis. It got spread around 
the world, the fact we had incredibly poor underwriting.
  I hope to fix that, by the way, with an amendment in a few days. I 
hope it comes up, and I hope it is adopted.
  What the Dodd bill does is give to a consumer protection agency loan 
underwriting standards. If you can imagine that. I would like for 
people in this body to think about that. A consumer protection agency 
being involved in setting underwriting standards for loans has to 
undermine the safety and soundness of our financial institutions. To 
me, that is a huge problem.
  All of us would like to see consumer protection take place. All of us 
would like to see it, I hope, take place in a way that is balanced, so 
the consumer protection laws that are put in place are put in place in 
a way that is balanced against ensuring that our financial institutions 
across this country are safe and sound; that people know they can go to 
those institutions and they are going to operate.
  I believe the Dodd bill, as it relates to consumer protection, is a 
vast overreach. I know people on the other side of the aisle have come 
up to me and said: Look, this is problematic, and if you guys can help 
us figure out a way to peel this back, we would like to be able to do 
that.
  We are going to have a chance, later today, to vote on a consumer 
protection amendment that has certainly

[[Page 7495]]

brought this more in balance. There may be other ways of getting at it. 
I would urge the chairman to consider looking at ways to peel this back 
because I do believe that, again, we are going to awake in this 
country--if the Dodd bill passes in its present form--in 10 or 15 years 
and realize consumer protection has gotten out of hand; that consumer 
protection has been used, in many ways, to create social justice, if 
you will, in our financial system. To me, that is something that is 
very dangerous.
  Let me just add one other thing. There is a new word in this title 
that is undefined. It is a word that says they will also be looking to 
see if practices were abusive. But nobody knows what that means. Nobody 
knows what that means. Under this bill, by the way, if someone were to 
come in after the fact and find that something was ``abusive,'' it 
would negate the financial transaction that was entered into. So you 
could have a zealous consumer advocate come in and say: I am sorry, 
this loan that was made between two parties was abusive, and it would 
negate that transaction.
  This bill is a huge overreach. It obviously goes right along the 
lines of the White House saying you should never let a good crisis go 
to waste. This bill is going to be around for a long time, if it 
passes. So I hope what we can do, over the course of the next several 
days, during this time when we are having one of the most civil debates 
I think we have had in the Senate since we have been here--a high level 
of civil debate--I hope we will be able to put this back in balance.
  I know the Presiding Officer is from a State where people care a 
great deal about their financial institutions. So I hope to work with 
her and my friend from Minnesota and others to try to achieve that 
balance.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Madam President, I will respond more fully a little later 
because my colleague and friend from Minnesota is on the floor to be 
heard, but I just wish to say that a lot of work went into this bill on 
consumer protection.
  You don't have to wait 10 or 15 years to find out what can happen. We 
have watched painfully what can happen over the last several years, 
when the very people--the prudential regulators--should have been 
standing and saying: No-doc loans are wrong and dangerous. In fact, it 
was consumer groups that warned about the real estate bubble. We were 
being told everything was safe and sound because people were making 
money, and it looked like it might go on forever.
  Of course, everyone has 20/20 hindsight looking back as to what 
occurred. But had we had in place someone saying: No-doc loans, no 
downpayments, adjustable rate mortgages at fully indexed prices are 
going to cripple people's ability to meet those obligations, we 
wouldn't be in the situation we are in today. None of the seven 
agencies that have jurisdiction over consumer protection were doing 
their job very well.
  I will address more specifically the alternative idea being 
suggested, and let me also say I have never claimed our proposal on 
consumer protection is perfect. I acknowledge the word ``abusive'' does 
need to be defined, and we are either talking about striking that word 
or defining it better. Deceptive and fraudulent cover the ground pretty 
well, but I thought abusive was a pretty good explanation point. 
Because it was abusive, in common language.
  So I will come back later, but I wished to acknowledge that we have a 
number of organizations that have endorsed this bill of ours, strongly 
support our committee bill, ranging from the Americans for Financial 
Reform, the Consumers Union, Center for Responsible Lending, the 
Consumer Federation of America, U.S. PIRG, Public Citizen, the National 
Consumer Law Center, Consumer Watchdog, and AARP.
  Of course, we are all familiar with the group representing older 
Americans. In fact, I ask unanimous consent to have printed in the 
Record, at this point, a letter from AARP, opposing the Shelby 
substitute on the consumer protection title.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                           American Association of


                                              Retired Persons,

                                      Washington, DC, May 6, 2010.
     Re Oppose Shelby substitute Consumer Protection title to S. 
         3217.

       Dear Senator: A key priority for AARP in the financial 
     reform legislation is strengthened consumer protection that 
     will help restore market accountability and responsibility, 
     rebuild confidence, and ensure the stability of the financial 
     markets. Surveys conducted by AARP demonstrate that Americans 
     50+, regardless of party affiliation, want Congress to act to 
     hold financial institutions accountable.
       AARP supports the creation of a Consumer Financial 
     Protection Bureau, as incorporated in S. 3217, that would 
     have as its sole mission the development and effective 
     implementation of standards that ensure that all credit 
     products offered to borrowers are safe. We have been clear 
     that such an agency should be truly independent in its 
     leadership, funding, staff and decision-making; that it 
     should have the authority to oversee all lenders and products 
     in the marketplace; and that it should have broad rulemaking, 
     enforcement and supervision powers over all types of 
     providers. We also have insisted that the states must be the 
     ``cops on the beat'' with the authority to move against 
     abusive practices that arise locally.
       Judged against this criteria, the Shelby substitute 
     Consumer Protection title fails in virtually every instance. 
     The consumer protection agency will not be independent; 
     rather the FDIC Board of Directors must approve all 
     rulemaking. Inadequate resources will cover rulemaking and 
     supervisory expenses only; there is no funding for 
     enforcement. Oversight and enforcement is extremely limited. 
     For example, the new agency will have no enforcement 
     authority over any bank or other type of depository 
     institution. Non-mortgage companies will be subject to 
     supervision only if they demonstrate a pattern or practice of 
     violating the law within the past three years. And, the bill 
     does not give the states the authority to take action where 
     necessary.
       We respectfully urge you to vote NO on the Shelby 
     substitute Consumer Protection title when it comes up for a 
     vote today. If you have questions, please feel free to call 
     me or have your staff contact Mary Wallace of our government 
     relations staff at (202) 434-3954 or [email protected].
           Sincerely,

                                              David P. Sloane,

                                            Senior Vice President,
                                Government Relations and Advocacy.

  Mr. DODD. So major groups, ones that are consumer oriented as well as 
those that watch out for older Americans--many of whom have to pay 
mortgages, are on fixed incomes--are worthy of note.
  Again, I wish to thank my colleagues for their comments and thoughts 
on this amendment, and I will address more of that later, but I will 
yield the floor.


                           Amendment No. 3808

  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. FRANKEN. Madam President, I rise to speak about the need to 
further address the problems of the credit rating agency industry. 
Senator Dodd has presented us with a very good bill that takes major 
strides in addressing many of the problems that brought our economy to 
the brink of collapse. It reins in too big to fail, brings derivatives 
out of the shadows, and creates a new consumer watchdog that will 
prioritize consumer protection over Wall Street profits.
  Senator Dodd's bill includes several provisions on credit rating 
agencies. It holds rating agencies accountable in court for being 
reckless in their duties, it requires increased disclosure, creates new 
complaint systems, and requires raters to use information beyond what 
is provided by issuers.
  These are a few of the many provisions the Dodd bill includes to 
begin to address issues with credit rating agencies, and they are all 
good. But one thing it doesn't do is get at the underlying problem--the 
conflict of interest inherent in the issuer-pays model, where the 
issuer pays the rating agency.
  To root out conflicts of interest completely, we must change the 
vested interests of each of the players. The central conflict of 
interest can be boiled down to this: The issuer has an interest in 
obtaining a high rating so it can sell its product. The credit rating 
agency has an interest in giving out a high

[[Page 7496]]

rating so it can sell its service. Tom Toles, of the Washington Post, 
depicts the problem quite well in this comical cartoon.
  Here we see the rating agencies--he labels them that so you know it 
is them--giving three 10s to a figure skater--labeled Wall Street, and 
he is kind of fat there. You see he says: ``I pay their salaries.'' 
That is why he is getting three 10s--or a AAA--and yet he is a figure 
skater and he is dumping trash. We see an apple core, there is a fish 
head, skeleton, a banana. You don't want those on the ice. You just 
don't want that. That is bad. Then there is a little figure here, the 
little garbageman. It says: ``Somebody else pays to clean the ice.'' 
That, of course, is us--the taxpayers.
  I think after seeing this cartoon, if there is anyone who doesn't 
support my amendment, I don't know what to do. Anyway, this actually 
makes the point very well that the issuer is paying the rating agency 
and, hence, the AAA.
  However, the credit rating agency should have an interest in 
providing accurate ratings--unlike the triple 10s in this cartoon--so 
investors are provided with the accurate information they need to make 
investment decisions. But for the reasons I just described, there are 
very few incentives to provide accurate ratings. The market simply 
doesn't reward accurate ratings.
  The best way to fix this problem is to change the way the market 
works so it rewards accurate ratings. Once we start getting accurate 
ratings, investors can make better decisions about the products they 
are selecting for inclusion into pension funds. Having safe products in 
pension funds protects the retirement security of hard-working 
Americans.
  Let me give you an example of the perverse incentives that have been 
driving the credit rating agency industry thus far. My friend and 
colleague Senator Levin recently held a hearing in the Permanent 
Subcommittee on Investigations. His investigators released many e-mails 
from the industry that reflect the conflicts of interest that drove the 
system.
  Here is a good example. There is a rating agency employee writing to 
his own rating agency people about a group of theirs, a group within 
his rating agency.

       We are meeting with your group this week to discuss 
     adjusting criteria for rating CDO's of real estate assets 
     this week because of the ongoing threat of losing deals. Lose 
     the CDO and lose the base business.

  So here the credit rating agency is proposing to change its rating 
criteria to avoid losing business. This is exactly what was at the root 
of all these AAA-rated, subprime, mortgage-backed securities that were 
leveraged and had the CDOs on them--these exotic instruments that were 
rated AAA--and what created this entire mess. It is clear the 
incentives are to keep customers coming back, to make sure accurate 
ratings aren't driving customers into the arms of other rating 
agencies--don't want to let accuracy get in the way of more business.
  We need to change the incentives. I believe my amendment, No. 3808, 
will do that. The amendment tasks a board--a self-regulatory 
organization--with selecting a pool of qualified credit rating 
agencies. The board would then choose a system to assign, one at a 
time, one of these qualified credit rating agencies to each request for 
an initial credit rating. Issuers could no longer shop around for the 
best rating. They could, however, get a second, third or fourth rating 
from any agency they choose. But the first assigned rating would 
provide a check against the next agency inflating its rating.
  The amendment would require the board to consider a rating agency's 
past performance and could adjust the number of rating assignments 
based upon demonstrated accuracy. If a small rating agency began 
performing extremely well, the board could start giving it more 
assignments, breaking the oligopoly of the big three raters, which 
served us very poorly, or maybe the big three would get their act 
together under this new system.
  The point is, when the agencies are finally operating in a market in 
which accuracy is valued, they will compete on the basis of accuracy. 
When accuracy is driving growth, not preexisting relationships or 
sweetheart deals, smaller rating agencies will have an opportunity to 
compete and grow, making the industry more robust.
  So properly addressing conflicts of interest in the credit rating 
agency industry necessitates realigning the interests of rating 
agencies with the interests of investors. The way to do that is by 
promoting and rewarding accuracy. My amendment will create these 
incentives, increase accuracy, promote competition and stability, and 
restore integrity to the credit rating industry system.
  I thank my colleagues, Senator Schumer and Senator Nelson, for 
helping me lead this effort and Senators Whitehouse, Brown, Murray, 
Merkley, and Bingaman for joining us.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SHELBY. Madam President, I rise today to discuss the amendment 
that Senate Republicans are offering to greatly improve consumer 
financial protection.
  This amendment recognizes that our existing financial regulatory 
system fails to adequately provide consumer protection. Our system is 
broke, and it needs fixing.
  The recent financial crisis has revealed that our financial 
regulators were asleep at the switch and had neglected to uphold their 
basic responsibilities for consumer protection.
  Far too often, our regulators were more concerned about pleasing the 
entities they regulated than looking out for consumers. It is clear 
that we need to refocus the priorities of our financial regulators and 
ensure that consumer protection gets the attention it deserves.
  Make no mistake. Republicans want to strengthen consumer protection.
  We need to make sure that consumers get clear and understandable 
disclosure so that they can make good decisions.
  We need to make sure that regulators have sufficient authority to 
combat fraudulent practices.
  We also need to make sure that our consumer protection laws and 
regulations keep up with changes in our dynamic and innovative 
marketplace.
  Any changes to consumer protection, however, need to reflect that 
consumer protection does not stand in isolation. It is inherently 
linked with safety and soundness regulation.
  This is most dramatically illustrated by the fact that an ill-
conceived consumer protection law, such as allowing for no down 
payments, could cause banks to fail.
  Given that taxpayers are ultimately on the hook for bank failures, it 
would be irresponsible not to require regulators to consider the impact 
proposed consumer protections could have on the deposit insurance fund.
  After all, one of the most important consumer protections is a 
healthy financial system, where financial institutions are able to keep 
long-term commitments to consumers, like annuities, insurance, and 
retirement funds.
  The amendment we are proposing embodies this approach. It would put 
the FDIC in charge of writing consumer protection regulations. That 
responsibility currently rests with the Fed.
  As a prudential regulator, the FDIC has the experience necessary to 
ensure that the right balance is struck between consumer protection and 
safety and soundness.
  To raise the status of consumer protection, a new division will be 
established at the FDIC. The division will be led by a Presidentially 
appointed and Senate-confirmed director.
  The director will serve a term of 4 years and will be required to 
testify before Congress at least twice a year. This will help ensure 
that regulators are held accountable for their actions on consumer 
protection.
  In addition, this amendment does not disrupt the century and a half 
of precedent on preemption with respect to national banks.
  We should be very cautious about allowing national banks to be 
regulated by 50 different States and opening up

[[Page 7497]]

the door to needless state litigation that only enriches trial lawyers 
and raises costs to consumers.
  The Republican amendment also grants the FDIC primary supervision and 
enforcement authority over large nonbank mortgage originators, and 
other financial services providers that have violated consumer 
protection statutes.
  This will give the FDIC broad authority to clamp down on the worst 
offenders of our consumer protection laws without needlessly subjecting 
law-abiding businesses to expensive regulation.
  The Republican approach to consumer protection sharply contrasts with 
the approach of the Dodd bill.
  Under the Dodd bill, the Consumer Financial Protection Bureau would 
issue rules without considering their impact on the safety and 
soundness of financial institutions.
  Need I remind my colleagues that this is the same regulatory model 
that produced the fiascos at Fannie and Freddie. In that case, HUD 
wrote rules on their housing goals and underwriting standards, while 
OFHEO regulated them for safety and soundness.
  Do we need a better example of the foolishness of divorcing consumer 
protection from safety and soundness?
  How did that regulatory model help consumers? It certainly left them 
with a huge tax bill to cover the government bailout.
  An examination of the powers and size of the bureau established by 
the Dodd bill shows further how the Republican approach differs from 
the approach advocated by the Obama administration and the Democrats.
  They start with the assumption that small busiesses are, in President 
Obama's words, ``bilking people'' and that heavyhanded regulations and 
an extensive bureaucracy are the only ways to ensure that small 
businesses do not take advantage of their consumers.
  I do not believe that the tens of thousands of small businesses--the 
florists, the retailers, the dentists, the auto dealers--that fall 
within the regulatory reach of their new bureaucracy are ``bilking'' 
people. I also know that these entities had nothing to do with the 
financial crisis.
  Unfortunately, the Dodd bill would create a massive new bureaucracy 
with unprecedented powers to regulate small businesses and consumers.
  The Consumer Financial Protection Bureau could dictate exactly what 
forms business must use, who they provide services to, and how they 
sell their products.
  Control over American businesses would shift further from 
entrepreneurs to bureaucrats in Washington.
  Perhaps the most troubling aspect of their approach is that it 
assumes that consumers need benevolent bureaucrats to make decisions 
for them. In order to make that happen, the Dodd bill authorizes the 
new consumer agency to collect any information it desires.
  Small businesses across this country fear the massive and potentially 
very intrusive new bureaucracy created under the rubric of consumer 
protection. They have every right to be afraid.
  This massive new government bureaucracy has the power to place 
individuals under oath and demand information about their personal 
financial affairs.
  The new bureaucracy is also required to report to the IRS any 
information it gets that it believes may be evidence of tax evasion.
  Why does their new bureaucracy need these incredible powers? Because 
their bill envisions the bureau analyzing and monitoring Americans' 
behavior and then issuing regulations to stop them from doing things 
the bureaucrats deem ``irrational'' or ``inappropriate.''
  Just read the writings of the Assistant Secretary of Treasury for 
Financial Institutions, one of the chief architects of this expansive 
new bureaucracy. He has written how ``regulating . . . appropriately is 
difficult and requires substantial sophistication by regulators, 
including psychological insight.''
  Let me translate this academic jargon.
  He is saying that all-knowing regulators should be empowered to make 
decisions for consumers because benevolent regulators are the only ones 
who possess the right ``psychological'' mind set to do things 
``appropriately.''
  Think about it a minute.
  Regulators are wise and should be heeded; consumers are foolish and 
should do as they are told. That is what we are talking about here.
  The architects of this massive new bureaucracy have long argued for a 
consumer bureaucracy with the right ``culture.''
  Whether that ``culture'' focuses on consumer protection and a safe 
and sound banking system or it becomes a way for community organizers 
and groups like ACORN to grab Federal resources is left wide open.
  One of the strongest proponents for the new consumer bureaucracy has 
been Treasury's Assistant Secretary for Financial Institutions, as I 
said.
  Allow me to read into the Record a couple of quotes from a paper 
entitled ``Behaviorally Informed Financial Services Regulation'' 
coauthored by the Assistant Secretary Barr in October of 2008.
  The Secretary writes, ``Because people are fallible and easily 
misled, transparency does not always pay off. . . .''
  He writes that: ``. . . regulatory choice ought to be analyzed 
according to the market's stance towards human fallibility.''
  On regulation, he writes that: ``Product regulation would also reduce 
cognitive and emotional pressures related to potentially bad 
decisionmaking by reducing the number of choices. . . .''
  He is talking about choices in the market place. Yes, the 
administration's chief advocate believes that benevolent regulators 
need to reduce choices for the consumer so that they can be protected 
from bad decision making and their own inherent fallibility.
  He also opines on the topic of disclosures where he states that:

       [D]isclosures are geared towards influencing the intention 
     of the borrower to change his behavior; however, even if the 
     disclosure succeeds in changing the borrower's intentions, we 
     know that there is often a large gap between intention and 
     action.

  I believe that regulators need to ensure that consumers have the 
information they need to make their own decisions based on their needs 
and circumstances.
  The proponents of behavioral economics believe, however, that 
regulators need to influence peoples' intentions and change their 
behavior so that they make decisions that the regulator deems 
appropriate for them. As I have said before, this is the nanny state at 
its worst.
  Finally, he writes of a proposal on late fees charged by financial 
service providers.
  He writes:

       Under [his] proposal, firms could deter consumers from 
     paying late or going over their credit card limits with 
     whatever fees they deemed appropriate, but the bulk of such 
     fees would be placed in a public trust to be used for 
     financial education and assistance to troubled borrowers.

  The translation is that behavioral economists not only believe that 
they are best positioned to make decisions for us, but they are also 
best positioned to decide how private companies spend their money.
  Needless to say, this is a disturbing perspective, but it does reveal 
just how much the Obama administration wants to empower bureaucrats.
  We should remember that the failure of our existing regulators, 
primarily the Federal Reserve, to properly enforce consumer protections 
helped cause the crisis. Yet the Dodd bill's response is to create a 
bigger bureaucracy and hire more bureaucrats at the Fed.
  In contrast, the Republican amendment would make the changes and 
improvements that we all can agree need to be done, but would do so in 
a more focused and prudent manner.
  The expansive reach of the Dodd bill means that the new bureau is 
going to be expensive. The budget for the bureau is approximately $650 
million in new taxpayer costs, funded Argentina-style by tapping the 
central bank's money-printing powers.

[[Page 7498]]

  In comparison, the budget for the Office of the Comptroller of the 
Currency, our national bank regulator, is currently $750 million, and 
that agency does both consumer protection and prudential supervision.
  Under the Republican plan, industry, not taxpayers, would pay the 
costs of consumer protection.
  Despite giving the bureau a huge budget and vast powers, the Dodd 
bill fails to take any reasonable steps to hold the bureau accountable.
  The bureau receives all of its funding from the Federal Reserve, 
beyond both congressional and executive oversight.
  The bureau has complete discretion on how it spends its budget, 
allowing it to devise programs for backdoor funding of special interest 
groups like ACORN and other liberal activist groups.
  The more we learn about the Dodd bill's approach to consumer 
protection, the more I believe the Republican approach makes more sense 
and strikes the right balance.
  The Republican amendment wisely places consumer protection in a 
financial regulator, the FDIC, but enhances the status of consumer 
protection by creating a new division of consumer protection.
  It holds regulators accountable and ensures that repeat violators of 
consumer protection laws face stiffer penalties and regulation.
  The Republican amendment avoids creating costly new bureaucracies and 
imposing unnecessary costs on small businesses that had nothing to do 
with the crisis.
  We all agree that consumer protection needs to be modernized and 
given more attention by our regulators.
  I believe the Republican approach does this. And it does so without 
building the expansive and expensive bureaucracy contained in the Dodd 
bill.
  Most importantly, the Republican approach ensures that consumers are 
protected, but that they, not bureaucrats, are ultimately the ones 
making decisions for themselves.
  I have heard from productive American companies--from tractor 
manufacturers to beer brewers--from motorcycle manufacturers to public 
utilities that provide heating fuel to your home--and they strongly 
oppose this bill because it will increase their operational and risk 
management.
  I have heard small responsible business owners, who offer their 
customers the convenience of installment payments, express serious 
concerns about the potential for an out-of-control consumer bureaucracy 
that the Dodd bill creates.
  Although the bill's supporters have and will argue that the fears are 
unfounded because the bill says that merchants not engaged 
``significantly'' in offering consumer financial services are excluded 
from the new consumer regulatory bureaucracy.
  The bill does not, however, define what the word ``significantly'' 
means--leaving that to the discretion of the benevolent bureaucrats.
  The supporters of this massive new government agency trust the 
bureaucrats. I trust American small business owners.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Madam President, I congratulate the Senator from 
Alabama for his comments and for his proposal, which he described as a 
Republican proposal. Of course, what all of us hope is that it becomes 
a bipartisan proposal as our friends on the other side look carefully 
at it. That is what happened with the big bank bailout provision we 
worked on yesterday. Senator Dodd and Senator Shelby worked for a 
while, Senators Corker and Warner had worked before that, and we came 
up with a conclusion that all but five Senators agreed to. Now we have 
moved to address two of the other major deficiencies in the Dodd bill 
that we have wrapped up in one proposal here, and it is really wrapped 
up with the central issue that is before the American people.
  President Obama said in September of last year that the health care 
bill was a proxy for a larger issue about the role of government in 
Americans' lives. The President was exactly right about that, and we 
have seen the issue of government's role over and over again. I don't 
think it will change between now and the November election. In fact, 
the President said at our health care summit that is why we have 
elections, and I think he is correct about that. We have seen a 
Washington takeover of banks; we have seen a Washington takeover of car 
companies; we have seen a Washington takeover of many aspects of health 
care; we have seen a gratuitous Washington takeover of student loans. 
In this financial regulation bill, instead of dealing with the high 
jinks of big banks, we are going to take over Main Street lending and, 
on top of it, create a new czar or czarina to make decisions about 
millions of transactions across America that are on Main Street.
  So what Senator Shelby's proposal offers--and we hope it receives the 
same kind of bipartisan consideration that the resolution authority or 
the big bank bailout discussion did yesterday that we finally agreed 
on--is that we would like to change this bill in two ways. Republicans 
would like to say: Let's take Main Street lending out of it. The 
Senator from Connecticut, Mr. Dodd, said it is not in there. But the 
language makes it look as if it is in there. It looks like we're about 
to start regulating your daughter's dentist bill, the plumber, and the 
store owners up and down Main Street who give you flexible credit. In 
other words, if you say: You can pay me over time--it looks as if 
Congress is going to start regulating that transaction.
  That is going to make credit harder to get because the dentist or the 
plumber or the store owner is going to say: I'm not going to fool with 
it. I don't want to be regulated by some Washington bureau, so if you 
want to buy my goods, go to the bank and get some money or get another 
credit card.
  And you know what that is going to do? That's going to slow down the 
economy. That's going to make jobs harder to create because it is going 
to make credit harder to obtain and credit harder to offer.
  Making credit harder to get is not what we need at this time. We just 
had the reports of the economic growth of our country during the first 
quarter. It was 3.2 percent. That is not very good. I can vividly 
remember flying on a helicopter with President Bush when I was 
Education Secretary in 1992, and the economic growth of the third 
quarter of the year was better than that; it was 4.2 percent. And Bill 
Clinton beat George Bush, Sr., on the ``It's the Economy, Stupid'' 
campaign. So 3.2 percent is not going to cut it for our country. Most 
economists say that if our economy continues to grow over the next 
year, through 2010, at the same rate it grew in the first quarter, the 
unemployment rate will not change. The unemployment rate will still be 
about 9 or 10 percent at the end of this year, as it is today.
  What can we do to change that? Well, we have to create an environment 
for job growth. We have done pretty good in creating job growth in 
Washington. The one place the stimulus has really worked is in 
Washington, DC. Salaries are up. Jobs are up. There are plenty of new 
jobs around here. But out across America, we are not creating enough 
new jobs, and too many of the things we are doing here make it harder 
to create new jobs.
  The health care bill makes it harder to create new jobs because it 
imposes taxes on job creators and it imposes taxes on investors. Tax 
increases make it harder to create new jobs. Running up the debt--the 
President's budget doubled the debt in 5 years and tripled it in 10 
years--makes the economy less certain and it makes it harder to create 
new jobs. And the threat of creating a czar or czarina in Washington, 
DC, and a new bureau to supervise and make Main Street lending more 
difficult and expensive makes it harder to create new jobs. We should 
take it out of the bill.
  If the Senator from Connecticut, who is one of our finest Senators, 
and is well intentioned, wants Main Street lending out of the bill, 
let's just take it out of the bill. Let's don't leave in there the 
possibility that someone might come along and interpret 
``significantly'' involved financial activities to include the plumber 
and the dentist.

[[Page 7499]]

  This has attracted the attention of a lot of people from Tennessee: 
community bankers, credit unions, and the National Federation of 
Independent Businesses. They are talking about office suppliers, 
jewelers, health professionals, and furniture stores who are all 
concerned with this bill. The NFIB estimates that about 50 percent of 
small businesses let you pay over time. In other words, they offer you 
credit. They make special arrangements. They say: OK, we know you don't 
have all of the cash right now. You might not want to run up your 
credit card or maybe your credit card is near the limit, so we will 
sell you whatever we have to sell you or we will provide the service 
you need. You can pay us in 6 months. You can pay us in 5 months.
  Well, under this bill, if you offer payment plans you could be 
``significantly'' involved in financial activities. Then this czar or 
czarina in Washington, DC, is going to be regulating you. You might be 
a very small business and you might not have a lot of extra money to 
fill out regulatory forms, but you are going to be filling out forms 
and suffering more regulations. And you are going to be offering less 
credit and credit will be harder to get up and down Main Street.
  If our real intention in this body on both sides of the aisle is to 
not interfere with Main Street lending, then let's actually do that. 
That is what the Republican amendment--which we hope becomes a 
bipartisan--does.
  Then there is the second big idea that is in this Republican 
amendment. So far as I am concerned--we don't need another czar. This 
bill is supposed to be about big banks, about financial high jinks on 
Wall Street, about this recession we are in, and about issues that will 
change the regulations in a sensible way that will avoid as many future 
recessions as possible and, at the same time, about creating an 
environment in which we can grow the largest number of good new jobs. 
But suddenly, we have this new Washington agency not only possibly 
regulating Main Street lending but creating an unaccountable person at 
the top to write the rules and the regulations. When I say 
``unaccountable,'' that means she or he is just over here at the Fed. 
Once confirmed by the Senate, this person has no boss. This person 
doesn't report to the President, doesn't have to come before Congress 
for appropriations, and has a steady stream of money and really 
unlimited authority. There is nothing to keep this new czarina or czar 
from writing the kinds of regulations and rules that got us into 
trouble in the first place with housing. Nothing to keep this person 
from writing rules that might encourage irresponsible home ownership. 
That is what we had before. So the Dodd bill might encourage 
irresponsible borrowing.
  So the second major idea in the Republican amendment is, let's make 
this person accountable. The President appoints a Director who is 
confirmed by the Senate, but this person would be in the Federal 
Deposit Insurance Corporation. This Director would be accountable to 
other people appointed by the President and confirmed by the Senate and 
would have to come before the Congress multiple times annually to give 
us a chance to inquire about things.
  I have come to the floor today to say we made an important step in 
the right direction when we worked on the first part of this bill 
yesterday across party lines. We addressed one of the five issues we 
need to deal with.
  The issue of, what to do with banks that are too big to fail and get 
the rest of us into trouble, has been addressed.
  But we have four more big issues to deal with here and other smaller 
issues. Two of the big issues are addressed in this Republican 
amendment. One is: let's not take over Main Street lending and make it 
harder to loan money, harder to get money, and harder to create jobs.
  No. 2 is: let's not create another czar in Washington. The last thing 
we need is another Washington takeover and another Washington czar.
  We hope our amendment will attract significant bipartisan support, 
and then we can move on to the other important questions in this 
legislation.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Maryland.
  Mr. CARDIN. Madam President, first, let me thank Senator Dodd for 
bringing forward a strong bill to regulate Wall Street. The bill 
provides for strict new regulations to stop Wall Street's reckless 
gambling.
  I think one needs to understand the current system and how we got to 
where we are today. We have eight Federal regulatory entities that 
oversee the financial sector. Their authority is different, their 
powers are different, their ability to respond to a particular problem 
is different, and the entity that is regulated today can shop for the 
regulator they want by what they call themselves and the types of 
activities they try to define themselves as. They can shop and look for 
the regulatory entity they believe they can circumvent the easiest. 
They can escape and did escape proper supervision.
  Well, this legislation ends that practice by a clear regulatory 
framework in order to regulate all financial institutions. The 
regulatory entity that does the regulation is based upon size and 
jurisdiction. And we have the Financial Stability Oversight Board that 
provides uniformity. No more gaps in the regulatory system. And it 
provides the tools for the regulators for early intervention. That 
means we end, once and for all, too big to fail. By early intervention 
on takeovers, closing down financial institutions, requiring the sale 
of financial institutions, we can prevent the need for too big to fail. 
The risk will be on the investors, not on the taxpayers of this 
country. The Boxer amendment makes that clear.

  Tools that are needed for orderly liquidation to minimize the impact 
on the financial sector and our economy are provided in this 
legislation.
  It recognizes the need for special attention to our community 
financial institutions. They were not the cause of the financial crisis 
we went through. We know it came from Wall Street. Our community banks 
were very much vulnerable as a result of the financial collapse. We 
need to streamline the regulatory process as it relates to our 
community banks. Regulation is cost. We have to have regulation. We 
need regulation. They need regulation. But we need to make sure it is 
sensible. This bill streamlines the regulatory structure as it relates 
to our local financial institutions.
  We need strong and adequate regulation, and it provides it. We need 
to write a balance, and this legislation provides that. I might say, 
there are amendments we have already considered that I think were the 
right thing in order to make sure this balance is correct. I am sure 
there will be other amendments we will consider to make sure we get 
that balance right between adequate regulation and the cost of 
regulation to small community financial institutions.
  This legislation puts the consumer first, as it should, with a strong 
consumer bureau. Some say: Why do we need that? Isn't the current 
regulation adequate? The answer is no. All you need to look to is what 
happened in the residential mortgage marketplace. All you need to look 
at are the advertisements that were taking place just 2 years ago for 
no-doc or stated-income loans or no-down-payment loans--loans that 
provided over 100 percent of the cost. And look at the subprime lending 
in each of our communities, where home buyers who could have qualified 
for traditional home mortgages were steered into the subprime market 
because the mortgage company or the seller made more money by steering 
them into subprime loans. Well, those practices have to come to an end. 
Those housing practices sparked, as we know, the trigger for this 
recession. These practices helped create that bubble that burst and the 
damage that was caused when it did burst.
  We can take a look at the cost of this recession. The Pew Financial 
Reform Project estimated that just a slowdown in economic growth will 
cost every family in America close to $6,000. Well, that is money that 
will never be made up. We have to make sure it never happens again. The 
Federal spending, in order to prevent the economic collapse

[[Page 7500]]

of Wall Street, is estimated to cost $2,000 per household. If you look 
at just the decline in real estate values, in 9 months, from July 2008 
to March 2009, the wealth lost equaled about $30,000 per household in 
real estate and over $60,000 per household in the stock market. We lost 
millions of jobs. I could go on and on. We have an obligation to make 
sure our economy and our people are protected from that type of 
financial meltdown in the future.
  This legislation properly regulates risky gambling by financial 
institutions by putting in place prohibitions and disclosures. It puts 
an end to derivatives markets that have no economic value to our 
economy. It requires disclosure on the derivatives markets, so we can 
take Justice Brandeis' advice and use sunlight as the best 
disinfectant. It provides for the Volcker rule, codifying that, by 
restricting certain types of high-risk financial activities by banks 
and bank holding companies.
  This legislation regulates credit rating companies. We know credit 
rating companies--their rating will very much affect the price of a 
security and the viability of the security.
  In this recession, many Marylanders and people from every State in 
this Nation have lost their homes, their jobs, and savings. We have a 
responsibility to act to end the reckless practices on Wall Street that 
helped plant the seeds for this recession. This legislation is a giant 
step forward.


                           Amendment No. 3732

  Madam President, I will now speak briefly about an amendment I intend 
to offer.
  I rise to urge the inclusion of amendment No. 3732 to S. 3217. This 
amendment is a critical part of the increased transparency and good 
governance we are striving to achieve in the financial industry.
  This is a bipartisan amendment that would require all foreign and 
domestic companies registered with the U.S. Securities and Exchange 
Commission, the SEC, to report in their annual report to the SEC how 
much they pay each government for access to their oil, gas, and 
minerals. Most of the world's extractive industries companies would be 
covered by this law, setting a new international standard for 
transparency, for openness.
  We have seen the devastating effects of a lack of transparency in 
this country, what happens when Wall Street is left unchecked and 
barons cloaked in secrecy make off with millions while others lose 
their homes. This is why we are addressing openness and transparency in 
the underlying legislation today. We would be remiss to create this 
sweeping reform of our financial sector without addressing the need for 
adding a new layer of transparency to a set of companies already under 
the SEC's jurisdiction--the oil, gas, and mining companies that make up 
the extractive industries.
  This amendment would create an environment of transparency to 
reassure investors, help stabilize global energy markets, and thus 
support goals of energy security.
  Current Federal Accounting Standards Board standards require reports 
of tax, royalty, and bonus payments to host governments, but the 
numbers need only be reported in aggregated categories, such as 
``production costs excluding taxes'' and ``taxes other than income.'' 
These payments are reported on a country level where a company's 
operations are very substantial, but otherwise they are reported on 
such a broad basis that a company can simply report on which continent 
it was operating. Such disclosure is not useful in determining the 
extent of a company's operations in or its ongoing financial 
arrangements with a country.
  In terms of energy security, the oil, gas, and mining revenues are 
critically important economic sectors in about 60 developing and 
transition countries which are paradoxically home to more than two-
thirds of the world's poorest people. Despite receiving billions of 
dollars per year from extractive revenue, these countries rank among 
the lowest in the world on poverty, economic growth, authoritarian 
governance, conflict, and political instability. Unaccountable 
management of natural resource revenues by foreign governments leads to 
corruption and mismanagement, which in turn creates unstable and high-
cost operating environments for multinational companies and threatens 
the security of the energy supply of the United States and other 
industrialized nations. So we are talking about in these countries 
where mineral wealth becomes a mineral curse. It becomes a source of 
revenue for corruption rather that a source of revenue for economic 
growth so a country can grow. It runs counter to our foreign policy 
objectives of good governance and economic growth for the developing 
world. Transparency will help make sure the mineral wealth goes to the 
people of that nation.
  The provisions of this amendment would apply to all oil, gas, and 
mining companies required to file periodic reports with the SEC; 
namely, 90 percent of the major internationally operating oil companies 
and 8 out of the 10 largest mining companies in the world--only 2 of 
which are U.S. companies. We are talking about foreign-owned companies, 
not U.S. companies, by and large. Of the top 50 largest oil and gas 
companies by proven oil reserves, 20 are national oil companies that do 
not usually operate internationally. These companies are not registered 
with the SEC or any other exchange and only operate within their own 
country, which means these national oil companies do not compete with 
internationally operating companies. Of the remaining 30 companies that 
do operate internationally, 27 would be covered by this legislation--27 
of the 30. These include Canadian, European, Russian, Chinese, 
Brazilian, and other international companies.
  We currently have a voluntary international standard to promote 
transparency. A number of countries and companies have joined the 
Extractive Industries Transparency Initiative, the EITI, an excellent 
initiative that has made tremendous strides in changing the culture of 
secrecy that surrounds the extractive industries. But too many 
countries and companies remain outside this voluntary system.
  The notion of transparency has been endorsed by the G8, the IMF, the 
World Bank, and a number of regional development banks. It is clear to 
the financial leaders of the world that transparency in natural 
resources development is key to holding government leaders accountable 
to the needs of their citizens and not just building up their personal 
offshore bank accounts.
  It is now time to create in law an international standard for 
transparency. It will only happen if the United States is in the 
leadership. The international community looks to us to be a leader on 
this issue.
  Investors need to be able to assess the risks of their investments. 
Investors need to know where, in what amount, and on what terms their 
money is being spent in what are often very high-risk operating 
environments. These environments are often poor developing countries 
that may be politically unstable, have lots of corruption, and have a 
history of civil unrest. The investor has a right to know about the 
payments. Secrecy of payments carries real bottom-line risks for 
investors.
  Creating a reporting requirement with the SEC will capture a larger 
portion of the international extractive industries corporations than 
any other single mechanism, thereby setting a global standard for 
transparency and promoting a level playing field.
  Investors should be able to know how much money is being invested up 
front in oil, gas, and mining projects. For example, oil companies 
often pay very large signature payments to secure the rights for an 
oilfield, long before the first drop of oil is produced. Such payments 
are in addition to the capital investment required. In Angola, for 
example, $500 million is not an unusual signature bonus that has to be 
paid for a single field, and a single field can cost more than $2 
billion to develop. Such costs take years for companies to recoup 
through their production-sharing arrangements with host companies. For 
this reason, it is in the interest of the investors to know the amount 
and timing of payments of high-risk operating environments.
  When a company they have invested in becomes targeted by a campaign 
of

[[Page 7501]]

misinformation, only the transparency of their financial information 
will help the investor. Disclosure of payments is one way to address 
risk, helping companies protect themselves from false or unfair 
accusations and blame-shifting by host governments that can tarnish 
their image in the investor community and the general public.
  I urge my colleagues to join me in supporting the creation of a 
historic transparency standard that will pierce the veil of secrecy 
that fosters so much corruption and instability in resource-rich 
countries around the world.
  I thank the Presiding Officer and yield the floor.
  The PRESIDING OFFICER (Mr. Burris). The Senator from Missouri is 
recognized.
  Mr. BOND. Mr. President, Americans have sent Congress a message: 
Reform Wall Street, hold the bad actors accountable, but do not hurt 
the folks on Main Street who had nothing to do with the financial 
crisis. That is what we are debating about here in the Senate this 
week.
  Senators on both sides of the aisle agree on one thing: All of us 
want to hold Wall Street accountable for the havoc wreaked on Main 
Street. We all agree we need to enact reform to prevent another 
financial crisis. But we have some disagreements on what responsible 
reform looks like.
  While we all agree on the need to reform Wall Street to protect Main 
Street, the current bill, even with amendments so far, does not, in my 
view, do the trick. We are making progress, but there is still a lot of 
work to do because, in its current form, the bill is still a massive 
government overreach, punishing Main Street, hurting families, and 
costing jobs by stifling small business and entrepreneurs.
  Today, I will highlight some of the concerns I have heard from Main 
Streets in Missouri and elsewhere and some of the amendments that have 
been filed to improve the bill.
  First, on the GSEs, none of us can deny that Fannie Mae and Freddie 
Mac were significant contributors to the financial crisis. Just like 
any real reform, to prevent a future financial crisis, we have to deal 
with Wall Street, and we must also deal with Fannie Mae and Freddie 
Mac. Unfortunately, this bill totally ignores it. It turns a blind eye 
to these government-sponsored enterprises, these GSEs which contributed 
to the financial meltdown by buying high-risk loans banks were directed 
to make to people who could not afford them.
  The irresponsible actions in the marketplace by Fannie and Freddie 
turned the American dream into the American nightmare for far too many 
families who faced foreclosure. They then devastated entire 
neighborhoods with the foreclosed homes and communities where property 
values diminished. Ultimately, it led to a national and international 
financial crisis. No one--especially those of us who are taxpayers--can 
forget what happened after Fannie and Freddie got done wreaking havoc 
on families and neighborhoods. They went belly up. That is right. Over 
a year and a half ago, the government had to take over the GSEs, 
leaving taxpayers to foot the bill.
  To make matters worse, I am sure everybody read with shock just 
yesterday when the press reported that Freddie lost $8 billion in the 
first quarter. That is a lot of work. Then they had the nerve to 
request another $10.6 billion from the American taxpayers and warned 
that this $10.6 billion is just a downpayment on the money they will 
need in the future. Is it time to call a halt? Is it time to get a 
handle on it? It is well past time.
  In case my colleagues need a reminder, this latest $8 billion Freddie 
lost is on top of the $126.9 billion Fannie and Freddie had already 
lost through the end of 2009. The Wall Street Journal today hit the 
nail on the head when they referred to Fannie and Freddie as the 
``toxic twins.'' These toxic twins are far and away the biggest losers 
in the entire financial crisis--bigger than AIG, Citigroup, and all the 
rest.
  So when we focus our anger, let's not forget our friends at Fannie 
and Freddie. You talk about doing some damage. Here is where the damage 
is. Here is where the burden comes, not just on us but on the credit 
cards of our children and grandchildren, the young people here as 
pages. They don't realize how heavy a debt burden we have already put 
in their wallets. Sorry about that, folks, but you and your generation 
and generations to come are going to be paying for it.
  Taxpayers now and taxpayers in the future will be the biggest losers, 
since according to the Congressional Budget Office's optimistic 
estimates, these toxic twins will cost the taxpayers close to $380 
billion. Even for those of us in Washington, $380 billion is a big 
number.
  After all this pain to families, neighborhoods, and taxpayers, one 
would think the oversight of Fannie and Freddie would be a top 
priority, which is why it is stunning to me that the Obama 
administration has only recently nominated someone to fill the 
critically important position of inspector general of the Federal 
Housing Finance Agency to oversee the GSEs. How can we have proper and 
effective oversight of Fannie and Freddie when the office has been 
vacant at the highest level for so long?
  The bottom line is, responsible reform must address Fannie Mae and 
Freddie Mac. Responsible reform would put an end to the taxpayer-funded 
bailout of Fannie and Freddie and refocus them on affordable housing. 
Senators McCain, Shelby, and Gregg have filed an amendment to protect 
taxpayers and put an end to the government bailout of Fannie and 
Freddie. In short, this amendment cuts up the Federal credit card by 
putting an end to the limitless line of credit Fannie and Freddie 
currently enjoy, compliments of us as taxpayers.
  This amendment puts an end to the conservatorship and requires each 
to operate eventually without government subsidies and on a level 
playing field with the private sector.
  Next of great importance is seed capital. It is critical in reforming 
Wall Street that we not punish Main Street and the very specific small 
business startups that are so critical to job creation. If there is one 
thing we are worrying about it is, Where are the jobs? Well, I will 
tell my colleagues where the jobs are. They are the jobs the 
entrepreneurs and the innovators and the inventors can start. 
Unfortunately, in the current form of this bill, there are provisions 
that will kill the business startups. While title IX of the Dodd bill 
has been little talked about--far too little, in my opinion--it could 
have devastating consequences. Specifically, this provision would kill 
small business startups by delaying and eliminating the availability of 
private investor seed capital, and that is essential for these startups 
to survive and grow.
  According to new regulations by the SEC, innovators and entrepreneurs 
would be subject to registering with the SEC for a 4-month review; 
thus, tying up vital venture capital needed for immediate use by new 
business. This could cripple new businesses.
  Next, the bill proposes to add a further requirement to raise the net 
worth threshold on those who can invest to $2.3 million and raise the 
annual household income to $450,000. This would disqualify two-thirds 
of current accredited investors, according to the Angel Capital 
Association.
  Small businesses and startup companies are the backbone of our 
country. They are where we are looking to get the new jobs of the 
future, and a critical role is played by angel investors in creating 
and developing new companies, small or large.
  I will confess, this is of particular concern to my State of 
Missouri, where I have been working for a long time to build an 
agricultural biotech corridor across the State. In Missouri, we have 
the research institutions, the scientific leaders, and advanced 
agricultural research and biotechnology. Research in the biotech 
industry is our best hope for a stimulus to create high-paying, skilled 
jobs in rural as well as urban Missouri and, I would say, across 
America.
  The stimulus these biotech and research companies are spurring in 
Missouri is also happening today across the Nation. According to the 
Kauffman

[[Page 7502]]

Foundation, between 1980 and 2005, companies less than 5 years old 
accounted for all--all--the net job growth in the United States. As a 
matter of fact, that same study showed that in 2008, angel investors 
provided roughly $19 billion to help start up more than 55,000 
companies. Why would we want to limit that? The bill, if enacted, would 
deny immediate access to the capital and, if enacted, would say to 
these innovators and entrepreneurs: You are too small to succeed, too 
small to survive--not too big to fail.
  But there is good news here, and there is a bipartisan solution in 
the works. I am very thankful and grateful to Senator Dodd, who has 
agreed to work with me to fix the problem. We both want to protect 
these small business startups that are vital to job creation across the 
country. I think we are close to an agreement to fix this, and we hope 
to have a bipartisan amendment soon. I urge all my colleagues to take a 
look at it and to join us in supporting it.
  Next and finally for today, one of the biggest problems in the bill--
which I believe will undoubtedly hurt ordinary Americans who had no 
role in causing the financial crisis--is the creation of the so-called 
Consumer Financial Protection Bureau, CFPB. Those initials could, in 
the future, scare people more than all the combined deadly 10 acronyms, 
including the IRS, EPA, and SEC. This new massive supergovernment 
bureaucracy would have unprecedented authority to impose expensive 
mandates on any entities that extend credit. We are not talking about 
Goldman Sachs or big Wall Street banks. Instead, this new 
superbureaucracy could hit hard the community banker, farm lender, 
local dentist or auto dealer. The pain on Main Street will not just be 
borne by small business, but the costs will be passed on to consumers, 
the ordinary Americans the bill seeks to protect. It might even cost 
them their jobs.
  The National Federation of Independent Business, a strong voice for 
small business, stated their concern clearly when they said:

       These small businesses had nothing to do with the Wall 
     Street meltdown and should not be faced with onerous, new, 
     and duplicative regulations because of a problem they did not 
     cause. Further, as the most recent NFIB Small Business 
     Economic Trends survey shows, small businesses continue to 
     struggle with lost sales, and such regulations could make 
     these problems worse, stifling any potential small business 
     recovery.

  That is why I have joined with Senators McConnell, Shelby, Gregg, and 
others on an amendment to fix the problem. Instead of creating a 
brandnew superbureaucracy with unlimited authority and reach, our 
amendment would empower the FDIC to look out for consumers. This makes 
sense. The FDIC is the one that has a strong record of providing 
consumer protections. It has a record of being able to deal with 
financial institutions. It deals with the financial institutions that 
get into problems. It is in the banks. Any institution that is 
regulated by the FDIC, they are in there looking over their shoulder.
  Our amendment would create a division of consumer financial 
protection within the FDIC so they can protect consumers without adding 
burdensome and duplicative regulations. It would avoid costs being 
passed on to consumers, the very folks we are trying to protect, not 
saddle them with new costs. The amendment will ensure that the consumer 
protection division focuses on the real problems currently operating 
under the radar--the shadow banking I call it--or, as I like to say, 
the clicks, not the bricks. These are the people who have preyed on 
vulnerable Americans.
  Before the financial crisis that was brought on by bad loans, 
especially too-good-to-be-true home loans pushed on families who could 
not afford the loans, my fax and inbox were cluttered, despite my best 
spam filters, with 1 percent or no down payment loan offers. These 
offers were not regulated effectively by State regulators, the SEC, the 
Federal Reserve or the OCC. They succeeded in escaping effective 
regulation entirely, although some have later fallen to regulation by 
U.S. attorneys who filed criminal fraud suits a little bit too late in 
the game.
  Also, it is important this new division be tasked with providing 
financial literacy, as I will continue to stress. We have to improve 
consumer education in any and all areas where loans are made. While 
foreclosure counseling is important--another bipartisan program on 
which I worked with Senator Dodd in December of 2007 and in which we 
put $180 million to reach out to financial counseling groups. They are 
doing a good job trying to help counsel families in danger of losing 
their home and ways to solve the problem. Those counselors came back to 
us unanimously and pleaded with us to make available preloan counseling 
before somebody buys a home, to make sure they understand the terms and 
can afford to service the loans.
  These are just some of the things we need to do.
  Missourians and people across America are angry. They are angry bad 
actors caused the financial crisis that left many of them with a pink 
slip instead of a paycheck. They are angry Wall Street bad actors left 
them with a nightmare of foreclosure instead of the American dream of 
home ownership. They are angry government has committed trillions of 
taxpayer dollars for rescuing the financial industry when so many of 
them are still struggling to pay bills. Is it any surprise that 
Missourians and Americans across the country are skeptical about 
financial reform?
  These folks were made more skeptical when they heard and saw on TV 
and read in the paper that it is the actors on Wall Street, with whom 
the bill was supposed to deal and who caused the financial crisis, who 
are now cheerleading this bill. Missourians ask me how this bill can be 
real reform when the head of the investment bank Goldman Sachs, who is 
supporting the bill, said--let me make sure you understand. This is 
from the head of the largest investment bank on Wall Street: ``The 
biggest beneficiary of reform is Wall Street itself.''
  That is a quote about the original bill.
  Missourians have asked me not to pass a bill that will bail out Wall 
Street. We need to take care of Main Street. There is no bailout for 
struggling families. We don't want anymore Wall Street bailouts. We 
need to pass a bill that reforms Wall Street and protects Main Street. 
I believe we have an opportunity to pass real, responsible, and 
bipartisan reform, if Senators of both parties will listen to the 
concerns raised by ordinary Americans who didn't cause but are paying 
for the financial crisis.
  I have heard similar concerns discussed by speakers on the other side 
of the aisle who seem to indicate we share the same concerns. I hope we 
can work together to get a good, strong reform bill that will deal with 
the problems that caused the last financial crisis, protect consumers, 
and ensure the safety and soundness of all financial institutions and 
not subject them to special interests who may have pushed for the bad 
loans that caused the last crisis.
  I thank the Chair, yield the floor, and suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. BOXER. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. BOXER. Mr. President, what is the pending business, or the 
order?
  The PRESIDING OFFICER. Amendment No. 3826, offered by Senator Shelby, 
is the pending business.
  Mrs. BOXER. Mr. President, I want to take some time to speak out 
against the Shelby amendment and urge that it be defeated. If that is 
appropriate at this time, I will use as much time as I may consume.
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. BOXER. Mr. President, this is a pivotal point in the debate on 
Wall Street reform. We never want to see what happened to this country 
happen again, where they essentially crashed the stock market. People 
had been talked into very difficult to understand and exotic subprime 
mortgages. We had

[[Page 7503]]

such greed running rampant on Wall Street, and instruments were created 
that were even difficult for the Secretary of the Treasury to explain--
derivatives that were so complex they were in about the third order.
  If we were to adopt the Shelby amendment, we would weaken this bill. 
As a matter of fact, we will weaken current law, and not only will 
consumers be hurt but they will actually lose ground--when the purpose 
of the Dodd bill--our bill--is to elevate consumers, give them 
protection from these kinds of schemes that brought our economy to its 
knees and resulted in 700,000 jobs a month being lost then, and the 
wealth of the average American, who had even a 401(k), was down 20, 30, 
40, and maybe 50 percent and, as a result of that, the lack of consumer 
confidence that followed.
  We know our economy is based on consumer confidence. Seventy percent 
of our economy is attached to consumer spending. When people see the 
stock market and their wealth going down, and see neighbors losing 
their homes and jobs, they feel threatened and they pull back, and 
rightly so. It started from deregulation on steroids on Wall Street, 
where the regulators didn't even use the powers they had to protect 
consumers. An essential part of this bill is putting a cop on the beat 
for consumers, finally. So whether you are a consumer of credit cards, 
or a consumer in terms of the housing market, or a consumer in terms of 
the stock market or the commodities market, you are finally going to 
have a watchdog.
  We know the regulators didn't care about consumers. We know that. We 
know, for example, that the Fed had the authority to intervene in the 
housing market, if they felt these subprime loans were wrong, and stop 
them. They didn't do it. We know the SEC was warned about Madoff. There 
were whistleblowers to that Ponzi scheme, and many more Ponzi schemes 
were going on. They didn't even follow the lead.
  We need to have a strong, independent consumer agency that says to 
the regulators: You are not doing your job. We are going to make sure 
you do it.
  That is what is in the bill before us. But the Shelby amendment takes 
us back. The new Consumer Financial Protection Bureau will enforce 
existing consumer protection laws--those same laws that went unenforced 
by current regulators. I gave you the example of the SEC and the Ponzi 
schemes, and of the Fed overlooking the mortgage crisis, and there are 
many others. It would also ensure clear disclosure to consumers of all 
the terms and conditions of the financial products they buy.
  Believe me, you would have to have a degree in economics and finance 
and everything else to understand some of the fine print in a credit 
card bill. People are stunned to know they are paying 20, 30-percent 
interest rates on their credit cards, because there is no clear way of 
knowing.
  In this bill, that is over. You have to know the terms and conditions 
of the financial products you buy. This bill will bring protections to 
home buyers from the kinds of exotic mortgages that led to the current 
crisis.
  Let me give you an example. People were offered mortgages at a teaser 
rate--a very low rate--and were not being told in clear terms that in a 
couple of years that teaser rate would go up and go up and go up.
  I have to say, some in the mortgage business were paid more 
commissions to put unsuspecting consumers into these exotic mortgages. 
So they pushed those mortgages. That is wrong. We need a consumer 
protection agency that notes it is wrong and puts a stop to it.
  We have a situation that weakens the current law. If you think that 
is right, if you think, for example, that consumers caused the Wall 
Street meltdown--I think you are living on another planet--vote for 
this amendment. We know who caused this crisis. We know the greed on 
Wall Street. We know even while these companies were getting bailed 
out, they were paying their people huge bonuses. The word 
``outrageous'' really can be defined by what these people did.
  If my colleagues want more of the same--I cannot understand why they 
would--but if they want more of the same, if they do not want to 
strengthen consumer protection, then vote for the Shelby amendment.
  Let's be clear. This amendment is a gutting amendment. Instead of 
creating an independent consumer watchdog, the Shelby amendment creates 
a weak sister, a weak division of the consumer protection in the FDIC. 
This new idea of Senator Shelby's, this new division of consumer 
protection, would no longer be independent. It would be under the FDIC. 
It would not have any authority to adopt any rule without the approval 
of the same bank regulators who have routinely ignored or opposed the 
needs of consumers.
  Let me repeat that. The weak consumer protection agency created in 
the Shelby amendment would have no authority to adopt any rule without 
the approval of the same bank regulators who have routinely ignored or 
opposed the needs of consumers. It even would give bank regulators a 
veto over consumer protection regulations. That is totally 
unacceptable.
  If my colleagues are for Wall Street reform, they have to vote no on 
the Shelby amendment. This is the moment of truth. Either my colleagues 
are going to stand with the people of this country who are innocent 
victims of greed on Wall Street or they are not. If they want to stand 
for the greed on Wall Street, if they want to stand for no protection 
for consumers, a weakening of the protections they already have, which 
are far too weak, vote for this amendment, and let's go forward with a 
Dodd bill which has a strong independent consumer protection agency.
  I would add that the Shelby amendment would burden the new consumer 
protection division that he has in his amendment with incredible 
procedural hurdles--hurdles that have effectively prevented the FTC, 
that has similar rules, from writing any new rules protecting consumers 
since 1984.
  Mr. President, 1984 was an interesting year for me. It was a long 
time ago. I was a lot younger. It was before my hair turned blond. In 
that year, I was in the House of Representatives, and I was pushing the 
Federal Trade Commission to help consumers. They had too many hurdles. 
They have not done anything in all those years. Yet this is the 
template that Senator Shelby is using for this watered-down consumer 
protection division.
  I see Senator Merkley on the floor, and I am going to yield in a 
minute. He is such a leader on all these issues and such a great 
populist leader in this Senate.
  Maybe my colleagues who support this amendment think the regulators 
who allowed all of these abuses to happen under their watch, despite 
repeated warnings, did a fine job and are the best protectors of 
consumers.
  But even if those regulators have somehow had a change of heart and 
are determined to change their ways, this amendment would leave them 
with even fewer powers to protect consumers than exist under the 
current system..
  The Shelby amendment would burden the new Consumer Protection 
Division with the same incredible procedural hurdles that face the 
Federal Trade Commission--hurdles that have effectively prevented the 
FTC from writing any rules in the consumer finance area since 1984.
  In addition, the amendment would actually prohibit the proposed 
consumer division from doing any rulewriting under the FTC Act for 
payday lenders, debt collectors, foreclosure scam operators, mortgage 
brokers and other nonbank consumer finance companies.
  If the new division did somehow manage to get new rules written, the 
amendment would make sure that they could not be enforced.
  Under this amendment, the new weakened consumer division could do 
examinations of some finance companies only after consumers have been 
harmed repeatedly.
  This after-the-fact authority closes the barn door after the horse is 
out, and handcuffs regulators from protecting consumers until the harm 
is already done.

[[Page 7504]]

  Some of my colleagues want us to believe that the Consumer Financial 
Protection Bureau that we have proposed in our Wall Street reform bill 
would harm small businesses.
  Nothing could be further from the truth.
  Merchants, retailers, and sellers of nonfinancial goods are 
specifically excluded from the oversight of our proposed new Consumer 
Financial Protection Bureau.
  This includes retailers who provide ordinary credit to their 
customers to buy their goods.
  Even for small businesses that do sell financial products--including 
community banks and all kinds of small lenders--the Consumer Financial 
Protection Bureau will have no direct enforcement authority. 
Enforcement of rules will be handled by the current regulator or State 
attorneys general.
  I will give one more example I think is very important. I told you 
the template for Senator Shelby's new consumer protection agency is the 
FTC. I told you under those rules, the FTC has not done anything since 
1984. Let's say they were able to get new rules written. Let's say they 
were able to do that. Senator Shelby ensures that the rules they write 
could never be enforced.
  How does he do that? Because he says the only time the weakened 
consumer division could do any examinations of some financial companies 
would be after consumers have been harmed repeatedly. This is after-
the-fact authority. I have seen too many people crying because of what 
happened on Wall Street. I have seen too many people crying because 
they lost their jobs because of what happened on Wall Street. I have 
seen pictures in the paper of Americans crying because of what Bernie 
Madoff did to them and their children.
  I want this stopped. I do not want it stopped after the fact. Yes, 
thank goodness Bernie Madoff is in prison where he belongs. But it is 
very difficult to make the people whole who were harmed by that Ponzi 
scheme.
  We do not want after-the-fact authority; we want before-the-fact 
authority. We want this consumer protection agency to be on its toes, 
to intervene, to see if there is a scam going on; to see if there is a 
credit card scam that leads to 30, 40, 50 percent interest rates; to 
see if there is a scam on mortgages where people unknowingly walk into 
a mortgage where the rate goes up to 12 percent.
  At the end of the day, we know consumers were hurt hard by Ponzi 
schemes, by markets in the dark, confusing mortgage options, some 
bordering on fraud by credit card scams and worse.
  Let's take a stand in a bipartisan way and vote no on this amendment 
and support the consumer protection agency, the strong one that is in 
this bill. I can tell my colleagues, if we do that, the American people 
can take a deep breath and know that they will be protected.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon is recognized.
  Mr. MERKLEY. Mr. President, I applaud my colleague from California 
who has been an extraordinary champion of consumers throughout her 
career. She understands that the basis of a successful nation is 
successful families. That depends on them having a strong financial 
foundation. We should not measure the success of our country by the 
million-dollar bonuses or the billion-dollar quarterly profits on Wall 
Street. We should measure it by the success of our families.
  This bill is absolutely essential to restoring those financial 
foundations; whereas this amendment before us does the opposite. The 
Shelby amendment No. 3826 carves the heart out of this bill. This dog 
don't hunt. In fact, this dog doesn't bite. I don't even think this dog 
barks. For that matter, I am not so sure it is a dog. That is how bad 
the Shelby amendment is.
  The background is this: Predatory mortgages and securitization of 
those mortgages on Wall Street built a house-of-cards economy that came 
falling down last year. The predatory mortgages were done at the retail 
level, but the securitization and selling of those packages occurred on 
Wall Street. They built investments that were taken in by every major 
financial house practically in the world, and those investments, those 
securities had a 2-year fuse on them, essentially a 2-year teaser rate 
on every underlying mortgage.
  At the end of the 2 years, interest rates doubled, families could not 
make the payments, securities went bad, and we had financial firms one 
after another collapse. We had Lehman collapsing. We had Bear Stearns 
collapsing. We had Merrill Lynch collapsing. We had major problems at 
Bank of America needing a bailout, a $4 billion TARP bailout. We had 
Citibank collapsing. We had Washington Mutual collapsing--all built on 
predatory mortgage practices, every single piece. That is why consumer 
protection is so important. That is why it is at the very heart of this 
bill. And that is why we need a Federal consumer protection agency.
  I have friends back in Oregon who write to me, citizens back in 
Oregon, constituents who will say: Here is what went on, and how can 
that be fair? Let me just give an example.
  A woman from Salem wrote to me and said: I always pay my credit card 
on time, always have for years and years. But I got my credit card 
statement, and it had a late fee. So I called up the credit card 
company, and I said: How is it possible? I always mail my payment on 
this day. It should have had plenty of time to get there.
  The credit card company said: Yes, as a matter of fact, your payment 
did come on time. But you know, Madam, we are not required to post your 
payment on the day we receive it. In fact, in the contract we have, we 
can sit on your payment for 10 days and then post it, and then your 
payment is late and we get to charge you this fee. We are just 
following the rules.
  She said: How can that be fair?
  It is not fair. Everyone knows it is not fair. Let me give another 
example.
  Citizens wrote saying: Hey, I had a whole series of transactions with 
my bank, and then the bank changed the order of those transactions to 
put the biggest transaction first. It so happened that biggest 
transaction made me $10 over the funds I had in the bank. I had an 
overdraft. By putting that big transaction first, it meant instead of 
one overdraft fee, I have 10 overdraft fees. Instead of only $35 for 
one overdraft, I owe $350 for an overdraft series. How can it be fair 
that the order of the transactions was changed in order to multiply the 
fees I owe tenfold?
  Everyone knows that is not fair. Everyone knows it. We simply need to 
have an agency that is able to say that is not OK. We do not want to 
have a process where something that is unfair goes on for 10 years or 
15 years or 20 years before there is legislation to address it.
  You cannot address a consumer product's choking hazard by doing it in 
legislation. You have to empower an agency to say: No, that part is too 
small. You cannot address lead paint by doing legislation every time 
something is painted. No, you have to have an agency that says they 
will test that paint and say lead paint is not OK.
  It is the same with consumer financial products. We need the same 
power to fix traps and tricks in real time for fairness to America's 
families so they can rebuild their financial foundations because that 
is what a strong country is, families with strong financial 
foundations, not million-dollar bonuses, not billion-dollar quarterly 
profits based on stripping funds from working Americans. It all comes 
down to the heart of it: fairness in consumer financial documents.
  Let's take a look at amendment No. 3826 and why it carves the heart 
out of this important bill for America's families, America's Main 
Street families and businesses.
  Here is what it does: First, it says virtually no one is covered. 
Let's look at the list. What is covered under the language of the 
amendment are large nonbank mortgage originators. Large nonbank 
mortgage originators do not exist anymore. So it covers firms that do 
not exist anymore. It is kind of like

[[Page 7505]]

saying we are going to have the regulation of safety on cars, but it is 
only for cars that are powered by gasoline and were built before 1850. 
No such cars exist. All the other cars, the ones actually on the road, 
we are not going to cover them.
  We have a list. We have commercial banks, not covered; investment 
banks, not covered; credit card companies, not covered; car lenders, 
not covered; payday lenders, not covered; nonbanks that sell financial 
products of a whole sort, not covered.
  I think you get the picture that this amendment is meant to make sure 
nothing is covered. Then, just in case there is some little piece that 
does get covered, it says: You know what. This agency is not 
independent. It cannot write rules. It has to have everything it does 
approved by the financial world--the financial world that brought us 
all these problems, that brought us to tricks and traps, that stripped 
wealth from working Americans. They are going to decide what is 
covered.
  I echo my constituent from Salem and say: Where is the fairness in 
that?
  Mr. DURBIN. Will the Senator yield for a question?
  Mr. MERKLEY. Certainly.
  Mr. DURBIN. Let me ask the Senator: As I understand the amendment of 
the Republican Senator, it goes back to the old days when there was 
virtually no consumer financial protection. The bill we have before us 
here--that Senator Dodd and the Banking Committee brought forward--has 
the strongest consumer financial protection law in the history of the 
United States. It has an agency with independent authority to protect 
Americans, but more importantly to empower Americans to make the right 
decisions when they are taking out a mortgage, a loan for a car, a home 
loan or a student loan. What the Republicans are suggesting in the 
Shelby amendment is to go back to the old days when there was no 
protection, there was no authority.
  The argument is made about the fact that when it comes to mortgages, 
they weren't the problem, the problems were with Wall Street. But at 
the heart of the issue on Wall Street was the mortgage being signed by 
the family in Springfield, IL, and Portland, OR. So I ask the Senator: 
In your State, in your experience, as you look at this, if the 
Republicans have their way and move us back to the old days when it 
comes to this consumer empowerment, consumer protection, don't we run 
the risk of falling into another economic crisis, losing millions more 
jobs across America? Isn't that the risk we run if we go the route 
suggested by the Republican amendment?
  Mr. MERKLEY. My colleague is absolutely right. Because predatory 
mortgage practices were at the heart of this crisis that led to 
securities that blew up the economy and led to the loss of millions of 
jobs around our Nation, with an unemployment rate in my State that has 
been over 12 percent. We not only have the risk of going back there, we 
are perhaps more at risk because we have fewer larger banks. Many 
investment houses that were independent are now inside those banks, in 
a position where, if they blow up, they will blow up the banks as well.
  So unless we have this strong consumer financial protection agency, 
it is like taking this bill before us and sticking it in the shredder, 
and with it shredding the hopes and aspirations of America's working 
families to build strong finances in the future.
  Mr. DURBIN. If the Senator will yield for another question.
  Mr. MERKLEY. Yes.
  Mr. DURBIN. Is it not true that last week, on three different 
occasions, the Republicans filibustered this bill to stop us from even 
starting the debate on this bill, and it was only when we reached the 
point after the Goldman Sachs hearing--when there was this embarrassing 
testimony from executives, telling America what they were up to, and it 
all became very public--that the Republicans finally backed off their 
filibuster, backed off their delay of this legislation and let us come 
forward to debate; and that now, one of the first amendments they offer 
is to weaken this bill so the financial institutions and the banks are 
going to have more power over the economy, more power over consumers 
than this bill provides?
  Isn't that the real history of how we got to this moment in this 
debate?
  Mr. MERKLEY. My friend and colleague is absolutely correct; that, 
indeed, my colleagues across the aisle, the Republicans, voted three 
times to say they did not want to proceed to the bill, where their 
ideas would bear public scrutiny. Instead, they wanted to talk behind 
closed doors. You know what they were looking to do was not to 
strengthen this bill.
  Now that the amendment has come out and been placed before us 
publicly, we do see that it does what we feared. It is designed to take 
a knife and carve the heart out of this financial reform.
  Mr. DURBIN. I would ask the Senator from Oregon if he would yield for 
one last question.
  Now that we have been through this experience where we have lost $17 
trillion in American value in this economy--$17 trillion accounted for 
in the savings accounts of ordinary Americans in Illinois and Oregon, 
$17 trillion in businesses that failed and jobs that were lost--isn't 
it critically important that this bill from the Senate Banking 
Committee move forward, and that each amendment take this strong bill 
and make it stronger, instead of the Republican amendments, which 
clearly are designed to weaken this amendment and to open us up to the 
vulnerability of facing more job loss and more economic crisis?
  Mr. MERKLEY. Well, my colleague is absolutely correct. The failure of 
financial rules has become so obvious and had such devastating impact 
for our families--as my colleague put it, $17 trillion worth of damage. 
That means families lost their retirements, families lost their savings 
for their children to go to college, and it means families have houses 
under water, if they are lucky. For many families, it means the loss of 
a job, the loss of income, and the inability to make those mortgage 
payments, which means they are in foreclosure and have lost their dream 
at every single level. That is the damage $17 trillion did to our 
families, and that is why every amendment to the bill we have before us 
should seek to say: Here is the bill and here is how we should make it 
stronger.
  With that, Mr. President, I yield the floor.
  Mr. DODD. If my colleague would yield quickly, I appreciate everyone 
wanting to make my bill stronger. We have a pretty good bill here, but 
every bill could use a little improvement, I admit.
  I want to compliment the Senator from Oregon, a member of the Banking 
Committee. He has been a very valued member of the committee. I 
mentioned earlier--I say to the majority whip--in the committee 
meetings we have had, it is by seniority, and so I have this cluster of 
new members down at the end of that committee table. The Senator from 
Illinois and I have been in that position at those tables over the 
years. But Senator Tester, Senator Merkley, and Senator Bennet kind of 
occupy those last three seats on the Banking Committee.
  I say that with great respect to all the rest around the committee. 
Those three new members on the committee have added tremendous value to 
our debates, and in particular, the Senator from Oregon has been 
wonderful in his concern about mortgages, prepayment penalties, what 
has happened to the 7 million foreclosures in our country, the 8\1/2\ 
million jobs that got lost in our Nation, why we need to address this 
issue, and why it is so critically important.
  I want to make one more point about this Shelby amendment that may be 
lost on our colleagues, and that is in our bill there is no assessment 
on a nonbank or a bank, but there are assessments in this amendment. We 
just went through the Tester-Hutchison amendment to actually lower the 
assessments on community banks. What a great irony that the next 
amendment--there will be those having supported the earlier amendment 
to reduce cost--sets assessments. In fact, it asks community banks to 
have assessments on the nonbanks out there in

[[Page 7506]]

order to pay for their consumer bureau within the FDIC.
  So for those who are concerned about the burdens on community banks--
and I think it is a legitimate concern, one I think the Hutchison-
Tester amendment did a great deal to alleviate--we are going to turn 
right around on these institutions that are struggling to stay alive to 
serve their communities and add a financial burden to them. So for all 
those reasons the Senator from Oregon mentioned, plus that one, the 
Shelby amendment deserves to be defeated.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, I want to point out that you have just seen 
an example of why there isn't bipartisanship in this Chamber. You 
cannot denigrate the other party and denigrate every single thing they 
put up as an amendment and suggest there is going to be bipartisanship. 
The amendment that is before you is an attempt to correct some of the 
things that are in the bill.
  The filibuster was mentioned. Well, the filibuster bought enough time 
that Senator Dodd and Senator Shelby were able to work out the 
agreement for the amendment that has passed--a major amendment, a major 
change, a wanted change, an expected change, and a change that makes 
the bill far better. If every amendment the Republicans bring up is 
going to get the kind of treatment this amendment is getting and not 
looking for that piece in there that might make a difference, we are 
not going to have much success on this bill.
  I heard the other side mention Goldman Sachs. Goldman Sachs said they 
like this bill; one of the offenders, and they like it. That encourages 
me that it is a good bill.
  I appreciate the Senator from Oregon giving the examples of some 
things that are terrible in our economy--some of the credit card 
examples he gave. It absolutely shouldn't happen in America. I don't 
think this bill fixes it, and I will explain that in a few minutes.
  If our amendment is too open-ended, the Democratic amendment raises 
the possibility of controlling every single thing for middle America--
every single thing--and I will explain how that works. I don't think it 
was what was intended, and that is why we go through an amendment 
process, to clear up problems such as that.
  But I am going to talk today about consumer financial protection. I 
want to be clear when I speak about this protection that I am talking 
about protecting consumers from bad actors. I am talking about 
educating consumers. When I talk about consumer protection, I am not 
separating consumer protection from the health of the economy. I rise 
today to talk about what is flawed in title X--called the Consumer 
Protection Title--of the financial reform bill, and to raise awareness 
about an alternative to the current language in title X.
  I believe an alternative to this section is desperately needed 
because the Federal Government should not be involved in our daily 
lives and everyday decisions. Under the proposed consumer protection 
title, we would be opening the floodgates of government involvement. 
The Federal Government could be telling us how we can spend our money, 
how we save for the future by making decisions for us, and could truly 
limit financial markets to the point of economic decline. The Federal 
Government should not operate with the belief that it is protecting us 
from ourselves. However, that is where title X language begins to work.
  From supporters of this bill, we have heard that in order for 
consumer protection to be truly effective it needs its own independent 
agency--or bureau now--and that this Consumer Financial Protection 
Bureau should be free from outside influence. Independence from outside 
influence is a fine goal, but our government was built on using a 
system of checks and balances and this bureau would be totally 
unchecked. It would have unprecedented power and authority to write its 
own rules--no review. It would have an uncontested budget--no 
appropriation. And decisions made by the bureau would be made without 
regard to the impact those rules would have on the health of our 
economy. Where is the transparency in this power? Where is the 
accountability of this proposal? I haven't even touched on what the 
title could do to consumers' personal information or financial 
decisions.
  To achieve independence, this bureau would consolidate all financial 
protections and efforts from the various Federal Government agencies, 
all in the name of better protecting consumers. Don't get me wrong, 
there are issues needing to be addressed for consumer protection. But 
right now, each Federal agency acts as a check on its neighbor when it 
comes to consumer protection. My fear is that once this bureau has 
consolidated power, it will not stop at protecting consumers from fraud 
or deceptive practices. This agency would only be getting started.
  I am deeply troubled about the creation of this bureau because it 
would place the bureau within the jurisdiction of the Federal Reserve. 
Too many of my constituents already believe the Federal Reserve gaining 
additional power is an alarming thought. However, what is most alarming 
to me is the fact the Federal Reserve would have little authority over 
this proposed bureau. Mostly, they provide the money.
  Right now, as this bill is written, the Federal Reserve would be 
required--required--to give the bureau a designated 12 percent of their 
operating budget. The catch here is that Congress would have no 
budgetary authority and would not approve this money. And it is 
adjusted for inflation. If you are going to get a percentage of a 
budget, how do you adjust a percent for inflation? But aside from that, 
it is adjusted for inflation. It works up to be 12 percent of the 
operating budget of the Federal Reserve.
  In addition, they can even invest any of the money they do not spend. 
You will find that on page 1,073. I know it is a huge book, so I didn't 
want you to have to look through the whole thing. On page 1,074, it 
even says these aren't government funds. You know why. That way it 
doesn't cost under the scoring. Even though it will drive up the 
deficit and the debt, it doesn't count that way. It looks like a free 
program, but that is not true. So they get to keep the money and invest 
what they do not spend--I don't know of another entity that gets that 
right--and it is not considered to be government funds. That provides a 
little latitude.
  The bureau not only has an uncontested budget, but the bureau would 
be the single most powerful agency in the Federal Government. Not only 
could the bureau write their own rules for our States' businesses and 
local banks to follow, it would oversee consumer decisions, and the 
bureau would be the enforcer of their own rules. No other agency has 
that kind of unchecked power. Where is the accountability in this? 
Unchecked power doesn't lend itself to accountability either.
  What is important is for the public, for the average American, to 
know this bill could protect people. But it could also go potentially 
10 steps further and take some of their decisionmaking power and 
transfer it to the Federal Government. We don't do that in America.
  For example, as the bill stands, it is so overreaching and ambiguous 
in areas that it could impact everyday purchases for most Americans. 
How would they do that? Under the rules they write that nobody takes a 
look at. There is nothing to hold this bureau in check.
  Here is how the bureau would regulate consumer financial products or 
services, as well as service providers, sweeping thousands of already 
regulated small businesses into the bureau's purview. Then you add in 
section 1027 of the bill, and it could penalize anyone who buys or 
sells something on an installment plan or it could affect any local 
small business that offers some kind of monthly payment on credit. That 
is why we are being flooded right now with people who want to be 
exempted from this bill. They are worried about not being able to 
provide their service anymore.

[[Page 7507]]

  Have you ever bought a car and paid for it over a few years with a 
financing plan from the dealer? Many of us probably have. This bill's 
language is so ambiguous and unclear that it looks like people who want 
to pay for a service on an installment plan or those who offer those 
plans will be penalized and regulated by the new consumer protection 
agency--I should say consumer protection superagency. Nobody has ever 
had this kind of power.
  Small business owners, regular people off the streets and from our 
States have been streaming into the congressional offices, looking for 
these exemptions that I just talked about because of this title in this 
bill. As drafted, this title is so ambiguous, so far-reaching, that 
consumers and good actors are being swept up with the bad.
  Anyone who ever paid for dental care in installments could, in the 
near future, be facing the prospect of paying for dental work upfront, 
as dentists realize they cannot afford to keep up with the new 
regulations, additional regulators or the cost of compliance with the 
bureau's demands.
  For auto dealers, where financing is hardest to come by in rural 
towns in small America, this would, in fact, be a direct hit on their 
business. Right now the financial burdens of the bureau would also be 
borne by auto dealers that direct clients to available financing but 
don't originate or authorize car loans themselves. That is pretty far-
reaching.
  Additionally, though, if a consumer purchases something on an 
installment plan, whether the loan is for a bike, a minivan, braces, an 
engagement ring, livestock or a home, if there are more than four 
installments, the government, through the bureau, would have a say in 
approving that loan.
  The bureau, also in the name of protecting us from ourselves, would 
require banks to keep and maintain records of all bank account activity 
and financial activity of their clients for at least 3 years, while 
also requiring this information be sent regularly to the bureau for 
safekeeping. I have serious concerns about our Government collecting 
information on the daily activities of our citizens and equal concerns 
about the Government approving or disapproving the financial choices of 
its citizens.
  I have just outlined why the Consumer Financial Protection Bureau is 
bad for consumers, why it is bad for small businesses and our 
communities, and why it is bad for individual consumer choices and 
freedoms. I point out all these things to you because there is an 
alternative to this bureau that is being proposed by my colleagues from 
Kentucky, Alabama, and Tennessee. This alternative proposal addresses 
each of the concerns I have just raised about accountability, 
oversight, consumer protections, consumer education, and consumer 
rights. This new proposal keeps our current regulatory infrastructure 
intact and improves on it. This alternative would not scramble all our 
current regulators in the name of a change, but, instead, has carefully 
and thoughtfully made our current system better, creating more 
effective checks and balances. The consumer protection alternative 
title would create a consumer protection division to be housed within 
the FDIC.
  The FDIC already oversees consumer deposit protection, so it is a 
logical step to place consumer protection interests here. While the new 
consumer protection division is shielded from outside influence and has 
autonomy, the division is, at the same time, prevented from wielding 
absolute power like the bureau. When rule changes or actions are 
proposed, the FDIC Board would be better able to use their regulatory 
experience to protect consumers, while at the same time ensuring safety 
and soundness are not disregarded.
  This division would still have a Presidentially appointed and Senate 
confirmed Director who serves a 4-year term in office. Instead of 
needlessly looping all kinds of small businesses into the fold for 
additional regulation, the division's mission would be of a proactive 
consumer education, ensuring consumers are able to receive timely and 
understandable information on consumer financial products. The division 
would partner with other agencies, such as the Federal Trade 
Commission, to develop guidelines for market oversight. Through these 
types of partnerships, the division would pursue fraudsters and the bad 
actors in our market. They would be developing best practices for 
overseeing nondepository mortgage originators and addressing the risk-
based supervision of our nondepository institutions.
  Very importantly, this new alternative leaves current prudent 
regulators in place for banks, savings associations, and credit unions. 
While the division would watch over the large institutions that have 
already violated consumer protection statutes, this alternative would 
provide an infrastructure with regulatory experience that would also 
meet the demands of growing consumer financial protection concerns. 
This proposal creates a balance between past regulating experience and 
the call by consumers to have more protection, without losing the 
rights to make personal financial decisions.
  I am a cosponsor of the title X alternative because I believe in its 
ability to address consumer protection without regulating consumers out 
of their rights as citizens. I am a cosponsor because I believe this 
alternative regulates the bad actors without tossing small business 
into the mix and regulating them out of business.
  It doesn't form a new agency that has to go through a whole 
rulemaking process over a period of time before we even know what they 
are doing.
  Putting this bureau under the Federal Reserve, with all the concerns 
and pressures focused on the Fed right now, is a very bad idea. Moving 
consumer protection to an unregulated, nontransparent, not accountable 
new agency that can write its own rules without review and operate 
using unchecked money is beyond my comprehension, and I think it is 
beyond the comprehension of the American people when they find out 
about it. I am not sure they are aware of it or I think there would be 
a huge hue and cry across this country. People are more concerned over 
their freedoms right now than they ever have been, and this will take 
away freedoms. You have to have the freedom to make your choices and 
even to make bad choices. But in America that is the way it works and 
Big Brother is not allowed to hang over your shoulder and decide for 
you whether you are making a good decision.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Florida is recognized.
  Mr. LeMIEUX. Mr. President, I could not have said better what my 
friend and colleague from Wyoming just talked about in terms of this 
consumer protection bill. Every Member of this body is in favor of 
consumer protection. The goal is to get it right, not to do too much 
and not to do too little.
  I think it is important for us to remember what we are trying to 
address. We are trying to address the financial market meltdown that 
happened in 2008 and the ramifications that have been so devastating to 
this economy. They were very devastating in my home State of Florida. 
But what we should do is address the problem. What we should do is try 
to make sure the problem does not happen again and not use this crisis 
as an opportunity to create a huge, new, all-powerful bureau of 
government that is going to regulate orthodontists and folks who had 
nothing to do with this financial crisis.
  Let's think back about what happened. To me there are three or four 
parts of this story where you can find culpability, places where we 
should be regulating, some of which is not done in this bill. One is we 
know mortgages were given to people who should not have had mortgages--
people who had no income and no jobs. They called them ninja loans--no 
income, no jobs. There were a lot of them in my State of Florida. Why 
were they written? Many of them were written because they were written 
by mortgage brokers and banks that did not have to retain any of those 
mortgages on their books. There were no underwriting standards. They 
could just ship them off. They had no skin in the game and no 
responsibility.

[[Page 7508]]

  Then, on Wall Street, this huge market was created to suck in all 
these mortgages, to create these new investment vehicles that put all 
these mortgages together--mortgages that did not have the underwriting 
standards so you could make sure they were sound. In the need to create 
more and more investment instruments, they created what are called 
synthetic investment entities. Those are not even ones that held these 
actual mortgages. They were just merely a shadow that tracked them. So 
we compounded the problem into hundreds of trillions of dollars, 
betting on mortgages that should never, in many ways, have been written 
in the first place.
  Then, what was the third part of the problem? These mortgages got 
bundled into these mortgage-backed securities, sold on Wall Street, and 
the world looked to the rating agencies to stamp their approval on 
them. The Morningstars and the Moody's and the Fitches and the S&P's 
stamped their rating and said they are AAA, without understanding them, 
without evaluating them. That is another one of the culprits that 
caused this financial crash that we had that has devastated our 
economy. But for those rating agencies putting the AAA grade on these 
mortgage-backed security investments, I don't believe we would have had 
the crash that occurred. People would not have placed their confidence 
in them.
  Why did that happen? Why did these rating agencies stamp them? Why 
did so many people rely upon them? What we come to find out is these 
rating agencies are written into law. They are written into the Federal 
law as the way to determine the creditworthiness of investments. The 
FDIC abdicates its authority and allows rating agencies to be the ones 
that say something is a good investment or not. That is in the law.
  How do these rating agencies get paid? They get paid by the very 
banks that put products in front of them for them to rate. So here is a 
real easy way to understand this. We all buy Consumer Reports Magazine. 
Consumer Reports Magazine evaluates everything from toasters to 
Toyotas, but they don't take any money from the people they rate. They 
don't have advertisers. But for these rating agencies, they are paid by 
the people they rate, by the products these banks bring in front of 
them. Our law says they are the ones that are going to determine 
whether something is creditworthy.
  I wish to make sure we have, as Senator Shelby has put forward, a 
good consumer protection law in this country. But I also wish to make 
sure we are addressing the problems that caused this failure in the 
first place, and one of the ways to do that is to make sure we have 
underwriting on these mortgages so people have some skin in the game: 
You are putting a downpayment on your house, you are showing you are 
creditworthy. That is the way it always was. It is only recently that 
went away. We need to go back to that.
  That is why I join my colleagues, Senator Corker, Senator Isakson, 
Senator Gregg, on their amendment to put the underwriting back in the 
mortgage business.
  But another thing we need to do, we need to take the credit rating 
agencies and write them out of the law. They should no longer get their 
preferential treatment. No longer should the FDIC abdicate its 
responsibility to determine creditworthiness. The market should take 
care of this. If people know they can't just rely upon three or four or 
five rating agencies and they are going to have to do their evaluation 
themselves, we may prevent this problem from happening in the future 
and the next way this problem may manifest itself.
  I have filed an amendment, amendment No. 3774, which will do this. It 
will take these credit rating agencies out of law. In that way, I 
believe we can stop one of the reasons why we had this financial 
collapse. It is not just me who believes in this. On the other side of 
this building, in the House of Representatives, this same language was 
put forward in the package that was passed.
  So this should not be a Republican issue, it should not be a 
Democratic issue because the Democrats in the House supported something 
very similar to what I am proposing. This just makes common sense. 
Let's go after one of the problems that caused this financial mess.
  I would like to point to the August 21 edition of the Wall Street 
Journal. In their editorial they say:

       When the government ordains Moody's and Standard and Poor's 
     as official arbiters of risk, the damage can be catastrophic 
     because so many people rely on them.

  Well, let's no longer abdicate the government's responsibility. Let's 
no longer enshrine these rating agencies in Federal law. Let's get rid 
of one of the reasons we had this financial meltdown to start with. 
Let's not create a whole now huge consumer agency that does way too 
much, gets involved in too many things that had nothing to do with this 
financial meltdown. Let's go after the problem, solve that problem.
  I believe we can do so by passing the amendment I have introduced 
today.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from South Dakota.
  Mr. THUNE. Mr. President, I compliment my colleague from Florida. He 
has addressed an issue which is an important part of this debate; that 
is, making sure loans that get made in this country, both on the 
borrower side and the lender side, are responsible loans.
  I think the amendment he will offer is one on which we ought to have 
a debate and on which we ought to have a vote. I hope this body will 
act in a way that leads to more responsible practices, a higher level 
of responsibility, both with borrowers and lenders in this country, 
which was at the heart of why we ended up where we did.
  It is interesting to me that we continue to watch the problems we are 
experiencing in our economy. Probably by far the most important one is 
the high level of unemployment. That has become sort of a chronic 
problem. Even though the economy appears to be recovering and growing 
again, we still continue to see these very high rates of unemployment, 
certainly worse in some parts of the country than in others, but, 
nonetheless, something that we cannot tolerate.
  We ought to be attacking every single day. Everything we do ought to 
be focused on what we can do to eliminate this high level of 
unemployment, to provide incentives to small businesses to create jobs, 
to grow their businesses and expand, get the economy going again, and, 
obviously, in my view at least, the small businesses in this country 
are the economic engine of our economy. They are our job creators.
  We ought to be focused on making it easier for them to create jobs 
rather than harder. That is why I think it is ironic that almost 
everything the Congress has been doing of late makes it even more 
difficult for small businesses to do that.
  We passed a big, massive expansion of the health care entitlement in 
the Congress a while back. That is going to impose lots of new taxes, 
lots of new mandates on small businesses. It is going to raise their 
insurance premiums, which we are seeing now more and more. The CMS 
Actuary, with their recent report, suggests what we suggested all 
along; that is, this is going to drive up the cost of insurance and 
health care in this country. It is not going to drive it down, it is 
going to drive it up.
  So I think what we are going to see with small businesses across this 
country is not only a higher tax burden associated with paying for 
that, and also many of the new mandates that are associated with it, 
but you are also going to see them having to deal now with higher 
insurance costs that will be associated and come with this massive 
health care expansion that was passed, not to mention the fact that, in 
my view, this is going to end up in a tremendous amount of growth in 
the debt in the outyears when we realize this is going to cost way more 
than it was anticipated, and that many of the offsets or pay-fors are 
probably not going to come to fruition.
  But that being said, it seems to me at least that having all of this 
uncertainty coming out of Washington, whether it is the implementation 
of

[[Page 7509]]

the new health care bill, whether it is questions about a climate 
change bill that could impose a crushing new energy tax on our economy, 
questions about what is going to happen with tax rates with regard to 
dividends and capital gains and marginal income tax rates next year, 
what is going to happen with the death tax--all of this uncertainty is 
just hanging a cloud over this economy and making it very difficult for 
our small businesses to do what they do best; that is, to exercise that 
entrepreneurial spirit, to grow the economy, to create jobs.
  It is very difficult to do that when you pile more and more burdens 
and more and more costs on top of the very small businesses that we are 
hoping will lead us out of this recession. That is why I think in all 
of our efforts we ought to have a very close eye on what impact they 
are going to have on the small business sector of our economy.
  This is no exception. The debate on financial services reform is 
about some very critical issues, issues that need to be addressed, 
issues that we should be focused on: how to deal with the issue of 
systemic risk and make sure that systemically risky enterprises in this 
country, that that risk is constrained, that there is appropriate 
oversight, there is appropriate transparency.
  I think there is an important issue to be debated in terms of 
derivatives, which is a $600 trillion economy in this country that has 
been operating in the shadows. The legislation that is before us, I 
think if it is amended the right way--and I hope it will be on the 
Senate floor--will bring all of that into the light. There will be 
transparency, something that I think is desperately needed in that 
area.
  I hope this will be done in a way that does not impose new burdens on 
end users, those who are trying to legitimately hedge against higher 
commodity prices, currency rates, and interests rates and those sorts 
of things. But there is work to be done in this legislation to deal 
with the issue of systemic risk, to ensure that we take all of the 
steps we possibly can to avoid and prevent the type of economic 
collapse and meltdown we witnessed a couple of years ago.
  I think it is ironic this legislation does not encompass something 
that was at the very heart of that economic meltdown; that is, the 
issue of Freddie Mac and Fannie Mae. It is ironic to me, at least, the 
focus of this legislation is to deal with the issues that lead to the 
economic malaise that we found ourselves in and the collapse that we 
experienced a couple of years ago that would attempt to accomplish the 
objective of preventing that in the future, absent dealing with Freddie 
Mac and Fannie Mae, which was a huge contributing factor to what we 
witnessed a couple of years ago.
  So it does not include that. It does get at derivatives; it does 
address, in some fashion, the issue of too big to fail. Then it also 
addresses this issue that we are debating right now, which is the issue 
of consumer protection. I would argue this is an important part of the 
debate when it comes to the regulation of our financial markets, 
perhaps even the most important part; that is, protecting consumers.
  Having said that, I think what the recent financial crisis 
highlighted was the fact that there were a number of bad actors out 
there in the marketplace who were out for a quick profit, without 
concern for the consumer, and this consumer protection effort as part 
of this legislation is designed to correct that, or at least address 
and get at that problem.
  I strongly support some of the consumer protection ideas that have 
been put forward. There is a Republican alternative amendment that has 
been offered to the base bill. But as is typically the case in the 
Congress, instead of just dealing with the issue that needs to be 
fixed, trying to fix the issue that needs to be fixed, it seems like 
the pattern is that we try to go beyond that and fix issues that do not 
need to be fixed; in fact, in this particular case, with a whole new 
bureaucracy, creating the whole new Consumer Financial Protection 
Bureau manned with lots of new Federal Government employees with lots 
of new powers, in my view, extending a reach way beyond what should 
ever have been contemplated to deal with the important issue of 
protecting consumers in this country.
  Why do I say that? I had in my office last week a bunch of community 
bankers. I have met with credit unions. I have met with auto dealers. I 
have met with a lot of small businesses. I would argue these are not 
the types of entities that led to all of the problems we experienced. 
Those are not systemically risky entities or companies. These are hard-
working, in most cases, small businesses.
  When I sat down with my community bankers--I am not talking about big 
Wall Street banks; I am talking about Main Street banks, local banks, 
banks that are about their customers because they care about their 
customers; they are their neighbors; they are the folks they hang out 
with; their friends and their kids go to school together; these are 
people who are far removed from Wall Street--they told me about how 
this bill does not level the playing field and how they are going to be 
subject to a whole now layer of regulation they cannot afford. They 
told me stories about how they would make sure their customers are 
always satisfied and how they cannot afford to make bad loans. In these 
smaller banks in smaller communities where there is a tremendous amount 
of accountability, obviously these are not the types of banks at which 
this legislation should be targeted or directed.
  These are banks that provide capital to our farmers, our small 
business owners. In my State of South Dakota, these are the people 
who--most of my constituents would rather bank with these big, large 
chain banks that we talk about when it comes to the issue of systemic 
risk. The Democrats' bill, in its current form, places new burdens on 
these banks, costly regulation on banks that are already heavily 
regulated, that have already proved to be sound financial entities.
  I also recently sat down with some car dealers from my State, again 
small Main Street businesses in South Dakota, who have personal 
relationships with their customers. They told me how they may have to 
cut some of the services that they provide to their customers because 
of the broad authority that is granted to this brandnew agency, this 
Consumer Financial Protection Bureau.
  These business take great pride--when I say ``these,'' the auto 
dealers--in the service they provide to their friends and neighbors who 
come into their businesses to buy a car. To have bureaucrats in 
Washington, DC, looking over their shoulder does not seem like the 
right approach to me.
  I have heard the arguments that these small banks are somehow not 
going to be affected because of the $10 billion exemption, but I think 
it is important that we point out here, and that we clear up some of 
the facts on this issue. That $10 billion exemption is from enforcement 
and examination authority by the new Consumer Financial Protection 
Bureau. The new bureaucracy still has the ability to oversee every 
product and loan and transaction these small banks enter into with 
their customers.
  I have also heard the argument that section 1027 excludes many of the 
small businesses that are calling me and e-mailing me and coming to my 
office because they are concerned. However, it seems to me, once a 
small business decides to give their customers an option to pay for 
their goods or services over time, this new Consumer Financial 
Protection Bureau can come knocking on their door. What Washington 
bureaucrats are going to tell them is what is in the best interest of 
their customers in South Dakota. So you can imagine the implications of 
this type of authority. Currently, the legislation provides very few 
checks on this new bureau's broad new authorities.
  I want reforms to our current regulatory oversight structure. We need 
better protections for our consumers. But the bill that is before us 
creates a new bureaucracy that has a funding stream outside of 
congressional oversight with very few checks and balances, and that is 
not reform.
  What I would like to see is this bureau removed from the bill. There 
are

[[Page 7510]]

other ways to provide better protection for consumers without burdening 
small businesses, which, as I said earlier, are the engine of our 
economy.
  Just to illustrate or to put a fine point on that, I have a letter 
from the National Federation of Independent Business, which represents 
businesses all across this country, has a very large membership, 
including many businesses in my State. They write to express their 
concerns with certain parts of the bill that are too far reaching and 
would impose major new costs on small business.
  They go on to say:

       The establishment of the Consumer Financial Protection 
     Bureau will cover many small businesses strictly because they 
     set up flexible payment arrangements with their customers.

  According to a study they did a few years back on getting paid, 
approximately 50 percent of small businesses offer special terms or 
credit-type arrangements to allow customers to pay for goods or 
services. Then they go on to describe the nature of some of those 
arrangements. But I think it is fair to say a lot of small businesses--
and car dealers are probably the most notable example. But as was said 
earlier, that could extend to furniture stores, jewelers; that could 
extend to orthodontists and dentists. People who allow their customers 
to spread out the payments over time to pay on terms and have these 
flexible types of payment arrangements would be covered by this.
  That makes no sense. At a time when we are trying to have our small 
businesses help lead us out of this recession, start creating jobs 
instead of dealing with the systemically risky entities that got us 
into this mess in the first place, we are talking about piling a whole 
new burden and lots of new costs on top of our small businesses at a 
time when they can least afford it.
  So I would hope the amendment that is being offered, the alternative 
to the Consumer Protection Financial Bureau in this bill, will be 
adopted; that my colleagues in the Senate will take steps to improve 
the way this bill treats consumer protection and in the way it treats 
small businesses under this bill.
  I, frankly, as I said earlier, would like to see this title removed 
entirely and us deal with this in a way that makes more sense; that 
does not create a whole new bureaucracy, with all kinds of new 
government employees with all kinds of new powers. There are certainly 
ways in which we can address the issue of consumer protection absent 
having to go to these great lengths and this great cost, expense to the 
taxpayer, and great new burdens imposed upon small businesses in this 
country.
  So I am one who will be supporting not only the amendment that is 
before us but other amendments that address this title in the bill. I 
have one I am working on that would exempt many of the small businesses 
that would be covered by this bill, some of which I mentioned in my 
remarks earlier. But I think this is an issue that is incredibly 
consequential in this legislation and so far removed--so far removed--
from the purpose of this bill in the first place.
  As I said earlier, we ought to fix the things that need to be fixed. 
But we should not try to fix things that do not need to be fixed, 
particularly when it calls for creating a whole new government 
bureaucracy in Washington, DC, with new government employees, at great 
additional cost and, of course, as I said earlier, at great additional 
expense to America's small businesses, which are the economic engine 
and job creators in our economy.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized.
  Mr. MENENDEZ. Mr. President, I wanted to come to the floor to talk 
about the Shelby amendment. I think we need to be 100 percent clear 
about one thing; that is, we need to pass a consumer protection bill--
not a Wall Street protection bill--with a strong independent agency 
that can aggressively defend families in all sectors of the financial 
industry. That is consumer protection.
  A weak agency that cannot defend families against commercial banks, 
investment banks, credit card companies, car dealers, payday lenders, 
and entities such as AIG, that is Wall Street protection. That is, in 
essence, what this amendment does. The fact is, the Republicans' 
proposal on this issue seems to symbolize America's worst fears about 
how the powerful operate--the powerful protecting the powerful. The 
problem isn't that families have too much protection on Wall Street; 
the problem is they have not been protected enough.
  The Shelby substitute is just the status quo. It is a cynical attempt 
to pretend they are doing consumer protection. In reality, it is meant 
to make sure there is no meaningful consumer protection at the end of 
the day. It willfully ignores the lessons we should have learned: that 
left to their own devices, there are lenders who can and will take 
advantage of consumers. That is what the marketplace--as it is right 
now--has taught us.
  We absolutely need a muscular, independent agency--however it is 
configured, wherever it is housed--one that will have full and 
comprehensive authority to develop and implement real, honest, 
proconsumer rules so they will no longer be fooled by 30 pages of fine 
print that no one except bank lawyers could possibly understand; one 
that has independent rule-writing authority and authority over banks 
and nonbanks, while maintaining strong State consumer protection laws; 
one that will stop the ongoing attempts by credit card companies to 
circumvent the rules this Senate and Congress have already enacted. 
They are already working at it.
  As Harvard Law Prof. Elizabeth Warren has noted: Thanks to product 
safety rules, you can't buy a toaster that would burn down your house. 
But you can buy a faulty mortgage that could take your house away.
  The bank regulators have been of no great help because they are 
looking out for the banks--not for us, not for you, not for 
unsuspecting families who need the full force protections of robust 
regulations implemented by a muscular agency that is on your side.
  In my view, a new independent agency would provide not only the 
comfort they need but the protection they deserve. We can argue about 
details, but I doubt there is much disagreement after what we have been 
through that Wall Street needs a watchdog, one that has jurisdiction 
over all financial products no matter who offers them, not just the 
products offered by big banks.
  Chairman Dodd has worked very hard over many months to craft the 
details of an agency that strikes the right balance. I was happy to see 
that finally our Republican colleagues were saying: We are on the Wall 
Street reform train. But now I begin to wonder--when I see amendments 
such as this--that they jumped on the train to strike the emergency 
brake on consumer protection enforcement.
  The Shelby amendment offers nothing in the way of consumer 
protection. There is no independence. The CFPB would simply be a 
division within the FDIC with no autonomy of its own. It could not even 
finalize a rule without FDIC approval. It will not have any resources. 
And that is how Republicans want it: no resources, no supervisory 
authority, no enforcement power. Guess who wins in that scenario.
  Nonmortgage companies will never be subject to supervision unless 
they have a pattern or practice of breaking the law within the past 3 
years. So what does that mean? ``Let's have a lot of people get hurt 
before we actually would say we should now give them protection.'' It 
is not my sense of how the law should operate.
  The Shelby amendment would establish the Division of Consumer 
Protection at the FDIC. It maintains, in essence, the status quo. 
Consumer protection rule writing will still be under the same 
authority, the same regulators who routinely ignored or opposed the 
needs of consumers. The amendment provides no safeguards to prevent the 
FDIC Chair or board from overriding decisions by the division director.
  The amendment would actually prohibit--prohibit--the proposed 
consumer division from doing any rule writing under the Federal Trade 
Commission

[[Page 7511]]

Act for payday lenders, debt collectors, foreclosure scam operators, 
mortgage brokers, and other nonbank consumer finance companies. It 
could only do examinations of nonbank consumer finance companies if 
they ``demonstrate a pattern or practice of violations'' of consumer 
law. So only after the consumer has been harmed repeatedly--after they 
have been harmed repeatedly--could the consumer division do any 
examination of the business.
  This is simply saying: I am going to tell you that I am going to put 
a cop on the beat. He has no uniform, he has no equipment, and he 
cannot stop the bad guys. What a falsehood. We need to defeat this 
amendment, and we need to have a bill that ultimately gives strong 
consumer protections for millions of families in this country who have 
already faced the consequences of the system that is going on 
unregulated in a way that it allows greed and excesses to take place 
and that puts protections, yes, for Wall Street but not for Main 
Street.
  Senator Dodd has struck the right balance. We need to preserve it. I 
look forward to supporting him and opposing this amendment.
  With that, Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized.
  Mr. DODD. Mr. President, let me briefly express my gratitude to my 
great pal and friend from New Jersey, Bob Menendez, once again. We look 
around. There are 100 of us here. I do not often acknowledge these 
things, but if I had to pick one of our colleagues to be in my corner 
as an advocate, I would pick Bob Menendez every time. He is a strong 
advocate. When he is focused and passionate about a matter, as he is on 
this one, there is no better advocate in the Senate. He has been a 
great member of our committee and a great help over the last few years 
where we have worked together on a number of bills coming out of the 
committee.
  His understanding of this issue is exactly right. I say, there are 
ideas people can offer on which they can make a case that they 
strengthen our particular provision. But I say, respectfully, this is 
such a step backward, it is even hard to imagine someone could actually 
conjure up an amendment that would step us this farther away from even 
the status quo.
  I thought I might get an amendment that would strike this and leave 
the world as it is. Senator Thune made that argument, that somehow this 
is not broken, leave it alone. Yet there is not a person I know of in 
the country who does not recognize this problem all began because there 
were unscrupulous brokers, there were people willing to put ratings on 
bundled securities that were worthless, there were bankers willing to 
turn a blind eye and a deaf ear, pushing out mortgages they knew people 
could not possibly afford, luring them into it by promising them they 
could meet all their obligations.
  To suggest the system is not broken--you would almost have to have 
been living on a different planet over the last few years not to 
recognize what happened because consumers were forgotten. Safety and 
soundness, we were told, were in great shape. Institutions were making 
money. This was a very stable situation.
  We had a hearing almost 3 years ago in our committee. It was in June 
of 2007. A guy by the name of David Berenbaum from the National 
Community Reinvestment Coalition came before the committee. Let me 
quote, if I can--this is 3 years ago--from his testimony:

       For the past 5 years, community groups, consumer protection 
     groups, fair lending groups, and all of our members in the 
     National Community Reinvestment Coalition have been sounding 
     an alarm about poor underwriting--underwriting that not only 
     endangered communities, their tax bases, their municipal 
     governments, their ability to have sound services and 
     celebrate home ownership--but [underwriting that] was going 
     to impact on the safety and soundness of our banking 
     institutions themselves. Those cries for action fell on deaf 
     ears, and here we are today.

  I remember my colleague from New Jersey, almost 3 years ago--I 
remember his words--I do not have them written down in front of me, but 
I remember them very clearly. I say to the Senator, your words that day 
were: This is going to be a tsunami. It was the first time I heard 
those words used to describe the looming foreclosure crisis.
  We were told then there would be maybe 1 million, maybe 2 million 
foreclosures. Now we know the number is in excess of 7 million that 
have occurred--not to mention job loss and the like.
  The consumer people were arguing for underwriting standards. It was 
the safety and soundness regulators who were refusing to acknowledge we 
did not have underwriting standards or were refusing to acknowledge we 
needed to do something about it. So I wanted to commend my colleague.
  Mr. MENENDEZ. Mr. President, if I may ask my distinguished chairman 
to yield for a moment, the Chairman is absolutely right. As a matter of 
fact, when I made that comment that we were going to have a tsunami of 
foreclosures, the administration witnesses at the time--the previous 
administration, of course--said, with all due respect, that is an 
exaggeration.
  Mr. DODD. Right.
  Mr. MENENDEZ. I wish they had been right and we had been wrong. But I 
think the chairman hits it right on point. In the context of the rating 
agencies, they were playing coach and referee. When you are playing 
coach and referee, somehow the game does not work out quite all that 
well.
  I appreciate what the Senator done in that respect here as well.
  I think the chairman makes the case very clearly that the definition 
of insanity is doing the same thing time and time again and expecting a 
different result. If we want to see what has happened to the American 
consumer in this country continue--facing the same consequences they 
have had to face over the last couple years--then we adopt this 
amendment. But if we want to change that, then we would support the 
underlying provisions in his bill.
  I thank the Senator for his leadership.
  Mr. DODD. Mr. President, I thank the Senator.
  The last point I want to make on the amendment is, under this 
proposal, any person who is subject to one of the enumerated statutes 
could be assessed--under this bill, in section 1015(a)--and this 
amendment, by the way--talk about a bureaucracy, it is a long 
amendment--but in 1015(a), it says:

       The Chairperson shall establish, by rule, an assessment 
     schedule--

  So we are going to assess now these various institutions that are 
already burdened with assessments--

       including the assessment base and rates, applicable to 
     covered persons subject to section 1023. . . .

  I know this sounds like a lot of gibberish, but what is section 1023? 
What does it say? Section 1023 talks about nondepository institutions 
subject to consumer laws--just consumer laws. One of the complaints 
about our underlying bill--which is totally false--is that florists and 
butchers and dentists and accountants and lawyers would be subject to 
the provisions of this act. Nothing could be further from the truth, 
and the language in our bill makes it explicitly clear that you must be 
significantly involved in financial services or products. That is the 
language of our bill.
  Section 1023: Nondepository institutions subject to consumer laws 
could be levied with assessments. That is your florist, your butcher, 
your dentist, your accountant, your lawyer. So as to those who argue 
against my bill and argue for this alternative--in fact, explicitly in 
here, at least as I read this--it could very well impose assessments on 
the very people they claim are affected by our legislation.
  Again, I invite my colleagues to read it. It is not a speech I am 
reading. I am reading from the proposed amendment. That section 1023--
specifically, you can look it up in here; it is a section of the bill--
it speaks about nondepository institutions subject to consumer laws. 
And the definition, accordingly, is the very people who are not 
financial institutions, who could be levied with those assessments.
  So for all those reasons, respectfully, I would urge my colleagues to 
reject

[[Page 7512]]

this amendment. I do not claim perfection in our underlying consumer 
protection language. We think we have a very strong bill. I am always 
anxious to hear from people who think they can make it stronger or 
better in some way. Fine. But to propose a whole new regulatory 
structure here, with new people coming on, at great cost, with no power 
whatsoever to do anything about the very problem that confronts us, 
seems to me to be the height of what we are trying to avoid: creating a 
bureaucracy that does not do much. That, it seems to me, is what the 
American taxpayers want us to avoid.
  With that, we have completed on our side the debate against this 
amendment. Unless there is some further comment, then I would ask for 
the yeas and nays on the amendment and call for a vote.
  Mr. BYRD. Mr. President, I oppose the Shelby amendment.
  In our zeal to protect consumers from egregious banking and lending 
practices, I fear the Senate is paying too little attention to basic 
constitutional tenets.
  The Shelby amendment proposes to create a Division for Consumer 
Protection within the Federal Deposit Insurance Corporation, FDIC, to 
exempt that new entity from the congressional appropriations process. 
The underlying substitute amendment proposes a similar model--a new 
Bureau of Consumer Financial Protection within the Federal Reserve 
System, which would also be exempt from the congressional 
appropriations process. This is in addition to several exemptions 
proposed in the underlying substitute amendment--an exemption for the 
Securities and Exchange Commission, and for a new fund for the 
Securities and Exchange Commission and exemptions for Commodity and 
Futures Trading Commission fund to reward whistleblowers.
  I understand the desire by some to create a new consumer agency, and 
to elevate its status to that of a banking regulator but, these 
proposals--the Shelby amendment, and the underlying Democratic 
substitute--are alarming in the aggregate spending latitude they are 
recommending for one agency. The usual procedure of executive review by 
the White House budget office, and public discussion of the President's 
budget submission through hearings, testimony, questions, debate and 
amendment--would not apply to the new consumer agency under both the 
Republican and Democratic proposals. I support stronger consumer 
protections in the financial services industry, but I do not believe 
that the elected representatives of the people have to forfeit their 
constitutional oversight responsibilities in order to make that happen.
  We need to remember that the financial regulators have their 
directors appointed by presidents, and that the Congress needs to be 
able to exercise oversight. If enforcement is inadequate, or abusive, 
the people's most potent weapon to effect change is the congressional 
power of the purse.
  In the bill passed by the House of Representatives last year, the 
House proposed to create a new consumer protection agency, and to 
subject its funding--at least in part--to the annual appropriations 
process. That model is a better way of helping consumers than exempting 
the budget of the consumer protection agency from congressional review.
  Mr. SHELBY. Mr. President, it is my understanding that Chairman Dodd 
has asserted that the Shelby consumer protection substitute would lead 
to additional assessments on community banks. I want to make it clear 
for the record that this is not true.
  But before doing so, I do want to highlight that the basic thrust of 
Chairman Dodd's assertion is based on the belief that placing the 
taxpayer on the hook for the costs of regulating Goldman Sachs, 
Citigroup, and J.P. Morgan is the preferential way of proceeding.
  Again, Chairman Dodd believes that taxpayers paying the freight for 
Goldman is the way to go.
  But I want to set the record straight about my amendment. First, my 
provision ensures that any nonbanks that are subject to regulation pay 
the full cost of that regulation themselves. They get no handouts from 
the taxpayer.
  Secondly, community banks are not presently assessed by the FDIC for 
the cost of regulation, and my amendment does not provide the FDIC with 
any new authority to make such assessments.
  Funding for the new division will be provided by assessments on 
nonbank mortgage originators, the other nonbank entities that are 
subject to regulation and large banking institutions. I would point out 
that the assessments on large banks will increase considerably 
following passage of the Tester amendment, which Chairman Dodd 
supported.
  Finally, in an effort to protect deposit insurance, my amendment 
creates a separate consumer financial protection fund which will ensure 
that funds for deposit insurance and consumer protection are never 
comingled.
  Mr. President, let's be clear about the differences in the funding 
sources in the two bills. The Dodd bill uses taxpayer funds to give a 
free ride to Goldman Sachs and the other big Wall Street Banks while my 
amendment makes big banks and bad actors cover their own costs.
  The PRESIDING OFFICER (Mr. Franken). Is there a sufficient second? 
There is a sufficient second.
  The yeas and nays were ordered.
  Mr. DODD. Mr. President, before calling for the vote, I ask unanimous 
consent that the Senate now proceed to a vote with respect to the 
Shelby amendment No. 3826, with no amendment in order to the amendment 
prior to the vote; further, that the previous order with respect to the 
Sanders amendment remain in effect, and provided that after the Sanders 
amendment has been called up and reported by number, Senator McCain be 
recognized to call up an amendment relating to GSEs; that after the 
McCain amendment has been reported by number, the Senate then resume 
consideration of the Sanders amendment.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. DODD. Mr. President, again, before we get to this vote, let me 
make this appeal. We are going to have this vote, and then we will go 
to the Sanders amendment and then to the McCain amendment. Again, we 
are going to try to go back and forth and move along. The number of 
amendments now has increased to over 150. I say to my colleagues, there 
are actually more amendments on the Democratic side than the Republican 
side--not many more but more. I urge my colleagues, if you have very 
like minded amendments, it may be in your interests to combine these 
ideas in a single amendment--maybe rally around one that actually makes 
the point, to either extract from the bill or add to the bill because 
we all realize we are not going to be on this bill forever, and I want 
to accommodate as many people as I can and have the kind of discussion 
we just had on this amendment. But to do that in the timeframe we have 
is going to require cooperation and some indulgence on the part of 
people to not be demanding.
  To the extent you have an amendment up, let's try to get to it and 
have a good discussion but not too long so we give other people a 
chance to be heard as well. I make that plea to everyone involved.
  With that, I yield the floor.


                Amendment No. 3826 to Amendment No. 3739

  The PRESIDING OFFICER. The yeas and nays have been ordered.
  The question is on agreeing to the amendment.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. KYL. The following Senator is necessarily absent: the Senator 
from Utah (Mr. Bennett).
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 38, nays 61, as follows:

                      [Rollcall Vote No. 133 Leg.]

                                YEAS--38

     Alexander
     Barrasso
     Bond
     Brown (MA)
     Brownback
     Bunning
     Burr
     Chambliss
     Coburn

[[Page 7513]]


     Cochran
     Collins
     Corker
     Cornyn
     Crapo
     DeMint
     Ensign
     Enzi
     Graham
     Gregg
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johanns
     Kyl
     LeMieux
     Lugar
     McCain
     McConnell
     Murkowski
     Risch
     Roberts
     Sessions
     Shelby
     Thune
     Vitter
     Voinovich
     Wicker

                                NAYS--61

     Akaka
     Baucus
     Bayh
     Begich
     Bennet
     Bingaman
     Boxer
     Brown (OH)
     Burris
     Byrd
     Cantwell
     Cardin
     Carper
     Casey
     Conrad
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Franken
     Gillibrand
     Grassley
     Hagan
     Harkin
     Inouye
     Johnson
     Kaufman
     Kerry
     Klobuchar
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     McCaskill
     Menendez
     Merkley
     Mikulski
     Murray
     Nelson (NE)
     Nelson (FL)
     Pryor
     Reed
     Reid
     Rockefeller
     Sanders
     Schumer
     Shaheen
     Snowe
     Specter
     Stabenow
     Tester
     Udall (CO)
     Udall (NM)
     Warner
     Webb
     Whitehouse
     Wyden

                             NOT VOTING--1

       
     Bennett
       
  The amendment (No. 3826) was rejected.
  Mr. DODD. Mr. President, I move to reconsider the vote.
  Mr. SHELBY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, let me give my colleagues some idea of how 
we are going to proceed.
  Senator Sanders has the next amendment. We entered into a unanimous 
consent agreement a few minutes ago. Senator Sanders has asked for 80 
minutes to be equally divided on his amendment. We then turn to the 
McCain amendment. I am hoping we get a time agreement on that amendment 
as well.
  There are 141 amendments, about equally divided between us. I want to 
accommodate everybody as much as I can. If some people take too much 
time, it means others do not get a chance to offer their amendments.
  I make a request of my good friend Senator Shelby to inquire, before 
we get to the McCain amendment, what kind of time agreement we can have 
on his amendment. Then my intention is to go to a Democratic amendment 
and possibly a Republican amendment tonight.
  There are going to be votes tomorrow. I am letting my colleagues know 
we will have votes tomorrow. I gather Monday and Friday of next week 
are nonvote days. If we have 141 amendments and Members want to be 
heard--and I want to give them time to be heard and have good debate--
obviously we cannot go on forever.
  Mr. REID. Will my friend yield?
  Mr. DODD. I will be happy to.
  Mr. REID. Mr. President, for all the Senators here, we may have 141 
amendments, but this is not the first time we have had 141 amendments 
on a bill. I have looked at a catalog of the amendments, and a lot are 
on the same subject. What we are trying to do is find out different 
categories and not have everybody offer the same amendment.
  Our goal tonight should be to try to get rid of four amendments. If 
we could have four amendments out of the way tonight, we could look--
and I thank my friend because I told him we are going to have votes in 
the morning, or at least a vote. I can create a vote. I hope we don't 
have to start creating votes. I hope they are on amendments people want 
to debate.
  Senator Sanders has an amendment. Has he agreed to a time?
  Mr. DODD. Yes, he has.
  Mr. REID. Senator McCain, has he agreed to a time?
  Mr. SHELBY. It is on GSE. It will take a while.
  Mr. DODD. If everybody demands more time, everyone suffers. There is 
not unlimited debate. With 141 amendments equally divided between us, 
we have to provide time for people. I cannot do that if people insist 
on unlimited time or more time. We know these issues pretty well. It is 
not as if it is a new bill.
  Mr. McCONNELL. If my friend from Connecticut will yield for an 
observation, Mr. President, we may have 141 amendments, but they are 
not all equal. We are going to try to work our way through the major 
amendments in a serious way. This is a very important piece of 
legislation. The majority leader and I had a conversation earlier today 
on how to go forward. We will keep working on it in a systematic way 
and maximize a way for people to have votes on important amendments.
  Mr. DODD. I agree. I say to my friend the Republican leader, we spent 
24 hours on one amendment. We have to do better than that. I cannot 
accommodate people if we are going to spend a day on one amendment. It 
just does not work. All amendments may not be equal, but all Members 
are, and all Members deserve an opportunity to be heard.
  I appreciate the majority leader's point of trying to consolidate if 
several Members have the same idea about something. Maybe it can be 
brought together in one amendment rather than five--I say that to both 
Democrats and Republicans--as a way of moving the process along, and we 
can have a good discussion. I cannot spend 24 hours on one amendment 
and accommodate people. It just is not going to happen. That is my 
point.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SHELBY. Mr. President, we are making progress. We might not be 
making progress as quickly as some people would like. Maybe we did 
spend a lot of time on this amendment, but it is very important. We 
have debated it. I guess it has been disposed of, at least that part of 
it, now. But there are a lot of other important amendments coming up. 
We can work together and work through some of them because a lot are 
duplications to some degree, and some of them we can take. Senator Dodd 
and I can help our staffs on that. Remember, this affects all of our 
economy--everything.
  Mr. DODD. I will take advantage of the moment to say that I will be 
here all weekend. We are not going to have votes on the weekend. I will 
be here all weekend. For people who would like to have amendments and 
would like us to consider them, Senator Shelby's staff will be around 
and my staff will be around to work on their amendment to see if we can 
accommodate it, modify it, or talk about it. I will spend Saturday and 
Sunday here all day for people to go over their products so maybe we 
can expedite things next week as well.
  Mr. REID. Mr. President, if I may talk to the two managers through 
the Chair, I know how important everyone thinks their amendment is. But 
you can have half an hour on each side, an hour for an amendment. 
Someone can say quite a bit in 5 minutes. I think we are going to have 
to have some guidelines as to what we are going to do. Everyone thinks 
their amendment is the most important, and I am sure in their mind it 
is. We have to set some standard. I have been very accommodating in 
this last 24 hours because I think so much of the comanager of the 
bill, Senator Shelby. We could have moved to table his amendment a long 
time ago.
  Let's understand, there are other ways we can move forward. If 
somebody says: I need 3 hours on an amendment--there is not an 
amendment on this bill that is worth 3 hours, OK? We have had a good 
conversation.
  I hope the two managers can give us some guidelines as to what they 
expect to do tonight and tomorrow because Members have other things to 
do than listen to the three of us.
  Mr. DODD. Senator Sanders.
  The PRESIDING OFFICER. The Senator from Vermont.


                Amendment No. 3738 to Amendment No. 3739

  Mr. SANDERS. Mr. President, I call up amendment No. 3738.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Vermont [Mr. Sanders], for himself, Mr. 
     Feingold, Mr. DeMint, Mr. Leahy, Mr. McCain, Mr. Wyden, Mr. 
     Grassley, Mr. Dorgan, Mr. Vitter, Mrs. Boxer, Mr. Brownback, 
     Mr. Risch, Mr. Wicker, Mr. Graham, Mr. Hatch, and Mr. Crapo, 
     proposes an amendment numbered 3738 to amendment No. 3739.

  Mr. SANDERS. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.

[[Page 7514]]

  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To require the non-partisan Government Accountability Office 
   to conduct an independent audit of the Board of Governors of the 
Federal Reserve System that does not interfere with monetary policy, to 
   let the American people know the names of the recipients of over 
  $2,000,000,000,000 in taxpayer assistance from the Federal Reserve 
                    System, and for other purposes)

       On page 1525, strike line 20 and all that follows through 
     page 1528 line 3 and insert the following: ``to the taxpayers 
     of such assistance.''.

     SEC. 1152. INDEPENDENT AUDIT OF THE BOARD OF GOVERNORS.

       (a) Amendments to Section 714.--Section 714 of title 31, 
     United States Code, is amended--
       (1) in subsection (a), by striking ``the Office of the 
     Comptroller of the Currency, and the Office of Thrift 
     Supervision.'' and inserting ``and the Office of the 
     Comptroller of the Currency.'';
       (2) in subsection (b), by striking all after ``has 
     consented in writing.'' and inserting the following: ``Audits 
     of the Federal Reserve Board and Federal reserve banks shall 
     not include unreleased transcripts or minutes of meetings of 
     the Board of Governors or of the Federal Open Market 
     Committee. To the extent that an audit deals with individual 
     market actions, records related to such actions shall only be 
     released by the Comptroller General after 180 days have 
     elapsed following the effective date of such actions.'';
       (3) in subsection (c)(1), in the first sentence, by 
     striking ``subsection,'' and inserting ``subsection or in the 
     audits or audit reports referring or relating to the Federal 
     Reserve Board or Reserve Banks,''; and
       (4) by adding at the end the following:
       ``(f) Audit of and Report on the Federal Reserve System.--
       ``(1) In general.--An audit of the Board of Governors of 
     the Federal Reserve System and the Federal reserve banks 
     under subsection (b) shall be completed within 12 months of 
     the enactment of the Restoring American Financial Stability 
     Act of 2010.
       ``(2) Report.--
       ``(A) Required.--A report on the audit referred to in 
     paragraph (1) shall be submitted by the Comptroller General 
     to the Congress before the end of the 90-day period beginning 
     on the date on which such audit is completed and made 
     available to--
       ``(i) the Speaker of the House of Representatives;
       ``(ii) the majority and minority leaders of the House of 
     Representatives;
       ``(iii) the majority and minority leaders of the Senate;
       ``(iv) the Chairman and Ranking Member of the appropriate 
     committees and each subcommittee of jurisdiction in the House 
     of Representatives and the Senate; and
       ``(v) any other Member of Congress who requests it.
       ``(B) Contents.--The report under subparagraph (A) shall 
     include a detailed description of the findings and conclusion 
     of the Comptroller General with respect to the audit that is 
     the subject of the report.
       ``(3) Construction.--Nothing in this subsection shall be 
     construed--
       ``(A) as interference in or dictation of monetary policy to 
     the Federal Reserve System by the Congress or the Government 
     Accountability Office; or
       ``(B) to limit the ability of the Government Accountability 
     Office to perform additional audits of the Board of Governors 
     of the Federal Reserve System or of the Federal reserve 
     banks.''.

     SEC. 1153. PUBLICATION OF BOARD ACTIONS.

       (a) In General.--Notwithstanding any other provision of 
     law, the Board of Governors shall publish on its website, 
     with respect to all loans and other financial assistance it 
     has provided since December 1, 2007 under the Asset-Backed 
     Commercial Paper Money Market Mutual Fund Liquidity Facility, 
     the Term Asset-Backed Securities Loan Facility, the Primary 
     Dealer Credit Facility, the Commercial Paper Funding 
     Facility, the Term Securities Lending Facility, the Term 
     Auction Facility, the agency Mortgage-Backed Securities 
     program, foreign currency liquidity swap lines, and any other 
     program created as a result of the third undesignated 
     paragraph of section 13 of the Federal Reserve Act--
       (1) the identity of each business, individual, entity, or 
     foreign central bank to which the Board of Governors has 
     provided such assistance;
       (2) the type of financial assistance provided to that 
     business, individual, entity, or foreign central bank;
       (3) the value or amount of that financial assistance;
       (4) the date on which the financial assistance was 
     provided;
       (5) the specific terms of any repayment expected, including 
     the repayment time period, interest charges, collateral, 
     limitations on executive compensation or dividends, and other 
     material terms; and
       (6) the specific rationale for providing assistance in each 
     instance.
       (b) Timing.--The Board of Governors shall publish 
     information required by subsection (a)--
       (1) not later than 30 days after the date of enactment of 
     this Act; and
       (2) in updated form, not less frequently than once 
     annually.

  Mr. SANDERS. Mr. President, this amendment, which calls for 
transparency at the Fed, is, frankly, one of the more unusual 
amendments I have ever participated in, not so much for its content but 
for the kind of coalition that has come together around it. How often 
do you have the AFL-CIO and FreedomWorks supporting the same effort? 
How often do you have the SEIU, which is the largest trade union in 
this country, moveOn.org, which I believe has some 5 million 
progressive members, and Public Citizen striving for the same goal as 
the National Taxpayers Union or the Eagle Forum or the Conservative 
Americans for Tax Reform? There is a coalition representing tens of 
millions of grassroots activists. Some of them are progressive, some 
where I come from, some of them are conservative, but they are all 
united around a very basic principle: We need transparency at the Fed, 
and we need it now.
  I want to use this opportunity--and I thank Chairman Dodd for 
allowing me to do this--to talk about the amendment, what it does, and 
why so many diverse groups are coming together in support of it because 
you do have to ask yourself: What is bringing together some of the most 
progressive groups in the country with some of the most conservative 
groups, some of the most progressive members of the Senate with some of 
the most conservative? I also want to tell my colleagues not only what 
this amendment does but to clarify as best I can what it does not 
because there has been some distortion about this amendment, and those 
distortions are blatantly untrue. I want to touch on that also.
  The origin for this amendment came on March 3, 2009. That was the 
date that, as a member of the Budget Committee, I had the opportunity 
to ask Chairman Bernanke what I thought was a pretty simple question. 
Chairman Bernanke, obviously, is Chairman of the Fed. What I asked him 
was: Mr. Chairman, my understanding is that the Fed has lent out some 
$2 trillion to some of the largest financial institutions in this 
country. Would you please tell me and the American people who received 
that money? I thought that was a pretty simple and straightforward 
question. Mr. Bernanke said: No. Despite the fact that this was $2 
trillion in zero interest or near zero interest loans, he apparently 
believes the American people do not have a right to know who received 
that money.
  On that very same day, I introduced legislation requiring the Fed to 
put this information on its Web site, just as Congress required the 
Treasury Department to do with respect to the $700 billion TARP. And 
here we are today. Whatever one may think of TARP, one can get 
information as to who received that money, when it was paid back--the 
details. It is right there on the Internet. I believe that same 
information should be made available in terms of the Fed's zero 
interest and near zero interest loans.
  What the Fed apparently does not understand--and this is the 
important point--is that this money, these trillions of dollars, do not 
belong to the Fed; they belong to the American people. It is 
incomprehensible to me--and I think to the overwhelming majority of 
people in our country--that the Fed believes they can keep this 
information secret.
  This amendment not only requires that the Fed tell us who has 
received the $2 trillion it lent out, but, similar to the language 
incorporated in the House bill, it calls for an audit of the Fed by the 
GAO. That is it. That is what we are attempting to do with this 
amendment: transparency and a straightforward audit. Who got what when, 
on what basis, on what terms, who was at the meetings, who made the 
decisions, and taking a look at possible conflicts of interest--simple, 
factual questions that people from the State of Vermont ask me and I 
suspect people from Minnesota ask you, Mr. President, and people all 
over this country, regardless of their political persuasion, are 
asking.

[[Page 7515]]

  I understand this amendment may not be supported by everyone. Some 
may suggest, inaccurately, that this amendment--and I quote from a 
statement--``takes away the independence of the Federal Reserve and 
puts monetary policy into the hands of Congress.'' That is one of the 
charges being made against this amendment.
  Let me address that concern by simply reading to the Members of the 
Senate exactly what is in the amendment so that we know what we are 
talking about. I quote from page 4 of a six-page amendment. It is not a 
long amendment. It cannot be clearer than this. This is what it says:

       Nothing in this subsection shall be construed as 
     interference in or dictation of monetary policy to the 
     Federal Reserve System by the Congress or the Government 
     Accountability Office.

  If there are people who are saying: Oh, we are going to get involved 
in monetary policy; oh, we are going to be politicizing the Fed; oh, we 
are going to have, before an election, Congress telling the Fed to 
raise interest rates or to lower interest rates, that is absolutely 
inaccurate. That is not what we are doing. That is not, in my view, 
what we should be doing.
  We want an independent Fed. We want them to develop monetary policy. 
That is not--underline not--what this amendment does. This amendment 
does not tell the Fed when to cut short-term interest rates and when to 
raise them. It does not tell the Fed which banks to lend money to and 
which banks not to lend money to. It does not tell the Fed which 
foreign central banks they can do business with and which ones they 
cannot do business with. It does not impose any new regulations on the 
Fed, nor does it take any regulatory authority away from the Fed. Let's 
be clear about that.
  I think what the opponents of this amendment are doing is equating 
independence with secrecy, and there is a difference. At a time when 
our entire financial system almost collapsed, we cannot let the Fed 
operate in secrecy any longer. The American people have a right to 
know.
  I find it amusing that there are some people who oppose this 
amendment. As Chairman Dodd and the Presiding Officer know, we have had 
heated debates on the floor of the Senate over a $5 million amendment, 
over an $8 million provision that goes on for hours. Yet where we have 
trillions of dollars being lent out, there are some people who think 
the American people don't have a right to know who got that money. I 
think, frankly, that is absurd.
  The American people, as we hear over and over on the floor of the 
Senate, play by the rules. That is what the average American family 
does; they play by the rules. Well, what are the rules governing the 
Fed? Who makes those rules or are they just made up as they go along 
and they do not have to tell anybody about it? So I have a problem with 
that, and that is what this amendment is about.
  Here, to my mind--and these are just my issues; others may have 
different issues, and I am sure they do--are just a few of the 
questions the American people are asking and why we need a GAO audit of 
the Fed. These are just a few. Let me throw them out.
  Why was Lloyd Blankfein, the CEO of Goldman Sachs, invited to the New 
York Federal Reserve to meet with Federal officials in September of 
2008 to determine whether AIG would be bailed out or allowed to go 
bankrupt?
  When the Fed and Treasury decided to bail out AIG to the tune of $182 
billion, why did the Fed refuse to tell the American people where that 
money was going? Why did the Fed argue that this information needed to 
be kept secret ``as a matter of national security?''
  Here is the point. When AIG finally released the names of the 
counterparties receiving this assistance, how did it happen that 
Goldman Sachs received $13 billion of this money; AIG, $182 billion; 
$13 billion going to Goldman Sachs--100 cents on the dollar of a 
company that was going bankrupt and that was bailed out. How is that--
100 cents on the dollar? Not bad.
  Another question people might ask: Did Goldman Sachs use this money 
to provide $16 billion in bonuses the next year? Here you have Goldman 
Sachs getting $13 billion out of the $182 billion that AIG got, and the 
next year they are announcing $16 billion in bonuses. Did they use some 
of this money to provide those bonuses?
  A GAO audit of the Fed might help explain to the American people if 
there were any conflicts of interest surrounding this deal. I think the 
average American would say: Yes, there is a conflict of interest. You 
have a guy from Goldman Sachs sitting in the room arguing for $182 
billion. They got $182 billion; he gets $13 billion. The next year his 
company gives $16 billion in bonuses.
  Is there a conflict of interest? I think so. That is my opinion. My 
opinion isn't the important one, but that is what the GAO will be doing 
if this amendment is passed.
  Just another question out there. In 2008, it seems to me--I may be 
wrong--there was a conflict of interest at the Federal Reserve Bank of 
New York, when Stephen Friedman, the head of the New York Fed, who also 
served on the board of directors of Goldman Sachs--let's back it up. 
The head of the Fed serves on the board of Goldman Sachs, approved 
Goldman's application to become a bank holding company, giving it 
access to cheap loans from the Federal Reserve. OK. The head of the New 
York Federal Reserve, on the board of Goldman Sachs, is applying for 
Goldman Sachs to become a bank holding company to gain cheap loans from 
the Fed.
  It looks to me like there may be a conflict of interest, but what do 
I know? That is what we need a GAO report to tell us.
  Here, interestingly enough, is an article from May 9, 2009, in the 
Wall Street Journal. Let me quote briefly from that article:

       Goldman Sachs received speedy approval to become a bank 
     holding company in September of 2008. During that time, the 
     New York Fed's chairman, Stephen Friedman, sat on Goldman's 
     board and had a large holding in Goldman's stock, which, 
     because of Goldman's new status as a bank holding company, 
     was a violation of Federal Reserve policy. The New York Fed 
     asked for a waiver, which, after about 2\1/2\ months, the Fed 
     granted. While it was weighing the request, Mr. Friedman 
     bought 37,300 more Goldman shares in December. They have 
     since risen $1.7 million in value. Mr. Friedman, who once ran 
     Goldman, says none of these events involved any conflicts.

  That is the Wall Street Journal article from May 9, 2009. That is 
what Mr. Friedman says. Well, I kind of disagree with him, but I would 
like the GAO to take a look at that. Without a comprehensive GAO 
report, we have to take Mr. Friedman at his word, and I don't think we 
should. Who got what? When did they get it? On what basis and what 
terms? Who was at those meetings? Were there conflicts of interest? 
These are the kinds of questions a GAO audit of the Fed will answer.
  As a result of the bailout of Bear Stearns and AIG, the Fed--and this 
is a beauty, this is quite something--the Fed now owns credit default 
swaps--listen up on this one--betting that California, Nevada, and 
Florida will default on their debt. So the Federal Reserve stands to 
make money if California, Nevada, and Florida go bankrupt. I suspect 
that the Senators from the great States of California, Nevada, and 
Florida would be rather interested to know that if their States go 
bankrupt, the Fed makes money.
  On the surface, this looks a little absurd to me, but again, I think 
this is an issue that the GAO might be taking a look at.
  It has been reported that the Federal Reserve pressured the Bank of 
America into acquiring Merrill Lynch--making this financial institution 
even bigger and riskier--allegedly threatening to fire its CEO if the 
Bank of America backed out of this merger. When the merger went 
through, Merrill Lynch employees received $3.7 billion in bonuses. Was 
this a good deal for the American taxpayer? A GAO audit can help us 
find out.
  When the Federal Reserve provided a $29 billion loan to JPMorgan 
Chase to acquire Bear Stearns, the CEO of JPMorgan Chase, Jamie Dimon, 
served on the Board of Directors at the New

[[Page 7516]]

York Federal Reserve. Let me repeat that. When the Federal Reserve 
provided $29 billion to JPMorgan Chase, the CEO of JPMorgan Chase 
served on the Board of Directors of the New York Fed. Did this 
represent a conflict of interest? I think the average American would 
say yes. Maybe some people would have a different point of view. But I 
think a GAO audit can help explain all this to the American people.
  Currently--and I think we have to appreciate this as well; we have to 
shed some light on these issues--some 35 members of the Federal 
Reserve's Board of Governors are executives at private financial 
institutions which have received nearly $120 billion in TARP funds, but 
we don't know how much these big banks received from the Fed. We know 
what they got from the TARP, not from the Fed. A GAO audit could answer 
this question.
  All of us--I believe all of us--are deeply concerned that small- and 
medium-sized businesses around this country--I know it is certainly the 
case in Vermont--are begging for affordable credit. They have the 
opportunity to expand. We are beginning to see some economic recovery, 
but they want to expand, they want to create new jobs, and they are 
finding it extremely difficult to acquire those desperately needed 
affordable loans. I find it an important issue to ask how much of the 
trillions of dollars in zero or near zero interest loans that financial 
institutions received from the Fed went out to those small businesses 
or, perhaps, as I personally believe is the case, were simply invested 
in Federal Government bonds, earning an interest rate of 3 or 4 
percent.
  A number of observers believe--and the GAO can help us discover--the 
Fed provided zero interest loans to a large bank, which then took that 
money and bought government bonds at 3 percent. If that was the case, 
and I suspect it was, you are looking at a huge scam--a huge scam--when 
small- and medium-sized businesses needed the money. That was the 
intention of these loans. But I don't know how much of this was 
invested in growth bonds, you don't know, and the American people don't 
know. It is time we found out.
  This amendment I am offering is virtually identical to legislation 
that I have offered on this subject that has 33 cosponsors. The 
amendment, I think, has 20, 22 Democrats and Republicans. The original 
legislation had 33 cosponsors. Just so you can get a sense of the 
diversity of ideological opinion behind this amendment, let me tell you 
the names of the people on board the legislation--not the amendment, 
the legislation: Senators Barrasso, Bennett, Boxer, Brownback, Burr, 
Cardin, Chambliss, Coburn, Cochran, Cornyn, Crapo, DeMint, Dorgan, 
Feingold, Graham, Grassley, Harkin, Hatch, Hutchison, Inhofe, Isakson, 
Landrieu, Leahy, Lincoln, McCain, Murkowski, Risch, Sanders, Thune, 
Vitter, Webb, Wicker, and Wyden.
  Those are people who are on the original legislation--33 cosponsors. 
As you can see, they range from some of the most progressive Members to 
some of the most conservative Members. The amendment that is now on the 
floor has, I believe, 22 cosponsors, Republicans and Democrats alike, 
and I wish to thank all of them for their support.
  The American people are asking: Can people work together? Can they 
come together on important issues? If there is an important issue that 
people with different ideological backgrounds have come together on, 
this is that one. So I wished to thank my Republican friends and my 
Democratic friends who, every other day, are fighting like cats and 
mice but on this issue have come together, and I appreciate that.
  But it is not only the Members of the Senate. In terms of progressive 
grassroots organizations, this amendment enjoys the strong support of 
the AFL-CIO; the Service Employees International Union, the single 
largest union in the country; the United Steelworkers of America; 
Public Citizen; the New American Foundation; Center for Economic 
Policy; U.S. Public Interest Research Group; Americans for Financial 
Reform, which is a coalition of over 250 consumer, employee, investor, 
community, and civil rights groups. There is a huge amount of support 
from the progressive community. It also has a huge amount of support 
from the conservative community.
  Let me read, briefly, a letter I received from the legislative 
director of the AFL-CIO. This is what he says:

       On behalf of the AFL-CIO, I am writing to urge you to 
     support the Sanders-Feingold-DeMint-Leahy-McCain-Grassley-
     Vitter-Brownback amendment to increase transparency at the 
     Federal Reserve. Working people want to know who benefitted 
     from the liquidity provided by taxpayers during the crisis 
     and this amendment will ensure that we receive this 
     information.

  I received another letter, which came from the president of the SCIU, 
the president of the United Steelworkers, the president of Public 
Citizen and many other progressive groups and this is what they say:

       Since the start of the financial crisis, the Federal 
     Reserve has dramatically changed its operating procedures. 
     Instead of simply setting interest rates to influence 
     macroeconomic conditions, it rapidly acquired a wide variety 
     of private assets and extended massive secret bailouts to 
     major financial institutions. There are still many questions 
     about the Fed's behavior in these new activities. The Federal 
     Reserve's balance sheet expanded to more than $2 trillion, 
     along with implied and implicit backstops to Wall Street 
     firms that could cost even more. Who received the money? 
     Against what collateral? On what terms and conditions? The 
     only way to find out is through a complete audit of the 
     Federal Reserve. That's why we support the amendment to 
     increase transparency at the Fed.

  That is from the SEIU, and many other unions.
  That is what some of the progressive groups, quite frankly, that I 
work with quite often have to say about this amendment. But let me 
quote from some of the conservative organizations that, frankly, I 
usually do not have very good voting records with. Very often they 
oppose what I bring forth.
  Here is the National Taxpayers Union. I don't know how many folks 
they have, but they are a big organization. This is what the National 
Taxpayers Union says:

       The National Taxpayers Union urges all Senators to vote 
     ``yes'' on S. Amendment 3738 to the financial regulatory 
     reform legislation. This amendment, introduced by Senators 
     Sanders and DeMint, would require the Government 
     Accountability Office to conduct an audit of the Federal 
     Reserve. . . .

  I like their next sentence.

       Transparency is not a Democrat or Republican issue, but 
     rather an issue of right or wrong. If the Senate insists on 
     further expanding the Fed's reach, Americans deserve to know 
     more about the workings of a government-sanctioned entity 
     whose decisions directly affect their economic livelihood. A 
     ``yes'' vote on S. amendment 3738 [this amendment] will be 
     significantly weighted as a pro-taxpayer vote in our annual 
     Rating of Congress.

  That means I may have at least a 1-percent approval vote from the 
National Taxpayers Union. I appreciate their support. That is from the 
National Taxpayers Union.
  Let me quote from another letter of support I received from a group 
of conservative organizations that includes the Americans for Tax 
Reform, the Campaign for Liberty, the Rutherford Institute, the Eagle 
forum, Freedomworks, and the Center for Fiscal Accountability--again, 
some of the more conservative groups in the country, groups that 
usually do not support my issues. This is what they say:

       We urge you to vote for Senators Sanders, Feingold, DeMint, 
     and Vitter's Federal Reserve Transparency Amendment. . . . 
     This amendment does not take away the ``independence'' of the 
     Fed. It simply requires the GAO to conduct an independent 
     audit of the Fed and requires the Fed to release the names of 
     the recipients of more than $2 trillion in taxpayer-backed 
     assistance during this latest economic crisis. Any true 
     financial reform effort will start with requiring 
     accountability from our Nation's central bank.

  Let me thank all of the conservative groups--in this case the 
Americans for Tax Reform, the Campaign for Liberty, and the others--for 
their very strong grassroots effort in supporting this amendment. It is 
an indication, again, that on certain issues progressives and 
conservatives can come together.
  Let me mention this because I think it is possible that some of the 
Members do not know this. This amendment is not a radical idea. As part 
of the budget resolution debate in April of 2009, the Senate voted 
overwhelmingly in

[[Page 7517]]

support of this concept by a vote of 59 to 39. I brought that up. It 
was a nonbinding vote, part of the budget resolution, 59 to 39. So many 
Senators have already gone on record supporting that.
  Here is also an important piece of information. In the House of 
Representatives, this concept passed the House Financial Services 
Committee by a vote of 43 to 26 and was incorporated into the House 
version of the Wall Street reform bill that was approved by the House 
last December.
  Again, what we are talking about is something that was passed in the 
House, and it is in the House bill. There is a variation. We are not 
the same, to be honest, but the same concept--for a Fed audit--already 
exists in the Wall Street reform bill passed in the House.
  This concept has the support of the Speaker of the House, Nancy 
Pelosi, who has said Congress should ask the Fed to put this 
information ``on the Internet like they've done with the recovery 
package and the budget.'' That is exactly what this amendment would do.
  Here is another point many people don't know. A lot of this language 
is in the House bill. A lot of this language has already been supported 
in the Senate last year as part of the budget resolution. But here is 
an important point many people do not know. Bloomberg News service did 
a very good job, and they have aggressively demanded, as a news 
organization, this information about who the Fed lent money to be made 
public. As a result of their efforts, two Federal courts--not one, two 
Federal courts--have ordered the Fed to release all the names and 
details of the recipients of more than $2 trillion in Federal Reserve 
loans since the financial crisis as a result of a Freedom of 
Information Act lawsuit.
  So Bloomberg News filed suit and two Federal courts supported 
Bloomberg. The Fed had argued in court in opposition to Bloomberg that 
it should not have to release this information, citing, according to 
Reuters--this is what the Fed said--``an exemption that it said lets 
Federal agencies keep secret various trade secrets and commercial or 
financial information.''
  However, the U.S. Court of Appeals in New York disagreed. Here is 
what a unanimous three-judge appeals court panel wrote in their 
opinion:

       To give the Fed power to deny disclosure because it thinks 
     it best to do so would undermine the basic policy that 
     disclosure, not secrecy, is the dominant objective. If the 
     Board believes such an exemption would better serve the 
     national interest, it should ask Congress to amend the 
     statute.

  This appeals court decision upheld an earlier ruling by the Southern 
Federal District Court of New York that also ordered the Fed to release 
this information. In other words, we now have 59 Senators who, as part 
of the budget resolution, voted on this issue; 320 Members of Congress, 
the House, and two U.S. courts that have all told the Fed in no 
uncertain terms: Give us transparency. That is what we have.
  As I wind down and conclude my remarks, let me just simply say that I 
am thankful for all of the support, all the grassroots support from 
progressive and conservative groups, and from my fellow Senators. The 
American people have a right to know when trillions of their dollars 
are being spent and who gets it. The American people have a right to 
know whether there are conflicts of interest.
  I thank my colleagues--there are so many cosponsors, I will not 
mention them all--but I thank all of them.
  Let me conclude by saying I am very proud to say we have been working 
with Senator Dodd's office and some other offices.


                    Amendment No. 3738, as Modified

  I am going to ask that my amendment be modified with the changes that 
are at the desk. I am proud to say these modifications have been worked 
out with Senator Dodd and would allow the GAO to conduct a top-to-
bottom audit of all of the Federal Reserve's emergency lending 
activities since December 1, 2007. In addition, the modifications 
require the Fed to put on its Web site all of the recipients of over $2 
trillion in emergency assistance since December 1, 2007.
  The PRESIDING OFFICER (Mrs. Shaheen). The amendment is so modified.
  The amendment (No. 3738), as modified, is as follows:

       At the end of title XI, add the following:

     SEC. 1159. GAO AUDIT OF THE FEDERAL RESERVE FACILITIES; 
                   PUBLICATION OF BOARD ACTIONS.

       (a) GAO Audit.--
       (1) In general.--Notwithstanding section 714(b) of title 
     31, United States Code, or any other provision of law, the 
     Comptroller General of the United States (in this subsection 
     referred to as the ``Comptroller General'') shall conduct a 
     one-time audit of all loans and other financial assistance 
     provided during the period beginning on December 1, 2007 and 
     ending on the date of enactment of this Act by the Board of 
     Governors under the Asset-Backed Commercial Paper Money 
     Market Mutual Fund Liquidity Facility, the Term Asset-Backed 
     Securities Loan Facility, the Primary Dealer Credit Facility, 
     the Commercial Paper Funding Facility, the Term Securities 
     Lending Facility, the Term Auction Facility, Maiden Lane, 
     Maiden Lane II, Maiden Lane III, the agency Mortgage-Backed 
     Securities program, foreign currency liquidity swap lines, 
     and any other program created as a result of the third 
     undesignated paragraph of section 13 of the Federal Reserve 
     Act.
       (2) Assessments.--In conducting the audit under paragraph 
     (1), the Comptroller General shall assess--
       (A) the operational integrity, accounting, financial 
     reporting, and internal controls of the credit facility;
       (B) the effectiveness of the collateral policies 
     established for the facility in mitigating risk to the 
     relevant Federal reserve bank and taxpayers;
       (C) whether the credit facility inappropriately favors one 
     or more specific participants over other institutions 
     eligible to utilize the facility;
       (D) the policies governing the use, selection, or payment 
     of third-party contractors by or for any credit facility; and
       (E) whether there were conflicts of interest with respect 
     to the manner in which such facility was established or 
     operated.
       (3) Timing.--The audit required by this subsection shall be 
     commenced not later than 30 days after the date of enactment 
     of this Act, and shall be completed not later than 12 months 
     after that date of enactment.
       (4) Report required.--The Comptroller General shall submit 
     a report on the audit conducted under paragraph (1) to the 
     Congress not later than 12 months after the date of enactment 
     of this Act, and such report shall be made available to--
       (A) the Speaker of the House of Representatives;
       (B) the majority and minority leaders of the House of 
     Representatives;
       (C) the majority and minority leaders of the Senate;
       (D) the Chairman and Ranking Member of the Committee on 
     Banking, Housing, and Urban Affairs of the Senate and of the 
     Committee on Financial Services of the House of 
     Representatives; and
       (E) any member of Congress who requests it.
       (b) Audit of Federal Reserve Bank Governance.--
       (1) Audit.--
       (A) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Comptroller General shall complete 
     an audit of the governance of the Federal reserve bank 
     system.
       (B) Required examinations.--The audit required under 
     subparagraph (A) shall--
       (i) examine the extent to which the current system of 
     appointing Federal reserve bank directors effectively 
     represents ``the public, without discrimination on the basis 
     of race, creed, color, sex or national origin, and with due 
     but not exclusive consideration to the interests of 
     agriculture, commerce, industry, services, labor, and 
     consumers'' in the selection of bank directors, as such 
     requirement is set forth under section 4 of the Federal 
     Reserve Act;
       (ii) examine whether there are actual or potential 
     conflicts of interest created when the directors of Federal 
     reserve banks, which execute the supervisory functions of the 
     Board of Governors of the Federal Reserve System, are elected 
     by member banks;
       (iii) examine the establishment and operations of each 
     facility described in subsection (a)(1) and each Federal 
     reserve bank involved in the establishment and operations 
     thereof; and
       (iv) identify changes to selection procedures for Federal 
     reserve bank directors, or to other aspects of Federal 
     reserve bank governance, that would--

       (I) improve how the public is represented;
       (II) eliminate actual or potential conflicts of interest in 
     bank supervision;
       (III) increase the availability of information useful for 
     the formation and execution of monetary policy; or
       (IV) in other ways increase the effectiveness or efficiency 
     of reserve banks.

       (2) Report required.--A report on the audit conducted under 
     paragraph (1) shall be submitted by the Comptroller General 
     to the Congress before the end of the 90-day period

[[Page 7518]]

     beginning on the date on which such audit is completed, and 
     such report shall be made available to--
       (A) the Speaker of the House of Representatives;
       (B) the majority and minority leaders of the House of 
     Representatives;
       (C) the majority and minority leaders of the Senate;
       (D) the Chairman and Ranking Member of the Committee on 
     Banking, Housing, and Urban Affairs of the Senate and of the 
     Committee on Financial Services of the House of 
     Representatives; and
       (E) any member of Congress who requests it.
       (c) Publication of Board Actions.--Notwithstanding any 
     other provision of law, the Board of Governors shall publish 
     on its website, not later than December 1, 2010, with respect 
     to all loans and other financial assistance it has provided 
     during the period beginning on December 1, 2007 and ending on 
     the date of enactment of this Act under the Asset-Backed 
     Commercial Paper Money Market Mutual Fund Liquidity Facility, 
     the Term Asset-Backed Securities Loan Facility, the Primary 
     Dealer Credit Facility, the Commercial Paper Funding 
     Facility, the Term Securities Lending Facility, the Term 
     Auction Facility, Maiden Lane, Maiden Lane II, Maiden Lane 
     III, the agency Mortgage-Backed Securities program, foreign 
     currency liquidity swap lines, and any other program created 
     as a result of the third undesignated paragraph of section 13 
     of the Federal Reserve Act--
       (1) the identity of each business, individual, entity, or 
     foreign central bank to which the Board of Governors has 
     provided such assistance;
       (2) the type of financial assistance provided to that 
     business, individual, entity, or foreign central bank;
       (3) the value or amount of that financial assistance;
       (4) the date on which the financial assistance was 
     provided;
       (5) the specific terms of any repayment expected, including 
     the repayment time period, interest charges, collateral, 
     limitations on executive compensation or dividends, and other 
     material terms; and
       (6) the specific rationale for each such facility or 
     program.

  Mr. DODD. I will just take 30 seconds. I will speak longer on this a 
little later. But let me thank our colleague from Vermont. He is a 
remarkable individual who brings great intelligence and passion to this 
cause. He does not get involved in every issue that comes up on the 
floor of the Senate. I admire that. Some believe they have to have 
something to say about everything. But when Senator Sanders gets 
involved with something, you better believe he does it with a great 
deal of conviction and passion and purpose.
  I am a cosponsor of this amendment he has just modified. I think it 
is absolutely correct. On the transparency issues, there are no 
excuses. When as much American taxpayer money has been exposed as has 
been, we have the right to know where it is going and who is involved 
in it. There was a concern about whether the independence of the Fed 
would be compromised. He has guaranteed in his language that is no 
longer an issue whatsoever. I thank him for it. It is a great 
amendment.
  I know Senator Grassley wants to be heard, and I yield the floor.
  Mr. SANDERS. I thank the chairman.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Madam President, you have heard me say many times to my 
colleagues that the public's business ought to be public. I don't know 
why that does not apply to the Federal Reserve, at least on its 
regulatory activities when it gives out money. There are all kinds of 
reasons it should not apply to monetary policy. But for everything 
else, the Federal Reserve is acting at the behest of Congress through a 
law going way back to 1913 giving them certain powers. If Congress 
exercised these same powers--and under the Constitution we have the 
authority to do that--it would be the public's business; in fact, even 
more than what this amendment does. So the public's business ought to 
be public.
  With transparency, and that is what this amendment is all about, you 
get accountability--it seems to me, with what has happened over the 
last 10 years, more transparency leading to accountability. If we had 
that transparency we probably would not have had the bubble in the 
first place that broke in 2008, which brought us to this recession.
  So I rise not hesitantly but forthrightly to support the pending 
amendment by the Senator from Vermont. I appreciate all of his hard 
work on making the Federal Reserve more accountable to the people of 
this country. I am a cosponsor of his stand-alone bill, so I am glad to 
be a cosponsor of this amendment, to bring sunshine to the Fed.
  During the last 2\1/2\ years, the Fed has gone well beyond what was 
viewed as its historical authority. It has taken on more and more risk, 
in complicated and unprecedented ways. It intervened in the market to 
prop up certain firms. It intervened in the market to protect these 
firms from failing, using an unlimited source of taxpayers' dollars to, 
in effect, pick winners and losers.
  The risks they have taken will ultimately be borne by the American 
taxpayers. So in the interest of accountability, the taxpayers deserve 
to have answers on who got money and how it was spent.
  Under law, the Federal Reserve has lending authority for unusual and 
exigent circumstances. Under section 13(c) of the Federal Reserve Act, 
the Reserve can ``discount for any individual, partnership or 
corporation, notes, drafts and bills of exchange when such notes, 
drafts and bills of exchange are endorsed or otherwise secured to the 
satisfaction of the Federal Reserve bank.''
  Essentially, this means the Fed can lend to any entity or person when 
it believes there is an emergency. This is an extraordinary amount of 
power and discretion, and it should be exercised in the light of day. 
Transparency, accountability--the public's business ought to be public. 
Trillions of dollars were provided to financial institutions and 
corporations since the financial crisis began. The Fed helped rescue 
Fannie Mae and Freddie Mac. The Fed propped up Bear Stearns and AIG 
when they were on the brink of failure. They intervened in the business 
efforts of Lehman Brothers, Merrill Lynch, and Citigroup.
  But how much has been doled out and to whom is still a mystery. This 
amendment would allow the independent arm of Congress, the Government 
Accountability Office, to review the decisions made by the Federal 
Reserve. And the Government Accountability Office is nothing but a 
group of professional people without a political motive and the right 
group to get the job done and do it on an ongoing basis. An objective 
review of the Fed's actions will serve our country well in the future.
  We can learn from the mistakes that may have been made. We can 
determine if the losses or profits from the Fed's investments help 
serve the economy well. Did the Federal Reserve act in an appropriate 
and ethical manner? Was the relationship between regulators and the 
financial industry too cozy, hampering the ability to make an objective 
decision?
  Proponents of the Federal Reserve should not consider this as a 
threat to the independence of the Fed--an independence I support. They 
should embrace an independent evaluation as an opportunity to improve 
its operations and, most importantly, strengthen public trust for 
future generations who may be faced with similar financial crises.
  As the Senator from Vermont has made very clear, the intent of his 
amendment is not to interfere in monetary policy. I share that same 
feeling he has, and I would not support an amendment that went into 
monetary policy. But the Fed's extraordinary power outside of monetary 
policy should be subject to the light of day, transparency and 
accountability. The public's business ought to be public. We should 
allow the Government Accountability Office to audit the Fed since they 
have moved far beyond their traditional and primary mission of 
conducting monetary policy.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. SANDERS. I thank the Senator from Iowa not only for his support 
but for his long fight for transparency. It has been a pleasure working 
with the Senator.
  The PRESIDING OFFICER. The Senator from Kansas.

[[Page 7519]]


  Mr. BROWNBACK. Madam President, I wish to thank my colleagues, 
Senators Sanders and DeMint, for putting forward, bringing this 
amendment to the floor. I am a cosponsor of this amendment, along with 
several of my other colleagues.
  I would say as well to my colleague from Vermont, my colleague from 
South Carolina, and others who are sponsors, this is an issue I hear a 
lot about when I am traveling around my State, which is often. When I 
am traveling around and listening to people, this is something people 
are concerned about. They are concerned about the monetary policy. They 
are concerned about the money system. They are concerned.
  I would note to people, and to my colleagues in particular, that the 
Congress created the Fed, the Fed didn't create the Congress. So the 
Congress does have control over this issue, and I think we need to look 
at it and say: Let's look at what is appropriate and what is proper. 
And this is clearly one piece of it.
  I think the Fed has done a number of things quite well and quite 
right. Yet I don't see any problem whatsoever with having a simple 
audit; that that is going to somehow reveal the genie in the bottle and 
let out all of these secrets that are going to be harmful to the 
development of monetary policy. There seems to me to be a fair amount 
of overstatement on the other side of the terrible damage this audit 
would do. That does not seem right to me. It does not seem right to my 
constituents. My constituents look at this and say: Well, I do not want 
to harm the development of monetary policy. I want it to be wise and 
good and sound. But I do not see how it is harmed by an audit of an 
entity that is created by the government, that is created by the 
Congress. So why shouldn't we do something like this?
  That is why I think this is a prudent amendment. It is a good 
commonsense amendment, and I think it will be well received by the 
constituents of this great country who I think are pretty wise on these 
and other decisions; that as we go around, if we will listen to what 
people are saying, I think there is a lot of wisdom in that. They are 
saying we ought to know more about what is taking place in the Fed.
  I know we would all like to move forward on financial regulatory 
reform legislation. I have some serious problems in this bill. I think 
the consumer financial product piece shouldn't penalize auto dealers 
and orthodontists and others who did not cause any of these problems.
  So I have an amendment. I have other amendments I am a part of as 
well, along with this one, that I think we need to consider before we 
move on forward, even though I have some problem with the basis of the 
bill. I think it hits more Main Street than it does Wall Street. The 
difficulty is that we just have different ideas and beliefs about the 
best way to move forward, and that is normal.
  This amendment is not just about the choices, though, that we have on 
reforming the financial sector. I believe it gets to the heart of a 
more fundamental issue: what the American people have a right to expect 
and know from their governmental institutions.
  The fact that this amendment is brought forward by the Senator from 
Vermont, Mr. Sanders, and the Senator from South Carolina, Mr. DeMint, 
two Members who could not be further apart on the ideological spectrum, 
should be a sufficient warning and measure to make everyone sit up and 
take notice of what it is that is here that is so troubling.
  This amendment isn't about whether the legislation will put an end to 
taxpayer-backed bailouts. It isn't about whether the legislation will 
end too big to fail. It isn't even about how to best protect the 
American people and taxpayer dollars. It is about something I believe 
is even more fundamental: the accountability of governmental 
institutions to the people of the United States and to the Congress.
  I think it is important, as I stated, to remember--I want to state 
this again--one single fundamental reality in this debate: Congress 
created the Federal Reserve, not the other way around. We created the 
Federal Reserve System to serve the interests of the citizens of this 
Nation, not to serve the interests of large financial institutions.
  In establishing the Federal Reserve, Congress recognized the 
importance of a central bank that could operate with independence to 
ensure the orderly functioning of the banking systems and to maintain 
price stability. That is the core function of the Fed. More recently, 
the Federal Reserve mandate was expanded to charge them with 
maintaining price stability and maximum employment. That was an 
expansion piece that was added.
  The Government Accountability Office is also a creation of Congress. 
GAO is an independent, nonpartisan agency that works for Congress. What 
is GAO's mission? GAO's mission is to support the Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and ensure the accountability of the Federal Government for the benefit 
of the American people.
  In my view, the real issue here is whether you believe the Congress 
has the right to ask GAO--in many respects, our auditor--to review 
actions and activities of an institution that we, the Congress, 
created.
  I certainly understand the importance of the Federal Reserve's 
independence in the execution of monetary policy. I understand and I 
support that. I understand the importance of not interfering with the 
operation of the FOMC. That is not what this amendment is attempting to 
do. That is not my intention. I am confident, as well, it is not the 
intention of the main sponsors of this amendment. But I do believe it 
is relevant to know whether the Federal Reserve is operating in a 
manner that is consistent with its statutory authority. It is relevant 
to know whether the Federal Reserve is following its own established 
rules and procedures or whether it is just making it up as it goes 
along. I do think it is relevant for Congress to know who was involved 
in decisions to take extraordinary measures by exercising emergency 
powers, as well as who was and was not consulted before those actions 
were taken. Those are prudent and proper things for us to know.
  I think it is equally important to know whether the policy statements 
and subsequent minutes of FOMC meetings accurately reflect what went on 
in those meetings.
  Recent news reports surrounding the release of transcripts from 2004 
meetings of the Fed contained some serious, distressing information. 
Those reports revealed that as far as back as 2004, there were 
significant concerns raised by regional Reserve Bank presidents about 
an emerging housing bubble that, indeed, did emerge and burst. Did we 
see any indication of that in the meeting minutes or the policy 
statements? We did not. And what that tells me is the minutes did not 
accurately--I will even say they did not directly portray what went on 
in the meetings. I do not believe that is right.
  Disturbingly, the transcripts reveal that the Federal Reserve Bank 
president from Atlanta warned that:

       A number of folks were expressing growing concern about 
     potential overbuilding and worrisome speculation in the real 
     estate markets, especially in Florida. Entire condo projects 
     and upscale residential lots are being pre-sold before any 
     construction, with buyers freely admitting that they have no 
     intention of occupying the units or building on the land but 
     rather are counting on ``flipping'' the properties--selling 
     them quickly at higher prices.

  That is a direct quote.
  Disconcertingly, at the same meeting, the former Chairman of the 
Board of Governors, Alan Greenspan, made the following statement:

       We run the risk, by laying out the pros and cons of a 
     particular argument, of inducing people to join in on the 
     debate, and in this regard it is possible to lose control of 
     a process that only we fully understand.

  Let me repeat that quote. This is from former Chairman Greenspan:

       We run the risk, by laying out the pros and cons of a 
     particular argument, of inducing people to join in on the 
     debate, and in this regard it is possible to lose control of 
     a process that only we [the Federal Reserve Board] fully 
     understand.

  Now, I serve as the ranking member of the Joint Economic Committee.

[[Page 7520]]

Senator DeMint is also a member of our committee. We believe in free 
markets and a free enterprise system. We recognize the importance of a 
strong financial system. Yet a fundamental requirement for the orderly 
operation of free markets is transparency and accurate reporting--
information. I think the suggestion that only the Federal Reserve was 
capable of fully understanding is evidence enough that this amendment 
is necessary.
  Congress needs to demand change and greater accountability so people 
can have more information. What if the people had known about this 
debate going on at the Federal Reserve as the housing bubble was 
developing? How would people have acted? My guess is, they would have 
acted quite prudently, saying: The Federal Reserve is concerned about 
this. This is legitimate information. Maybe we should pull back on 
housing investments. Maybe we should be watching this as well.
  I think people can get it; they need the information, though.
  While this amendment does not address the issue of the time delay in 
releasing transcripts, I do believe the current 5 years, which amounts 
to almost 6 in many cases, is indefensible, between the actual minutes 
and them being released--5 years between the actual minutes and their 
being released to the public. In my judgment, that time limit should be 
reduced to no more than 2 years. Members of this body should have had 
access to these and other transcripts before we were asked to reconfirm 
the current Chairman of the Federal Reserve Board of Governors. I would 
suggest it would have been helpful to have had access to this 
information before the housing market collapsed and before it turned 
into a financial crisis.
  The American people are mad at Washington. They are mad at the 
governmental institutions that they view as increasingly unresponsive 
and unaccountable. Let's take this step in the direction of 
transparency, accountability, and disclosure of information. The 
American people have a right to know whether their interests were 
protected or simply placed on the back shelf. They have a right to know 
the information.
  I urge my colleagues to support this amendment, and I urge the 
Federal Reserve to work with us to address real concerns about this 
amendment, rather than trying to defeat it or amend it with the purpose 
of making it a symbolic and meaningless gesture. Let's remind the 
Federal Reserve Board of Governors that they are not the only people 
capable of fully understanding issues on which all of our economic 
future depends.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. SANDERS. I wish to thank the Senator from Kansas for his remarks 
and for his strong support from day one for this concept of 
transparency of the Fed.
  Mr. BROWNBACK. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. COBURN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Sanders). Without objection, it is so 
ordered.
  Mr. COBURN. Mr. President, as we have watched the debate the last 6 
days on the financial regulation reform bill, I thought it would be 
interesting just to raise a few questions. The Congress--both the House 
and the Senate--created what was called the Financial Inquiry 
Commission. As a matter of fact, they had a meeting today. The purpose 
of that Commission--that will turn in their report in December of this 
year--was to take a thorough and complete look at what happened to us 
in 2008--the causes, the regulatory failures, the poor incentives--and 
then make recommendations to the Congress on what we should do.
  The question I have for my colleagues is, we have a bill on the floor 
that has given no credence to the Commission we created, and we are 
actually, according to the majority leader, going to finish this bill 
next week without the benefit of that Commission's inquiry. So a couple 
questions I would ask are, No. 1: Why? Why are we doing that? And, No. 
2--by the way, the people on that Commission are learned people with 
great exposure and great experience in the areas of which we are 
discussing--Why are we allowing the Commission to continue spending 
money if we are not going to pay any attention to them? Why don't we 
just end the Commission, since we have obviously decided what they are 
going to have to give to us is not of value as we make the decision 
about what we need to change? I thought that is what we had the 
Commission for.
  So I find it peculiar that in our rush to blame somebody, our rush to 
take the focus off of where it belongs--by the way, that is right here 
in the U.S. Congress because 90 percent of what went wrong was our 
fault--our fault; that is where it lies--in our rush to shield and 
reflect that away from us, we are going to pass a bill with all sorts 
of unintended consequences of which we fully do not understand right 
now. It is a bill that is going to treat the symptoms, not the 
underlying disease of the financial problems we had. It rings well from 
a populist standpoint, but in the long run it does a disservice to our 
country. That does not mean this bill may not hit it 100 percent on 
what this Commission recommends, but we have no idea what they are 
going to recommend.
  So I think it is a great question for the public to be asking us: Why 
are we doing that? And why are we continuing a Commission that we 
obviously are not paying any attention to? One, it was created so we 
could offload the problem. That is why we created the Commission. We 
obviously did not care what they thought because we are not going to 
pay any attention to them. No. 2, we are going to continue to spend 
money on a Commission that we are not going to value. If we were going 
to value it, we would at least either give it a mandate to hurry up so 
we can make appropriate decisions and use their expertise or we would 
eliminate it.
  Now to the bill that is in front of us. What really happened to us. 
This is my opinion of what happened to us. The Congress created 
incentives to increase with ease the ability to own a home in this 
country. Then we created incentives through Fannie Mae and Freddie Mac 
to do that even greater. Then we created the ability to package and 
offload what Fannie Mae and Freddie Mac had taken and securitized it.
  We wonder why people would take advantage of that. There was not one 
oversight hearing on the Office of Thrift Supervision, which absolutely 
failed in terms of loan originators. There was one hearing in 4 years 
at the SEC that had nothing to do with their oversight of the packaging 
of these incentives before they became a problem. There was no 
oversight--significant oversight--on the explosive nature of 
derivatives trading in this country and around the world. We are so 
quick to point the finger at the people who took advantage of the 
incentives we set in motion.
  So now what do we have? We have $6 trillion or $8 trillion worth of 
exposure for the U.S. taxpayer in terms of guaranteed mortgages by the 
Federal Government through Fannie Mae, Freddie Mac, and FHA, and we are 
hustling along so none of that ends up getting focused on us. We have a 
bill on the floor that does not address the core problem of what went 
wrong.
  Here is the core problem of what went wrong: There were no mortgage 
origination standards that were enforced by the Federal Government, as 
they took American taxpayers, to guarantee what was going to be an 
asset. What did we find at the Permanent Subcommittee on 
Investigations? That in the last year before this, for one company 
alone that originated a vast majority of the loans in California--Long 
Beach Mortgage--90 percent of the mortgages were based on fraudulent 
data.
  OTS knew it and did not do anything about it. Why did they not do it? 
Because they got 16 percent of their revenue from Washington Mutual, 
who owned Long Beach Mortgage.
  So we set up all these systems, we incentivized this system, and now 
that

[[Page 7521]]

it blew up in our faces--because we did not look at it, we did not 
oversight it, we did not do our fiduciary responsibility--we want to be 
quick and get rid of that blame from us by pointing the finger 
somewhere else.
  We have minimal leverage requirements in this bill. If we are going 
to create an incentive for people to act badly, at least we ought to 
put a block somewhere else that will limit the exposure of financial 
institutions based on capital ratios. We have not done that. We have 
not accomplished that in this bill. That is something that has to be 
there. We had companies leveraging to 40 and 50 times their net worth. 
Yet we are not addressing that issue to a significant extent. It is one 
small portion of the bill.
  Then we are going to take a consumer protection agency--which we 
created the problems for--and create a massive government bureaucracy 
that is going to filter all the way down to every small business in 
this country and isolate that power within one individual who is not 
accountable to the Congress and not accountable to the President, and 
we are going to say: You fix it. There will be an unlimited funding 
stream that is going to be totally out of control that is going to 
impede and impact the freedom of Americans' ability to make a living in 
the name of consumer protection.
  If you think I am giving a speech to protect the banks, you are 
wrong. I like them about as much as I like insurance companies. But we 
have to think about what we are doing, and we ought to be about fixing 
the real disease. That real disease is us--us not doing oversight, us 
not being responsible for the legislation we created, and setting up 
incentives, and then yawn as it goes awry and point our fingers 
somewhere else.
  There is no question we need to change the regulatory structure in 
this country. But there is something we need to change more than the 
regulatory structure; that is, the demand on the Congress to start 
doing its job in terms of oversight. We are quick to whip a bill out 
when it is politically expedient to do it and create a whipping boy, or 
several whipping boys, and say we are addressing things. But it is kind 
of like the pea under the three walnut shells. You never know where the 
pea is. The reason you never know is because there is not really even a 
pea there. There was when it started, but it went away. Then it gets 
put back.
  So we are playing the game. We are playing the American people that 
what we are doing is substantive, and that, in fact, it is going to 
enhance capital formation, when what we are doing is going to decrease 
capital formation.
  We have one section in this bill that says every small bank in 
Oklahoma--if they write a mortgage and sell it, forever they have to 
keep 5 percent of it. Well, if they are a small capitalized bank, guess 
what they are going to do. They are never going to create another 
mortgage in Oklahoma. So we are going to concentrate all the mortgages 
in the big banks in the country. That is why Goldman Sachs loves this 
bill. That is why Citibank loves the bill. We are not making the big 
banks smaller; we are making the big banks bigger. We are going to 
undercut the small and medium-sized banks in the country because we are 
going to put a 5-percent retention on every mortgage they write, when, 
in fact, all we would have to say is: If you write a mortgage and you 
package it and sell it, there is recourse back to you, the originator 
of the loan; that mortgage, when it becomes nonperforming, comes back 
to you. That is all we have to do. That does not tie up their capital. 
That does not limit their incentive to create housing in our own 
regional markets that is made available with capital in those regional 
markets.
  No, we are going to make the big boys bigger. All the regulation that 
is in this bill none of the big banks will ever have a problem with. 
They already have thousands and thousands of staff to handle government 
regulation. They will not add a person. But every small community bank 
in this country, every small financial institution in this country, is 
going to drown in the requirements of this bill.
  I know the chairman of the Banking Committee has worked hard to try 
to bring a forth bill. I know there have been great deliberations with 
many from our side of the aisle on the bill. But I think we have thrown 
common sense out the window. The motives are good. The goal--fix the 
problem--is good. But if we treat the symptoms of this and convince the 
American people we have fixed it when, in fact, we have not, when we 
have not eliminated too big to fail--because we are going to make the 
big banks bigger--what we are going to see is a further decline in 
confidence.
  In the name of fixing things, we are going to be taking massive 
amounts of freedom away from small businesses in this country. We are 
going to take discretion away from capital risk that has minimal risk 
to the country but has every bit of risk to the person lending the 
capital. We are even going to take away ``sugar daddy'' investors who 
are the only hope for some ideas--not venture capitalists. We are going 
to take away the ability for somebody to come in and say: I will invest 
in 40 percent of your business and give you the capital to try 
something. We have actually created requirements for that.
  As we look at what we are about to do, the American people ought to 
ask three questions, three very important questions: No. 1, does it fix 
the problem? No. 2, does it grow the government and require increased 
spending? And, No. 3, is there anything to make you think--since we 
were regulating all these industries already--the Congress might 
oversight the next set of regulations we put out there to fix this 
problem? I think the answer to that--all three of those questions--is 
no. I am in a minority, I understand that.
  I said previously, I think we ought to change the regulations in this 
country. I think we also ought to eliminate too big to fail by making 
those that are too big become so small they won't make a difference if 
they do fail. We ought to create the market circumstances that would 
force that to happen. But this bill doesn't do that. This bill won't do 
that.
  So as we go through this rather large bill, which I think has had 
three or four accepted amendments thus far and which is 1,409 pages 
long, one of the other questions we ought to be asking is how many 
Members have read the entire bill. How many Members understand what is 
in the bill? How many Members can have the capability to anticipate the 
unintended consequences of what is in the bill? I think we will find 
the answer to that is zero. Yet we are in a hurry to do this for a 
political reason.
  So I will go back to what I started on. We created the Financial 
Inquiry Commission. What are we going to do with it? What happens if 
they come out in December and say everything we did was wrong? Why did 
we create it? I would love to read back some of the speeches that were 
given on this floor about why we were creating it, because we had to 
know what went wrong. Now we have a commission that has been charged to 
tell us what went wrong, but we are going to ignore them. We are going 
to pass a bill before they have even completed their hearings.
  I think it is no wonder the country has a low level of confidence in 
our deliberations, because they don't make sense to the average 
American. They understand the political spin. They understand pinning 
the tail on the donkey. They understand placing blame so you can 
deflect it from yourself. They get all that. They see it and they see 
right through it. But we are creatures of habit.
  There are good things in this bill. Let me end on that. The 
elimination of the Office of Thrift Supervision had to happen. The 
reason they were ineffective is they got their money from the very 
people they were supervising and when their biggest customer is doing 
something wrong, rather than lose some of their revenue, they turn 
their eye the other way. Consequently, billions and billions and 
billions of dollars out of Washington Mutual became junk. Most of it 
was junk to begin with. It is the concept of greed.
  Other good things: Changing the rating agencies and what they are 
accountable for. This bill goes in a direction different than I would 
have gone,

[[Page 7522]]

but the point is there needs to be a change. They need to not get paid 
by the very people who are asking them to rate something they are 
getting ready to sell, and they ought to be paid by the person who is 
getting ready to buy what they are getting ready to sell, so the 
accountability will be there. But we haven't done that.
  We recovered, and our recovery from this financial fiasco is because 
of the resilience of the American people. The price is enormous, with 
having 14 million people unemployed. That is a tremendous price to pay. 
The loss in terms of dignity, the loss in terms of the ability to 
provide for your family, the loss of losing the skill set you had and 
no longer can find a job to do it is a tremendous price that has been 
paid. But the American people are resilient. What they don't want to 
tolerate, however, is a Congress that fails to recognize and continues 
to repeat mistakes of the past.
  We can say, Well, we have been working on this for 6 months. We have. 
There have been negotiations going on for a long time. My question is, 
Do we have the answers? Do we know what the answers are? And if the 
answer to that question is yes, then let's disband the Financial 
Inquiry Commission right now. Let's not waste those folks' time. Let's 
not spend another penny of Federal taxpayers' money if we think we 
already have the answers. We are going to do just as we do on every 
other program: We are going to create another one and we are going to 
keep spending on the first one.
  Needless to say, I think this bill is fixable. I think we ought to 
address the real key issues: Fannie Mae and Freddie Mac. Why are we not 
addressing them? Because we don't want to put out the bucks, the cost 
to do that. That is why. That is why we are not addressing it. We know 
the issues.
  We have taken an unlimited amount of our kids' money and put it in 
exposure and we have given an absolute implicit and implied guarantee 
to both of those organizations. The President in late December took 
office, and they are now buying back close to $400 billion worth of 
mortgages from the Treasury--nonperforming mortgages--and our kids are 
going to pay all that back. It will be 20 or 30 years before any of 
that property actually reaches the level at which it was sold.
  So what is coming next? What is coming next is we are going to 
mandate principal reduction on mortgages across this country. Who does 
that impact? What that says is that everybody who paid their mortgage 
on time and kept up with their payments by making tremendous sacrifices 
other places, guess what. You are going to get to pay for the mortgage 
of everybody who didn't through your taxes and through your kids' 
taxes. You acted responsibly, but what is coming down the pike is we 
are going to lift the load for those who didn't. You met your 
obligations. You signed the contract on the bottom line, and those who 
were less fortunate than you, you now are going to get to pay for them 
too. That is what is coming. Mark my words. You will hear it before 
November. That is what is coming through the HAMP, through the 40-
percent reduction in the principal amount on many of these mortgages.
  So what is going on? We are rushing the financial reform bill that 
doesn't attack the three major underlying diseases of the financial 
system, and then right after we pass that, we are going to force 
principal reductions on hundreds of thousands, if not millions, of 
mortgages, on which you, the taxpayer, are going to pick up the bill. 
That is what is coming. We are going to hear that it is not. That is 
what is coming.
  Watch carefully what we do. Watch how we spin things. Watch how we 
create demons when, in fact, we are the source of the problem. Watch 
how we point our fingers at others whom we incentivized to take 
advantage of systems we created and say, Oh, no, we are not culpable at 
all. Oh, it wasn't us. We did all the oversight hearings. We changed 
it.
  When we saw the writing on the wall, we didn't do any of that. The 
Congress created this mess, and we are going to continue to act in the 
same way that is going to create more. Because we are going to create a 
whole new set of regulations and then we are not going to have the 
oversight hearings: Are you doing it? Where is the metrics? How do we 
measure whether you are doing it? Are you, Mr. Bureaucrat, doing what 
the Congress directed? As a matter of fact, we don't even put in the 
regulations. We let somebody else write the regulations. We are so 
knowledgeable that we are getting ready to fix this problem, and 
besides the fact the Financial Inquiry Commission hasn't said anything 
to us yet about what the causes are and the potential solutions, but we 
are not even going to write the regulations, just as we didn't in the 
health care bill. The Department of HHS is going to write 1,690 
regulations on the health care industry in this country. The same thing 
is going to happen in this bill.
  As I say, I hope we can fix the bill because I think we need to make 
major changes. There are some good things in this bill.
  We are in danger of losing what confidence is left of the American 
people in our actions. We ought to be asking the right questions for 
the right reasons that shouldn't have anything to do with politics, 
shouldn't have anything to do with partisanship, and ought to have 
everything to do with what is the best, right solution for our country 
in the long run.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I have come to speak in support of the 
Sanders amendment. I am intrigued by my colleague's presentation, so I 
will respond to a bit of it. There are a couple of areas where we agree 
and some where I profoundly disagree, but let me start with the 
agreement.
  When my colleague says, If you are too big to fail, you are too big 
and you ought to get smaller, I fully agree with that. I have an 
amendment that says if you are too big to fail--judged by the council 
in this bill that you are too big to fail, at that point you require 
the breaking up or the paring back of whatever is necessary of that 
institution to bring it below the level at which its failure would 
cause a moral jeopardy or an unacceptable risk to this country's entire 
economy. If we end this process and too big to fail still exists--that 
is, we have companies that are, in fact, too big to fail--then we will 
have failed, in my judgment.
  Too big to fail means you are too big. We have broken up Standard Oil 
into 23 pieces and it turns out that 23 pieces are more valuable than 
the whole. AT&T was broken up. I am not interested in breaking up 
companies for the sake of it, but I am saying this: We know what has 
happened.
  This chart shows what has happened to the largest financial 
institutions in this country. It shows that with respect to assets and 
liabilities, the top six commercial financial institutions in this 
country have gotten bigger, bigger, bigger, and much, much, much 
bigger. Does that cause jeopardy to this country? Well, if you have 
been awake the last few years to watch $700 billion be pledged to avoid 
a calamitous event to this economy, then you understand that this is 
too big and something has to be done about it. Create early warnings? 
No, I don't think so. Stop signs? How about deciding that if you are 
too big, you are too big, and you have to pare back those portions of 
your institution that make you too big to fail and a moral hazard to 
this country that is an unacceptable risk to the future of this 
economy.
  Here is another chart that shows about the same thing. It shows the 
growth of these institutions going back to 1995. It is relentless, 
aggressive growth. If we end this without having addressed it, we will 
not have been able--we won't be able to tell the American people: We 
took care of too big to fail. So I agree with the Senator from Oklahoma 
on that point.
  Where we disagree is the notion that the problem here is us. Well, I 
will tell my colleagues what. The ``us'' bears plenty of 
responsibility, but let me talk about the ``us.'' It wasn't the ``us'' 
who decided in Countrywide Mortgage, which was the largest single 
mortgage company in this country, to write

[[Page 7523]]

liars' loans, to decide to say to people, Hey, you want to get some 
money from us? We are a big company. We are making a lot of fees. We 
are paying a lot of money to our executives and we want you to come to 
us. In fact, I have an ad they ran, Countrywide, the biggest mortgage 
company in the country. Here is the ad: Do you have less than perfect 
credit? Do you have late mortgage payments? Have you been denied by 
other lenders? Call us. We have money for you. Are you a bad risk? Are 
you a bad person? You can't pay your bills? Come to us.
  It wasn't the Congress that did that, I would say to my friend. This 
was Countrywide Mortgage. By the way, the guy who ran this organization 
got off with $200 million. So he is now under criminal investigation. 
But don't suggest to me that somehow that was the responsibility of 
somebody other than the guy running the company that puts up ads such 
as: Zoom Credit. It says: You have been bankrupt, slow credit, no 
credit, can't pay? Who cares? That is what was advertised to the 
American people. That wasn't somebody in this Chamber going out and 
saying, Hey, how about letting us give you a loan if you have bad 
credit. Was it somebody in this Chamber who decided we are going to 
create credit default swaps? That is like saying ``the devil made me do 
it'' from the old TV show. No, no, no. It was a group of people who are 
high fliers, hotshots, wearing silk shirts and monogrammed sleeves, and 
they go out and create all of these exotic instruments such as credit 
default swaps, and they weren't enough; they have to do synthetic or 
naked default swaps with no insurable interest on the other side of the 
transaction. It was simply wagering. It had nothing to do with 
investment. It wasn't somebody in this Chamber who said please do this. 
It was the most unbelievable greed and avarice I have ever seen in the 
history of this country by a lot of folks. It created big 
institutions--I am not saying everybody did it, but enough did it to 
imperil this country's economy and to require emergency action to, as 
the Treasury Secretary then said, ``save the American economy.''
  All this was going on. Everybody was having a carnival and making 
lots of money. In 2008, Wall Street had a net loss of $35 billion and 
paid bonuses of $16 billion. I got a master's degree in business. I 
went to business school. There is no place that teaches that--to go 
lose a bunch of money and then pay huge bonuses. This was a carnival of 
greed that went on in this country and steered this country right into 
a ditch.
  When my colleagues say it is government that did that, I am sorry, 
that is flatout wrong. What government did--and they did it for a 
number of years in the last decade--is they hired a bunch--and the 
previous administration is especially responsible--of regulators who 
didn't like government and didn't want to regulate. One of the key 
people who came to this town in a key position of regulatory 
responsibility said: Hey, this is a new day. This is a business-
friendly place. Understand that. We are going to be willfully blind 
here for a number of years. So do what you want; we won't watch and we 
don't care.
  So the responsibility for regulatory authority is not in this 
Chamber.
  I am not somebody who comes here to blame previous administrations 
very often, but when the Bush administration came to office--about the 
same time that Gramm-Leach-Bliley, by the way, with the support of the 
Clinton administration, repealed Glass-Steagall and said you can create 
big financial holding companies as big as you want and you can merge 
investment banks with commercial banks and security sales, and you can 
do it all--a one-stop financial shop. It will be great, and we will 
call it modern. About the time that passed--over my objections, as I 
was one of eight Senators who voted no, and I was out here six, eight 
times opposing it--about that time, we had a new administration come in 
and say: We are going to put regulators in place who have no interest 
in watching what you do, so do what you want. They put out naked credit 
default swaps and trillions of dollars for them. Who cares? If you want 
to increase your leverage from 12 times, to 20 times, to 30 times your 
capital, fine. We will have a meeting in the basement of the SEC, and 
we will, just like that, approve you to be able to increase your 
leverage to 30 times your capital. And it will hardly be reported by 
anybody because we are not watching anything. They were blind 
regulators--dead blind. Unbelievable.
  Don't blame this on someone else. We can blame it on bad legislation 
a decade ago. That is fair. Those who were making bad loans and taking 
big checks to the bank and filling it with millions of dollars were 
doing it because they were greedy and nobody was willing to stop them. 
That avalanche of greed built into a bubble of speculation that really 
injured this country and nearly ran it off a cliff.
  By the way, at the same time all of this was happening in the last 15 
years or so, the financial institutions decided they were going to 
securitize everything. Doesn't matter; find some debt, and we have 
people who can roll it into a security. Once they do that, they can 
sell it three, four times, to an investment bank, to a hedge fund, you 
name it, and they can get a rating agency--because the investment banks 
pay the costs of the rating agencies that rate their securities, which 
is a pretty big conflict of interest--to help roll these forward, and 
nobody has any skin in the game.
  My colleague talks about how unfair it would be to ask somebody to 
save at least a portion of a loan they are providing. Do you know what? 
The only way you have proper underwriting of loans in this country is 
if you sit across the table from somebody who wants to get a loan and 
look at their credit reports and determine if they are eligible. The 
only way you ever ensure that happens the right way is to have that 
kind of underwriting, and you would do that if you are going to have 
some continuing risk.
  But if you are going to give a $750,000 loan to somebody who makes 
$17,000 a year--and it happened, by the way--a liar's loan, requiring 
no documentation, with no interest or principal paid because he put it 
all on the back side--if you can sell that in a security to somebody 
else and you have no further risk, you get your money free and clear. 
That is what was going on at every single level. It was just the most 
unbelievable, irresponsible lack of regulation, perhaps, in the history 
of this country.
  I want to say that the government has made plenty of mistakes, but 
don't blame this Chamber or people who were elected to the Senate for 
the bad behavior of somebody who takes $200 million away from the 
biggest mortgage finance company in this country and was selling liar's 
loans and advertising that if you have bad credit, no credit, slow 
credit, and bankruptcy, come to us, we are going to give you money. 
Don't blame that on somebody else. Put that blame where it rests--the 
unbelievable greed among the people who should have known better and 
should not have been able to do it in the first place because the 
regulators should have been all over them in a moment, saying: You 
cannot do it. That didn't happen.
  This demonstrates the need for effective regulation. The free market 
system works, but when people try to subvert it, when people commit 
fouls in the free market system, it needs a referee with a whistle and 
a striped shirt. That was missing in the last decade.
  Mr. President, one final point. Part of this argument is excusing 
criminal behavior because there wasn't a cop on the beat. Don't excuse 
the criminal behavior. We need cops on the beat. We need legislation 
that will make sure we close the loopholes that exist. We need to 
legislate soberly and thoughtfully and give the American people some 
notion that this behavior cannot happen again.
  By the way, I think the way we do that is to make certain you cannot 
be too big to fail. By what justification should the major financial 
companies of this country continue this kind of concentration and 
escalation of size in a manner that jeopardizes this country should 
they fail? By what justification should we allow that to continue? The 
answer is that it should not.

[[Page 7524]]

  There are two amendments to address that I am aware of--one by 
Senators Brown and Kaufman, which creates a numerical limit on size, 
and I fully support. The other one, which I prefer because it has my 
name on it, is to flatout break up firms that have gotten too big to 
fail to the point where they are not too big to fail. That is the most 
effective way, in my judgment, to do this.
  I will speak ever so briefly about the Sanders amendment. I got 
sidetracked by my colleague from Oklahoma, as is so often the case.
  My colleague from Vermont has offered a piece of legislation that I 
think has great merit. Let me tell you what it doesn't do. It does not, 
as those who fear the amendment say, invoke the tentacles of the U.S. 
Congress in the construction of monetary policy. That area belongs to 
the Federal Reserve Board.
  The Federal Reserve Board is a creature of legislation that Congress 
created. If you went back and read the debate, the country was assured 
that this was not creating a strong central bank. There were just lead 
pipe assurances to that, but, of course, that turned out not to be the 
case. Nonetheless, the Federal Reserve Board creates monetary policy, 
and there is a thought--and I agree with it--that we don't want 
monetary policy created on the floor of the Senate. We don't want to 
intrude on the creation or development of monetary policy. We do fiscal 
policy, the taxing and spending side. The monetary side is the Federal 
Reserve Board's terrain.
  But the Federal Reserve Board ought not be unaccountable to anybody 
for anything. The Federal Reserve Board, it seems to me, deserves, No. 
1, to be audited properly--a Government Accountability Office audit--
which the Sanders amendment would require. And I know the Fed is having 
an apoplectic seizure thinking that maybe this amendment will pass. You 
know what. It is the right thing to do, to say at long, long last, 
there should be an audit of the Federal Reserve Board. I am not talking 
about auditing monetary policy but what it does generally. It is 
necessary, and I support this and think it is the right policy.
  No. 2, this legislation does what I and many others have been pushing 
the Fed for, for some while. Last July of 2009, I had a letter signed 
by 10 of my colleagues to Chairman Bernanke saying: You have now used 
your emergency powers for the first time in U.S. history to open your 
loan window to investment banks, as never before in the history of our 
country. Serious financial problems, you say? Open the loan window and 
come and get some money. So we write and say: OK, you did that on an 
emergency basis for the first time in our history. What was the result? 
Who got the money? What were the terms and the conditions?
  The American people deserved to have that information. I wrote again 
on March 19 of this year. On both occasions, we received letters from 
Chairman Bernanke that were polite, thoughtful, but that said: You know 
what. We don't intend to provide you or the American people information 
about what happened at our loan window. We don't intend to talk about 
the loans we gave to investment banks for the first time in history.
  I wonder--and this is idle curiosity--did we have investment banks 
show up at this window and get near zero interest rate loans and then 
invest them back into Treasury bonds? How much money did they make on 
that transaction? I know many of these organizations--the largest 
investment banks--are now making record profits. But it is not as a 
result of loaning money to businesses in this country that need the 
lending; it is by trading securities--once again, right back in the 
same trench.
  This legislation that my colleague, Senator Sanders, has offered is 
legislation that will put in law a requirement that the Federal Reserve 
Board disclose the activities, in a certain period of time, of who 
received the lending from the Federal Reserve Board, what the 
conditions were, and what the amounts of funding were.
  The Chairman of the Fed, who said this might make it very difficult 
and it will undermine this and that, undermine these programs, publicly 
releasing names--look, two Federal courts have required the Federal 
Reserve Board to do this. Two Federal courts--the district court and 
the appellate court--have said the Federal Reserve Board does not have 
the authority to withhold this information. The Federal Reserve Board 
has once again said: It doesn't matter, we intend to appeal again. 
They, apparently, intend to keep this tied up in the court system as 
long as they can. This amendment in this piece of legislation will say 
to the Federal Reserve Board: You cannot do that. The law requires you 
to disclose to the American people what you have done.
  I come here to say I think this is a good bill. I had introduced a 
separate amendment on the disclosure by the Fed, but if we pass the 
Sanders amendment, that will take care of my amendment. Some people 
talked earlier about duplicates. Mine will be taken care of if we pass 
the larger amendment offered by Senator Sanders.
  I support the amendment. I know a good many of my colleagues will 
too. It has been a long time to try to get an audit of the Federal 
Reserve Board--not an audit of the monetary policy but an audit of the 
Federal Reserve Board. But if we do that, this will be a significant 
step forward for those of us who believe that is necessary and 
important for the country.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Kaufman). The Senator from South Carolina.
  Mr. DeMINT. Mr. President, I join Senator Dorgan and Senator Sanders 
in the amendment to audit the Federal Reserve.
  Let me begin with a perspective on what happened in the stock market 
today. Clearly, someone got it wrong, and it created a domino effect of 
one thing falling after another, and before we knew it, the stock 
market was down 1,000 points. Fortunately, it climbed back up before it 
closed today.
  It reminds us how volatile, how vulnerable we are in a world where so 
many systems are involved with our financial system.
  It is good Congress is looking at financial reform. I only regret we 
are not dealing with the real causes of our financial crisis.
  Wall Street is clearly jittery. We can see that from the stock market 
today. Everyone is waiting for the dominos to fall. We see what is 
happening in Greece, one country that continued to spend more than it 
was bringing in until it went bankrupt. Unfortunately, the American 
people are on the hook for yet another bailout, not even a bailout in 
this country but billions of American tax dollars are headed for Greece 
right now.
  As other European countries head toward bankruptcy, last year in this 
Congress we created another credit line for the International Monetary 
Fund to be drawn down. The real irony is, we are borrowing money from 
countries such as China in order to bail out other countries in the 
world at a time when the United States is carrying $13 trillion of debt 
and projections of tens of trillions of more dollars in the future. It 
is clearly unsustainable.
  The stock market and investors have a reason to be jittery, and 
Americans have a reason to be angry. We saw what the failure of large 
government organizations such as Fannie Mae did and how it cost 
Americans trillions of dollars. People who had been saving and 
investing all their lives found out almost overnight that the system 
they counted on and that we were supposed to oversee was not what they 
thought it was, and suddenly wealth was gone.
  If Fannie Mae could do that much damage to our country, that is small 
in comparison to what would happen if the Federal Reserve does it 
wrong.
  The Constitution gives Congress the responsibility for our monetary 
policy. Congress, years ago, delegated that to an independent agency we 
call the Federal Reserve. But we are still responsible for monetary 
policy. If something is done wrong with that policy, all we worked for 
in this country, everyone's savings and investments, everyone's wealth, 
not only in this country but because we are the reserve currency for

[[Page 7525]]

the world, the whole economic system of the world is resting on top of 
what the Federal Reserve does.
  The fact is, while it is our responsibility to oversee monetary 
policy, we do not know what the Federal Reserve is doing. Keep in mind, 
we were assured only months before Fannie Mae and Freddie Mac 
collapsed--and, by the way, we bailed them out and Freddie Mac for 
another $10 billion this week--only months before they collapsed, we 
were told by Chairman Bernanke at the Federal Reserve and many other 
economic experts that there was no problem. But there was a problem. 
The real problem was we did not know it, and that was a company created 
by this Congress. It was our responsibility to oversee it, and we did 
not carry out our responsibility.
  We need an independent Federal Reserve. We do not need political 
manipulation and second-guessing of our monetary policy. But we do not 
need a secret Federal Reserve. We have to know what they are doing if 
we are going to be responsible for what they are doing. It is not going 
to be enough if they do something wrong and we point our finger at them 
and say it was their fault because it is our responsibility.
  For years, the Federal Reserve has been avoiding any kind of audit, 
any kind of accountability, any kind of transparency. Every time we ask 
for any type of disclosure, they say we are violating their 
independence. We are not violating their independence by this amendment 
proposed by Senator Sanders. All we are doing is uncloaking the secrecy 
that exists within the Federal Reserve.
  It is important to know what we do know. We know the Federal Reserve 
has bailed out Bear Stearns and AIG. The taxpayers are stuck holding 
failed bets on everything from toxic subprime mortgages to strip malls 
and hotels. Thanks to the bailouts, taxpayers now own stakes in 
bankrupt Hilton hotels in Malaysia, Russia, and Singapore. I am not 
sure that is what the Congress had in mind when they started the 
Federal Reserve.
  The Federal Reserve owns part of the Civic Opera building in Chicago 
and the Crossroads Mall in Oklahoma City. I thought it was bad when the 
Fed was printing money to keep up the government's shopping spree, but 
I never expected they would buy a mall to go shopping in.
  They say it is over when the fat lady sings. Well, now the Fed has an 
opera house ready for her singing.
  Americans deserve to know if the Federal Reserve is being honest with 
the Congress and with the American people. We know what they say behind 
closed doors does not square with what they say publicly.
  Recently released transcripts show, in 2004, members of the Federal 
Reserve publicly downplayed specific concerns they discussed internally 
about the coming housing crisis. They knew we had a problem. At that 
time, Chairman Alan Greenspan said, if they were to encourage the 
public to talk about it ``it's possible to lose control of a process 
that only we fully understand.'' Meanwhile, they were telling the 
Congress and the public everything was fine.
  By doing that, they cost millions of Americans a lifetime of savings, 
and they are still struggling. Millions of people are out of work 
because of mismanagement by the Federal Reserve. Yet they seem to think 
they require no supervision, no accountability, no transparency. We 
need to end that with this amendment today.
  Within 30 days of the President signing this amendment that has been 
proposed, the Federal Reserve will have to tell us who got all this 
bailout money, how much they got and the reasoning for giving it and 
what terms of repayment there are. It is a pretty simple request. True 
financial reform must include a full audit of the Federal Reserve and a 
breakup and a winddown of Freddie Mac and Fannie Mae. But the people 
who run the government are not willing to hold the government 
institutions responsible.
  Those who understand what happened in this financial crisis know that 
the easy money policy of the Federal Reserve, Fannie Mae and Freddie 
Mac buying subprime mortgages and securitizing them and selling them 
all over the world were a large part of the meltdown of our financial 
system. Yet this financial reform bill we are talking about does not 
even address the real causes of our financial meltdown. One thing we 
can do if we adopt this amendment is make sure there is more 
transparency, more accountability at the Federal Reserve.
  As I already mentioned yesterday, Freddie Mac posted an $8 billion 
loss. That is now fully owned by the Federal Government. The Federal 
Government is clearly mismanaging Freddie Mac, and they asked for 
another $10 billion bailout from the taxpayers. This time that does not 
have to go through Congress. President Obama has taken the caps off 
anything that can go to these bankrupt companies. Billions of dollars 
are going to flow from taxpayers directly to these government-owned 
entities.
  Freddie Mac and Fannie Mae together have lost at least $126.9 billion 
so far. It is pretty amazing in a time when this country is overcome 
with debt. There is no end in sight. There is no cap on how much 
taxpayers can bail them out. Yet they are not even mentioned in this 
financial reform bill. We heard about greed on Wall Street, but we have 
not even addressed the greed within the government and within the 
government agencies.
  The Democratic House Financial Services chairman, Barney Frank, does 
not think these government-run institutions are good candidates for 
reform. He wrote a memo to the White House saying they were ``being 
managed responsibly and aren't doing any further economic damage.'' 
Fortunately, Senator McCain has an amendment to address this issue, and 
I hope it is adopted. But if there is one place the blame can be placed 
for this financial meltdown, it comes back to Fannie Mae and Freddie 
Mac.
  Wall Street certainly deserves a lot of the blame for the financial 
crisis because they took advantage of a lot of the mismanagement in 
government to their own benefit. But the Federal Reserve, Freddie Mac, 
and Fannie Mae also deserve a lot of the blame, and they should be 
addressed as well.
  The Sanders amendment at least begins the process in letting us know 
what the Federal Reserve is doing. The audit-the-Fed amendment has more 
than 300 cosponsors in the House and 32 in the Senate. It is supported 
by a broad spectrum of political groups from FreedomWorks all the way 
to very liberal groups. Within the Senate, if America wants bipartisan 
activity, it could not be more bipartisan than Bernie Sanders and Jim 
DeMint.
  I encourage my colleagues to support this amendment. Let's reform not 
only the financial system but our own house, and that includes the 
Federal Reserve.
  I yield the floor.
  The PRESIDING OFFICER (Mrs. Shaheen). The Senator from Virginia.
  Mr. WARNER. Madam President, I rise to speak very briefly, following 
the comments of my colleague from South Carolina on the pending 
amendment that I know has received broad bipartisan support. I also 
wish to comment on what happened in the market today.
  The stock market was down about 347 points. But what was more telling 
was the stock market, at one point today, approached a loss of 1,000 
points which, if it had held, would have been the largest single-day 
loss in modern history.
  There were a number of causes. My colleague mentioned some clear 
concerns about the crisis in Greece. What it appears to be in terms of 
real-time reporting going on right now is that part of this precipitous 
drop took place because it appears there was a technology glitch on an 
order put in that had no backguard or safeguards to stop it.
  I am going to quickly go into an area that is actually the expertise 
of Senator Kaufman. I know Senator McCain's amendment will be up in a 
moment.
  I have heard, while sitting in that chair, my friend, the Senator 
from Delaware, come to this floor time and again to talk about the 
challenges that have been created in the marketplace with the increased 
use of high-speed

[[Page 7526]]

trading, flash trading, colocation, sponsored access--a whole series of 
technical terms but terms that we may have seen the first inkling today 
with what happens when these tools of technology do not work the way 
they are supposed to.
  I ask my friend, the Senator from Delaware, who has spent time on 
this issue much more than I, today we saw--and I have become a believer 
and I know the SEC has started moving forward on the flash trading 
issue, but there is a series of other activities that as we go through 
this financial reform bill, we at least need to have more facts. I 
believe the SEC needs to have the resources to keep up with the 
marketplace. We saw a living, breathing real-time example of the 
potential catastrophe that could take place if we do not have the 
ability to adequately use the technology and have safeguards and 
realize how some of these firms are using this technology to get an 
advantage over the everyday Main Street investor.
  Mr. KAUFMAN. Madam President, the Senator from Virginia right from 
the beginning has been sympathetic. Because of his great knowledge on 
Wall Street and finance, he has been a great source of encouragement to 
me. I have spoken on this floor repeatedly, and this is not a surprise. 
If this turns out to be the worst case of what we are talking about--we 
do not know.
  What happened over the years is that we basically went from a market 
that was a floor-based market to a market that was digitalized and 
decimalized, where we began to have tenths using decimals as opposed to 
eighths. What happened is that markets, computer firms--if you want to 
read a great story, a book called ``The Quants,'' by Scott Patterson. 
People came into the market and began to develop these high-speed 
computers. Human beings were no longer doing the trading, computers 
were. They developed these algorithms. It ran automatically. It grew 
and grew, and now it is something like--they went from 30 percent to 70 
percent of all the trades on our markets are in this high-frequency 
trading, using these high speed computers. There is no way to know what 
is going on. They trade 2,000 to 3,000 shares in a second. No one knows 
what is happening in the exchanges when this trading is going on. No 
one knows.
  The Securities and Exchange Commission has said--after repeated 
requests--that we are going to go look at market structure. This is 
months ago. They say we are going to look into this. Now they are 
having a group look into it. Right now, there is no way to know what is 
happening in this marketplace. All we have been requesting from the 
Securities and Exchange Commission is that they take a look at what is 
happening.
  Remember, you have 2,000 to 3,000 trades a second. The only records 
that are kept are of the actual trades. But 90 percent--to let you know 
how complicated this is--90 percent of the trades are canceled. Why are 
they doing that? There are a lot of allegations about why they are 
doing this and what is going on, but right now we have this gigantic 
business--70 percent of our trading--and we have no idea what is going 
on.
  I will say one final thing, because it reflects on this bill. What 
will happen if we allow our banks to be mingled with our investment 
banks and don't put some kind of cap on it? That is my big concern. 
Investment banks are into high risk things, and that is where most of 
these things are taking place. If you go back and look at derivatives, 
what we had under derivatives is a whole lot of money. Nobody argues, 
derivatives are gigantic. This is now gigantic. You had a lot of 
change. We went from very few derivatives to massive numbers of them. 
We went from 30 to 70 percent of all our trades being high frequency 
trading. We have no transparency as we have with derivatives. We didn't 
know what was going on in the derivatives market. We had no regulation, 
because you don't know what the trades are. And what happened? We had 
this gigantic meltdown.
  I am saying that I totally agree with the Senator from Virginia. We 
have a very dangerous situation.
  Mr. WARNER. I will wrap up very quickly.
  We saw today, for example, in a matter of a moment or two, Procter & 
Gamble--one of America's premier companies--fall from $60 to $39. We 
saw another company fall from around $30 to a penny stock. This was not 
the result of a market, this was the result of, I believe, some lack of 
oversight. There is nobody in this Chamber who is more of an advocate 
of technology and the powerful tool that technology can be, but we are 
seeing what the Senator from Delaware has been an early leader on. I 
have listened to his speeches for months, and everything in my gut says 
he is onto something here.
  I have asked the chairman of the Banking Committee to make sure as 
this piece of legislation proceeds that we make sure that whether it is 
a study, whether it is an appropriate question of the SEC, this high 
speed, high frequency trading, colocation, sponsored access, all of 
these series of tools that seem to give the big guys a slightly bigger 
advantage over the everyday investor, be an appropriate subject of some 
additional study.
  We may disagree about how we go into the last crisis, but I believe 
the Senator from Delaware is potentially on to what could be the next 
crisis. I think we perhaps saw a little window into that possibility 
today when the stock market got close, for moments in time--based on 
what appeared to be technology errors and high speed trading--to 
perhaps the single biggest loss in modern American history--a thousand 
point loss for a moment in time this afternoon.
  I know the Senator from Arizona wants to talk about his issues as 
well. But there was a warning sign shot across the bow today, and if we 
don't deal with this as part of the mix, I think we are not acting 
appropriately.
  Mr. KAUFMAN. I will yield, but this is a case where I think we have 
to look into this and see what is going on.
  I yield for the Senator from Arizona.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. Madam President, I want to discuss amendment No. 3839. 
This amendment is designed to end the taxpayer-backed conservatorship 
of Fannie Mae and Freddie Mac by putting in place an orderly transition 
period and eventually requiring them to operate without government 
subsidies on a level playing field with their private sector 
competitors.
  Events of the last 2 years have made it clear that never again can we 
allow the taxpayer to be responsible for poorly managed financial 
entities which gamble away billions of dollars. Fannie Mae and Freddie 
Mac are synonomous with mismanagement and waste and have become the 
face of too big to fail. The time has come to end Fannie Mae and 
Freddie Mac's taxpayer-backed free ride and require them to operate on 
a level playing field.
  I want to quote from an AP story yesterday entitled: ``Freddie Mac 
seeks $10.6B in aid after 1Q loss.'' Freddie Mac is asking for $10.6 
billion in additional Federal aid after posting a big loss in the first 
3 months of the year. It is another sign that the taxpayer bill for 
stabilizing the housing market will keep mounting. The McLean, VA-based 
mortgage finance company has been effectively owned by the government 
after nearly collapsing in September of 2008. The new request will 
bring the total tab for rescuing Freddie Mac to $61.3 billion. Freddie 
Mac says it lost $8 billion, or $2.45 a share, in the January-March 
period. That takes into account $1.3 billion in dividends paid to the 
Treasury Department. It compares with the loss of $10.4 billion or 
$3.18 a share, in the year-ago period.
  So the beat goes on and the drainage goes on. Here on this chart we 
have the money yet to be repaid by institutions that received $10 
billion or more in taxpayer bailouts. Obviously, these organizations 
have paid back. GMAC still has $16 billion they owe the taxpayer; 
Citigroup, $25 billion; GM--despite their PR stunt the other day, where 
they say they paid back, with TARP money, they paid the taxpayers with 
taxpayer money--$43.7 billion; AIG, $69.8 billion; and, of course, 
Fannie and Freddie, $125.9 billion plus.
  I wish to begin today by calling my colleagues' attention to an 
editorial in

[[Page 7527]]

this morning's Wall Street Journal, which states:

       Fan and Fred owned or guaranteed $5 trillion in mortgages 
     and mortgage-backed securities when they collapsed in 
     September of 2008. Reforming the financial system without 
     fixing Fannie and Freddie is like declaring a war on terror 
     and ignoring al-Qaida.

  I want to repeat that sentence for the benefit of my colleagues. This 
is from the Wall Street Journal this morning.

       Reforming the financial system without fixing Fannie and 
     Freddie is like declaring war on terror and ignoring al-
     Qaida.
       Unreformed, they are sure to kill taxpayers again. Only 
     yesterday, Freddie said it lost $8 billion in the first 
     quarter, requested another $10.6 billion from Uncle Sam, and 
     warned that it would need more in the future. This comes on 
     top of the $126.9 billion that Fan and Fred had already lost 
     through the end of 2009. The duo are by far the biggest 
     losers of the entire financial panic--bigger than AIG, 
     Citigroup and the rest.
       From the 2008 meltdown through 2020, the toxic twins will 
     cost taxpayers close to $380 billion, according to the 
     Congressional Budget Office's cautious estimate.

  The numbers, I say to my colleagues, are staggering--staggering.

       The Obama administration won't even put the companies on 
     budget for fear of the deficit impact, but it realizes the 
     problem because last Christmas Eve--

  Strangely enough on Christmas Eve--

     . . . it raised the $400 billion cap on their potential 
     taxpayer losses to . . . infinity. Moreover, these taxpayer 
     losses understate the financial destruction wrought by Fan 
     and Fred. By concealing how much they were gambling on risky 
     subprime and Alt-A mortgages, the companies sent bogus 
     signals on the size of these markets and distorted decision-
     making throughout the system. Their implicit government 
     guarantee also let them sell mortgage-backed securities 
     around the world, attracting capital to U.S. housing and thus 
     turbocharging the mania.

  Specifically, this amendment does several things:
  It provides for a finite end to the current conservatorship period 
for both government-sponsored enterprises--GSEs--at 2 years of date 
from the enactment. The Federal Housing Finance Agency has an option to 
extend conservatorship for 6 months if the FHFA Director determines and 
notifies Congress that adverse market conditions exist. If at the end 
of conservatorship a GSE is not financially viable, the FHFA must place 
that GSE in receivership. If the GSE is financially viable, then it 
would be allowed to reenter the market under new operating 
restrictions.
  It provides for the following changes to existing operating 
structure:
  It calls for the repeal of the affordable housing goals mandates for 
the GSEs.
  It calls for new limits for mortgage assets held on its books of no 
more than 95 percent of mortgage assets owned on December 31 of the 
prior year, reduced an additional 25 percent by the end of year 1, 
reduced an additional 25 percent by the end of year 2, and reduced to 
$250 billion by the end of year 3.
  It strengthens capital standards and allows them to be increased by 
the FHFA as necessary.
  It calls for the repeal of the temporary increases in conforming loan 
limit and high cost area increases, and a return to the $417,000 
conforming loan limit for the first year, subject to annual adjustments 
by FHFA.
  It provides for a prohibition on the purchase of mortgages exceeding 
the median home price for that area.
  It calls for a minimum downpayment requirement of at least 5 percent 
for all new loans purchased by the GSE, increasing to 7.5 percent in 
the second year, and 10 percent in the third year.
  It repeals the GSE exemption from having to pay State and local 
taxes.
  I wonder how many of my colleagues and fellow citizens knew that 
Fannie and Freddie did not have to pay State and local taxes.
  It calls for a repeal of the exemption allowing GSE securities to 
avoid full SEC registration.
  In other words, given their enormous clout here in the Congress, 
Fannie and Freddie were able to have an exemption from their securities 
falling under SEC registration.
  It calls for an assessment of fees on GSEs to recoup full value of 
the benefit due to guarantee provided by the Federal Government. And 
GAO will conduct a study to determine current value of government 
guarantee.
  The amendment establishes a 3-year period after the end of 
conservatorship for GSEs to operate under new operating restrictions 
until their government charter expires. Upon charter expiration, it 
provides for a 10-year period with the creation of a separate holding 
corporation and a dissolution trust fund for any remaining mortgages or 
debt obligations held by the GSE.
  It establishes a Senate-confirmed special inspector general within 
the Government Accountability Office with responsibility for 
investigating and reporting to Congress on decisions made with respect 
to the conservatorships of Fannie Mae and Freddie Mac. The SIG would 
provide quarterly reports to Congress.
  While GSEs remain in conservatorship, it reestablishes the Federal 
funding limit of $200 billion per institution for the GSEs and requires 
the GSEs to reduce their portfolio holdings by 10 percent of the prior 
year's holdings. It also establishes an approval process for any 
further agreements that put the taxpayers at risk.
  It places Fannie Mae and Freddie Mac as part of the Federal budget as 
long as either institution is under a conservatorship or receivership.
  Again, my colleagues might be interested that Fannie Mae and Freddie 
Mac, and what we are doing with them now, is not part of the Federal 
budget--remarkable.
  It requires the FHFA to establish minimum prudent underwriting 
standards for mortgage loans eligible for government-sponsored entities 
purchase. Minimum requirements will include verification and 
documentation of income and assets relied upon to qualify the borrower 
for the mortgage loan and determination of borrower's ability to repay 
the mortgage loan.
  I might add that the Congressional Budget Office has indicated this 
amendment would save the taxpayers several billions of dollars 
annually. I repeat, the Congressional Budget Office states--and, by the 
way, it has not been given any phony assumptions such as a doc fix--
this amendment would save the taxpayers several billions of dollars 
annually.
  During the debate on this financial reform bill, we will continue to 
hear a lot about how the U.S. Government will never again allow a 
financial institution to become too big to fail. We will hear 
continuous calls for more regulation to ensure that taxpayers are never 
again placed at such tremendous risk.
  Sadly, and I say very sadly, the underlying bill completely ignores 
the elephant in the room because no other entity's failure would be as 
disastrous to our economy as Fannie Mae's and Freddie Mac's. Yet this 
bill does not address them at all.
  In a recent Opinion Piece in the Wall Street Journal, Robert Wilmers 
wrote:

       Congress may be making progress crafting new regulations 
     for the financial-services industry, but it has yet to begin 
     reforming two institutions that played a key role in the 2008 
     credit crisis--Fannie Mae and Freddie Mac.
       We cannot reform these government-sponsored enterprises 
     unless we fully confront the extent to which their outrageous 
     behavior and reckless business practices have affected the 
     entire commercial banking sector and the U.S. economy as a 
     whole.
       At the end of 2009, their total debt outstanding--either 
     held directly on their balance sheets or as guarantees on 
     mortgage securities they'd sold to investors--was $8.1 
     trillion. That compares to $7.8 trillion in total marketable 
     debt outstanding for the entire U.S. government. The debt has 
     the implicit guarantee of the federal government but is not 
     reflected on the national balance sheet.
       The public has focused more on taxpayer bailouts of banks, 
     auto makers and insurance companies. But the scale of the 
     rescue required in September 2008 when Fannie and Freddie 
     were forced into conservatorship--their version of 
     bankruptcy--was staggering. To date, the federal government 
     has been forced to pump $126 billion into Fannie and Freddie. 
     That's far more than AIG, which absorbed $70 billion of 
     government largess, and General Motors and Chrysler, which 
     shared $77 billion. Banks received $205 billion, of which 
     $136 billion has been repaid.
       Fannie and Freddie continue to operate deeply in the red, 
     with no end in sight. The Congressional Budget Office 
     estimated that

[[Page 7528]]

     if their operating costs and subsidies were included in our 
     accounting of the overall federal deficit--as properly they 
     should be--the 2009 deficit would be greater by $291 billion.

  The op-ed continues:

       All this happened in the name of the ``American Dream'' of 
     home ownership. But there's no evidence Fannie and Freddie 
     helped much, if at all, to make this dream come true. Despite 
     all their initiatives since the early 1970s, shortly after 
     they were incorporated as private corporations protected by 
     government charters, the percentage of American households 
     owning homes has increased by merely four percentage points 
     to 67%.
       According to a 2004 Congressional Budget Office study, the 
     two GSEs enjoyed $23 billion in subsidies in 2003--primarily 
     in the form of lower borrowing costs and exemption from state 
     and local taxation. But they passed on only $13 billion to 
     home buyers. Nevertheless, one former Fannie Mae CEO, 
     Franklin Raines, received $91 million in compensation from 
     1998 through 2003.

  Amazing.

       In 2006, the top five Fannie Mae executives shared $34 
     million in compensation, while their counterparts at Freddie 
     Mac shared $35 million. In 2009, even after the financial 
     crash and as these two GSEs fell deeper into the red, the top 
     five executives at Fannie Mae received $19 million in 
     compensation and the CEO earned $6 million.
       This is not private enterprise--it's crony capitalism, in 
     which public subsidies are turned into private riches. From 
     2001 through 2006, Fannie and Freddie spent $123 million to 
     lobby Congress--the second-highest lobbying total in the 
     country. That lobbying was complemented by sizable direct 
     political contributions to members of Congress.
       Changing this terrible situation will not be easy. The 
     mortgage market has come to be structured around Fannie and 
     Freddie and powerful interests are allied with the status 
     quo.
       Nonetheless, Congress must get to work on the reform of 
     Fannie Mae and Freddie Mac. A healthy housing market, a 
     healthy financial system and even the bond rating of the 
     federal government depend on it.

  There have been countless warnings about the mismanagement of both 
Fannie and Freddie over the years. In May of 2006, after a 27-month 
investigation into the corrupt corporate culture and accounting 
practices at Fannie Mae, the Office of Federal Housing Enterprise 
Oversight--OFHEO--the Federal regulator charged with overseeing Fannie 
Mae--issued a blistering, 348-page report which stated that:

       Fannie Mae senior management promoted an image of the 
     Enterprise as one of the lowest-risk financial institutions 
     in the world and as ``best in class'' in terms of risk 
     management, financial reporting, internal control, and 
     corporate governance. The findings in this report show that 
     risks at Fannie Mae were greatly understated and that the 
     image was false.
       During the period covered by this report--1998 to mid-
     2004--Fannie Mae reported extremely smooth profit growth and 
     hit announced targets for earnings per share precisely each 
     quarter. Those achievements were illusions deliberately and 
     systematically created by the Enterprise's senior management 
     with the aid of inappropriate accounting and improper 
     earnings management.
       A large number of Fannie Mae's accounting policies and 
     practices did not comply with Generally Accepted Accounting 
     Principles (GAAP). The Enterprise also had serious problems 
     of internal control, financial reporting, and corporate 
     governance. Those errors resulted in Fannie Mae overstating 
     reported income and capital by a currently estimated $10.6 
     billion.
       By deliberately and intentionally manipulating accounting 
     to hit earnings targets, senior management maximized the 
     bonuses and other executive compensation they received, at 
     the expense of shareholders. Earnings management made a 
     significant contribution to the compensation of Fannie Mae 
     Chairman and CEO Franklin Raines, which totaled over $90 
     million from 1998 through 2003. Of that total, over $52 
     million was directly tied to achieving earnings per share 
     targets.
       Fannie Mae consistently took a significant amount of 
     interest rate risk and, when interest rates fell in 2002, 
     incurred billions of dollars in economic losses. The 
     Enterprise also had large operational and reputational risk 
     exposures.
       Fannie Mae's Board of Directors contributed to those 
     problems by failing to be sufficiently informed and to act 
     independently of its chairman, Franklin Raines, and other 
     senior executives; by failing to exercise the requisite 
     oversight over the Enterprise's operations; and by failing to 
     discover or ensure the correction of a wide variety of unsafe 
     and unsound practices.
       The Board's failures continued in the wake of revelations 
     of accounting problems and improper earnings management at 
     Freddie Mac and other high profile firms, the initiation of 
     OFHEO's special examination, and credible allegations of 
     improper earnings management made by an employee of the 
     Enterprise's Office of the Controller.
       Senior management did not make investments in accounting 
     systems, computer systems, other infrastructure, and staffing 
     needed to support a sound internal control system, proper 
     accounting, and GAAP-consistent financial reporting. Those 
     failures came at a time when Fannie Mae faced many 
     operational challenges related to its rapid growth and 
     changing accounting and legal requirements.
       Fannie Mae senior management sought to interfere with 
     OFHEO's special examination by diretstOg the Enterprise's 
     lobbyists to use their ties to Congressional staff to No. 1, 
     generate a Congressional request for the Inspector General of 
     the Department of Housing and Urban Development (HUD) to 
     investigate OFHEO's conduct of that examination and No. 2, 
     insert into an appropriations bill language that would reduce 
     the agency's appropriations until the Director of OFHEO was 
     replaced.
       OFHEO has directed and will continue to direct Fannie Mae 
     to take remedial actions to enhance the safe and sound 
     operation of the Enterprise going forward. OFHEO staff 
     recommends actions to enhance the goal of maintaining the 
     safety and soundness of Fannie Mae.

  A remarkable report.
  So what steps were taken by the Congress to punish Fannie Mae for 
such deliberate manipulation and outright corruption? Basically: NONE. 
According to published reports--including Fannie Mae's own news 
release--Daniel Mudd, the president and CEO of Fannie Mae at the time, 
was awarded over $14.4 million in 2006--the year this report was 
issued, and over $12.2 million in 2007 in salary, bonuses and stock. 
And Fannie Mae continued their risky behavior--successfully posting 
profits of $4.1 billion in 2006.
  The blatant corruption reported by the OFHEO led me to come to the 
Senate floor back in 2006 and call for the immediate consideration of 
GSE regulatory reform legislation. At the time I said:

       For years I have been concerned about the regulatory 
     structure that governs Fannie Mae and Freddie Mac and the 
     sheer magnitude of these companies and the role they play in 
     the housing market. OFHEO's report this week does nothing to 
     ease these concerns. In fact, the report does quite the 
     contrary. OFHEO's report solidifies my view that the GSEs 
     need to be reformed without delay.
       If Congress does not act, American taxpayers will continue 
     to be exposed to the enormous risk that Fannie Mae and 
     Freddie Mac pose to the housing market, the overall financial 
     system, and the economy as a whole.

  Additionally, also in May, 2006, I joined 19 of my colleagues in 
writing to the majority leader urging him to bring the Federal Housing 
Enterprise Regulatory Reform Act to the floor for debate.
  I ask unanimous consent this letter be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                  U.S. Senate,

                                      Washington, DC, May 5, 2006.
     Hon. William H. Frist, MD,
     Majority Leader, U.S. Senate,
     Washington, DC.
     Hon. Richard C. Shelby,
     Chairman, Banking, Housing and Urban Affairs Committee, U.S. 
         Senate,
     Washington, DC.
       Dear Majority Leader Frist and Chairman Shelby, We are 
     concerned that if effective regulatory reform legislation for 
     the housing-finance government sponsored enterprises (GSEs) 
     is not enacted this year, American taxpayers will continue to 
     be exposed to the enormous risk that Fannie Mae and Freddie 
     Mac pose to the housing market, the overall financial system, 
     and the economy as a whole. Therefore, we offer you our 
     support in bringing the Federal Housing Enterprise Regulatory 
     Reform Act (S. 190) to the floor and allowing the Senate to 
     debate the merits of this bill, which was passed by the 
     Senate Banking Committee.
       Congress chartered Fannie and Freddie to provide access to 
     home financing by maintaining liquidity in the secondary 
     mortgage market. Today, almost half of all mortgages in the 
     U.S. are owned or guaranteed by these GSEs. They are mammoth 
     financial institutions with almost $1.5 trillion of debt 
     outstanding between them. With the fiscal challenges facing 
     us today (deficits, entitlements, pensions and flood 
     insurance), Congress must ask itself who would actually pay 
     this debt if Fannie or Freddie could not?
       Substantial testimony calling for improved regulation of 
     the GSEs has been provided to the Senate by the Treasury, 
     Federal Reserve, HUD, GAO, CBO, and others. Congress has the 
     opportunity to recommit itself

[[Page 7529]]

     to the housing mission of the GSEs while at the same time 
     making sure the GSEs operate in a manner that does not expose 
     our financial system, or taxpayers, to unnecessary risk. It 
     is vitally important that Congress take the necessary steps 
     to ensure that these institutions benefit from strong and 
     independent regulatory supervision, operate in a safe and 
     sound manner, and are primarily focused on their statutory 
     mission. More importantly, Congress must ensure that the 
     American taxpayer is protected in the event either GSE should 
     fail. We strongly support an effort to schedule floor time 
     this year to debate GSE regulatory reform.
           Sincerely,
         Chuck Hagel; John E. Sununu; John McCain; Elizabeth Dole; 
           Lindsey Graham; Jeff Sessions; Wayne Allard; Mike 
           Crapo; Jim Bunning; Jon Kyl; Rick Santorum; Mel 
           Martinez; Judd Gregg; John Thune; Richard Burr; John 
           Ensign; Larry Craig; Jim DeMint; James M. Inhofe; Tom 
           Coburn.

  Mr. McCAIN. The letter stated in part:

       Substantial testimony calling for improved regulation of 
     the GSEs has been provided to the Senate by the Treasury, 
     Federal Reserve, HUD, GAO, CBO, and others. Congress has the 
     opportunity to recommit itself to the housing mission of the 
     GSEs while at the same time making sure the GSEs operate in a 
     manner that does not expose our financial system, or 
     taxpayers, to unnecessary risk. It is vitally important that 
     Congress take the necessary steps to ensure that these 
     institutions benefit from strong and independent regulatory 
     supervision, operate in a safe and sound manner, and are 
     primarily focused on their statutory mission.
       More importantly, Congress must ensure that the American 
     taxpayer is protected in the event either GSE should fail.

  Sadly, the bill which had passed the Senate Banking Committee under 
the leadership of then-Chairman Shelby, with the support of all the 
committee's Republicans and none of the Democrats, was not brought up 
for consideration before this body.
  It is critical to note, it was in 2005 that the GSEs, which had been 
acquiring increasing numbers of subprime loans for many years in order 
to meet their HUD-imposed affordable housing requirements, accelerated 
the purchases that led to their 2008 insolvency.
  If legislation along the lines of the Senate Banking Committee's bill 
had been enacted that year, many if not all the losses Fannie Mae and 
Freddie Mac suffered, and will suffer in the future, may have been 
avoided. I wish to make it clear to my colleagues: Failure of Congress 
to act could have prevented--if they had acted--many of the failures we 
are now facing.
  Any criticism leveled at Congress for the failures in Fannie Mae and 
Freddie Mac is very well placed. On October 3, 2008, the Wall Street 
Journal reported on how Congress pushed Fannie Mae and Freddie Mac to 
increase the purchases of low- and moderate-income borrowers. They 
wrote:

       Beginning in 1992, Congress pushed Fannie Mae and Freddie 
     Mac to increase their purchases of mortgages going to low- 
     and moderate-income borrowers. For 1996, the Department of 
     Housing and Urban Development (HUD) gave Fannie and Freddie 
     an explicit target--42 percent of their mortgage financing 
     had to go to borrowers with income below the median in their 
     area. The target increased to 50 percent in 2000 and 52 
     percent in 2005.

  For 1996, HUD required that 12 percent of all mortgages purchased by 
Fannie Mae and Freddie Mac be ``special, affordable'' loans, typically 
to borrowers with income less than 60 percent of their area's median 
income. That number was increased to 20 percent in 2000 and 22 percent 
in 2005. The 2008 goal was to be 28 percent.
  Between 2000 and 2005, Fannie Mae and Freddie Mac met these goals 
every year, funding hundreds of billions of dollars' worth of loans, 
many of them subprime and adjustable rate loans made to borrowers who 
bought houses with less than 10 percent down.
  Fannie Mae and Freddie Mac also purchased hundreds of billions of 
subprime securities for their own portfolios to make money and help 
satisfy HUD affordable housing goals. Fannie Mae and Freddie Mac were 
important contributors to the demand for subprime securities. Congress 
designed Fannie Mae and Freddie Mac to serve both their investors and 
the political class.
  Demanding that Fannie Mae and Freddie do more to increase home 
ownership among poor people allowed Congress and the White House to 
subsidize low-income housing outside the budget, at least in the short 
run. It was a political free lunch. The Community Reinvestment Act, 
CRA, did the same thing with traditional banks. It encouraged banks to 
serve two masters, their bottom line and the so-called common good.
  First passed in 1977, the CRA was ``strengthened'' in 1995, causing 
an increase of 80 percent in the number of bank loans going to low- and 
moderate-income families. By the way, there is nothing wrong with that 
as long as they meet the fundamental criteria, that they are borrowing 
money they can pay back.
  Fannie Mae and Freddie Mac were part of the CRA story too. In 1997, 
Bear Stearns did the first securitization of CRA loans, a $384 million 
offering guaranteed by Freddie Mac. Over the next 10 months, Bear 
Sterns issued $1.9 billion of CRA mortgages backed by Fannie Mae or 
Freddie Mac.
  Between 2000 and 2002, Fannie Mae securitized $394 billion in CRA 
loans, with $20 billion going to securitize the mortgages. Fannie Mae 
and Freddie Mac played a significant role in the explosion of subprime 
mortgages and subprime mortgage-backed securities.
  Without Fannie Mae and Freddie Mac's implicit guarantee of government 
support, which turned out to be all too real, would the mortgage-backed 
securities market and the subprime part of it have expanded the way 
they did? Perhaps. But before we conclude that markets failed, we need 
a careful analysis of public policy's role in creating this mess. 
Greedy investors obviously played a part, but investors have always 
been greedy, and some inevitably overreach and destroy themselves.
  Why did they take so many down with them this time? Part of the 
answer is, a political class greedy to push home ownership rates to 
historic highs, from 64 percent in 1994 to 69 percent in 2004. This was 
mostly the result of loans to low-income, higher risk borrowers. Both 
Bill Clinton and George W. Bush, abetted by Congress, trumpeted this 
rise as it occurred.
  The consequence, on top of putting the entire financial system at 
risk, the hidden cost has been hundreds of billions of dollars funneled 
into the housing market instead of more productive assets. Beware of 
trying to do good with other people's money.
  Unfortunately, that strategy remains at the heart of the political 
process and a proposed solution to this crisis. Congress had the 
responsibility to ensure that Fannie Mae and Freddie Mac were properly 
supervised and adequately regulated. Congress failed. The devastation 
caused by that failure continues to reverberate across the Nation as 
more and more families face foreclosures every day.
  In September 2008, the Washington Post published an in-depth article 
titled: ``How Washington Failed to Rein in Fannie, Freddie. As Profits 
Grew, Firms Used Their Power To Mask Peril.'' It is extremely 
informative and raised many troubling questions about the culture of 
corruption which is evident in the operations of both enterprises.
  The Post piece begins:

       Gary Gensler, an undersecretary of the Treasury, went to 
     Capitol Hill in March 2000 to testify in favor of a bill 
     everyone knew would fail.
       Fannie Mae and Freddie Mac were ascendent, giants of the 
     mortgage finance business and key players in the Clinton 
     administration's drive to expand home ownership. But Gensler 
     and other Treasury officials feared the companies had grown 
     so large that, if they stumbled, the damage to the U.S. 
     economy could be staggering. Few officials had ever publicly 
     criticized Fannie Mae and Freddie Mac, but Gensler concluded 
     it was time to rein them in.
       ``We thought this was a hand-on-the-Bible moment,'' he 
     recalled.
       The bill failed.
       The companies kept growing, the dangers posed by their 
     scale and financial practices kept mounting, critics kept 
     warning of the consequences. Yet across official Washington, 
     those who might have acted repeatedly failed to do so until 
     it was too late.
       Blessed with the advantages of a government agency and a 
     private company ``at the same time, Fannie Mae and Freddie 
     Mac used their windfall profits to co-opt the politicians who 
     were supposed to control them. The companies fought 
     successfully against

[[Page 7530]]

     increased regulation by cultivating their friends and 
     hounding their enemies.
       The agencies that regulated the companies were outmatched: 
     They lacked the money, the staff, the sophistication and the 
     political support to serve as an effective check.
       But most of all, the companies were protected by the belief 
     widespread in Washington--and aggressively promoted by Fannie 
     Mae and Freddie Mac--that their success was inseparable from 
     the expansion of homeownership in America. That conviction 
     was so strong that many lawmakers and regulators ignored the 
     peril posed to that ideal by the failure of either company.
       In October 1992, a brief debate unfolded on the floor of 
     the House of Representatives over a bill to create a new 
     regulator for Fannie Mae and Freddie Mac. On one side stood 
     Jim Leach, an Iowa Republican concerned that Congress was 
     ``hamstringing'' this new regulator at the behest of the 
     companies.
       He warned that the two companies were changing ``from being 
     agencies of the public at large to money machines for the 
     stockholding few.''
       On the other side stood Barney Frank, a Massachusetts 
     Democrat, who said the companies served a public purpose. 
     They were in the business of lowering the price of mortgage 
     loans.
       Congress chose to create a weak regulator, the Office of 
     Federal Housing Enterprise Oversight. The agency was required 
     to get its budget approved by Congress, while agencies that 
     regulated the banks set their own budgets. That gave 
     Congressional allies an easy way to exert pressure.
       ``Fannie Mae's lobbyists worked to ensure that [the] agency 
     was poorly funded and its budget remained subject to approval 
     in the annual appropriations process,'' OFHEO said more than 
     a decade later in a report on Fannie Mae. ``The goal of 
     senior management was straightforward: to force OFHEO to rely 
     on the [Fannie] for information and expertise to the degree 
     that Fannie Mae would essentially regulate itself.''
       Congress also wanted to free up money for Fannie Mae and 
     Freddie Mac to buy mortgage loans and specified that the pair 
     would be required to keep a much smaller share of their funds 
     on hand than other financial institutions. Where banks that 
     held $100 could spend $90 buying mortgage loans, Fannie Mae 
     and Freddie Mac could spend $97.50 buying loans.
       Finally, Congress ordered that the companies be required to 
     keep more capital as a cushion against losses if they 
     invested in riskier securities. But the rule was never set 
     during the Clinton administration, which came to office that 
     winter, and was only put in place nine years later.
       The Clinton administration wanted to expand the share of 
     Americans who owned homes, which had stagnated below 65 
     percent throughout the 1980s. Encouraging the growth of the 
     two companies was a key part of that plan.
       ``We began to stress homeownership as an explicit goal for 
     this period of American history,'' said Henry Cisneros, then 
     Secretary of Housing and Urban Development. ``Fannie Mae and 
     Freddie Mac became part of that equation.''
       The result was a period of unrestrained growth for the 
     companies. They had pioneered the business of selling bundled 
     mortgage loans to investors and now, as demand for investors 
     soared, so did their profits.
       Near the end of the Clinton administration, some of its 
     officials had concluded the companies were so large that 
     their sheer size posed a risk to the financial system.
       In the fall of 1999, Treasury Secretary Lawrence Summers 
     issued a warning, saying, ``Debates about systemic risk 
     should also now include government-sponsored enterprises, 
     which are large and growing rapidly.''
       It was a signal moment. An administration official had said 
     in public that Fannie Mae and Freddie Mac could be a hazard.
       The next spring, seeking to limit the companies' growth, 
     Treasury official Gensler testified before Congress in favor 
     of a bill that would have suspended the Treasury's right to 
     buy $2.25 billion of each company's debt--basically, a $4.5 
     billion lifeline for the companies.
       A Fannie Mae spokesman announced that Gensler's remarks had 
     just cost 206,000 Americans the chance to buy a home because 
     the market now saw the companies as a riskier investment.
       The Treasury Department folded in the face of public 
     pressure.
       There was an emerging consensus among politicians and even 
     critics of the two companies that Fannie Mae might be right. 
     The companies increasingly were seen as the engine of the 
     housing boom. They were increasingly impervious to calls for 
     even modest reforms.
       As early as 1996, the Congressional Budget Office had 
     reported that the two companies were using government support 
     to goose profits, rather than reducing mortgage rates as much 
     as possible.
       But the report concluded that severing government ties with 
     Fannie Mae and Freddie Mac would harm the housing market. In 
     unusually colorful language, the budget office wrote, ``Once 
     one agrees to share a canoe with a bear, it is hard to get 
     him out without obtaining his agreement or getting wet.''
       Fannie Mae and Freddie Mac enjoyed the nearest thing to a 
     license to print money. The companies borrowed money at 
     below-market interest rates based on the perception that the 
     government guaranteed repayment, and then they used the money 
     to buy mortgages that paid market interest rates. Federal 
     Reserve Chairman Alan Greenspan called the difference between 
     the interest rates a ``big, fat gap.'' The budget office 
     study found that it was worth $3.9 billion in 1995. By 2004, 
     the office would estimate it was worth $20 billion.
       As a result, the great risk to the profitability of Fannie 
     Mae and Freddie Mac was not the movement of interest rates or 
     defaults by borrowers, the concerns of normal financial 
     institution. Fannie Mae's risk was political, the concern 
     that the government would end its special status.
       So the companies increasingly used their windfall for a 
     massive campaign to protect that status.
       ``We manage our political risk with the same intensity that 
     we manage our credit and interest rate risks,'' Fannie Mae 
     chief executive Franklin Raines said in a 1999 meeting with 
     investors.
       Fannie Mae, and to a lesser extent Freddie Mac, became 
     enmeshed in the fabric of political Washington. They were 
     places former government officials went to get wealthy--and 
     to wait for new federal appointments. At Fannie Mae, chief 
     executives had clauses written into their contracts spelling 
     out the severance benefits they would receive if they left 
     for a government post.
       The companies also donated generously to the campaigns of 
     favored politicians.
       But Fannie Mae wasn't just buying influence. It was selling 
     government officials on an idea by making its brand 
     synonymous with homeownership. The company spent tens of 
     millions of dollars each year on advertising.
       In tying itself to politicians and wrapping itself in the 
     American flag, Fannie Mae went out of its way to share credit 
     with politicians for investments in their communities.
       ``They have always done everything in their power to 
     massage Congress,'' Leach said.
       And when they couldn't massage, they intimidated. In 2003, 
     Richard H. Baker (R-La.), chairman of the House Financial 
     Services subcommittee with oversight over Fannie Mae and 
     Freddie Mac, got information from OFHEO on the salaries paid 
     to executives at both companies. Fannie Mae threatened to sue 
     Baker if he released it, he recalled. Fearing the expense of 
     a court battle, he kept the data secret for a year.
       Baker, who left office in February, 2008, said he had never 
     received a comparable threat from another company in 21 years 
     in Congress. ``The political arrogance exhibited in their 
     heyday, there has never been before or since a private entity 
     that exerted that kind of political power,'' he said.
       In June 2003, Freddie Mac dropped a bombshell: It had 
     understated its profits over the previous three years by as 
     much as $6.9 billion in an effort to smooth out earnings.
       OFHEO seemed blind. Months earlier, the regulator had 
     pronounced Freddie's accounting controls ``accurate and 
     reliable.''
       Humiliated by the scandal, then-OFHEO director Armando 
     Falcon Jr. persuaded the White House to pay for an outside 
     accountant to review the books of Fannie Mae. The agency 
     reported in September 2004 that Fannie Mae also had 
     manipulated its accounting, in this case to inflate its 
     profits.
       The companies soon faced new bills in both the House and 
     the Senate seeking increased regulation. The Bush 
     administration took the hardest line, insisting on a strong 
     new regulator and seeking the power to put the companies into 
     receivership if they foundered. That suggested the government 
     might not stand behind the companies' debt.
       Fannie Mae and Freddie Mac succeeded in escaping once more, 
     by pounding every available button.
       The companies orchestrated a letter-writing campaign by 
     traditional allies including real estate agents, home 
     builders and mortgage lenders. Fannie Mae ran radio and 
     television ads ahead of a key Senate committee meeting, 
     depicting a Latino couple who fretted that if the bill 
     passed, mortgage rates would go up.
       The wife lamented: ``But that could mean we won't be able 
     to afford the new house.''
       Most of all, the company leaned on its Congressional 
     supporters.
       Fannie Mae even persuaded the New York Stock Exchange to 
     allow its shares to keep trading. The company had not issued 
     a required report on its financial condition in a year. The 
     rules of the exchange required delisting. So the exchange 
     created an exception when ``delisting would be significantly 
     contrary to the national interest.''
       The amendment was approved by the Securities and Exchange 
     Commission. Fannie Mae would remain on the New York Stock 
     Exchange.
       As Fannie Mae and Freddie Mac were trying to recover from 
     their accounting scandals, a new and ultimately mortal threat 
     emerged. Yet again, the warnings went unheeded for too long.
       The companies had begun buying loans made to borrowers with 
     credit problems.

[[Page 7531]]

       Fannie Mae and Freddie Mac had been losing market share to 
     Wall Street banks, which were doing boomtown business 
     packaging these riskier loans. The mortgage finance giants 
     wanted a share of the profits.
       Soon, the firms' own reports were noting the growing risk 
     of their portfolios. Dense monthly summaries of the 
     companies' mortgage purchases were piling up at OFHEO.
       An employee at one of the companies said it was already a 
     constant discussion around the office in 2004: When would the 
     regulators notice?
       ``It didn't take a lot of sophistication to notice what was 
     happening to the quality of the loans. Anybody could have 
     seen it,'' the staffer said. ``But nobody on the outside was 
     even questioning us about it.''
       President Bush had pledged to create an ``ownership 
     society,'' and the companies were helping the administration 
     achieve its goal of putting more than 10 million Americans 
     into their first homes.
       Fannie Mae and Freddie Mac's appetite for risky loans was 
     growing ever more voracious. By the time OFHEO began raising 
     red flags in January 2007, many borrowers were defaulting on 
     loans and within months Fannie Mae and Freddie Mac would be 
     running out of money to cover the losses.
       Finally, as the credit crisis escalated, Congress passed a 
     bill in July of 2008 that established a tough, new regulator 
     for Fannie Mae and Freddie Mac. It was too late.

  Americans are hurting. The economic situation remains depressed in my 
State. Unemployment is at record levels. The time has come to end the 
taxpayer-funded free ride of the gambling institutions. We cannot 
afford it anymore.
  Mr. President, for us to somehow say we are going to enact 
significant and meaningful financial regulatory reform without 
addressing this situation--these hundreds of billions of dollars of 
toxic assets that still have not been resolved; two government-
supported enterprises that have been propped up by the taxpayers of 
America for too long, while they engaged in the riskiest of 
enterprises, paying obscene profits to their executives and CEOs, their 
boards of directors derelict in their duties, criminally so.
  We must enact reform of Freddie and Fannie if we are going to perform 
our duties, albeit too late--too late because of the terrible losses we 
have inflicted on the American taxpayers. But it is not too late to fix 
it.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER (Mr. Burris). The Senator from Rhode Island is 
recognized.
  Mr. WHITEHOUSE. Thank you, Mr. President.
  I rise to speak for a moment again about my amendment No. 3746, of 
which I am delighted that the distinguished Presiding Officer is a 
cosponsor. I ask unanimous consent that Chairman Patrick Leahy, Senator 
Jim Webb, and Senator Bob Casey all be added as cosponsors to the 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WHITEHOUSE. Just to recap it briefly, if you go around the 
country--
  Mr. DODD. Mr. President, will the Senator yield for a moment?
  Mr. WHITEHOUSE. I will be glad to yield to the chairman.
  Mr. DODD. Mr. President, I see my friend from Arizona.
  Can I ask the Senator, did he lay down his amendment? I am unclear.
  Mr. McCAIN. I have not laid down the amendment because I understand 
the Senator from Connecticut would move to table, and there are 
numerous Members who want to talk on this issue--this multitrillion-
dollar issue. So, no, I have not. But I can also assure the Senator 
from Connecticut, if I propose the amendment, and it is tabled without 
proper debate, there will be another amendment just like it.
  Mr. DODD. Let me say to my friend from Arizona--and he is my friend--
I have no intention of immediately tabling anyone's amendment. I have 
not done that at all in the process. I think most Members appreciate I 
have been trying to make sure everybody has a chance to be heard and to 
work out amendments where we can so we can move along.
  You can also understand my dilemma, in a sense. We have 100 Members 
here who basically all have amendments on which they want to get heard. 
Everyone thinks their amendment is pretty important, and I respect 
that. All I am trying to look for are some time agreements so we can 
say: How long do we need? So we can then set up a schedule whereby, 
with some predictability--Members want to go home tomorrow. Are we 
going to have votes tomorrow? Are we going to have votes on Monday?
  I am just trying to have a schedule so I can accommodate as many 
people as I can so they can be heard on their matters. That is all I am 
seeking. I am not trying to shortcut anybody, although I would ask for 
reasonableness on time so everybody gets a crack at what they would 
like to do. That is all I am inquiring.
  Mr. McCAIN. In the words of Humphrey Bogart in Casablanca, I was 
misinformed because I was told by several different individuals that 
you would be moving to table the amendment if it was proposed. I am 
glad to hear that is not the case. I know of at least 20 Members on 
this side who want to speak on this issue. I will try to compile that 
and try to come to the Senator with a list and the time they want to 
discuss.
  With all due respect to all the other amendments--and I do not say 
this very often--when we are talking about trillions of dollars--
trillions of dollars--this is a very important amendment. So I will try 
to get to the distinguished chairman--I say with sympathy and respect--
a list of speakers and the amount of time they may consume as soon as 
possible.
  Mr. DURBIN. Mr. President, will the Senator from Arizona yield for a 
question?
  Can I ask the Senator from Arizona, while he is working out his list 
and speakers and time, can we move some other amendments?
  Mr. McCAIN. Sure. Absolutely.
  Mr. DURBIN. Bring them to a vote on the floor this evening?
  Mr. McCAIN. Absolutely.
  Mr. DURBIN. Does the Senator have any objection to that?
  Mr. McCAIN. I have no objection to moving other amendments while I am 
doing that. None whatsoever.
  Mr. DURBIN. On both sides of the aisle I hope we can work to 
accomplish that.
  Mr. McCAIN. We have to ask our leader but, yes, that is fine. Our two 
leaders say it is fine. I thank you.
  Mr. DODD. I thank the Senator from Arizona.
  We have Senator Sanders' pending amendment, on which I think we have 
reached a lot of consensus. I would like to see us get a vote on it. I 
know there are some issues that are--I will not mention them at all, 
but my hope is my colleagues might let us go to this. Is there any 
chance of that at all? Would someone get back to me and let me know it 
we can--
  I urge a vote on the Sanders amendment and ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  Mr. DODD. Is there a sufficient second?
  The PRESIDING OFFICER. There is not a sufficient second.
  Mr. SANDERS. Point of order: How many hands do you need up?
  The PRESIDING OFFICER. Twenty.
  Ordering the yeas and nays does not force a vote on the amendment.
  Mr. REID. Mr. President, I note the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk called the roll, and the following Senators 
entered the Chamber and answered to their names.

                          [Quorum No. 3 Leg.]

     Alexander
     Bennett (CO)
     Brown (OH)
     Burris
     Dodd
     Durbin
     Gregg
     Hagan
     Isakson
     McCain
     Murray
     Reid (NV)
     Sanders
     Schumer
     Shelby
     Udall (CO)
     Warner
     Whitehouse
  The PRESIDING OFFICER. A quorum is not present.
  The majority leader is recognized.
  Mr. REID. Mr. President, I enter a motion to instruct the Sergeant at 
Arms to request the presence of absent Senators.
  The PRESIDING OFFICER. The question is on agreeing to the motion.
  The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from West Virginia (Mr. Byrd) 
is necessarily absent.
  Mr. McCONNELL. The following Senators are necessarily absent: the 
Senator from Utah (Mr. Bennett), the

[[Page 7532]]

Senator from South Carolina (Mr. DeMint), the Senator from Arizona (Mr. 
Kyl), the Senator from Indiana (Mr. Lugar), and the Senator from Ohio 
(Mr. Voinovich).
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 61, nays 33, as follows:

                      [Rollcall Vote No. 134 Leg.]

                                YEAS--61

     Akaka
     Baucus
     Bayh
     Begich
     Bennet
     Bingaman
     Boxer
     Brown (MA)
     Brown (OH)
     Burris
     Cantwell
     Cardin
     Carper
     Casey
     Conrad
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Franken
     Gillibrand
     Graham
     Hagan
     Harkin
     Hatch
     Inouye
     Johnson
     Kaufman
     Kerry
     Klobuchar
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     McCaskill
     Menendez
     Merkley
     Mikulski
     Murray
     Nelson (NE)
     Nelson (FL)
     Pryor
     Reed
     Reid
     Rockefeller
     Sanders
     Schumer
     Shaheen
     Specter
     Stabenow
     Tester
     Udall (CO)
     Udall (NM)
     Warner
     Webb
     Whitehouse
     Wyden

                                NAYS--33

     Alexander
     Barrasso
     Bond
     Brownback
     Bunning
     Burr
     Chambliss
     Coburn
     Cochran
     Collins
     Corker
     Cornyn
     Crapo
     Ensign
     Enzi
     Grassley
     Gregg
     Hutchison
     Inhofe
     Isakson
     Johanns
     LeMieux
     McCain
     McConnell
     Murkowski
     Risch
     Roberts
     Sessions
     Shelby
     Snowe
     Thune
     Vitter
     Wicker

                             NOT VOTING--6

     Bennett
     Byrd
     DeMint
     Kyl
     Lugar
     Voinovich
  The motion was agreed to.
  The PRESIDING OFFICER. A quorum is present.
  The majority leader is recognized.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I am sometimes a patient person. I am really 
doing my best to be patient. I am going into this with good faith, as I 
hope my Republican colleagues are. We have not gotten a lot done. The 
issue we are working on is very important. But I just tell my friends 
on the other side of the aisle, we do not need a filibuster by some 
other name. I am approaching this in good faith.
  People have worked very hard. We have a lot to do. I think it goes 
without saying that we were at a meeting today, and we were told we 
have to complete the supplemental for the war spending by the time we 
leave here. That came from Secretary Gates. We have a lot to do.
  My suggestion is that people who want to offer amendments work 
tomorrow, they work Saturday and Sunday. The Banking staff will be 
available and the Agriculture staff will be available. If you have 
amendments, bring them together. We have a lot of amendments, but many 
of them are on the same subject. Work with the Banking staff and the 
Agriculture staff to come up with the amendments we can move through as 
quickly as possible. I want people, if they have something to say, to 
say it, but we don't need hours and hours to say it.
  One of the most important amendments we are trying to do is one that 
has been talked about by Senators Kaufman and Brown for weeks. And he 
has agreed to take 5 minutes on it. It has been talked about. We have 
read it. Senator Brown has agreed to take 5 minutes. We have read about 
it in the press. Everybody knows what he is trying to do. So I 
appreciate very much the Republicans allowing us to move forward on 
this amendment tonight. But, please, over the next few days we have a 
lot of amendments that are important, and I understand that, but when 
it comes time to offer these amendments, you need a lot of work on 
them. It always happens because it is a complicated bill. And we only 
need one amendment. We do not need the same amendment offered by five 
different Senators.
  I appreciate everyone's patience tonight. We are trying to work 
through this. We are not going to have votes tomorrow. We are going to 
have votes tonight. And it has been hard to get here.
  I appreciate the conversation I had with the Republican leader 
earlier today, and I know how hard this has been for the two managers 
of this part of the bill, Senators Dodd and Shelby.
  Senator Shelby has been especially gracious during the whole day. 
This is his birthday. His wonderful wife is waiting for him for dinner. 
She has been waiting for an hour now, and she is going to have to wait 
a little while longer, as she has waited for him a long time on other 
occasions. So we wish him a happy birthday.
  I ask unanimous consent that the following be the next amendments in 
order: Cantwell amendment No. 3786, to be modified with the changes at 
the desk, and it is my understanding that is going to go by voice; 
Brown amendment No. 3733, with a second-degree amendment by Senator 
Ensign, amendment No. 3869; that Senator Brown will have 5 minutes, 
Senator Ensign will have 5 minutes, and Senator Dodd will have 5 
minutes, and then we will proceed to a vote on that matter. I further 
ask consent that it be in order for a Democratic side-by-side to the 
McCain GSE amendment and that the Cardin amendment No. 3840 be 
considered tonight, and it is my understanding that amendment will be 
decided by a voice vote; that after the Cantwell amendment is called 
and modified, there be 10 minutes of debate with respect to that 
amendment, with the time equally divided and controlled in the usual 
form; that upon the use or yielding back of the time, the amendment be 
agreed to, and that there be no amendments in order to the amendments 
in this agreement prior to a vote except as we have stated.
  The PRESIDING OFFICER (Mr. Merkley.) Is there objection?
  Mr. McCONNELL. Mr. President, reserving the right to object--I am 
certainly not going to object; I just wanted to make sure everyone 
understands. So tomorrow would be debate only?
  Mr. REID. Yes, debate only, and the same on Monday.
  Mr. McCONNELL. I want to echo the comments of the majority leader 
with regard to getting amendments prepared. It is to our advantage to 
have amendment votes. We are going to work hard to get them in the 
queue and to get them voted on.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Washington is recognized.


         Amendment No. 3786, as modified, to Amendment No. 3739

  Ms. CANTWELL. Mr. President, I ask unanimous consent that the pending 
amendment be set aside and call up my amendment No. 3786, as modified.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Washington [Ms. Cantwell], for herself, 
     Mr. Whitehouse, and Mr. Sanders, proposes an amendment 
     numbered 3786, as modified, to amendment No. 3739.

  Ms. CANTWELL. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 762, between lines 5 and 6, insert the following:

     SEC. ___. ANTIMARKET MANIPULATION AUTHORITY.

       (a) Prohibition Regarding Manipulation and False 
     Information.--Subsection (c) of section 6 of the Commodity 
     Exchange Act (7 U.S.C. 9, 15) is amended to read as follows:
       ``(c) Prohibition Regarding Manipulation and False 
     Information.--
       ``(1) Prohibition against manipulation.--It shall be 
     unlawful for any person, directly or indirectly, to use or 
     employ, or attempt to use or employ, in connection with any 
     swap, or a contract of sale of any commodity in interstate 
     commerce, or for future delivery on or subject to the rules 
     of any registered entity, any manipulative or deceptive 
     device or contrivance, in contravention of such rules and 
     regulations as the Commission shall promulgate by not later 
     than 1 year after the date of enactment of the Restoring 
     American Financial Stability Act of 2010.
       ``(A) Special provision for manipulation by false 
     reporting.--Unlawful manipulation for purposes of this 
     paragraph shall include, but not be limited to, delivering, 
     or

[[Page 7533]]

     causing to be delivered for transmission through the mails or 
     interstate commerce, by any means of communication 
     whatsoever, a false or misleading or inaccurate report 
     concerning crop or market information or conditions that 
     affect or tend to affect the price of any commodity in 
     interstate commerce, knowing, or acting in reckless disregard 
     of the fact, that such report is false, misleading or 
     inaccurate.
       ``(B) Effect on other law.--Nothing in this paragraph shall 
     affect, or be construed to affect, the applicability of 
     section 9(a)(2).
       ``(2) Prohibition regarding false information.--It shall be 
     unlawful for any person to make any false or misleading 
     statement of a material fact to the Commission, including in 
     any registration application or any report filed with the 
     Commission under this Act, or any other information relating 
     to a swap, or a contract of sale of a commodity, in 
     interstate commerce, or for future delivery on or subject to 
     the rules of any registered entity, or to omit to state in 
     any such statement any material fact that is necessary to 
     make any statement of a material fact made not misleading in 
     any material respect, if the person knew, or reasonably 
     should have known, the statement to be false or misleading.
       ``(3) Other manipulation.--In addition to the prohibition 
     in paragraph (1), it shall be unlawful for any person, 
     directly or indirectly, to manipulate or attempt to 
     manipulate the price of any swap, or of any commodity in 
     interstate commerce, or for future delivery on or subject to 
     the rules of any registered entity.
       ``(4) Enforcement.--
       ``(A) Authority of commission.--If the Commission has 
     reason to believe that any person (other than a registered 
     entity) is violating or has violated this subsection, or any 
     other provision of this Act (including any rule, regulation, 
     or order of the Commission promulgated in accordance with 
     this subsection or any other provision of this Act), the 
     Commission may serve upon the person a complaint.
       ``(B) Contents of complaint.--A complaint under 
     subparagraph (A) shall--
       ``(i) contain a description of the charges against the 
     person that is the subject of the complaint; and
       ``(ii) have attached or contain a notice of hearing that 
     specifies the date and location of the hearing regarding the 
     complaint.
       ``(C) Hearing.--A hearing described in subparagraph 
     (B)(ii)--
       ``(i) shall be held not later than 3 days after service of 
     the complaint described in subparagraph (A);
       ``(ii) shall require the person to show cause regarding 
     why--

       ``(I) an order should not be made--

       ``(aa) to prohibit the person from trading on, or subject 
     to the rules of, any registered entity; and
       ``(bb) to direct all registered entities to refuse all 
     privileges to the person until further notice of the 
     Commission; and

       ``(II) the registration of the person, if registered with 
     the Commission in any capacity, should not be suspended or 
     revoked; and

       ``(iii) may be held before--

       ``(I) the Commission; or
       ``(II) an administrative law judge designated by the 
     Commission, under which the administrative law judge shall 
     ensure that all evidence is recorded in written form and 
     submitted to the Commission.

       ``(5) Subpoena.--For the purpose of securing effective 
     enforcement of the provisions of this Act, for the purpose of 
     any investigation or proceeding under this Act, and for the 
     purpose of any action taken under section 12(f) of this Act, 
     any member of the Commission or any Administrative Law Judge 
     or other officer designated by the Commission (except as 
     provided in paragraph (7)) may administer oaths and 
     affirmations, subpoena witnesses, compel their attendance, 
     take evidence, and require the production of any books, 
     papers, correspondence, memoranda, or other records that the 
     Commission deems relevant or material to the inquiry.
       ``(6) Witnesses.--The attendance of witnesses and the 
     production of any such records may be required from any place 
     in the United States, any State, or any foreign country or 
     jurisdiction at any designated place of hearing.
       ``(7) Service.--A subpoena issued under this section may be 
     served upon any person who is not to be found within the 
     territorial jurisdiction of any court of the United States in 
     such manner as the Federal Rules of Civil Procedure prescribe 
     for service of process in a foreign country, except that a 
     subpoena to be served on a person who is not to be found 
     within the territorial jurisdiction of any court of the 
     United States may be issued only on the prior approval of the 
     Commission.
       ``(8) Refusal to obey.--In case of contumacy by, or refusal 
     to obey a subpoena issued to, any person, the Commission may 
     invoke the aid of any court of the United States within the 
     jurisdiction in which the investigation or proceeding is 
     conducted, or where such person resides or transacts 
     business, in requiring the attendance and testimony of 
     witnesses and the production of books, papers, 
     correspondence, memoranda, and other records. Such court may 
     issue an order requiring such person to appear before the 
     Commission or member or Administrative Law Judge or other 
     officer designated by the Commission, there to produce 
     records, if so ordered, or to give testimony touching the 
     matter under investigation or in question.
       ``(9) Failure to obey.--Any failure to obey such order of 
     the court may be punished by the court as a contempt thereof. 
     All process in any such case may be served in the judicial 
     district wherein such person is an inhabitant or transacts 
     business or wherever such person may be found.
       ``(10) Evidence.--On the receipt of evidence under 
     paragraph (4)(C)(iii), the Commission may--
       ``(A) prohibit the person that is the subject of the 
     hearing from trading on, or subject to the rules of, any 
     registered entity and require all registered entities to 
     refuse the person all privileges on the registered entities 
     for such period as the Commission may require in the order;
       ``(B) if the person is registered with the Commission in 
     any capacity, suspend, for a period not to exceed 180 days, 
     or revoke, the registration of the person;
       ``(C) assess such person--
       ``(i) a civil penalty of not more than an amount equal to 
     the greater of--

       ``(I) $140,000; or
       ``(II) triple the monetary gain to such person for each 
     such violation; or

       ``(ii) in any case of manipulation or attempted 
     manipulation in violation of this subsection or section 
     9(a)(2), a civil penalty of not more than an amount equal to 
     the greater of--

       ``(I) $1,000,000; or
       ``(II) triple the monetary gain to the person for each such 
     violation; and

       ``(D) require restitution to customers of damages 
     proximately caused by violations of the person.
       ``(11) Orders.--
       ``(A) Notice.--The Commission shall provide to a person 
     described in paragraph (10) and the appropriate governing 
     board of the registered entity notice of the order described 
     in paragraph (10) by--
       ``(i) registered mail;
       ``(ii) certified mail; or
       ``(iii) personal delivery.
       ``(B) Review.--
       ``(i) In general.--A person described in paragraph (10) may 
     obtain a review of the order or such other equitable relief 
     as determined to be appropriate by a court described in 
     clause (ii).
       ``(ii) Petition.--To obtain a review or other relief under 
     clause (i), a person may, not later than 15 days after notice 
     is given to the person under clause (i), file a written 
     petition to set aside the order with the United States Court 
     of Appeals--

       ``(I) for the circuit in which the petitioner carries out 
     the business of the petitioner; or
       ``(II) in the case of an order denying registration, the 
     circuit in which the principal place of business of the 
     petitioner is located, as listed on the application for 
     registration of the petitioner.

       ``(C) Procedure.--
       ``(i) Duty of clerk of appropriate court.--The clerk of the 
     appropriate court under subparagraph (B)(ii) shall transmit 
     to the Commission a copy of a petition filed under 
     subparagraph (B)(ii).
       ``(ii) Duty of commission.--In accordance with section 2112 
     of title 28, United States Code, the Commission shall file in 
     the appropriate court described in subparagraph (B)(ii) the 
     record theretofore made.
       ``(iii) Jurisdiction of appropriate court.--Upon the filing 
     of a petition under subparagraph (B)(ii), the appropriate 
     court described in subparagraph (B)(ii) shall have 
     jurisdiction to affirm, set aside, or modify the order of the 
     Commission, and the findings of the Commission as to the 
     facts, if supported by the weight of evidence, shall in like 
     manner be conclusive.''.
       (b) Cease and Desist Orders, Fines.--Section 6(d) of the 
     Commodity Exchange Act (7 U.S.C. 13b) is amended to read as 
     follows:
       ``(d) If any person (other than a registered entity), is 
     violating or has violated subsection (c) or any other 
     provisions of this Act or of the rules, regulations, or 
     orders of the Commission thereunder, the Commission may, upon 
     notice and hearing, and subject to appeal as in other cases 
     provided for in subsection (c), make and enter an order 
     directing that such person shall cease and desist therefrom 
     and, if such person thereafter and after the lapse of the 
     period allowed for appeal of such order or after the 
     affirmance of such order, shall fail or refuse to obey or 
     comply with such order, such person shall be guilty of a 
     misdemeanor and, upon conviction thereof, shall be fined not 
     more than the higher of $140,000 or triple the monetary gain 
     to such person, or imprisoned for not less than six months 
     nor more than one year, or both, except that if such failure 
     or refusal to obey or comply with such order involves any 
     offense within subsection (a) or (b) of section 9 of this 
     Act, such person shall be guilty of a felony and, upon 
     conviction thereof, shall be subject to the penalties of said 
     subsection (a) or (b): Provided, That any such cease and 
     desist order under this subsection against any respondent in 
     any case of manipulation shall be issued only in conjunction 
     with an order issued against such respondent under

[[Page 7534]]

     subsection (c). Each day during which such failure or refusal 
     to obey or comply with such order continues shall be deemed a 
     separate offense.''.
       (c) Manipulations; Private Rights of Action.--Section 
     22(a)(1) of the Commodity Exchange Act (7 U.S.C. 25(a)(1)) is 
     amended by striking subparagraph (D) and inserting the 
     following:
       ``(D) who purchased or sold a contract referred to in 
     subparagraph (B) hereof or swap if the violation 
     constitutes--
       ``(i) the use or employment of, or an attempt to use or 
     employ, in connection with a swap, or a contract of sale of a 
     commodity, in interstate commerce, or for future delivery on 
     or subject to the rules of any registered entity, any 
     manipulative device or contrivance in contravention of such 
     rules and regulations as the Commission shall promulgate by 
     not later than 1 year after the date of enactment of the 
     Restoring American Financial Stability Act of 2010; or
       ``(ii) a manipulation of the price of any such contract or 
     swap or the price of the commodity underlying such contract 
     or swap.''.
       (d) Effective Date.--
       (1) The amendments made by this section shall take effect 
     on the date on which the final rule promulgated by the 
     Commodity Futures Trading Commission pursuant to this Act 
     takes effect.
       (2) Paragraph (1) shall not preclude the Commission from 
     undertaking prior to the effective date any rulemaking 
     necessary to implement the amendments contained in this 
     section.

  Ms. CANTWELL. I further ask unanimous consent that Senators Merkley, 
Brown of Ohio, and Shaheen be added as cosponsors.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. I would like to be added as a cosponsor.
  Ms. CANTWELL. I ask unanimous consent that Senator Dodd also be added 
as a cosponsor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. CANTWELL. My amendment strengthens the Commodity Futures Trading 
Commission's authority to go after manipulation and attempted 
manipulation in the swaps and commodities markets. It makes it unlawful 
to manipulate or attempt to manipulate the price of a swap or commodity 
using any manipulative device or contrivance.
  Some people might be thinking: Why do we need legislation like that? 
Don't we already have something in place? Unfortunately, current law 
does not have enough protections for our consumers, and we have found 
in other areas that it is very important to have a strong bright line, 
a law on the books against manipulation. We want the CFTC to have 
strong tools to go after this kind of behavior. This amendment is about 
protecting the integrity of markets for people who rely on them for 
their business.
  Current law makes it very difficult for the Commodity Futures Trading 
Commission to prove market manipulation. The CFTC has to prove that 
someone had specific intent to manipulate, and that is a very difficult 
standard to prove. Most individuals don't write an e-mail, for example, 
saying they intend to manipulated prices, but that is currently what 
the law requires the Commodity Futures Trading Commission to prove: 
``specific intent'' to manipulate. As a result of this, the Federal 
courts have recognized that with the CFTC's weaker anti-manipulation 
standard, market ``manipulation cases generally have not fared so 
well.'' In fact, the law is so weak that in the CFTC's 35-year history, 
it has only had one successfully prosecuted case of market 
manipulation, and that case is currently on appeal in Federal court. I 
am going to say that again. In the 35 years of its history, the CFTC 
has only successfully prosecuted one single case of manipulation.
  This language in this amendment is patterned after the law that the 
SEC uses to go after fraud and manipulation; that there can be no 
manipulative devices or contrivances. It is a strong and clear legal 
standard that allows regulators to successfully go after reckless and 
manipulative behavior.
  This legislation tracks the Securities Act in part because Federal 
case law is clear that when the Congress uses language identical to 
that used in another statute, Congress intended for the courts and the 
Commission to interpret the new authority in a similar manner, and 
Congress has made sure that its intention is clear.
  In the 75 years since the enactment of the Securities and Exchange 
Act of 1934, a substantial body of case law has developed around the 
words ``manipulative or deceptive devices or contrivances.''
  The Supreme Court has compared this body of law to ``a judicial oak 
which has grown from little more than a legislative acorn.'' It is 
worth noting that the courts have held that the SEC's manipulation 
authority is not intended to catch sellers who take advantage of the 
natural market forces of supply and demand, only those who attempt to 
affect the market or prices by artificial means unrelated to the 
natural forces of supply and demand.
  Mr. President, Congress granted the same antimanipulation authority 
to the Federal Energy Regulatory Commission in 2005 in the Energy 
Policy Act. We did this as a result of the Enron market manipulation. I 
am very proud of this legislation and its ban on manipulation in 
electricity and natural gas markets. I say that because there was a 
similar issue of deregulation of energy markets that led to the Federal 
regulators not doing their job.
  Since we have implemented this language in the electricity markets, 
the Federal Energy Regulatory Commission, since 2005, has used its 
authority to conduct 135 investigations. Of those 135 investigations, 
41 have resulted in settlements involving civil penalties or other 
monetary remedies totaling over $49 million.
  Two investigations brought about enforcement actions against 
manipulation, one against Amaranth for $291 million----
  The PRESIDING OFFICER (Mr. Udall of Colorado). The Senator has used 5 
minutes.
  Ms. CANTWELL. Mr. President, I ask unanimous consent for an 
additional 1 minute.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. CANTWELL. The alleged market manipulation brought enforcement 
action against Amaranth for $291 million in civil penalties and Energy 
Trading Partners for $167 million in civil penalties. That is just an 
example of what a statute with teeth and a regulatory entity can do to 
actually stop manipulation when given that authority.
  So, Mr. President, I hope my colleagues will support this strong 
antimanipulation standard being inserted into the Commodity Exchange 
Act. It will truly put a policeman on the beat and stop the kind of 
manipulation that has occurred in these commodities markets.
  I thank the Presiding Officer and yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mrs. LINCOLN addressed the Chair.
  The PRESIDING OFFICER. Who yields time in opposition?
  Mr. DODD. Mr. President, as I recall the unanimous consent agreement, 
there were 5 minutes. Is there time allocated? I do not believe there 
is any opposition to this amendment; therefore, if there is any, we 
yield back the time.
  I say to the Senator, did you want to be heard on the Cantwell 
amendment?
  Mrs. LINCOLN. Yes.
  Mr. DODD. I am sorry.
  The PRESIDING OFFICER. There is 5 minutes remaining for debate.
  The Senator from Arkansas.
  Mrs. LINCOLN. Mr. President, I rise this evening in support of my 
good friend, Senator Cantwell, and her amendment. I would like to thank 
the Senator from Washington who has for years been a leader in the 
Senate on the complicated issue of derivatives and who has been 
particularly effective at strengthening manipulation standards. There 
has not been a more effective champion of consumers and efficient 
markets than Senator Cantwell.
  This amendment comes as a result of hours of thoughtful hard work 
from Senator Cantwell and her staff. While the Dodd-Lincoln bill 
contains a strong antimanipulation authority, Senator Cantwell came to 
me and my staff with ideas on how to strengthen the provision, and I 
was pleased to have listened. We worked through our concerns and built 
on each other's strengths

[[Page 7535]]

and, in the end, came up with an improved product. That is the 
amendment we are accepting here today.
  Market manipulation is an ever-present danger in derivatives trading. 
Derivatives are leveraged transactions, and it is well known that in 
these markets there are numerous opportunities for traders to abuse 
their positions in order to game the market to their advantage. This is 
unacceptable. These markets are a fundamental part of our economy. They 
are used to manage risk and for price discovery, and their integrity 
must be preserved.
  The Dodd-Lincoln bill strengthens existing law to target specific 
market abuses that have arisen in recent years. These abuses are 
outlawed as disruptive practices in section 747 of the underlying bill.
  I wholeheartedly support Senator Cantwell's amendment, which takes 
the significant step of adding a new and versatile standard for 
deceptive and manipulative practices under the Commodity Exchange Act. 
It addresses false reporting and authorizes private rights of action 
that will aid the CFTC in its enforcement effort. Senator Cantwell's 
amendment will supplement the CFTC's existing standards as the 
Commission and the SEC work together to regulate derivatives.
  The Commodity Exchange Act is a complex statute that covers many 
trading venues. Senator Cantwell's amendment will give the CFTC a very 
important new weapon in its arsenal to combat ever-evolving forms of 
manipulative trading schemes that undermine public confidence in the 
proper functioning of these markets.
  I am very proud to be a supporter of what Senator Cantwell has done 
with this amendment, and I urge all of our colleagues to take a look at 
it and realize she has really helped to improve the bill, the 
underlying bill, in her actions.
  I yield the floor.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 3786), as modified, was agreed to.
  Mr. DODD. I move to reconsider the vote and I move to lay that motion 
on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Maryland is recognized.


                Amendment No. 3840 to Amendment No. 3739

  Mr. CARDIN. Mr. President, under the unanimous consent agreement, I 
call up amendment No. 3840.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Maryland [Mr. Cardin], for himself and Mr. 
     Grassley, proposes an amendment numbered 3840 to amendment 
     No. 3739.

  Mr. CARDIN. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

    (Purpose: To provide whistleblower protections for employees of 
        nationally recognized statistical rating organizations)

       On page 977, line 19, strike ``The Securities'' and insert 
     the following:
       (a) In General.--The Securities
       On page 994, between lines 2 and 3, insert the following:
       (b) Protection for Employees of Nationally Recognized 
     Statistical Rating Organizations.--Section 1514A(a) of title 
     18, United States Code, is amended--
       (1) by inserting ``or nationally recognized statistical 
     rating organization (as defined in section 3(a) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c),'' after 
     ``78o(d)),''; and
       (2) by inserting ``or nationally recognized statistical 
     rating organization'' after ``such company''.

  Mr. CARDIN. Mr. President, the Cardin-Grassley amendment extends 
whistleblower protections to employees of nationally recognized 
statistical rating organizations, NRSROs. NRSROs are the companies--
such as Moody's and Standard & Poor's--which issue credit ratings that 
the U.S. Securities and Exchange Commission permits other financial 
firms to use for certain regulatory purposes.
  There are 10 NRSROs at present, including some privately held firms. 
The NRSROs played a large role--by overestimating the safety of 
residential mortgage-backed securities and collateralized debt 
obligations--in creating the housing bubble and making it bigger.
  Then, by marking tardy but massive simultaneous downgrades of these 
securities, they contributed to the collapse of the subprime secondary 
market and the ``fire sale'' of assets, exacerbating the financial 
crisis.
  In the wake of the Enron, WorldCom, and Tyco corporate scandals, 
Congress passed the Sarbanes-Oxley Act in July of 2002. One of the 
provisions in the act was extended whistleblower protections to 
employees of any company that is registered under the SEC Act of 1934 
or that is required to file reports under section 15(d) of the same 
act. The whistleblower provisions of the Sarbanes-Oxley Act protect 
employees of the publicly traded companies from retaliation by giving 
victims of such treatment a cause of action which can be brought in 
Federal court.
  Section 1514(a) delineates which companies are covered by that act 
and what actions are prohibited. The Cardin-Grassley amendment expands 
the provision to include employees of the rating companies.
  I think it is important we have the whistleblower protection. S. 3217 
contains several provisions to improve SEC and congressional oversight 
of the functioning of the NRSROs. So the underlying bill does provide 
for the regulatory framework for the rating agencies.
  What the Cardin-Grassley amendment does is extend the whistleblowing 
provisions--that protect employees--to all of the rating agencies. I 
would urge my colleagues to support the amendment.
  With that, Mr. President, I yield back the remainder of my time.
  The PRESIDING OFFICER. Is there further debate on the amendment?
  The Senator from Connecticut.
  Mr. DODD. Mr. President, I rise in strong support of the amendment 
offered by our colleague from Maryland, which would protect 
whistleblowers.
  We have all learned, over the many months of discussions since the 
collapse and fall in 2008, of the culpability of the credit rating 
agencies--in terms of what was sold in the market place, relying on the 
reputation of the credit rating agencies and their classification of 
these bundled mortgages. We have had a lot of discussion about how best 
to do this, to rein in the credit rating agencies so we get far greater 
reliability and due diligence out of them.
  One thing for certain that would clearly help is the Cardin 
amendment. It may not solve all the problems with the credit rating 
agencies, but it is going to be a major opportunity for us to be able 
to break down the bales that exist.
  A significant part of our bill improves, we think, regulation. This 
bill contains several provisions that will make rating agencies more 
transparent, accountable, and accurate. That will increase the SEC's 
regulatory performance, and that will reduce investors' reliance on 
ratings issued by nationally recognized statistical rating 
organizations.
  Senator Cardin's amendment complements this provision in the bill, 
and I commend him for it. It adds employees of nationally recognized 
statistical rating organizations to a list of already protected 
whistleblowers. It is a valuable contribution to this bill, and I thank 
him for it.
  The PRESIDING OFFICER. Is there further debate?
  If not, the question is on agreeing to the amendment.
  The amendment (No. 3840) was agreed to.
  Mr. DODD. I move to reconsider the vote and I move to lay that motion 
on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Ohio is recognized.


                Amendment No. 3733 To Amendment No. 3739

   (Purpose: To impose leverage and liability limits on bank holding 
                   companies and financial companies)

  Mr. BROWN of Ohio. Mr. President, I call up amendment No. 3733.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Ohio [Mr. Brown], for himself, Mr. 
     Kaufman, Mr. Casey, Mr.

[[Page 7536]]

     Whitehouse, Mr. Merkley, Mr. Harkin, Mr. Sanders, and Mr. 
     Burris, proposes an amendment numbered 3733 to amendment No. 
     3739.

  Mr. BROWN of Ohio. Mr. President, I ask unanimous consent that 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in the Record of Wednesday, April 28, 2010, 
under ``Text of Amendments.'')
  Mr. BROWN of Ohio. Mr. President, the Kaufman-Brown amendment, with 
14 cosponsors, would scale back the six largest banks in the Nation, 
requiring them to spin off into smaller more manageable banks and 
maintain sufficient capital to cover their debts.
  These six banks' assets total $9 trillion. Our amendment ends 
bailouts by ensuring that no Wall Street firm is so big or so reckless 
that it fails, and then so does our economy. The bill we are 
considering today is strong, but it needs to be stronger. It focuses on 
monitoring risk--risk is the biggest problem--and takes action once 
there are signs of trouble.
  But size is also a huge problem. Everyone, from consumer groups, to 
small business owners, to former directors, Governors of the Fed, 
Chairmen of the Federal Reserve--two of them--understand what is at 
stake if we do not pass this amendment.
  They have understood because we see it for ourselves that when a few 
megabanks dominate our financial system, the downfall of any of them 
can mark the downfall of our entire economy. We have seen millions of 
jobs lost. We have seen millions of homes lost. We have seen trillions 
of dollars in savings and wealth drained.
  Just 15 years ago--just 15 years ago--the six largest U.S. banks had 
assets equal to 17 percent of our GDP. Today, the six largest banks 
have total assets estimated to be in excess of 63 percent. From 17 
percent of GDP to 63 percent of GDP--these six largest banks.
  Alan Greenspan said too big to fail is too big. Too big to fail is 
too big. These six banks, in addition to the fact they already have 
such dominance in our economy, when borrowing money when going into the 
capital markets, enjoy an 80-basis point advantage over banks in Denver 
and Cleveland, regional banks in our States, and community banks that 
are even smaller. They have an 80-basis points advantage ensuring that 
if we don't pass the Brown-Kaufman amendment, their advantage will only 
grow because these banks will grow larger, because the playing field is 
tilted toward them, because they have this interest rate advantage when 
they borrow money--another reason to understand that too big to fail is 
too big.
  I yield the last 2 or 3 minutes to Senator Kaufman.
  Mr. KAUFMAN. Mr. President, I want to say to those who say this is 
Draconian, think of one thing: Citigroup under this will be the size 
they were in 2002. They competed internationally. Everything was the 
same.
  In terms of risk, James Cayne said today, after he spoke before the 
Financial Crisis Inquiry, that Bear Stearns failed because their ratio 
of assets to capital was 40 to 1. This bill would cap it at 16. Bear 
Stearns would not have failed. We should not leave this for the 
regulators. In 1933 our forbears before us made tough decisions after 
the Great Depression and put in Glass-Steagall. We should do no less. 
We should be legislating for generations here tonight and support this 
amendment.
  Thank you.
  The PRESIDING OFFICER. The Senator from Nevada.


                Amendment No. 3898 to Amendment No. 3733

  Mr. ENSIGN. Mr. President, I have a second-degree amendment to the 
Brown amendment at the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Nevada [Mr. Ensign] proposes an amendment 
     numbered 3898 to amendment No. 3733.

  Mr. ENSIGN. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To amend the definition of the term ``financial company'' for 
         purposes of imposing limits on nondeposit liabilities)

       On page 2 of the amendment, strike lines 11 through 15 and 
     insert the following:
       (1) Financial company.--The term ``financial company'' 
     means--
       (A) any nonbank financial company supervised by the Board;
       (B) the Federal National Mortgage Association; and
       (C) the Federal Home Loan Mortgage Corporation.

  Mr. ENSIGN. Mr. President, I have a very simple second-degree 
amendment actually supporting the underlying amendment. But what my 
second degree does is it simply says that Fannie Mae and Freddie Mac 
will be subject to the same limits. Everybody has been talking about 
too big to fail. That is one of the problems. All of this 
interconnectedness of our financial markets, when one is too big to 
fail, draws the entire market down. That is why TARP was needed. That 
is why people have justified a lot of bailouts. I don't think there is 
anybody who can legitimately argue that Fannie and Freddie aren't too 
big to fail.
  What this second-degree amendment says, very simply, is the 3 percent 
of GDP that we are limiting the banks to, we limit Freddie Mac and 
Fannie Mae to those same limits.
  We saw yesterday afternoon that Freddie Mac said they needed another 
$10 million in taxpayer bailouts. There is no question it is too big. 
There is no question that if we actually put their debt on our balance 
sheets, we look much worse, the deficits on our balance sheet, we look 
much worse. What we are seeing over in Greece with the rioting and how 
that is affecting our financial markets, we need to be honest in our 
accounting, but we also need to make sure these things don't continue 
to get larger and larger.
  Back in December the President took the limits off of Fannie and 
Freddie--took the limits off. That is saying they can grow and keep 
borrowing and keep doing the irresponsible things they did in the past.
  When we look at the root causes of the financial crisis, people took 
risks they never should have taken because there were implicit 
guarantees not only in the banks being too big to fail but especially 
in Fannie and Freddie being too big to fail. It skewed the markets. 
People took risks they never should have taken.
  There are other things I believe that need to be done with Fannie and 
Freddie, but certainly we can't allow them to get as large as they are 
now. So the reasonable limits that have been put on the large banks I 
think need to be put on these GSEs, the government-sponsored entities, 
and if we do that, I think we will be in better shape in the future for 
not having another financial collapse.
  It is a very simple amendment and I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  Mr. ENSIGN. Madam President, I reserve the remainder of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. DODD. Mr. President, how much time remains?
  The PRESIDING OFFICER. The Senator from Connecticut has 5 minutes.
  Mr. DODD. I yield 2 minutes to my colleague from Virginia, Senator 
Warner, a member of the Banking Committee.
  The PRESIDING OFFICER. The Senator from Virginia.
  Mr. WARNER. Mr. President, I rise in opposition to both the second-
degree amendment and the initial Brown-Kaufman amendment. I understand 
their goals. I believe the chairman's bill addresses those goals. We 
have 10 percent total liabilities in the United States in the existing 
bill right now. We only have 4 of the largest 50 banks in the world 
that are American domiciled. I believe this arbitrary asset cap size is 
not the appropriate restriction. The real question should be the level 
of interconnectedness and the risk taking. We saw in the crisis of 2008 
the character of the firms was not simply the largest firms but firms 
that did undue risk taking.

[[Page 7537]]

  We have put forward in this legislation two very important ways so 
that if these firms do take undue risk or if their size is a 
contributing factor, the Dodd bill does provide the ability for these 
banks to be broken up, one through the funeral plans, to make sure 
these large institutions have to show how they can do an orderly 
unwinding process through bankruptcy. If they can't show that, whether 
it is due to the international holdings or the domestic holdings, the 
systemic risk council can break up these institutions.
  In addition, there are other parts of the bill that also allow it. If 
these institutions continue to pose a systemic risk, they can be broken 
up, so I rise in opposition to both amendments.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, I join the Senator in opposition to the 
Brown amendment, but I wish to speak about the Ensign amendment.
  We talk about rushing things through around here. I have heard that 
mentioned a lot over the last couple of days. This is going beyond 
rushing through. The entire 97 percent of all mortgages--97 percent of 
all mortgages in the country today--are going through the GSEs, Fannie 
and Freddie. Without them, there is no housing market in the country. 
So before we decide to do this without any alternative in place--and 
clearly one is needed. I take a backseat to no one on the idea we need 
to reform how the GSEs are functioning.
  As I think my friend Judd Gregg mentioned the other day, this is far 
too complex an issue to include in this bill. We already have 1,500 
pages. We never intended to deal with every financial issue in the 
United States, and particularly one where the housing market today is 
completely dependent on this. Adopt this amendment and, believe me, by 
tomorrow we will have an economic reaction in the country we won't want 
to believe.
  So with all due respect, we will deal with this. I will have language 
in this bill that will absolutely guarantee we are going to take up 
this issue in the coming Congress. It has to be done. But to grapple 
with that and all of these other matters in the same bill is asking too 
much. It doesn't minimize the importance of the issue, but this 
evening, without any other kind of alternative in place, to adopt this 
amendment and then have the implications--97 percent of all mortgages 
in the United States go through the GSEs and without them there is no 
housing market--I urge my colleagues to reject the Ensign amendment.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. ENSIGN. Mr. President, I think the case has been made that Fannie 
and Freddie are too big. There is no question they are too big. We have 
also had almost 2 years to deal with it, but we haven't done anything.
  Mr. DODD. If my colleague would yield, that is untrue. We passed 
legislation only last year on the GSEs.
  Mr. ENSIGN. We have not reformed the GSEs the way we needed to. We 
haven't done what needs to be done on the GSEs. This is one large step 
to doing that, and I believe we should. They are too big and they can 
take this entire economy down, and that is why we have to limit the 
size of them. I would encourage my colleagues to support this 
amendment.
  The PRESIDING OFFICER. The Senator from New Hampshire.
  Mr. GREGG. Has all the time been used in opposition?
  The PRESIDING OFFICER. The Senator from Connecticut has 2 minutes 
remaining. The Senator from Ohio has 1 minute 45 seconds, as does the 
Senator from Nevada.
  The Senator from New Hampshire.
  Mr. GREGG. Mr. President, I don't understand this Brown amendment. 
Basically what it says is if you are successful--we are not talking 
about too big to fail here, we are talking about entities, businesses 
that are big, yes. They are actually not as big as a lot of the 
international banks they compete with, and that we as a Nation compete 
with, but they are large and they are successful. You are going to 
break them up. Where does this stop? Do we take on McDonald's? Do we 
take on Wal-Mart? Do we take on Microsoft? Do we take on Google? Should 
we set a standard that we as a body can step in and unilaterally decide 
that some company has gotten too large and deserves to be broken up, 
even if it is healthy?
  If it is a systemic risk because it has overextended itself and put 
itself into a situation where we have a question of whether it can 
survive, then we have the resolution authority to take care of that. 
But why would we--we 100 people--think we know enough to start breaking 
up businesses in this Nation which are profitable and which make us 
competitive as a Nation? It doesn't make any sense to me.
  The PRESIDING OFFICER. Who yields time?
  Mr. ENSIGN. I yield back the remaining time.
  Mr. DODD. I don't think I have any time left, do I?
  The PRESIDING OFFICER. The Senator has 45 seconds remaining.
  Mr. DODD. I yield it back.
  The PRESIDING OFFICER. The Senator from Ohio.
  Mr. BROWN of Ohio. Mr. President, I would only say that Alan 
Greenspan, not someone who has been on a crusade to break up America's 
businesses, talking about these banks, said too big to fail is too big. 
I think that sums it up pretty well.
  I yield the remainder of my time, and I ask for the yeas and nays on 
the Brown amendment.
  The PRESIDING OFFICER. Is there objection to ordering the yeas and 
nays on the Brown amendment?
  Without objection, it is so ordered.
  Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  Mr. DODD. Parliamentary inquiry, Mr. President: We are voting first 
on the Ensign amendment, is that correct?
  The PRESIDING OFFICER. That is correct.
  The yeas and nays have been ordered.
  The question is on agreeing to the amendment.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from West Virginia (Mr. Byrd) 
is necessarily absent.
  Mr. KYL. The following Senators are necessarily absent: the Senator 
from Utah (Mr. Bennett), the Senator from Kentucky (Mr. Bunning), the 
Senator from South Carolina (Mr. DeMint), the Senator from Indiana (Mr. 
Lugar), and the Senator from Louisiana (Mr. Vitter).
  Further, if present and voting, the Senator from Kentucky (Mr. 
Bunning) would have voted ``yea.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 35, nays 59, as follows:

                      [Rollcall Vote No. 135 Leg.]

                                YEAS--35

     Barrasso
     Bingaman
     Bond
     Brownback
     Burr
     Cantwell
     Chambliss
     Coburn
     Cochran
     Collins
     Corker
     Cornyn
     Crapo
     Ensign
     Enzi
     Feingold
     Grassley
     Hatch
     Hutchison
     Inhofe
     Kohl
     Kyl
     Lincoln
     McCain
     McConnell
     Merkley
     Murkowski
     Risch
     Roberts
     Sessions
     Shelby
     Snowe
     Thune
     Wicker
     Wyden

                                NAYS--59

     Akaka
     Alexander
     Baucus
     Bayh
     Begich
     Bennet
     Boxer
     Brown (MA)
     Brown (OH)
     Burris
     Cardin
     Carper
     Casey
     Conrad
     Dodd
     Dorgan
     Durbin
     Feinstein
     Franken
     Gillibrand
     Graham
     Gregg
     Hagan
     Harkin
     Inouye
     Isakson
     Johanns
     Johnson
     Kaufman
     Kerry
     Klobuchar
     Landrieu
     Lautenberg
     Leahy
     LeMieux
     Levin
     Lieberman
     McCaskill
     Menendez
     Mikulski
     Murray
     Nelson (NE)
     Nelson (FL)
     Pryor
     Reed
     Reid
     Rockefeller
     Sanders
     Schumer
     Shaheen
     Specter
     Stabenow
     Tester
     Udall (CO)
     Udall (NM)
     Voinovich
     Warner
     Webb
     Whitehouse

                             NOT VOTING--6

     Bennett
     Bunning
     Byrd
     DeMint
     Lugar
     Vitter
  The amendment (No. 3898) was rejected.
  Mr. DODD. Mr. President, I move to reconsider the vote, and I move to 
lay that motion on the table.

[[Page 7538]]

  The motion to lay on the table was agreed to.


                           Amendment No. 3733

  The PRESIDING OFFICER. The question is on agreeing to the Brown 
amendment No. 3733.
  The yeas and nays have been ordered.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from West Virginia (Mr. Byrd) 
is necessarily absent.
  Mr. KYL. The following Senators are necessarily absent: the Senator 
from Utah (Mr. Bennett), the Sentor from Kentucky (Mr. Bunning), the 
Senator from South Carolina (Mr. DeMint), the Senator from Indiana (Mr. 
Lugar), and the Senator from Louisiana (Mr. Vitter).
  Further, if present and voting, the Senator from Kentucky (Mr. 
Bunning) would have voted ``yea.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 33, nays 61, as follows:

                      [Rollcall Vote No. 136 Leg.]

                                YEAS--33

     Begich
     Bingaman
     Boxer
     Brown (OH)
     Burris
     Cantwell
     Cardin
     Casey
     Coburn
     Dorgan
     Durbin
     Ensign
     Feingold
     Franken
     Harkin
     Kaufman
     Leahy
     Levin
     Lincoln
     Merkley
     Mikulski
     Murray
     Pryor
     Reid
     Rockefeller
     Sanders
     Shelby
     Specter
     Stabenow
     Udall (NM)
     Webb
     Whitehouse
     Wyden

                                NAYS--61

     Akaka
     Alexander
     Barrasso
     Baucus
     Bayh
     Bennet
     Bond
     Brown (MA)
     Brownback
     Burr
     Carper
     Chambliss
     Cochran
     Collins
     Conrad
     Corker
     Cornyn
     Crapo
     Dodd
     Enzi
     Feinstein
     Gillibrand
     Graham
     Grassley
     Gregg
     Hagan
     Hatch
     Hutchison
     Inhofe
     Inouye
     Isakson
     Johanns
     Johnson
     Kerry
     Klobuchar
     Kohl
     Kyl
     Landrieu
     Lautenberg
     LeMieux
     Lieberman
     McCain
     McCaskill
     McConnell
     Menendez
     Murkowski
     Nelson (NE)
     Nelson (FL)
     Reed
     Risch
     Roberts
     Schumer
     Sessions
     Shaheen
     Snowe
     Tester
     Thune
     Udall (CO)
     Voinovich
     Warner
     Wicker

                             NOT VOTING--6

     Bennett
     Bunning
     Byrd
     DeMint
     Lugar
     Vitter
  The amendent (No. 3733) was rejected.
  Mr. DODD. I move to reconsider the vote and to lay that motion on the 
table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, there are no further votes today. As I 
understand it, there will be no votes tomorrow. But there will be a 
session tomorrow for Members to come and to be heard on the remaining 
parts of the bill or amendments we still have to consider.
  I think we all heard the majority leader, Senator Reid, make the 
point that I made earlier; that is, I intend to be here all weekend. My 
staff and Senator Shelby's staff will be as well. So for those Members 
who still have amendments, we are more than happy to sit down and try 
to resolve and work together on those amendments to see if we can't 
reach agreement on some or at least to work with the authors of the 
amendments or their staffs. So we will be here to do that.
  Let me just thank all Members again. Mr. President, it is Richard 
Shelby's birthday today--my seatmate on the Banking Committee, the 
former chairman of the Banking Committee--and I would just note that, 
even though he was late for his dinner with Annette, his lovely wife, 
we stepped aside around 4 p.m. this afternoon--the members of the 
Banking Committee, his staff, and I--and we brought out a nice cake for 
Senator Shelby. So we celebrated in the midst of the debate.
  It is important for the people of the country to know that we have 
very strong differences--I had strong objections to the Shelby 
amendment today, and we debated that. Yet despite those very strong 
differences, and while we disagree with each other on substantive 
issues, we can enjoy each other's company on a personal level, on a 
civil level.
  So let me, on behalf of all of us today, wish Richard Shelby a very 
happy birthday on this day. Again, I thank him for his cooperation and 
that of his staff.
  I thank our floor staff today as well, working hard every day. They 
are here every day early in the morning and they stay here with us 
until late in the evening. So I want to thank them all for their 
tremendous work.
  With that, Mr. President, I am all done, and I yield the floor.
  Ms. COLLINS. Mr. President, I wish to discuss an amendment that would 
expand the Financial Stability Council established in S. 3217 to 
include the Chairman of the National Credit Union Administration. It is 
important that the council incorporate a Federal credit union regulator 
to ensure consumer regulation protections. Ninety-two million Americans 
are members of credit unions.
  Insofar as S. 3217, section 1023 provides that any member agency of 
the council may set aside a final regulation or provision prescribed by 
the bureau, a national credit union representative should sit on the 
council to ensure fairness for its members.
  Moreover, similar legislation passed by the House included the 
Chairman of the National Credit Union Administration in its Financial 
Services Oversight Council, so this amendment would make the 
composition of the council in both the House and Senate consistent.
  Finally, given their size, no single credit union poses a systemic 
risk to the overall U.S. financial system.
  I ask unanimous consent to have printed in the Record this statement 
and the supporting letters from the Credit Union National Association, 
the largest credit union advocacy organization representing nearly 90 
percent of America's 8,700 State and federally chartered credit unions, 
National Credit Union Administration, and the National Association of 
Federal Credit Unions.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                             Credit Union National


                                                  Association,

                                      Washington, DC, May 5, 2010.
     Hon. Susan Collins,
     U.S. Senate,
     Washington, DC.
       Dear Senator Collins: On behalf of the Credit Union 
     National Association, I am writing in support of your 
     amendment to S. 3217 which would add the National Credit 
     Union Administration (NCUA) to the Financial Stability 
     Oversight Council (the Council). CUNA is the largest credit 
     union advocacy organization representing nearly 90 percent of 
     America's 8,700 state and federally chartered credit unions 
     and their 92 million members.
       Because of the relative size of credit unions, we believe 
     no single credit union is large enough to impose any systemic 
     risk on the overall financial system. Nevertheless, we 
     believe there would be value in having the federal credit 
     union regulator on the Council if for no other reason than 
     Section 1023 of the underlying bill gives the members of the 
     Council the authority to petition to stay or set aside rules 
     promulgated by the Bureau under limited circumstances when 
     the rules may put the safety and soundness of the banking 
     system or the stability of the financial sector of the United 
     States at risk. Your amendment would ensure that the credit 
     union regulator has a voice in the review of the consumer 
     regulations.
       The House-passed version of this legislation includes the 
     NCUA Chairman on the Financial Services Oversight Council; 
     therefore, your amendment would eliminate a difference 
     between the House-passed version and the Senate bill under 
     consideration and ensure that all of the federal financial 
     regulators are part of the Council.
       On behalf of America's credit unions, thank you very much 
     for introducing this amendment. We look forward to working 
     with you to secure its inclusion in S. 3217.
           Sincerely,
                                                   Daniel A. Mica,
     President & CEO.
                                  ____

                                                   National Credit


                                         Union Administration,

                                      Alexandria, VA, May 5, 2010.
     Hon. Susan M. Collins,
     Ranking Member, Committee on Homeland Security and 
         Governmental Affairs, U.S. Senate, Washington, DC.
       Dear Senator Collins:
       Thank you for your leadership in drafting an amendment to 
     S. 3217, the Restoring American Financial Stability Act of 
     2010, to add the Chairman of the National Credit Union 
     Administration (NCUA) as a voting member of the Financial 
     Stability Oversight Council (the Council).

[[Page 7539]]

       I have had the opportunity to review the proposed 
     amendment. I wish to express my strong support for both the 
     amendment and the underlying bill.
       As you know, the NCUA was not included as a member of the 
     Council in the legislation as reported by the Senate 
     Committee on Banking, Housing and Urban Affairs. Among other 
     duties and responsibilities, members of the Council may 
     petition the full Council to set aside a rule (or a part 
     thereof) issued by the Bureau of Consumer Financial 
     Protection if that rule threatens the safety and soundness of 
     the U.S. financial sector or our system of depository 
     institutions.
       It bears noting that the NCUA Chairman is a designated 
     member of the Consumer Financial Protection Oversight Board 
     in the House-passed measure. If adopted, I believe your 
     amendment would help harmonize the House and Senate bills 
     with respect to oversight of the Consumer Financial 
     Protection Agency or Bureau, particularly in regard to the 
     credit union system.
       Thank you again for your leadership on this important 
     matter and for the opportunity to review and comment on your 
     amendment.
           Sincerely,
                                                      Debbie Matz,
     Chairman.
                                  ____

                                           National Association of


                                        Federal Credit Unions,

                                       Arlington, VA, May 5, 2010.
     Hon. Susan Collins,
     U.S. Senate, Dirksen Senate Office Building, Washington, DC.
       Dear Senator Collins: I am writing on behalf of the 
     National Association of Federal Credit Unions (NAFCU), the 
     only trade organization exclusively representing the 
     interests of our nation's federal credit unions, in support 
     of your amendment to the Restoring American Financial 
     Stability Act of 2010 (S. 3217) that would add the Chairman 
     of the National Credit Union Administration (NCUA) to the 
     Financial Stability Oversight Council established in the 
     underlying bill.
       We applaud your efforts to ensure that the voices of credit 
     unions are heard by placing NCUA on the oversight council. As 
     you know, this is an issue of fairness and will enable the 
     NCUA to petition for the review of a rule issued by the 
     Bureau of Consumer Financial Protection. Without passage of 
     this amendment, credit unions would not have the ability to 
     appeal rule making that could have a detrimental effect on 
     the credit union industry.
       We thank you and your staff for your work on this amendment 
     as the Senate takes up comprehensive financial regulatory 
     reform. If we can answer any questions or provide you with 
     further information on this matter, please do not hesitate to 
     contact me or NAFCU's Director of Legislative Affairs Brad 
     Thaler at (703) 522-4770.
           Sincerely,

                                                B. Dan Berger,

                                         Executive Vice President,
     Government Affairs.

                          ____________________