[Congressional Record (Bound Edition), Volume 156 (2010), Part 6]
[Senate]
[Pages 8145-8164]
[From the U.S. Government Publishing Office, www.gpo.gov]




           RESTORING AMERICAN FINANCIAL STABILITY ACT OF 2010

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will resume consideration of S. 3217, which the clerk will 
report.
  The assistant legislative clerk read as follows:

       A bill (S. 3217) to promote the financial stability of the 
     United States by improving accountability and transparency in 
     the financial system, to end ``too big to fail,'' to protect 
     the American taxpayer by ending bailouts, to protect 
     consumers from abusive financial services practices, and for 
     other purposes.

  Pending:

       Reid (for Dodd/Lincoln) amendment No. 3739, in the nature 
     of a substitute.
       Collins amendment No. 3879 (to amendment No. 3739), to 
     mandate minimum leverage and risk-based capital requirements 
     for insured depository institutions, depository institution 
     holding companies, and nonbank financial companies that the 
     Council identifies for Board of Governors supervision and as 
     subject to prudential standards.
       Brownback modified amendment No. 3789 (to amendment No. 
     3739), to provide for an exclusion from the authority of the 
     Bureau of Consumer Financial Protection for certain 
     automobile manufacturers.
       Brownback (for Snowe/Pryor) amendment No. 3883 (to 
     amendment No. 3739), to ensure small business fairness and 
     regulatory transparency.
       Specter modified amendment No. 3776 (to amendment No. 
     3739), to amend section 20 of the Securities Exchange Act of 
     1934 to allow for a private civil action against a person 
     that provides substantial assistance in violation of such 
     Act.
       Dodd (for Leahy) amendment No. 3823 (to amendment No. 
     3739), to restore the application of the Federal antitrust 
     laws to the business of health insurance to protect 
     competition and consumers.
       Sessions amendment No. 3832 (to amendment No. 3739), to 
     provide an orderly and transparent bankruptcy process for 
     non-bank financial institutions and prohibit bailout 
     authority.
       Dodd (for Durbin) amendment No. 3989 (to amendment No. 
     3739), to ensure that the fees that small businesses and 
     other entities are charged for accepting debit cards are 
     reasonable and proportional to the costs incurred, and to 
     limit payment card networks from imposing anti-competitive 
     restrictions on small businesses and other entities that 
     accept payment cards.
       Dodd (for Franken) amendment No. 3991 (to amendment No. 
     3739), to instruct the Securities and Exchange Commission to 
     establish a self-regulatory organization to assign credit 
     rating agencies to provide initial credit ratings.

  The ACTING PRESIDENT pro tempore. The Senator from Pennsylvania.


                    Amendment No. 3776, As Modified

  Mr. SPECTER. Madam President, I have sought recognition to ask 
cosponsors of the pending amendment who wish to present an argument to 
come to the floor as early as practical. The pending amendment involves 
reinstating a civil cause of action against aiders and abettors. The 
law, up until 1994 with a Supreme Court decision, provided that aiders 
and abettors were liable for damages for those who had been defrauded 
in securities transactions.
  We all know the massive problems caused by Wall Street operations 
with many allegations of fraud. In our effort to reform Wall Street, 
this is a very important provision. Traditionally, people who have been 
injured, lost money, as a result of fraud have had a civil right of 
action to go into a civil court. The law had been uniform that under 
the Securities Act those cases could be brought.
  There have been two Supreme Court decisions which have modified that, 
requiring this act change the decisions of the Supreme Court of the 
United States--which we have the authority to do: not decided on 
constitutional grounds but decided on grounds of statutory 
interpretations. So Congress has the plenary power to make that 
modification.
  I have offered the amendment and argued it briefly. We will discuss 
it further a little later this morning. I offered it on behalf of 
Senator Reed of Rhode Island, Senator Kaufman, Senator Durbin, Senator 
Harkin, Senator Leahy, Senator Levin, Senator Menendez, Senator 
Whitehouse, Senator Franken, Senator Feingold, and Senator Merkley, and 
I want to let all of the cosponsors know the matter is now on the 
floor, and if they care to support the arguments, now would be the time 
to come to the floor.
  Madam President, I see other colleagues waiting for recognition, so I 
yield the floor.
  Mr. WYDEN. Madam President, I note the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. WYDEN. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. WYDEN. Madam President, I am going to speak for about 5 minutes 
on the effort to finally, once and for all, eliminate secret holds in 
the Senate. Senator Grassley, my partner in this effort for a decade, 
will also speak. Then, two colleagues on our side who are a part of 
this large, bipartisan coalition, Senator Whitehouse and Senator 
Bennet, and who also have done very good work along with Senator 
Grassley, Senator Inhofe, and Senator Collins, who have been part of a 
bipartisan coalition, will take just a few minutes.
  Let me also express my appreciation to the chairman of the committee, 
Senator Dodd, Senator Durbin, and others who have been so helpful.
  This bipartisan amendment will abolish the secret hold in the Senate, 
which, in my view, is a violation--an

[[Page 8146]]

indefensible violation--of the public's right to know. With a secret 
hold, any Senator can block a piece of legislation or a nomination in 
secret simply by telling the leader of their party of their desire. 
This means that one person, without any public disclosure whatsoever, 
can keep the American people from even getting a peek at what is public 
business.
  When asked why he robbed banks, Willie Sutton said: ``That's where 
the money is.'' In the Senate, secret holds are where the power is. 
With a secret hold, one of the most powerful tools a Senator has to 
affect the lives of our people can be exercised anonymously.
  In 2007, the Senate sought to eliminate secret holds. Since then, big 
loopholes have been developed to keep too much Senate business in the 
dark, unaccountable, and away from the public.
  This bipartisan amendment closes those loopholes. With this 
bipartisan proposal, every single hold in the Senate will have an owner 
who is public within 2 days. It is an amendment that will be enforced. 
Here is how it would work: If a Senator puts a hold on a bill or 
nomination, they are required to submit a written notice in the 
Congressional Record within 2 days. When that bill or nomination comes 
to the floor and any Senator objects to its consideration on the 
grounds of a hold, one of two things will happen: either the Senator 
placing the secret hold will have their name publicly released or the 
Senator who objects on their behalf will own that hold, and then that 
individual will have their name published in the Congressional Record. 
For the first time, there would be both public accountability and peer 
pressure on those trying to keep Senate business behind closed doors.
  The bipartisan proposal includes two additional reforms. First, the 
proposal eliminates the ability a Senator has today to lift a hold 
before the current 6-day period expires and never have it disclosed. 
This has been a huge abuse. It has allowed a Senator to do business in 
secret and never have it reported.
  With the new proposal, if a Senator places a hold--even for a day, 
even for a minute--that hold is going to be disclosed. Second, the 
proposal makes it harder for a group of Senators to place revolving 
holds on a nomination or a bill. I particularly thank Senator 
Whitehouse, who has highlighted this issue of revolving holds in his 
past comments on the floor. With the 6-day time period, a group of 
Senators can literally pass a hold from one colleague to another and 
never have it disclosed. By requiring all holds to be made public, it 
will be much more difficult to find new Senators to place revolving 
holds.
  What this comes down to is the question of whether public business 
ought to actually be done in public. It seems to me that if it is 
important enough for a Senator to say they are making it a priority to 
keep a bill or nomination from coming to a vote, that ought to be a 
public matter and not be something that is decided in the shadows, away 
from the public and unaccountable.
  I thank my colleagues. This has been part of a bipartisan coalition. 
No one has put more time into this cause than my friend from Iowa, 
Senator Grassley. I also thank Senator McCaskill, who has prosecuted 
this cause of accountability and openness relentlessly, along with 
Senators Warner, Whitehouse, Bennet, Inhofe, and Collins--I could go 
on.
  Finally, there is a desire in the Senate to eliminate secret holds 
once and for all. I will close with this. I don't think that 1 out of 
100 people in this country have any idea what a secret hold is. Most 
people probably think it is some kind of hairspray. It is one of the 
most powerful tools in our democracy that is being used to keep what is 
public business from the eyes of the American people, and it has to 
change.
  I will yield to my colleagues, Senators Grassley, Whitehouse, and 
Bennet. I thank Chairman Dodd and Senator Shelby for indulging us at 
this time. It seems to me that when Senator Dodd has done so much good 
in terms of arguing for openness and accountability on Wall Street, 
this is a perfect time to say we ought to have that in the Senate. That 
is what we are going to do on a bipartisan basis today.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Iowa is 
recognized.
  Mr. GRASSLEY. Madam President, I thank Senator Wyden for his 
leadership and for working together with me and other Senators over a 
long period of time. I think he referred to maybe 10 years that we have 
been struggling to get to what we are finally getting to today.
  In the past, we thought we had victories and they turned out to be 
hollow victories--maybe a little more openness but largely ineffective. 
So maybe now we will finally be able to accomplish an effective 
openness in the Senate on one of the most powerful tools a Senator has.
  I think it gives hope to the fact that if you are right, eventually 
right wins out, even in the Senate. Long struggle does pay. I think we 
are bringing simply common sense to a process in the Senate. It is, as 
my friend from Oregon said, transparency, and with transparency we have 
accountability.
  The amendment Senator Wyden and I have offered would restore the 
prohibition on secret holds the Senate voted for overwhelmingly in a 
previous Congress--the 109th Congress--and make it even more robust. As 
I said, those turned out to be largely not very effective.
  At that time, in the 109th Congress, our measure passed as an 
amendment to the ethics reform bill by a vote of 84 to 13. That bill 
never became law, but the next Congress passed then what is referred in 
the title of the legislation as the Honest Leadership and Open 
Government Act. Our provision was also originally included in that 
bill.
  Ironically, as I have alluded to, in a move that reflected neither 
honest leadership nor open government, our provisions were altered 
substantially--I might say too substantially--behind closed doors, 
before we had final passage.
  The current provisions essentially say it is OK to keep a hold 
anonymous until 6 days after someone asks unanimous consent to proceed 
to a bill or a nominee. I am not going to explain how that process 
works out, but it can be summed up in the words that it is a very 
ineffective sort of transparency, hardly doing any good whatsoever.
  The amendment that is before us says Senators must go public from the 
moment they place the hold.
  Perhaps I should take this opportunity to address what a hold is all 
about. A hold arises out of the right of all Senators to withhold their 
consent when unanimous consent is asked.
  It goes without saying that any Senator has a right to object to a 
unanimous consent request that the Senator does not support because it 
is not unanimous unless, obviously, we all support it.
  In the old days, when Senators conducted much of their daily business 
from their desk on the Senate floor, it was a simple matter to stand 
and say, ``I object'' when necessary, and, of course, that Senator was 
immediately identified. Now, Since most Senators spend so much time off 
the Senate floor in committee hearings, meeting with constituents, and 
other sorts of obligations that we have, we have tended to rely upon 
the majority and minority leaders to protect our rights and 
prerogatives as individual Senators, asking them to object on our 
behalf.
  Just as any Senator has the right to stand on the Senate floor and 
say, ``I object,'' it is perfectly legitimate to ask another Senator to 
object on our behalf if we cannot make it to the floor when consent is 
requested.
  By that same token, it would be illegitimate, not to mention 
impossible, for a Senator to stand on the floor and object anonymously. 
Senators have no inherent right to have others object on their behalf 
and keep their identity secret.
  If a Senator has a legitimate reason to object to proceeding to a 
bill or a nominee, then he or she ought to have the guts to do so 
publicly.
  I believe this is part of expanding the principle of open government. 
The public's business ought to be public.

[[Page 8147]]

Lack of transparency in the public policy process leads to cynicism and 
distrust of public officials and, quite honestly, less accountability.
  I maintain that the use of secret holds--with emphasis upon the 
adjective ``secret''--damages public confidence in the institution of 
the Senate. The public's business ought to be done in public, period.
  I have made it my practice to put a statement in the Record when I 
have placed a hold on a nominee or a bill for over a decade. I can tell 
you that is no burden whatsoever, and it hasn't hurt me in any way 
whatsoever to let my colleagues and the public know--for the last 
decade--that Senator Chuck Grassley had a hold on a bill and why I had 
that hold on a bill or nominee.
  Our amendment--the one before us--would make it crystal clear that 
holds are to be public. Senators placing a hold must get a statement in 
the Record within 2 days, and they must give permission to their 
leaders at the time they place the hold to object in their name.
  Also, if a Senator objects, ostensibly on behalf of another Senator 
but refuses to name the Senator he is objecting for and that Senator 
doesn't come forward within those 2 days, the objecting Senator will be 
listed as having that hold, owning that hold.
  I wish to make it clear that we do not come to this lightly. We have 
tried other paths to accomplish our goal. I said those other paths have 
turned out to be largely ineffective.
  We sought the advice and assistance of several majority and minority 
leaders over the last decade, and we twice tried informal policies 
issued jointly by the two leaders, in 1999 and 2003, but those turned 
out to be as flimsy as the sheet of paper on which they were written.
  So working with two former majority leaders, Senators Lott and Byrd, 
we crafted the policy I mentioned earlier that the Senate adopted by a 
vote of 84 to 13, which was later gutted.
  It is this policy, with some improvements--in fact, some very needed 
improvements--that we are introducing today. It is important the Senate 
have the opportunity to speak on this issue as a body. I look forward 
to this vote and finally having a true victory against secrecy.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Republican leader is 
recognized.


                          National Police Week

  Mr. McCONNELL. Madam President, all across the country this week, 
Americans will honor the law enforcement officers who keep our towns 
and communities safe and pay solemn tribute to those who have lost 
their lives in the line of duty. National Police Week is a time to 
thank all those whose service preserves the rule of law, at great risk 
to themselves.
  I wish to pay special tribute to one of those heroes today, Officer 
Bryan J. Durman. Officer Durman was a 27-year-old, decorated, 
Lexington, KY, police officer and a veteran of the U.S. Air Force. He 
was, tragically, the first Lexington police officer to die in the line 
of duty in over 20 years.
  This past April 29, he was responding to a noise complaint when he 
was struck by a car and killed. He leaves behind his wife Brandy and 
their 4-year-old son Brayden.
  Bryan Durman went to Paul Laurence Dunbar High School in Lexington, 
where he was on the wrestling team. After graduation in 2001, he 
enlisted with the Air Force. He rose to the rank of staff sergeant and 
served in both Operation Enduring Freedom and Operation Iraqi Freedom. 
More important, it was while serving in the Air Force that Bryan met 
Brandy, his wife.
  Bryan's mother, Margaret Durman, says that from the time her son was 
a small boy, she knew he would grow up to be a peacemaker. After 
leaving Air Force service in July 2007, Bryan returned to Lexington to 
keep the peace here at home and was accepted into the Lexington police 
academy.
  In his 3 years of service with the Lexington metro police department, 
Bryan earned great respect from his colleagues and the community. ``The 
amount of support that we have received speaks volumes about the 
caliber of person Bryan was and his character,'' says his wife Brandy.
  For administering lifesaving CPR to a vehicle collision victim and to 
a woman in medical emergency in two separate instances, Bryan received 
the Lifesaving Award and the Exceptional Service Award. His family will 
be presented with those awards as a small reminder that, as his mother 
puts it, Bryan ``died doing something that he loved.''
  During this National Police Week, as we remember our peace officers 
and their families, we also remember the loved ones Officer Durman 
leaves behind: his wife, Brandy; his son, Brayden; his mother, Margaret 
Durman; his sisters, Monique Wanner, Michelle Wiesman, and Danielle 
Hood; his brothers, John A. Day and David P. Durman II; his brother-in-
law, Robert Fletcher; and many other family members and friends.
  Brandy will always have a fond memory of a recent Christmas when 
Bryan and Brayden received toy dart guns. Father and son spent much of 
the day playing with their new toys. ``I found about 50 darts in the 
Christmas tree,'' Brandy says. ``They were in the sink, in the 
bathtub.''
  The day after Officer Durman's death, Lexington police officers wore 
black bands across their badges as a tribute to their fallen brother. 
The bands are also a stark reminder of the hazards of the job each and 
every peace officer in Kentucky and across the country faces every day.
  The Senate has the deepest admiration and respect for police officers 
in every community in the Nation. We recognize theirs is both an 
honorable job and a dangerous one. We recognize they bravely risk their 
lives for ours. I appreciate all they do. And America is grateful.
  Madam President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Texas.
  Mr. CORNYN. Madam President, I know there are a number of Senators on 
the floor who wish to speak on unrelated matters. I wish to speak on 
the underlying bill. I believe Senator Whitehouse and maybe Senator 
McCaskill and Senator Bennet wish to speak on the hold issue. I merely 
ask that we alternate back and forth after the next speaker speaks on 
whatever subject they do and that I then be allowed to speak on the 
underlying bill and then go back to the other side of the aisle.
  The ACTING PRESIDENT pro tempore. The Senator from Connecticut.
  Mr. DODD. Madam President, if I may make a suggestion to my friend 
from Texas, as I understand, my colleagues are going to speak 2 or 3 
minutes apiece. So the cumulative time of all three Senators will be 
about 6 or 8 minutes. I know the Senator from Texas has a longer 
statement to make on Senator Sessions's amendment.
  Mr. CORNYN. I will be glad to defer to them under those circumstances 
and then ask to be recognized following those 6 or 7 minutes.
  Mr. DODD. Madam President, I make that request.
  Mr. WYDEN. Will the Senator yield for a question? Again, to save 
time--the Senator from Connecticut has been very gracious to allow an 
opportunity to do this--Senator Whitehouse, Senator McCaskill, and 
Senator Bennet are all going to speak. I think that would allow us to 
set up time later for the vote, and we would have to formally offer the 
amendment. Would that be acceptable to the chairman?
  Mr. DODD. I cannot agree to anything at this point. We can certainly 
talk with the leadership about that.
  Mr. WYDEN. It is acceptable to the leader.
  Mr. DODD. I am not in a position to give that consent. That is 
something that has to go through leadership. Let's get the speeches 
done so we can get back on the bill.
  Mr. WYDEN. All right.
  The ACTING PRESIDENT pro tempore. The Senator from Rhode Island.
  Mr. WHITEHOUSE. Madam President, I congratulate Senator Wyden and 
Senator Grassley for their long effort to eliminate the secret holds in 
this body. They thought they had succeeded in 2007 with a mechanism 
that would scrub secret holds and make

[[Page 8148]]

them public after 6 days. But it turns out that a number of our 
colleagues on the other side discovered a loophole in the rule. Whether 
it is called the old switcheroo or revolving holds or hold laundering, 
they found a way to defeat the purpose of a rule that was voted for by 
84 Members of the Senate on a strong bipartisan basis. That is why we 
are back here today.
  I want to also add to the role of honor on this subject Claire 
McCaskill, who has done the lion's share of the work of shepherding in 
some cases 100 stalled nominees blockaded on the Executive Calendar 
through those 2007 year procedures so that we could get to the point of 
proving that there were, in fact, secret holds and that despite the 
rule, hold laundering was taking place and the rule was not being put 
into effect and holds were being kept secret.
  I suppose an asterisk on the role of honor should go to Senator 
Coburn, who is the one Senator on the Republican side who had the 
courage to stand up and disclose his actual holds. Everybody else went 
to some other Senator and said: I don't want my name on this. Would you 
please take my hold over so I can avoid the rule, keep my hold, and 
have no accountability.
  Perhaps there once was a reason for a secret hold, for this kind of 
business to be done in the dark, in the shadows, and anonymously. I 
think history and common sense tell us that deeds that are done in the 
dark are not usually ones of which we are proud. Certainly, the 
experience of the last few months has shown that if there ever was a 
legitimate use for secret holds, that purpose has evaporated. It has 
evaporated under the pressure of blocked nominees numbering, in some 
cases, over 100--a systematic approach, a systematic attempt to disable 
this administration's ability to govern by systematically opposing 
nominees, irrespective of the merits; opposing nominees who came out of 
committee in a bipartisan fashion; opposing nominees who came out of 
committee with zero opposing votes; with Senators raising objections to 
nominees they voted for in committee. There is clearly something more 
going on than a sincere concern about an individual nominee.
  Finally, this effort to what I call hold launder and to avoid the 
rule 84 Senators stood up and voted for that does nothing more than put 
your hold in the plain light of day shows that the 2007 rule, 
unfortunately, has been ineffective and that it is time for a change.
  I have continuing gratitude for Senator Wyden, Senator Grassley, and 
for all those who have supported us on this issue and particularly for 
Senator McCaskill for her relentless presence on the floor, making this 
actually happen.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Colorado.
  Mr. BENNET. Madam President, I join my colleagues in support of the 
effort Senator Wyden and Senator Grassley have led to end the corrosive 
practice of secret holds. This is a reform that is needed and cannot 
wait.
  I have been in Washington for only about a year, but it did not take 
that long to realize our government needs to fundamentally change the 
way it does business. Coloradans deserve a government that works for 
them. They are tired of the petty partisanship in Washington. They want 
their elected officials to listen and address their day-to-day 
concerns. I cannot think of a worse example of this dysfunction than 
the secret hold. It is undemocratic, and it is hurting our economy.
  Quite a few of us in the Senate--the chairman and I--have young 
daughters, young kids who are familiar with the ups and downs of a long 
car ride heading out on vacation. The first hour always seems to go 
pretty well, full of excitement about where everybody is headed. But it 
is not long before that excitement turns to restlessness and that 
restlessness turns to secretly doing everything they can to bother 
their siblings just for the sake of doing it. And every time you turn 
around, they stop and smile and claim their innocence.
  It never occurred to me that experience would actually prepare me to 
come to the Senate. Countless nominations and important legislation 
make their way to the floor. Senators make speeches about the 
importance of doing the country's business, appearing motivated to get 
the job done, to get the American people's work done. But when the 
cameras are off, they use the secret hold to bring this progress to a 
stop.
  Since I have been here, I have seen nominees and bipartisan 
legislation held up for weeks, only to pass with 97 or 98 votes, all to 
score political points and waste the American people's time and the 
American people's money.
  Earlier this year, we spent months working to reform health care. We 
have spent a lot of time under the chairman's leadership trying to fix 
Wall Street. It is past time we fix the way Washington works as well.
  Congress must stop living under a glass dome. The Wyden-Grassley 
amendment is simple. It requires any Senator seeking to hold up the 
Nation's business to publicly announce his or her hold. All holds 
should be in writing, made public for the other 99 of us and, most 
importantly, for the American people so they can render their own 
judgment.
  While I support this amendment, I have legislation that would go even 
further. My legislation would not only end secret holds, as this 
amendment does, but also require that any hold be bipartisan or else it 
expires after 2 legislative days. All holds, public or private, would 
expire in 30 days. At that point, the pending business would be ready 
to be considered on the Senate floor.
  The Senate was designed to be the greatest deliberative body in the 
world. Let's have the debate and put an end to these secretive attempts 
to prevent debate.
  Once again, I thank Senators Wyden and Grassley for their leadership 
and look forward to the passage of this amendment. I also wish to 
recognize the great work our colleague from Missouri, Claire McCaskill, 
has done bringing this legislation to this point.
  Madam President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Missouri.
  Mrs. McCASKILL. Madam President, first, let me say how grateful I am 
to Senator Cornyn for his patience. I will try to be very brief because 
I know he is waiting to address the underlying bill.
  I think everything that needs to be said has been said. I will be 
interested in this vote because there is a group of people right now 
who voted for a rule that simply said: You have to disclose your secret 
holds if a certain procedure takes place. There are a bunch of people 
who voted for that who are not doing it. I do not know how that 
computes in the mind of a U.S. Senator. I do not know how you vote for 
a rule that requires you to disclose and then you knowingly continue to 
keep a hold secret.
  I had a colleague tell me the other day they had talked with a 
colleague across the aisle about a couple of judges they desperately 
wanted to get released from the land of secret holds. This colleague 
visited with a Republican about it, and the Republican told her: The 
leader says he has to get something for it. You have to get something 
for it? Have we come to that, that you get to hold on to someone whose 
life is in limbo to be a U.S. district judge until you get something 
for it? That is not the way the American people want us to operate 
around here.
  I know Senator Grassley and Senator Wyden have toiled in this field 
for a long time. I appreciate their efforts. I thank all my colleagues 
who have been helpful in us bringing this to the attention of the 
American people. We now have 60 Senators who have signed a letter 
saying they will never engage in secret holds and they want them 
completely abolished. The Wyden-Grassley approach is almost as good as 
never. It is a very limited window, and I pray that it will work. I had 
been wildly optimistic it would work right after I voted for the rule 
back in 2007. I thought, this is all it is going to take. I am not as 
optimistic, frankly, right now. Games may still be played. I think we 
have to get to 67 names on that letter.

[[Page 8149]]

  The American people have to rise with their pitch forks, the way they 
are in so many other ways, and say: Enough already. Stop this 
incredibly bad habit of thinking you can hold up nominations just 
because you feel like it and never have to own it.
  I encourage everyone to vote for the Wyden-Grassley amendment. I 
appreciate Senator Cornyn's patience with us this morning. I look 
forward to a vote on this amendment. I really want to find out who is 
secretly holding right now, who votes for this amendment, and how they 
reconcile those two things.
  The ACTING PRESIDENT pro tempore. The Senator from Texas.
  Mr. CORNYN. Madam President, I want to speak on the underlying bill, 
particularly on the Sessions amendment to the bill, but let me just 
precede that with some more general comments.
  I was very concerned when I read in the most recent publication of 
National Affairs comments from the inspector general of TARP--appointed 
to oversee that program that has now gotten completely out of control. 
More to the point, he says what has happened since September of 2008 is 
that we have seen further consolidation of the banking industry. 
Actually, he has said what has happened is that things have actually 
gotten worse as a result of the several mergers that have actually made 
banks larger. The implicit guarantee of moral hazard that we are not 
going to let these large institutions fail has contributed to them 
engaging in more and more risky conduct.
  The problem with too big to fail and these large institutions, 
particularly large banks with assets of over $100 billion, is that they 
can actually borrow money cheaper than community banks in Texas or New 
York or Connecticut or elsewhere, and they actually represent a $34 
billion subsidy to the largest 18 banks in America because this bill 
does nothing to eliminate the concept of too big to fail. Indeed, in 
many ways, it makes it worse. It institutionalizes the concept.
  I want to address specifically the provisions in the Dodd bill--the 
underlying bill--which have to do with how we deal with these large 
financial institutions if they get into trouble. The underlying bill 
empowers the Federal Deposit Insurance Corporation--which previously 
has had no experience dealing with investment banks or other companies 
that engage in financial transactions, other than depository banks--to 
seize a vast range of financial companies based on nothing more than 
their impression that the institution is in ``danger of default.''
  Of course, we know one of the reasons we have gotten into this mess--
why Wall Street has gotten into the shape it has gotten into--is 
because either regulators were too close to the people they were 
supposed to regulate or they were asleep at the switch. If we empower 
the Federal Deposit Insurance Corporation now to take on this new role 
as megaregulator in the resolution authority, it literally is going to 
have to run these businesses--something they are not prepared to do, 
something they have never done before. It will actually encourage 
management at the institutions that are subject to this new expanded 
authority of the FDIC to foster stronger relationships with the 
regulators, further entangling the government with the fabric of the 
U.S. private sector.
  This underlying legislation creates a resolution scheme for large 
complex financial institutions that allows the FDIC to serve in 
multiple capacities at once--as corporate management, as creditor to 
the corporation, and referee of the liquidation process. There is no 
question that in the underlying bill there are going to be enormous 
conflicts of interest on the part of the government agency itself when 
it is required to wear this many hats at the same time.
  The underlying bill also provides the government--and here 
specifically the FDIC--the authority to discriminate among creditors of 
the same class. All we have to do is look at what happened when the 
Federal Government took over General Motors, where we saw the 
government's $15 billion gift to labor unions to the disadvantage of 
the bond holders. This is the same sort of abuse that is propagated and 
continued in the underlying resolution authority in the bill which 
needs to be fixed. It needs to be changed.
  This underlying legislation also forces companies that are 
financially sound and that have done nothing wrong to contribute to a 
fund to bail out organizations and institutions--I should say 
companies--that have been irresponsible and done exactly the wrong 
thing.
  I must say I really wonder why we are rushing through this 
legislation so fast when the very commission that Congress has created 
to report back to us--the Financial Crisis Inquiry Commission--is not 
supposed to report until December. So in the very complex and 
complicated area such as financial regulatory reform, we are going to 
be denied the very report that Congress commissioned, which is due in 
December, that will tell us, hopefully, how to get this done and get it 
done right.
  I think it is a terrible mistake for us to give the FDIC this 
incredible authority and discretion which will just alter the 
relationship again between the private sector and government. We have 
seen a tendency over the last year and a half to grow government and to 
basically burden the private sector in ways that cause many people to 
wonder whether we are still committed to a free enterprise system or 
whether we are going to have one government takeover after another. 
This legislation--particularly this resolution authority--represents 
something that will provide for more government intervention in the 
private sector without making sure ``too big to fail' comes to an end.


                           Amendment No. 3832

  I want to talk specifically about the Sessions amendment, as I said, 
because the Sessions amendment restores the rule of law to the 
resolution authority that would be granted under this bill. Under 
American bankruptcy law, we have an adversarial process. We have judges 
who are independent, we have a requirement that when you walk into 
bankruptcy court you actually have to swear under oath, under the 
penalty of perjury, that what you are saying is the truth, the whole 
truth, and nothing but the truth, so help you God.
  I don't know why we should allow these big financial institutions 
that are covered by the resolution authority under the underlying bill 
a special set of rules. Why shouldn't they be forced to operate under 
the same rules--bankruptcy rules--that apply to every business that 
gets into financial trouble all across America today? Many scholars and 
policy analysts have argued convincingly that bankruptcy reform would 
be the most effective action Congress could take to protect against 
future financial panics and bailouts.
  There is one note I would make of the Lehman Brothers bankruptcy. As 
the Chair and my colleagues know, there was a voluminous report written 
by the court-appointed examiner who dissected the Lehman Brothers 
bankruptcy for reasons why Lehman Brothers failed. This is a 2,209-page 
examiner's report which documents accounting gimmicks that were used to 
hide the extent of Lehman's indebtedness, which was not even known to 
the Securities and Exchange Commission because the Securities and 
Exchange Commission took the position it didn't have jurisdiction to do 
this very sort of regulation and very sort of oversight that might have 
detected and prevented the meltdown of Lehman Brothers and all across 
Wall Street.
  Amazingly, Richard Fuld, chief executive of Lehman Brothers, when he 
was confronted with the examiner's report documenting the various 
maneuvers, including one known as Repo 105 transactions, said he had no 
knowledge of the accounting maneuvers that were used to take some of 
the financial obligations of Lehman Brothers off its books.
  So I would ask my colleagues: Don't we want this sort of transparency 
and accountability that comes only out of a bankruptcy-type resolution 
authority? Don't we want that kind of information so we can hold the 
people who

[[Page 8150]]

were responsible for these huge meltdowns of our financial system 
accountable? I would say we must insist on that kind of accountability. 
Unfortunately, under the authority given to the FDIC to conduct this 
resolution in the Dodd bill, there will be no sort of report by court-
appointed examiners such as the one that exposed Lehman Brothers' 
accounting gimmicks and the complete abdication of responsibility of 
the chief executive officer for not knowing what kind of accounting 
transactions were taking place and which hid a lot of their liabilities 
not only from him but also from examiners. We would not have that kind 
of information.
  That is another reason I believe bankruptcy provides a far superior 
way of handling this resolution rather than giving the FDIC--a sort of 
FDIC on steroids--the power to make these decisions without the kind of 
transparency and accountability we need.
  Recently, in the Wall Street Journal, a couple of professors wrote:

       If there were a silver bullet in financial reform, 
     legislation would have been enacted a long time ago. There 
     isn't, but removing the special treatment of derivatives in 
     bankruptcy comes close. It could provide the basis for a 
     sensible compromise on derivatives regulation while also 
     addressing the bailout problem.

  That is exactly what the Sessions amendment does. With a small tweak 
of bankruptcy law, we could assure that everyone is going to have to 
play by the same rules, and when any financial institution goes 
bankrupt the automatic stay, which protects the court's jurisdiction to 
be able to sort out the creditors and debtors, can be used in an 
appropriate way to deal with derivatives contracts. Currently, 
derivatives contracts are exempted from the automatic stay, which 
creates a very dangerous risk of a run on the bankrupt entity's 
derivatives book. This could lead to a cascade effect, exacerbating 
systemic risk. The Sessions amendments provides for timely court 
supervision over any stay on derivatives contracts. Other than that, 
the Bankruptcy Code would apply as it does every day in bankruptcy 
courts across this country involving businesses both large and small.
  So I think the Sessions amendment provides much more transparency, 
much greater accountability, much more certainty, and certainly helps 
restore the rule of law to an otherwise discretionary authority over a 
Federal agency that has never exercised this kind of authority before, 
one that has the very real danger of perpetuating the kind of picking 
of winners and losers that we saw in the GM bankruptcy where the 
bondholders, who were supposed to be among the most secure creditors, 
if not the most secure, were forced to take a significant loss in favor 
of unions, which happened to be more active players in the political 
process.
  So I would urge my colleagues to support the Sessions amendment, 
which makes bankruptcy a preferable alternative to dealing with future 
failures of financial institutions.
  Madam President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Nevada.
  Mr. ENSIGN. Madam President, we are venturing down a dangerous path 
that threatens to put the economic future of our country in jeopardy. 
When the housing market collapsed, the government stepped in with a 
blank check to bail out the Nation's largest mortgage giants--Fannie 
Mae and Freddie Mac. When the automakers started to feel the pinch of a 
downward economic turn, again the government stepped in, taxpayer money 
in hand, and bailed them out. When the giants of the financial market 
started to see their bank accounts drop below zero, again the U.S. 
Government stepped in to bail them out, allowing them to sidestep the 
pain of their financial mismanagement--pain that was then passed on to 
hard-working Americans, many of whom are barely scraping by during 
these difficult economic times.
  The pain was certainly not felt by the managers of these institutions 
when they received exorbitant bonuses, despite their bad performance.
  This country has witnessed bailout after bailout after bailout. Yet 
not one piece of legislation has passed this body that would establish 
protections for taxpayers to ensure that we do not remain on the hook 
for bailing out these institutions every single time they mismanage 
themselves.
  Unfortunately, this financial reform bill that we have before us 
continues this trend. Last week, I offered an amendment that would have 
restricted the size of Fannie Mae and Freddie Mac so they would not 
continue to be too big to fail. My amendment was defeated, largely 
along party lines.
  Senator McCain offered an amendment this week that would have reduced 
the size of Fannie and Freddie, while moving to let them stand on their 
own so the government gets out of the business of subsidizing 
mortgages. Again, his amendment was defeated, largely along party 
lines.
  Today, we have another chance to listen to the American people and to 
stop the bailouts of these mismanaged corporations. The amendment 
offered by Senator Sessions, of which I am a cosponsor, will do this by 
taking away the bailout option, to, instead, force these companies to 
declare bankruptcy. This amendment will produce a clear set of rules 
which will create certainty in the marketplace, rather than continuing 
the precedents set during the crisis where the government was allowed 
to pick winners and losers.
  This is not the first time I fought against these bailouts. In 2008, 
when we were debating the bailout of the automakers, I offered an 
amendment, along with Senator Shelby, that would have required the big 
three to file Chapter 11 bankruptcy. At that time, I argued that this 
was the best way to ensure the automakers would emerge in the future as 
successful companies. I still believe that. Chapter 11 bankruptcy would 
have allowed them to restructure their firms and would have protected 
the employees of these automakers by keeping politics out of the 
process by eliminating the need for an auto czar. Unfortunately, the 
government stepped in and, with the exception of Ford, decided to bail 
them out. I thought this was wrong at that time, and I still believe 
this was the wrong thing to do.
  While we cannot erase the decisions of the past that led to the 
bailouts of the automakers, Fannie and Freddie and the financial firms, 
we can correct course to ensure that the American taxpayers get off the 
hook for bailing out these industries in the future by forcing them to 
file bankruptcy, should they mismanage their finances again in the 
future.
  The reality is, when Americans mismanage their funds or are unable to 
stay afloat under mounting debt, they file bankruptcy. I am sure many 
would rather have the government step in and pay off their debt, but 
this is simply an unsustainable option.
  The same argument can be made for bailouts of financial firms. 
Bailout after bailout footed by the taxpayers will force our already 
debt-laden country into further debt that we cannot afford to crawl out 
from under. We are already rapidly approaching this reality. These 
bailouts do not incentivize these institutions to minimize their risks. 
Instead, they go as far as to privatize the profits while socializing 
the risks of their losses.
  The amendment offered by Senator Sessions offers hard-working 
Americans a reprieve from footing another financial sector bailout. But 
he also discourages these companies from continuing the irresponsible 
practices that got them into trouble in the first place. Under the 
financial bill we are currently debating, the government will continue 
to pick winners and losers and the taxpayer will continue to foot the 
bill, unless we adopt the amendment offered by Senator Sessions. This 
amendment would make these companies utilize an enhanced bankruptcy 
process, which would ensure that the costs are covered by the financial 
institutions and their creditors, not the taxpayer.
  The amendment creates a new chapter 14 in the Bankruptcy Code that 
will utilize many of the tenets in chapter 11 reorganization bankruptcy 
but will be for the specific use of the big financial institutions. 
This addition to the Bankruptcy Code creates a new pathway to limit the 
cascading spread of

[[Page 8151]]

risk and panic throughout the financial system and ensures the more 
orderly wind down of these financial institutions insulated from 
bailouts and political influence.
  The amendment offered by Senator Sessions delivers much needed 
transparency, accountability, stability, and due process through the 
use of bankruptcy courts and the expertise that we have in bankruptcy 
courts. Further, to protect the taxpayers, it specifically denies the 
Federal Government the authority to take over firms, dictate the terms 
of the reorganization or liquidation, and support them with Federal 
bailouts. This amendment guarantees real reform that will result in 
real stability.
  This is what the American people are asking us to do. They are asking 
us to make sure they are not the ones responsible for bailing out these 
financial giants that make poor decisions. The American people are 
working hard to weather through these tough economic times, and we owe 
them much more than legislation that will continue to allow the 
government to pick winners and losers and will allow too big to fail to 
continue.
  I hope we adopt the Sessions amendment. Unfortunately, almost every 
good amendment that has been offered to this Wall Street bill has been 
defeated, largely along party lines. This is an amendment that will 
actually stop too big to fail. It is a responsible amendment. It is my 
hope that we will finally adopt a good amendment to this bill.
  I yield the floor and I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SPECTER. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.


                           Amendment No. 3776

  Mr. SPECTER. Madam President, I have sought recognition to comment 
further about the pending amendment to make tortfeasors, under the 
Securities Act, liable for civil damages; that is, people who engage in 
fraudulent conduct. We have a deep recession. Millions of people have 
lost their jobs. There were enormous financial losses. There were many 
contentions of fraudulent practices being responsible for that conduct. 
In this act, we are seeking to reform Wall Street.
  The practice had been, the law had been, for decades, under the 
Securities Act, someone who was cheated, defrauded by people who 
practice under the Securities Act could sue them. That would involve 
those aiders and abettors and people in the chain beyond the principal 
would be responsible. I have offered an amendment on behalf of myself 
and Senators Reed, Kaufman, Durbin, Harkin, Leahy, Levin, Menendez, 
Whitehouse, Franken, Feingold, and Merkley to reinstate the law prior 
to what it had been prior to the decision of the Supreme Court. The 
Supreme Court has held that aiders and abettors are not liable and that 
there is a requirement that the defendant must have made the 
representation directly to the person buying or selling the securities, 
which is a sharp reversal from what the law had been.
  It is anomalous, unheard of, to have criminal liability under the 
Federal Criminal Code for aiding and abetting but not to have liability 
under the civil claims. It is a much higher standard of proof, criminal 
culpability, to put somebody in jail than it is to establish a claim 
for monetary damages. But that is where we find the law and we find 
people in urgent need of this kind of standing to recover their damages 
but also to have this procedure serve as a deterrent to Wall Street 
fraud.
  The issue was succinctly summarized by a distinguished Federal judge, 
Judge Gerald Lynch, in a case captioned In re Refco Litigation, 609 F. 
Supp. 2d 304 (S.D.N.Y. 2009), to this effect:

       It is perhaps dismaying that participants in a fraudulent 
     scheme who may even have committed criminal acts are not 
     answerable in damages to the victims of fraud. . . . There 
     are accomplices and there are accomplices: after all, in the 
     criminal context, when the Godfather orders a hit, he is only 
     an accomplice to murder--one who ``counsels, commands, 
     induces or procures'' but he is nonetheless liable as a 
     principal for the commission of the crime. Likewise, some 
     civil accomplices are deeply and indispensably implicated in 
     wrongful conduct.

  So that you have aiders and abettors. There have to be people who are 
participants in the fraud. It simply is not a one-person operation. 
Yesterday, I put into the Record the impact of these civil suits in 
financial recoveries compared to the lesser amounts which can be 
collected by the SEC. Illustrative of that were two cases--Enron, where 
the SEC recovered $450 million and the private litigants recovered $7.3 
billion--14, 15 times more. In the WorldCom case, the SEC recovered 
$750 million, the private litigants recovered $6.85 billion. So there 
is an enormous difference.
  This is a subject I have had a deep concern about going back to my 
law school days, when I wrote a comment for the Yale Law Journal on the 
subject, about the importance of private prosecutions. Private actions 
have been very important--treble damages under our antitrust laws, very 
important under our securities laws.
  In 1995, we restricted the scope of discovery. I urged the President, 
at that time, to veto the bill.
  Just a very brief personal story. I was in my condo one night at 
about 10:30, quarter of 11, I got a call from the White House. The 
President came on the line and said: Do you have a few minutes to let 
me read to you my veto message? Well, I had more than a few minutes. I 
was very interested in the President's veto message.
  But the law, nonetheless, notwithstanding the veto, the law was 
modified.
  There is other litigation pending to open the scope of pleading. 
Federal Rules of Civil Procedure have traditionally been what we call 
notice pleading; that is, put the defendants on notice as to the claim. 
Then, under the discovery proceedings, the party is then entitled to 
probe into the records of the defendant because these are all 
transactions within the sole control and possession of the defendant on 
almost all circumstances.
  When the Supreme Court of the United States was considering taking 
the Stoneridge case, I wrote President Bush a letter, on August 3, 
2007, urging him to allow the Solicitor General to respond to the 
request of the Securities and Exchange Commission for the Solicitor 
General to argue the case. The Solicitor General was precluded from 
doing so. Stoneridge came down with a very restrictive holding that the 
people responsible had to make direct representations to the person 
buying or selling the securities--which is an unrealistic and 
unreasonable standard. It backed up the prior decision of the Supreme 
Court in 1994, in Central Bank of Denver, which eliminated aiders and 
abettors from responsibility.
  This is a very important bill. I did compliment the distinguished 
chairman for his very effective work on it.
  I do believe it is fair and accurate to say this is one of the most 
important provisions of this bill.
  I thank the Chair and yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from North Dakota.
  Mr. DORGAN. Madam President, I wanted to note during this discussion 
some commentary this week about something that is quite extraordinary. 
We saw news reports this week about a perfect game that was pitched in 
the Major Leagues recently by a pitcher from the Oakland Athletics 
named Braden. In all of the history of baseball, it was the 19th 
perfect game ever pitched. But it is not the only perfect thing that 
has happened recently.
  We have news reports now that the four biggest banks in America have 
scored a perfect 61-day run, never having lost money in 61 days. That 
is like a perfect game, batting 1,000. It is all of those things.
  How is it that the four largest banks in the country could, for the 
first quarter of the year, make money every single day? Is the system 
rigged? A columnist named Jonathan Well pointed out that if you managed 
a highly leveraged, diversified investment fund and

[[Page 8152]]

have become so skilled at it that you had a 70-percent probability of 
winning on any given trading day, the prospect of your winning 63 times 
in a row would be about 1.75 billion. Even if you had a 95-percent 
chance of winning every day because you were so skilled at picking all 
of the right investments, you would have about a 3.9-percent chance of 
doing it on 63 straight trading days. And yet four of the largest banks 
in America, Goldman Sachs, JPMorgan Chase, Bank of America and Citi, 
scored a perfect game.
  How did that happen? Does it happen because the Federal Reserve Board 
loans them money at near-zero interest rate, and then they invest in 
10-year Treasuries at 3.8 percent? That is how you make profits every 
single day. Is that a rigged game? Can everyone do that? If everyone 
can do that, I have got a sure-fire way here for everybody to make 
money. You get to borrow from the Federal Reserve Board for near 
nothing, and then you can invest it in 3.8-percent 10-year Treasury 
notes.
  It is interesting this relates to something else we have been trying 
to do for a while. We have been trying to get information about how 
much money the Federal Reserve Board is lending those investment banks 
and the biggest banks in America. How much money is the Federal Reserve 
Board giving them and at what rate? We know it is at a near-zero rate, 
but we do not know how much and to whom.
  The Federal Reserve Board has now been told by two Federal courts, 
you have a responsibility to tell the American people and the Congress 
who got your money and what the terms were and how much. The Federal 
Reserve Board has said, we do not intend to tell everybody. They have 
now appealed it to a third Federal court.
  I have led the effort in letters to the Fed Chairman saying, you have 
a responsibility here. But now this latest evidence tells us how this 
game is played. Isn't it interesting, and isn't it pathetic, that at a 
time when so many people wake up in the morning jobless, so many people 
are still losing money on their homes, on their assets, losing hope and 
losing confidence in the future of this economy, that at the very top 
of the heap, some of the same firms that caused the problem that threw 
this country into the deepest recession since the Great Depression now 
announce they are pitching a perfect game every single day. They are 
batting 1,000 and pitching perfect games. Why? It appears to me that it 
is not about lending money to help restore America and help firms that 
want to expand by providing capital. It appears to me that their 
reports suggest they are once again back doing the same things they 
used to do, except this time they understand that they cannot fail.
  They borrow money from the Fed at near-zero interest rates, and 
invest it in Fed 10-year notes at 3.8 percent. That is about as close 
to guaranteed income as you can get. But it is not guaranteed income 
for all of the American people, it is just for the folks at the very 
top of the chain, the biggest financial firms.
  Again, let my say as I do every time I come to the floor, I don't 
have a grief against the biggest financial firms. We need big financial 
firms. But we do not need them too big to fail. And we certainly do not 
need to be feeding them with a strategy that says, I tell you what; we 
will give you a deal no other American has. You get to go to a window 
at the Fed, get money for almost nothing, and then invest it back in 
Fed bonds and pay 3.8 percent. We will give you a guaranteed annual 
income.
  I just wanted to make note. It is too often little known, and it is 
seldom raising much concern among anybody these days, that all of this 
is happening. I think it is scandalous. It seems to me worth mentioning 
the only perfect game that is going on around here was not by a pitcher 
named Braden, but it is by some of the biggest financial institutions 
in the country that are not only fully recovered but have guaranteed 
income opportunities every single day, every single day, while a lot of 
the American people are trying to figure out, how am I going to pay the 
rent? How am I going to find another job?
  I had come to the floor because I want to indulge--I should not say 
indulge. I wonder if the Senator from Connecticut will indulge me for a 
moment. I have spoken to the Senator, and I recognize that doing what 
he is doing is perhaps a cross between a migraine headache and a root 
canal. This is tough business out here hour after hour after hour and 
day after day.
  I respect that. I was on the floor with a piece of legislation last 
year that took forever and it did try my patience. So kudos to my 
colleague from Connecticut. I respect the difficult job he has.
  I have had an amendment, along with Senator Kaufman, Senators Levin, 
Cantwell, Feingold, Sanders, and so on, a Dorgan amendment No. 4008. I 
would ask the courtesy of being able to set aside the pending amendment 
and call up this amendment. I do not intend to proceed with it, I just 
want to get it pending. I would proceed with debate at any time that is 
convenient. I do not want to inconvenience the Senator and the 
schedules he has. But I wish to ask if he would give me the opportunity 
to at least call it up, get it pending, and then we will proceed at a 
pace and at a time that would be convenient to the manager of the bill.
  Mr. DODD. Let me say first, I appreciate my colleague from North 
Dakota's inquiry. All I am trying to do in this--and, again, everyone 
can do that. I suppose there are about 60 amendments, and if we can 
have everyone's amendment called up, we end up with 60 amendments 
pending around the place. It adds to the difficulty of sorting it out, 
because obviously it takes consent to withdraw amendments, to modify 
amendments, do all sorts of things. So while it seems harmless enough 
to do so, it complicates the job, which is to sequence events, because 
obviously then it takes consent to do different things, at which point, 
for all sorts of different reasons, people can have motivations on why 
not to give consent, including people who may oppose the amendment, for 
reasons they want the amendment pending. So I will be very candid with 
my friend from North Dakota, it complicates my job. But, obviously, I 
do not want to cause anyone discomfort in the process. They all have 
amendments they want to bring up, and my job here is to try and 
orchestrate in a way so that amendments can be brought up, be discussed 
and debated.
  My concern is that we end up with sort of this flood. Then everyone 
comes over, why not give everyone else the same courtesy along the way. 
If we do, then we end up potentially with chaos, on what happens to be 
a pretty good bill, I think at this juncture. More work needs to be 
done, I will be the first to acknowledge and admit that. But there is 
no guarantee that because we are in a good spot right now and heading, 
I think, toward a good conclusion of this bill--there are those who 
frankly would like to see it lose. I know that. There are thousands of 
lobbyists who have been hired to oppose this piece of legislation, the 
underlying bill that is before us. They are here in town and will use 
every mechanism and vehicle available to them to throw this off track. 
They are very smart. They do not just get paid well, they are bright, 
and they know how to do this. Many of them, in fact, worked up in these 
buildings for years. So they know how the place operates. They know a 
consent to bring up an amendment is, lay it aside, and pending, and 
they know what unanimous consent means in this body. Any one Member 
here can object.
  So it does add difficulties to the management of the bill to have an 
unlimited amount of amendments brought up and pending, of which you 
then try to go through and orchestrate an outcome here that gets us to 
a reasonable conclusion where people are given an opportunity to debate 
their amendments.
  So, again, I know what I am in for once this starts. We run the risk, 
I will say--I am very blunt on the Record. If we start this process, 
which I am fearful will be the case, we run the risk of losing this 
bill. That is the reality. This is not hyperbole. I have been here for 
30 years, and I have watched what

[[Page 8153]]

can happen. When you have got this many opponents, the opponents of 
this bill who are determined to throw this bill off track, to stop too 
big to fail, consumer protection, from getting the kind of sunlight on 
derivatives, all of those issues, including what my colleague from 
North Dakota wishes to achieve, there are people who will use every 
means available to destroy this piece of legislation.
  We only have a couple of days left, maybe, and then we are going to 
move on to other bills. I urge my colleagues here--Senator Shelby and I 
are doing our best to try and accommodate all of our colleagues. We 
have had no tabling motions, we have had no filibusters on this bill, 
we have dealt with literally I do not know many amendments, I think 
some 20 or 30 amendments already. So we are moving through it and we 
are getting to everyone who is along the way.
  So, again, if my colleagues want to go this route, I understand it, 
but I would be less than honest if I said, does it help or hurt the 
effort. Candidly, having everyone come over and demanding they be in 
line hurts.
  Mr. DORGAN. Madam President, let me say, my purpose here is not to 
add to the burdens of the Senator from Connecticut, who is trying to 
get a bill through the Congress and signed by the President. I 
understand that.
  I think I tried to in my opening comments be pretty complimentary of 
the work and understanding of the work. I agree there are times when 
there is a straw that breaks the camel's back. I also think this camel 
can carry a bit more. What I wish is, I think the Senator from 
Connecticut would agree that I have been to this floor a fair number of 
times, spoken with some passion and some vigor on things that I care a 
lot about. It is not as though I came out of a closet someplace here in 
the cloakroom and started talking about the issue that I intend to 
offer an amendment.
  What I wish to do, with the consent of the Senator from Connecticut, 
is ask unanimous consent that the pending amendment be set aside and to 
call up amendment No. 4008.
  The ACTING PRESIDENT pro tempore. Is there objection?
  Mr. DODD. Reserving the right to object, I will make the case again. 
There are unlimited Members who wish to be in line. I understand that. 
I warn my colleagues, no amendment, in my view, is more important than 
the underlying bill. Understand that if we go this route, and I end up 
with every Member coming over and making that request--and there are 
many more who want to do that here--once this starts, then my ability 
to get us to the conclusion of a good bill is at risk. So I am going to 
object.
  The ACTING PRESIDENT pro tempore. Objection is heard.
  Mr. DORGAN. Let me say that unfortunately when I, last evening, saw 
the note on the desk in front of us that said ``no further rollcall 
votes'' I had another event, and so I left the Chamber, because there 
were no further votes, and I went to the other event.
  I discovered later that even as I was leaving the Chamber, I 
understood that there were three amendments at that point made in 
order. There were, I believe, two Republican amendments and one 
Democratic amendment that were noticed, and I think the chairman 
indicated they would be the next amendments. That is the basis on which 
I left this Chamber.
  When I came back this morning, I understand that a fair number of 
other amendments had been called up, the pending amendment had been set 
aside, and other amendments had been called up. I do not know how many. 
I think four or six amendments, perhaps, beyond the three. I was 
unaware that opportunities such as that would have existed last 
evening. I think as one Member of the Senate who has spent a 
considerable amount of time on this floor on this issue, had I been 
aware last evening that the gate was open a bit to be able to get an 
amendment pending that I have talked about many times on this floor, I 
would have been here last evening.
  I was not aware of that, and that is the basis on which I came this 
morning at 11 o'clock. I hope the Senator from Connecticut would not 
object. I would hope he would rethink that. He has every right as 
chairman to decide to manage this bill as he wishes. We cannot have 100 
managers for this bill. The chairman has done a lot of work to bring 
the bill to the floor.
  On the other hand, this issue is not some ordinary issue. The country 
will live with the consequences of this bill perhaps for a decade, 
perhaps more, perhaps less than a decade if we do not do the right 
things and we suffer another economic near collapse. We will have 
another bill on the floor for those who are here in 2 years or 5 years.
  What I want is financial reform to be done, done well, done right. I 
was going to say to the Senator from Connecticut, the amendment I have 
offered is an amendment that I think is very important.
  I don't have any idea whether we have the votes for it. But I do 
think it is one of those pieces that is essential--critical, in fact--
in order to address financial difficulties going forward. If we don't 
pierce this unbelievable building bubble of speculation that has caused 
a significant part of our problem, then we will not have addressed the 
real issues of financial reform. The issue of what are called naked 
credit default swaps, those are newly created instruments by which 
people make wagers with one another with no insurable interest on any 
side of the security. If we don't put a dagger in the heart of that 
kind of activity--and that is not shutting down, as my colleague from 
Georgia said yesterday, the use of credit default swaps. It is shutting 
down one portion of them, the largest portion that is just a flatout 
gambling device.
  I hope we can address these issues. I think I have been respectful to 
the chairman of the committee. I say to the chairman if I am allowed to 
set this amendment aside and offer amendment No. 4008, I will certainly 
be willing to have a reasonably short time period for debate. That kind 
of cooperation is also important in the construct of trying to get this 
bill done. It is an amendment that should have a lengthier debate.
  When I left the floor yesterday, the Senator from Georgia had an 
amendment. I think it was 2\1/2\ hours later that we had a vote. This 
amendment is much more consequential than that. I am willing, if we can 
at least get it pending, when the Senator from Connecticut believes it 
is appropriate to debate it, to engage in an agreement on a short 
timeframe.
  Mr. DODD. Madam President, let me say to my colleague, I have any 
number of colleagues who would like to be doing the same thing. All of 
them believe strongly in their amendments. I am not arguing about the 
substance of the amendment. At the conclusion of last evening, we tried 
to establish a sequence. I have no problem putting my colleague's 
amendment in the next tranche. My problem is, what do I say to the next 
colleague who wants to do the same thing? At what point do I say: I 
can't manage this if we are going to do it this way. Anyone can make a 
request, and I am trying to deal with these requests as they come 
forward and put it together in a way that allows us to go forward.
  We will vote shortly on the Sessions amendment, a Franken amendment. 
Senator Durbin has an amendment I would like to have called up. Trying 
to get time agreements is the art of management of legislation. I do 
not want to deprive anyone of offering an amendment. But at some 
point--what is the point of having someone sit in this chair if we just 
all come over and offer amendments and get in line somehow and then we 
have 60 amendments? Taking unanimous consent at some point to drop that 
creates a problem in terms of managerial capacity.
  My colleague will get, to the best of my ability, a chance to have 
his amendment come up and, hopefully, an adequate amount of time to 
debate it. I respectfully ask him to give me a chance so I don't end up 
opening the door to the next Senator making a similar passionate 
request. At some point we have to put a stop to this so I can manage 
the bill and go forward. That is all I am saying.
  Mr. DORGAN. I am not unsympathetic to what the Senator is doing. It

[[Page 8154]]

is the case that I, certainly as one Senator, see amendments being 
offered again and again by Senators from the Banking Committee, and 
they had a pretty good shot at this for a good long while before it 
came to the floor. Those of us who don't serve on that committee just 
want an opportunity to get amendments pending and up and so on.
  Mr. DODD. The next three amendments--those of Senators Durbin, 
Specter, and Franken--are not offered by members of the committee.
  Mr. DORGAN. I am speaking about amendments that have been offered. If 
the Senator objects, he has the right, but I will be back. If I am in 
the next tranche the Senator from Connecticut announces, that is fine. 
I will be able to offer an amendment. But between now and then, I guess 
I would like to understand how the system is going to work because I 
will continue to come and ask consent to offer this amendment. Then 
when we do debate it, I will have a real debate. This is the heart and 
soul of trying to shut down a system that creates unbelievable 
speculation in the economy and poses great danger.
  I might point out, we should not always assume that we are in safe 
territory on all of these issues. Colleagues probably saw the news this 
morning. Last month's Federal budget deficit is $83 billion. Take a 
look at what the trade deficit is. As I mentioned, in the midst of all 
this, the biggest financial institutions in the country are batting a 
thousand. Every single day they make a profit with what I think looks 
like a rigged system.
  This bill is very important. I want the Senator from Connecticut to 
succeed. If we don't pass a financial reform bill, the American people 
have a right to look at the Congress and say: What on Earth are you 
there for? What are you doing? But not just any bill, a bill that 
actually addresses the heart of the issues that caused the near 
economic collapse of this country. That is what we need to have 
accomplished at the end of this process. That is what brings me to the 
Senate floor. I am sorry I can't get this pending at the moment. But as 
Governor Schwarzenegger said in a previous life: I will be back, and 
soon.
  The ACTING PRESIDENT pro tempore. The Senator from South Carolina.


                           Amendment No. 3832

  Mr. DeMINT. Madam President, I rise to speak in favor of the Sessions 
bankruptcy amendment. This is critical to the current financial debate 
because one of the big issues in whether we treat some companies and 
some banks differently. The current bankruptcy laws create a 
predictable rule of law. There is no arbitrary or political 
decisionmaking. When a company can't pay its bills, it can ask for 
bankruptcy protection to restructure or liquidate in some kind of 
controlled fashion. This is what is meant by ``justice is blind.'' Our 
courts, our legal system and political systems do not get involved with 
deciding which companies have to be liquidated, go through bankruptcy. 
During our current financial meltdown, the government decided to pick 
winners and losers, to bail out some companies, some banks, and not 
others.
  The underlying financial regulation bill makes that system permanent, 
essentially throwing out the rule of law and allowing the political 
system, the bureaucratic system to decide which companies need to be 
treated differently while others have to go through the bankruptcy 
process. The Sessions amendment would treat all companies the same and 
allow an orderly restructuring or liquidation of banks, regardless of 
how big they are.
  The underlying bill abandons the rule of law. It suspends free market 
principles, and it perpetuates the idea that there are some companies 
that are too big to fail and have to be treated differently. It even 
expands that arbitrary system by giving the FDIC the ability to pick 
companies they think might fail and to seize them if they are not 
meeting certain criteria. The market does not decide which company is 
failing anymore. This becomes a political system which sets up 
corruption and political meddling as part of the financial system.
  There is no reason we can't have special bankruptcy courts to deal 
with large banking institutions so their failure does not take down the 
whole financial system. This idea that some people in Washington are 
going to look at Wall Street or anywhere in the country and decide 
which company is too big to fail, has to be treated differently, while 
this company goes through a traditional bankruptcy process--that puts 
us right back where we are now, where people in the government can 
arbitrarily take taxpayer money and bail out one company. Maybe it is 
their political friends and supporters--or maybe they don't bail out 
the companies that are their political enemies. It makes no sense to 
make bold promises to the American people that we are going to end too 
big to fail when this bill actually makes it permanent.
  I encourage my colleagues to consider the Sessions amendment. It 
would take us back to a rule-of-law that is predictable, that let's 
every company, every bank know if they can't pay their bills, they have 
to go through a predetermined system, not one that is decided by 
bureaucrats at the last minute based on criteria that could change at 
any moment.
  Let's get this one right. The underlying bill will not do what we 
promise. The Sessions amendment will move us in the right direction to 
keep our promises to the American people.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Minnesota.


                           Amendment No. 3991

  Mr. FRANKEN. Madam President, let me say how thankful I am that 
Senator Dodd has worked with us to get my amendment to a vote. I know 
how hard he has been working on this bill and how precious floor time 
is during this debate.
  Last week I proposed an amendment with Senator Schumer and Senator 
Bill Nelson to reform our Nation's credit rating industry. Today I am 
thrilled to announce that Senators Grassley, Kaufman, Durbin, Harkin, 
Klobuchar, Levin, Wyden, and Begich have joined as cosponsors. Senator 
Grassley, of course, is the ranking member of the Finance Committee and 
a senior member of the Budget Committee. Senator Levin led the 
Permanent Subcommittee on Investigations which revealed some of the 
credit rating industry's worst abuses. Senator Kaufman has also been a 
leading critic of the rating agencies, pointing out how these agencies 
kept AAA ratings ``rolling off the assembly,'' despite consistent and 
increasing indications that they were totally unwarranted. Senators 
Durbin, Harkin, and Klobuchar have long established themselves as 
strong voices on behalf of consumers.
  Over 20 of my colleagues have now cosponsored my amendment, including 
senior members of the Senate Finance and Banking Committees. Since I 
have filed this amendment, I have come to the floor several times to 
explain the different aspects of it. Now that this amendment will be up 
for a vote, I wish to step back and summarize. To underscore the scope 
of this problem, I want to explain how this amendment is a simple 
investor-based solution to the problem. Here it is in a nutshell.
  There is a staggering conflict of interest affecting the credit 
rating industry. The way it works now, issuers of securities are paying 
for the credit ratings. They shop around for their ratings, selecting 
those agencies that tend to offer them the best ratings and threatening 
to stay away from rating agencies that are too tough on them. Because 
of this, the credit rating agencies are issuing ratings that are orders 
of magnitude higher than they should be. We know this from the record. 
We know from the PSI release of e-mails that this was the case. This 
conflict of interest has cost American investors and pensioners 
billions of dollars because supposedly risk-free investments have 
failed or been downgraded to junk status.
  My amendment will correct that conflict of interest by having an 
independent third party assign the credit rating agency that conducts 
the initial rating for newly issued complex financial problems. My 
amendment puts investors in charge, not the government.

[[Page 8155]]

  Let's take this from the top. Right now, when a bank issues a 
product, it gets a credit rating--it gets a couple credit ratings 
before they will sell their product. But the problem is, they don't get 
their rating from an independent agency. They don't get it from someone 
who has a real interest in being accurate. Rather, issuing banks 
currently get their credit ratings from rating agencies they hire, and 
they pay them upwards of $1 million per transaction.
  Now, you do not have to be Adam Smith to guess what has happened. As 
with any other financial transaction, the issuers--the buyers of credit 
ratings--shopped around for ratings. When they would go to a credit 
rating agency, and the credit rating agency did not give them the 
rating they wanted, they would not hire them the next time. So the 
credit rating agencies responded in kind. They changed their algorithms 
for rating the products when the ratings they produced were too low, 
and, thus, they repeatedly overrated terrible securities.
  This is not a hypothetical. The Permanent Subcommittee on 
Investigations, Senator Levin's committee, uncovered pages upon pages 
of e-mails confirming this is exactly what happens. But I think the 
numbers explain it the best, and we know this. Of all the subprime 
mortgage-backed securities issued in 2006 and 2007 that received a AAA 
rating, over 90 percent have since been downgraded to junk status.
  Credit rating agencies will counter that the downgrading of AAA bonds 
to junk status occurred because of the unpredictable collapse of the 
housing market. Two points here: The e-mails that were released in the 
investigation by the Permanent Subcommittee on Investigations showed 
that the credit rating agency knew what was happening. Here is an e-
mail from 2006. This is from one of the Standard & Poor's executives:

       [T]his is like another banking crisis potentially looming!!

  There was an executive who said they wished they could go public with 
the loss figures they were seeing--this is in 2006--but that ``may be 
too much of a powder keg.'' And there are e-mails where they were 
saying: We better increase the ratings so we keep getting business.
  These were the guys who got it. Admittedly, there were guys who did 
not get it in the credit rating agencies. But there is an old Upton 
Sinclair quote, which is: You can't get a man to understand something 
that his salary depends on him not understanding.
  So there is this inherent conflict of interest, which is, if I give a 
good rating to these subprime mortgage-backed securities, I am going to 
make a lot of money; there is a lot of money here; my salary depends on 
my not getting what is happening. That all emanates from the conflict 
of interest. That is what I am going after. That is why they either 
ignored what they were seeing in 2006, or, if they got it, they did not 
say anything about it. So some were maybe less than completely getting 
it, and others who got it were corrupt. It was all for the same reason: 
because of this conflict of interest.
  These downgrades did not just result in major losses to Wall Street. 
They resulted in multibillion-dollar losses to millions of Americans, 
especially pension holders. CalPERS, which 1\1/2\ million Californians 
rely on for their pensions and health benefits, lost $1 billion. 
Pensioners in Ohio lost $\1/2\ billion. The same story is repeated all 
across the country.
  This was people's retirement money. This was not people buying 
yachts. This was not people staying a night at the Waldorf. This was 
their retirement money. So this was the problem, the conflict of 
interest.
  Let me tell you how our amendment addresses this problem. My 
amendment would call for a new clearinghouse, regulated by the SEC, to 
assign issuers to a credit rating agency that will give them their 
first rating on complex financial products. They would be assigned. 
That means an issuer will no longer be able to shop around for a 
rating. They will not be able to pressure a rating agency into giving a 
good score in exchange for future business. Over time, the 
clearinghouse will monitor the ratings these agencies give out and 
refine its method of assignments. It can reward agencies that are more 
accurate and give fewer assignments to those that are less accurate. It 
will incentivize accuracy. Imagine that. In doing so, it will give 
smaller agencies a chance to get into the action.
  Standard & Poor's and Moody's and Fitch do about, what, 94 percent of 
the business. The other agencies will get a chance because what will be 
rewarded is accuracy.
  By making these simple changes--and it is a very simple change; it is 
a third party--the amendment will eliminate the fundamental conflict of 
interest at the core--at the core--of this problem.
  Some people are going to tell you this is a government takeover of 
the credit rating industry. That is patently, 100 percent false. The 
clearinghouse will not issue a single rating. The clearinghouse is not 
going to tell credit rating agencies how to determine their ratings. In 
fact, every single rating an agency gives after being assigned a 
security will have a disclaimer that says, ``This is not a government-
approved rating.''
  Moreover, the clearinghouse will be run by investors such as managers 
of pension funds and managers of university endowments. OK. There is 
not a single seat on this board that would be reserved for a government 
official. Moreover, while the initial board members are to be named by 
the SEC, after the initial appointments, the board itself will choose 
its future members. There will be a representative from the rating 
agencies, there will be a representative from the banks, but a majority 
will be investors. This makes sense. We will be putting people in 
charge who are the people who are actually buying the securities, and 
who pay the price when the securities prove to be significantly 
overrated.
  So let me repeat that. We are putting the buyers of securities--not 
the government--in charge. OK.
  The clearinghouse will be an independent, self-regulatory 
organization that operates with oversight from the SEC, just like the 
Financial Industry Regulatory Authority or FINRA.
  Finally, this board will not act as an intermediary for every credit 
rating issued. It will only assign an agency to do the initial rating--
the first rating an issuer receives. The issuer is then free to seek as 
many other credit ratings as it wants from whomever it wants, as most 
issuers currently do.
  I am merely proposing that at least one rating--the initial rating--
from an issuer be free from the conflicts of interest inherent in an 
issuer-pays system. This initial rating will then serve as a check 
against any possible inflation in subsequent ratings.
  You may also have heard there are alternative proposals that would 
eliminate any requirement of reliance upon a credit rating issued by an 
NRSRO. Senator LeMieux, my good colleague from Florida, will be 
offering a side-by-side to this amendment. Now, my only problem with 
this is, this approach ignores the reality that ratings will, by 
necessity, continue and will always play a role in our economy. 
Investors will still rely on them even if the statutes do not mandate 
it.
  I believe Senator LeMieux's approach does absolutely nothing to 
tackle the conflicts of interest or address the current oligopoly, both 
of which would surely persist under this approach, especially the 
conflicts of interest.
  There is nothing in Senator LeMieux's approach that I understand is 
contradictory at all to what I am doing. So if a Member would like to 
vote for Senator LeMieux's side-by-side, it would be fine. You have to 
determine for yourself the value of that. I am just saying it does not 
get at the heart of the matter, which is the conflict of interest: the 
issuer actually paying the rating agency for the rating.
  With the help of Senators Schumer and Nelson, I have crafted a 
measure that is not liberal or conservative. It is not moderate. It is 
not on any spectrum. It just makes sense. It is common sense. This is 
like the solving of forum shopping in courts. It is an elegant 
solution. I can say that because I

[[Page 8156]]

did not think of it. Some professors in academia thought of it, and I 
guess the chief economist at Patton Boggs. It is just a simple, elegant 
idea. So it is not conservative; it is not liberal. It is just common 
sense.
  That is why Senator Wicker has embraced this amendment. Senator 
Grassley has embraced this amendment. It is just plain common sense. 
That is why Senators Levin, Johnson, Murray, Durbin, Whitehouse, Brown, 
Merkley, Bingaman, Lautenberg, Shaheen, Casey, Sanders, Kaufman, 
Harkin, Klobuchar, Wyden, and Begich also support the amendment.
  That is why Americans for Financial Reform support it. That is why 
the Consumers Union supports it; the Teamsters, the National 
Association of Consumer Advocates, Public Citizen, SEIU, and a number 
of other national organizations stand behind this amendment.
  That is why, as I said, leading economists in academia and private 
industry support this amendment. In fact, as I was saying, the chief 
economist at Patton Boggs, Dr. David Raboy, who first developed a 
similar proposal, is squarely behind this amendment. Of course he would 
be; he developed it.
  That is why independent, smaller rating agencies have come out in 
support of this amendment. That is why this amendment cannot wait.
  I urge colleagues on both sides of the aisle to vote in favor of this 
amendment.
  I thank you, Madam President.
  I believe my good colleague from Florida has a side-by-side which, as 
I say, in no way conflicts--I do not believe--with this amendment. I 
yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Florida.


         Amendment No. 3774, as Modified, to Amendment No. 3739

  Mr. LeMIEUX. Madam President, I ask unanimous consent to temporarily 
set aside the pending amendment so I may call up amendment No. 3774, as 
modified.
  The ACTING PRESIDENT pro tempore. Is there objection?
  Without objection, the clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Florida [Mr. LeMieux] proposes an 
     amendment numbered 3774, as modified, to amendment No. 3739.

  Mr. LeMIEUX. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The amendment, as modified, is as follows:

  (Purpose: To remove statutory references to credit rating agencies)

       On page 1036, strike line 14 and all that follows through 
     page 1041, line 3, and insert the following:

     SEC. 939. REMOVAL OF STATUTORY REFERENCES TO CREDIT RATINGS.

       (a) Federal Deposit Insurance Act.--The Federal Deposit 
     Insurance Act (12 U.S.C. 1811 et seq.) is amended--
       (1) in section 7(b)(1)(E)(i), by striking ``credit rating 
     entities, and other private economic'' and insert ``private 
     economic, credit,'';
       (2) in section 28(d)--
       (A) in the subsection heading, by striking ``Not of 
     Investment Grade'';
       (B) in paragraph (1), by striking ``not of investment 
     grade'' and inserting ``that does not meet standards of 
     credit-worthiness as established by the Corporation'';
       (C) in paragraph (2), by striking ``not of investment 
     grade'';
       (D) by striking paragraph (3);
       (E) by redesignating paragraph (4) as paragraph (3); and
       (F) in paragraph (3), as so redesignated--
       (i) by striking subparagraph (A);
       (ii) by redesignating subparagraphs (B) and (C) as 
     subparagraphs (A) and (B), respectively; and
       (iii) in subparagraph (B), as so redesignated, by striking 
     ``not of investment grade'' and inserting ``that does not 
     meet standards of credit-worthiness as established by the 
     Corporation''; and
       (3) in section 28(e)--
       (A) in the subsection heading, by striking ``Not of 
     Investment Grade'';
       (B) in paragraph (1), by striking ``not of investment 
     grade'' and inserting ``that does not meet standards of 
     credit-worthiness as established by the Corporation''; and
       (C) in paragraphs (2) and (3), by striking ``not of 
     investment grade'' each place that it appears and inserting 
     ``that does not meet standards of credit-worthiness 
     established by the Corporation''.
       (b) Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992.--Section 1319 of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992 (12 
     U.S.C. 4519) is amended by striking ``that is a nationally 
     registered statistical rating organization, as such term is 
     defined in section 3(a) of the Securities Exchange Act of 
     1934,''.
       (c) Investment Company Act of 1940.--Section 
     6(a)(5)(A)(iv)(I) Investment Company Act of 1940 (15 U.S.C. 
     80a-6(a)(5)(A)(iv)(I)) is amended by striking ``is rated 
     investment grade by not less than 1 nationally registered 
     statistical rating organization'' and inserting ``meets such 
     standards of credit-worthiness as the Commission shall 
     adopt''.
       (d) Revised Statutes.--Section 5136A of title LXII of the 
     Revised Statutes of the United States (12 U.S.C. 24a) is 
     amended--
       (1) in subsection (a)(2)(E), by striking ``any applicable 
     rating'' and inserting ``standards of credit-worthiness 
     established by the Comptroller of the Currency'';
       (2) in the heading for subsection (a)(3) by striking 
     ``Rating or Comparable Requirement'' and inserting 
     ``Requirement'';
       (3) subsection (a)(3), by amending subparagraph (A) to read 
     as follows:
       ``(A) In general.--A national bank meets the requirements 
     of this paragraph if the bank is one of the 100 largest 
     insured banks and has not fewer than 1 issue of outstanding 
     debt that meets standards of credit-worthiness or other 
     criteria as the Secretary of the Treasury and the Board of 
     Governors of the Federal Reserve System may jointly 
     establish.''.
       (4) in the heading for subsection (f), by striking 
     ``Maintain Public Rating or'' and inserting ``Meet Standards 
     of Credit-worthiness''; and
       (5) in subsection (f)(1), by striking ``any applicable 
     rating'' and inserting ``standards of credit-worthiness 
     established by the Comptroller of the Currency''.
       (e) Securities Exchange Act of 1934.--Section 3(a) 
     Securities Exchange Act of 1934 (15 U.S.C. 78a(3)(a)) is 
     amended--
       (1) in paragraph (41), by striking ``is rated in one of the 
     two highest rating categories by at least one nationally 
     registered statistical rating organization'' and inserting 
     ``meets standards of credit-worthiness as established by the 
     Commission''; and
       (2) in paragraph (53)(A), by striking ``is rated in 1 of 
     the 4 highest rating categories by at least 1 nationally 
     registered statistical rating organization'' and inserting 
     ``meets standards of credit-worthiness as established by the 
     Commission''.
       (f) World Bank Discussions.--Section 3(a)(6) of the 
     amendment in the nature of a substitute to the text of H.R. 
     4645, as ordered reported from the Committee on Banking, 
     Finance and Urban Affairs on September 22, 1988, as enacted 
     into law by section 555 of Public Law 100-461, (22 U.S.C. 
     286hh(a)(6)), is amended by striking ``credit rating'' and 
     inserting ``credit-worthiness''.
       (g) Effective Date.--The amendments made by this section 
     shall take effect 2 years after the date of enactment of this 
     Act.
       (1) In general.--Commission shall undertake a study on the 
     feasability and desirability of--
       (A) standardizing credit ratings terminology, so that all 
     credit rating agencies issue credit ratings using identical 
     terms;
       (B) standardizing the market stress conditions under which 
     ratings are evaluated;
       (C) requiring a quantitative correspondence between credit 
     ratings and a range of default probabilities and loss 
     expectations under standardized conditions of economic 
     stress; and
       (D) standardizing credit rating terminology across asset 
     classes, so that named ratings correspond to a standard range 
     of default probabilities and expected losses independent of 
     asset class and issuing entity.
       (2) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Commission shall submit to 
     Congress a report containing the findings of the study under 
     paragraph (1) and the recommendations, if any, of the 
     Commission with respect to the study.

  Mr. LeMIEUX. Madam President, I come to the floor today to talk about 
this important issue my friend from Minnesota has brought forth, and I 
congratulate him on the work he has done. We know one of the main 
reasons we had our financial debacle in 2008 was that credit agencies 
failed to do their job. They put AAA stamps of approval on products 
that deserved no such stamp. The investing world relied upon the fact 
that rating agencies were supposed to do their job, and they failed to 
do their job.
  So just as when you read Consumer Reports, and you believe they are 
giving objective information and a good accounting of how a product is 
or is not safe, the investing world thought Fitch and Moody's and S&P 
and these others had done their job and had done the due diligence. So 
I congratulate, again, my friend from Minnesota. He has focused on one 
of the main reasons we had our financial debacle.

[[Page 8157]]

  Unfortunately, much of what is in this 1,409-page bill does not go 
after what caused the debacle in 2008. We do not deal with Fannie and 
Freddie. We did not pass significant underwriting standards yesterday 
in the Corker amendment. We have a chance to address the issue of the 
rating agencies, because, but for their failure to do their job, we may 
not have had this debacle that destroyed, as some estimate, $600 
trillion worth of wealth.
  Where I differ with my friend from Minnesota is that I don't think he 
has gone far enough. I appreciate his efforts to go after conflicts of 
interest. I believe there are conflicts of interest. We cannot have the 
people whose products they rate pay them. He is right about that, but I 
would go further. My amendment writes these organizations out of law. 
Why should we reward them and allow them to continue to have what, in 
effect, is a government-sponsored monopoly? Federal law says 
creditworthiness will be determined by these rating agencies. Why 
should we reward them by allowing them to continue in any fashion to 
have the sanction and permission and basically a monopoly granted by 
Federal law? That doesn't make any sense to me.
  So the amendment I am proposing, again, is not, as my friend from 
Minnesota said, inconsistent with his amendment, and I believe there 
will be Members who will vote for his amendment and my amendment. I am 
glad we are both focused on addressing this issue.
  What my amendment will do is take away this sanctioned monopoly that 
holds out these rating agencies as the entities that determine what is 
creditworthy. Certainly, rating agencies will still exist, but there 
will be more rating agencies involved, plus banks themselves will have 
to do the due diligence to convince the FDIC or whoever the regulator 
is that the bonds they hold on their books are creditworthy. In a way, 
we are saying that the astrology we relied upon in the past didn't 
work. Let's have some new and better astrology.
  The rating agencies don't work. Did they not work because they had a 
conflict of interest? Perhaps. Did they not work because they are 
incompetent independent of that conflict of interest? Perhaps. I hope 
what my amendment does will achieve both goals. They will not be paid 
by these same investment banks if they are no longer written into law, 
I believe. Plus, if they are no longer written into law, there will 
have to be something in the marketplace that people can rely upon when 
they have to make their case to your Federal regulator that these 
instruments are creditworthy. Someone is going to have to do their 
homework.
  My friend from Minnesota is exactly right that the damage done in the 
marketplace was done in large part because of our reliance upon these 
rating agencies. The Wall Street Journal on April 21 said:

       When the government ordains--

  And that is an important word--

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

  So let's stop ordaining them. Why are we going to reward bad 
behavior?
  My friend from Minnesota, who has gotten his language from professors 
and others, the language we have worked on--it is not a conservative 
idea; it is not a Democratic idea. In fact, it is exactly the same as 
the language Barney Frank put forward on the House side. So we have a 
liberal Democrat and a conservative Republican working to the same end. 
So let's not just go halfway. Let's go all the way. Let's make sure 
these rating agencies don't get rewarded for bad behavior.
  This will take some time to implement. It needs time for the market 
to adjust. There is a 2-year period in this amendment for this to take 
effect. That is important so that banks can beef up their staff to make 
sure they can do the due diligence, do the homework, to prove 
creditworthiness. It is good for the market to settle, which it will 
need to do, from relying upon just these three big rating agencies.
  I believe the solution has to go the full measure. While I 
congratulate my friend from Minnesota for tackling this issue and while 
I also don't think our two measures are inconsistent, I believe the 
amendment I am proposing, which is almost exactly--similar to the 
language of Barney Frank on the House side--is the right answer to 
really get us off this ordination of these rating agencies.
  Madam President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from New York.
  Mr. SCHUMER. Madam President, I rise in strong support of the Franken 
amendment.
  First, I wish to praise my colleague from Minnesota for the great job 
he has done on this amendment. This is going to make a huge difference. 
It strengthens the section that is already in Senator Dodd's fine bill, 
on which Senator Jack Reed did great work, and now it goes a little 
further.
  In particular, I thank my colleague from Minnesota for really getting 
at the heart of the conflicts of interest. We can vote around the 
conflict of interest, we can shine a mirror of light on the conflict of 
interest, but unless we get to the heart of it, we are not going to 
undo the problem. The Senator from Minnesota does that, and I praise 
him for his fine work. I think that if this amendment passes, it is 
going to be one of the lasting contributions and one of the most 
significant contributions to prevent a future crisis from happening.
  Nobel economist Joseph Stiglitz said:

       I view the rating agencies as one of the key culprits . . . 
     They were the party that performed the alchemy that converted 
     the securities from F-rated to A-rated. The banks could not 
     have done what they did without the complicity of the rating 
     agencies.

  Credit rating agencies played an important role--an unfortunate and 
important role--in what led up to the financial crisis. They adopted 
questionable practices intended to win over clients and capture greater 
market share, ignoring the true credit quality of the complex 
securities at the heart of the market meltdown. They neglected their 
own internal controls and developed a coziness with clients. And 
because rating the complicated structured finance products brought in 
more money to these agencies, they raced each other to the bottom, 
competing for clients by inflating ratings. Because the clients had an 
incentive to sell products with the highest ratings to investors, the 
rating agencies would give them advice on how to structure their 
products to score AAA. This race to the bottom is the easiest, 
quickest, and least disputatious. Giving an AAA rating is one of the 
major culprits of the financial crisis we are seeing.
  The conflict of interest-ridden industry helped bring our economy to 
its knees. To provide one example, 93 percent of AAA-rated subprime 
mortgage-backed securities issued in 2006 have been downgraded to junk 
status. Is that incredible? Ninety-three percent went from AAA to junk 
status. That is not an accident and, frankly, that doesn't just happen 
because people make mistakes. There was something more pernicious at 
work, which was conflict of interest. That is the fundamental problem. 
Again, 93 percent of the securities the rating agencies concluded were 
of the highest quality, least risky investments, in just 2 years they 
became worthless. Many people lost money. Some were big investors, some 
were small investors, some were large banks and institutions, and some 
were pension funds that had the savings of millions of hard-working 
Americans. Everyone suffered because of what the credit rating agencies 
did. This bill we are debating this week makes important strides in 
holding the rating agencies accountable to their credit quality 
assessments.
  Once again, I commend Senator Dodd, our able chairman, and Senator 
Jack Reed, our able chairman of the securities subcommittee, for the 
immense work they did in this area. Requiring the creation of a new 
Office of Credit Rating Agencies at the SEC; disclosures of rating 
methodologies; prohibiting compliance officers from working on ratings 
methodologies or sales; a new liability provision; and requiring rating 
analysts to pass qualifying exams all helps.
  As I said, the provision Senator Franken is offering and I am proud 
to

[[Page 8158]]

cosponsor goes to the heart of the conflict of interest. It doesn't go 
around the edges of the conflict of interest but is a dagger at the 
heart. This amendment breaks that inherent conflict by having a third 
party, a neutral third party, step in-between. Issuers will no longer 
be able to choose a rating agency and directly influence what kind of 
ratings they get.
  The amendment establishes a board of highly knowledgeable and 
experienced people, a majority of whom will be from the investor 
industry, including pension funds, municipalities, and retail investors 
who got clobbered in this financial crisis because the rating agencies 
were getting paid by the issuer and had an incentive to issue the best 
rating possible.
  How the heck--this is a little digression--how the heck no-doc loans 
got AAA ratings over and over, packages of no-doc loans--what does that 
mean to the average person? It means they never asked you if you could 
afford to pay the mortgage, and they got AAA credit ratings. What was 
going on, and why didn't anyone catch it? Well, the Dodd part and the 
Reed part of the amendment will catch it, but the Franken part of the 
amendment will prevent it by having a noninterested party make a 
rating.
  The Franken amendment establishes a board of highly knowledgeable and 
experienced people, as I said. They have to submit their products to be 
rated to the board and, like a wheel, the board will choose a rating 
agency for each product. When I say a wheel, it is like a wheel; it 
comes up randomly. Where did Senator Franken--and I have spoken with 
him about this, so I know--where did he come up with this idea? This is 
how we prevent forum shopping, bias of judges. When you go to the 
Southern District of New York and you have a case, it is a wheel and 
you get a judge randomly. In the past, we have found there were even 
conflicts of interest in the judiciary because you got to choose your 
own judge, just as the issuer now gets to choose its own credit rating 
agency. The wheel makes it random. You don't choose it. That is a big, 
huge step forward.
  The board will also monitor the performance of these ratings and 
ensure the rating agencies are qualified to rate the products. This 
model will motivate rating agencies to develop and gain the right 
expertise and methodologies so they can become eligible to rate 
different classes of structured finance products, and the smaller 
rating agencies and investor-paid agencies will have a level playing 
field to compete against the big three.
  This proposal has a broad range of bipartisan support. I greatly 
appreciate not only Senator Franken's outstanding work on this issue 
but the cosponsorship of Senators Nelson, Whitehouse, Brown, Murray, 
Merkley, Bingaman, Lautenberg, Shaheen, Casey, Sanders, Johnson, 
Kaufman, Durbin, Harkin, and--thank you to our Republican friends--
Senators Wicker and Grassley.
  So I hope we will get unanimous support for this amendment. I hope we 
won't leave out any major provisions. I hope we won't modify it or 
weaken it. Let's stick to this amendment. It is modest and thoughtful 
and goes to the heart of what helped cause the financial crisis--the 
inherent conflict of interest in the way credit rating agencies worked.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Connecticut.
  Mr. DODD. Madam President, I was going to address the underlying 
question here, but I know my colleague from Maine wishes to be heard on 
a different amendment.
  Let me say briefly that I appreciate the comments and I appreciate 
the efforts of Senator Franken in this regard. Forty pages of our bill 
are exclusively dedicated to rating agencies. We spent an inordinate 
amount of time on the rating agency question. This is a complex issue 
and the source of a lot of discomfort. There is a headline in one of 
the national newspapers this morning that talks about the rating 
agencies and the problems they have posed in giving ratings to products 
that were worth vastly less than their claims.
  Very briefly, on the underlying bill, the SEC will have a new office 
of credit ratings to regulate and promote accuracy in ratings, staffed 
with experts in structured, corporate, and municipal debt finance. The 
office's own examination staff will conduct annual inspections, and the 
essential findings will be available to the public. The SEC will have 
expanded authority to suspend the registration of agencies that 
consistently produce ratings without integrity. It will have more 
authority to sanction ratings agencies that violate the law, including 
penalties for management for failure to supervise employees who break 
the law.
  The bill imposes tough new requirements on credit rating agencies. 
Ratings agency boards are subject to new rules for independence. 
Ratings analysts must be separated from those who sell the firm's 
services. Agencies must publicly disclose when they materially change 
their procedures or methodologies or make significant errors and update 
their credit ratings accordingly. Agencies must establish strong 
internal controls for following procedures and methodologies and have 
these attested to by their CEO to the SEC. The agencies must establish 
hotlines for whistleblowers and complaints, retain complaints about the 
firm's work for regulators to examine.
  Compliance officers must submit annual compliance reports to the SEC. 
They are required to consider credible information they received from 
sources other than the issuers in making the ratings, rather than 
relying on the--basing ratings only on the issuer's representations.
  Investors are empowered. The agencies must disclose more about their 
ratings assumptions, limitations, risks, accuracy, and factors that 
might lead to change in ratings. Agencies must disclose their track 
record of ratings in a way that is in compliance so that users can 
compare ratings for accuracy across different agencies.
  It also will have the benefit of having new pleading standards so 
when private suits are brought, they will be able to have actions 
brought against these rating agencies.
  The issuer or underwriters of any asset-backed security shall make 
available any due diligence reports, and on and on.
  The point I want to make is we have spent a lot of time on this 
issue. A lot of work went into this issue. My colleague from Minnesota 
has what I think is a good and sound idea. Here is my concern as 
chairman of the committee. I do not know what the implications are 
because we have had no real examination of having the wheel about which 
my friend from New York talked. Not all rating agencies are equal. 
There ought to be more of them. There are smaller ones out there that 
ought to be able to grow in their competency and do things. But there 
are companies of different sizes and needs, and merely changing a 
rating agency based on an arbitrary choice without considering whether 
the rating agency can do the job is my concern.
  I like the idea because what it does do is get away from the conflict 
of interest. That is as it presently exists. Here is the quandary we 
have: Right now, the company that seeks the rating agency pays the 
rating agency. Obviously, on its face, you have a problem. If I am 
buying a service from you--and by the way, I would like to get a AAA 
rating--I have a pretty good chance of getting it whether I deserve it 
or not. The alternative idea, somebody said, is why don't you have the 
buyers of the rating agency? There is a similar problem. They might 
like to have a DDD rating to lower the value. So you have a conflict on 
either side of this question that is difficult and difficult to 
resolve.
  Compound the problem with the fact that the rating agencies, as 
presently construed, prior to our language in this bill, basically rely 
on the information from the very purchase of the rating agency to 
determine whether it is a good product. There is no due diligence done 
by the rating agency. Our bill changes all of that.
  It is with a great deal of reluctance--as I said to my colleague from 
Minnesota, I was prepared to take a good

[[Page 8159]]

study of this; in fact, language that would recommend the SEC and 
others--the SEC has authority under existing law to deal with conflicts 
of interest. They have the power to do it. Whether they do it is 
another matter. That is always the issue with a regulator.
  I am concerned what this means. I say that respectfully to the 
author. He has worked hard on this amendment. There are a lot of good 
ideas in it. I am just uneasy about what the implications can be. I 
would be remiss if I did not express that as chairman of the committee 
having spent hours listening to the debate back and forth.
  On the amendment offered by our colleague from Florida, there is a 
different set of issues I have, but I also have to express my 
opposition to that amendment. The reason is because very simply we know 
that credit ratings are far from the perfect measure. We know that. We 
wrestled with this.
  I agree that the markets may place too much reliance on credit 
ratings. But the way to address the problem is not to simply repeal the 
safety and soundness provisions of the law. That is what he is asking 
us to do.
  While I have problems with the present system and we made major 
inroads on how to address that in ways we thought made some sense, the 
idea of the Senator from Florida that because we are not happy with the 
present structure--although I think the bill before us does an awful 
lot in 40 pages to deal with how this is to be accomplished--he repeals 
all of it. Someone may have a better idea out there, but to get rid of 
what we have, leaving a vacant space, in a sense, is not my view of the 
way this ought to be addressed. Congress could not simply repeal safety 
and soundness laws without careful prior study of the impact on the 
markets. That is what we are doing with the LeMieux amendment.
  Our bill sets out a process by which overreliance on these rating 
agencies can be reduced without creating risk throughout the financial 
system. That is my concern. Stripping everything out of safety and 
soundness in this area does not get you safety and soundness.
  With regard to both amendments, I am more attracted to the amendment 
offered by Senator Franken, and I like the idea of where he is going. I 
just do not know whether it is sound. Again, it is the kind of thing I 
wish to see examined--and that is not to suggest he has not done that--
where you take the time and go through the process.
  It is with some reluctance that I express my opposition to both 
amendments and urge my colleagues to review, if they care to, the 40 
pages of effort we have made in our bill.
  Jack Reed of Rhode Island deserves a lot of credit for having worked 
particularly hard on the rating issue in our committee and the 
subcommittee dealing with securities. We think we have a strong bill in 
these areas. I would be the first to say it is far from perfect, but we 
did our best to find a way to get far greater responsibility and 
accountability out of the credit rating agencies. There is a great 
concern here that accountability and responsibility needs to be taken 
into consideration.
  As I said, our bill has 40 pages of safeguards to strengthen the SEC, 
empower investors, and to make rating agencies far more responsible and 
accountable.
  Madam President, I yield the floor.
  The PRESIDING OFFICER (Mrs. Hagan). The Senator from Maine.


                           Amendment No. 3883

  Ms. SNOWE. Madam President, I rise to speak today on amendment No. 
3883, which is pending, which I have offered with my good friend and 
colleague from Arkansas, Senator Pryor.
  I ask unanimous consent that Senator Pryor be able to follow my 
remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEVIN. Will the Senator yield for a question?
  Ms. SNOWE. I will be glad to yield.
  Mr. LEVIN. How long does the Senator expect to take?
  Ms. SNOWE. Fifteen minutes.
  Mr. LEVIN. Does the Senator from Maine know how long Senator Pryor 
will take?
  Ms. SNOWE. About 5 minutes.
  Mr. LEVIN. I thank the Senator.
  Ms. SNOWE. Madam President, the amendment that is pending that we 
have offered--and I add that also has been cosponsored by Senator 
Graham and Senator Menendez--would ensure that small businesses are 
considered in the federal rulemaking process by the Bureau of Consumer 
Financial Protection that would be created in this bill.
  The more attentive we are with respect to small businesses and the 
issues incorporated in this legislation, the better small businesses 
will be in their ability to create jobs and to survive what is a very 
difficult and tragic economic environment.
  This amendment would ensure that when the newly created bureau 
promulgates rules and regulations, it fully considers the economic 
impact those rules and regulations would impose on our Nation's more 
than 30 million small businesses that have created 64 percent of all 
new jobs over the past 15 years and no question will drive our Nation's 
economic recovery. Indeed, we are depending on these small businesses 
to lead us out of this jobless recovery.
  We know a jobless recovery is not a true recovery. We have more than 
15 million Americans who are unemployed or underemployed. Clearly, it 
is going to be small businesses that pave the way toward employment.
  Plain and simple, onerous regulations are crushing the 
entrepreneurial spirit of America's small businesses. In 2009 alone, 
there were close to 70,000 pages in the Federal Register, and the 
annual cost of Federal regulations now totals more than $1.1 trillion. 
Furthermore, according to the research by the Small Business 
Administration's Office of Advocacy, small firms--and this is no 
surprise--bear a disproportionate burden, paying approximately 45 
percent more per employee in annual regulation compliance than larger 
firms.
  The amendment we are offering today would ensure small business 
fairness and regulatory transparency by first designating the Consumer 
Financial Protection Bureau as a ``covered agency'' under the 
Regulatory Flexibility Act so that small business review panel 
provisions would apply to the bureau's rulemaking. These advisory small 
business panels currently apply to EPA and OSHA and have been extremely 
successful in helping to shape more workable regulations at these 
agencies for small businesses across America.
  Since 1996, when these small business panel provisions were passed 
unanimously in the Senate and signed into law by then-President 
Clinton, the EPA has convened 35 panels and OSHA has convened 9 panels. 
The findings of the panel reports have helped EPA and OSHA improve 
draft proposals by tailoring regulatory approaches to the unique 
situations of small businesses.
  I know there are some who will argue that my amendment will undermine 
the rulemaking capacity of the bureau. This simply is not the case. 
According to the SBA Office of Advocacy report, ``The panel process 
does not replace, but enhances, the regular notice-and-comment 
process.''
  The Office of Advocacy has also found that these small business 
review panels have facilitated ``revisions or adjustments to be made to 
an agency draft rule that mitigated its potentially adverse effects on 
small entities, but did not compromise the rule's public policy 
objective.''
  Others have expressed concern that these small business advocacy 
review panels should not apply to the bureau because they apply to no 
other financial regulatory authority. Unfortunately, there is continued 
frustration by leaders in the small business community toward 
government agencies and one-size-fits-all regulation. Independent 
agencies, such as the Securities and Exchange Commission, the SEC, and 
its approach to regulation under Sarbanes-Oxley, and the Federal 
Communications Commission, the FCC, and its rulemaking governing 
telecommunications practices are too often cited as failing to 
adequately consider their impact on small business prior to issuing new 
regulatory mandates. This is why it is vital that small business 
requirements apply to the new independent agency that is created in the 
underlying legislation.

[[Page 8160]]

  Still others will argue that our amendment is unnecessary because my 
earlier amendment to this legislation provides for an exemption for 
small businesses from the regulatory requirements of the bureau. 
However, we must go further to ensure that rules that the bureau 
promulgates do not unintentionally impact small firms' job creation 
capacity. That is why our amendment would also specify during the 
rulemaking process the bureau must consider the economic effects its 
rule would have on the cost of credit for small businesses.
  According to a recent National Federation of Independent Business, 
NFIB, survey--and that is the foremost organization that speaks for 
small businesses--42 percent of small business owners use a personal 
credit card for business purposes. It is imperative that small business 
interests are fully considered when the bureau issues regulations on 
consumer credit cards, so that however well-intentioned, the bureau 
does not inadvertently cut off vital small business credit sources, 
especially during these tenuous economic times when a recent Federal 
Deposit Insurance Corporation survey noted that banks posted their 
sharpest decline in lending since 1942.
  That is a big issue right now because lending is not occurring to 
small businesses. That is one of the issues we must address in any 
small business tax relief package. Those discussions are ongoing right 
now with the Treasury Department and the Administrator of the Small 
Business Administration, Karen Mills, with Chairman Landrieu of the 
Small Business Committee, myself, and key staff from the Finance 
Committee, and the leadership of both the Republican and Democratic 
sides because it is so critical. If we cannot get access to lending to 
small businesses, jobs cannot be created.
  We do not want to compound the problem with the creation of this 
bureau that ignores the implications when it comes to applications for 
credit from small businesses. After all, all the entities under this 
legislation--even the smaller institutions--all the entities will be 
covered under this bureau with respect to regulations. We must make 
sure that the smallest financial institutions' voices are heard because 
they are the ones that primarily provide access to small businesses, 
not to mention the credit card companies that also will certainly be 
regulated under this bureau.
  We want to make sure we are not just having the big institutions' 
voices heard but not the small financial institutions and not how it 
will affect small businesses throughout the country.
  To give an understanding of how strongly regarded and supported this 
legislation is, we have a broad cross-section of stakeholders who 
support this amendment, more than 23 organizations that represent 
millions and millions of small business owners. I am going to list them 
now because they are so important, given the support they are providing 
this amendment and how critical they think it is to the functioning of 
this bureau and being cognizant of the regulations that are issued, 
that they do not adversely affect the well-being of small businesses 
during these tumultuous economic times. You have the Associated 
Builders and Contractors, the Association of Kentucky Fried Chicken 
Franchisees, the Hearth, Patio & Barbecue Association, Hispanic 
Leadership Fund, Independent Electrical Contractors, Institute for 
Liberty, International Franchise Association, the National Association 
for the Self-Employed, the National Federation of Independent Business, 
the National Lumber and Building Material Dealers Association, the 
National Restaurant Association, the National Roofing Contractors 
Association, the National Small Business Association, the Printing 
Industries of America, the S Corporation Association, Small Business & 
Entrepreneurship Council, Society of American Florists, the Society of 
Chemical Manufacturers & Affiliates, the Tire Industry Association, the 
U.S. Chamber of Commerce, the U.S. Black Chamber of Commerce, the 
United States Hispanic Chamber of Commerce, and the Women Impacting 
Public Policy.
  As you can see, a broad array of stakeholders are so concerned about 
the pending legislation with respect to this bureau that they support 
this amendment.
  These groups have sent a letter as well to both the chairman and the 
ranking member of the Banking Committee as well as the majority and 
minority leadership because they are so concerned about the underlying 
legislation, the creation of this Consumer Financial Protection Bureau, 
and how it will affect small businesses. I wish to quote from their 
letter. It says that our amendment is:

     . . . an effort to prevent unintended consequences by a new 
     agency that could harm the small business sector . . . and 
     provides assurance that small business access to credit is a 
     top consideration by Bureau officials as they take on the 
     important task of overseeing our financial sector.

  Just to give you another indication of how supportive and how 
important these advisory panels are--the ones that would be created in 
order to review the regulations that would be issued by this bureau--
this would be before they issue the proposed rule that these advisory 
panels would be created--this has occurred under EPA as well as OSHA 
since 1996. To give an illustration of the rules that have been 
reviewed through these advisory panels that are created--within a 60-
day period, I might add, they would be required to report to the bureau 
on their assessment of any particular rule before they propose and 
issue that rule so we can understand the ramifications. The EPA has 
issued rules that created an advisory panel on groundwater, radon and 
drinking water, arsenic and drinking water, and diesel fuel 
requirements, just to give an illustration.
  Since 1996, these advisory panels, as the SBA Office of Advocacy has 
indicated in their materials, has provided extremely valuable 
information on the real-world impact--and that is important to 
understand, the real-world impact, when a small business has to digest 
and to live by and to implement any rules and regulations issued by 
this bureau and the compliance costs of these agency proposals. So, 
clearly, this will have enormous benefits to small businesses because 
we will have a chance to review, in advance, through these advisory 
panels that would be comprised of the rulemaking agency--in this 
instance it would be the Consumer Financial Protection Bureau--
representatives of the small business community, as well as the Office 
of Management and Budget's Office of Information and Regulatory 
Affairs. So there would be a broad array of voices including small 
business concerns to examine these rules before they are proposed for 
the rulemaking process.
  Doesn't that make sense? Isn't it important to understand the 
ramifications before we issue these regulations that could have adverse 
consequences for small businesses as they attempt to survive during 
these tenuous economic times?
  The SBA Office of Advocacy has indicated in their materials with 
respect to how these panels work--and, again, they are required under 
law within 60 days to make a proposal to the bureau in terms of the 
ramifications or the effects or other considerations that ought to be 
incorporated as they issue their proposed rule.
  The purpose of the panel process is threefold, and this is from the 
SBA Office of Advocacy. First, the panel process ensures that small 
entities that would be affected by a regulatory proposal are consulted 
about the pending action and offered an opportunity to provide 
information on its potential effect. Second, a panel can develop, 
consider and recommend less burdensome alternatives to a regulatory 
proposal when warranted. Finally, the rulemaking agency has the benefit 
of input from both real-world small entities and the panel's report and 
analysis prior to publication.
  Doesn't it make sense? It saves everybody a lot of aggravation, a lot 
of money, a lot of energy that would have to be devoted in the 
rulemaking process after they issue the proposal rather than before 
they issue the proposal for the rulemaking process.
  It clearly does make sense and that is why it has worked so well for 
EPA

[[Page 8161]]

and OSHA and that is why it will work well under this circumstance and 
most especially during these times when we are creating this bureau 
that will have a wide-ranging effect on financial institutions all 
across this country that ultimately will affect the more than 30 
million small businesses, because 42 percent of them depend on personal 
credit cards for credit. We want to make sure we are considering the 
consequences of anything that is done.
  Also, the downstream effect of bank regulations would be considered 
as well as a potential effect of a regulation by this bureau. When 
banking practices are restricted, they do not just affect consumers, 
they also affect small businesses--higher capital requirements tighten 
the availability of credit for small businesses. That is another 
example of a potential rule that would come out of this bureau that 
could directly affect small businesses. So it is not only consumers, it 
is also small businesses.
  The regulation of angel investors--a very important fact. In fact, 
NFIB has written on this question because there will be subsequent 
amendments to address this issue as well. But the regulation of angel 
investors also affects the economic well-being of small businesses 
because they use them as a source of capital. I know that NFIB is 
concerned about the reduced pool, as they have indicated in their 
letter, with respect to angel investors. Many small businesses depend 
on these individuals who invest to provide that kind of startup capital 
in their businesses. There are other significant small entities in the 
financial products industry who are likely to be overlooked in the 
bureau's rulemaking process. The panel requirement will benefit these 
businesses and will benefit the bureau's consideration of how their 
rules should be tailored to minimize the impact on these businesses 
while maximizing the intended benefits overall for small businesses.
  This is not anything unique to what we don't already know about how 
important the Regulatory Flexibility Act is overall. Every agency is 
required to consider the effect of any rule or law and how it is going 
to have implications on small businesses and two agencies--the EPA and 
OSHA--are required to establish advisory panels when it is determined 
rules are going to be issued that have consequences on small businesses 
and that gives them the opportunity to have input into the process 
before this bureau issues those rules.
  I think it makes a great deal of sense. It is reasonable, it is 
logical, and it averts any unintended consequences in the onset of the 
process rather than waiting to see how well it takes effect, and then 
we discover that, in fact, it depresses the ability of small businesses 
to create jobs or to survive.
  So I hope we can get very strong support for this legislation. I am 
very appreciative of the work of my colleague, Senator Pryor, with whom 
I work on the Small Business Committee. He does a great job and has 
provided a great deal of input into the drafting of this legislation, 
and I appreciate his leadership. I appreciate the fact that it is done 
on a bipartisan basis because I think we all recognize the pivotal role 
small businesses play in today's economy and will certainly depend on 
playing a critical role in the future.
  I ask unanimous consent to have printed in the Record a report 
regarding the Regulatory Flexibility Act.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                TABLE A.4--SBREFA PANELS THROUGH FISCAL YEAR 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                   Final rule
           Rule title                Date convened      Report completed     NPRM1 published       published
----------------------------------------------------------------------------------------------------------------
                                         Environmental Protection Agency
 
Nonroad Diesel Engines..........  03/25/97...........  05/23/97..........  09/24/97..........           10/23/98
Industrial Laundries Effluent     06/06/97...........  08/08/97..........  12/12/97..........  .................
 Guideline2.
Stormwater Phase................  06/19/97...........  08/07/97..........  01/09/98..........           12/08/99
Transportation Equipment          07/16/97...........  09/23/97..........  06/25/98..........           08/14/00
 Cleaning Effluent Guideline.
Centralized Waste Treatment       11/06/97...........  01/23/98..........  09/10/03..........           12/22/00
 Effluent Guideline.
                                  ...................  ..................  01/13/99..........  .................
Underground Injection Control     02/17/98...........  04/17/98..........  07/29/98..........           12/07/99
 Class V Wells.
Ground Water....................  04/10/98...........  06/09/98..........  05/10/00..........           11/08/06
Federal Implementation Plan       06/23/98...........  08/21/98..........  10/21/98..........           04/28/06
 (FIP) for Regional Nitrogen
 Oxides Reductions.
Section 126 Petitions...........  06/23/98...........  08/21/98..........  09/30/98..........           05/25/99
Radon in Drinking Water.........  07/09/98...........  09/18/98..........  11/02/99..........  .................
Long Term 1 Enhanced Surface      08/21/98...........  10/19/98..........  04/10/00..........           01/14/02
 Water Treatment.
Filter Backwash Recycling.......  08/21/98...........  10/19/98..........  04/10/00..........           06/08/01
Light Duty Vehicles/Light Duty    08/27/98...........  10/26/98..........  05/13/99..........           02/10/00
 Trucks Emissions and Sulfur in
 Gasoline.
Arsenic in Drinking Water.......  03/30/99...........  06/04/99..........  06/22/00..........           01/22/01
Recreational Marine Engines.....  06/07/99...........  08/25/99..........  10/05/01..........           11/08/02
                                  ...................  ..................  08/14/02..........  .................
Diesel Fuel Sulfur Control        11/12/99...........  03/24/00..........  06/02/00..........           01/18/01
 Requirements.
Lead Renovation and Remodeling    11/23/99...........  03/03/00..........  01/10/06..........  .................
 Rule.
Metals Products and Machinery     12/09/99...........  03/03/00..........  01/03/01..........           05/13/03
 Effluent Guideline.
Concentrated Animal Feedlots      12/16/99...........  04/07/00..........  01/12/01..........           02/12/03
 Effluent Guideline.
Reinforced Plastics Composites..  04/06/00...........  06/02/00..........  08/02/01..........           04/21/03
Stage 2 Disinfectant Byproducts   04/25/00...........  06/23/00..........  08/11/03..........           01/04/06
 Long Term 2 Enhanced Surface
 Water Treatment.
                                  ...................  ..................  08/18/03..........           01/05/06
Nonroad Large Spark Ignition      05/03/01...........  07/17/01..........  10/05/01..........           11/08/02
 Engines, Recreational Land
 Engines, Recreational Marine
 Gas Tanks, and Highway
 Motorcycles.
                                  ...................  ..................  08/14/02..........  .................
Construction and Development      07/16/01...........  10/12/01..........  06/24/02..........  .................
 Effluent Guidelines3.
                                  ...................  ..................  11/28/08..........  .................
Aquatic Animal Production         01/22/02...........  06/19/02..........  09/12/02..........           08/23/04
 Industry.
Lime Industry--Air Pollution....  01/22/02...........  03/25/02..........  12/20/02..........           01/05/04
Nonroad Diesel Emissions--Tier    10/24/02...........  12/23/02..........  05/23/03..........           06/29/04
 IV Rules.
Cooling Water Intake Structures-- 02/27/04...........  04/27/04..........  11/24/04..........           06/15/06
 Phase III Facilities.
Section 126 Petition (2005 Clean  04/27/05...........  06/27/05..........  08/24/05..........           04/28/06
 Air Implementation Rule--CAIR).
Federal Implementation Plan for   04/27/05...........  06/27/05..........  08/24/05..........           04/28/06
 Regional Nitrogen Oxides (2005
 CAIR).
Mobile Source Air Toxics........  09/07/05...........  11/08/05..........  03/29/06..........           02/26/07
Nonroad Spark-ignition Engines/   08/17/06...........  10/17/06..........  05/18/07..........           10/08/08
 Equipment.
Total Coliform Monitoring Rule    01/31/08...........  03/31/08..........  ..................  .................
 (TCR).
Renewable Fuel Standards 2        07/09/08...........  09/05/08..........  05/26/09..........  .................
 (RFS2).
                                  Occupational Safety and Health Administration
 
Tuberculosis4...................  09/10/96...........  11/12/96..........  10/17/97..........  .................
Safety and Health Program Rule..  10/20/98...........  12/19/98..........  **................  .................
Ergonomics Program Standard.....  03/02/99...........  04/30/99..........  11/23/99..........           11/14/00
Electric Power Generation,        04/01/03...........  06/30/03..........  06/15/05..........  .................
 Transmission, and Distribution.
Confined Spaces in Construction.  09/26/03...........  11/24/03..........  11/28/07..........  .................
Occupational Exposure to          10/20/03...........  12/19/03..........  ..................  .................
 Respirable Crystalline Silica
 Dust.
Cranes and Derricks in            08/18/06...........  10/17/06..........  10/09/08..........  .................
 Construction.
Occupational Exposure to          01/03/04...........  04/20/04..........  10/04/04..........           02/28/06
 Hexavalent Chromium.
Occupational Exposure to          09/17/07...........  01/15/08..........  ..................  .................
 Beryllium.
Occupational Exposure to          05/05/09...........  07/02/09..........  ..................  .................
 Diacetyl.
----------------------------------------------------------------------------------------------------------------
1Notice of Proposed Rulemaking (NPRM) published in the Federal Register.
2Proposed rule was withdrawn August 18, 1999. EPA does not plan to issue a final rule.
3Proposed rule was withdrawn on April 26, 2004. EPA issued a new proposal November 28, 2008.
4Proposed rule was withdrawn on December 31, 2003. OSHA does not plan to issue a final rule.
**In process.


[[Page 8162]]

                     Chapter 41--Regulatory Panels

       In 1996, SBREFA amended the RFA to include a number of 
     important provisions. One of those was section 609, which 
     requires, among other things, that certain agencies conduct 
     special outreach efforts to ensure that small entity views 
     are carefully considered prior to the issuance of a proposed 
     rule. This outreach is accomplished through the work of small 
     business advocacy review panels, often referred to as SBREFA 
     panels.


                      who must hold SBREFA panels?

       The statute requires that the Environmental Protection 
     Agency (EPA) and the Occupational Safety and Health 
     Administration (OSHA) evaluate their regulatory proposals to 
     determine whether SBREFA panels should be convened. The 
     requirement for SBREFA panels may appear to impose additional 
     steps for EPA and OSHA in their rulemaking processes. 
     However, the panel process only formalizes the outreach 
     requirements and analyses that the Administrative Procedure 
     Act and the RFA already mandate for all new rules that affect 
     small businesses. Any additional work that may be needed in 
     this special early outreach effort should be offset by time 
     saved at the other end of the regulatory process. When 
     problems are resolved before a proposed rule is published, 
     objections from the public are reduced. Experience has shown 
     that the panel process results in better rules, better 
     compliance and reduced litigation. In at least one instance, 
     EPA withdrew a regulatory proposal based on work performed in 
     connection with the panel process.


            how is the decision to hold a SBREFA panel made?

       For each proposed rule, the RFA requires that an agency 
     either certify that the proposal has no significant economic 
     impact on a substantial number of small entities, or prepare 
     an initial regulatory flexibility analysis (IRFA) on the 
     proposal. Whenever EPA or OSHA determines that a regulatory 
     proposal may have a significant economic impact on a 
     substantial number of small entities, the law further 
     requires that the agency convene a SBREFA panel. This SBREFA 
     panel outreach must take place before the publication of the 
     proposed rule. SBREFA panels are required for all EPA and 
     OSHA rules for which an IRFA is required. However, the Chief 
     Counsel for Advocacy may waive the panel requirement upon the 
     request of EPA or OSHA under certain conditions. To waive the 
     panel requirement, the Chief Counsel must find that convening 
     a panel would not advance the effective participation of 
     small entities in the rulemaking process. Section 609(e) of 
     the RFA lays out several factors in making this 
     determination, including consideration of whether small 
     entities have already been consulted in the rulemaking 
     process and whether special circumstances warrant the prompt 
     issuance of a rule.


                     how does a SBREFA panel work?

       A SBREFA panel consists of a representative or 
     representatives from the rulemaking agency, the Office of 
     Management and Budget's Office of Information and Regulatory 
     Affairs (OIRA) and the Chief Counsel for Advocacy.
       The panel solicits information and advice from small entity 
     representatives (SERs), who are individuals that represent 
     small entities affected by the proposal SERs help the panel 
     better understand the ramifications of the proposed rule. 
     Invariably, the participation of SERs provides extremely 
     valuable information on the real-world impacts and compliance 
     costs of agency proposals.
       The law requires that a SBREFA panel be convened and 
     complete its report with recommendations within a 60-day 
     period. The formal panel process begins with the convening of 
     the panel by the rulemaking agency. The date is normally 
     fixed after consultation with both Advocacy and OIRA. Before 
     convening, the three agencies usually work together to 
     discuss regulatory alternatives and their advantages and 
     disadvantages. The rulemaking agency usually has preliminary 
     discussions with small entities about its draft proposal 
     before the panel is formally convened. These preparations 
     ensure that the panel process can be completed during the 
     statutorily specified 60-day period.
       The product of a SBREFA panel's work is its panel report on 
     the regulatory proposal under review. The panel completes its 
     final report, including its recommendations, early in a 
     rule's developmental stages, so that the agency has the 
     benefit of the report's findings prior to publication of a 
     proposed rule. The panel report also becomes part of the 
     official docket for the proposed rule.
       The purpose of the panel process is threefold. First the 
     panel process ensures that small entities that would be 
     affected by a regulatory proposal are consulted about the 
     pending action and offered an opportunity to provide 
     information on its potential effects. Second, a panel can 
     develop, consider, and recommend less burdensome alternatives 
     to a regulatory proposal when warranted. Finally, the 
     rulemaking agency has the benefit of input from both real-
     world small entities and the panel's report and analysis 
     prior to publication.


                    suggested SBREFA panel timeline

       The RFA provides that the formal panel process must be 
     concluded within 60 days from the formal convening of the 
     panel to the completion of its report. Experience has shown 
     that the panel process works best if agencies and panel 
     members accomplish as much preliminary work as possible 
     before the formal convening of the panel. A suggested 
     timeline follows, although panel members have flexibility to 
     adjust their pre-panel work schedules to ensure the best 
     outcome for each individual rule.

  Ms. SNOWE. Madam President, I yield the floor and now also yield to 
the Senator from Arkansas.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. PRYOR. Madam President, at this point I wish to thank my 
colleague from the State of Maine. She has been a great leader in small 
business matters. She and I serve on the Small Business Committee 
together, and we have been working for, I guess, 3 years now on the 
Regulatory Flexibility Act and other related efforts to try to make 
sure the proper environment exists in America for small businesses to 
thrive and for entrepreneurs to be successful.
  This amendment would make certain that key provisions of the 
Regulatory Flexibility Act, which require that Federal agencies fully 
consider during the rulemaking process the economic impact on small 
firms, would apply to the CFPB created in the bill offered by Senator 
Dodd. This amendment would ensure that the newly created CFPB, when it 
is promulgating its rules and regulations, fully consider the economic 
impact those rules and regs would impose on our Nation's almost 30 
million small firms, which have created 64 percent of all the new jobs 
in this country over the last 15 years and, undoubtedly, will drive 
this Nation's economic recovery.
  The last point I wish to make before I make a few closing comments is 
the fact that we, as the Senate and as the House, should be aware and 
should address the fact that onerous regulations can crush 
entrepreneurial spirit for America's small businesses. In 2009 alone--
last year--during a recession, there were close to 70,000 pages added 
to the Federal Register of new regulations. The annual cost of 
complying with Federal regulations totals about $1.1 trillion.
  I am not saying we should end all regulation. I think most of these--
or at least a lot of these--make a lot of sense and there are good 
reasons for a lot of them. But we have to be careful and we have to 
understand the impact that these regulations have on small businesses. 
We want our small businesses to thrive. We want our small businesses to 
be successful. If we are not careful, an agency such as the CFPB--and 
there are many other Federal agencies--can create rules and relations 
that actually choke off business opportunities for entrepreneurs and 
for small businesses.
  So I am proud to join my friend and colleague from Maine on this 
amendment, and I would encourage other colleagues to look at this 
amendment, look at the text of the amendment. I have enjoyed working 
with the Senator from Maine, over the last few years, when it comes to 
trying to help small businesses.
  With that, I yield the floor.


                           Amendment No. 3808

  The PRESIDING OFFICER. The Senator from Michigan.
  Mr. LEVIN. Madam President, I come to the floor to support the 
amendment of the Senator Franken, amendment No. 3808, along with his 
cosponsors. This will address a major unresolved cause of the financial 
meltdown.
  The cause which this amendment focuses on is the flawed and 
inaccurate credit ratings that labeled poor-quality mortgage-backed 
securities and high-risk collateralized debt obligations as AAA 
investments. AAA means they were on par, in the view of these rating 
agencies, with U.S. Treasurys. Investors from pension funds, to 
universities, municipalities, insurance companies, and more lost 
hundreds of billions of dollars, in part, because of these ratings.
  How did the credit rating agencies get it so wrong? A big part of the 
answer--one that would be remedied by the Franken amendment--is the 
inherent conflict of interest that now permeates the credit rating 
industry. I am going to read from a few e-mails we uncovered and 
disclosed at our hearings.

[[Page 8163]]

We had long hearings. We have been investigating this economic meltdown 
that we had--the financial meltdown--for about a year and a half. One 
of the four hearings we had was looking at the credit rating agencies--
looking at Standard & Poor's, looking at Moody's--and looking through 
their documents, which we subpoenaed, literally, by the millions.
  Listen to some of these e-mails, and we want to focus on what this 
conflict of interest is. If you want to get a feel for how it is that 
the credit rating agencies are being paid by the very people whose 
financial instruments they are doing the ratings of, listen to just a 
few of these e-mails which we got.
  One Standard & Poor's analyst wrote that a ratings model that could 
have been released months before wasn't because we had to massage the 
subprime numbers; if ``we didn't have to massage the sub-prime . . . 
numbers to preserve market share.''
  Inside Standard & Poor's you have their analysts saying we had to 
massage the numbers on this financial document. Why? Not because the 
rating required it or because the merits required it, but in order to 
preserve their market share they were massaging the subprime numbers.
  Here is an e-mail from a UBS banker warning Standard & Poor's not to 
make it harder to get high credit ratings. This is a UBS banker, 
talking to the credit rating agency:

       Heard you guys are revising your residential [mortgage 
     backed security] rating methodology. . . . Heard your ratings 
     could be 5 notches back of mo[o]dy's equivalent. This is 
     going to kill your [residential business]. It may force us 
     [UBS] to do moodyfitch only cdos.

  The Standard & Poors manager who received the e-mail asked a 
colleague, ``[A]ny truth to this?'' The response:

       We put out some criteria a couple of weeks ago that we will 
     begin to use for deals closing in July. . . . We certainly 
     did not intend to do anything to bump us off a significant 
     amount of deals.

  They are worried about their deals. They are worried about their 
bottom line. The country worries about whether those AAA ratings are 
real.
  Here is another example, called Vertical ABS. A major bank asks 
Standard & Poor's and Moody's to rate one of these financial 
instruments. The bank refused to cooperate with the analysts--so the 
bank is not working with the analysts at Standard & Poor's and Moody's 
to rate a CDO. One analyst now is complaining to another, inside of 
this credit rating agency.

       Don't see why we have to tolerate lack of cooperation. 
     Deals likely not to perform.

  ``Deals likely not to perform,'' one analyst inside to another. That 
is Exhibit 94b, by the way, if anyone wants to look it up.
  Despite the analyst's judgment that financial instrument, that CDO, 
was unlikely to perform, both Moody's and Standard & Poor's rated it, 
giving AAA ratings to the four top levels of that particular CDO. What 
happened? Six months later both agencies downgraded that financial 
instrument and it later collapsed.
  One more example. In June 2007, a Moody's analyst sent an email to a 
Merrill Lynch banker stating that he could not finalize a rating until 
the issue of fees was resolved. The Merrill Lynch banker responded: 
``We are okay with the revised fee schedule for this transaction. We 
are agreeing to this under the assumption that this will not be a 
precedent for any future deals and that you will work with us further 
on this transaction to try to get to some middle ground with respect to 
the ratings.'' Moody's assured the Merrill analyst that its deal 
analysis was independent from its fees, but it is clear as glass what 
is going on here. That is Exhibit 23 from our hearing.
  It is past time to tackle the conflicts problem. This bill is the 
right legislation, and the Franken amendment takes the problem head on. 
It would direct the SEC to create a self-regulatory organization, a 
clearinghouse or SRO, to develop a method of assigning credit rating 
agencies to provide initial ratings to structured finance products. The 
entity would have the discretion to develop its own methodology for 
assignment--it could use a rotating system or a formula, just as long 
as the issuer doesn't get to choose the rater. It wouldn't set prices 
or issue ratings, it would just act as an intermediary between issuers 
and raters. In addition, it could increase the number of assignments to 
a particular credit rating agency, based on that agency's past 
performance, or decrease assignments in the case of poor performance, 
creating a key incentive for accurate ratings.
  The amendment would also permit issuers to go to whichever credit 
rating agency they wanted for second or third ratings.
  I commend Senator Franken for this far-sighted effort to correct the 
conflicts problem. If we don't fix it now, we are going to be right 
back here with another financial crisis fueled by inaccurate, 
conflicts-ridden credit ratings.
  I want to note that, while this amendment attacks the most important 
problem with CRAs, there are a number of other problems that also need 
to be addressed in the credit rating agency area. To me, the most 
important remaining problem is eliminating the current statutory ban 
that prevents real SEC oversight. This is what current law says right 
now in 15 U.S.C. section 78o-7(c)(2):

       Notwithstanding any other provision of law, neither the 
     Commission nor any State (or political subdivision thereof) 
     may regulate the substance of credit ratings or the 
     procedures and methodologies by which any nationally 
     recognized statistical rating organization determines credit 
     ratings.

  To me, that statutory ban against looking at the substance of a 
rating or the procedures or methodologies used to produce that rating 
is absurd. It ought to be eliminated. We can't give the SEC the 
responsibility for overseeing credit rating agencies and then prevent 
them from looking at the substance of a rating or the procedures or 
methodologies used to produce that rating.
  I have introduced an amendment with Senator Kaufman that would 
eliminate that statutory provision and direct the SEC to set standards 
and exercise oversight of credit rating agency procedures and 
methodologies, including qualitative and quantitative data and models, 
to ensure that the ratings have a reasonable basis in fact and 
analysis. Given the overwhelming evidence at our hearing about basic 
flaws in the rating models, how the models were tweaked to help 
clients, and how the models were ignored when agencies wanted to 
inflate ratings, it defies common sense to prohibit the SEC from 
looking at the models and the procedures.
  The Levin-Kaufman amendment would also preclude the credit rating 
agencies from relying on due diligence that they had reason to believe 
was wrong. Our investigation showed that the credit rating agencies 
knew that they were relying on bad information because of the rampant 
fraud and weak underwriting standards, and this led to bad ratings. 
Again, this is a commonsense fix, that we hope to offer later or have 
incorporated into a managers amendment.
  In the meantime, I urge my colleagues to vote in support of the much-
needed Franken amendment to eliminate the inherent conflicts of 
interest that now infest the credit rating industry.
  I know the leader is trying to get on with votes, but I want to alert 
colleagues that our hearings, based on a 1\1/2\ year investigation, 
looked at one of the major causes of this collapse. One of the major 
causes was because our credit rating agencies were interested in their 
bottom lines instead of getting accurate ratings for the financial 
instruments, which our universities, our pension funds were buying.
  The Franken amendment corrects it. It requires that this conflict of 
interest be ended. It does not just study it, it requires an end to the 
conflict of interest by allowing the Securities and Exchange Commission 
to identify an independent intermediary who will put a process in place 
to end this conflict of interest. I commend Senator Franken for his 
amendment.
  The PRESIDING OFFICER. The majority leader.
  Mr. REID. Madam President, I appreciate my friend from Michigan 
yielding

[[Page 8164]]

the floor. I appreciate the statement. I appreciate the work the 
Subcommittee on Investigations has done and I appreciate the work his 
Permanent Subcommittee on Investigations has done. They have done 
remarkably good work.
  I ask unanimous consent the Senate now proceed to vote in relation to 
the following amendments in the order listed; that no amendments be in 
order to any of the amendments covered in this agreement: Franken 
amendment No. 3991; LeMieux amendment No. 3774, as modified, and as a 
side-by-side to No. 3991; provided further that after the first vote in 
the sequence, the remaining vote be limited to 10 minutes; and that 
there be 2 minutes of debate equally divided and controlled prior to 
the second vote; further, that at the conclusion of these votes, 
Senator Kaufman be recognized for a period of 5 minutes as in morning 
business; that at the conclusion of his remarks, the Senate then stand 
in recess until 2 p.m.; that at 2 p.m. there be a period of morning 
business, in which Senators Menendez, Lautenberg, and Nelson of Florida 
be permitted to speak on the subject of S. 3305 and make a unanimous 
consent request upon the subject; that immediately thereafter the 
Senate resume the consideration of S. 3217 and there be 5 minutes 
debate remaining in order to the Sessions amendment No. 3832, with the 
time equally divided and controlled in the usual form; that upon the 
use or yielding back of time, the Senate proceed to vote in relation to 
the Sessions amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 3991

  The PRESIDING OFFICER. Under the previous order, the question is on 
agreeing to the Franken amendment.
  Mr. KYL. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  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.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 64, nays 35, as follows:

                      [Rollcall Vote No. 146 Leg.]

                               YEAS -- 64

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

                                NAYS--35

     Alexander
     Barrasso
     Bayh
     Bennett
     Bond
     Brownback
     Bunning
     Burr
     Chambliss
     Coburn
     Corker
     Cornyn
     DeMint
     Dodd
     Enzi
     Gregg
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johanns
     Kyl
     LeMieux
     Lieberman
     Lugar
     McCain
     McConnell
     Nelson (NE)
     Reed
     Roberts
     Sessions
     Shelby
     Thune
     Vitter
     Voinovich

                             NOT VOTING--1

       
     Byrd
       
  The amendment (No. 3991) was agreed to.
  The PRESIDING OFFICER. The Senator from Massachusetts.


      Visit to the Senate by President Hamid Karzai of Afghanistan

  Mr. KERRY. Madam President, we are currently being visited in 
Washington by the President of Afghanistan. He has been in the Senate 
engaged in a luncheon with Senators. I ask unanimous consent that the 
President of Afghanistan, Hamid Karzai, be permitted the privilege of 
coming on the floor to be greeted by the Senate, together with his 
Ministers who are here for a series of important meetings.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  [Applause.]


                    Amendment No. 3774, as Modified

  The PRESIDING OFFICER (Mr. Burris). Under the previous order, there 
are 2 minutes of debate equally divided on the LeMieux amendment No. 
3774.
  Who yields time?
  The Senator from Florida.
  Mr. LeMIEUX. Mr. President, this Chamber just supported and voted for 
the Franken amendment. My measure goes further. My measure says we are 
going to write these rating agencies out of the law. We should not 
reward bad behavior. There are other ways to determine 
creditworthiness. There will be a 2-year period to figure that out. 
There is a better way to solve this problem. These rating agencies were 
responsible for this debacle.
  I yield the remainder of my time to my colleague, Senator Cantwell.
  Ms. CANTWELL. Mr. President, this language was also offered in the 
House by our colleague, Barney Frank. It is appropriate that we don't 
require Federal agencies to just rely on these rating agencies. It is 
critical that agencies such as the FDIC and the Comptroller of the 
Currency use their discretion to come up with appropriate standards of 
creditworthiness and not rely on the monopoly of rating agencies. I 
hope my colleagues will support the amendment.
  The PRESIDING OFFICER. Who yields time in opposition?
  The Senator from Connecticut.
  Mr. DODD. Briefly, my concern with this amendment is we are replacing 
the rating agencies without having anything in their place. I urge my 
colleagues to vote no and yield back my time.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  Mr. ENSIGN. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The clerk will call the roll.
  The bill clerk called the roll.
  Mr. DURBIN. I announce that the Senator from West Virginia (Mr. Byrd) 
is necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 61, nays 38, as follows:

                      [Rollcall Vote No. 147 Leg.]

                                YEAS--61

     Alexander
     Barrasso
     Bayh
     Begich
     Bennet
     Bennett
     Bond
     Boxer
     Brown (MA)
     Brownback
     Bunning
     Burr
     Cantwell
     Chambliss
     Coburn
     Cochran
     Collins
     Corker
     Cornyn
     Crapo
     DeMint
     Dorgan
     Ensign
     Enzi
     Feingold
     Graham
     Grassley
     Gregg
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johanns
     Kaufman
     Klobuchar
     Kyl
     Landrieu
     LeMieux
     Levin
     Lincoln
     Lugar
     McCain
     McCaskill
     McConnell
     Menendez
     Murkowski
     Murray
     Reid
     Risch
     Roberts
     Sanders
     Sessions
     Shelby
     Snowe
     Specter
     Thune
     Udall (CO)
     Vitter
     Voinovich
     Wicker
     Wyden

                                NAYS--38

     Akaka
     Baucus
     Bingaman
     Brown (OH)
     Burris
     Cardin
     Carper
     Casey
     Conrad
     Dodd
     Durbin
     Feinstein
     Franken
     Gillibrand
     Hagan
     Harkin
     Inouye
     Johnson
     Kerry
     Kohl
     Lautenberg
     Leahy
     Lieberman
     Merkley
     Mikulski
     Nelson (NE)
     Nelson (FL)
     Pryor
     Reed
     Rockefeller
     Schumer
     Shaheen
     Stabenow
     Tester
     Udall (NM)
     Warner
     Webb
     Whitehouse

                             NOT VOTING--1

       
     Byrd
       
  The amendment (No. 3774), as modified, was agreed to.
  The PRESIDING OFFICER. The Senator from Delaware is recognized.

                          ____________________