[Congressional Record (Bound Edition), Volume 156 (2010), Part 6]
[Senate]
[Pages 8669-8684]
[From the U.S. Government Publishing Office, www.gpo.gov]




     RESTORING AMERICAN FINANCIAL STABILITY ACT OF 2010--Continued

  Mr. DORGAN. My understanding is that we would now yield 6 minutes to 
the Senator from Illinois, after which I have been asked to call for a 
quorum call.
  The PRESIDING OFFICER. The Senator from Illinois is recognized.
  Mr. BURRIS. Mr. President, I am proud to join my colleagues on the 
floor of this Chamber today.
  Here, in our Nation's Capital, we gather to confront shared 
challenges. We celebrate our great leaders, and mourn fallen heroes. 
Here, we carry out the hard work of self-government. We try to make 
this union a little more perfect every day. It is messy. It is 
difficult. We make mistakes, and at times we fall short.
  In any other country, these flaws and missteps might be fatal--but 
not in the United States of America. Here, we are defined by our 
ability to correct injustice to confront problems and move ahead 
peacefully, with respect for the rule of law even when those problems 
are great.
  Mr. President, much of our history has been written right here in 
this city. But in some ways, the city itself tells two divergent 
stories:
  More than two centuries ago, the foundation of this country was laid 
by a group of American patriots, who chose this land for their new 
Capitol.
  They fought--and many died--for principles of freedom and equality. 
They framed the greatest, most progressive system of government in the 
history of the world.
  And then, in an irony both tragic and unjust, the foundation of this 
very

[[Page 8670]]

building the heart of our democracy was laid by enslaved African 
Americans.
  So, from the very beginning, our Nation has struggled to live up to 
its highest ideals.
  But, in many ways, I believe that is where our greatness truly lies: 
in our ability to determine our own course, and correct the mistakes of 
the past.
  That is why the American civil rights movement is perhaps one of the 
greatest periods in our history.
  During the 1950s and the 1960s, citizens and activists joined 
together with lawmakers to overturn policies of hatred and 
discrimination that created a powerful nonviolent movement for civil 
rights under the rule of law which brought about one of the most 
significant social and cultural changes in our Nation's history.
  Earlier today, I spoke before the Subcommittee on National Parks, 
chaired by my friend, the distinguished Senator from Colorado, Mr. 
Udall, to advocate for a piece of legislation that is very important to 
me. I am proud to sponsor the United States Civil Rights Trail Special 
Resource Study Act, S. 1802, a bill that will help identify and 
preserve the history of the people and places that defined the civil 
rights movement. This bill joins a bipartisan companion measure from 
the House of Representatives, H.R. 685, which passed unanimously last 
September.
  It will honor folks who forever changed the landscape of this Nation. 
Their stories deserve to be told. In any other country, this kind of 
progress would have been impossible, but not in America. We have the 
capacity for sweeping change woven into our very identity, and that is 
what my bill would recognize, celebrate, and preserve.
  This Capitol Building was constructed under slavery. Yet it embodies 
a system of government that allows subsequent generations to correct 
this terrible wrong. During the civil rights movement, thanks to 
ordinary people with extraordinary vision, we witnessed a revolution of 
values and ideas that changed this Nation forever.
  I come to this floor today in celebration of the pioneers who made 
these changes possible. My bill would direct the Secretary of the 
Interior to identify the places, the resources, and the themes 
associated with this movement and consider adding them to the National 
Trails System. This would include the sites of the famous march in 
Selma and Montgomery, AL, the Greensboro sit-in, and the Montgomery bus 
boycotts. We would commemorate these places where peaceful protesters 
demonstrated for equal rights, and even in some places where violence 
broke out and lives were lost in the cause of freedom.
  My bill would also recognize folks such as the citizens and elected 
leaders of Savannah, GA, who were ahead of the rest of the country and 
took peaceful action to desegregate local communities well before 
Federal laws were passed.
  We need to make sure the next generation learns and does not forget 
the story of the civil rights movement and the ideals it strove to 
achieve. That is why this legislation is so important.
  This bill, with the companion bill in the House, would highlight this 
powerful legacy. Yes, these injustices were great and they must never 
be forgotten, but it would be a mistake to dwell exclusively on the 
errors of our past. Instead, I believe we should celebrate the progress 
we have made. We accomplished what many other countries find 
impossible. We corrected the greatest mistakes of our history. We 
encountered obstacles and overcame them. We took control of our shared 
destiny and redefined it.
  Our Union remains far from perfect, but challenges persist, and it 
will be up to future generations to address these challenges. But there 
is no denying we have come a very long way.
  Two centuries ago, my ancestors would not have been allowed in this 
building except as laborers. Today I stand on the floor of the Senate 
as a Member of the highest ranking body in this land. That is a 
powerful affirmation of what this country stands for.
  Let's preserve this history and pass it on to the next generation.
  I thank Chairman Udall, Ranking Member Burr, and other members of the 
Subcommittee on National Parks for allowing me to offer a statement 
earlier today.
  I ask my colleagues to join me in supporting this bill before the 
full committee and the full Senate so we can send it to the President's 
desk.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Washington.
  Ms. CANTWELL. Mr. President, I wish to spend a few minutes talking 
about our previous vote this evening.
  I know many of my colleagues worked hard on regulatory reform 
legislation, but I also think it is important that we keep our eye on a 
very critical part of solving this problem. I know many of my 
colleagues, particularly on the Banking Committee, have had a long 
history with banking issues and may see things a little differently 
from the context of the issues they have been dealing with in the 
committee.
  It has been clear to me for a long time that the deregulation of the 
derivatives market in 2000 led to a very unfortunate situation. Before 
deregulation, we actually had transparent trades in reporting to the 
CFTC. We had capital requirements. We had speculation limits. We had 
antifraud and antimanipulation. We had trader licensing and 
registration. And we had public exchange trading.
  The reason I bring that up is because to me, if the derivative crisis 
brought on basically a world economic implosion, then the principles of 
this underlying bill ought to adhere to the principles that have been 
laid out by the White House and others on what would help us fix this 
problem.
  We know it was deregulated, and we know these things were eliminated. 
But I take the Treasury Secretary at his word when he wrote earlier 
this year:

       To contain systemic risks, the CEA and the securities laws 
     should be amended to require clearing of all standardized 
     derivatives through regulated central counterparties.

  The reason I bring that up is because the underlying bill before us--
even though the Agriculture Committee corrected this--the language 
coming from the Banking Committee created a loophole and basically says 
that if you go to a clearinghouse and they say you do not need to be 
cleared, don't worry about it, you don't need to be cleared.
  It should be no surprise to anybody that the swaps dealers are the 
people who own the clearinghouses. In that context, a fundamental tenet 
of derivative regulatory reform, exchange trading, clearing, aggregate 
position limits, and transparency, one of those pillars is missing from 
this bill.
  Look at what happened because of this deregulation in 1999. There was 
less than $100 billion in the derivatives market, and today we are at a 
$600 trillion derivatives market--$600 trillion. Before deregulation it 
was a very small amount of money, and now we have this incredible 
market.
  The question is whether we are going to regulate it to have the basic 
tenets of true competition, which means there is some oversight and 
some transparency to make sure that there are not manipulative devices 
or contrivances in this legislation.
  The good news is we have tried to say that of these principal tenets 
of exchange trading, we have to have transparency, real-time 
monitoring--all these things should be in there. But you also have to 
have capital behind the trades. That means we have to have a 
clearinghouse to make sure this type of activity is being cleared.
  There were many times before the Senate Finance Committee where the 
Treasury Secretary said:

       I'm fully supportive of moving the standard part of those 
     markets onto central clearinghouses and exchanges . . . We 
     want to make sure that the standardized part of those markets 
     moves into central clearinghouses and onto exchanges as 
     quickly as possible . . .

  That was in January.
  We had another time where the administration said:

     . . . we need to establish a comprehensive framework of 
     oversight, protections and disclosure for the OTC derivatives 
     market, moving the standardized parts of those markets to 
     central clearinghouses, and encouraging further use of 
     exchange-traded instruments.


[[Page 8671]]


  That was in March.
  I don't know why we are still having this debate as to whether we are 
going to have clearing of these derivatives. To me it is critical.
  I know there are other good parts of this legislation about which 
people care deeply. But if we have this $600 trillion market and we are 
not truly going to have exchange trading and clearing and aggregate 
position limits across all exchanges, we are not going to rein in the 
derivatives problem. We are not.
  I hope my colleagues will take these words from the Treasury 
Secretary and from the White House and hopefully get a piece of 
legislation on this floor that will take care of this clearinghouse 
loophole.
  I know my colleagues think we can talk about building a dam against 
this wall of dark derivatives. But even something such as Hoover Dam, 
with all the great concrete and all the great engineering and all the 
great things that make that structure work, still has a problem if 
somebody drills a hole in the bottom of it. Over time, that is where 
all the water will flow, and that is where this derivative market is, 
too. If we do not have a regime of exchange trading and clearing, we 
will have money seeping into a continuation of a dark market.
  Would I like other amendments, would I like a vote on an amendment by 
my colleague from Arizona and me that is the reinstatement of Glass-
Steagall? Sure, I would. Sure, I would like to have many other 
amendments that my colleagues have been talking about, and hopefully 
they will get votes on them, whether it is Merkley-Levin or other 
pieces of legislation people have been offering. But this issue is a 
fundamental one. We will not have reform if we do not have exchange 
trading and clearing, if we do not bring derivatives onto the same kind 
of mechanisms we have for other products in the financial markets. If 
we do not do that, then I don't know what we are doing out here in the 
context of what brought us to this crisis.
  Trading of dark market derivatives is what has brought this challenge 
to our U.S. economy. Let's bring some transparency into that market. 
Let's adhere to these words and actually implement this so we can move 
on with this legislation.
  I yield the floor.
  Mr. SHELBY. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. Mr. President, what is the order of business before the 
Senate?
  The PRESIDING OFFICER. The Merkley amendment is pending.
  Mr. DURBIN. Mr. President, I stand in support of the Merkley 
amendment. This is an effort by Jeff Merkley of Oregon and Carl Levin 
of Michigan to try to strengthen the bill that is before us on Wall 
Street reform; to try to minimize the types of investments made by 
banks which could, in fact, jeopardize those government institutions 
that guarantee the deposits at banks because some bankers make bad 
decisions and bad investments. What Senator Merkley is trying to do is 
to reduce that likelihood, which means banks are less likely to fail 
and taxpayers are less likely to be holding the bag.
  Senator Levin of Michigan, you will remember, 3 or 4 weeks ago held a 
historic hearing with Goldman Sachs representatives, including Mr. 
Lloyd Blankfein, their CEO, to discuss some of their practices. Those 
of us who know Senator Levin know he is a very studious and thoughtful 
individual and he doesn't take on complex issues lightly. He spent 
months in preparation for that hearing, and coincidentally it came up 
just as we began the debate here on Wall Street reform. It was quite a 
hearing. It went on for many hours because there was an effort by the 
witnesses to avoid answering questions, so the committee decided they 
would keep the witnesses there until the questions were answered. As a 
result, they stayed into the night. At the end of the day, I think 
people had a better understanding of some of the practices at Goldman 
Sachs, one of the largest financial institutions on Wall Street. I 
think they also may have had some second thoughts about some of the 
standards being used by that firm and others.
  We know Goldman Sachs is currently being investigated by the 
government for alleged wrongdoing when it comes to the sale of 
investment products. It turns out, as best I understand it, that this 
Wall Street firm of Goldman Sachs was selling investments to 
individuals and then basically betting they would fail--with their own 
money. It strikes me as a complete abdication of any financial or 
fiduciary responsibility, to put their customers in that kind of 
compromised position. It is interesting that I have had a conversation 
with people in other firms on Wall Street who think this is routine and 
not extraordinary. That makes it all the more troubling.
  The Levin portion of the Merkley-Levin amendment addresses this issue 
about the ethical considerations of these companies that, in fact, are 
selling products to their customers and then turning around and 
secretly, quietly betting with their own investments that those 
products will fail.
  So that sort of thing should be addressed in this bill. The Merkley-
Levin amendment is an amendment which would have been considered 
regardless of whether today's cloture motion had passed.
  For those who do not follow the Senate, the cloture motion is an 
attempt to at least bring a close to the beginning of a debate and 
start to wind down the debate toward a vote. So we had a vote today. We 
needed 60 votes in the Senate out of 100 Members to vote in favor of 
the cloture vote.
  After 4 weeks on the floor of the Senate on this Wall Street reform 
bill, the majority leader and many of us felt we had reached a point 
where we needed to start winding this bill down and bring it to a final 
vote. Well, we needed 60 votes to do it. There are 59 Democratic 
Senators here when all are present and accounted for. One of our 
Senators, Mr. Specter of Pennsylvania, was not here today, and as a 
consequence we found ourselves needing help from the other side of the 
aisle.
  We needed at least one--it turns out three--Republican vote in order 
to move forward and to bring this bill to a vote. At the end of the 
day, we did not have them. We fell one vote short. We had two 
Republican Senators who crossed the aisle and voted with us--that would 
be the two Senators from Maine, Susan Collins and Olympia Snowe--and no 
other Republicans who would join us in trying to bring this bill to a 
close with some closing amendments and a vote.
  If you followed the debate on this bill, it is no surprise that the 
Republicans are reluctant to be part of Wall Street reform. When the 
debate started, it started with three--not one but three--straight 
filibuster votes. Those were efforts by the Republicans to stop us from 
even bringing this issue and subject to the floor of the Senate. Many 
of us felt this discussion and debate over this bill was long overdue. 
We know this recession has cost us dearly in the United States. We know 
it extracted $17 trillion out of the American economy.
  We felt it personally. You felt it in your savings account, your IRA, 
your retirement account. You saw it when the business down the street 
started to lay off its employees and another one closed. You noticed 
the home across the street going into foreclosure.
  You heard all the stories about unemployed people, maybe some in your 
own family. So we knew what this recession meant and what it cost us, 
$17 trillion. What we are trying to do with this Wall Street reform 
bill is to change the way they do business on Wall Street so we never 
face another recession such as the one we are in, brought on by the 
greed and stupidity of the so-called banking experts on Wall Street.
  We know what happened. Wall Street got away with murder for years, 
and taxpayers ended up holding the bag.

[[Page 8672]]

Hundreds of billions of dollars out of the Treasury, out of the wallets 
of families across America in terms of tax payments, that ultimately 
found their way to Wall Street to rescue the failing businesses there.
  Why were they failing? Well, try reading ``The Big Short'' by Michael 
Lewis, one of the most popular books now in America. Mr. Lewis was in 
my office today. He has written a number of books, and he is pretty 
good at it. He talked about his experience sitting down with people who 
were insiders on Wall Street who were describing what went on literally 
for years.
  What you think is that when you get to the top, you will find the 
smartest people. I guess that is possible and likely. But in this case, 
when you got to the top, you found some of the dumbest people who were 
involved in constructing investment ideas that were fundamentally 
flawed, taking failing mortgages across the United States and packaging 
them together and then trying to sell them locally and globally and 
watching the bottom eventually fall out.
  Lewis wrote this in this his book, ``The Big Short.'' Many of us have 
read it. He and I had a chance to talk about it today. But it was that 
kind of conduct that led to this recession that cost us all these jobs, 
that wrecked the savings accounts of American families, that has set us 
back on our heels, and we are finally coming out of it slowly. But it 
has cost us dearly as a nation.
  We are trying to change the way Wall Street does business so we never 
have to face a recession such as this again. The Republicans in the 
Senate, with only a few exceptions, have resisted our efforts to pass 
this bill.
  First, with three straight filibusters to stop us from bringing the 
Wall Street reform bill to the floor, three efforts to stop us from 
even debating the bill, then 4 weeks of debate on the floor of the 
Senate, and I will tell you, that is rare. I have been around here for 
a few years. It is very rare that you would spend 4 weeks on one bill. 
Well, this is our fourth week on this bill.
  During that time, Senator Dodd, the chairman of the Senate Banking 
Committee, has been working with Senator Shelby, the ranking Republican 
from Alabama, who is on the floor, and they have been going back and 
forth with amendments.
  I think Senator Dodd said today almost 60 amendments have been 
considered, pretty close. A lot of different ideas have come to the 
floor back and forth. Some Democratic amendments have been considered 
and failed, some passed. Some Republican amendments were considered and 
failed. There were bipartisan rollcalls. It has been a real Senate 
debate.
  It feels good. It does not happen enough around here. This so-called 
deliberative body spends a lot of time, such as at this moment, where 
nothing is going on, on the floor except some profound speeches by the 
Members. What we have tried to do, during the course of this debate, is 
give everybody a chance to bring out their point of view. Points of 
view are much different. That is OK. That is why we are here. We are 
supposed to debate these things and vote on them.
  I had an amendment last week, one that I have been working on for 
literally 3 years or more, that deals with the credit card companies' 
charges to merchants and retailers. When a customer uses a credit card, 
they not only get credit to buy a meal, for example, that restaurant 
has to pay a percentage of the bill, the cost of the meal, back to the 
credit card company. This interchange fee has become unfair to small 
businesses.
  Well, after working at it for more than a week, we finally had the 
amendment called 6 days ago, and it was enacted, passed by the Senate, 
with a vote of 64 to 33, 17 Republicans joined me. So it was a good 
bipartisan amendment. It was a surprise to many because the credit card 
companies and the banks that support them are very powerful. In this 
case, they came up short. The retailers, the merchants, the convenience 
stores, the gas stations, the restaurants, grocery stores all across 
America finally prevailed in this long battle against the credit card 
companies.
  But that was the best of the Senate, I thought, and of course I am 
partial because my amendment passed. But it was the best of the Senate 
because it was a real debate and a real vote and an outcome which was 
bipartisan.
  We felt this was a good time, in the course of the debate, to start 
winding it down and come down to a handful of amendments, vote on them, 
and then vote for final passage so we can conference this bill, work it 
out with the House, send to it the President to be signed into law. But 
we could not get the votes.
  The Republicans, but for two Senators, refused to give us the votes 
to end this part of the debate and bring this bill to a final vote. It 
is frustrating. I do not know that they can argue that we have been 
unfair. We have given pretty wide berth to the Republican side to offer 
the amendments they wanted to offer. They have offered quite a few, and 
we have, too, on our side of the aisle.
  So I do not think you can argue that we should not stop debate over 
fairness in the course of the debate. They might be arguing they do not 
want a bill at all. That is possible. First, they filibustered to stop 
us from bringing the bill to the floor. Now they are basically 
filibustering to stop us from ending the debate on the bill and bring 
it to a final vote.
  I only know of several groups across the country that want to stop 
the debate on this bill: Wall Street, the biggest credit card 
companies, and the biggest banks. They want to stop this bill. They 
want to kill it. They have spent a fortune on lobbyists, roaming around 
our offices on Capitol Hill, to try to convince Members to stop this 
Wall Street reform bill.
  Well, they at least were successful today. They convinced all but two 
Republican Senators to come to their side of the issue and to stop this 
debate on Wall Street reform. That is unfortunate because I think the 
American people expect us to get something done. They expect us to hold 
Wall Street accountable, to make sure the reckless gambling by Wall 
Street institutions that led to the loss of more than 8 million 
American jobs comes to an end.
  They want to end taxpayer bailouts once and for all. They do not ever 
want to hear the word ``TARP'' again, unless it is something you can 
put over the top of your station wagon. They certainly do not want us 
in a situation where we are coming up with hundreds of billions of 
dollars to bail out these banks. Thanks to an amendment by Senator 
Barbara Boxer of California, one of the first, we made it clear that we 
are prohibiting any future bank bailouts under this bill. Senator Boxer 
was a real leader on that issue.
  I think most Americans believe we need to have an agency that is 
going to be here in Washington which will administer the strongest 
consumer financial protection law in the history of the United States, 
a law that will empower consumers when they go through a real estate 
closing or sign a credit card agreement or sit down next to their son 
or daughter to sign the student loan forms or take out a loan for a 
car, knowing they are not going to be cheated and treated poorly.
  This agency is there to empower consumers so they are not, in fact, 
swindled out of their life savings and are not brought into legal deals 
which are totally unfair. We want to bring sunlight and transparency to 
shadowy markets. Some of the things we voted on will move us in that 
direction, to start eliminating some of the trading that has gone on 
that is an outrage.
  I do not think business as usual is the right way to go. But the 
Republican votes today, all but two Republican Senators voted to 
continue business as usual on Wall Street. They do not want this bill 
to pass. So they voted that way today. At the end of the day, 39 out of 
41 Republican Senators voted for the status quo, keep things as they 
are on Wall Street.
  In addition, of course, we understand that Wall Street is powerful. 
When my amendment came up on interchange fees, the banks warned 
Senators: If you vote for the Durbin amendment, we are not going to 
support you; that is, contribute, in the next election campaign. That 
was on the front page of the New

[[Page 8673]]

York Times last Saturday. It is the most bald-faced admission I have 
ever seen by special interest groups that they are putting the pressure 
on Members who vote for Wall Street reform.
  So I say to my colleagues: They may have won today and kept the banks 
happy. But, ultimately, it is more than the bankers who will be voting 
in November. It is people all across America who are angry at what 
happened on Wall Street and do not want it to happen again. They are 
going to remember the Senators who voted with Wall Street and those who 
voted for reform, and today we have a rollcall that indicates it.
  We have to make sure we make the changes that make the difference 
across America. Some of the things that have happened here are pretty 
graphic. Paul Krugman, a writer from the New York Times, wrote a few 
weeks ago:

       The main moral you should draw from the charges against 
     Goldman, though, doesn't involve the fine print of reform; it 
     involves the urgent need to change Wall Street. Listening to 
     financial industry lobbyists and the Republican politicians 
     who have been huddling with them, you'd think that everything 
     will be fine as long as the federal government promises not 
     to do any more bailouts. But that's totally wrong--and not 
     just because no such promise would be credible.
       For the fact is that much of the financial industry has 
     become a racket--a game in which a handful of people are 
     lavishly paid to mislead and exploit consumers and investors. 
     And if we don't lower the boom on those practices, the racket 
     will just go on.

  That is why this vote today was so critically important. Those who 
want to stick with the status quo, who want to reward the special 
interests, who want to load up this bill with lobbyists' loopholes, 
prevailed today on this vote today by one vote on the floor of the 
Senate. There will be another vote tomorrow and maybe the day after 
too. The question is, Will any other Republicans, aside from the two 
Senators from Maine, break ranks and join the Democrats for Wall Street 
reform?
  This is a once-in-a-political-lifetime opportunity. If they want to 
stand with the special interests and Wall Street to stop this reform, 
they will certainly have to answer for it when the time comes and they 
face the voters.
  This attempt we are making to change the rules on Wall Street is an 
attempt to empower the people of this country to help them make the 
right decisions personally and to make certain that they do not end up 
losing their savings and their homes and their jobs because of the 
greed and selfishness of those on Wall Street.
  I can remember many years ago on the floor of the Senate, when I was 
a brand new Senator, way in the back row there, and offered an 
amendment to a bankruptcy bill. The amendment said: If you are a 
predatory lender; that is, if you violated the laws of America in the 
loans that you are making, such as mortgages, you cannot then turn 
around in bankruptcy court and recover from the debtor who has been the 
victim of your predatory lending practices.
  I was arguing on the floor with Senator Phil Gramm of Texas, who was 
here arguing against my amendment. He was high ranking on the Senate 
Banking Committee. He said: If the Durbin amendment passes, it is going 
to kill the subprime mortgage market in America. Well, I lost by one 
vote. If my amendment had prevailed, who knows, history might have been 
a little different. That is why one vote makes a difference.
  Today, we needed one more Republican Senator to vote for Wall Street 
reform. We had two. We needed one more. I understand two of our 
Democratic Senators withheld their votes because they want this bill to 
be stronger. I hope they will come around. I hope they will vote with 
us. But at the end of the day, we only had two Republican Senators who 
stepped up and said they favored Wall Street reform.
  Well, I lost my amendment by one vote that might have changed a 
little bit of financial history if it had passed. Today, we lost by one 
vote when it came to Wall Street reform.
  We are not going to quit. President Obama is committed to it. 
Democrats in the Senate are committed to it. Democrats in the House 
already passed their bill. We need to get this done. It is time to stop 
the obstructionism. It is time to stop the stonewalling. It is time to 
bring this to a close with a handful of amendments on both sides of the 
aisle. Let's have an up-or-down vote, and let's get on with it. Let's 
pass this bill.
  On final passage, a number of Republicans who have been holding back 
and would not support this bill may have second thoughts. They may 
decide they don't want to be found on the wrong side of history again; 
that it isn't worth standing up with the special interest groups or 
Wall Street lobbyists when America is crying for basic reform and 
accountability.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Georgia.
  Mr. ISAKSON. Mr. President, I appreciate the distinguished majority 
whip. I voted with him last week on the interchange fees on debit 
cards. I thought it was a good amendment. But I have to take issue. 
Don't generically accuse those of us in this body of stonewalling a 
bill or more or less being interested in looking out for Wall Street or 
anybody else.
  A little history lesson is due. First, what brought us into this 
recession was the subprime market, which the distinguished Senator 
mentioned, and the housing market. It happened because Members of this 
body and the body down the way, 13 years ago, began to direct Fannie 
Mae and Freddie Mac to include in their portfolios a portion of 
affordable housing loans which were the words for what became subprime 
loans.
  Freddie Mac and Fannie Mae created the market that allowed Wall 
Street to go find capital and collect that capital, put a high premium 
on the capital, high interest rate, maybe 200 basis points over the 
going rate, but then make it a higher credit risk to lenders because 
that is the way credit works. What happened is, those loans became 
popular, and because of a government-sponsored entity that began the 
consumption of those loans, they proliferated. Those securities were 
sold around the world. When they collapsed, and we went all through 
that, it was a terrible collapse. But the root of this problem is that 
Freddie Mac and Fannie Mae were under the direction of the Congress as 
to what they should do in terms of the securities they owned. I am 
saying the Congress of the United States, not pointing fingers at any 
particular party.
  With that being true--and I don't think anybody can dispute it--we 
have a financial reform bill before us that exempts Freddie Mac and 
Fannie Mae from reform. That doesn't make any sense. If you listen to 
the arguments to why they weren't there, it is because it was too hard.
  These are hard times. Americans are having hard times. It is time we 
did the hard things. It is time we not try and politically label 
Members as friends of Wall Street or friends of Main Street. We are all 
Americans. It is our economy. It is not just part of the economy. I 
take issue with the labeling that takes place sometimes. Let's talk 
about the facts that are there, one way or another. Let's let the facts 
determine what we do.
  I didn't vote for cloture because I don't think it is right to leave 
Freddie Mac and Fannie Mae outside the equation and incorporate every 
other business on Main Street and on Wall Street to the extent we have. 
It is right for us to take some of the blame in the Congress. A lot of 
this wouldn't have happened had we not directed the government-
sponsored entities with which we had influence, and the implied full 
faith and credit of the taxpayers would be the consumers that would 
create the liquidity for subprime loans.
  My only statement to the majority whip is this: I understand facts. 
The facts are that Freddie Mac and Fannie Mae started this. They are 
exempt from this piece of legislation. I, for one, take issue with 
that. We cannot reform and address the concerns that happened if we 
don't address the root of the problem.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois.

[[Page 8674]]


  Mr. DURBIN. Mr. President, at the risk of a real debate, I invite the 
Senator from Georgia to stay, if he would, for a moment so we can 
engage.
  Mr. ISAKSON. I am happy to.
  Mr. DURBIN. I have the highest respect for the Senator from Georgia 
personally, and I thank him for his support on my interchange 
amendment. We have worked on many other issues, and we will in the 
future. I will concede what he pointed to as a fundamental flaw, a 
mistake that was made. There was a presumption made that owning a home 
was such a valuable American ideal--and I know your background; you 
certainly agree with that--but we went too far. We extended the 
opportunity for home ownership to people who were not ready. We 
believed if we pushed them to the limit of how much they could pay, the 
home would appreciate in value, their incomes would go up, and 
everything would work out. It turned out that gamble was wrong for some 
people. Certainly, Fannie Mae and Freddie Mac, as the ultimate 
guarantors of mortgages, were part of that. There is a government 
element here. I don't question that for a moment. Certainly some blame 
lies there.
  Blame lies with those people who overextended, bought more than they 
could afford. They may have been misled into it, but the fact is, they 
did it. They made mistakes.
  Having said that, though, there were a lot of people involved in 
financial institutions which led them into this, misled them into this. 
No-doc closings, where people didn't have to present a document proving 
the amount of income they had, basically telling people: We will give 
you a mortgage where it is; you will be paying just interest for a few 
years, and everything will be just fine.
  These mortgages where the interest rates would explode in the 
outyears, and people would not be able to pay, there was a lot of 
things that went wrong there. But I hope the Senator from Georgia will 
agree that behind this bill is the notion that some things happened on 
Wall Street which were outrageous. The fact that we ended up coming up 
with somewhere in the range of $700 or $800 billion to save most Wall 
Street institutions is an indication that things were out of hand on 
Wall Street, that we never want to return to that again.
  I will concede to the Senator from Georgia his premise. Do we need to 
reform Fannie Mae and Freddie Mac? Yes, we do. If we don't, we will pay 
dearly for it. I don't know if we can accomplish it in this bill, 
accomplish it at this moment, but it literally has to be done. I have 
never quarreled with that premise in the debate, nor do I question his 
starting point that this was part of the problem that led to where we 
are today.
  It is always the best is the enemy of the good around here. We have a 
good Wall Street reform bill that moves in the right direction to avoid 
some of the abuses there. To argue that it doesn't include Fannie Mae 
and Freddie Mac and therefore we can't support it, perhaps we just have 
a different point of view. I think this is a valuable thing to do to 
move forward. I will concede his point. He is right in what he said.
  Mr. ISAKSON. Will the Senator yield?
  Mr. DURBIN. Yes.
  Mr. ISAKSON. I appreciate his comment. That was my point. When I was 
listening to the Senator's speech, I got a little irritated. Then I 
realized I have probably done the same thing before too. I leaped over 
some facts that belong in the debate. The fact that the Congress 
directed Freddie and Fannie to own a percentage of their portfolio in 
subprime loans was the source of the capital that bought the first 
securities that created the subprime securities. I do not argue that 
there are not good things in this bill.
  In fact, when the Senator was referring to the liar loans, it was the 
Isakson-Landrieu amendment that we successfully added to this bill that 
defined that a qualified loan is to be exempt from risk potential 
because it requires income verification, requires an employer statement 
that the employee is hired, and it requires an income ratio that is 
sufficient to retire debt that is borrowed. I agree with the Senator.
  My point was that when all of us make these remarks of what bills are 
and they are not, we ought to include all of the facts that are in 
there, not just a select few. I appreciate the Senator's comments. I 
was proud to be a part of his amendment.
  Mr. DURBIN. I thank my colleague from Georgia. It depends on one's 
perspective. The amendment he just described that he added to the bill 
is a valuable part of this bill. It wasn't there originally. It is now. 
I am glad it is. I am happy to support it. That is what we are trying 
to do today, to move its passage so it becomes the law of the land. But 
because we fell short by only two Republican votes coming forward 
today, we can't move forward.
  If the position of the Senator is we should not pass his amendment or 
this underlying bill until we reform Fannie Mae and Freddie Mac, I am 
with him in terms of the reformation. I don't believe it is reasonable 
to require this bill to do everything that needs to be done. That is my 
only difference with the Senator from Georgia.
  Mr. ISAKSON. The Senator and I might differ on points, but I defer to 
the Senator. I wish I had the control to control votes, but I don't. 
There were two on his side and two on ours. There are people with 
higher pay grades who were responsible for that. I wanted to make the 
point about what is, to me, a serious issue with regard to the bill and 
something that should be considered in the debate.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, I don't mean to jump into these things, but 
I wanted to make a couple comments. First, no one knows real estate 
like Johnny Isakson. I have had the privilege of working with the 
Senator from Georgia over the last year or so on a couple of proposals, 
one of which I think made a big difference. That was the $8,000 tax 
credit for home buyers to go out and encourage home purchases and 
sales. It has proven to be pretty worthwhile. I haven't seen the latest 
data. My friend is far more familiar than I. But, clearly, for most 
Americans, home ownership is the single largest and most important 
acquisition they ever have. It is the greatest wealth creator for most 
Americans.
  As the Senator from Illinois points out, that additional trajectory 
is where we increased this, and people used that equity to help with 
retirement and student loans, a variety of things they need as a 
family.
  As my friend from New Hampshire pointed out the other day, there is a 
history here. I acknowledge that we in Congress have failed in this 
responsibility, actually going back to around 2003. The Senator from 
Alabama can correct me. There were various attempts. A good friend of 
ours, the former chairman of the House Financial Services Committee, 
Mike Oxley, a Republican, offered one as chairman. They actually got 
one done.
  It was a bipartisan bill in the House on Fannie and Freddie in 2005. 
It then came to the Senate, and things got bogged down over here. There 
were attempts, including the former chairman from Alabama, who offered 
a proposal. Senator Sarbanes did. It went back and forth. We didn't get 
the job done.
  It is important to remember during times such as this, when we are 
not hesitant to point an accusing finger at other institutions for 
having helped create this problem, we in Congress collectively did not 
get the job done with Fannie and Freddie. I join with my colleague from 
Illinois, it is important we acknowledge that if we are going to be 
accusing other institutions for malfeasance or misfeasance. In this 
case, we should have done a better job.
  Here is the problem. As the Senator from New Hampshire pointed out--I 
am quoting him--this issue was ``too complex'' for this bill. The 
reason is, we don't know what to replace it with at this point. There 
are a number of ideas floating around because all of us recognize we 
need to have a housing financing system in place. In the absence of 
having any in place, around 97 percent of all home mortgages are backed 
by the Federal Government today. If we pull that rug out at this 
particular juncture, I don't know what the implications would be. I 
think they would be pretty profound.

[[Page 8675]]

  We are caught in this quandary, acknowledging the need to reform and 
replace Fannie and Freddie, the present structure, but doing so without 
replacing it with something could pose serious problems in the very 
area the Senator from Georgia is so knowledgeable in; that is, how do 
we continue to promote home ownership.
  What we did--and I would be the first to admit it, being the author 
of the provision--is fairly anemic in light of what we need to be 
doing. We have said we are mandating that there be a study completed 
with options presented within 6 months. The President of the United 
States I have heard say on one occasion, maybe more, this is a top 
priority come next January for him and this Congress to grapple with.
  Again, there is nothing there that absolutely requires it, but it 
will be essential that we come up with options.
  I recall the previous Secretary of the Treasury advocating for a 
public utility concept to replace Fannie and Freddie. I would be the 
last one to tell others whether that is a good idea or a bad one. But 
it is one option. Clearly, we have conflicting goals--one of home 
ownership, which is the very one we all support, combined with the goal 
of satisfying shareholder interests. What happened is, shareholder 
interests trumped in a sense the kind of manageable, sensible policy 
that would promote home ownership at the expense of returning 
investments for shareholders. That is also a laudable goal. But to have 
the same entity have the two missions, one for home ownership, one for 
a return on investment, they collided with each other. We have ended up 
in the situation we are in without a great answer--yet--as to how to 
replace it.
  The point I guess I am making is, I totally agree with the Senator's 
premise. The question is, as chairman of this committee, how do we fix 
this thing at this point? And I have never suggested with this bill we 
were dealing with every financial problem in the country. It would be 
an impossible task for us to take that on.
  So all I can say to the Senator, as someone who will not be here next 
January, is, I hope whoever sits at this desk--or at this desk, across 
from my good friend from Alabama chairing the committee--that this will 
be a priority of our Banking Committee. I cannot dictate that. I cannot 
even bind the next Congress constitutionally with anything we require 
here. But my fervent hope would be--I cannot think of a more important 
priority for the Banking Committee of the Senate than to have the 
reform of Fannie and Freddie because I think we are going to be in 
deeper and deeper trouble both financially and in terms of home 
ownership if we do not. So whatever else happens here in the next few 
days with regard to this bill, I want to thank my friend from Georgia 
for his continuing commitment to the issue and to say that I associate 
myself with his concerns. I would also plead that failure to deal with 
that issue in this bill ought not to be justification for walking away 
from all the other good things we are trying to accomplish in this 
legislation.
  I thank the Senator for hanging around and listening to this 
filibuster.
  Mr. ISAKSON. Mr. President, will the Senator yield for one comment?
  Mr. DODD. I am happy to yield to my friend.
  Mr. ISAKSON. First of all, my comments were directed specifically to 
the speech of the Senator from Illinois.
  Mr. DODD. I did not hear it. I apologize.
  Mr. ISAKSON. They were not a criticism of the chairman, first of all. 
I think the ranking member would certainly agree with that.
  Second of all, there is some good news that was received today, 
thanks to the Senator's help, because I could not have done it if it 
were not for him. We had the tax credit we extended and ultimately 
passed, which terminated April 30. As to the numbers from the most 
recent month: the average sales price in the 20 top markets in America, 
for the first time in 36 months, went up by six-tenths of 1 percent. So 
the distinguished chairman deserves a lot of credit for that 
contribution as well.
  I was just making sure there was a voice over here that reminded 
everybody of what got us in this to begin with in the context of the 
speech of the Senator from Illinois. It was never a criticism of the 
chairman of the committee.
  Mr. DODD. I thank my friend from Georgia.
  With that, Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. ISAKSON. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 3746, as Modified

  Mr. ISAKSON. Mr. President, I understand the body may, in a little 
bit, take up the Whitehouse amendment, and out of an abundance of 
caution, to be sure my statement is in the Record, I want to speak to 
that amendment for a second.
  I have the greatest respect for the Senator from Rhode Island, Mr. 
Whitehouse, and all of his work. But the amendment he has proposed 
basically says that the usury rate to apply to any loan shall be the 
usury rate in the State, which will take us back to a period of time 
post 1982 or 1983, when interest rates went to 16 and three-quarters 
percent. And because usury rates in the United States were 8, 9, or 10 
percent in most of the States, there was no money. Usury rates are the 
maximum ceiling that a loan can do.
  Now we have South Dakota and Delaware where there are no usury rates. 
Most banks are chartered there and, therefore, interest rates on loans 
are negotiable and competitive. There are a lot of people in public 
life who think: Well, if you put a ceiling on interest rates, you are 
guaranteeing the consumer that they are not going to pay a high rate. 
What you are usually guaranteeing the consumer is, they are going to 
pay a fixed rate, which is whatever the government says is the usury 
rate. Floors set by government become ceilings, and ceilings by 
government become rates.
  So I want to caution the body, in considering the Whitehouse 
amendment, to be very careful what you ask for. Because what you will 
do is you will put an end to credit in the housing business and in many 
other types of instruments in the United States, and you will have 50 
different usury regimens in 50 different States. You will create a 
fixed-rate environment by the government, not by competition. What 
effectively happens is a rise in the cost of credit, a rise in the cost 
to the consumer, and in the end what I am sure is intended to be 
beneficial to the consumer will, in fact, cost the consumer more money 
and be disastrous to the expansion of credit in a time where there is 
very little credit as it is.
  I would respectfully ask the body to consider what we went through in 
the mid-1980s and early 1980s with interest rates. We hope they will 
not go up again, but if they do, credit is more important than no 
credit at all, and usury rates can assure you have no credit at all and 
end up having the unintended consequence of having a negative impact on 
the economy.
  I would oppose the Whitehouse amendment, should it come up tonight, 
and I hope the Members of the body will consider the history lesson 
from the early 1980s.
  Mr. President, I yield back and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                Amendment No. 3746, as Further Modified

  Mr. DODD. Mr. President, I ask unanimous consent that the Senate now 
resume consideration of the Whitehouse amendment No. 3746 and that the 
amendment be further modified with the changes at the desk; that it 
also be in order for the Ensign amendment to be considered; that they 
be debated for a total of 10 minutes, with time equally

[[Page 8676]]

divided and controlled between Senators Whitehouse and Ensign or their 
designees; that upon the use or yielding back of time, the Senate 
proceed to vote in relation to the Whitehouse amendment, to be followed 
by a vote in relation to the Ensign amendment; that each of these 
amendments be subject to an affirmative 60-vote threshold; that if they 
achieve that threshold, then they be agreed to and the motion to 
reconsider be laid upon the table; that if they do not achieve that 
threshold, then they be withdrawn; further, that prior to the second 
vote, there be 4 minutes of debate, divided as specified above, and the 
second vote be limited to 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment, as further modified, is as follows:

       On page 1325 between lines 20 and 21 insert the following:
       ``(g) Transparency of OCC Preemption Determinations.--The 
     Comptroller of the Currency shall publish and update not less 
     frequently than quarterly, a list of preemption 
     determinations by the Comptroller of the Currency then in 
     effect that identifies the activities and practices covered 
     by each determination and the requirements and constraints 
     determined to be preempted.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     one of title LXII of the Revised Statutes of the United 
     States is amended by inserting after the item relating to 
     section 5136B the following new item:

``Sec. 5136C. State law preemption standards for national banks and 
              subsidiaries clarified.''.

       (c) Usurious Lenders.--Section 5197 of the Revised Statutes 
     of the United States (12 U.S.C. 85) is amended--
       (1) by striking ``Any association'' and inserting the 
     following:
       ``(a) In General.--Any association''; and
       (2) by adding at the end the following:
       ``(b) Limits on Annual Percentages Rates.--Effective 12 
     months after the date of enactment of this subsection, the 
     interest applicable to any consumer credit transaction, as 
     that term is defined in section 103 of the Truth in Lending 
     Act (other than a transaction that is secured by real 
     property), including any fees, points, or time-price 
     differential associated with such a transaction, may not 
     exceed the maximum permitted by any law of the State in which 
     the consumer resides. Nothing in this section may be 
     construed to preempt an otherwise applicable provision of 
     State law governing the interest in connection with a 
     consumer credit transaction that is secured by real 
     property.''.

  Mr. DODD. Mr. President, I further ask unanimous consent that there 
be no further amendments to those amendments.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. Further, Mr. President, I ask unanimous consent that it be 
in order for the Cantwell amendment No. 4086 to be called up for 
consideration.
  The PRESIDING OFFICER. Is there objection?
  Mr. SHELBY. I object.
  The PRESIDING OFFICER. Objection is heard.
  The Whitehouse amendment is now the pending question.
  The Senator from Connecticut.
  Mr. DODD. Mr. President, I commend the Senator from Rhode Island for 
his passionate and persistent advocacy for his amendment. He has been 
extremely eloquent.
  However, I have to oppose the Senator's amendment. I do it with some 
reluctance.
  Nobody has been more concerned about credit card abuses in this body 
than I have.
  We passed strong, new legislation to address many of these abuses 
just last year, and the Federal Reserve has written regulations to 
implement these protections.
  In addition, the Wall Street Reform Act includes a strong new 
consumer financial protection bureau that will, for the first time, 
create an independent entity devoted to empowering consumers with 
clear, transparent, easy-to-understand disclosures so that they can 
make smart financial decisions for themselves.
  This bureau will help achieve the goals that Senator Whitehouse hopes 
to accomplish with his amendment, though it will not be done in exactly 
the way he seeks to do it.
  By creating better disclosures, by eliminating confusing fine print, 
the consumer bureau will help consumers become better shoppers. This 
will help drive down credit card interest rates.
  In addition, as Senator Whitehouse knows, the Wall Street Reform Act 
will use States as partners in enforcing new rules under the consumer 
title. This will put additional cops on the beat to make sure American 
families are not lured into buying unfair, deceptive, or abusive 
financial products.
  In sum, the underlying legislation would be a giant leap forward for 
consumer protection.
  But as I have said earlier, I reluctantly oppose Senator Whitehouse's 
amendment. One of the reasons is that this amendment does not actually 
address the problems that it is supposed to solve. It would only stop 
national banks from exporting interest rates. Out-of-state savings 
associations and state-chartered banks can still charge a higher 
interest rate. So it does not restore the states ability to enforce 
interest rate caps against all out-of-state lenders. And it does not 
level the playing field for local lenders as intended.
  I believe that the Wall Street Reform Act represents an important 
step forward for consumer protection. If, indeed, the Whitehouse 
amendment is even the right thing to do, we should not make the perfect 
the enemy of the very good.
  Finally, let me say that the abuses of which Senator Whitehouse 
speaks are very real. The interest rates so many of these banks charge 
are outrageous. However, it is a complex issue that will not be solved 
in this debate.
  I urge my colleagues, let's pass the Wall Street reform bill into 
law, so the consumer bureau can start doing its work and start helping 
the American people make smart financial choices.
  Mr. President, I have great respect for our colleague. He has worked 
hard on this amendment. He has been trying to get attention over the 
past 2 weeks, probably as much as anyone in this Chamber, and he is 
anxious to be heard. So I am grateful to my colleagues for giving him 
the opportunity to have this debate on a legitimate issue; that is, 
interest rates. All of us, of course, hear from our constituents about 
the rising and higher cost of interest rates.
  This amendment takes an approach that would, in effect, repeal the 
so-called Marquette decision reached a number of years ago that allowed 
for interest rates to basically be determined by the home State of a 
corporation. That the corporation actually does business in other 
States is not terribly relevant to whatever the rates would be, but 
whatever the rate is in the State where their corporate headquarters is 
domiciled is what would determine that. I may not be stating that quite 
as eloquently as the author of the amendment will, but it is words to 
that effect. I am getting tired after days of describing these.
  While I respect the effort here, there are some problems associated 
with this, in my view, so I will vote against the Whitehouse amendment. 
But, again, I respect my colleague's proposal. I respect the efforts he 
has made and believe there is legitimacy to the issue. I am not sure, 
however, the approach is the correct one to pursue.
  With that, I see my colleague and I yield the floor.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. WHITEHOUSE. I thank the chairman. I guess as the old song goes, 
what a long, strange trip it has been to get to this vote. But I 
appreciate very much the chairman's efforts and the ranking member's 
efforts that have allowed this vote.
  I thank the cosponsors who have helped me work so hard on this 
legislation: Senators Cochran, Merkley, Durbin, Sanders, Levin, Burris, 
Franken, Brown of Ohio, Menendez, Chairman Leahy, Senators Webb, Casey, 
Wyden, my distinguished senior colleague from Rhode Island, Jack Reed, 
Senator Udall of New Mexico, and Senator Begich, who is now Presiding.
  I am very proud of that support and very proud of the support of over 
200 consumer groups for this legislation, including AARP, Consumers 
Union, National Consumer Law Center, Public Citizen, and Common Cause. 
That is a blue ribbon group of consumer supporters, and it is just the 
tip of the iceberg of a large organizational push to

[[Page 8677]]

correct an inequity in American society that arises out of an 
inadvertent loophole that the Supreme Court created 30 years ago.
  This vote presents all of my colleagues a clear, stark choice. Whose 
side you are on will be defined by your vote on this amendment. If you 
are on the side of the big out-of-State banks that are marketing into 
your home State and that are forcing your home State citizens to pay 30 
percent and over interest rates even though those interest rates might 
be illegal under your home State laws, then you will cast your vote 
against this amendment and in favor of those big out-of-State banks 
charging that exorbitant interest. If you support it, you are taking 
the side of your home State citizens who are being gouged right now by 
banks over which they have no control because they are pitching their 
business into the home State from elsewhere and the home State laws, 
because of this peculiar Supreme Court loophole, have been held not to 
apply. If you vote in favor of this amendment, you are voting in favor 
of your home State's laws.
  This is not a reach of Federal authority. This is traditional 
federalism and States rights to honor the laws of the States whose 
citizens sent us here and who wish to protect them from abusive 
interest rates.
  If you vote in favor of this amendment, you are also voting in favor 
of your community banks, your local State-chartered banks, which don't 
take advantage of this loophole, which don't create their headquarters 
in a faraway State that gives them zero consumer protection restriction 
and allows them to target their marketing against the laws of the home 
State. The home State banks have to play by the laws of the home State, 
and this would level the field for your home State banks.
  So it is a pretty clear and stark choice: Are you for your home State 
citizens, are you for your home State's laws, are you for your home 
State's banks or do you want to take your stand today with the big out-
of-State banks whose interest rates are unregulated, whose behavior is 
in conflict with 200 years of American history and every civilized 
legal tradition dating back into the mists of time? Every major 
religion has limited usury. Every civilized legal code has restricted 
the ability of one individual to harm another by charging them 
exorbitant interest rates when they are in need.
  This is the aberration we are facing right now. We have the chance to 
fix it. We have the chance to fix it in a way that is justified and 
proven by 202 years of history in the United States and thousands of 
years of tradition before that. I urge my colleagues to stand up for 
their fellow citizens against these out-of-State banks.
  Mr. President, I yield the floor, and I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The question is on agreeing to the amendment.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from West Virginia (Mr. 
Byrd), the Senator from Connecticut (Mr. Lieberman), the Senator from 
New Jersey (Mr. Menendez), the Senator from Pennsylvania (Mr. Specter), 
and the Senator from Virginia (Mr. Warner) are necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 35, nays 60, as follows:

                      [Rollcall Vote No. 159 Leg.]

                                YEAS--35

     Akaka
     Begich
     Bennet
     Boxer
     Brown (OH)
     Burris
     Cardin
     Casey
     Cochran
     Dorgan
     Durbin
     Feingold
     Feinstein
     Franken
     Gillibrand
     Harkin
     Lautenberg
     Leahy
     LeMieux
     Levin
     McCaskill
     Merkley
     Mikulski
     Nelson (FL)
     Reed
     Reid
     Rockefeller
     Sanders
     Schumer
     Stabenow
     Udall (CO)
     Udall (NM)
     Webb
     Whitehouse
     Wyden

                                NAYS--60

     Alexander
     Barrasso
     Baucus
     Bayh
     Bennett
     Bingaman
     Bond
     Brown (MA)
     Brownback
     Bunning
     Burr
     Cantwell
     Carper
     Chambliss
     Coburn
     Collins
     Conrad
     Corker
     Cornyn
     Crapo
     DeMint
     Dodd
     Ensign
     Enzi
     Graham
     Grassley
     Gregg
     Hagan
     Hatch
     Hutchison
     Inhofe
     Inouye
     Isakson
     Johanns
     Johnson
     Kaufman
     Kerry
     Klobuchar
     Kohl
     Kyl
     Landrieu
     Lincoln
     Lugar
     McCain
     McConnell
     Murkowski
     Murray
     Nelson (NE)
     Pryor
     Risch
     Roberts
     Sessions
     Shaheen
     Shelby
     Snowe
     Tester
     Thune
     Vitter
     Voinovich
     Wicker

                             NOT VOTING--5

     Byrd
     Lieberman
     Menendez
     Specter
     Warner
  The PRESIDING OFFICER. Under the previous order requiring 60 votes in 
the affirmative, the amendment is not agreed to.


                Amendment No. 4146 to Amendment No. 3739

  Mr. DODD. Mr. President, the pending business is the Ensign 
amendment; is that correct?
  The PRESIDING OFFICER. It has not been called up at this time.
  Mr. DODD. I would suggest that we call up the Ensign amendment. I 
understand the Senator from Nevada has a modification.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. ENSIGN. I ask that the amendment be called up for immediate 
consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Nevada [Mr. Ensign] proposes an amendment 
     numbered 4146 to amendment No. 3739.

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

       On page 1273, delete lines 17-18.

  Mrs. McCASKILL. Mr. President, I wish to be recorded as opposing the 
Ensign amendment. Whether I have been speaking to community banks, 
consumer advocates, or businesses, I have been clear that the purpose 
of the Consumer Financial Protection Bureau would be to ensure that 
everyone plays by the same rules. I said I would not support carve-
outs. It was clear from the initial drafts of the Ensign amendment that 
this was intended to exempt certain lending by casinos from the 
jurisdiction of the bureau. The underlying bill already clearly exempts 
sellers of nonfinancial products who offer financing in support of 
those sales. It is my belief that the Ensign amendment could undermine 
that goal and I therefore oppose it.
  Mr. ENSIGN. Mr. President, from what I understand the amendment is 
agreeable to both sides.
  Mr. DODD. With the modification.
  Mr. ENSIGN. It is already modified. I would tell the chairman of the 
committee, through the Chair, the modification was the amendment we 
called up. So it is actually the modified amendment at the desk.
  Mr. DODD. I understand there is no need for a recorded vote, we can 
have a voice vote?
  Mr. ENSIGN. That is correct. I ask for a voice vote.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The amendment (No. 4146) was agreed to.
  Mr. REID. Mr. President, I move to reconsider the vote and move to 
lay that motion upon the table.
  The motion to lay upon the table was agreed to.
  Mr. REID. Mr. President, I have an announcement to make. Members of 
the Senate, we have made progress today. We are going to come in at 
9:30 tomorrow. There will be amendments processed until we leave to go 
to the joint session. We will come back as soon as that is over and 
continue working on this bill.
  At 2:30 I will move to reconsider the vote we had earlier today. So 
we will have a cloture vote at 2:30 tomorrow. Following that, of 
course, we have to look forward to when we are going to move to the 
bill of Senator Inouye and Senator Cochran, on which I understand they 
have done some good work.

[[Page 8678]]

That will be the next matter we move to. No further votes this evening.
  Mr. FRANKEN. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


         Amendment No. 4003, as Modified, to Amendment No. 3739

  Mr. DODD. Mr. President, I ask unanimous consent that the Senate now 
consider the Vitter amendment No. 4003, and that the amendment then be 
modified with the Pryor amendment No. 4087; that the amendment, as 
modified, then be agreed to, and the motion to reconsider be laid upon 
the table.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The amendment (No. 4003) is as follows:

  (Purpose: To protect manufacturers and entrepeneurs from unintended 
                              regulation)

       On page 19, strike line 16 and all that follows through 
     page 21, line 22 and insert the following:
       (4) Nonbank financial company definitions.--
       (A) Foreign nonbank financial company.--The term ``foreign 
     nonbank financial company'' means a company (other than a 
     company that is, or is treated in the United States as, a 
     bank holding company or a subsidiary thereof), that is--
       (i) incorporated or organized in a country other than the 
     United States; and
       (ii) the consolidated revenues of which from activities 
     that are financial in nature (as defined in section 4(k) of 
     the Bank Holding Company Act of 1956) constitute 85 percent 
     or more of the total consolidated revenues of such company.
       (B) U.S. nonbank financial company.--The term ``U.S. 
     nonbank financial company'' means a company (other than a 
     bank holding company or a subsidiary thereof, or a Farm 
     Credit System institution chartered and subject to the 
     provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et. 
     seq.)), that is--
       (i) incorporated or organized under the laws of the United 
     States or any State; and
       (ii) the consolidated revenues of which from activities 
     that are financial in nature (as defined in section 4(k) of 
     the Bank Holding Company Act of 1956) constitute 85 percent 
     or more of the total consolidated revenues of such company.
       (C) Inclusion of depository institution revenues.--In 
     determining whether a company is a financial company for 
     purposes of this title, the consolidated revenues derived 
     from the ownership or control of a depository institution 
     shall be included.
       (5) Office of financial research.--The term ``Office of 
     Financial Research'' means the office established under 
     section 152.
       (6) Significant institutions.--The terms ``significant 
     nonbank financial company'' and ``significant bank holding 
     company'' have the meanings given those terms by rule of the 
     Board of Governors.
       (b) Definitional Criteria.--The Board of Governors shall 
     establish, by regulation, the criteria to determine, 
     consistent with the requirements of subsection (a)(4), 
     whether a company is substantially engaged in activities in 
     the United States that are financial in nature (as defined in 
     section 4(k) of the Bank Holding Company Act of 1956) for 
     purposes of the definitions of the terms ``U.S. nonbank 
     financial company'' and ```foreign nonbank financial 
     company'' under subsection (a)(4).

  The amendment (No. 4003), as modified, was agreed to, as follows:

   (Purpose: To address nonbank financial company definitions and to 
                  provide for anti-evasion authority)

       On page 20, line 1, strike ``substantially'' and insert 
     ``predominantly''.
       On page 20, beginning on line 2, strike ``activities'' and 
     all that follows through line 5, and insert ``financial 
     activities, as defined in paragraph (6).''.
       On page 20, line 17, strike ``substantially'' and all that 
     follows through the end of line 20, and insert 
     ``predominantly engaged in financial activities as defined in 
     paragraph (6).''.
       On page 21, line 11, strike ``(6)'' and insert the 
     following:
       (6) Predominantly engaged.--A company is ``predominantly 
     engaged in financial activities'' if--
       (A) the annual gross revenues derived by the company and 
     all of its subsidiaries from activities that are financial in 
     nature (as defined in section 4(k) of the Bank Holding 
     Company Act of 1956) or are incidental to a financial 
     activity, and, if applicable, from the ownership or control 
     of one or more insured depository institutions, represents 85 
     percent or more of the consolidated annual gross revenues of 
     the company; or
       (B) the consolidated assets of the company and all of its 
     subsidiaries related to activities that are financial in 
     nature (as defined in section 4(k) of the Bank Holding 
     Company Act of 1956) or are incidental to a financial 
     activity, and, if applicable, related to the ownership or 
     control of one or more insured depository institutions, 
     represents 85 percent or more of the consolidated assets of 
     the company.
       (7)
       On page 21, line 16, strike ``criteria'' and all the 
     follows through line 22, and insert ``requirements for 
     determining if a company is predominantly engaged in 
     financial activities, as defined in paragraph (6).''.
       On page 37, line 3, strike ``(c)'' and insert the 
     following:
       (c) Anti-evasion.--
       (1) Determinations.--In order to avoid evasion of this Act, 
     the Council, on its own initiative or at the request of the 
     Board of Governors, may determine, on a nondelegable basis 
     and by a vote of not fewer than \2/3\ of the members then 
     serving, including an affirmative vote by the Chairperson, 
     that--
       (A) material financial distress related to financial 
     activities conducted directly or indirectly by a company 
     incorporated or organized under the laws of the United States 
     or any State or the financial activities in the United States 
     of a company incorporated or organized in a country other 
     than the United States would pose a threat to the financial 
     stability of the United States based on consideration of the 
     factors in subsection (b)(2);
       (B) the company is organized or operates in a manner that 
     evades the application of this Act; and
       (C) such financial activities of the company shall be 
     supervised by the Board of Governors and subject to 
     prudential standards in accordance with this title.
       (2) Notice and opportunity for hearing and final 
     determination; judicial review.--Subsections (d), (f), and 
     (g) shall apply to determinations made by the Council 
     pursuant to paragraph (1) in the same manner as such 
     subsections apply to nonbank financial companies.
       (3) Covered financial activities.--For purposes of this 
     subsection, the term ``financial activities'' means 
     activities that are financial in nature (as defined in 
     section 4(k) of the Bank Holding Company Act of 1956) and 
     related to the ownership or control of one or more insured 
     depository institutions and shall not include internal 
     financial activities conducted for the company or any 
     affiliates thereof including internal treasury, investment, 
     and employee benefit functions.
       (4) Treatment as a nonbank financial company.--
       (A) Only financial activities subject to prudential 
     supervision.--Nonfinancial activities of the company shall 
     not be subject to supervision by the Board of Governors and 
     prudential standards of the Board. For purposes of this Act, 
     the financial activities that are the subject of the 
     determination in paragraph (1) shall be subject to the same 
     requirements as a nonbank financial company. Nothing in this 
     paragraph shall prohibit or limit the authority of the Board 
     of Governors to apply prudential standards under this title 
     to the financial activities that are subject to the 
     determination in paragraph (1).
       (B) Consolidated supervision of only financial 
     activities.--To facilitate the supervision of the financial 
     activities subject to the determination in paragraph (1), the 
     Board of Governors may require a company to establish an 
     intermediate holding company, as provided for in section 167, 
     which would be subject to the supervision of the Board of 
     Governors and to prudential standards under this title.
       (d)
       On page 37, line 15, strike ``(d)'' and insert ``(e)''.
       On page 39, line 3, strike ``(e)'' and insert ``(f)''.
       On page 40, line 13, strike ``(f)'' and insert ``(g)''.
       On page 40, line 21, strike ``(g)'' and insert ``(h)''.

  Mr. DODD. With that, Mr. President, I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DODD. Mr. President, I ask unanimous consent that at 2:30 p.m. 
Thursday, May 20, the motion to proceed to the motion to reconsider be 
agreed to, the motion to reconsider be agreed to, and the Senate then 
proceed to vote on the motion to invoke cloture on the Dodd-Lincoln 
substitute, amendment No. 3739.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                            Cloture Motions

  Mr. DODD. Mr. President, I have two cloture motions at the desk.
  The PRESIDING OFFICER. The cloture motions having been presented

[[Page 8679]]

under rule XXII, the Chair directs the clerk to read the motions.
  The legislative clerk read as follows:

                             Cloture Motion

       We, the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     hereby move to bring to a close debate on the Dodd substitute 
     amendment No. 3739 to S. 3217, the Restoring American 
     Financial Stability Act of 2010.
         Harry Reid, Christopher J. Dodd, Tim Johnson, Jack Reed, 
           Charles E. Schumer, Patty Murray, Daniel K. Inouye, 
           Kent Conrad, John F. Kerry, Jon Tester, Roland W. 
           Burris, Mark R. Warner, Daniel K. Akaka, John D. 
           Rockefeller, IV, Sheldon Whitehouse, Michael F. Bennet.

                             Cloture Motion

       We, the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     hereby move to bring to a close debate on S. 3217, the 
     Restoring American Financial Stability Act of 2010.
         Harry Reid, Christopher J. Dodd, Tim Johnson, Jack Reed, 
           Jon Tester, Charles E. Schumer, Patty Murray, Daniel K. 
           Inouye, Kent Conrad, John F. Kerry, Roland W. Burris, 
           Mark R. Warner, Daniel K. Akaka, John D. Rockefeller, 
           IV, Sheldon Whitehouse, Michael F. Bennet.

  Mr. DODD. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DODD. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                     bureau of consumer protection

  Mr. JOHANNS. Mr. President, it is my understanding that title X of 
the bill would give the Bureau of Consumer Financial Protection the 
power to regulate not only businesses that provide financial products 
and services to consumers but also companies that provide services to 
these businesses. I understand that the purpose of giving the bureau 
the power to regulate these service providers is to prevent a financial 
service company's use of a service provider to frustrate the efforts of 
the bureau to protect consumers because important functions that bear 
directly on consumers are contracted out to service providers. I also 
understand that this approach is designed to provide the bureau with 
authority comparable to the authority that Federal bank regulators have 
over service providers to banks under the Bank Service Company Act.
  Am I correct in understanding that it is the intent of the service 
provider provisions for the bureau to focus on the service contracted 
out, not the terms of the service contract? Further, am I correct that 
it is not the intent of the service provider provisions for the bureau 
to subject the terms of business-to-business contracts, or the 
agreements between providers of consumer financial products and 
services and their own service providers, to the jurisdiction of the 
bureau, even when there may be disputes between these business parties?
  Mr. DODD. Mr. President, the gentleman is correct; the purpose of the 
Bureau of Consumer Protection is to protect consumers and not to 
address disputes between businesses over the terms of their business 
relationships.
  Ms. COLLINS. Mr. President, I rise to speak in support of an 
amendment that Appropriations Committee Chairman Inouye, Vice Chairman 
Cochran, Financial Services and General Government Appropriations 
subcommittee Chairman Durbin and I filed to the Restoring American 
Financial Stability Act regarding funding for the Securities and 
Exchange Commission--SEC.
  This amendment would strike the section that would permit the 
Securities and Exchange Commission to be ``self-funded''. I have 
serious concerns with this provision because it would allow the SEC to 
self finance and thus avoid the scrutiny and oversight of the 
appropriations process. Our bipartisan amendment would keep SEC funding 
as part of the appropriations process and maintain critical 
congressional oversight.
  The financial crisis and its consequences have served to remind us 
all of the critical requirement for more robust oversight and 
heightened transparency throughout our regulatory environment and 
financial system. As we have seen, most recently in the review of the 
SEC's actions in the Bernie Madoff Ponzi scheme, there is clearly a 
demonstrated need for more Congressional oversight. The annual budget 
and appropriations process ensures congressional oversight of vital 
enforcement agencies such as the SEC. As noted by Vice Chairman 
Cochran, our amendment recognizes the need to ``regulate the 
regulators'' and to hold accountable those regulators who fail do their 
jobs correctly.
  And the recent inspector general investigation revealing that high-
level SEC employees spent their days looking at porn rather than 
pursuing wrong-doing demonstrates the need for oversight.
  The appropriations process subjects the SEC to a review which must 
balance the requests of the Commission against the competing needs of 
other Federal agencies. That process, however, is grounded in the 
Constitution and the very foundation of our government is based on the 
concept of checks and balances. While I appreciate the accomplishments 
Chairman Shapiro has achieved during her tenure as chairman, funding 
decisions and the process by which they are made, cannot be based on 
any particular holder of an office, but rather on government- wide 
needs and the best interests of the taxpayers.
  Allowing the SEC to have sole authority to negotiate the fees that 
support its operations with the institutions they regulate precludes 
any meaningful oversight by Congress and invites conflicts of interest. 
Reports by the Government Accountability Office and the SEC Inspector 
General regarding enforcement procedures and internal controls over 
financial reporting highlight the need for congressional oversight. 
Also, the GAO has noted that SEC's current system of transaction-based 
fees could provide revenues that are less predictable and more 
difficult to estimate than the assessments used by bank regulators to 
fund their operations.
  While the budget and appropriations process is challenging for all 
Federal agencies, Senator Durbin and I, in our roles as Chairman and 
ranking member of the Financial Services and General Government 
Appropriations subcommittee, have given careful review to all resource 
requests from the SEC and consistently placed a high priority on its 
requests, recognizing the agency's critical enforcement role. For the 
current fiscal year, Congress provided $1.11 billion, a 25 percent 
increase over the fiscal year 2007 level and $85 million above the 
amount that the President and the SEC requested.
  The financial reform bill passed by the House of Representatives does 
not include a provision for the SEC to be self-funding. I share the 
hope of Chairman Inouye and all of the cosponsors of this amendment 
that the conference agreement on the bill before the Senate will 
preserve the critical oversight function inherent in the appropriations 
process. I urge that the SEC self-funding provision be dropped from the 
bill in conference to ensure that Congress can continue to play an 
important role in the oversight of our financial regulators.
  Mr. LEAHY. Mr. President, last week, I filed two important amendments 
to the pending Wall Street reform legislation to protect the identity 
of whistleblowers and to ensure transparency and accountability to the 
American public when the government investigates allegations of 
financial fraud. My amendments on whistleblower confidentiality strike 
a careful balance between the need to protect the identity of 
whistleblowers and the public interest in transparency. I hope the 
Senate will work to include these amendments in the bill.
  The recent economic crisis has revealed how corporate greed must be 
reigned in on Wall Street. While average Americans were suffering, many 
Wall Street investment banks and insurance companies went to great 
lengths to hide their shaky finances from stockholder and government 
regulators. Whistleblowers serve an important role in exposing 
financial

[[Page 8680]]

fraud. This underscores the importance of ensuring that whistleblowers 
are provided the necessary protections to come forward with allegations 
of financial fraud and ensuring that the American public has access to 
critical information about corporate financial wrongdoing.
  My amendments addresses two key problems with the whistleblower 
provisions in the bill: First, the bill would prevent whistleblowers 
from obtaining information that they themselves have provided to 
government regulators under any circumstances. Second, the bill creates 
an unnecessary exemption to the Freedom of Information Act, FOIA, that 
would, in some cases, shield critical information about financial fraud 
from the public indefinitely.
  To strengthen the protections for whistleblowers, my amendments 
strike the well-intended, but overbroad confidentiality provisions in 
sections 748(h) and 922(h) of the bill, and replace those provisions 
with new language that both protects the confidentiality of 
whistleblower identity information and ensures the public's right to 
know. Specifically, the amendments require that government regulators 
may not disclose whistleblower identity information without the 
whistleblower's consent. My amendments also require that the government 
notify the whistleblower if information about the whistleblower's 
identity will be shared with other government agencies, or foreign 
authorities assisting with an investigation.
  To ensure the public's right to know, my amendments remove language 
from the bill that, in some cases, would change law and could 
indefinitely shield critical information about financial fraud from the 
public. My amendments do not change existing disclosure requirements 
and exemptions under FOIA, but, rather, they require that government 
regulators treat information that reveals the identity of 
whistleblowers as confidential. Other information that a whistleblower 
provides to the government would remain subject to the existing 
disclosure requirements and exemptions under FOIA and other Federal 
laws.
  My amendments are modeled after whistleblower protection provisions 
that Congress has previously and overwhelmingly enacted in other recent 
legislation. The amendments also complement the whistleblower 
protections already included in the bill.
  My amendments are supported by a broad coalition of open government 
organizations, including--the Project on Government Oversight, Citizens 
for Responsibility and Ethics in Washington, OpenTheGovernment.org, 
Public Citizen, the Progressive States Network, Common Cause, National 
Community Reinvestment Coalition, Consumer Action, OMB Watch, National 
Fair Housing Alliance, and Americans for Financial Reform. I thank each 
of these organizations for their support of the amendments and for 
their work on behalf of whistleblowers and the public's right to know.
  As the Senate concludes debate on critical reforms to head off the 
Wall Street fraud and abuses, we must work to ensure accountability and 
openness in how the government responds to this crisis. The 
improvements in my amendments will ensure that whistleblowers have the 
protection that they deserve and that financial firms will be held 
accountable. I urge all Senators to support these open government 
amendments.
  I ask unanimous consent that a copy of a support letter signed by 
several open government organizations be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                     May 11, 2010.
     Hon. Patrick Leahy,
     U.S. Senate,
     Washington, DC.
       Dear Senator Leahy: We, the undersigned organizations, 
     write to thank you and share our support for the amendment 
     (SA 3297) you have offered to the Restoring American 
     Financial Stability Act, S. 3217. The amendment will replace 
     two dangerous provisions that would unnecessarily limit 
     public access to critical information and place a gag on 
     whistleblowers with language that instead would provide 
     authentic confidentiality and protection of the identity of 
     whistleblowers. We believe that in order to both preserve 
     government accountability and encourage whistleblowers to 
     come forward this amendment must be incorporated into S. 
     3217.
       Tucked inside two provisions to establish whistleblower 
     incentives and protections to rightly encourage the flow of 
     information of wrongdoing to the Securities and Exchange 
     Commission (SEC) and the Commodities Futures Trading 
     Commission (CFTC) are poison pill secrecy measures. Sections 
     748(h)(2) and 922(h)(2) bar the public and the whistleblower 
     from ever being able to obtain information about 
     investigations if the government never acts. If a 
     whistleblower faces retaliation there would be no access to 
     government records needed to prove status as a whistleblower. 
     If there is no action due to inept bureaucracy, fraud, 
     collusion, or worse, there would be no way to hold the 
     government accountable.
       We must preserve the ability of the whistleblower to gain 
     access to the information if retaliation occurs, as well as 
     public access to hold the Commission and other government 
     agencies accountable, especially if there is no investigation 
     or the investigation leads to no further judicial or 
     administrative action. Your amendment would do just that, and 
     would remove the blanket gag orders creating a permanent seal 
     and government secrecy.
       Moreover, as you know, it is unnecessary to add additional 
     exemptions to the Freedom of Information Act (FOIA) in these 
     whistleblower provisions. Forty years of jurisprudence have 
     proven the FOIA's exemptions (amended in 1986 to expand 
     protection for law enforcement records) have stood the test 
     of time, fairly and effectively balancing the agency's 
     interests in confidentiality and personal privacy rights with 
     the public's right to know.
       Investigations occur across the federal government every 
     day and information pertaining to the administrative stages 
     of these investigations is protected. In more than two 
     decades, no agency has expressed concern over unwarranted 
     access to investigative information during an open 
     investigation. We not only see no justification to hide 
     closed investigations of possible wrongdoing in the financial 
     industry, whether or not provided by a whistleblower, but 
     find this to be at cross-purposes with making government 
     regulation of the financial industry more transparent and 
     effective.
       We thank you for this amendment to preserve whistleblower 
     rights, public access to information, and government 
     accountability, and for your commitment to protecting the 
     public's right to know.
           Sincerely,
         Project on Government Oversight (POGO); Citizens for 
           Responsibility and Ethics in Washington (CREW); 
           Government Accountability Project (GAP); 
           OpenTheGovernmentorg; Public Citizen; Progressive 
           States Network; Common Cause; National Community 
           Reinvestment Coalition; Consumer Action; OMB Watch; 
           National Fair Housing Alliance; Americans for Financial 
           Reform.

  Mr. ENZI. Mr. President, I would like to make a point of 
clarification on my GASB amendment. This amendment creates a new and 
stable funding source for the Governmental Accounting Standards Board. 
The GASB serves an important function to provide pronouncements on 
accounting and financial reporting for State and local governments, and 
their work should be commended. However, I must clearly make a point 
that for the purpose of this amendment, and the work of the GASB, that 
financial reporting be defined as the ``presentation of objective 
historical financial data on the financial position and resource 
inflows and outflows of State and local governments, as well as 
information necessary to demonstrate compliance with finance-related 
legal or contractual provisions.''
  Mr. FEINGOLD. Mr. President, I am pleased to be an original cosponsor 
of two amendments to the Restoring American Financial Stability Act 
that seek to ensure there is greater transparency around how 
international companies are addressing issues of foreign corruption and 
violent conflict that relate to their business. Creating these 
mechanisms to enhance transparency will help the United States and our 
allies more effectively deal with these complex problems, at the same 
time that they will also help American consumers and investors make 
more informed decisions.
  Mr. President, I am very pleased that my colleagues agreed yesterday 
to accept the first amendment, sponsored by Senator Brownback. This 
amendment specifically responds to the continued crisis in the eastern 
region of the Democratic Republic of Congo. Despite efforts to curb the 
violence, mass atrocities and widespread sexual violence and rape 
continue at an alarming

[[Page 8681]]

rate. Some have justifiably labeled eastern Congo as ``the worst place 
in the world to be female.'' Several of us in this body, including 
Senators Brownback and Durbin and I, have traveled to this region and 
seen first-hand the tragedy of this relentless crisis. Increasingly, 
American citizens are also learning of the devastating situation in 
eastern Congo and are actively engaged to bring about policy changes. I 
am pleased to see Americans so engaged on this issue.
  One of the underlying reasons this crisis persists is the 
exploitation and illicit trade in natural resources, specifically 
cassiterite, columbite-tantalite, wolframite and gold. The United 
Nations Group of Experts has reported for years how parties to the 
conflict in eastern Congo continue to benefit and finance themselves by 
controlling mines or taxing trading routes for these minerals. In 
response to these reports, the U.N. Security Council adopted Resolution 
1857, 2008, encouraging Member States ``to ensure that companies 
handling minerals from the DRC exercise due diligence on their 
suppliers.'' Over a year ago, Senator Brownback, Senator Durbin, and I 
teamed up to author legislation that would do just that: the Congo 
Conflict Minerals Act, S. 891.
  Senator Brownback's amendment is taken from that bill, but includes 
modifications based on discussions with representatives from industry, 
U.S. Government agencies, and the Banking Committee. The amendment 
applies to companies on the U.S. stock exchanges for which these 
minerals constitute a necessary part of a product they manufacture. It 
will require those companies to make public and disclose annually to 
the Securities and Exchange Commission if the minerals in their 
products originated or may have originated in Congo or a neighboring 
country. Furthermore, it will require those companies to provide 
information on measures they have taken to exercise due diligence on 
the source and chain of custody to ensure activities involving such 
minerals did not finance or benefit armed groups.
  I recognize that this conflict minerals problem is a complex one, 
given the importance of this trade to the local economy in eastern 
Congo and given the extensive supply chains and processing stages 
between the source and end use of these minerals. The Brownback 
amendment was narrowly crafted in consideration of those challenges, 
and it includes waivers and a sunset clause after 5 years. However, I 
believe strongly that the status quo in eastern Congo is unacceptable 
to the people there and it should be to us as well. We have put 
financial resources toward mitigating this crisis, but we need to get 
serious about addressing the underlying causes of conflict. The 
Brownback amendment is a significant, practical step toward doing that, 
and I thank my colleagues for their support of it. I thank Senator 
Brownback for his longstanding leadership on these important 
humanitarian issues.
  The second amendment, led by Senator Cardin and Senator Lugar, is 
different than the Congo amendment but would complement it. This 
amendment would require companies listed on U.S. stock exchanges to 
disclose in their SEC filings extractive payments made to foreign 
governments for oil, gas, and mining. This information would then be 
made public, empowering citizens in resource-rich countries in their 
efforts to combat corruption and hold their governments accountable. In 
far too many countries, natural resource wealth has fueled corruption 
and conflict rather than growth and development. This so-called 
``resource curse'' is especially problematic in Africa, and in 2008, I 
chaired a subcommittee hearing on this very topic. I said then that we 
must look for ways that the United States can use our leverage to push 
for greater corporate transparency in Africa's extractive industries.
  In addition to helping countries combat the ``resources curse,'' it 
is also in our national interest to improve transparency in the 
extractive industries. The amendment was drawn from an important piece 
of legislation, the Energy Security through Transparency Act, S. 1700. 
The bill was given this title because enhancing transparency in the 
extractive industries can have real benefits for U.S. energy security. 
This will ultimately create a more open investment environment and 
increase the reliability of commodity supplies. Energy security is a 
topic that Senator Lugar and his staff have worked on for years, and we 
all know how central it is to our national security. I thank Senator 
Lugar and Senator Cardin for their work on this important amendment, 
and I urge my colleagues to support it.
  Mr. DURBIN. Mr. President, I rise today to commend and thank Senators 
Dodd and Shelby for their extraordinary leadership and tenacity in 
shepherding this complex bill through the arduous floor consideration 
process over the past several weeks, and for their years of work to 
reach this point. Their task has not been an easy one. The amendment 
process was delicate at times, but certainly collegial and fair. The 
fruits of our labor are an improved product emerging from the Senate, 
albeit not a perfect one. Invariably, in a bill of this scope and 
significance, some matters were not fully addressed or resolved to 
everyone's satisfaction.
  I am disappointed that we did not consider an important bipartisan 
amendment submitted by Senators Inouye and Cochran relating to the 
funding of the Securities and Exchange Commission.
  Section 991 of the bill would permit the Securities and Exchange 
Commission to be ``self-funded,'' thus removing a critical oversight 
role for the Appropriations Committee. The Inouye-Cochran amendment 
would have stricken this section.
  Retention of the language in the bill is objectionable for a host of 
reasons. Section 991 removes the role of Congress in dictating how 
potentially limitless funds, up to whatever level is generated in fees 
under a budget that would be set by the SEC itself, are to be spent. It 
would make the agency potentially less, rather than more, responsive to 
congressional priorities. Spending would go unmonitored. The critical 
role of the Office of Management and Budget for apportionment of funds 
would also disappear.
  Congress oversees Federal agencies primarily through two distinct but 
complementary processes--authorizations and appropriations. The 
authorizing committees are responsible for creating a program, 
mandating the terms and conditions under which it operates, and 
establishing the basis for congressional oversight and control. The 
appropriations committees and subcommittees are charged with assessing 
the need for, amount of, and period of availability of appropriations 
for agencies and programs under their jurisdiction.
  Exempting an agency from the appropriations process reduces 
opportunities for annual congressional oversight. The appropriations 
process, with its annual budget justifications, hearings, and markups, 
provides a useful layer of congressional review and scrutiny of agency 
operations, in addition to what is provided by the authorizing process. 
In the appropriations subcommittee I am privileged to chair, I have 
conducted annual hearings on the SEC's budget through which I have 
learned much about this agency's requirements, particularly its 
staffing and information technology needs.
  Allowing an agency to set its own budget is an abdication of the 
constitutional responsibility of the legislative branch of government. 
It is a dangerous surrender of the congressional power of the purse.
  It does not make sense--in this comprehensive bill aimed at 
bolstering oversight, transparency, and accountability of the world 
that the SEC regulates--that we would weaken, in fact, abolish, the 
vital role of the appropriations committee to evaluate the resource 
needs and spending by this agency.
  This comprehensive bill confers significant new responsibilities on 
the SEC as a financial regulator. Shouldn't we evaluate on a regular 
basis whether this agency is responsive to the mandates we impose? 
Shouldn't Congress determine if the SEC has adequate funds and is using 
those resources wisely, in the right places, to accomplish its mission? 
Under section 991, we toss

[[Page 8682]]

out the important, longstanding role and responsibility of 
appropriators to do just that.
  Public opinion of the SEC as a vigilant investor-protector has been 
less than stellar in recent years. The SEC has been under withering 
criticism over the past years with the release of the inspector 
general's report chronicling the SEC's failure to identify Madoff's 
Ponzi scheme as far back as 1992. The recent IG report on the Stanford 
case is another example of years of SEC inaction to act against a Ponzi 
scheme.
  Under the leadership of Chairman Mary Schapiro, the SEC is making 
strides to turn things around. I think Chairman Schapiro is doing a 
commendable job leading the charge for reform. However, she herself 
admits that there's more to do and much room for improvement. Our 
interest in leaving the appropriations oversight process intact is not 
a verdict on Chairman Schapiro's ability to effect meaningful change.
  Those who contend that the SEC ought to set its own budget argue that 
requiring the agency to compete for funding in the annual 
appropriations process will lead to chronic underfunding and limited 
flexibility. Recent experience suggests to the contrary. My Financial 
Services and General Government Appropriations Subcommittee has placed 
high priority on the budgets of several agencies including healthy and 
justified increases above the President's request. For the current 
fiscal year, Congress provided $1.111 billion, a 25-percent increase 
over the fiscal year 2007 level--and $85 million above the amount that 
the President and the SEC requested. We have also acted promptly to 
consider and approve reprogramming and internal reorganization 
requests.
  Those who claim that the SEC has been shortchanged in past years 
should consider that in each of the past 7 years, the SEC has had 
substantial amounts of unobligated balances from prior years. This 
means there were appropriations provided that the SEC was not able to 
use.
  The SEC has not been reauthorized since the Sarbanes-Oxley Act of 
2002, when Congress authorized $776 million for fiscal year 2003. 
Instead of putting this agency beyond the reach and oversight of 
appropriators, we should act to authorize levels of robust funding for 
each of the ensuing 5 years--like the House did--and thus clearly 
express the intent of Congress that this agency be adequately funded.
  Reauthorization of suitable and reasonable funding levels would 
certainly send a strong signal about the amount of resources that 
Congress believes are necessary for this agency to thrive and grow to 
meet its important mission and satisfy its many new responsibilities. 
Leaving this agency unchecked in its budgeting and spending activities 
is simply the wrong way to go.
  I trust that as we reconcile this bill with the version adopted in 
the House that this matter will be favorably resolved and that the 
conference agreement will acknowledge and preserve the critical 
oversight role of the appropriations process.
  Mr. DODD. Mr. President, I rise to further discuss the reasons for my 
votes against two amendments relating to credit rating agencies, 
amendment No. 3991 creating a new credit rating agency board and 
amendment No. 3774 which eliminates references to requiring credit 
ratings from certain financial laws.
  First, I want to emphasize that I agree with my colleagues that 
erroneous credit ratings on asset backed securities played a central 
role in the financial crisis and that we need to improve the regulation 
of credit ratings.
  Credit rating agency reform is an extremely important area of the 
Restoring American Financial Stability Act of 2010 passed by the 
Banking Committee. It has 40 pages of carefully constructed credit 
rating reforms to improve regulation, transparency and accountability. 
Let me highlight some of these strong provisions, as they would improve 
the SEC, reform rating agencies and empower investors.
  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. The SEC will also have more authority to sanction 
ratings agencies that violate the law, including managers who fail to 
supervise employees.
  Credit rating agencies will have to comply with tough new 
requirements. Rating agency boards will be subject to new rules for 
independence. Rating analysts must work separately 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. The agencies 
must establish hotlines for whistleblowers and retain complaints about 
the firm's work for regulators to examine. Agency compliance officers 
must report annually to the SEC. Agencies must consider credible 
information they receive from sources other than the issuers in making 
the ratings, rather than relying only on the issuer's representations.
  Investors will be empowered. Agencies must disclose their track 
record of ratings in a way that is comparable so that users can compare 
ratings for accuracy across different agencies. The agencies must 
disclose more about their ratings assumptions, limitations, risks, 
historic accuracy and factors that might lead to changes in ratings. 
Investors will also have access to due diligence reports prepared at 
the request of underwriters on asset backed securities, as well as have 
the benefit of having a new pleading standard when they need to file 
suit.
  The recommendations and ideas underlying these provisions have been 
considered by the Banking Committee over the course of more than 3 
years. The committee held hearings and received analyses from countless 
experts, regulators, ratings agencies, investors and other users. The 
provisions in this bill have been extensively vetted, improved and 
refined.
  Regarding conflicts of interest, when I served as ranking member of 
the Securities Subcommittee, I worked with then-Banking Committee 
Chairman Shelby and others to enact legislation to control or eliminate 
credit rating agency conflicts of interest. Through the Credit Rating 
Agency Reform Act of 2006, we added section 15E to the Securities 
Exchange Act of 1934 so that they are controlled or eliminated if they 
cannot be effectively managed. It gave to the SEC the power:

     to prohibit, or require the management and disclosure of, any 
     conflicts of interest relating to the issuance of credit 
     ratings by a nationally recognized statistical rating 
     organization, including, without limitation, conflicts of 
     interest relating to--
       (A) the manner in which a nationally recognized statistical 
     rating organization is compensated by the obligor, or any 
     affiliate of the obligor, for issuing credit ratings or 
     providing related services;
       (B) the provision of consulting, advisory, or other 
     services by a nationally recognized statistical rating 
     organization, or any person associated with such nationally 
     recognized statistical rating organization, to the obligor, 
     or any affiliate of the obligor;
       (C) business relationships, ownership interests, or any 
     other financial or personal interests between a nationally 
     recognized statistical rating organization, or any person 
     associated with such nationally recognized statistical rating 
     organization, and the obligor, or any affiliate of the 
     obligor;
       (D) any affiliation of a nationally recognized statistical 
     rating organization, or any person associated with such 
     nationally recognized statistical rating organization, with 
     any person that underwrites the securities or money market 
     instruments that are the subject of a credit rating; and
       (E) any other potential conflict of interest, as the 
     Commission deems necessary or appropriate in the public 
     interest or for the protection of investors.

  The SEC has adopted several rules under the act to address NRSRO 
conflicts of interest, amending those rules twice since they took 
effect in 2007. The first set of amendments took effect in 2009, and 
the second set of amendments will go live in a few weeks.

[[Page 8683]]

Among other things, in addition to prohibiting certain conflicts of 
interest outright, these rules require each NRSRO--issuer-pay and 
subscriber-pay--to publicly disclose certain additional conflicts, as 
well as the policies and procedures it has adopted to address those 
conflicts. Pursuant to these rules, NRSROs must separate their business 
activities from their rating activities, so that the analysts, who 
operate in teams, to reduce the influence of any one person, do not 
negotiate, arrange or discuss fees. Commission rules designed to 
address the issuer-pay conflict include prohibitions on issuing credit 
ratings in certain circumstances, such as when: the NRSRO has received 
10 percent or more of its revenue from an issuer or underwriter; the 
NRSRO makes recommendations on how to structure an instrument; the 
analyst has participated in fee negotiations with the issuer; or the 
analyst has received gifts from the issuer. There also is a new 
requirement that information provided to a hired NRSRO to rate a 
structured finance product be made available to any other NRSRO to 
allow the other NRSRO to determine an unsolicited--i.e., non-issuer-
paid--credit rating.
  Since these rules have been in effect for only a short time, we have 
yet to see their full benefits. And if more regulation is needed, the 
SEC has authority to go farther under the 2006 law.
  During the consideration of S. 3217, amendment No. 3808 was 
introduced and passed to direct the SEC to set up a new credit rating 
agency board, which prohibits the private selection by issuers of 
rating agencies for initial asset-backed securities ratings and creates 
a system in which the board makes semi-random ratings assignments to 
nationally recognized statistical ratings organizations that it deems 
to be qualified. The intention is to eliminate negative effects of 
conflicts of interest in the issuer pay business model.
  I applaud my colleague's goal of developing a solution to this 
problem of poor credit ratings. And I appreciate his devoting a 
tremendous amount of effort in a short period of time to craft his 
solution.
  However, this novel approach raises many questions which have yet to 
be answered. While I support Senator Franken's goal, I could not vote 
for this amendment while many questions and uncertainties remained 
about the impact of this new type of ``self-regulatory organization.''
  Credit ratings have a tremendous impact on the credit markets 
nationally and internationally. Any significant change in their 
preparation should be the subject of full examination before enactment. 
Unresolved questions raise the potential for unintended or unforeseen 
consequences. In addition to my own concerns, I have received 
communications from many interested parties, such as a letter from the 
Investment Company Institute that I will ask to be printed in the 
Record.
  Let me identify some of the questions that, it seems to me, exist 
with respect to the board and its operations:
  Will the board's semi-random assignment of ratings work cause the 
rating agencies to lose their incentive to do a superior job, which 
otherwise might get them more initial ratings business?
  Will the ``reasonable'' fees that the legislation directs the SEC to 
set for QNRSROs to charge issuers generate sufficient revenues for 
rating agencies of different types of securities to perform the quality 
of ratings they would like? In this connection, a technical question, 
what standards should the SEC use to determine the fees--a 
``reasonable'' return on capital? prices comparable to other ratings 
agencies? sufficient to hire staff at compensation levels comparable to 
other businesses or to Federal regulatory agencies?
  How many of the 10 nationally recognized statistical rating agencies 
are expected to register as ``qualified nationally recognized 
statistical ratings organizations''? Will the registrants be sufficient 
to make the board meaningful? Will some ratings agencies choose not to 
register with the board, to avoid board assessments, costs, regulatory 
burden or for other reasons, and would this affect the quality of 
ratings? Will some smaller rating agencies not register because they 
are unable to meet the board's qualification standards? I understand 
that after the passage of the amendment, one of the NRSROs has 
deregistered from providing ratings on asset-backed securities.
  The amendment uses an issuer-pay business model. How would the 
amendment affect the rating agencies that use a different business 
model, such as a subscriber pay model, and want to provide ratings on 
asset backed securities?
  What will be the costs of operating the new board? The legislation 
authorizes the board to assess QNRSROs, and how much is the board 
expected to assess the QNRSROs to cover its budget? How much would it 
add to the current cost of ratings? What is the expected budget of a 
board that must hire financial experts who evaluate rating agencies' 
qualities, institutional and technical capacity and performance and 
implement systems that can make ratings assignments to QNRSROs on 
potentially hundreds of thousands of securities in a timely fashion?
  How many different categories of securities are expected to be rated 
and how many rating agencies are expected to be qualified to rate each 
type? If only two agencies have the capacity or experience to rate some 
complex types of securities, and an issuer wants two ratings, what will 
be the purpose of the SRO randomly choosing a rating agency?
  How will the board attract, afford and retain top experts who would 
be needed to perform its statutory mandates to assess the effectiveness 
of ratings methodologies and assess the accuracy of ratings?
  The board would be given substantial powers such as rulemaking 
authority over NRSROs, allocating business to NRSROs or rejecting an 
NRSRO's ability to obtain business. Is it certain that the board's 
establishment and exercise of authority are consistent with the 
Constitution?
  The legislation states that the board will be a ``self-regulatory 
organization.'' What will be the impact on the new board on the 
numerous statutory and regulatory restrictions and obligations in the 
Securities Exchange Act of 1934 affecting ``self-regulatory 
organizations''?
  What will be the interaction of the legislation's mandate that the 
board assess the accuracy of the credit ratings provided by QNRSROs and 
the ``effectiveness of the methodologies used by'' QNRSROs and the 
existing Federal law that states the SEC may not ``regulate the 
substance of credit ratings or the procedures and methodologies by 
which any nationally recognized statistical rating organization 
determines credit ratings''?
  In this legislation, the Federal Government will obligate one private 
party to deal with another private party of the government's choosing 
in a private business transaction. Does this raise any potential legal 
questions?
  It is my understanding that beginning in June, all NRSROs will also 
have to publish a history of their rating actions since the NRSRO 
regulatory regime was instituted in June of 2007. When enough data 
becomes available, issuers can see which NRSRO's ratings were more 
reliable. Would the board be expected to be better able to identify 
better QNRSROs than issuers who examine this data on their own?
  These are some of the questions that existed at the time of the vote. 
While I am sure these questions will be fully addressed in the months 
and years ahead, and hope that the board is successful, these questions 
are significant and created uncertainty, with the potential for 
significant unintended consequences. Accordingly, I felt it 
inappropriate as chairman of the Banking Committee to support the 
amendment.
  Amendment No. 3774, which the Senate passed, removes provisions in 
banking and securities statutes that use credit ratings of NRSROs to 
distinguish the creditworthiness of obligors or debt instruments and 
would replace these provisions with standards promulgated by banking 
agencies--in the case of the banking statutes--and the SEC--in the case 
of securities statutes.
  I agree with the intent of the provision to reduce investor reliance 
on NRSRO ratings in making investment

[[Page 8684]]

decisions. However, I feel that it is unwise to eliminate all of these 
statutory requirements without a prior study of the consequences. 
Therefore, I voted against this provision.
  I think it more prudent to carefully study this matter and remove 
ratings that are found to be unnecessary. This is why I included in S. 
3217 passed by the Banking Committee a required 2-year GAO study to 
examine the scope of provisions in Federal and State law as to the 
necessity and purposes of NRSRO ratings requirement; which requirements 
could be removed with minimal disruption to the financial markets; the 
potential impacts on the financial markets and on investors if the 
rating requirements were rescinded; and whether the financial markets 
and investors could benefit from the removal of such requirements. This 
would be followed by reviews by the Federal financial regulators of all 
regulations requiring the use of an assessment of a security, 
requirements related to credit ratings and alternative standards of 
creditworthiness that are based on market-generated indicators. The 
bill required each agency to modify references to credit ratings in 
their regulations and, when removed, to use an appropriate standard of 
creditworthiness not related to credit ratings, if possible and 
consistent with the statute or the public interest. This seems to me 
the more appropriate way to improve the ratings situation while taking 
appropriate steps to avoid unforeseen and unintended consequences.
  Mr. President, I ask unanimous consent to have printed in the Record 
the letter from the Investment Company Institute to which I referred.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 Investment Company Institute,

                                     Washington, DC, May 13, 2010.
     Hon. Harry Reid,
     Senate Majority Leader, The Capitol, Washington, DC.
     Hon. Mitch McConnell,
     Senate Minority Leader, The Capitol, Washington, DC.
     Hon. Christopher J. Dodd,
     Chairman, Senate Banking Committee, Dirksen Senate Office 
         Building,
     Washington, DC.
     Hon. Richard C. Shelby,
     Ranking Minority Member, Senate Banking Committee, Russell 
         Senate Office Building,
     Washington, DC.

     Re Senate Amendment #3991, Credit Ratings.

       Dear Senators: I am writing on behalf of the Investment 
     Company Institute, the national association of U.S. 
     investment companies, to express our concerns with elements 
     of Senate Amendment 3991 to S. 3217 of the Restoring American 
     Financial Stability Act of 2010 (RAFSA). The Institute is 
     highly supportive of the majority of rating agency reforms 
     contained in the RAFSA, which focus primarily on disclosure 
     and transparency of ratings and the ratings process. As long 
     as ratings continue to play an important role in the 
     investment process, they should provide investors and other 
     market participants with high-quality, reliable assessments 
     of the credit risks of a particular issuer or financial 
     instrument. We are concerned, however, that Amendment 3991, 
     which would create a Credit Rating Agency Board to regulate 
     structured finance product ratings, may conflict with the 
     RAFSA, create confusion for investors, and hinder competition 
     in the rating agency space. Presented at the last minute, the 
     changes contemplated by the Amendment would significantly 
     alter the current regulatory regime for rating structured 
     finance products and could, ultimately, affect the rating 
     process for other debt securities.
       First, to properly address concerns about conflicts of 
     interest, poor disclosure, and lack of accountability, the 
     Institute believes the reform of the regulatory structure for 
     rating agencies must be applied in a uniform and consistent 
     manner and should apply equally to all types of rated 
     securities. This uniformity and consistency is not only 
     critical to improving ratings quality and allowing investors 
     to identify and assess potential conflicts of interest, but 
     also to increasing competition among rating agencies. By 
     focusing solely on structured finance securities, the 
     Amendment would create a different set of rules for different 
     segments of the rated marketplace which, among other issues 
     discussed below, could create confusion among investors.
       Second, establishing an additional and distinct oversight 
     system for ratings of structured finance securities, as 
     outlined in the Amendment, does not improve investor access 
     to information about these securities. The Institute believes 
     that issuers, in addition to credit rating agencies, have a 
     role to play in the effort to increase transparency and 
     disclosure about structured finance products, as well as for 
     other debt instruments. To this end, we have recommended that 
     the Commission expand the disclosure of information to 
     investors by rating agencies. We also have recommended that 
     the Commission take additional steps to provide investors 
     with increased information by requiring increased disclosure 
     directly by issuers to investors, and requiring the 
     disclosure be in a standardized format where appropriate. In 
     its recent proposal to revise the asset-backed securities 
     regulatory regime, for example, the Commission has proposed 
     to do just that--expand and standardize issuer disclosure in 
     public and private offerings of asset-backed securities--and 
     we commend the Commission for its efforts.
       Third, we are concerned that having a Board assign a rating 
     agency to a structured finance product stifles competition by 
     denying the market of two or more ratings on a security and 
     perhaps differing opinions and insights. Investors should be 
     encouraged to pick and choose investment transactions using, 
     to the extent they desire, the ratings they receive from the 
     various rating agencies, not a single agency. Further, this 
     approach creates the appearance of a ``seal of approval'' for 
     the assigned rating by placing a government imprimatur on the 
     rating, regardless of the proposed disclaimer contemplated by 
     the Amendment. The fact that the Amendment would permit 
     unsolicited ratings of an assigned security becomes 
     meaningless under the proposed framework; as in the status 
     quo, it will rarely, if ever, be done.
       Fourth, a Board designating a rating agency allows for 
     politicizing the rating process, even if it is by a lottery 
     or rotation, whereby the Board could be biased on how it 
     chooses the ``preferred'' rating agency. Conflicts can arise 
     because Board members may have a strong interest in ensuring 
     favorable ratings for a particular issuer or security. 
     Consequently, we do not perceive an advantage to the proposed 
     Board-model over the existing rating agency models, all of 
     which possess various beneficial and detrimental 
     characteristics.
       Fifth, what will be the criteria used for determining the 
     ``best performer'' for purposes of assigning a rating agency 
     to a new issue? Is an ``A1'' rating more correct than an 
     ``A'' rating? How would the Board define success or failure? 
     Performance of debt securities in the municipal market, for 
     example, has as much to do with structure and maturity of the 
     security as with its credit. Drawing a line in the structured 
     finance market would be even more difficult because of the 
     complexity, diversity, and novelty of this market. Further, 
     who would be responsible for surveillance under this model--
     the Board, the Commission, the rating agencies?
       We believe that education regarding the characteristics and 
     limitations of a rating would be of more value to investors 
     than the operational and policy concerns raised by the 
     Amendment. In the end, credit ratings are informed opinions 
     which play a significant role in the investment process. 
     Accordingly, the Institute has repeatedly stated that 
     improving disclosure and transparency about ratings and the 
     ratings process may be the most important reform for 
     improving the quality and reliability of ratings. Public 
     disclosure of this information allows investors and market 
     participants--the consumers of ratings--to more effectively 
     evaluate a rating agency's independence, objectivity, 
     capability, and operations. Such disclosure also serves as an 
     additional mechanism for ensuring the integrity and quality 
     of the credit ratings themselves.
       We appreciate the substantial progress made in the RAFSA to 
     improve the ratings process and we look forward to continuing 
     to work with the Senate for the benefit of investors in this 
     area.
           Sincerely,
                                              Paul Schott Stevens,
     President and Chief Executive Officer.

                          ____________________