[Congressional Record (Bound Edition), Volume 156 (2010), Part 9]
[Senate]
[Pages 12819-12821]
[From the U.S. Government Publishing Office, www.gpo.gov]




   WALL STREET REFORM AND CONSUMER PROTECTION ACT--CONFERENCE REPORT

  Mr. REID. I now move to proceed to consideration of the conference 
report to accompany H.R. 4173.
  The PRESIDING OFFICER. The question is on agreeing to the motion.
  The motion was agreed to.
  The PRESIDING OFFICER. The report will be stated.
  The legislative clerk read as follows:

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendments of the Senate to the bill (H.R. 
     4173) to provide for financial regulatory reform, to protect 
     consumers and investors, to enhance Federal understanding of 
     insurance issues, to regulate the over-the-counter 
     derivatives markets, and for other purposes, having met, 
     after full and free conference, have agreed that the House 
     recede from its disagreement to the amendment of the Senate 
     to the text of the bill and agree to the same with an 
     amendment, and the Senate agree to the same, that the House 
     recede from its disagreement to the amendment of the Senate 
     to the title and agree to the same, signed by a majority of 
     the conferees on the part of both Houses.

  (The conference report is printed in the House proceedings of the 
Record of June 29, 2010.)


                             Cloture Motion

  Mr. REID. I have a cloture motion at the desk.
  The PRESIDING OFFICER. Pursuant to rule XXII, the clerk will report 
the motion to invoke cloture.
  The assistant bill 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 conference 
     report to accompany H.R. 4173, the Wall Street Reform and 
     Consumer Protection Act.
         Harry Reid, Christopher J. Dodd, Charles E. Schumer, 
           Sheldon Whitehouse, Amy Klobuchar, Thomas R. Carper, 
           Benjamin L. Cardin, Jeff Merkley, Kay R. Hagan, John F. 
           Kerry, Tom Harkin, Jack Reed, Frank R. Lautenberg, Mark 
           Begich, Barbara Boxer, Mark R. Warner, Joseph I. 
           Lieberman.

  Mr. REID. Mr. President, I ask unanimous consent that the mandatory 
quorum be waived.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Connecticut is recognized.
  Mr. DODD. Mr. President, very briefly, because the hour is late and 
we will have a longer time to engage in a debate about the conference 
report, I wish to begin this evening, as I will try to repeat during 
the next 2 days, with my deep appreciation to the majority leader, 
Harry Reid. While there were a lot of people involved in this process 
over the last several years who have brought us to this moment for us 
to consider this very important landmark piece of legislation regarding 
reform of our financial services, none of this ever happens unless you 
have a leader who makes it possible to happen.
  While that is a simple enough sentence to say, there is so much that 
goes into that sentence--the organization, bringing people together, 
seeing to it that the time is available, making sure the procedures 
that we will work under allow us to have a full-throated debate, as we 
were able to on this bill.
  This bill went through almost a month of consideration on the Senate 
floor. We considered almost 60 different amendments offered by both 
parties, many of which were adopted to change the bill, added value to 
it. It then proceeded to a conference with the other body in which we 
spent another 2 weeks, well into the all-night session until June 25 in 
which another 60 or 70 amendments were considered, and then came back 
to this Chamber where we are now in the position of adopting the 
conference report. None of that happens without having leadership in a 
body that makes it possible for those events to unfold.
  While there will be a lot of talk over the coming days about how this 
happened and what is in the bill, it is important that as we begin the 
conversation over the next several days, before we vote whether to 
accept this conference report, that I begin by expressing my gratitude 
to the majority leader and his staff and others who made it possible 
for us to arrive at this historic moment as to whether we will change 
the status quo and set up a regulatory structure that makes it possible 
for us to address future economic crises, as certain as they will 
occur, with the ability to deal with them early on, to avoid them 
becoming larger problems as this one did because we failed to have the 
regulatory process in place, we failed to have the kind of oversight, 
we failed to have the kind of protections for consumers that this bill 
drafts and provides for.
  I thank the majority leader for his leadership. While he was not 
directly involved day to day, there wasn't a single occasion when I 
could not pick up that phone or walk into his office, cite a problem I 
had on how to get from point A to point B in which he didn't stop 
everything he was doing to make sure we could work our way through 
those difficulties. A lot goes on unseen on how we operate in this 
Chamber. But, again, when this bill is adopted, as I hope it will be, 
there are many people who deserve gratitude and expressions of thanks. 
We ought to begin by thanking the majority leader for making it 
possible. To him and to his staff and others, I say thank you. I look 
forward over the next 2 days to the debate.
  I yield the floor.
  The PRESIDING OFFICER. The majority leader is recognized.
  Mr. REID. Mr. President, I hope the distinguished Senator from 
Connecticut and I have an opportunity, which we will, to sit down and 
talk about what we have been through the last 2 years. We had a 
difficult situation with the banks, financial institutions going 
bankrupt, going to close, and we worked our way through that. We had 
credit card legislation that was so very difficult. We had the housing 
legislation that was so extremely difficult. And, of course, we have 
had this.
  This piece of legislation is really a masterpiece. To think that we 
have been able to get as for as we have--for example, in today's 
newspaper, it did

[[Page 12820]]

not go unnoticed by me that Secretary Paulson said some extremely nice 
things about this piece of legislation. He did not have to do that. He 
did it because he thought it was the right thing to do. Here is a man 
who came to Washington inexperienced in government in any way and was 
given this plate of a really bad situation that developed. So we have 
the present Secretary of Treasury and the past Secretary of Treasury 
saying this is an extremely fine piece of legislation, which it is.
  I have been around not as long as my friend from Connecticut in the 
Congress of the United States, but I have been around a long time and 
this really, I repeat, is a masterpiece. I think it is appropriate to 
acknowledge the work he has done in this legislation. He was saying 
nice things about me--I appreciate that--but that is really not very 
meaningful for someone who was watching him work his way through this 
legislation.
  The vote is not complete yet, and we hope it will all turn out well. 
But there are a number of people who have been very courageous in 
allowing us to move forward. We will talk more about them later. They 
are three or four in number and we will talk about them later. But my 
friend and I have developed a forever friendship based on the crisis we 
have gone through together, and I so admire him. There will be another 
time for talking about his more complete service, but I can say this 
without any hesitation or reservation, I will so miss this man who has 
done such a remarkably good job for the State of Connecticut and our 
country in his long service. He has been an exemplary Senator to me, 
and I am so fortunate I have gotten to know him as well as I have.


                    Small Business Lending Fund Act

  Mr. President, we have been on the small business jobs bill trying to 
work our way through, and there are a lot of issues we could work our 
way through, but my friends on the other side of the aisle made a 
decision today--maybe not tomorrow but today--to not let us move 
forward. I had a conversation with the Republican leader an hour or so 
ago and he said he wants to do some legislating on the bill tomorrow. I 
hope that, in fact, is the case because we are ready to do that.
  This small business jobs bill is extremely important. It is a 
bipartisan bill and I hope we can get it completed. Having said that, I 
sadly report there will be no votes tonight.
  Mr. DODD. 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. WHITEHOUSE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Regulatory Capture

  Mr. WHITEHOUSE. Mr. President, the majority leader indicated today 
that he would be preparing legislation on energy to deal with a number 
of different issues, among them the response we should make to the 
terrible spill, geyser of oil gushing into the Gulf of Mexico and all 
the damage that has ensued in the gulf States as a result.
  I come to the floor this evening to say a few words about a problem I 
believe we need to address in the context of this catastrophe. That 
problem is the problem of regulatory capture of the captive regulator. 
Although it comes up in the context of the failure of the Minerals 
Management Service to do its job to see that the private sector 
deepwater drilling in the gulf was done properly, it is a problem that 
is not limited just to the geyser of oil gushing into the Gulf of 
Mexico and the failure of MMS to have taken adequate steps to prevent 
it. It occurs in other areas as well.
  One that leaps to mind is the Securities and Exchange Commission, the 
so-called securities watchdog which was sound asleep at the switch as 
the economy careened towards the huge financial meltdown with 
repercussions we are still seeing today.
  The Senator from Michigan, Ms. Stabenow, was just talking about the 
catastrophes in her State and the pain that the lack of unemployment 
insurance is creating. That goes back to the original Wall Street 
meltdown, and that launched a tsunami of misery across the country that 
we are still dealing with today.
  So if you take a look at those two catastrophes--the giant financial 
meltdown catastrophe, the consequences of which we are still living, 
that families in Rhode Island, families in Illinois, families in 
Michigan are still dealing with; and the disaster in the gulf that has 
created a catastrophe throughout Louisiana, Alabama, Florida--they have 
a common theme. The common theme is this issue of regulatory capture.
  My hometown paper editorialized pretty trenchantly about the gulf 
problem. They said:

       The Deepwater Horizon accident has made it painfully clear 
     that, in its current form, MMS is a pathetic public guardian. 
     Neither it nor BP was prepared for a disaster of this 
     magnitude, and MMS' cozy relationship with industry is a big 
     reason why.

  The issue of regulatory capture has been written about for a long 
time. In 1913, Woodrow Wilson wrote:

       If the government is to tell big business men how to run 
     their business, then don't you see that big business men have 
     to get closer to the government even than they are now? Don't 
     you see that they must capture the government, in order not 
     to be restrained too much by it?

  `` . . . they must capture the government, in order not to be 
restrained too much by it.''
  The first dean of the Woodrow Wilson School, Marver Bernstein, wrote, 
55 years ago, that regulators tend over time to ``become more concerned 
with the general health of the industry'' and that they try ``to 
prevent changes which will adversely affect'' the industry. He said, it 
``is a problem of ethics and morality as well as administrative 
method.'' He called it ``a blow to democratic government and 
responsible political institutions.'' And ultimately he said it leads 
to what he called ``surrender.'' He said, ``The commission finally 
becomes a captive of the regulated groups.''
  Even recently, the Wall Street Journal editorial page contained an 
article by a senior fellow at the Cato Institute, saying:

       By all accounts, MMS operated as a rubber stamp for BP. It 
     is a striking example of regulatory capture: Agencies tasked 
     with protecting the public interest come to identify with the 
     regulated industry and protect its interests against that of 
     the public. The result: Government fails to protect the 
     public.

  So from Woodrow Wilson, in 1913, through Marver Bernstein, 55 years 
ago, to the Wall Street Journal editorial page just this month, the 
identification of the problem at MMS with the doctrine of regulatory 
capture I think is clear.
  So the question is, What are we going to do about that? It has been a 
recurring problem, and the difficulty is that for the regulatory 
agency, they are constantly engaged with the regulated industry. The 
industry is there all the time. The industry is pushing on them all the 
time. The industry is on the other side of the revolving door of jobs, 
often. The industry has lawyers and lobbyists working the agency. The 
industry threatens lawsuits if it gets regulations it does not like, 
and is accommodating and friendly when it gets regulations it does 
like. In some cases, such as MMS, the relationship gets completely 
toxic and you get social events with industry representatives, 
including illegal drug use and sex. You get staff failing to collect 
millions of dollars in royalties owed to the American people. You get 
senior executives steering contracts to an outside company created by 
those executives. You get district managers telling investigators: Hey, 
obviously we are all oil industry. You get employees accepting gifts 
from the companies regulated by MMS, trips to the Peach Bowl on a 
private airplane, skeet shooting contests, hunting and fishing trips, 
golf tournaments.
  You get an MMS inspector inspecting the oil drilling platforms of a 
company that he has a job application in with. While they are 
considering whether to hire him, he is inspecting their oil drilling 
rigs. I guess it comes as no surprise that in those oil rig inspections

[[Page 12821]]

he found no violations. But that is an environment in which the 
regulatory agency has yielded to this long recognized problem of 
regulatory capture. So I think it is time we did something about it.
  It is a doctrine that has been known for many years, and clearly both 
at the Securities and Exchange Commission and at MMS it has been 
realized, and it has been realized in ways that are extraordinarily 
painful and damaging for America. It has been realized in ways that are 
truly catastrophic--in one case, for our economy, in another case, for 
the environment of the gulf area.
  What I have proposed is that we authorize the Attorney General of the 
United States, at the direction of the President or upon the invitation 
of a Cabinet official who senses a concern about that agency, to make a 
determination whether that agency is still truly independent of the 
industry it is supposed to regulate. If the President or the Cabinet 
official deemed that component no longer credibly independent of the 
corporation or the industry it is supposed to regulate, then the 
Attorney General is allowed to step in and clean up.
  It is as simple as that. They would be charged to hire and fire and 
take personnel actions; to ensure the integrity of the personnel within 
the component; to establish interim regulations and procedures; to 
ensure the integrity of a process in the component of government. They 
would be charged to audit the permits and the contracts and ensure that 
the component of government has signed off on them legitimately, and if 
it appears that the permits or contracts have been affected by improper 
corporate influence, to recall them and renegotiate them so that they 
are done fairly and squarely and not a friendly negotiation in which 
both sides of the negotiation are, in effect, working for the industry 
and no one is representing the public interest. They would be charged 
to establish an integrity plan for that component and then to clear out 
once his or her job is done.
  We have known about regulatory capture now for a century. We have 
seen it in action throughout that period. We have had two of the most 
catastrophic examples of regulatory capture happen just now on our 
watch, and in all this time we have never really come up with a 
mechanism for addressing it, because the pressure on these regulatory 
agencies is systemic, because it is constant and persistent, because it 
is done quietly. The industry doesn't come in and say: We are taking 
over. News flash to the world: This isn't going to be an independent 
agency any longer.
  No. Quietly, as quietly as they can, they slip their tentacles deeper 
and deeper and deeper into the agency until they quietly control it--
surreptitiously, stealthily, but they own it--and the interest that 
agency wants to serve is now the corporate interest and not the public 
interest.
  So if we are going to face up to a problem that is that persistent, 
that constant, which has been recognized for a century and has recently 
yielded the two biggest disasters, economic and environmental, this 
country has recently seen, we have to create a persistent 
counterpressure. I think the threat of the Attorney General of the 
United States, our top law enforcement officer, coming in and cleaning 
house is that kind of persistent counterpressure we need.
  So I urge my colleagues, as we discuss the different provisions we 
are going to bring to bear that are going to be our lessons learned 
from the gulf catastrophe, that we not overlook what is probably the 
biggest lesson of all: the lesson we have known for a long time about 
the problem of regulatory capture and the incidence of regulatory 
capture in these particular cases bearing such painful, damaging fruit, 
such bitter harvest for the American people.
  I will continue to push. If colleagues have ideas they think would 
improve it, I would be delighted to discuss those ideas. I think we 
will have failed in our duty to the public if we do not take away from 
the financial disaster caused by the deliberately blind eye of the 
Securities and Exchange Commission and the catastrophe caused by the 
complete co-opt of MMS--if we don't take away from those the lesson 
that this can't be tolerated anymore.
  Regulatory capture is no longer a theory; it has been proven to be a 
disastrous practice in at least those two agencies, and we don't know 
how many more agencies are in a similar position. The disaster may not 
yet have happened, but they may be just as captive. When you think of 
the billions and billions of dollars of taxpayer value in Federal land, 
in timber leases, in mining leases within the continental United 
States, in contrast with giant corporations; when you think of that 
huge pile of public wealth from which the giant corporations feed, it 
is hard to imagine they are not working just as hard to co-opt the 
regulators who protect that wealth as they work to successfully co-opt 
the regulators who are supposed to be watching the Wall Street 
financiers and who are supposed to be watching big oil as it drilled in 
the gulf.
  So let's not overlook this lesson. I am willing to consider a lot of 
ideas that will help get us there. I put this out because it is the 
best one I have come up with yet, and I look forward to working with 
folks. It is too important that we don't go away from this having 
failed in our duty to protect the American public from the next 
disaster.
  I thank the Presiding Officer.
  I yield the floor, and I note the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. WHITEHOUSE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________