[Congressional Record (Bound Edition), Volume 160 (2014), Part 5]
[House]
[Pages 6342-6346]
[From the U.S. Government Publishing Office, www.gpo.gov]




         RESTORING PROVEN FINANCING FOR AMERICAN EMPLOYERS ACT

  Mr. GARRETT. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 4167) to amend section 13 of the Bank Holding Company Act of 
1956, known as the Volcker Rule, to exclude certain debt securities of 
collateralized loan obligations from the prohibition against acquiring 
or retaining an ownership interest in a hedge fund or private equity 
fund, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 4167

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Restoring Proven Financing 
     for American Employers Act''.

     SEC. 2. RULES OF CONSTRUCTION RELATING TO COLLATERALIZED LOAN 
                   OBLIGATIONS.

       Section 13(g) of the Bank Holding Company Act of 1956 (12 
     U.S.C. 1851(g)) is amended by adding at the end the following 
     new paragraphs:
       ``(4) Collateralized loan obligations.--
       ``(A) Inapplicability to certain collateralized loan 
     obligations.--Nothing in this section shall be construed to 
     require the divestiture, prior to July 21, 2017, of any debt 
     securities of collateralized loan obligations, if such debt 
     securities were issued before January 31, 2014.
       ``(B) Ownership interest with respect to collateralized 
     loan obligations.--A banking entity shall not be considered 
     to have an ownership interest in a collateralized loan 
     obligation because it acquires, has acquired, or retains a 
     debt security in such collateralized loan obligation if the 
     debt security has no indicia of ownership other than the 
     right of the banking entity to participate in the removal for 
     cause, or in the selection of a replacement after removal for 
     cause or resignation, of an investment manager or investment 
     adviser of the collateralized loan obligation.
       ``(C) Definitions.--For purposes of this paragraph:
       ``(i) Collateralized loan obligation.--The term 
     `collateralized loan obligation' means any issuing entity of 
     an asset-backed security, as defined in section 3(a)(77) of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(77)), 
     that is comprised primarily of commercial loans.
       ``(ii) Removal for cause.--An investment manager or 
     investment adviser shall be deemed to be removed `for cause' 
     if the investment manager or investment adviser is removed as 
     a result of--

       ``(I) a breach of a material term of the applicable 
     management or advisory agreement or the agreement governing 
     the collateralized loan obligation;
       ``(II) the inability of the investment manager or 
     investment adviser to continue to perform its obligations 
     under any such agreement;
       ``(III) any other action or inaction by the investment 
     manager or investment adviser that has or could reasonably be 
     expected to have a materially adverse effect on the 
     collateralized loan obligation, if the investment manager or 
     investment adviser fails to cure or take reasonable steps to 
     cure such effect within a reasonable time; or
       ``(IV) a comparable event or circumstance that threatens, 
     or could reasonably be expected to threaten, the interests of 
     holders of the debt securities.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New 
Jersey (Mr. Garrett) and the gentleman from Florida (Mr. Murphy) each 
will control 20 minutes.
  The Chair recognizes the gentleman from New Jersey.


                             General Leave

  Mr. GARRETT. I ask unanimous consent that all Members have 5 
legislative days within which to revise and extend their remarks and 
submit extraneous materials to the Record on H.R. 4167, as amended, 
currently under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New Jersey?
  There was no objection.
  Mr. GARRETT. Mr. Speaker, at this point, I yield myself such time as 
I may consume.
  Mr. Speaker, I rise today in support of H.R. 4167, which is the 
Restoring Proven Financing for American Employers Act. It was 
introduced by the gentleman from Kentucky (Mr. Barr), who we will be 
hearing from shortly. And I would also like to thank my good friend 
from New York (Mrs. Maloney), the ranking member of the Capital Markets 
Subcommittee, for her bipartisan and commonsense work on this important 
issue as well.
  Today we have the opportunity to correct, in a strong, bipartisan 
way, an egregious example of regulatory overreach. For no reason that 
has been coherently stated by anyone, the banking regulators 
responsible for implementing the Volcker Rule have included provisions 
in their final rule that will literally cripple the market for 
collateralized loan obligations, also called CLOs.
  See, at the stroke of a pen, the banking regulators are going to 
wreak havoc on one of the largest and most important sources of 
financing for literally hundreds of growing companies across this 
country. If the CLO provisions in the Volcker Rule go forward as 
planned, there will be a heavy price to pay in failed companies and 
also lost jobs.
  So why is the government doing this? Did CLOs do anything to cause 
the financial crisis? No, they did not. Are CLOs a menace to the 
stability of our financial system? No, again. Is the small proportion 
of securities included in some CLO structures a national crisis that 
requires such a heavy hand by the Federal Government? Of course not.
  Thankfully, the bill we have today, introduced by my friend from 
Kentucky (Mr. Barr), fixes this problem of the banking regulators' own 
making. First, it prevents a disastrous fire sale of suddenly 
impermissible legacy CLOs. Second, it narrows the Volcker rule's 
absurdly broad definition of an ``ownership interest'' in a CLO.
  Last month, the Financial Services Committee passed this bill on an 
overwhelmingly bipartisan basis, with all but three members of the 
committee voting in favor of it. The Independent Community Bankers of 
America and the American Bankers Association have all voiced their 
support as well.
  I am sorry, though, that it has come to this. You know, time and time 
again the committee has admonished the banking regulators that the CLO 
provisions of Volcker were a threat to the economy and to the financial 
stability that they are supposed to be protecting. Time and again, 
however, the unwieldy banking regulators chose to do nothing. If they 
had corrected this problem as we have been urging them to do and which 
they could do, we

[[Page 6343]]

would not be here wasting valuable legislative time saving the CLO 
market from our own public servants.
  Now, some have suggested that the agencies don't have the legal 
authority to fix the problems. It is interesting that Federal agencies 
always seem to have plenty of authority when it comes to doing 
something, but when they need to fix something that they messed up, 
well, suddenly they have no authority.
  Perhaps the real problem is the fact that we have so many different 
banking regulatory agencies in the first place. If coordinating these 
agencies to avoid a regulatory train wreck is too difficult, then maybe 
we need fewer agencies.
  I have spoken before about the proliferation of government regulators 
with authority over our financial markets. More regulators mean more 
wasteful duplication of functions, more regulatory confusion, more 
empire building, more bureaucratic rivalry, less accountability, and 
less problem solving.
  An ever increasing number of agencies with ever increasing authority 
only makes our financial system more unsustainable and more arbitrary 
and more unstable, and it makes it all the more likely that the heavy-
handed government will fall suddenly on some unlucky corner of the 
economy.
  So it is my hope that this body can come together now and support 
this bipartisan piece of legislation so that we can ensure that the 
market for collateralized loan obligations, CLOs, is not carelessly and 
needlessly destroyed. While they may not have a high profile, CLOs 
provide a valuable function that our recovering economy cannot do 
without, and I urge my colleagues for that reason to support H.R. 4167.
  And at this time, I will reserve the balance of my time.
  Mr. MURPHY of Florida. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 4167, to create jobs and 
prevent unintended consequences of the Volcker Rule, which I strongly 
support.
  The bill before us represents a truly bipartisan compromise that 
balances the author's goal to preserve a proven financing mechanism 
with democratic concerns against watering down the Volcker Rule, which 
is designed to prevent banks from gambling on Wall Street with consumer 
deposits, the very type of behavior that nearly took down our financial 
system and gave us the Great Recession.
  The truth is the Volcker Rule is not intended to capture debt. Debt 
is an everyday tool of plain vanilla financial institutions. No, the 
Volcker Rule is about equity ownership. We don't want banks owning 
hedge funds and private equity funds, but of course we still want banks 
out in the communities lending to the real economy.
  I want to thank the gentleman from Kentucky and the gentlelady from 
New York (Mrs. Maloney) for working together on a compromise that makes 
a narrow, commonsense fix to the Volcker Rule without undermining its 
core purpose: prohibiting risky proprietary trading by federally 
insured banks.
  I also want to recognize Chairman Hensarling and Ranking Member 
Waters for the truly bipartisan way this bill came to the floor by a 
vote of 53-3. I am hopeful that we will see more bipartisanship from 
our committee on the business of the American people: comprehensive 
community bank regulatory relief, TRIA, reauthorizing the Export-Import 
Bank to help American job creators access foreign markets, and 
reforming Fannie Mae and Freddie Mac to protect taxpayers without 
undermining the housing market and preserving the 30-year fixed rate 
mortgage for middle class families.
  The bill before us would simply clarify that the right to vote to 
remove a CLO manager in traditional, creditor-protective circumstances, 
such as a material breach of contract, does not, by itself, convert a 
debt security into an equity security under the Volcker Rule.
  It would also provide narrow relief to existing CLO securities as 
long as they qualify as debt under this bill. For CLOs that are not 
debt securities under this bill, banks will get an additional 2 years 
to divest, which will prevent a disruptive fire sale of these 
securities and cost as much as $8 billion.
  At this time, I will insert the text of a letter from the Independent 
Community Bankers of America into the Record.

                                             Independent Community


                                           Bankers of America,

                                   Washington, DC, April 28, 2014.
     House of Representatives,
     Washington, DC.
       Dear Member of Congress: On behalf of the more than 6,500 
     community banks represented by ICBA, I write to express our 
     support for the Restoring Proven Financing for American 
     Employers Act (H.R. 4167), which will be considered on the 
     House floor this week. Introduced by Rep. Andy Barr, H.R. 
     4167 will allow community banks to retain debt securities of 
     collateralized loan obligations (CLO) issued before January 
     31, 2014. The Financial Services Committee reported H.R. 4167 
     by a nearly unanimous vote in March.
       As you may know, the final Volcker Rule implementing a 
     provision of the Dodd-Frank Act, issued December 10, requires 
     banks, including community banks, to divest their holdings of 
     CLOs by July 2015. Though the compliance date was later 
     extended, this requirement could cause a significant, 
     immediate and permanent loss of capital for community banks 
     that hold these securities and are still recovering from the 
     financial crisis. H.R. 4167 would avert this damaging and 
     unanticipated outcome by repealing the divestment requirement 
     for CLOs issued before January 31.
       ICBA urges you to support H.R. 4167. Thank you for your 
     consideration.
           Sincerely,
                                                   Camden R. Fine,
                                                  President & CEO.

  Mr. MURPHY of Florida. Once again, I would like to thank the 
gentleman from Kentucky (Mr. Barr), who also is a member of the United 
Solutions Caucus and is dedicated to real problem solving and saving 
the partisanship for another day. He worked hard on this bill and was 
willing to reach across the aisle for commonsense compromise. As a 
result of his hard work, this jobs bill is on the suspension calendar 
and has earned a strong bipartisan vote.
  I urge my colleagues to support this legislation and reserve the 
balance of my time.
  Mr. GARRETT. Mr. Speaker, at this time, we are now joined by the 
sponsor of the bill, the gentleman from Kentucky, who, as was 
indicated, worked in a bipartisan manner to get it out of committee, 
here on the floor. And I assume we are going to see a strong bipartisan 
vote for it on the floor as well.
  At this time, I yield such time as he may consume to the gentleman 
from Kentucky (Mr. Barr).
  Mr. BARR. Mr. Speaker, I thank the gentleman from New Jersey, my 
friend who has, himself, shown a considerable amount of leadership on 
this issue in making sure that American companies on Main Street and 
all across this country have access to reliable, affordable capital to 
grow their businesses and create jobs.
  I also want to thank the gentleman from Florida for participating in 
the discussion here today in a bipartisan manner and for his support. 
And I also thank my colleagues both on this side and that side of the 
aisle for their support and for recognizing that we do need to fix this 
problem.
  H.R. 4167, the Restoring Proven Financing for American Employers Act, 
is about jobs and economic growth. It is about reliable access to 
affordable credit to small, midcap, and emerging-growth companies, in 
fact, some of the most dynamic and job-producing companies in America.
  As the U.S. Chamber of Commerce states in its letter of support, my 
legislation is necessary to ``fix the adverse impacts of the Volcker 
Rule upon thousands of Main Street businesses.''
  This legislation, as has been mentioned earlier, passed out of the 
Financial Services Committee on a March 14 strongly bipartisan vote of 
53-3. I want to thank Congresswoman Carolyn Maloney of New York for her 
support and work in developing this commonsense legislation to provide 
a necessary clarification of the Volcker Rule while maintaining the 
original legislative intent regarding the treatment of collateralized 
loan obligations.
  While there are several exemptions provided in the statute included 
in section 619 of the Dodd-Frank law, which

[[Page 6344]]

authorizes the Volcker Rule, that legislative language states:

       Nothing in this section shall be construed to limit or 
     restrict the ability of a banking entity or nonbank financial 
     company supervised by the Federal Reserve Board to sell or 
     securitize loans in a manner otherwise permitted by law.

  Nevertheless, despite this plain language in the statute, certain 
asset-backed securities originally thought to be exempt by the Volcker 
Rule are now subject to the covered fund definition.
  So the pragmatic need to provide this defined, narrow fix is why the 
legislation is endorsed by the American Bankers Association, by the 
Kentucky Bankers Association, and by the small community banks around 
this country, the Independent Community Bankers of America. And it is 
why a small community bank in my home State of Kentucky contacted my 
office in January. He alerted us to the fact that failing to fix this 
problem could very well mean significant losses to that small community 
bank, possible layoffs of employees, and higher borrowing rates and 
fees for the customer in the local community.
  So getting this issue right and fixing the problem is important to 
community banks. It is important to U.S. employers and businesses on 
Main Street. It is important to a whole lot of jobs that support 
families in Kentucky and around this country. And here is why: 
collateralized loan obligations, or CLOs, have proven to be a critical 
source of funding for U.S. businesses over the last 20 years.

                              {time}  1300

  Today, CLOs continue to provide over $300 billion in financing to 
U.S. companies, including companies that are well-known to all of us in 
this Chamber--Dunkin' Donuts, American Airlines, Burger King, Toys 
``R'' Us, Neiman Marcus, Delta Air Lines, Goodyear Tire, and even a 
mattress and bedding company in my hometown of Lexington, Kentucky, 
Tempur Sealy. Yet, this valuable form of corporate finance that 
supports jobs is under assault due to the regulators' implementation of 
the Volcker Rule, which makes it impermissible for banks to retain or 
invest in these assets.
  According to the U.S. Chamber of Commerce, H.R. 4167 would ``preserve 
this important source of financing that supports growth and job 
creation throughout our economy.'' CLOs have a proven track record of 
success, and they ``performed very well before, during and since the 
financial crisis.''
  According to the Kentucky Bankers Association, investment in CLOs is 
a ``conservative addition to an existing and balanced investment 
approach'' and a ``thoughtful solution to the equity problem'' that 
banks face. In fact, the default rate on CLOs in the last 20 years has 
been less than one-half of 1 percent.
  Yet, despite this proven track record and despite this critical 
source of funding for growing U.S. companies and job producers in 
America, the Volcker Rule regulators require that banks divest of their 
CLO holdings. The consequences will be a fire sale in the market that 
will cause significant losses to banks currently holding what are known 
as legacy CLOs.
  Looking forward, it will increase the cost of borrowing in the future 
for U.S. businesses looking to expand, grow, and create much-needed 
jobs.
  These warnings may sound abstract. So let me explain how this affects 
a real business that employs many of my constituents in Kentucky's 
Sixth Congressional District. Tempur-Pedic is a high-end mattress 
bedding company, and they produce, through space-age technology, very 
comfortable, high-end beds for the top of the market. But they knew 
that in order to be resilient and to be growing in the future, they 
needed to acquire a competitor that covered the rest of the 
marketplace--the value products, the midlevel products, and a lower but 
higher level form of mattress so that in the event of an economic 
downturn or competitive pressures in the marketplace, they would have a 
cross-section of the entire marketplace with all price points of 
bedding.
  So Tempur-Pedic used CLO financing, where it didn't have access to 
affordable corporate bond financing, as affordable corporate bond 
financing. They accessed CLO financing and closed this transaction 
where they acquired a well-known company to a lot of Americans, Sealy, 
and that transaction closed in March of 2013. This allowed them to 
expand their business and create already in just a year's time 200 new 
jobs in my district.
  Thanks to CLO financing, Tempur Sealy is now a more resilient company 
and better poised for growth in the future. And if Tempur Sealy sees an 
opportunity to grow even more and is in need of a commercial loan, we 
want to make sure that this source of affordable financing is there for 
them and for all U.S. companies.
  H.R. 4167 is a defined, narrow fix which clarifies that the Volcker 
Rule should not be construed to require the divestiture of any debt 
securities of CLOs prior to July 21, 2017, if such CLOs were issued 
before January 21, 2014.
  H.R. 4167 also clarifies that a bank shall not be considered to have 
an ownership interest in a CLO for purposes of enforcement of the 
Volcker Rule if such debt security has no indicia of ownership other 
than the right to participate in removal for cause or in the selection 
of a replacement investment manager or investment adviser of the CLO.
  So, in sum, Mr. Speaker, this legislation is a bipartisan, 
commonsense fix to a real world problem voiced by community banks and 
emerging growth companies like Tempur Sealy in my own district that 
will benefit these companies all around the country. So I urge a vote 
in support of H.R. 4167, the Restoring Proven Financing for American 
Employers Act.
  Mr. GARRETT. I reserve the balance of my time.
  Mr. MURPHY of Florida. Mr. Chairman, I yield as much time as he may 
consume to the gentleman from Massachusetts (Mr. Capuano).
  Mr. CAPUANO. I thank the gentleman for yielding.
  Mr. Speaker, I am one of those three people who voted ``no.'' I do 
not expect to win here today on the floor. And I want to be real clear: 
I do not oppose consolidated loan obligations. I support them. They are 
an important financial tool.
  But that is not what this bill does. This bill allows risky CLOs. 
Most CLOs would be permitted pursuant to the Volcker Rule. If they only 
contained loans, they are okay. Any bank can own them to any degree.
  So let's not think that somehow the Volcker Rule has killed CLOs. 
They have simply said they have to be what they say they are, 
collateralized loan obligations, not collateralized loan obligations 
put together with all kinds of other junk. Simple. Straightforward.
  There is not going to be any fire sale. The regulators have already 
listened to the congressional comments, of which I was one, asking for 
a delay to allow the existing CLOs that do not meet the regulation to 
be held for 2 more years. There will be no fire sale. There has been no 
fire sale.
  As we speak, the sale of CLOs is at a historic high. The Volcker Rule 
has not killed the market. They are back to almost the same levels they 
were at in 2007 before the crash.
  Let me be clear. I agree that CLOs did not, on their own, participate 
in the '08 problems and that they do have a record of success. But 
prior to 2008, most people would have said the same thing about 
collateralized debt obligations. By the way, at some point, somebody 
has to explain to me the difference between debt and loans, but that is 
a different issue.
  Collateralized loan obligations are important. They are a good, 
thoughtful way to provide capital. By the way, most of them are used 
for leveraged buyouts, as the example we just heard, for leveraged 
buyouts. Now, you can argue whether leveraged buyouts to the extent 
they happen are good or bad, but that is what they are mostly used for.
  I also want to be real clear. Very, very, very few small, community 
banks have any CLOs. Over 70 percent of the collateralized loan 
obligations, both the ones that are allowed and disallowed, are owned 
by three banks.

[[Page 6345]]

Over 70 percent are owned by three of the largest banks in the world. 
And by the way, almost all of those CLOs would be permitted to those 
three large banks.
  So what are we solving here? We are pretending to save some great 
investment tool. It is not under threat. We are pretending that no 
problems could ever happen. Those are the same discussions we had in 
'05, '06, '07, and '08. All the risk that was being assumed comfortably 
and successfully prior to 2008 was perfectly fine. Those regulators are 
just killing America--until the crash happened, from which we are still 
recovering.
  All we want to do is take a look at some of the riskier aspects of 
this financial aspect and simply say, whoa, it doesn't mean everybody 
can't do it. It simply means regulated banks can't do it. Private 
investors could still do every one of these things. Why would regulated 
banks be prohibited from doing only the most risky CLOs? Because they 
are protected by taxpayer dollars, because they are protected by the 
FDIC, and because we, as a society, have said that bank stability is 
important to the American economy.
  So let's be clear: CLOs are not being killed. They are being limited 
in a very small way only to target the most risky CLOs. Banks and 
others have already adjusted to those limitations by reinvigorating the 
CLO market in a way that has been and would be allowed under the 
existing rule. But yet we have a problem.
  We have a crisis that we have to solve. A handful of people will not 
be allowed to risk my mother's investment. That is what we are crying 
about. Well, I have heard that before, and it didn't turn out too well 
in '08. A little limitation is good for the American system. And, by 
the way, it is historically the system as it has been for a thousand 
years.
  I just want to end with a quote by Paul Volcker himself. I presume 
Paul Volcker knows more about the economy and the markets than most 
people in Congress. But maybe not. Maybe some people are smarter than 
him. This is what he said about this bill:

       This constant effort to get around the rule limiting banks' 
     investment in hedge funds on behalf of a few institutions who 
     apparently want room to resume the financing practices that 
     got us into trouble in the past really should end.

  CLOs--straightforward and plain vanilla--are a good and important 
investment tool for the American economy. They should and will be 
allowed under the current rules. There should and will be time for 
people to move slowly and thoughtfully without a fire sale out of the 
handful of risky investments that are there, and even those people who 
love those risky investments will be able to do it still, just not 
through a subsidized bank.
  I know that I have not convinced anyone. I know that I am going to 
lose this vote on the floor, and I respect it. And I hope to God that 
my concerns are wrong and overblown. I hope that in a few years I come 
back and I apologize to the gentleman for my concerns, that they were 
overblown and unjustified. Because America will be better off if you 
are right. But if you are wrong, a handful of people will make a lot of 
money, but the rest of us will be dramatically and deeply hurt once 
again.
  Mr. MURPHY of Florida. I want to thank the gentleman from 
Massachusetts for his remarks.
  Mr. Speaker, I reserve the balance of my time.
  Mr. GARRETT. Mr. Speaker, how much time do we have remaining?
  The SPEAKER pro tempore (Mr. Amodei). The gentleman from New Jersey 
has 8\1/2\ minutes remaining. The gentleman from Florida has 10 minutes 
remaining.
  Mr. GARRETT. I yield 4 minutes to the gentleman from Kentucky (Mr. 
Barr).
  Mr. BARR. Mr. Speaker, I thank the gentleman from New Jersey, and I 
thank the gentleman from Massachusetts for his contribution to the 
debate. It gives us an opportunity to actually analyze what exactly we 
are talking about here.
  We are not talking about the risky assets that were contributing 
factors to the financial crisis. If this were junk, as the gentleman 
from Massachusetts describes it to be, the default rate on CLOs would 
have been much higher over the last 20 years. But the default rate on 
CLOs over the last 20 years, including during the financial crisis, was 
less than half of 1 percent. Not one of the nearly 4,000 notes rated 
AAA or AA ever defaulted in CLOs.
  Part of the reason for this strong, durable performance of CLOs is 
because CLOs are very different from the troubled assets that fueled 
the financial crisis. CLOs are distinct because, number one, they are 
based on diverse assets, commercial loans that are well diversified 
across the industry. These are solid, diversified loans, and they are 
typically secured loans.
  Secondly, there is an alignment of interest between CLO investors and 
the CLO managers. The managers actually have skin in the game.
  Finally, third, there are significantly greater transparency features 
to CLOs and disclosure since the commercial loans here, the secured 
commercial loans, are issued by companies that report financial 
information on a regular basis to investors, and they are required to 
provide regular financial reports with the SEC.
  Now, with respect to the gentleman's claim that the CLO market is 
doing just great, there is a lot of misinformation about this. 
According to the Loan Syndication and Trading Association, U.S. banks 
hold an estimated $70 billion of CLO notes, which would have to be 
divested if we don't make the fix by July 21, 2015, and with the Fed's 
change a little bit later. But even the threat of such a divestiture 
roiled the CLO market in December and January before Congress took 
action.
  So due primarily to uncertainty around the Volcker Rule in January 
2014, U.S. CLO issuance dropped nearly 90 percent from the prior year, 
drying up access to credit. The only reason why the CLO market has 
recovered since January is because of this bill. It is because of the 
legislative action, the bipartisan efforts of this body.
  Finally, I just would like to conclude by responding to the 
gentleman's assertion that a little limitation is good for the system--
a little limitation is good for the system. Well, hear what a witness 
at our hearing about this issue said about this little limitation:

       If you have a situation where the Volcker Rule basically 
     impedes U.S. banks and some foreign banks from investing in 
     CLOs, you can see their appetite reduced by 80 percent. They 
     will just not participate in the CLO market.

  Ultimately, that leads to our other point, in that we can see a 
significant cost to financing for U.S. companies. What happens when you 
see a significant cost to financing or decreased credit availability 
for companies? That means these companies that have over 5 million 
employees can't build new factories, they can't build new cellular 
networks, they can't expand, and they can't combine and merge to 
bigger, more resilient companies that can compete effectively on a 
global basis. It ultimately would have a very destructive effect on 
U.S. companies.
  So, Mr. Speaker, in sum, I will just bring it back to my home 
district. If a little limitation is good for the system, tell that to 
the 200 Kentuckians who now have jobs because of this innovative source 
and a responsible source of commercial credit in America.

                              {time}  1315

  Mr. GARRETT. Mr. Speaker, I yield myself such time as I may consume.
  I just want to take a moment to respond as well to the gentleman from 
Massachusetts. He indicated that he is probably not going to convince 
anyone who is supporting the bill. I presume I am probably not going to 
convince him either, as I look over there, because he is now off the 
floor; but if he is back in his office and tuning us in, let me just 
make some points where he might be convinced.
  He spoke about the fire sale that will not occur now under the 
proposed Volcker Rule. Well, yes, it still will occur, just because you 
are not saying that the sale has to occur this afternoon, but it is 
going to occur at a set point in time, either 6 months from now, a year 
from now, or as they are

[[Page 6346]]

proposing, 2 years from now. In either case, when you set a date 
certain for a sale, then everyone else out there knows that this is the 
day that they might as well wait for; and eventually, they will have to 
sell, and at that point in time, they will engage in a fire sale.
  In other words, by setting a date when you have to sell all of your 
assets or whatever you have, you are basically pushing the price down 
in that market.
  Secondly, with regard to sales up, I guess the gentleman from 
Kentucky already raised that point. Sales were going down until 
Congress came together in a unique experience for Congress, which was a 
bipartisan effort, and once the rest of Main Street and Wall Street saw 
that Congress can actually do things together and work together in a 
bipartisan manner, they did what the rest of Americans will do and 
said: good thing. They said: let's get that market going back up again.
  As the gentleman from Kentucky pointed out, that is exactly what 
occurred.
  Thirdly, the gentleman from Massachusetts admitted that the CLO 
market was not the cause or any cause of the crisis that we had back in 
2008, and I have not heard any testimony from anyone on any panel from 
either end of the spectrum that the CLOs would be a basis for the next 
crisis that inevitably will come.
  Next, the gentleman from Massachusetts raised the point that 
something like 70 percent of all the CLOs out there are captured by 
something like three large banks or three financial institutions and 
made it sound as though the smaller and midsized banks are not really 
playing here.
  Then you had to listen to the next thing that he said. He said that 
most of those CLOs held by those would already be protected by the 
current Volcker proposal out of the administration.
  Well, that tells you right there that the legislation from the 
gentleman from Kentucky is not addressing or not trying to solve a 
problem for the three large banks. The legislation he is trying to put 
forward in a bipartisan manner is, in fact, doing just as he explained 
for the smaller banks, for the midsized banks, those are the ones that 
we are concerned about; and we want to make sure that they are not hurt 
through fire sales or further restrictions on them.
  Finally, last--but maybe not least--is the fact that this bill will 
not end too big to fail. Well, we know that Dodd-Frank, unfortunately, 
did not end too big to fail.
  Dodd-Frank did a number of things, but it did not end too big to 
fail, and the way to solve that is not by nitpicking around the edges 
on areas such as this that did not cause the crisis in the first place.
  In fact, the authors and the proponents of Dodd-Frank understood that 
when they passed Dodd-Frank--because, look, what is the language in 
Dodd-Frank when it comes to the Volcker Rule and the CLO matter that is 
before us today? Did they want to have this included in the rule that 
Volcker would eventually come out with? The answer is no.
  The language specifically in 619 of Dodd-Frank--voted in favor of, by 
the way, by the gentleman from Massachusetts--says:

       Nothing in this section shall be construed to limit or 
     restrict the ability of a banking entity or nonbank financial 
     company supervised by the Federal Reserve Board to sell or 
     secure type loans in a manner otherwise permitted by law.

  What does that sentence mean? That means that the sponsors of--and 
those like the gentleman from Massachusetts who supported Dodd-Frank--
specifically put into the Dodd-Frank law the direction to the Fed and 
the other regulators that they should not be doing what they are doing 
right now. They should not be putting, as it says, limitations on this 
type of instrument.
  So for all of those reasons, if the gentleman from Massachusetts is 
still watching what we are doing on the floor, perhaps we have 
convinced him that he should join with the majority on both sides of 
the House and not be part of the three or so who remain opposed to this 
and support the legislation, H.R. 4167.
  With that, I yield back the balance of my time.
  Mr. MURPHY of Florida. Mr. Speaker, I would like to thank my 
colleagues and the gentleman from New Jersey for their thoughtful 
debate on this commonsense improvement to the Volcker Rule.
  I appreciate my colleagues on the Democratic side of the aisle always 
keeping the focus on preventing some of the world's largest banks from 
subjecting the American people to another financial crisis.
  However, I believe this bill strikes the right balance to protect the 
American people and create jobs. It was reported by the Financial 
Services Committee with a strong bipartisan 53-3 vote, and I urge my 
colleagues to support this bill.
  I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from New Jersey (Mr. Garrett) that the House suspend the 
rules and pass the bill, H.R. 4167, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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