[Congressional Record (Bound Edition), Volume 161 (2015), Part 9]
[House]
[Pages 12288-12291]
[From the U.S. Government Publishing Office, www.gpo.gov]




  FIFTH ANNIVERSARY OF THE DODD-FRANK WALL STREET REFORM AND CONSUMER 
                             PROTECTION ACT

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2015, the gentleman from Connecticut (Mr. Himes) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. HIMES. Mr. Speaker, I come to the floor today on this fifth 
anniversary of Dodd-Frank to reflect a little bit on a signal piece of 
legislation that, to this day, remains controversial.
  Dodd-Frank, of course, was a response to the worst economic meltdown 
that we have seen in this country since the Great Depression of the 
1930s.
  I want to reflect back on what led to the need for Dodd-Frank, the 
impact that that Great Recession, as we have come to call it, had on 
Americans and American families all over this country and then think a 
little bit about what Dodd-Frank has and has not done in the 5 years 
since its passage.
  It remains a controversial piece of legislation. All you have to do 
is look at the steady stream of press releases from the majority party 
on financial services.
  I have a few here:
  Dodd-Frank has enshrined too big to fail into law.
  Obama claimed Dodd-Frank would lift the economy. It has done the 
opposite, despite the fact that we learned today, of course, we have 
got one of the lowest jobless rates in a very, very long time.
  Financial crisis was caused by Washington's dumb regulations. That 
would come as a surprise to pretty much anybody with economic know-how 
who saw the long chain of malfeasance and irresponsibility in the 
mortgage market that actually led to the crisis.
  Dodd-Frank is setting the stage for the next crisis.

[[Page 12289]]

  ``Dodd-Frank Act leaves America less stable, less prosperous, less 
free.''
  These are truly extravagant claims.
  So let's back up a little bit and remember January of 2009. That 
happens to be the month that I was given the privilege of serving in 
this Chamber.
  It came after the last quarter of 2008 in which the United States' 
economy actually shrank at an 8 percent rate on an annualized basis.
  The economy was very literally melting down. The stock market was 
half of what it is today. Businesses were closing.
  Americans saw literally trillions of dollars of value--let's talk for 
a second about what ``value'' means.
  ``Value'' means that retirement fund that you were relying on in 
order to retire. It means the money that you had set aside in a 
brokerage account to educate your children.
  It means those savings that you had accumulated over many, many years 
of foregoing that vacation or scrimping on the budget, those things. 
All of that, for many Americans, was wiped out or cut in half, 
devastation.
  And, by the way, in January of 2009--I remember this--though the 
bailout had passed this House what was known as the TARP, the Troubled 
Asset Relief Program, and though that had been put into place by the 
United States Congress and seemed to have stabilized the market, at 
least temporarily, we worried day in and day out as to whether this--
let's face it--obnoxious measure--I don't think there is anybody who 
thinks in a free market system there should be bailouts--this 
obnoxious, politically toxic measure which, nonetheless, reasserted 
some stability in the financial services sector--nobody really knew if 
it was enough.
  I remember wondering whether we might not see a bankruptcy in a money 
center bank, a moment, perhaps, in which ATMs wouldn't have money in 
them. This was January of 2009.
  Most importantly--there are a lot of big words--asset values, this, 
that, and the other thing, money center banks--this meant devastation 
for millions of Americans who lost their jobs, for families who weren't 
going to be able to send their kids to school, who were going to have 
to postpone retirement, unemployment going into double digits, meaning 
that--and I spoke to one of my constituents yesterday who has an Ivy 
League degree who found himself working as a clerk at Home Depot, 
surrounded by other people with lots of education who were fortunate to 
have that job back in 2009, 2010 because the economy had been 
devastated by a financial services industry and, yes, by Fannie Mae and 
Freddie Mac, and insufficient regulation and irresponsibility on the 
part of some of the regulators had devastated the economy and left the 
American people holding the bag.
  So what happened? We went to work. We went to work in 2009. In 2010, 
we passed the Dodd-Frank Act. The Dodd-Frank Act is a complicated, big 
thing, but it addressed every stage of that chain of irresponsibility 
and malfeasance, starting with the selling of toxic and explosive 
mortgages to families that brokers and others knew couldn't possibly 
repay those mortgages to the bundling of those toxic mortgages into 
complicated securities which, frankly, you needed a Ph.D. to 
understand, to the fact that some of the credit rating agencies then 
put investment-grade AAA ratings on these toxic securities, to the fact 
that derivatives were then written on these securities, derivatives 
that were largely unregulated as the result of an act of this Congress, 
a long line of malfeasance and irresponsibility of insufficient 
regulation and of regulation insufficiently enforced, a terrible market 
practice.
  And, of course, in the middle of 2008, the chickens came home to 
roost and the economy was devastated and the American people, almost 
without exception, suffered.

                              {time}  1730

  We saw the Troubled Asset Relief Program--the bailout--passed. 
Imagine how shocking that is to the American people. I have lost my 
job; I have lost my home, and there is a bailout of these institutions 
that I don't know a whole lot about; but I suspect, correctly, were at 
the heart of this crisis.
  No wonder we had political upheaval in this country after that 
happened. Every step in that chain, Mr. Speaker, from toxic mortgages 
to securities that nobody understood, to credit rating agencies doing 
an awful job in evaluating those securities, to Fannie Mae and Freddie 
Mac acting irresponsibly, to regulators being asleep at the switch, 
Dodd-Frank addressed every element of that set of problems which 
combined to devastate the American economy and to hurt American 
families.
  Did it do it perfectly? Of course, it didn't do it perfectly. We were 
legislating under conditions of great fear and heightened emotions, and 
at the end of the day, we are mortals addressing very, very complicated 
issues.
  It was a good-faith effort to address what had clearly caused this 
problem. This notion that the Republicans are peddling that it was 
caused by Washington's dumb regulations is beyond insane because Dodd-
Frank looked at what actually caused the problems of 2008 and addressed 
them.
  What happened? We were told that Dodd-Frank would be a job killer. 
This was back in 2010 when anything that the then-Democratic Congress 
did was going to be a job killer.
  The Affordable Care Act which, as it turns out, has provided health 
insurance to 16 million Americans, was going to be a job killer. Dodd-
Frank was going to be a job killer. Everything was going to be a job 
killer. When we turned the lights on in this room, it was a job killer.
  You don't hear that much anymore because, since those fantastic 
descriptions of job-killing legislation, we have added almost 13 
million jobs to the economy. The unemployment rate today is as low as 
it was before the meltdown of 2008.
  The stock market has doubled since then, business confidence is up, 
business investment is up, and our capital markets are healthy. This 
idea that it was going to be job-killing was just flat-out wrong, 
certainly compared to the crisis, which was the true job killer.
  Mr. Speaker, the other accusation that was made, of course, was that 
Dodd-Frank was going to crush credit markets, that the sources of 
financing that a family needs to buy a home or to send a child to 
college, the sources of financing that give rise to startup companies, 
companies like Google which didn't exist 25 years ago, venture capital, 
the stock market that, of course, gives equity to our businesses to 
grow and expand and employ more, those were going away because of Dodd-
Frank. The criticisms leveled and the predictions made about the credit 
markets were apocalyptic.
  Let's take a look at what actually happened. I assembled a little bit 
of the data here just to show what has happened in the credit markets. 
We all love venture capital, that iconic image of the entrepreneurs in 
the garage developing a product that grows into a multibillion-dollar 
corporation that provides an electronic device that changes our lives 
and that makes our lives better--venture capital.
  Here is the line. Venture capital at the start of Dodd-Frank and, 
today, that is a line running up and to the right.
  Let's look at total consumer credit. You want to buy a car; you want 
to buy a television set. Consumer credit, we all use it. At the start 
of Dodd-Frank, 5 years ago--and today--a dramatic increase in consumer 
credit.
  Stock market--the stock market, of course, is where established 
companies go to raise money and where we put money hoping it will grow. 
What has happened there? A near doubling of the stock market--robust.
  Commercial and industrial loans--what if you are a business and you 
don't want to raise money in the stock market, you want to borrow 
money? Commercial and industrial loans--every one of these lines which 
capture most of the financing mechanisms and how healthy they are 
running at the point in time when Dodd-Frank was started to today is 
running strongly upwards.
  All of those criticisms that it was going to crush the credit markets 
are

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completely rebutted by pretty much anything that is happening in the 
credit markets today.
  Let's just spend a minute, Mr. Speaker, on what was actually in Dodd-
Frank because this is pretty complicated stuff. What was actually in 
Dodd-Frank were a couple of important ideas, that we should have 
something called a Consumer Financial Protection Bureau that says to 
credit card companies, No, you can't switch the order of a purchase to 
make it look like somebody overdrew an account or spent too much money 
so that you can charge a $25 fee; that said to mortgage brokers, No, 
you can't put somebody into an inappropriately risky or high-cost 
mortgage just because you make more money for doing so.
  Mr. Speaker, we have standards in our country. You can't buy a 
toaster that will burn down your house. You can't buy a car that will 
explode when you turn on the ignition. That happens because we have 
minimum safety standards.
  If you can't buy a toaster that will burn down your house, why should 
you be allowed to be sold a mortgage that very clearly will cause you 
to lose your house? That is what the Consumer Financial Protection 
Bureau does, and it has returned literally millions and millions of 
dollars to the American public as a result of its telling those cheats, 
those people who would prey on the financial naivete of the American 
people: You can't do that anymore; and if you do it, we are going to 
shut you down, and you are going to give the money back.
  That is what the Consumer Financial Protection Bureau is doing today.
  Mr. Speaker, the second important thing that Dodd-Frank did was to 
say, for the first time, that maybe we ought to regulate this 
derivatives market. Now, derivatives are a fairly complicated financial 
instrument.
  Most Americans don't use derivatives directly and don't necessarily 
know what they do. They are essentially bets, and that is okay. If you 
want to bet that oil prices are going to go up or down because you use 
oil, you ought to be able to take that bet to hedge your risk. That is 
okay.
  But in the early 2000s, the derivatives market had become very 
literally nothing but a betting game for people who simply wanted to 
roll the dice on the mortgage market or on the direction of a corporate 
credit or on the stock market.
  You could take any bet. People would lend you money; you could place 
that bet, and off you went. That is, of course, what brought down what 
was otherwise an iconic American insurance company, AIG. This was truly 
a storied insurance company that got into the derivatives business and 
touched off the crisis.
  Shockingly, by law, the derivatives market, even though it is more 
complicated and larger than the stock market, by law, was not 
regulated. When you wanted to buy or sell a derivative, you picked up 
the phone; you called your broker; you did the deal, and nobody 
necessarily knew about it.
  That obviously doesn't happen in the stock market. You go through a 
broker; the trade gets registered, and the SEC looks over the shoulder 
of the market to make sure it operates in a safe and sound fashion.
  By law, the derivatives market was unregulated and untransparent, and 
Dodd-Frank said that does not make sense and said that, if you are 
going to trade derivatives, you are going to do it over an exchange, 
the way we trade stocks. If you are going to trade derivatives--
particularly risky ones--you are going to put up capital against the 
bet you are taking so that if you lose, you can pay it off.
  That is what happened with AIG. They took a whole lot of very big 
bets that they had no ability to pay off when they lost.
  Who lent them the money to take those bets, Mr. Speaker? It was banks 
and brokerages who, when they found out that the bet they thought they 
won, there was no money coming to them, that is when we got into real 
trouble at places like Bear Stearns and Lehman Brothers.
  We said, crazy though it may sound, a market as complicated and as 
large as the derivatives market ought to be subject to the same 
transparency and regulation that the stock market has been subject to 
since the 1930s. That is what Dodd-Frank did.
  Finally--Dodd-Frank did a lot, but this is another really big thing--
Dodd-Frank said we ought to actually have a mortgage market that is a 
little friendlier to the American people because, for most Americans, 
the savings that they have is in their homes.
  For generations, until 2008, generally, home prices had gone up. 
Let's face it, the middle class works pretty hard not making a lot of 
extra money. The growth in the value of their home was the way you 
amassed a nest egg to retire or to buy that vacation cabin, whatever it 
was you aspired to do; yet by 2008, this had become yet another 
dangerous casino.
  It was true at the time, though it is not true anymore, that a broker 
could sell a mortgage to a family that was a lot more expensive and a 
lot riskier than it needed to be because that broker could get paid 
more in commission for selling that more complicated, more risky 
mortgage than that broker would get paid for selling a plain vanilla 
mortgage.
  Those days are gone. Those days are gone, and that is a very, very 
good thing for the American people. Remember, homes are where people--
most people--have their savings. That is what Dodd-Frank was.
  My friends on the Republican side who have these incredible 
statements, like the financial crisis was caused by Washington's dumb 
regulations, fail to see that Dodd-Frank was actually a proportionate 
and targeted response to a truly devastating financial crisis that had 
real impact on an awful lot of families.
  I am sorry about that. The reason I am sorry about that is because 
Dodd-Frank, of course, is not perfect. There are clearly issues around 
some things like Fannie Mae and Freddie Mac, which Dodd-Frank was 
silent on.
  Today, the vast majority of American mortgages are still explicitly 
backstopped by the Federal Government because we didn't reform Fannie 
Mae and Freddie Mac.
  Shame on both parties for that, by the way. We had a lot to do when 
the Democrats were running the show, and we didn't get to that point. 
In the many years since the Republicans have been controlling this 
Chamber, they have not taken that up. We should take that up. I am very 
proud to be, along with Congressman Delaney and Congressman Carney, a 
sponsor of legislation which would do just that.
  Mr. Speaker, there is still difficulty for Americans who should 
probably qualify for a mortgage in getting that mortgage. It is 
possible that Dodd-Frank swung the pendulum a little far in the 
mortgage market in a way that we ought to look at and be very, very 
careful about because, remember, at the core of the crisis in 2008 were 
mortgages that an awful lot of people shouldn't have been in, an 
overcommitment on the part of public policy and others to make every 
American a homeowner, to make it cheap, and to have outrageously 
complicated mortgages so that could happen. Carefully, we ought to look 
at what is happening in the mortgage market today.
  Mr. Speaker, there are more technical issues. There are questions 
about whether there is enough liquidity in the mechanisms, particularly 
bonds, that companies use to finance themselves.
  There are fair questions about whether we have adequately dealt with 
the question of too big to fail. Dodd-Frank certainly put profound 
strictures on large institutions. It gave the government unprecedented 
authority to look into the so-called too-big-to-fail institutions and 
say: Sorry, you have got to shrink down. You have got to get out of 
this business.
  It put additional capital--in fact, just this week, the Federal 
Reserve announced the additional capital that large institutions will 
be required to set aside. It is a fair debate as to whether or not we 
have truly dealt with the question of too big to fail.
  Mr. Speaker, this is the rub: as long as the discussion we have about 
Dodd-Frank is a near religious discussion

[[Page 12291]]

with my friends in the Republican Party making statements like Dodd-
Frank should be repealed, the Dodd-Frank Act leaves America less 
stable, less prosperous, and less free; and, yes, frankly, as long as 
the Democrats don't open the door to the notion that we may not have 
gotten it perfectly right on each one of its pages, we won't be able to 
come together to do something which is essential in any piece of 
legislation, but particularly in financial regulation, which is to 
adapt and allow the regulatory structure to change to reflect changing 
conditions.
  There are very few markets as adaptive, that change more rapidly, 
that innovate for good and for ill, as rapidly as the financial 
services market. As a result, we need a regulatory apparatus that 
adapts along with the market, that looks for new threats, and that 
realizes that the regulation of 40 years ago actually doesn't make a 
lot of sense today.
  This near religious conflict that we have with the Republicans 
saying, You ought to do away with the whole darn thing--they say that, 
of course, they have never actually brought legislation forward to 
repeal Dodd-Frank which should cause you to ask, Mr. Speaker, how 
serious they are about truly repealing it, but as long as that is the 
conversation--repeal or don't change a word of this legislation--we 
give up the opportunity to make it better and to make it change with 
the underlying conditions that it seeks to regulate.

                              {time}  1745

  That is where we need to go. We need to acknowledge that Dodd-Frank 
has done some very, very good things, that it has addressed some 
catastrophic problems, that it took on behavior that is embarrassing to 
contemplate when looked back 5, 10 years, but that maybe we didn't get 
it 100 percent right and start that conversation.
  We should do that to make sure that American families are never put 
in the position they were put in back in '09. We should do that because 
the truth is that the financial services industry is crucial to 
prosperity in this country.
  If you want to buy a house, educate a child, buy a car, invest in a 
company, start a company, grow a company, you have to have access to 
capital. One of the competitive advantages of this country is our 
incredibly liquid and efficient capital markets. It is a big part of 
why we are as prosperous as we are today.
  But if we can't acknowledge that the regulatory structure has to 
adapt and change, we risk either putting Americans at risk one more 
time or damaging these incredible capital markets that are truly a 
national competitive advantage of the United States, one of the reasons 
we are the center of innovation on the planet.
  I think, Mr. Speaker, we can get that balance right. I think we just 
need to take the temperature down, approach this from the standpoint of 
what makes sense, acknowledge that we all have good ideas, and move 
forward so that we remain innovative, we keep our competitive 
advantages, but we never, ever allow the American people to suffer the 
way they did starting in 2008.
  So looking back over 5 years, I think Dodd-Frank was a tremendous 
accomplishment. It really addressed a cataclysmic problem. But it 
doesn't stop there. I urge my colleagues to recognize that we have 
taken a very big step in the right direction, but the next step demands 
us to be constructive and remember that we can find a balance between 
innovation and liquid and strong capital markets and the protection of 
our constituents.
  Mr. Speaker, I yield back the balance of my time.

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