[Congressional Record (Bound Edition), Volume 162 (2016), Part 4]
[Senate]
[Pages 5348-5349]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    OVERSEEING OUR FINANCIAL MARKETS

  Ms. WARREN. Mr. President, 8 years ago, we suffered through the worst 
financial crisis in generations. Millions of people lost their homes, 
their jobs, and their savings. Although the economy has improved under 
President Obama's leadership, many of those families are still 
struggling to recover today.
  Terrible subprime mortgages were at the heart of this crisis, but 
Wall Street invented other new financial devices, including exotic 
derivatives, that piled risks on top of risks in the financial market. 
The subprime mortgages were like hand grenades, but the derivatives 
packed them together and magnified the risks, turning them into giant 
bombs that blew up parts of the economy. The Financial Crisis Inquiry 
Commission concluded that derivatives ``contributed significantly'' to 
the crisis, ``amplifying'' losses many times over and exposing 
institutions and investors throughout the system.
  Do you remember the billions and billions of taxpayer dollars that 
Congress shoveled into AIG as part of the bailout? That was to cover 
the massive losses from risky derivatives that went south.
  In response to the crisis and the bailout, Congress dedicated an 
entire title of the Dodd-Frank Act to the regulation of derivatives. 
Congress tried to make the derivatives market more transparent so that 
both investors and regulators could have at least a fighting chance to 
identify the risks and to address them. Congress also tried to reduce 
the risk to taxpayers by requiring banks to raise more capital as they 
increased their derivatives exposure and by forcing banks to push out 
that derivatives exposure from their depository banks--the parts that 
actually hold checking and savings accounts--and to put them into 
another entity that doesn't have access to taxpayer-backed insurance.
  Over the past few years, the Dodd-Frank approach to derivatives has 
started to unravel. At the end of 2014, the swaps pushout was repealed. 
How? Because lobbyists for Citibank literally wrote the amendment and 
had a friendly Congressman slip it into the end-of-the-year spending 
bill--a bill that had to pass or the government would shut down. With 
the help of other big banks, including personal phone calls from the 
CEO of JPMorgan Chase, Jamie Dimon, to his personal friends in 
Congress, the swaps repeal got rammed through Congress.
  How big was the hole that this Wall Street amendment blew in Dodd-
Frank? Well, Congressman Elijah Cummings and I spent a year looking 
into it, and here's the takeaway: The FDIC now estimates that the 
repeal allows a few big banks to put taxpayers on the hook for risky 
swaps to the tune of nearly $10 trillion. And who is gobbling down most 
of this $10 trillion risk? Three huge banks--Citigroup, JPMorgan Chase, 
and Bank of America--three banks, nearly $10 trillion of risk.
  These banks will happily suck down the profits when their high-stakes 
bets work out, and they will just as happily turn to the taxpayers to 
bail them out if there is a problem--all this because the Wall Street 
lobbyists persuaded Congress to do just one little favor for them.
  Meanwhile, last year, the Commodities Futures Trading Commission 
finally issued a rule that it was required to write under Dodd-Frank. 
The rule was about margin, the amount of money that financial 
institutions have to put up when they enter into a derivative contract. 
Essentially, the CFTC rule was about making sure that financial 
institutions had enough money to pay off their derivative bets if they 
bet wrong. It is the kind of money that keeps the taxpayers from 
needing to bail them out.
  The CFTC rule was exceedingly weak, far weaker than the one they had 
initially proposed. The changes in the rule came after months of 
intense lobbying from giant banks that were worried that a stronger 
margin rule might cut into their profits. As CFTC Commissioner Sharon 
Bowen wrote in her dissent to the rule:

       This action today seems to be a return to blindly trusting 
     in large financial institutions' ability and willpower to 
     manage their risks adequately. Are we really willing to make 
     that bet again?

  Well, I know that I am not, and that is why I think the recent 
Republican bill to weaken the CFTC is so dangerous. Rather than 
strengthening the agency and plugging the gaps in Dodd-Frank that have 
emerged in the last few years, the bill goes in the opposite direction, 
weakening or delaying other Dodd-Frank requirements and starving the 
agency of the resources it needs to oversee a $500 trillion derivatives 
market.
  I applaud Senator Stabenow, the ranking Democratic member on the 
Agriculture Committee, for leading the unanimous Democratic opposition 
to the bill in Committee. Democrats should not be supporting a bill 
that weakens financial rules, period.
  We need strong rules and strong Federal agencies to oversee our 
financial markets. We learned that lesson the hard way in 2008. While 
some lobbyists and their friends here in Washington may be trying to 
forget that lesson, I know that millions of American families remember 
it all too well, and they will be watching Congress to see who stands 
on their side and who stands on the side of the big banks.
  Thank you, Mr. President.
  I yield my time.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. BARRASSO. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.

[[Page 5349]]

  The PRESIDING OFFICER. Without objection, it is so ordered.


  

                          ____________________