H3252 CONGRESSIONAL RECORD — HOUSE May 6, 2010 bubble burst, and there are some ad- gressive Caucus to deliver what we call Today we’re talking about Wall justments. the ‘‘progressive message.’’ Street reform which is good for Main But everything that we have done The Congressional Progressive Cau- Street, meaning that many folks will over these past several years and even cus is a group of Members of this be thinking, well, what does Wall over the last several decades has al- United States Congress who believe in Street have to do with me? I mean, I ways been to resort to more inflation, the essentials of America, ideas like own a barber shop on Main Street, I print more money, spend more money, fairness and equality. We are the peo- own a mechanic shop on Main Street, I which only produces a problem that ple who stand up consistently for civil work for the factory down at the other delays the inevitable. What I am afraid rights and human rights. We believe side of the community. I’m not a play- of is the inevitable is here, and we that issues like color, national origin, er on Wall Street; I don’t trade in must do something about it. and gender should not be a barrier for stocks. That doesn’t have anything to do with me. Why am I worried about f people to fully participate in the Amer- ican Dream. it? The reason is, the progressive mes- The SPEAKER pro tempore. Under a The Progressive Caucus consistently sage tonight is that people who live on previous order of the House, the gen- stands up for the rights of the working Main Street—people who are the teach- tleman from Oregon (Mr. DEFAZIO) is class, the people who labor every day ers, the firefighters, the police officers, recognized for 5 minutes. to make this country run. We’re talk- the small business owners—people who (Mr. DEFAZIO addressed the House. ing about economic justice. We’re talk- work hard every day and make this His remarks will appear hereafter in ing about true health care reform. country function need to plug into the Extensions of Remarks.) Many of our members were on the uni- what’s happening with this Wall Street f versal single-payer health care bill and reform because it’s going on now in the The SPEAKER pro tempore. Under a advocated for the public option as the Congress and the interests of us all are previous order of the House, the gen- health care debate carried forward. at stake. So this idea of Wall Street reform tleman from Indiana (Mr. BURTON) is The Progressive Caucus, this is the recognized for 5 minutes. group that’s consistently arguing to will be the topic tonight, and the main (Mr. BURTON of Indiana addressed say that humanity, and as a matter of idea is Wall Street reform is good for the House. His remarks will appear fact as Americans, we can live in har- Main Street. Main Street needs to be hereafter in the Extensions of Re- mony with the Earth, we can respect plugged into what’s happening. And who can blame people, Madam Speak- marks.) the environment. So when you think er, for not really knowing what’s going f about the Progressive Caucus, Madam Speaker, the idea is that there is a on with this Wall Street reform. I The SPEAKER pro tempore. Under a mean, weird terms like ‘‘credit default body of folks in the Congress who be- previous order of the House, the gen- swaps’’ and ‘‘derivatives’’ and ‘‘collat- lieve in fairness, who believe in equal- tleman from California (Mr. SCHIFF) is eral debt obligations’’ and things like ity, who believe in equal opportunity, recognized for 5 minutes. that, ‘‘rating agencies,’’ ‘‘too big to who believe in equal justice, who be- (Mr. SCHIFF addressed the House. fail,’’ all this kind of stuff are things lieve in peace, and believe that the His remarks will appear hereafter in that the American people are trying to United States should put its diplomatic the Extensions of Remarks.) get all this stuff clear because folks foot first and its development foot first who don’t watch this stuff every day, f and should always, always, always seek The SPEAKER pro tempore. Under a folks who are not C–SPAN junkies, to be a force for peace in the word. they’re busy, they’re raising their kids, previous order of the House, the gen- Members of the Progressive Caucus they’re going to work, they’re doing tleman from Arizona (Mr. FRANKS) is made up the large bulk of the people what people normally do, may not recognized for 5 minutes. who called for the United States to get know that they really need to plug into (Mr. FRANKS of Arizona addressed out of Iraq and identified Iraq as not this issue of Wall Street reform be- the House. His remarks will appear the right policy for the United States cause it has a lot to do with how peo- hereafter in the Extensions of Re- from the very beginning. Many of us ple’s lives are going to be led, and it marks.) continue to make the demand for peace has a lot to do with people’s well-being, f and say that the proportion of develop- their economic opportunity, and things The SPEAKER pro tempore. Under a ment aid should outweigh the military like that. previous order of the House, the gentle- footprint in Afghanistan and not the So we’re going to talk about that to- woman from Ohio (Ms. KAPTUR) is rec- reverse. night, Madam Speaker. And we really ognized for 5 minutes. This is the Progressive Caucus. I’m want to let you know that we’re going (Ms. KAPTUR addressed the House. proud to be a vice chair of the Progres- to be focusing hard on this issue of Her remarks will appear hereafter in sive Caucus and to present the ideas of Wall Street reform and being good for the Extensions of Remarks.) the progressive message tonight. The Main Street. We want folks to absorb progressive message is when we come f this message, and so we’re going to be down to the House floor and we talk talking about it tonight. The SPEAKER pro tempore. Under a about the values of the Progressive Now, the fact is that if you have any previous order of the House, the gen- Caucus, what we’re working on, what doubt about whether Wall Street re- tleman from Georgia (Mr. GINGREY) is we’re doing, what we think is impor- form is important, maybe you thought recognized for 5 minutes. tant, so, Madam Speaker, that the peo- to yourself, well, you know, I’m not (Mr. GINGREY of Georgia addressed ple who watch C–SPAN and who tune sure it’s something that I really need the House. His remarks will appear into us know the ideas and thoughts of to be concerned about, let me just say hereafter in the Extensions of Re- the Progressive Caucus and know that that you can sometimes know how im- marks.) there is a progressive voice within the portant a topic is by how vigorously f caucus. Very, very important. other people are fighting against it. Tonight, our topic is the economy. You may not know the ins and outs of PROGRESSIVE CAUCUS What else? The economy. It’s what peo- health care reform; but when you find The SPEAKER pro tempore (Ms. ple are focused on nowadays with the out that some people were spending $14 MARKEY of Colorado). Under the Speak- dramatic unemployment rates, high million a day with lobbyists to stop er’s announced policy of January 6, unemployment rates, hovering in the health care reform, you know that 2009, the gentleman from Minnesota neighborhood of 10 percent in many there are some people with some big (Mr. ELLISON) is recognized for 60 min- places around this country, about 9.7 bucks and some big stakes in the game utes as the designee of the majority percent, as we’re seeing some States who thought the status quo was good leader. with dramatically higher and even for them even if reform was good for Mr. ELLISON. Madam Speaker, my some with lower; but everybody is con- the rest of us. name is KEITH ELLISON, and I’m here to cerned about jobs for the American Now, what’s interesting is this same claim this hour on behalf of the Pro- people. scenario is being played out right now

VerDate Mar 15 2010 01:39 May 07, 2010 Jkt 089060 PO 00000 Frm 00048 Fmt 4634 Sfmt 0634 E:\CR\FM\K06MY7.090 H06MYPT1 tjames on DSKG8SOYB1PROD with HOUSE May 6, 2010 CONGRESSIONAL RECORD — HOUSE H3253 with financial reform. I want to start countability when it comes to too-big- nomic growth sustained over the long our dialogue tonight about Wall Street to-fail firms, that there are a lot of term. reform, not by talking about the intri- folks who want to have it stay their So it’s about stabilizing the econ- cacies of the bill—because I’m going to way; but we’re trying to push for re- omy. It’s about saying, you know talk about the bill—and not by talking form, and the American people need to what? The economy is going to be sta- about what led us to this crisis, be- know that. The American people need ble, so you know what? You might be cause I’m going to talk about that too, to be aware that if they don’t pay at- able to make retirement plans. The but first by talking about what the tention to this debate, they may be economy is going to be stable and people of America are up against and sorry that they didn’t. And so we’re en- strong, so you should put some money who it is and how it is that people are couraging people, Madam Speaker, to away because you will be able to afford trying to stop it. just stay on top and stay focused on college for your kids. It’s talking about Wall Street is spending billions to what’s really going on. stabilizing the economy—yes, you kill reform. Look it up. In 2009, the fi- Now, let me just talk about what fi- should start that business because I’m nancial industry spent $465 million lob- nancial reform actually means. What telling you that there will be a stable bying Washington. How much was does it actually mean? Wall Street re- economy for you to participate in. So spent lobbying Washington for school form means policing Wall Street, mak- that’s what stabilizing the economy is lunches for poor kids? How much was ing sure that Wall Street abides by the all about. spent on trying to get America out of rules. Now, Wall Street does a lot of And then, also, we’ve got to stop Iraq and Afghanistan? How much was good for this economy. What it basi- gambling with worker pensions. Work- spent on trying to make sure that col- cally does is it takes people who have ers work hard. Workers work their lege kids could get into college and money to invest and unites it with peo- whole lives working hard to make have an affordable college education ple who need money to capitalize their goods and services for people in the for themselves and their family? How companies. It takes people who want to United States. They work hard and much was spent on these things? invest with companies that have new they put money into their pensions $465 million for lobbying Wash- ideas and some old ideas so they can year after year after year. When they ington? Now, that’s really something, get together and fund and finance their get 65 years old, they shouldn’t have to folks. That’s putting down a pretty company. It’s a good idea, it’s fine, but worry that people who were gambling penny to make sure that the interests sometimes it gets out of control. Look, with their money on Wall Street have of the industry are put up first and I have knives in my house, and they’re somehow gambled it away. And so this foremost before Members of Congress. very useful for cutting vegetables. But Wall Street reform is about stopping $1.4 million a day lobbying Congress, you know what? They still can be dan- gambling with worker pensions. It’s not as much as health care reform, but gerous. We need rules about how we about worker pensions, people who one a substantial pretty penny to be per deal with these things because they day want to retire, people who have day lobbying Congress; $1 million per have very, very powerful consequences worked hard and earned the privilege Member of Congress. So in 2009, if $465 on people. to retire, people who have literally million was spent lobbying Wash- So Wall Street reform means policing blazed a trail for all of us younger peo- ington, there are about 435 of us, Wall Street. It means ending bank bail- ple; and when they get 65, they ought there’s actually more than $1 million outs. President Obama stood right in to be able to go and take their retire- spent lobbying each Member of Con- this very room not too long ago when ment. gress if you just divide it by the num- he did his state of the Union speech This is what Wall Street reform is all ber of people in Congress. and he said, One thing is for sure, about. This is what we’re trying to do. So what is the point of this chart? whether you voted for the bailout or This is what the purpose is. It has The point of this chart is to say that not, everybody hated the bailout. I can nothing to do with trying to punish the folks who don’t want real reform in the say he was right on the money. I will average person. We want to see the area of financial services are putting tell you that I believed that our econ- economy grow; we want to see busi- their money down to try to stop it. omy was in ruin. I thought we were on nesses invest. We want to see them They’re deploying, literally, an army the brink of disaster back in Sep- grow, be competitive and successful; of lobbyists to try to convince Mem- tember, October 2008, and I voted for but there’s got to be rules of the road bers of Congress that their interests the bailout. But I will say this about it, so that everybody can be careful. are the ones that need to be first, not I didn’t want to, I had to be convinced Cars. Two thousand pounds of steel those of the American people: $3.9 bil- that it was necessary to do. You should going fast can hurt you; everybody lion in the last decade, that’s a lot of know that much of the money has been knows that. They’re very useful, but money, and nearly 2,000 lobbyists, 1,726 recouped and is being recouped every we still have to have rules, which is Washington lobbyists. day. And the President is proposing a why we have to have State troopers out Now, this may sound like I’m hard on tax on some of these large financial there. And in the same sense, Wall lobbyists; I’m not hard on lobbyists. I firms to make sure the American peo- Street reform means policing Wall think it’s an honorable profession. ple get all of their money back. Street, ending bank bailouts, stabi- They help Members of Congress under- But this is one of those things that lizing the economy, and stop gambling stand issues. But the fact is that every you didn’t want to have to do, but you with worker pensions. So that’s what Member of Congress can tell you a lob- had to do. It’s like if a friend says I Wall Street reform is all about. byist does not come in to try to per- need you to drive me home because I I’m going to return to this board in a suade you to do something other than drank too much. You know what? You moment, but before I do, Madam their interests, the people who pay don’t want to have to do that because Speaker, I’d like to get up here and put them. They’re paid to do a certain you would wish that people would be this document that I led off with be- thing, to convince Members of Con- more responsible, but you have to do cause I want to elaborate on it again. gress to do a certain thing. It’s not al- it. It’s something that you don’t want ways a bad thing, but it’s usually a to do, but you have to because you’re b 1630 thing that’s going to serve the inter- put in that difficult situation. Again Wall Street reform, Wall ests of the people who are sending We want to end the bank bailouts Street is spending billions to kill re- them there, and sometimes that’s not with Wall Street reform. We want to form, to stifle reform, to shape reform right in line with what the American stabilize the economy. This economy, to their interest, and it is a big deal. people want. because of this financial trouble cre- But I would like to say just a few spe- So it’s important for the American ated by a lack of deregulation, by tax cifics. people to know that when we’re stand- cuts for the wealthy, by not minding The fact is there are a lot of people ing up for consumer protection, that the store, we want to create stability who are former Members of Congress when we’re trying to stop bailouts ever in this economy so people can plan, so who are here. At least 70 former Mem- again, that when we’re trying to make they can invest, so they can pursue ca- bers of Congress employed by the fi- sure that there is real justice and ac- reers, and so that we can have real eco- nancial services industry, at least 70

VerDate Mar 15 2010 01:39 May 07, 2010 Jkt 089060 PO 00000 Frm 00049 Fmt 4634 Sfmt 0634 E:\CR\FM\K06MY7.097 H06MYPT1 tjames on DSKG8SOYB1PROD with HOUSE H3254 CONGRESSIONAL RECORD — HOUSE May 6, 2010 former Members of Congress here to slamming the creation of a Federal and concentrates it into one agency try to convince their former colleagues Consumer Protection Agency. That is and says to that one agency: It is your what the industry’s perspective is on unfortunate. Why would any good lend- job to protect the American consumer Wall Street reform, nearly half of the er who is trying to offer a good product from dangerous financial products like 150 former Members that reported lob- at a fair price be attacking consumer predatory loans and like predatory bying in 2009. protection? I thought the customer was credit cards and predatory payday Let me say about 150 former Mem- always right and you wanted to make lenders and people who would basically bers who might be working on any- sure that the customer was always rob you of your middle class life-style. thing from energy to forestry, about happy so you would get return busi- That is their job. half of them are working on Wall ness. Why would anybody be afraid of a They have basically three things that Street reform. That is a big deal and consumer protection agency that is they work on. The Consumer Financial people should know that. In total, going to look out for consumers? In Products Agency has three powers that about 125 former aides and lawmakers fact, I would think industry would be they can exert, and it is not passed yet, are now working for financial firms. happy about that. The fact is, though, but many of us are working hard on it. And so it is not just former Members of a lot of mishandling of consumers hap- One power it has, it has the power to Congress, their aides are working on pened. I will talk about that in a mo- do examinations, to say to a financial this stuff, too. They are employed and ment as well. That is why we need a firm, hey, we want to look over what hired to try to convince their former consumer protection agency. It is very, you’re doing to make sure you’re doing colleagues to do what Wall Street very interesting that some of these it fairly. They have that power to wants to do. Of the industry’s revolv- folks want to stop that. knock on the door and say, Are you ing door lobbyists, 19 are former Mem- The National Automobile Dealers As- doing the right thing? And if you’re bers who served on the Senate Banking sociation, and I am a big fan of auto- doing the right thing, you have little or House Financial Services Commit- mobile dealers, but the fact is that to worry about. But if you’re selling fi- tees. So they are getting people who they contributed $3 million to Federal nancial products that are dangerous to are on the committee who know the candidates in the 2008 election cycle, consumers, you might have to worry. most about this stuff to persuade their encouraging dealers to make hundreds Another power they have is enforce- colleagues about what the interest of of telephone calls to House Members ment. Whether it is rules, truth in the industry is, not the American peo- and secure an exemption from the lending, or some other law or act that ple. CFPA. is designed to protect consumers, this At least 33 additional lobbyists were The hedge fund lobby, which calls agency has the power to go in and say, staffers, as I mentioned before. And itself the Managed Funds Association, You are selling a product where the you should know, in Congress, some of doubled its spending during the last terms and conditions are tricky and few months of 2009, according to data the most influential people around are confusing and you cannot do that any recently released by the Federal Elec- staffers. People know the Member of more. tion Commission. So the Managed Congress, their name is on the lawn Let me give you an example. Let’s Funds Association, which is the hedge sign and they have commercials during just say I went and got a credit card fund lobby, strategically sprinkled the campaign season with themselves and I had a 30-page contract associated more than a million around Wash- featured in the commercials and some- with that credit card. And in that con- ington in the fourth quarter, compared times local communities know who the tract, you know, I can’t read it, it’s all to just $520,000, a little more than half, Members of Congress are. You may not legalese. It’s too difficult to under- spent during the same period in 2008. know the staffer, but I guarantee you stand. I can tell you, I am a lawyer by The fact is $25 million has been spent trade. I practiced law for 16 years be- one thing, staffers who are devoted to on TV ads about Wall Street and finan- working on a subject to help a Member fore I got this job. I have looked cial reform since January. You prob- through some of these credit card con- of Congress often know more about ably saw some of them yourself. tracts and can’t make heads or tails of that topic than the Member of Con- So with that, we know what we are them. I know a lot of people who get gress. That’s a fact. Many of them, up against. We know what we are deal- former aides and staffers, are hired to ing with. Wall Street reform is nec- credit cards, they are trusting that work on this as well. essary. Wall Street itself is galvanized somebody somewhere is making sure One of the former Members is former and fighting back hard to try to pro- that they are getting a fair product. Speaker of the House Dennis Hastert tect its interests, not the American Well, that someone, if we pass this bill, who is working for the industry. An- public’s interests. So it is important to will be the Consumer Financial Prod- other is Senate majority leader and talk to the American people at this ucts Agency. GOP Presidential nominee Bob Dole. point about what really is in financial Rather than taking the real informa- Another one is former Senate majority reform. What does financial reform tion that you need, which is the real leader Trent Lott. Another is former contain? What is it about? What’s in interest rate you are going to pay, the House majority leaders Dick Armey there? That is the question. The an- time you have to pay, the fees that and Dick Gephardt. Another is former swer is simply this: Wall Street reform might be associated if you have a de- Appropriations chairman Bob Living- is a simple solution to a complex prob- fault, meaning you are late on your ston and former Ways and Means chair lem and it simply addresses the worst credit card, and putting them way in Bill Thomas. So they don’t have the problems associated with the financial the back of the credit card application, lightweights and the people who are breakdown of the last few years. hidden up behind a bunch of legalese so only here for a few weeks, they have Let me just talk about the bill, what they can say, ‘‘Well, we told them.’’ the big heavy hitters here to try to it is about and some of the key fea- Because sometimes it is not that they persuade Members of Congress with tures that we will see with financial re- don’t tell you, it is they simply drown their former colleagues that the bill form. Financial reform quite simply you with so much information you needs to reflect what Wall Street addresses certain elements of the fi- can’t make heads or tails of this thing. wants. nancial system and addresses them to The Consumer Financial Products Madam Speaker, that is why we are make sure that they don’t go haywire Agency would have the power to say, here tonight talking about Wall Street and harm consumers. You have to state the terms and condi- reform, who is involved, whose inter- The first thing I want to talk about tions on one page in a clear way so peo- ests are at stake. Mostly the American is the Consumer Financial Products ple can make a decision whether they people’s interests are at stake, and Agency. The Consumer Financial Prod- want your product or not, and they they need to get well versed on what ucts Agency, Madam Speaker. One know exactly what they are getting this bill is all about. I am going to talk more time. The Consumer Financial themselves into. So that is the enforce- about that in a moment. Products Agency is what I want to talk ment power. The fact is that the U.S. Chamber of about right now. Another power they have will be Commerce spent about $3 million on What this is is an agency which col- something called rulemaking. When advertising, including commercials lects the power of seven other agencies Congress passes laws, sometimes there

VerDate Mar 15 2010 02:54 May 07, 2010 Jkt 089060 PO 00000 Frm 00050 Fmt 4634 Sfmt 0634 E:\CR\FM\K06MY7.099 H06MYPT1 tjames on DSKG8SOYB1PROD with HOUSE May 6, 2010 CONGRESSIONAL RECORD — HOUSE H3255 is a lot of space between the laws. they issued guidance on mortgage lend- But the other thing wrong with too What I mean by that is the law will say ing and the terms and conditions that big to fail is it’s not fair to smaller generally make sure that interest rates we now know as predatory lending. It players in the market who provide are reasonable; make sure that the was even after that that they came choice, who provide competition, and date on which a payment is due is with some guidance on the issue of who live by the decisions that they clearly stated. credit cards. make. Because if some firms are too Well, the Federal agency may have So the Federal Reserve was given the big to fail, then some other firms are the power to say exactly what is re- power. They didn’t use it, and we too small to save. Is that fair? quired, and so the rules are important should take it from them. In my view, So, for example, if I’m a huge bank and the Financial Products Agency it’s important to focus on this issue be- like Citibank and I make some deci- will have rulemaking ability, too. So cause the Federal Reserve already has sions that are poor ones and I start suf- they will be able to enforce the laws as its hands full dealing with monetary fering the consequences of those deci- they exist, promulgate rules to protect policy. The Federal Reserve Bank has a sions, then I’m going to get saved be- consumers, and do examinations to few important things they have to do. cause I’m big. But if X, Y, Z commu- make sure that people are doing what They have to control the money supply nity bank in Minneapolis makes bad they are supposed to do. and make sure that the economy has decisions, they get dissolved. That is Now some people may say examina- enough liquidity so that people can get what FDIC is for, the Federal Deposit tions, that might be kind of intrusive. loans and gain capital for their busi- Insurance Corporation. Well, let me ask you this question: if nesses and so forth, and it also has the So we can’t be in this situation. If somebody was doing an examination on responsibility to make sure that the we’re going to have a mixed economy Bernie Madoff, wouldn’t that have been economy doesn’t overheat and have in- where we have government regulation a good thing? If somebody said Bernie, flation. So that’s enough for them to and a free market together, we can’t open up the books and let me see what deal with. have a system where being big and I don’t think it’s the right idea to is going on. making improper decisions and making say, Oh, also do consumer protection, Let me tell you, today’s too-intrusive risky decisions which costs your busi- because when consumer protection is examination may be tomorrow’s salva- ness its solvency, you’re going to get shoved in there, too, what ends up tion of the financial system. So it is a bailed out, but the smaller ones, they being the last thing looked at? Well, good thing. The Consumer Financial just have to go suffer and deal with consumer protection. So consumer pro- Products Agency, it will be the agency what sometimes is referred to as ‘‘mar- tection is important all on its own, and that is there to look out after con- ket discipline,’’ meaning out of busi- there should be somebody whose job it sumers. Right now we have it all ness. is to focus on consumer protection. So spread out. The Fed has a little bit of So this too-big-to-fail thing, we have that is one of the key features and one responsibility. The Office of Thrift Su- to do something about it. And what we of the most important things that the pervision has a little bit of responsi- do and what financial reform does is to financial services bill will protect. say, Okay, we’re going to have what’s bility. The Comptroller of the Currency Let me also move on to talk about called a resolution fund, a resolution has a little bit of responsibility. The another key feature of the financial re- fund. What is a resolution fund? Well, a FTC, the Federal Trade Commission, form bill, and that is putting an end to resolution fund is to resolve, is to close has a little bit of responsibility. And it too-big-to-fail firms. Now, if a bank or down, shut down, chop up, sell off, and is all kind of spread out. a financial firm or a bank holding com- So what happens when Mom says to pany is too big to fail, and if they get end a firm that is systemically con- her five kids, clean the kitchen? And themselves in trouble, then all of us nected—a too-big-to-fail firm but has then she comes back from where she have to dig into the taxpayers’ money done things that are risky, and if they has been and the kitchen is still dirty. to, what, bill them out. So any firm were to fall, they wouldn’t be able to All of them say: I thought the other that is too big to fail is too big to meet their creditor obligations, and one was going to do it. That is how exist. Any firm that is too big to fail their creditors would not be able to these things work. When you have dis- and too big to have to deal with what meet their obligations, and those folks persed responsibility, you also have happens when you make bad decisions wouldn’t be able to make their obliga- dispersed action. So the best thing to in the marketplace shouldn’t be tions, and we would have a collapse in do is to say, I want you to do it on this around. the system. So what we say is, look, date. Then you have accountability. So But sometimes we have to—we had to these big firms have to pay into a fund we are going to take all of this respon- bail out these firms. Why? Because if on the front end, which then, if one of sibility for consumer protection and they fail, they have all kinds of credi- them fails, that fund would be the one take it from all of these agencies and tors, banks to whom they owe money. to pay creditors so that the whole mar- put it into one agency. And then if they can’t pay those folks, ket doesn’t fall, not the American tax- Some people will say, KEITH, don’t then those people who may have bor- payer. you think that consumer protection rowed money can’t pay the people who It’s very similar to how the Federal should remain under the Federal Re- they owe. And if we had just allowed Deposit Insurance Corporation works serve Bank? That is where most of it is these banks to fail, it would have set right now. I think the FDIC, if you now; and you know what, they didn’t off a ripple effect throughout the econ- have a deposit—money in a bank— do a good job. They were late on every- omy that could be in the proportions of you’re insured up to about $250,000 of thing. They were slow on everything. the Great Depression. So it wouldn’t your money. You know that if this In fact, in 1994—and I bet some people have been responsible to let banks fail. bank goes down, you’re not because watching this broadcast right now, We know that the one bank that did there’s the FDIC. Madam Speaker, were not even born in fail, Lehman Brothers, caused serious Now, the FDIC says, if a bank goes 1994—the Congress passed a law that and catastrophic losses throughout the down, the citizens—the depositor’s not said, Federal Reserve Bank, you can whole world, not just the United going to go down because we have the enforce the law and protect consumers States. Even my own State of Min- FDIC. But what if a big bank goes from tricky terms and conditions in nesota, their board of investment, their down and they owe money all around mortgage lending. You can do some- investment board lost about $58 million and, if they can’t pay the people who thing about tricky terms and condi- from Lehman Brothers’ failing. they owe, then those people can’t pay tions in mortgage lending. And you So the fact is that if we have a too- the people who they owe, and the next know exactly what the Fed did about big-to-fail system, what that means is thing you know, the whole economy’s it: Nothing. They didn’t do anything. that the big banks can engage in haz- going down? No, these people will be They did almost nothing. ardous, risky behavior, because they paid out of a fund which will then chop know at the end of the day, the Amer- them up and will pay the creditors, and b 1645 ican taxpayer is going to ride in to the then they will be done and over with. They did almost nothing. As a mat- rescue for them. And this is bad for our Now, some people argue that there ter of fact, it was 2006 and 2007 when economy, bad for everybody else. should be a fund after the bank has

VerDate Mar 15 2010 01:39 May 07, 2010 Jkt 089060 PO 00000 Frm 00051 Fmt 4634 Sfmt 0634 E:\CR\FM\K06MY7.100 H06MYPT1 tjames on DSKG8SOYB1PROD with HOUSE H3256 CONGRESSIONAL RECORD — HOUSE May 6, 2010 failed, after there’s been a too big to while, but now I just want to talk that hit Wall Street prevented them fail fall. In my opinion, that’s not a about mortgage reform. We’re going to from executing on their plan. They had good idea because, if a huge system- require investment advisers to act for to find some way to come up with ically large bank fails, it is going to the benefit of the client under the law, somebody, some sucker who would have an impact on the market. It will exercising the highest care involved. take over the liability for this $186 mil- drive the market down, and we’ll be I have been joined by my friend from lion loan, secured only by this modest trying to collect money from people Florida, ALAN GRAYSON, who I think is hotel chain of limited profitability who didn’t mess up after they have less here for another hour but is always being sucked dry already by its foreign money. And I think that’s a huge mis- welcome to join in on the conversation owners. take, but that is another point of view with me. So I yield to the gentleman. So they looked around, and at this people have been sharing. Mr. GRAYSON. Would the gentleman point, Bear Stearns was responsible for The fact is we need to have an be so kind as to yield the podium to this. So Bear Stearns looked and antibailout fund, which is a fund that me? I would like to speak from the lec- looked and looked, tried to find some- calls for a resolution of these system- tern, if that’s okay with you. Do you body silly enough, unwise enough to ically large firms when they make big mind? Can we switch places for a few stick this $186 million liability to, and mistakes and don’t do the right thing minutes? then Bear Stearns, itself, went kaput, that they should do for their deposi- Mr. ELLISON. That’s fine. Come on taken over by JPMorgan. JPMorgan tors, for their shareholders, or for any- down. moved in with the help of the Federal body else. Mr. GRAYSON. I want to thank the Reserve. The Federal Reserve arranged So we’ve talked a little bit about too gentleman for yielding his time tempo- so JPMorgan could take over Bear big to fail. Now let’s talk about mort- rarily and thank the gentleman for Stearns’ liabilities in general, but gage reform and predatory lending. bringing up the important subject of there were some liabilities that were so Many of you would like to know, the day, which is financial reform in odorous, so awful that JPMorgan just Where did this whole problem start? It America. wouldn’t take them over even though started in the consumer sector, and the I want to thank the gentleman for the Federal Reserve was stuck with the consumer sector is where we need to this opportunity to talk about one of liability for the great majority of those address our energy. The mortgage re- the key elements of financial reform in assets, and those became the Maiden form and antipredatory lending section both the House bill and the now-de- Lane assets. And among those assets, of this bill is to stop predatory and ir- bated Senate bill, which is auditing the the absolute dead loser assets, the as- responsible mortgage loan practices. Federal Reserve. And I want to con- sets that nobody in their right mind It might shock Americans to know gratulate the gentleman and, in fact, would want, the assets that were so that, despite 2.8 million foreclosures everyone in America because you now terrible that JPMorgan wouldn’t take last year, Congress has yet to pass an own a hotel chain. Congratulations. them from Bear Stearns’ pocket, from antipredatory lending bill. Many It’s this one right here. You own the Bear Stearns’ dead pocket even if the States have. My State of Minnesota Red Roof Inn. Federal Reserve was willing to pay for has. But Congress has not yet passed Now, I know what you’re thinking. it, among those assets was the Red such a bill. That will be part of finan- You’re thinking, That’s funny. I don’t Roof Inn. And who ended up with that? cial reform as well. remember buying the Red Roof Inn. b 1700 There will be tough new rules on But the Federal Reserve Bank, in its That’s right, the Federal Reserve wisdom, has done it for you. The Fed- risky practices, practices like, if you Bank—you know, that organization eral Reserve Bank has seen to it that buy a mortgage, no-doc and low-doc that dictates the money supply in this loans. That means that they don’t try you have the pleasure of ownership of country, the organization that has this to find out whether you can pay the this delightful chain of hotels that ex- magical ability to make money out of loan before you have to pay it back. tends from sea to shining sea. You, nothing—they simply make notations They just loan you the money and may America, you are now the owners of on their records, and magically, they not even get documentation and may the Red Roof Inn chain. Congratula- have more money than they had the not even get proper information before tions. day before. The Federal Reserve Bank they loan you money. Let me explain to you how that hap- decided that they would assume re- Now, these days, credit is tight, and pened. Deep in the midst of ancient his- sponsibility for a $186 million loan to a people can’t even hardly remember tory, going all the way back to 2007, a hotel chain. The Federal Reserve be- when money was flowing so freely. You foreign company decided they wanted came the sucker of last resort, and in may think to yourself, Why would to do a leveraged buyout of the Red doing so, the Federal Reserve made somebody lend money unless they Roof Inn chain. So they turned to Wall you—you, America—the sucker of last knew somebody was going to be able to Street, and Wall Street in its magical resort. pay it back? The reason is they would ability came up with the money, $500 Let’s move on. take that mortgage, which is docu- million, to do that. And part of that After 2008, pretty much nothing hap- mentation, paper, and they would sell money, $186 million, came from enti- pened, because nobody knew about it. that paper, and that would be ties that were formed strictly for the Nobody even knew what was inside the securitized on the secondary market. purpose of providing money so that Maiden Lane LLC pot. Nobody knew it So if I know that I can sell you a mort- somebody could end up controlling the was the Red Roof Inn or anything else. gage today and then take that stream Red Roof Inn other than the people Nobody knew. Why is that? Because we of income that’s supposed to come my who originally owned it. These for- don’t audit the Federal Reserve Bank. way because I have loaned you that eigners were able to prevail on Wall All they had to do was come up with a money and then sell it to somebody Street to come up with the financing line on their balance sheet that read else, I don’t really have to worry. It’s to buy the Red Roof Inn. ‘‘Maiden Lane LLC,’’ and for 2 years, almost like, as long as you’re not the Now, at that point, the question was nobody knew what the heck was in it. guy who is without a chair when the who was actually going to come up Then after enormous political pres- music stops, you just keep on going with the money, $186 million. The an- sure from Congress and from this en- around in that game of musical chairs. swer was Wall Street was going to find tire country, the Federal Reserve gave So we’re going to have some rules to some sucker, some fool that would be us a list of assets and what they called stop this practice to make sure that willing to take $186 million out of his ‘‘notional value’’ for those assets. You these risky practices don’t continue. or her pocket and put it into the pock- know, when you can make money, We’re going to have rules in this bill, ets of this management company, for- when you can create it, when you can Wall Street reform, to curtail excessive eign owners. The problem was an just make it appear, everything is no- speculation and derivatives and grow- earthquake hit Wall Street in 2008 be- tional. Everything is notional. That’s ing use of unregulated credit default fore they could execute on this deal all there is. swaps. And I want to talk about what and hand this liability off to John Q. Among those things that the tax- a credit default swap is in a little Public, and this financial hurricane payers now have responsibility for

VerDate Mar 15 2010 01:39 May 07, 2010 Jkt 089060 PO 00000 Frm 00052 Fmt 4634 Sfmt 0634 E:\CR\FM\K06MY7.101 H06MYPT1 tjames on DSKG8SOYB1PROD with HOUSE May 6, 2010 CONGRESSIONAL RECORD — HOUSE H3257 through the Federal Reserve, as we that something? Isn’t that something? tant. We need to find out all we can found out at the beginning of this year, You didn’t even know it. about what happens with our banking is this wonderful, enormously valu- But look. That’s not all the Federal system, and the Federal Reserve is also able—at least they want you to think Reserve has put up. The Federal Re- extremely important. this—chain of hotels called the Red serve has put up a half a trillion dol- So I was talking about the impor- Roof Inn. It stretches all the way from lars in mortgage-backed securities. tance of the bill. First, I talked about California to Maine. In fact, one of the What are ‘‘mortgage-backed securi- the Consumer Financial Products properties happens to be the Red Roof ties’’? They are securities backed by Agency. I moved on to discuss further Inn Convention Center property right mortgages. They are securities backed the regulations that would take place in Orlando, right in my district. I am by homes. in mortgages, so we would focus on so proud. I think I’ll stop by there and So guess what, America? Before long, making sure that mortgages which are ask for a free room. not only will you be owning hotel poorly underwritten and which are So what happened then? chains around this country, but you then sold into the secondary market Well, what do you think? It went will be owning houses, too—maybe will be something financial reform will bad—it went really sour—because, your neighbors’ houses, maybe your stop. We’ll bring that to a close. right now, it’s not such a good time for own houses. Though, not exactly, be- Let me now move on to another ele- the hotel industry. They leveraged the cause, you see, when the Federal Re- ment of the financial meltdown which business to the hilt. They leveraged it serve owns an asset, you don’t exactly will be addressed by this important fi- up to here—a half a billion dollars— own it. In fact, since we don’t audit the nancial reform: irresponsible com- from a series of properties that barely Federal Reserve, you don’t own it at pensation practices. The fact is that made any money in great times, and all. You have no control over it. Actu- one of the things we have seen in this now, as you may have noticed, it’s not ally, what is happening is that when whole financial meltdown is that not so great times. these mortgages go bad the Federal Re- only have Americans been losing their So what happened is very simple. serve owns your home, and if you can’t homes—2.8 million foreclosures last They are not paying on the debt. What make the payments, the Federal Re- year—but we’ve been seeing some of was debt is now equity because when a serve becomes your landlord. the most outrageous compensation company goes bankrupt and when it So isn’t that interesting? from the financial services industry can’t pay its creditors the creditors For all of this time, we’ve been hear- itself, with much of the compensation take over. ing about socialism, communism, emerging from the very firms that the Interestingly enough, the Wall Street about the creeping government control American people came together to bail Journal reported just 2 weeks ago that of our economy, how we shouldn’t have out in the first place. the major creditors of the Red Roof Inn the government owning GM, how we The financial reform bill addresses are moving in. They’re saying they’re shouldn’t have the government owning perverse pay practices that encourage not getting their money from this major banks. It has been happening by executives to take excessive risks. If hotel chain. So the two other entities stealth because we don’t audit the Fed- an executive can engage in a practice that put up the money to do this lever- eral Reserve. How else could it possibly that is risky and bad for the firm and aged buyout to this foreign group are be that we could end up owning a hotel then can get paid a lot for it and can moving in. They’re taking the hotels chain and not even know about it? end up making money, they get the over. If you are concerned about socialism money. Yet, if they don’t make any They went to Citibank, and they in this country, if you are concerned money and drive a firm into the ground asked, Citibank, what are you doing? about communism, about government and hurt the depositors and creditors They said, Well, we’re working it out control, let’s audit the Federal Re- in the process, they still make a lot of with them. We’re moving in. We’re tak- serve, and let’s find out once and for all money. This is not a good practice. So ing over the hotels. who owns the hotels, who owns the financial reform talks about executive They went to the third entity, and houses. This wild beast that creates compensation. It discourages execu- they asked the third entity, What are money out of nothing and jams it into tives who take excessive risks at the you doing? Well, we’re trying to work the pockets of special interests like expense of their companies, of their it out with them, but we’re taking over Maiden Lane, like Bear Stearns, like shareholders, of their employees, and the hotels. That’s the collateral. JPMorgan, and like all of their friends, ultimately, of the American taxpayers. Not a single word from the Federal let’s put them under some degree of re- For the first time ever, shareholders Reserve. Not one single word. Wouldn’t straint before it all comes crashing of publicly traded companies will have it be nice to know what happened to down—these hotels, these houses—be- an annual, nonbinding say-on-pay vote the $186 million that they put up? We fore it all comes crashing down on us. on compensation packages and on gold- don’t know because we don’t audit the Every time the Federal Reserve makes en parachutes for top executives. If you Federal Reserve, so we can’t know. that money, every time they do that, look at the history of Merrill Lynch, There is no way to know right now. every time they create that dollar by this is a company that basically ca- The Federal Reserve may be, for all we their magic, they are taking the dollar reened into the ground and ended up know, letting these other sharks, these that is in your pocket, and they are being in such a financial state of af- other Wall Street sharks—Citibank and making it cheaper—worthless. fairs that it was either going to go the other entities—move in and take Mr. ELLISON. Okay. Let me reclaim under or it was going to be bought. It over all of these hotels. Maybe they’re my time now. ended up being bought by Bank of doing nothing to defend the right of Mr. GRAYSON. If the gentleman America, but the CEO who was guiding the taxpayers to these assets. We don’t would yield, let me say one last word: that company ended up leaving with know. We just don’t know because we audit the Federal Reserve. $150 million of compensation. This is don’t audit the Federal Reserve. Thank you very much. not only an affront to the hardworking So, America, congratulations. You Mr. ELLISON. Let me just add that American people, but it also sets up own a hotel chain. In fact, if you keep the gentleman’s presentation is not a perverse incentives, the wrong incen- this up, America, you’ll own a whole part of the Progressive hour. I thought tives, for people who are at the head of bunch of hotel chains because it turned we were going to talk about financial these firms so that they can’t make out that of the Maiden Lane LLC pot of reform. I’m not going to yield back to good decisions and do the right thing money that the Federal Reserve as- the gentleman right now, but I thank by American companies. sumed liability for 86 percent of that is the gentleman for his presentation. I The bill also requires financial firms called the hospitality business. So, thought it was informative. Certainly, with at least $1 billion in assets to dis- America, before long, take a look. it is part and parcel of this whole dia- close to Federal regulators any incen- You’ll have enough to put a hotel on logue, of this national debate we’re tive-based compensation structures. Marvin Gardens, on Park Place and having about financial reform. Cer- Federal regulators will then be author- probably on Boardwalk, too. You’ll tainly, getting to the bottom of our fi- ized to ban any inappropriate or risky own all of the hotels in America. Isn’t nancial situation in America is impor- compensation practices that pose a

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We need a dissolu- everybody on my side I know agrees cial crisis of last year. tion authority for too-big-to-fail with. We ought to have an audit of the I also want to talk about investor banks. We need executive compensa- Federal Reserve. As Newt Gingrich has safeguards. One of the things that fi- tion reform, say-on-pay. We need inves- said repeatedly, if transparency is good nancial reform will bring forward are tor protections, and we need something enough for the CIA, it ought to be good safeguards for people who invest. Now, called ‘‘regulation of derivatives.’’ enough for the Federal Reserve. We some people might say, you know, I Now, when AIG first hit the news, a need to know what they are commit- don’t trade stocks, but if you have a lot of people were asking, What is a ting us to. We need to know what 401(k) or if you have a pension, you ac- ‘‘derivative’’? AIG, American Insurance they’re doing, how much trouble are tually do so indirectly. As a matter of Group, is a huge insurance company. A they getting us in. Those are things fact, recent events, such as the massive unit of this huge insurance company that need to be known. So I am de- $65 billion—with a ‘‘b’’—Madoff Ponzi actually was issuing these derivatives lighted to hear my friends across the scheme and the $8 billion Stanford fi- known as credit default swaps. In sim- aisle join us in our cry for an audit of nancial investment fraud, highlight the ple language, a ‘‘credit default swap’’ is the Federal Reserve. need for comprehensive reforms of the like insurance. It’s not insurance, but The difference between friends on regulatory system that failed so many it’s kind of like it. What it means is this side and friends across the aisle is investors. that you can buy it as sort of like an that my friends across the aisle have To better safeguard investors in the insurance policy if the value of interest the numbers, they have the power to future, the bill will enhance the SEC’s you expected to receive or the value of get an audit done of the Federal Re- enforcement powers and funding by the bond is not coming back to you in serve. There are a number of things doubling its authorized funding over 5 the way that you thought. So you that can be done when you control the years. That means it is going to have could buy credit default swaps. If the House and the Senate and the White more people to do the job—more polic- value of this mortgage-backed security House. And even if the White House ing, more cops on the beat. This will drops, then I am going to collect on an doesn’t agree, which they very well enable the SEC to obtain the tools insurance policy that can cover me if may not because of all the shenanigans needed to better protect investors and this happens. that have been going on in the finan- police today’s markets. The only problem is that I say it’s cial realm, the Congress still controls The financial reform bill will also like insurance, but it’s not. If it were the purse strings. And there are things create a whistleblower bounty program insurance, you would have an insur- that can be done in this House and with incentives to identify wrongdoing ance regulator who would require that down the hall in the Senate that would in our securities markets and with re- the company would have to have bring this to a head and would have the wards for individuals whose tips lead to enough capital in its books to cover Federal Reserve crying uncle, uncle, successful enforcement actions. With a losses and claims based on losses. all right, we will go ahead and allow bounty program, we will effectively the audit. It ought to be done. Enough 1715 have more cops on the beat for security b of the shenanigans, blaming one side or regulation. The failure to detect the But in this particular situation, that the other. Madoff and the Stanford financial kind of reform was not in place. That Well, the majority party has such a frauds demonstrate deep deficiencies in kind of regulatory control was not in massive majority, it’s a real easy thing our existing securities regulatory place. So when mortgage-backed secu- to get done, and I would be delighted if structure. The bill also calls for an rities began to decline and people who we had colleagues across the aisle that independent, comprehensive study of bought credit default swaps to hedge would come together with us on this the entire securities industry to iden- the risk against them, those people side and require that audit of the Fed- tify reforms and to force the SEC and came to make claims, and AIG did not eral Reserve so we would know what other entities to improve investor pro- have the money to meet those obliga- has actually been going on so we could tection. tions, which then put the United States set some goals and go about fixing this The Madoff fraud also revealed that taxpayer on the hook, and now we own economy, fixing this broken financial the public company accounting over- essentially AIG as well. system so we could get it back on a sight board lacked the powers it needed This is not a good thing. The market road that makes some sense. to examine the auditors of brokers and is not supposed to operate like that. Now, I have heard my friends across dealers. In addition, it exposed the And derivative reform is an important the aisle talking down here today and fault of the Security Investor Protec- part of what we need. Derivatives are as well yesterday evening about the fi- tion Act, SIPA, and the law that re- an important financial instrument. nancial bailout, and I was rather dis- turns money to customers of insolvent, They will be traded on an open market; appointed. I know some, like my friend fraudulent broker-dealers. The bill and whenever they are not or are not MARCY KAPTUR, have been adamant closes these loopholes, and it fixes amenable to be traded on an open ex- about the problems going on in the fi- these shortcomings. So investor pro- change, they will be required to be re- nancial system going back to the fall tection is an important part of finan- ported to the authorities so that there of 2008. And she and I, there are many cial regulatory reform—reforming Wall is some transparency and some real in- things we don’t agree on, but we are Street. formation about what is going on in both for complete transparency—she So whether we’re dealing with too the derivatives market. has been there all along—and demand- big to fail, whether we’re dealing with f ing full responsibility and account- exploitive and abusive predatory lend- ability in the financial sector. And I ing practices, whether we’re addressing THE FINANCIAL BAILOUT BILL have been so pleased with things she issues with regard to investors or The SPEAKER pro tempore. Under said in the last couple of years on this whether we’re addressing other mar- the Speaker’s announced policy of Jan- issue since the TARP bailout in Sep- kets and consumer protection in gen- uary 6, 2009, the gentleman from Texas tember, October of 2008. eral, this financial reform bill is impor- (Mr. GOHMERT) is recognized for 60 min- But then hearing other colleagues tant. It is important for people to utes as the designee of the minority across the aisle talk about Republicans know what good it is going to do them leader. are trying to stop financial reform be- and the difficulties that it will present Mr. GOHMERT. Madam Speaker, it cause Republicans are so closely in the future for people who want to has been an interesting week. It’s been aligned with Wall Street? I mean, that keep the status quo. an interesting time. And there are theme has been played long and loud

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