May 6, 2010 CONGRESSIONAL RECORD — SENATE S3303 The outrageous case that this some- that proposal at the moment. I wanted bling down, I fail to see where assets how reaches into retailers and mer- to speak about an amendment I have are going to exist in substantial quan- chants is highly offensive to me. It is discussed previously on the issue of too tity to repay the taxpayer. the last thing I would ever suggest to big to fail. But that was yesterday. I did not my colleagues, that we somehow get There is much yet to do on this sub- support that. That was yesterday. This into the business as Federal regulators ject of too big to fail. I recall, in a issue of creating a circumstance of of poring over florists and dentists and room just steps from here, on a Friday, early warning on too-big-to-fail firms butchers and accountants and lawyers. I believe it was, the Treasury Sec- is not satisfactory to me. The only way Nothing could be further from the retary leaning over the lectern in a to resolve too big to fail is to abolish truth. very stern way saying to the caucus too big to fail. I mean abolish too big This goes after those businesses in- that I was involved in, if within 3 days to fail. That means having firms that volved in financial services and prod- a three-page bill granting $700 billion are not too big to fail, that will not ucts. It does so in a way that provides to the Secretary of the Treasury, with cause a moral hazard or a grave risk to clarity, provides an opportunity for which to provide funds to stabilize the entire economy should they fail. those institutions to be regulated, to some of the biggest financial institu- Do you believe that is the case with know what rules they have to follow, tions in the country, if that did not this graph? Is there anything here and who is in charge of insisting that come about, our economy could very that—as this graph shows, we have they meet those obligations. well collapse completely. firms that are too big, far too big to So with that, I urge my colleagues to I remember that moment and remem- fail. Is there anything here that is vote against this amendment. My hope ber thinking that it was pretty bizarre going to solve that in this bill? The an- is we will vote fairly soon. Again, we that our country got to that point: swer is no. The only direct and effec- have hundreds of amendments that that all of a sudden 1 day, after being tive way to address this is to decide, if people want to be heard on, and we do told month after month that the econ- you are, in fact, too big to fail, then not have all of the time in the world to omy was strong, the economy was in there has to be some sort of divestiture deal with it. So we have to move on on good shape, that there were some rip- or dissolution to bring that firm back these issues. ples and hiccups here and there, but down to a point where in size and scope I think people understand the debate. things were on course and we had con- such firm is not too big to fail and is They can read the amendment. I urge fidence in the strength of the economy, not causing the kind of dramatic spe- you to read 1027 in our bill, the section that we were now being told the econ- cial risk to the country’s economy that dealing with consumer protection, omy may well collapse in days unless it would bring the economy down with dealing with who is covered. Then we the Congress comes up with $700 bil- it. will have a vote. lion. That is the only direct and effective Why was that the case? Because in- solution. Is that radical? Well, I have f stitutions that were so large in this an amendment that requires that if EXECUTIVE SESSION country, at the top of the financial in- you are determined to be too big to dustry, were so important to the econ- fail, then we begin a process, over 2 omy that their failure could very well years, of breaking away those parts EXECUTIVE CALENDAR result in failure of the entire American that make you too big to fail. Is it a Mr. DODD. Madam President, I ask economy. That is what is called too big radical idea? I do not think so. unanimous consent that the Senate to fail. One-fourth of the Board of Governors Let me show a chart that shows the proceed to executive session to con- of the Federal Reserve Board says we six largest financial institutions in the sider Calendar No. 789, the nomination ought to do that. Richard Fisher, presi- country and what has happened to of Larry Robinson to be Assistant Sec- dent of the Dallas Fed: Too big to fail them since 1995. This is their growth as retary of Commerce for Oceans and At- is not a policy, it is a problem. Too big a percentage of GDP. It shows that mosphere; that the nomination be con- to fail means too big period. We ought they are getting larger and larger and firmed and the motion to reconsider be to break them up. larger and much larger. Even during considered made and laid upon the Federal Reserve Bank of St. Louis, this period of near collapse, the same table; that any statements be printed James Bullard, president and chief ex- institutions that were judged too large ecutive officer: I do kind of agree that in the RECORD; the President be imme- to fail and judged to represent a grave diately notified of the Senate’s action, too big to fail is too big to exist. risk to the entire economy have gotten and the Senate resume legislative ses- The economist, Joe Stiglitz, Nobel larger than just too big to fail. sion. Prize winner: Too-big-to-fail banks We had a vote yesterday, but that have perverse incentives. If they gam- The PRESIDING OFFICER. Without cannot be the end of this discussion objection, it is so ordered. ble and win, they walk off with the pro- about how to address too big to fail. ceeds. If they fail, taxpayers, pick up The nomination considered and con- The vote yesterday was rather Byzan- firmed is as follows: the tab. tine, as far as I was concerned. I was Alan Greenspan—I seldom, if ever, DEPARTMENT OF COMMERCE not someone who was a big fan of the agree with Alan Greenspan, but I have Larry Robinson, of Florida, to be Assistant $50 billion to be pre-funded for resolu- used a quote of his to describe where Secretary of Commerce for Oceans and At- tion of too-big-to-fail companies. But we are now. He was around sitting on mosphere. having said that, to decide that the $50 his hands for a good many years while f billion, which would come from the these problems developed, despite the very institutions that are too big to LEGISLATIVE SESSION fact that he had the authority to have fail, should be abolished, and that the avoided them. Then he has written a The PRESIDING OFFICER. Under funds instead would come from the book acting as if he was exploring the the previous order, the Senate will re- FDIC, which are initially funds from surface of Mars while all of this went sume legislative session. the American taxpayer, made no sense on. f to me. Then suggesting that it will be But now he says: The notion that all right because the FDIC will be re- risks can be identified in a sufficiently RESTORING AMERICAN FINANCIAL paid with the sale of assets—oh, really? timely manner to enable the liquida- STABILITY ACT OF 2010—Continued Well, firms that are too big to fail that tion of a large failing bank with min- The PRESIDING OFFICER. The Sen- are going to get in trouble in the fu- imum loss has proved untenable during ator form North Dakota is recognized. ture are not going to have very many this crisis, and I suspect in the future Mr. DORGAN. Madam President, I assets. They are going to be in trouble crises as well. will join my colleague from Con- because of dramatic amounts of over- Simon Johnson, professor of entre- necticut in opposing the amendment on leverage, leverage that goes far beyond preneurship, the Sloan School: There is the floor if it weakens the underlying their ability to continue to do busi- simply no evidence, and I mean no evi- bill, but I do not come to speak about ness. And when the firm comes tum- dence, that society gains from banks

VerDate Mar 15 2010 00:36 May 07, 2010 Jkt 089060 PO 00000 Frm 00009 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.012 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3304 CONGRESSIONAL RECORD — SENATE May 6, 2010 having a balance sheet larger than $100 The PRESIDING OFFICER. The Sen- have stopped the subprime mess before billion. ator from Colorado. it spiraled out of control. For example, I do not know whether I agree or dis- Mr. BENNET. Thank you, Madam subprime giant Ameriquest would have agree with that. But his point is that President. been subject to meaningful rulemaking too big to fail means too big. I see our chairman and the ranking and enforcement authority. And while Arnold King, Cato—I seldom quote member over here from the Banking I prefer a wholly independent agency, Cato on the floor of the Senate. But, Committee on which I serve, and I this bill represents substantial and you know, strange bed fellows: Big want to congratulate them for their meaningful progress on a consumer banks are bad for free markets. There hard work in getting this legislation to protection front. is a free market case for breaking up the floor. We are finally doing some Third, had the bill’s derivatives re- large financial institutions—that our work around here, and we are doing it forms been in place, it is much less big banks are a product not of econom- in a bipartisan way. likely—much less likely—that the Fed- ics but of politics. I think this bill is going to improve eral Government would have been The president of the Federal Reserve over the course of this debate. It is an forced to spend tens of billions of tax- Bank of Kansas City, this is the third enormously important opportunity to payer dollars to rescue AIG from its Fed president: I think they should be safeguard our economy from the reck- own sloppiness and greed. broken up. And in doing so, I think you less danger that got us into this finan- In total, the plan before us represents will make the financial system itself cial mess. I am hopeful we can wade a strong and thoughtful measure that more stable, more competitive, and I through all this Washington wrangling rewrites the rules of the road for Wall think you will have long-run benefits and get something done to protect Street. And through the amendment over our current system. America’s financial future. process, we can make it even better. We broke up Standard Oil in this There is a shared understanding of For example, I think we need to en- country into 23 different pieces. It what got us here, and that is the good sure that certain State-chartered com- turned out the 23 pieces were more val- news. Some on Wall Street took all the munity banks that did little to con- uable than Standard Oil was. I am not risk. Yet it is the American people who tribute to the current crisis do not saying just go in and break up things paid the price. Small businesses, home- have to change their prudential regu- just for the purpose of breaking up. I owners, and working families were lator. In so many of our towns, commu- am saying this: If there is a standard forced to come in and clean up this nity banks play an important role in by which we judge that an institution mess. providing credit to our local econo- is too big to fail and causes a dramatic It is our responsibility to learn the mies. Many of these small institutions risk to the economy as a whole should lessons from the last collapse to help are struggling due to this difficult it fail, a moral hazard, unacceptable this economy recover and to head off economy, which means less available risk to the entire economy, then it the kinds of problems that could lead credit for families and small busi- seems to me like this issue of creating to another financial crisis. In short, we nesses. I have concerns that a change early warnings and stop signs and si- have to fix this economy, ensuring in prudential regulation may exert fur- rens and so on is largely irrelevant. there will never have to be another ther pressure on these small banks What we need to do is do something taxpayer-sponsored bailout. which continue to serve their local direct and effective and something we As someone who sits on both the Ag- communities. It is my hope we can bal- all knew we should do; that is to say, if riculture and Banking Committees ance the need to reduce regulatory ar- you are too big to fail, and judged to be which share jurisdiction over this bill, bitrage while preserving the existing so, and judged to pose those kinds of I can assure you that this package re- prudential supervisory structure for risks to our economy, then you must flects months of hard work and incor- some of these State-chartered banks. break off pieces. We would, over a 2- porates ideas and concepts from both I also believe it is time for us to take year period, require that to happen political parties. We have examined the advantage of this opportunity to begin until you are not too big to fail. problems that brought us to the finan- to move away from the last bank bail- Let me show a couple of quick cial brink nearly 2 years ago, and to- out, the TARP. While there are 100 charts. This one shows the top finan- gether these two committee bills cre- opinions in this Chamber about how ef- cial institutions: The Big Get Bigger. ated a thoughtful and comprehensive fective TARP was, there really is a This chart shows the same thing, meas- plan to increase transparency, reduce broad consensus here and in the coun- uring assets and liabilities: The Big systemic risk, and strengthen our com- try that it is time to wind down TARP, Get Bigger. Much, much bigger. The mitment to protecting consumers. recapture what we can for taxpayers, first chart I showed today dem- In reviewing the merits of the bill, I and prevent banks from tapping into onstrates why, if we do not pass the think it is important to analyze how it the Treasury going forward. That is amendment I suggest, we can thumb would have addressed so many of the why in the coming days I will be push- our suspenders and crow all we want in problems that led to the financial col- ing bipartisan legislation that will do every hallway in this Capitol Building, lapse in 2008. Too often, we do not ask exactly that. It would use recaptured but we will have not done what was the question, What problem is it we are TARP funds, borrowed from our chil- necessary to be done to address too big trying to solve, and then we get busy dren—$180 billion so far and counting— to fail. We just will not do it. either solving problems that did not for deficit reduction, and it would take So I have an amendment. I am here exist or creating unintended con- important steps to end the TARP. because I am pestering those who are sequences from our work. I think we More broadly, I also think we need to lining up amendments to make certain have worked hard on this legislation be aggressive about strengthening this I have a chance to debate and vote on for this not to be so. bill to further protect consumers. I will that amendment, and that will be the Had this legislation been the law of be supporting amendments which do test of whether this Congress has the land, we would not be talking exactly that. learned a lesson; whether, when some- about that $700 billion taxpayer-funded When it comes to Wall Street reform, day a Treasury Secretary leans over a rescue of our Nation’s largest bank we simply cannot afford to delay any lectern and says: If I do not get $700 holding companies. We would have longer. Recently, the TARP inspector billion to bail out the big interests been able to see many of the dangerous general underscored this point better that ran this country into the ditch, trends develop earlier, and we would than I could. He stated: our whole economy is going into the have required these systemically risky [E]ven if TARP saved our financial system ditch. companies to have more capital and from driving off a cliff back in 2008, absent So I hope very much that we will less debt. Had any of these companies meaningful reform, we are still driving on have the opportunity to both simply failed, we would have resolved them the same winding mountain road, but this and effectively do what is necessary to without transforming them into wards time in a faster car. finally and thoughtfully address this of the state, like AIG. In short, bailing out companies has issue of too big to fail. Second, had a strong consumer pro- made the future risk to our financial I yield the floor. tection infrastructure existed, we could system even worse, by creating the

VerDate Mar 15 2010 00:36 May 07, 2010 Jkt 089060 PO 00000 Frm 00010 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.013 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3305 moral hazard that a financial firm that The PRESIDING OFFICER. The Sen- go. The status quo simply will not do. participates in risky behavior is going ator from New York. There is no accountability in the cur- to somehow be bailed out by the gov- Mr. SCHUMER. First, Madam Presi- rent system. Consumer protection is ernment, by the taxpayer. This Wall dent, I wish to join my friend from split among seven different regulatory Street reform package takes a strong Connecticut in praising Senator BEN- agencies. For that reason, I was an step toward restoring some degree of NET, who has had an amazing effect and early supporter of efforts to create a sanity in our financial system and a steady hand in bringing this bill to truly independent consumer protection making that moral hazard a thing of the floor. I also thank my colleague agency, and I am still working with the past. from Virginia, Senator WARNER. The many of my colleagues, including Sen- Finally, Coloradans and the Amer- new Members have had a tremendous ator JACK REED and Senator DURBIN, to ican people are expecting us to act. I effect on this bill. This reflects the way strengthen the provisions of the bill am confident we are going to succeed. the Senate works these days, and I proposed by Chairman DODD. Lobbyists may have been able to slow think it is all for the better. Having One of the key authorities of any new down Wall Street reform temporarily, their input and experience has been consumer protection division or agency but the American people want it, as vital. is that it must be able to adopt rules to well they should. We are getting closer But, Mr. Chairman, I would also say protect consumers without being over- and closer every day to sustaining a that you are full of fresh ideas and vim ruled by banking regulators who would workable bill that can pass this Cham- and vigor. Just because you have been rather allow banks to pad their bottom ber and that we can eventually send to around here a long time does not mean lines by fleecing consumers with hid- the President for his signature. We that—— den fees. cannot allow the status quo to main- Mr. DODD. Thank you. Some argue that you cannot split tain its grip on our financial system. Mr. SCHUMER. In fact, you have had consumer protection from safety and soundness. But historically, in the We have to work together and pass this the wisdom to encourage some of our present setup, every time there is a groundbreaking reform package. new Members to actively participate, I want to close, again, by thanking and confidence to do that as well. conflict, the consumer loses. Con- the chairman of the Banking Com- I also do not want to fail to note my sumers deserve an accountable regu- mittee, who is here in the Chamber, for colleague from New York, Senator lator with oversight of consumer finan- his leadership throughout the months, GILLIBRAND, the Presiding Officer, who cial products as its primary objective, not as an afterthought. not just on this issue but on health has done a fabulous job, too, particu- The Republican proposal being dis- care as well but particularly for stick- larly on the agriculture portion of the cussed is totally inadequate. It would ing with this issue. I do not think we bill on the committee on which she sits. allow the same bank regulators, who would be having this debate right now have stood in the way of meaningful AMENDMENT NO. 3826 were it not for the work the chairman consumer protections for years, to veto Madam President, I come to the floor did. As a member of the Banking Com- consumer protection rules proposed by today and rise against the consumer mittee, I appreciate it very much. the head of the new division. Madam President, I yield the floor. amendment posed by Senator SHELBY For example, the Comptroller of the The PRESIDING OFFICER. The Sen- that is before us. I come to the floor to Currency, who publicly opposed the ator from Connecticut. speak about the need for a strong inde- Fed’s new credit card rules, would, Mr. DODD. Madam President, before pendent consumer watchdog. I am here under the Shelby amendment, get to turning to my colleague from New to talk about the proposal put forward vote on future credit card rules. So the York, let me say how fortunate I have by some of my Republican colleagues regulators who do not really care— been as chairman of the committee to to place a new consumer protection di- some of them—about consumer protec- have Senator BENNET as a member of vision within the FDIC and signifi- tion would be given veto power. our committee. I want to thank him cantly reduce the ability of that divi- The division would have no examina- immensely. He is a new member of the sion to carry out its mission. tion or enforcement power over any committee, but, again—like the Pre- The amendment before us greatly bank of any size or any of its affiliates. siding Officer, like my other colleague weakens the bill in terms of consumer Some of the worst actors in the from New York—I cannot tell you how protections. In fact, it is not just a step subprime mess were bank affiliates or valuable it has been having people who backward from the bill before us, it is subsidiaries. Even worse, it could only understand this issue and who bring to a step backward from the status quo. If do examinations of nonbank consumer this Chamber a previous life rich with we were to pass the amendment on the finance companies if they ‘‘dem- the experience of understanding these floor, consumer protections, weak as onstrate a pattern or practice of viola- issues. So let me thank the people of they are today, would be even weaker. tions’’ of consumer law—in other Colorado for having the Senator here. This amendment would leave the con- words, only after consumers have been What a difference the Senator has sumer naked and unprotected. This harmed repeatedly. That is what one made in the consideration of this legis- amendment strips the bill of some of could call too little, too late. Even the lation. its strongest protections. Not every fi- Fed recently deleted this requirement Some of the newest members of the nancial institution preys on con- from rules governing subprime mort- committee—and I think my colleague, sumers, but those that do would be gages because it hampered enforce- the senior Senator from New York, given too free a hand if this amend- ability of those rules so severely. would acknowledge this—some of the ment were to pass. I urge strong oppo- Even the banks want the new con- newest members of our committee sition to it. sumer division to be able to enforce its made some of the most valuable con- Let me explain. One of the roots of rules at nonbanks. This is amazing. tributions to this product, which is fur- this financial crisis was, undoubtedly, Some of the most rapacious institu- ther evidence that you do not have to that total failure of our consumer pro- tions that prey on consumers are not be here that long. In fact, sometimes tection regime. Americans were sold banks. They operate outside the scope maybe the shorter time you are here, products they did not understand and of the Federal regulatory authorities. you bring that kind of fresh experience could not afford by mortgage origina- They are often responsible for many of from our States and across the coun- tors eager for a fee and happy to sell the most egregious abuses and preda- try. those loans off into the great tory lending practices. Many of the So I did not want the moment to pass securitization machine which was products provided to consumers by without expressing to MICHAEL BENNET given a virtual carte blanche by the these nonbanks played a direct role in of Colorado my deep, deep apprecia- credit rating agencies. the financial crisis. And many of these tion. I say to the Senator, I thank you After the events of the last several businesses—payday lenders, rent-to- for your leadership, your thoughtful- years, no one can argue that funda- own companies—currently operate ness, and the contributions you have mental reform of our consumer protec- below the radar screen to prey on vul- made not only to this product but to tion regime is not necessary. No one nerable communities. How can we ex- others during your tenure. can argue the status quo is the way to empt some of these payday lenders and

VerDate Mar 15 2010 00:36 May 07, 2010 Jkt 089060 PO 00000 Frm 00011 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.014 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3306 CONGRESSIONAL RECORD — SENATE May 6, 2010 rent-to-own companies? I have seen For the last 30 years, Presidents and made by locally owned financial insti- them prey on poor people in my State. Congresses have consistently given tutions—institutions whose economic How can we exempt them from regula- into Wall Street lobbyists and weak- prospects are tied to the financial tion when they often are worse than ened essential safeguards. As has been health of the community they serve— many of the financial institutions? the case in so many areas, members of have long played a critical role in the The Republican amendment would both political parties are to blame. economic development of our Nation also prohibit the consumer division Legislation that paved the way for the and especially for our smaller commu- from issuing any rules ‘‘that affect any creation of massive Wall Street enti- nities and rural areas. underwriting standards’’ of deposit in- ties and removed essential protections But we have moved away from that stitutions and their affiliates. After for our economy passed with over- system. Directly as a result of policy the crisis we just went through, which whelming bipartisan support. From the changes made by Congress and regu- was in large part created by bad mort- savings and loan crisis in the late 1980s lators, banking assets are controlled by gage underwriting standards, I cannot to the more recent financial crisis that fewer and fewer institutions, and the believe anyone can propose this with a triggered the horrible economic down- diminishment of that locally owned straight face because—let me repeat turn from which we are still recov- and controlled capital has not bene- what it does. The consumer division ering, those three decades of bipartisan fited either businesses or consumers. Of cannot issue rules ‘‘that affect any un- blunders have been devastating to our course, most dramatically, taxpayers derwriting standards’’ of deposit insti- Nation. The price of those blunders has across the country must now realize tutions. It is saying: Let’s repeat the been paid by homeowners, Main Street that Senator Proxmire’s warning about mortgage crisis. It makes no sense. businesses, retirees, and millions of the concentration of banking assets If this consumer division were in families facing an uncertain economic proved to be all too prescient when place in 2008—the one proposed by my future. President Bush and Congress decided to colleagues here—it would not have had The impact of the recent financial bail out those mammoth financial in- the power to write the mortgage rules crisis on the Nation’s economy has stitutions rather than allowing them establishing the minimum ability to been enormous. Millions have lost their to fail. That was a bailout I strongly pay standards the Fed issued. As we jobs and millions more who are lucky opposed. The trend toward increased con- know, the Fed was not an extreme watchdog enough to have a job are forced to work in any sense. I have worked long and centration of capital was greatly accel- fewer hours than they want and need to hard in the area of consumer protec- erated in 1994 by the enactment of the work. According to a study done by the tion. I have worked with these regu- Riegle-Neal Interstate Banking and Pew Trust, the financial crisis caused lators. I have seen how slowly they Branching Act and especially in 1999 by American households an average of work. It took more than 10 years to get the enactment of the Gramm-Leach- nearly $5,800 in lost income. Of course, them to go along with the so-called Bliley Act, which tore down the protec- families lost a significant amount of Schumer box, where credit card inter- tive firewalls between commercial their personal savings. As a nation, we est rates were made clear and visible to banking and Wall Street investment lost $7.4 trillion in stock wealth be- prospective credit card purchasers. It firms. tween July 2008 and March 2009 and an- worked. But why did it take so long? Those firewalls had been established other $3.4 trillion in real estate wealth Then, when the banks came with new in the wake of the country’s last great during that same time. We simply can- ways of getting around the rules, financial crisis 80 years ago by the not afford to continue down the path again, it took me forever to get the Banking Act of 1933, the famous reform policymakers have set over the past 30 Fed to move because the Fed, frankly— measure also known as the Glass- years. Steagall Act. and Chairman Bernanke to his credit The test for this legislation then is a admitted this—did not make consumer Prior to Glass-Steagall, devastating simple one: Whether it will prevent an- financial panics had been a regular fea- protection a high enough priority. other financial crisis. Central to that So we need, in my judgment, an inde- ture of our economy, but that changed test will be how this bill will address pendent agency. That would be the best with the enactment of that momentous too big to fail. This is a critical issue solution. Second best would be an legislation, which stabilized our bank- that has been growing for some time agency, even if it is within the Fed, ing system by implementing two key now as increased economic concentra- that is largely independent in both the reforms. First, it established an insur- tion in the financial services sector has rules it can promulgate and its enforce- ance system for deposits, reassuring put more and more financial assets ment. We need strong, forward-looking bank customers that their deposits financial reform. I have always said I under the control of fewer and fewer were safe and, thus, forestalling bank want the reform to be constructive, not decisionmakers. runs. Second, it erected a firewall be- Years ago, a former Senator from punitive. But if we go through all this tween securities underwriting and com- Wisconsin, William Proxmire, noted and fail to leave consumers better pro- mercial banking so financial firms had that as banking assets become more tected than they were before this cri- to choose which business to be in. That concentrated, the banking system sis, we will have totally failed in our firewall was a crucial part of estab- itself becomes less stable, as there is mission to serve the American people. lishing another protection—deposit in- I strongly urge that this amendment greater potential for systemwide fail- surance—because it prevented banks be rejected by a large and hopefully bi- ures. Sadly, Senator Proxmire was ab- that accepted FDIC-insured deposits partisan majority. solutely right, as recent events have from making these speculative bets I yield the floor. proved. Even beyond the issue of sys- with that money. The PRESIDING OFFICER. The Sen- temic stability, the trend toward fur- The Gramm-Leach-Bliley Act tore ator from Wisconsin. ther concentration of economic power down that firewall, as well as the fire- Mr. FEINGOLD. Madam President, I and economic decisionmaking, espe- wall that separated insurance from am glad the Senate is finally consid- cially in the financial sector, simply is Wall Street banks, and we have seen ering the critically important issue of not healthy for the Nation’s economy. the disastrous results of that policy. I financial regulatory reform. Few Banks have a very special role in our voted against tearing down the firewall things are as important as ensuring we free market system: They are rationers that separated Main Street from the never again suffer the kind of melt- of capital. When fewer and fewer banks Wall Street banks. I did it for the same down of the financial markets that are making more and more of the crit- reason I voted against the Wall Street shoved our economy into the worst re- ical decisions about where capital is al- bailout: because I listened to the peo- cession since the Great Depression. I located, then there is an increased risk ple of Wisconsin who did not want to think it still remains to be seen if this that many worthy enterprises will not give Wall Street more and more power. bill will do that. While it certainly in- receive the capital needed to grow and Wall Street was gambling with the cludes some good reforms, more needs flourish. For years, a strength of the money of hard-working families and to be done, and the track record of American banking system was the too many Members of Congress voted Congress in this area is, at best, check- strong community and local nature of to let them do it. I didn’t support it be- ered. that system. Locally made decisions fore and I will not support it now. We

VerDate Mar 15 2010 00:36 May 07, 2010 Jkt 089060 PO 00000 Frm 00012 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.015 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3307 have to get this legislation right and most of the financial sectors and insti- admit they didn’t even know the prod- protect the people of Wisconsin and tutions that affect the daily lives of ucts they were selling to consumers— every State—protect them from some- Americans: payday lenders, car loans, who assumed not only that they knew thing such as this ever happening all those things. They are just off the but also that they would not be delib- again. table. So it amounts to a gesture, not erately misleading them. That is an ex- So I was pleased to join the Senator good legislative policy. ample. The example doesn’t stop on from Washington, Ms. CANTWELL, and We are working, and we have been Wall Street. It extends out to Main the Senator from Arizona, Mr. MCCAIN, working—and Senator DODD has taken Street, to people with credit arrange- in introducing legislation to correct the lead—to ensure that there is real ments, payday lenders, organizations that enormous mistake Congress made consumer protection built into this charging huge interest charges, and it in passing Gramm-Leach-Bliley. I look Wall Street reform legislation. We be- is designed to exploit consumers. forward to supporting an amendment lieve consumers need information to The Republican proposal does little, to this measure based on the Cantwell- make good choices. The thrust of our if anything, to prevent that. I hope, on McCain-Feingold bill. efforts is to ensure that the agency is a bipartisan basis, as Senator SCHUMER The measure before us seeks to make able to provide that information suggested, we reject this amendment. up for the lack of a protective firewall through simplified forms, through sim- It is, as they say in some places, all hat between the speculative investment ple products, through those mecha- and no cattle. We have an agency, but bets made by Wall Street firms and the nisms that allow men and women who we have no enforcement powers. We safety net-backed activities of com- are engaged in raising children, keep- have an agency, but they can’t enforce mercial banking by imposing greater ing jobs, coaching Little League, to un- their rules and regulations on certain regulatory oversight. We have seen derstand what they are putting their sectors; i.e., most of the sectors. So if how creative financial firms can be at resources into. we want to protect consumers and if we eluding regulation when so much profit That is not what the Republican want to have efficient markets—I is at stake. No amount of regulatory amendment is proposing to do. They think one of the inaccurate premises oversight can take the place of the are creating a six-person council with- that some people are suggesting is that legal firewall established by Glass- in the FDIC with no real independence consumer protection somehow is bad Steagall. So when it is offered, I urge and even less authority, and one could for business. I argue strenuously that my colleagues to support Senator question why the FDIC is the logical consumer protection is very good for CANTWELL’s amendment to restore that place to put in a council such as this. business. sensible protection. Rebuilding the They would create an oversight agency If you take care of the consumer, if they feel, and you provide, valued and Glass-Steagall firewall is essential in but exempt, as I said, virtually an en- good service—that used to be the preventing another financial crisis. tire financial sector or sectors from But even if we restore Glass-Steagall, oversight. It is not like a watchdog; it American sort of maxim. That used to there are additional steps we should is like a lapdog. It is bureaucracy with be the American byword for business: take to address too big to fail in this no bite. the consumer is always right; the con- bill. I am pleased to be joining the Sen- The Dodd bill, in contrast, contains a sumer comes first. In the Republican legislation, the ator from North Dakota in offering his very robust consumer protection provi- consumer comes last, not first. The amendment to address the problem di- sion. It creates a Consumer Financial consumer should come first. I hope this rectly by requiring that no financial Protection Bureau with resources—I amendment will be rejected and that entity be permitted to become so large wish to emphasize resources—and au- thority to prohibit abusive practices we support not only the underlying that its failure threatens the financial Dodd bill, but I think it can be im- stability of the United States. I am and deceptive financial products, rang- ing from credit card companies to proved. I commend the Senator from also looking forward to supporting an Connecticut who has done a remark- amendment that will be offered by the mortgage brokers to banks and to oth- ers. For example, it would hold the able job crafting the consumer protec- Senator from Ohio, Mr. BROWN, and the credit card companies accountable and tion agency. To accept the Republican Senator from Delaware, Mr. KAUFMAN, amendment would be to turn our backs who is in the Chamber, that proposes eliminate unfair lending practices, such as penalty fees for paying off your on consumers and reject essentially the bright line limits on the size of finan- old American maxim that the con- cial institutions. The disposition of debt on time. One of the big efforts we are under- sumer is always right and the con- those three proposals I have just re- taking is increased transparency for sumer comes first, and it will leave ev- viewed will go a long way in deter- Wall Street, and this consumer protec- erybody in this country where we are mining my vote for the final version of tion agency will provide that protec- today: buyer beware of the monstros- this measure. I very much want to tion to consumers. Basic economics, ities in the marketplace. craft in this body a bill that can pre- Econ 101: In a competitive market- The PRESIDING OFFICER. The Sen- vent the kind of crisis we experienced place, one of the presumptions is per- ator from Delaware is recognized. in the past, but the bill before us needs fect information. We have seen, frank- Mr. KAUFMAN. Madam President, I some work before we can legitimately ly, that individuals on Wall Street also commend Chairman DODD for his make that claim. have made billions of dollars operating work on this bill. We have a good bill. I thank the President and I yield the I will be opposing the amendment pres- floor. on imperfect information; in fact, one could even suggest deliberately manip- ently on the Senate floor. We need a The PRESIDING OFFICER. The Sen- strong, independent consumer product ulating products so they have the in- ator from Rhode Island. finance protection agency. I have heard formation and the consumer doesn’t. Mr. REED. Madam President, the Re- many different proposals to put the publican side has submitted a con- I think we were all taken aback when we were listening to the hearings con- consumer product finance protection sumer protection amendment that can agency here, there, and everywhere. be briefly summarized: Buyer beware ducted by Senator LEVIN which talked about Goldman Sachs, and their trader, The problem with putting it in any in- because they won’t help you. This stitution like the FDIC or the Fed is flows from the very simple premise Fabrice Tourre, described the system in rather evocative terms. In his words: that those institutions’ No. 1 responsi- that they have announced from the bility is, and should be, the safety and More and more leverage in the system, the very beginning of these discussions and soundness of the banks and financial deliberations they do not want an inde- entire system is about to crumble any mo- ment . . . the only potential survivor the institutions they are regulating. That pendent consumer protection agency fabulous Fab . . . standing in the middle of is their key charge. that has the authority to make rules all these complex, highly leveraged, exotic I think the reason the Fed had a con- and enforce rules to protect consumers. trades he created without necessarily under- sumer product agency, which did not So what they have suggested is a clas- standing all the implications of those mon- act to help consumers during the re- sic bait and switch. We will create an strosities. cent meltdown, was that they first ‘‘agency’’ within the FDIC, and then we Well, that seems, to me, very were concerned about safety and will deny them the power to regulate chilling—the fact that somebody would soundness.

VerDate Mar 15 2010 00:36 May 07, 2010 Jkt 089060 PO 00000 Frm 00013 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.017 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3308 CONGRESSIONAL RECORD — SENATE May 6, 2010 At the same time, we have to be very I hear people now talking about: We prised that more of our smaller banks careful we don’t put an undue burden can’t undo this. We need big banks to aren’t coming forward and saying this on community banks. They were not compete internationally. Alan Green- isn’t fair. The market says it is not involved in what happened. We should span is saying we don’t need these for fair. make sure while we are looking out for the economies. The second point is the too big to consumers that we don’t overregulate Mr. BROWN of Ohio. If the Senator fail. You can argue that you are not these local banks. would yield, I thank the Senator for too big to fail. But the market thinks We have a good bill. I think the too- bringing out that there is such broad you are, and I listen to the market. big-to-fail part we are getting around support, as we are seeing, from econo- That is one of the important consider- to. The recent amendments on the res- mists as conservative as Alan Green- ations. Unless people misunderstand— olution that if, in fact, the bank gets in span and as progressive as Bob Reich, people say you want to destroy the trouble, we can resolve it, is a good ap- and others, who say too big to fail banks, and the rest of that. But under proach. I am sure we will be talking means simply too big. Our amendment our amendment, Citigroup would be re- about it more. It is a good approach to will only affect the six largest banks— duced to the size it was in 2002. deal with the too-big part of too big to affect their size—and it will affect Now, were they able to compete over- fail. We have not done enough on the smaller banks in helping them be more seas and do all the things they had to too-big part of too big to fail. competitive. do then? Goldman Sachs, which is now Let me go over a chart that shows You said something on the Senate at about $850 billion, under the Brown- how big these banks have become. This floor yesterday that, in effect, the size Kaufman amendment would be down to is the average assets of our major of these banks gives them a subsidy, a a more reasonable level of just above banks relative to gross domestic prod- roughly 75 basis point or three-quarters $300 billion or around $450 billion if uct. If you look at this chart—and I en- of 1 percent advantage in the capital Goldman exits the bank holding com- courage comments from my colleague, markets. This amendment we have, pany structure. You may say that is a the Senator from Ohio. If you look at which is gaining increasing support— 50-percent decrease and that is going to this chart, you will see that just about we have now 10 or 11 cosponsors to it, hurt their opportunity. In 2003, they the time we removed Glass-Steagall, and we are working with people on had $100 billion in assets. So all we are this chart went absolutely through the both sides—simply to say too big to shrinking Goldman Sachs down to is 3 roof. fail is too big. to 41⁄2 times what they were in 2003. When you look at the concentration Talk to us for a moment about how This is not some draconian effort. of the U.S. banking system, you see on these banks get the subsidies. Some- The second point we have been focusing this chart that is very similar to the body in my office said in a sense we are on is that we also limit risk. This is first chart. It shows an exponential in- giving welfare to the Wall Street not about size; we limit risk. I rec- crease in concentration. This is not banks. Because of their size, they are ommend everybody to read the Wash- good for the country. This is not or- getting advantage on the capital mar- ington Post today—that is where I read ganic growth. I hear people say it is or- kets because investors, with their dol- it—about Jimmy Cayne, former CEO of ganic growth. This is growth from Bear Stearns. He testified to the Fi- mergers. Neither chart includes the lars, understand these banks are never nancial Crisis Inquiry Commission massive mergers that went on during going to be able to fail unless we really that, in his opinion, as CEO of Bear 2008. This is through 2007. It doesn’t keep them from getting too big. Explain that Wall Street welfare that show that Washington Mutual and Stearns, they failed because it was le- we see with these 50 literally trillion- Bear Stearns were consumed in veraged 40 times over its capital base— JPMorgan Chase. It doesn’t show the dollar-plus banks, which they extract 40 times over its capital base. Brown-Kaufman would cap leverage fact that Wachovia went into Wells from the system. Mr. KAUFMAN. Sure. I don’t come at at 16 times the capital base. What he is Fargo, and Merrill Lynch went into this from any other area except how basically saying is that if Brown-Kauf- Bank of America. It clearly shows that important our capital markets are. I the incredible concentration just goes man had been in effect, Bear Stearns on. am a market guy. I think the two would not have failed. Alan Greenspan made a number of greatest things we have are democracy A lot of people have different opin- decisions and statements while this and our capital markets and the credi- ions, but that is what he says. This is was going on about how we should pro- bility of the markets. So when I want not just about size; this is about risk. ceed during the 1990s and early 2000. He to find out what is going on in a finan- What we are trying to do is target risk. said himself that he thought self-regu- cial area, I don’t do a survey of 27 peo- These banks don’t fail—banks are lation would work and was dismayed ple. I say: What is the market telling doing great now; profits are out the that it didn’t. He came out with a cou- us? That is the best way. What does the roof. You don’t fail on a nice sunny ple statements recently that I was so market tell us about what is going on? day. You cannot sit here today and say incredibly surprised about. What the market says is, if you are a no problem. That is why regulators He said this: big bank like one of these top banks— don’t do anything because, basically, For years, the Federal Reserve had been referring to the study I talked about banks are doing well. concerned about the ever-larger size of our yesterday—if you are one of the big Time and again, when we had hear- financial institutions. Federal research has banks, you get a 70 to 80 basis point ad- ings before the Permanent Sub- been unable to find economies of scale in vantage when you borrow money. You committee on Investigations, we heard banking beyond a modest-sized institution. pay less than other people. from Washington Mutual and Goldman A decade ago, citing such evidence— Mr. BROWN of Ohio. So that means Sachs. They said they were doing so By the way, moderate size, according when one of the huge Wall Street well. How can you make them change? to Andrew Haldane, the executive di- banks—these six banks—is getting a The fact that they were doing so well rector of financial stability for the three-quarters percent, roughly, inter- by turning out mortgages that were ab- Bank of England, is $100 billion. He est rate differential—a bonus, per- solutely doomed to fail is an indication said he can find no reason to have the haps—that means that banks in Dela- that they should have moved in, but need for economies of scale at banks ware and Ohio that aren’t so big are at the regulators didn’t. larger than $100 billion. As you know, a competitive disadvantage. I assume I will not hold this out, but if you the present size of top banks are in the that also means those big banks have want to see what can happen under the $2 trillion range, as high as $2 trillion. opportunities to get larger. If the play- worst case, look at Europe today. Look Continuing to quote: ing field is not level, those toward at the mess unfolding in Europe. A decade ago, citing such evidence, I noted whom it tilts get other advantages and Greece falters and that affects con- that megabanks being formed by growth and grow larger and larger, making the fidence in other countries such as Por- consolidation are increasingly complex enti- ties that create the potential for unusually point of our amendment that much tugal, Spain, and Ireland. Europe and large systemic risks in the national/inter- stronger. other banks have massive exposures to national economy should they fail. Regret- Mr. KAUFMAN. Absolutely. Obvi- these countries. German and French tably, we did little to address the problem. ously, that is a key point. I am sur- banks carry a combined $119 billion in

VerDate Mar 15 2010 00:36 May 07, 2010 Jkt 089060 PO 00000 Frm 00014 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.019 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3309 exposure to Greek borrowers and more I am intrigued by that because our Once again I quote Alan Greenspan. He than $900 billion to Greece and other banks are trillion dollar banks. I know said: ‘‘Too big to fail, too big.’’ ‘‘Too vulnerable Euro countries, including there are studies that banks with as- big to fail, too big.’’ Ireland, Portugal, and Spain. sets of $300 billion and $400 billion and The idea that we should turn this People say: How can we compete with $500 billion have all the economies of over to the regulators and let the regu- those big banks? Remember, we are scale. Economies of scale do not work lators set the rates—that is the alter- only reducing Citibank to its size in forever. native. The alternative is to let the 2002. How can we compete with Europe? Mr. KAUFMAN. According to Alan regulators do it. We have good regu- Why do we want to do that? Why do we Greenspan. lators now. I think that is fine. want to go in with their megabanks Mr. BROWN of Ohio. A bank that is Remember several things. No. 1, the and deal with the problems they have? $300 billion, $400 billion, $500 billion has regulators did nothing. The regulators The Royal Bank of Scotland had a all the economies of scale as a trillion had the power to do most of what we balance sheet basically 11⁄2 times the dollar bank. are talking about. They did nothing in size of the UK economy when it failed The point they make about Euro- the past. in the fall of 2008. See these numbers. pean—we cannot compete internation- The second thing is, we could have a It is 63 percent right now. Our six larg- ally—it is clear from what the Senator new President come in and adopt the est banks make up 63 percent of the from Delaware said, all of our banks, same policy as before that self-regula- GDP. The Royal Bank of Scotland’s when they were smaller—smaller than tion works, hire a bunch of regulators was 11⁄2 times the size of the United the largest banks in the world—could to go in there, such as a number of reg- Kingdom when it failed. People say the compete internationally 10 years ago, ulators we had in our regulatory agen- big banks didn’t fail; it was the small and there is no reason they cannot cies—they were not bad people. They banks that failed. compete like that today. were smart people. They just basically I keep hearing that J.P. Morgan and I found the huge lumbering bureauc- believed self-regulation works. To Bank of America did not fail. It was racies, whether they are a bank or quote Alan Greenspan for the third Washington Mutual. They say there is whether they are the Center for Medi- time in this speech, he said: ‘‘I really no correlation. Megabanks, such as care and Medicaid Services, are not as thought self-regulation would work. Citigroup, only survived through mas- flexible and nimble and cannot keep up I’m dismayed that it didn’t.’’ sive capital infusions, regulatory for- with the market nearly as well if they We can have it come back. There are bearance, and Federal monetary eas- are that big. still people today who believe—we hear ing. Even J.P. Morgan has benefited The Brown-Kaufman amendment, it sometimes on the floor—we do not from not having to write down its sec- again, does not apply to very many in- need these regulators. The example I ond lien mortgages and commercial stitutions. No more than five or six use is a football game where somebody real estate. will be even unwound a little bit. We gets up and says: The referees keep The next thing they said when Wash- are not going to split them all up so blowing the whistle and stopping the ington Mutual failed was: How about they are small, little community play. Let’s get the referees off the field that, that was a smaller bank. That banks. They are still clearly going to and play football. That is what was was a big bank. The reason it went going on around here. be able to compete. There is no ques- down is because we knew at the time As many of my colleagues on the tion about it under the Brown-Kauf- when it failed that JPMorgan Chase other side point out, there was not man amendment. We give 3 years to would come in and grab it. enough oversight on these regulators. I ask the question: Who is going to banks to sell off some of the assets, to But you pull the football referees off bail out, if something goes wrong, spin off a line of business, to sell re- the field, maybe the first pileup will JPMorgan Chase, Bank of America, or gional operations they may have in one not be bad, but by the time you get to any of these six larger banks? Remem- area of the country to comply with this the second and third pileup, I do not ber, going back to Citigroup, Citigroup amendment. want to be in it. essentially failed and had to be bailed It is clear that as increasing numbers I think we ought to go back to what out three times in the last 30 years: in of people say, ‘‘Too big to fail is too our colleagues did in 1933, and we 1982 because of the emerging market big,’’ that if we allow these banks to should regulate not for 5 years, 10 deck, 1989–1991 because of commercial keep getting bigger and bigger—and we years, 15 years; we should regulate for real estate, and 2008–2009 because of see this chart where the six largest generations. Much of the stuff in this residential real estate. banks in total assets end up being 70 bill does regulate for generations. We Mr. BROWN of Ohio. Madam Presi- percent, 80 percent, 90 percent of should put in the bill hardline, adopted dent, will the Senator yield? I appre- GDP—it is hard for me to think that if by us to send a message for generations ciate this analysis. I hear, as we talk one stumbles and is about to fail that that this is not going to happen again. about the Brown-Kaufman amend- we are going to let it fail, that govern- Bear Stearns is not going to be able to ment—and it has gotten increasing at- ment will let it fail because it will leverage up to 40 times their capital tention because an increasing number have huge repercussions because of the base. That is what we need to do. We of people said too big to fail is too big economic power these institutions need to legislate for generations. and that if we allow these six banks— have. Madam President, I yield the floor. that chart the Senator showed origi- Mr. KAUFMAN. We all agree the The PRESIDING OFFICER (Mrs. nally—the largest six banks in the present bill is a good bill and has a HAGAN). The Senator from Tennessee. United States 15 years ago were 17 per- good resolution authority that has Mr. CORKER. Madam President, I am cent of our GDP and today they are 63 been worked on for years. My basic here to speak about the consumer pro- percent and growing, as Senator KAUF- concern is we need a little prevention tection title in the Dodd bill. I do want MAN mentioned. in the mix. to say that while I disagree with my Mr. KAUFMAN. Exponentially. As I said before, when people say we friends from Delaware and Ohio in Mr. BROWN of Ohio. Look at the rate cannot compete overseas, do we want their approach, I appreciate the way of growth. They did not grow a whole to go where the Royal Bank of Scot- they have conducted themselves. I lot until the last 10 years, and look land went? The Royal Bank of Scotland think the debate we have had on the what happened. They are going to con- was 11⁄2 times the UK economy when it floor on this bill, I say to the Senator tinue to grow since the Glass-Steagall went down. Do we want to get into this from Connecticut, has been of the high- repeal. mix in Europe? Is this the place we est level that I can remember in a long The argument opponents of our want to be with these banks facing the time. I thank him for setting that amendment use most frequently is: We problems they are going to have right tone. I thank my caucus for offering do not have the largest banks in the now, as we went through this earlier? nothing but constructive amendments. world anymore. There are larger banks Is this the place we want to be? People on both sides of the aisle have other places. And how are our banks I think we go back to what Senator tried to do that. going to compete with these huge DORGAN was saying earlier, and I wish It took a while to get here, but we banks? to add to that with a couple comments. are on the floor. Obviously, there are a

VerDate Mar 15 2010 00:36 May 07, 2010 Jkt 089060 PO 00000 Frm 00015 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.020 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3310 CONGRESSIONAL RECORD — SENATE May 6, 2010 lot of improvements people would like reach, and it is going to be highly dis- me, that is something that is very dan- to make to this bill, and I think people ruptive to our banking system. gerous. are focused on doing that. I thank the What it is going to do, because there Let me just add one other thing. Senator for setting that tone. is no Federal preemption, is actually There is a new word in this title that is At the same time, I do want to talk encourage general assemblies, State undefined. It is a word that says they about the consumer protection title on legislators across this country to be- will also be looking to see if practices which I wish to see vast improvement. come hyperactive. One of the things were abusive. But nobody knows what I wish to see consumer protection take that State banks—not Federal banks, that means. Nobody knows what that place. I think everybody in this body not national banks—one of the things means. Under this bill, by the way, if wishes to see that happen. But I believe State banks like about our existing someone were to come in after the fact that the consumer protection title that laws—by the way, State banks are not and find that something was ‘‘abu- exists in this bill is one that gets back these huge megabanks about which my sive,’’ it would negate the financial to the essence of what the White House friends from Delaware and Ohio were transaction that was entered into. So has said many times, and that is: Never talking. you could have a zealous consumer ad- let a good crisis go to waste. I think State banks across the coun- vocate come in and say: I am sorry, I think the consumer protection title try have enjoyed—again, these are the this loan that was made between two in this bill is a vast overreach. It is my smaller institutions—the fact there is parties was abusive, and it would ne- hope—I know we will have a vote later something called Federal preemption. gate that transaction. today on a different title. If that is not That has discouraged hyperactivity on This bill is a huge overreach. It obvi- successful, maybe there will be sur- behalf of State legislators to create ously goes right along the lines of the gical attempts to deal with some of the laws that might be populist in nature, White House saying you should never problems in this title. that might be done to, in essence, use let a good crisis go to waste. This bill For the first time in our country’s our financial system for other ends. is going to be around for a long time, if history, we will be giving vast powers One of the things I think is most dis- it passes. So I hope what we can do, to an individual to be involved in al- ruptive about this legislation is that— over the course of the next several most every aspect of any type of finan- if you can imagine this—I think all of days, during this time when we are cial transaction. Without a board, us realize what led to this last crisis is having one of the most civil debates I without any kind of check and balance, the fact that we had very poor under- think we have had in the Senate since the Dodd bill creates someone heading writing of loans. That is the essence of we have been here—a high level of civil consumer protection who has no one as this last crisis. It got spread around debate—I hope we will be able to put a check and balance. This person is the world, the fact we had incredibly this back in balance. going to be able to write rules, and this poor underwriting. I hope to fix that, by the way, with I know the Presiding Officer is from person is going to be able to enforce a State where people care a great deal those rules over our entire economy as an amendment in a few days. I hope it comes up, and I hope it is adopted. about their financial institutions. So I they relate to financial transactions. hope to work with her and my friend I know there is a process by which if What the Dodd bill does is give to a from Minnesota and others to try to a rule is felt to be problematic after it consumer protection agency loan un- achieve that balance. is put in place—not before—after a rule derwriting standards. If you can imag- I yield the floor. is put in place, there is the ability of a ine that. I would like for people in this board to actually look at those rules. body to think about that. A consumer The PRESIDING OFFICER. The Sen- The fact is, if a standard is set so high, protection agency being involved in ator from Connecticut. it would be very difficult to ever over- setting underwriting standards for Mr. DODD. Madam President, I will turn the rules that would be put in by loans has to undermine the safety and respond more fully a little later be- this consumer protection agency. soundness of our financial institutions. cause my colleague and friend from It has a vast budget. It sets its own To me, that is a huge problem. Minnesota is on the floor to be heard, budget, I might add. Again, Congress All of us would like to see consumer but I just wish to say that a lot of work has nothing whatsoever to do with protection take place. All of us would went into this bill on consumer protec- that. like to see it, I hope, take place in a tion. Some of the biggest problems with way that is balanced, so the consumer You don’t have to wait 10 or 15 years the consumer protection agency are protection laws that are put in place to find out what can happen. We have not just that it has no checks and bal- are put in place in a way that is bal- watched painfully what can happen ance, it writes rules and enforces rules, anced against ensuring that our finan- over the last several years, when the it sets its own budget. On top of that, cial institutions across this country very people—the prudential regu- it overturns the way our national are safe and sound; that people know lators—should have been standing and banking system has worked for years. they can go to those institutions and saying: No-doc loans are wrong and Congress years ago decided we wanted they are going to operate. dangerous. In fact, it was consumer to have a national banking system, I believe the Dodd bill, as it relates groups that warned about the real es- that we wanted the ability of banks to to consumer protection, is a vast over- tate bubble. We were being told every- operate across our country in a way reach. I know people on the other side thing was safe and sound because peo- that they had consistency, they knew of the aisle have come up to me and ple were making money, and it looked under what rules they would be oper- said: Look, this is problematic, and if like it might go on forever. ating. you guys can help us figure out a way Of course, everyone has 20/20 hind- The Dodd bill overturns that. It says to peel this back, we would like to be sight looking back as to what occurred. there is no Federal preemption any- able to do that. But had we had in place someone say- more. If States want to change laws, We are going to have a chance, later ing: No-doc loans, no downpayments, write laws—we could have a bank that today, to vote on a consumer protec- adjustable rate mortgages at fully in- operates in 50 States that has 50 dif- tion amendment that has certainly dexed prices are going to cripple peo- ferent sets of regulations if this bill brought this more in balance. There ple’s ability to meet those obligations, passes. That is highly problematic with may be other ways of getting at it. I we wouldn’t be in the situation we are banks that operate across our country would urge the chairman to consider in today. None of the seven agencies serving companies that operate across looking at ways to peel this back be- that have jurisdiction over consumer our country. One can imagine a bank cause I do believe that, again, we are protection were doing their job very that tries to adhere to all of those going to awake in this country—if the well. States laws that might come up as a Dodd bill passes in its present form—in I will address more specifically the result of this bill. 10 or 15 years and realize consumer pro- alternative idea being suggested, and In addition, this bill then unleashes tection has gotten out of hand; that let me also say I have never claimed 50 attorneys general on these banks. consumer protection has been used, in our proposal on consumer protection is That is something, again, that is not many ways, to create social justice, if perfect. I acknowledge the word ‘‘abu- the case today. This is a huge over- you will, in our financial system. To sive’’ does need to be defined, and we

VerDate Mar 15 2010 04:41 May 07, 2010 Jkt 089060 PO 00000 Frm 00016 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.022 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3311 are either talking about striking that government relations staff at (202) 434–3954 or I think after seeing this cartoon, if word or defining it better. Deceptive [email protected]. there is anyone who doesn’t support and fraudulent cover the ground pretty Sincerely, my amendment, I don’t know what to well, but I thought abusive was a pret- DAVID P. SLOANE, do. Anyway, this actually makes the Senior Vice President, ty good explanation point. Because it Government Relations and Advocacy. point very well that the issuer is pay- was abusive, in common language. ing the rating agency and, hence, the Mr. DODD. So major groups, ones So I will come back later, but I AAA. that are consumer oriented as well as wished to acknowledge that we have a However, the credit rating agency those that watch out for older Ameri- number of organizations that have en- should have an interest in providing cans—many of whom have to pay mort- dorsed this bill of ours, strongly sup- accurate ratings—unlike the triple 10s gages, are on fixed incomes—are wor- port our committee bill, ranging from in this cartoon—so investors are pro- thy of note. vided with the accurate information the Americans for Financial Reform, Again, I wish to thank my colleagues the Consumers Union, Center for Re- they need to make investment deci- for their comments and thoughts on sions. But for the reasons I just de- sponsible Lending, the Consumer Fed- this amendment, and I will address eration of America, U.S. PIRG, Public scribed, there are very few incentives more of that later, but I will yield the to provide accurate ratings. The mar- Citizen, the National Consumer Law floor. Center, Consumer Watchdog, and ket simply doesn’t reward accurate AMENDMENT NO. 3808 AARP. ratings. The PRESIDING OFFICER. The Sen- The best way to fix this problem is to Of course, we are all familiar with ator from Minnesota. change the way the market works so it the group representing older Ameri- Mr. FRANKEN. Madam President, I rewards accurate ratings. Once we cans. In fact, I ask unanimous consent rise to speak about the need to further start getting accurate ratings, inves- to have printed in the RECORD, at this address the problems of the credit rat- tors can make better decisions about point, a letter from AARP, opposing ing agency industry. Senator DODD has the products they are selecting for in- the Shelby substitute on the consumer presented us with a very good bill that clusion into pension funds. Having safe protection title. takes major strides in addressing many products in pension funds protects the There being no objection, the mate- of the problems that brought our econ- retirement security of hard-working rial was ordered to be printed in the omy to the brink of collapse. It reins in Americans. RECORD, as follows: too big to fail, brings derivatives out of Let me give you an example of the AMERICAN ASSOCIATION OF the shadows, and creates a new con- perverse incentives that have been RETIRED PERSONS, driving the credit rating agency indus- Washington, DC, May 6, 2010. sumer watchdog that will prioritize Re Oppose Shelby substitute Consumer Pro- consumer protection over Wall Street try thus far. My friend and colleague tection title to S. 3217. profits. Senator LEVIN recently held a hearing in the Permanent Subcommittee on In- DEAR SENATOR: A key priority for AARP in Senator DODD’s bill includes several the financial reform legislation is strength- provisions on credit rating agencies. It vestigations. His investigators released ened consumer protection that will help re- holds rating agencies accountable in many e-mails from the industry that store market accountability and responsi- court for being reckless in their duties, reflect the conflicts of interest that bility, rebuild confidence, and ensure the it requires increased disclosure, creates drove the system. stability of the financial markets. Surveys new complaint systems, and requires Here is a good example. There is a conducted by AARP demonstrate that Amer- raters to use information beyond what rating agency employee writing to his icans 50+, regardless of party affiliation, own rating agency people about a want Congress to act to hold financial insti- is provided by issuers. These are a few of the many provi- group of theirs, a group within his rat- tutions accountable. ing agency. AARP supports the creation of a Consumer sions the Dodd bill includes to begin to We are meeting with your group this week Financial Protection Bureau, as incor- address issues with credit rating agen- to discuss adjusting criteria for rating CDO’s porated in S. 3217, that would have as its sole cies, and they are all good. But one of real estate assets this week because of the mission the development and effective imple- thing it doesn’t do is get at the under- ongoing threat of losing deals. Lose the CDO mentation of standards that ensure that all lying problem—the conflict of interest and lose the base business. credit products offered to borrowers are safe. inherent in the issuer-pays model, We have been clear that such an agency So here the credit rating agency is should be truly independent in its leadership, where the issuer pays the rating agen- proposing to change its rating criteria funding, staff and decision-making; that it cy. to avoid losing business. This is ex- should have the authority to oversee all To root out conflicts of interest com- actly what was at the root of all these lenders and products in the marketplace; and pletely, we must change the vested in- AAA-rated, subprime, mortgage- that it should have broad rulemaking, en- terests of each of the players. The cen- backed securities that were leveraged forcement and supervision powers over all tral conflict of interest can be boiled and had the CDOs on them—these ex- types of providers. We also have insisted that down to this: The issuer has an interest otic instruments that were rated the states must be the ‘‘cops on the beat’’ in obtaining a high rating so it can sell AAA—and what created this entire with the authority to move against abusive its product. The credit rating agency practices that arise locally. mess. It is clear the incentives are to Judged against this criteria, the Shelby has an interest in giving out a high keep customers coming back, to make substitute Consumer Protection title fails in rating so it can sell its service. Tom sure accurate ratings aren’t driving virtually every instance. The consumer pro- Toles, of the Washington Post, depicts customers into the arms of other rat- tection agency will not be independent; rath- the problem quite well in this comical ing agencies—don’t want to let accu- er the FDIC Board of Directors must approve cartoon. racy get in the way of more business. all rulemaking. Inadequate resources will Here we see the rating agencies—he We need to change the incentives. I cover rulemaking and supervisory expenses labels them that so you know it is believe my amendment, No. 3808, will only; there is no funding for enforcement. them—giving three 10s to a figure skat- do that. The amendment tasks a Oversight and enforcement is extremely lim- ited. For example, the new agency will have er—labeled Wall Street, and he is kind board—a self-regulatory organization— no enforcement authority over any bank or of fat there. You see he says: ‘‘I pay with selecting a pool of qualified credit other type of depository institution. Non- their salaries.’’ That is why he is get- rating agencies. The board would then mortgage companies will be subject to super- ting three 10s—or a AAA—and yet he is choose a system to assign, one at a vision only if they demonstrate a pattern or a figure skater and he is dumping time, one of these qualified credit rat- practice of violating the law within the past trash. We see an apple core, there is a ing agencies to each request for an ini- three years. And, the bill does not give the fish head, skeleton, a banana. You tial credit rating. Issuers could no states the authority to take action where don’t want those on the ice. You just longer shop around for the best rating. necessary. don’t want that. That is bad. Then They could, however, get a second, We respectfully urge you to vote NO on the Shelby substitute Consumer Protection title there is a little figure here, the little third or fourth rating from any agency when it comes up for a vote today. If you garbageman. It says: ‘‘Somebody else they choose. But the first assigned rat- have questions, please feel free to call me or pays to clean the ice.’’ That, of course, ing would provide a check against the have your staff contact Mary Wallace of our is us—the taxpayers. next agency inflating its rating.

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00017 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.024 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3312 CONGRESSIONAL RECORD — SENATE May 6, 2010 The amendment would require the protection does not stand in isolation. Do we need a better example of the board to consider a rating agency’s It is inherently linked with safety and foolishness of divorcing consumer pro- past performance and could adjust the soundness regulation. tection from safety and soundness? number of rating assignments based This is most dramatically illustrated How did that regulatory model help upon demonstrated accuracy. If a small by the fact that an ill-conceived con- consumers? It certainly left them with rating agency began performing ex- sumer protection law, such as allowing a huge tax bill to cover the government tremely well, the board could start giv- for no down payments, could cause bailout. ing it more assignments, breaking the banks to fail. An examination of the powers and oligopoly of the big three raters, which Given that taxpayers are ultimately size of the bureau established by the served us very poorly, or maybe the big on the hook for bank failures, it would Dodd bill shows further how the Repub- three would get their act together be irresponsible not to require regu- lican approach differs from the ap- under this new system. lators to consider the impact proposed proach advocated by the Obama admin- The point is, when the agencies are consumer protections could have on istration and the Democrats. finally operating in a market in which the deposit insurance fund. They start with the assumption that accuracy is valued, they will compete After all, one of the most important small busiesses are, in President on the basis of accuracy. When accu- consumer protections is a healthy fi- Obama’s words, ‘‘bilking people’’ and racy is driving growth, not preexisting nancial system, where financial insti- that heavyhanded regulations and an relationships or sweetheart deals, tutions are able to keep long-term extensive bureaucracy are the only smaller rating agencies will have an commitments to consumers, like annu- ways to ensure that small businesses opportunity to compete and grow, ities, insurance, and retirement funds. do not take advantage of their con- The amendment we are proposing making the industry more robust. sumers. embodies this approach. It would put So properly addressing conflicts of I do not believe that the tens of thou- the FDIC in charge of writing con- interest in the credit rating agency in- sands of small businesses—the florists, sumer protection regulations. That re- dustry necessitates realigning the in- the retailers, the dentists, the auto sponsibility currently rests with the terests of rating agencies with the in- dealers—that fall within the regulatory Fed. reach of their new bureaucracy are terests of investors. The way to do that As a prudential regulator, the FDIC ‘‘bilking’’ people. I also know that is by promoting and rewarding accu- has the experience necessary to ensure these entities had nothing to do with racy. My amendment will create these that the right balance is struck be- the financial crisis. incentives, increase accuracy, promote tween consumer protection and safety Unfortunately, the Dodd bill would competition and stability, and restore and soundness. create a massive new bureaucracy with integrity to the credit rating industry To raise the status of consumer pro- unprecedented powers to regulate system. tection, a new division will be estab- small businesses and consumers. I thank my colleagues, Senator lished at the FDIC. The division will be The Consumer Financial Protection SCHUMER and Senator NELSON, for help- led by a Presidentially appointed and Bureau could dictate exactly what ing me lead this effort and Senators Senate-confirmed director. WHITEHOUSE, BROWN, MURRAY, The director will serve a term of 4 forms business must use, who they pro- MERKLEY, and BINGAMAN for joining us. years and will be required to testify be- vide services to, and how they sell I yield the floor. fore Congress at least twice a year. their products. The PRESIDING OFFICER. The Sen- This will help ensure that regulators Control over American businesses ator from Alabama. are held accountable for their actions would shift further from entrepreneurs Mr. SHELBY. Madam President, I on consumer protection. to bureaucrats in Washington. rise today to discuss the amendment In addition, this amendment does not Perhaps the most troubling aspect of that Senate Republicans are offering to disrupt the century and a half of prece- their approach is that it assumes that greatly improve consumer financial dent on preemption with respect to na- consumers need benevolent bureau- protection. tional banks. crats to make decisions for them. In This amendment recognizes that our We should be very cautious about al- order to make that happen, the Dodd existing financial regulatory system lowing national banks to be regulated bill authorizes the new consumer agen- fails to adequately provide consumer by 50 different States and opening up cy to collect any information it de- protection. Our system is broke, and it the door to needless state litigation sires. needs fixing. that only enriches trial lawyers and Small businesses across this country The recent financial crisis has re- raises costs to consumers. fear the massive and potentially very vealed that our financial regulators The Republican amendment also intrusive new bureaucracy created were asleep at the switch and had ne- grants the FDIC primary supervision under the rubric of consumer protec- glected to uphold their basic respon- and enforcement authority over large tion. They have every right to be sibilities for consumer protection. nonbank mortgage originators, and afraid. Far too often, our regulators were other financial services providers that This massive new government bu- more concerned about pleasing the en- have violated consumer protection reaucracy has the power to place indi- tities they regulated than looking out statutes. viduals under oath and demand infor- for consumers. It is clear that we need This will give the FDIC broad author- mation about their personal financial to refocus the priorities of our finan- ity to clamp down on the worst offend- affairs. cial regulators and ensure that con- ers of our consumer protection laws The new bureaucracy is also required sumer protection gets the attention it without needlessly subjecting law-abid- to report to the IRS any information it deserves. ing businesses to expensive regulation. gets that it believes may be evidence of Make no mistake. Republicans want The Republican approach to con- tax evasion. to strengthen consumer protection. sumer protection sharply contrasts Why does their new bureaucracy need We need to make sure that con- with the approach of the Dodd bill. these incredible powers? Because their sumers get clear and understandable Under the Dodd bill, the Consumer bill envisions the bureau analyzing and disclosure so that they can make good Financial Protection Bureau would monitoring Americans’ behavior and decisions. issue rules without considering their then issuing regulations to stop them We need to make sure that regulators impact on the safety and soundness of from doing things the bureaucrats have sufficient authority to combat financial institutions. deem ‘‘irrational’’ or ‘‘inappropriate.’’ fraudulent practices. Need I remind my colleagues that Just read the writings of the Assist- We also need to make sure that our this is the same regulatory model that ant Secretary of Treasury for Finan- consumer protection laws and regula- produced the fiascos at Fannie and cial Institutions, one of the chief archi- tions keep up with changes in our dy- Freddie. In that case, HUD wrote rules tects of this expansive new bureauc- namic and innovative marketplace. on their housing goals and under- racy. He has written how ‘‘regulating Any changes to consumer protection, writing standards, while OFHEO regu- . . . appropriately is difficult and re- however, need to reflect that consumer lated them for safety and soundness. quires substantial sophistication by

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00018 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.025 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3313 regulators, including psychological in- He writes: businesses that had nothing to do with sight.’’ Under [his] proposal, firms could deter con- the crisis. Let me translate this academic jar- sumers from paying late or going over their We all agree that consumer protec- gon. credit card limits with whatever fees they tion needs to be modernized and given He is saying that all-knowing regu- deemed appropriate, but the bulk of such more attention by our regulators. lators should be empowered to make fees would be placed in a public trust to be I believe the Republican approach decisions for consumers because benev- used for financial education and assistance does this. And it does so without build- olent regulators are the only ones who to troubled borrowers. ing the expansive and expensive bu- possess the right ‘‘psychological’’ mind The translation is that behavioral reaucracy contained in the Dodd bill. set to do things ‘‘appropriately.’’ economists not only believe that they Most importantly, the Republican Think about it a minute. are best positioned to make decisions approach ensures that consumers are Regulators are wise and should be for us, but they are also best positioned protected, but that they, not bureau- heeded; consumers are foolish and to decide how private companies spend crats, are ultimately the ones making should do as they are told. That is their money. decisions for themselves. what we are talking about here. Needless to say, this is a disturbing I have heard from productive Amer- The architects of this massive new perspective, but it does reveal just how ican companies—from tractor manu- bureaucracy have long argued for a much the Obama administration wants facturers to beer brewers—from motor- consumer bureaucracy with the right to empower bureaucrats. cycle manufacturers to public utilities ‘‘culture.’’ We should remember that the failure that provide heating fuel to your Whether that ‘‘culture’’ focuses on of our existing regulators, primarily home—and they strongly oppose this consumer protection and a safe and the Federal Reserve, to properly en- bill because it will increase their oper- sound banking system or it becomes a force consumer protections helped ational and risk management. way for community organizers and cause the crisis. Yet the Dodd bill’s re- I have heard small responsible busi- groups like ACORN to grab Federal re- sponse is to create a bigger bureauc- ness owners, who offer their customers sources is left wide open. racy and hire more bureaucrats at the One of the strongest proponents for the convenience of installment pay- Fed. the new consumer bureaucracy has ments, express serious concerns about In contrast, the Republican amend- been Treasury’s Assistant Secretary the potential for an out-of-control con- ment would make the changes and im- for Financial Institutions, as I said. sumer bureaucracy that the Dodd bill provements that we all can agree need Allow me to read into the RECORD a creates. couple of quotes from a paper entitled to be done, but would do so in a more Although the bill’s supporters have ‘‘Behaviorally Informed Financial focused and prudent manner. and will argue that the fears are un- Services Regulation’’ coauthored by The expansive reach of the Dodd bill founded because the bill says that mer- the Assistant Secretary Barr in Octo- means that the new bureau is going to chants not engaged ‘‘significantly’’ in ber of 2008. be expensive. The budget for the bu- offering consumer financial services The Secretary writes, ‘‘Because peo- reau is approximately $650 million in are excluded from the new consumer ple are fallible and easily misled, new taxpayer costs, funded Argentina- regulatory bureaucracy. transparency does not always pay style by tapping the central bank’s The bill does not, however, define off. . . .’’ money-printing powers. what the word ‘‘significantly’’ means— He writes that: ‘‘. . . regulatory In comparison, the budget for the Of- leaving that to the discretion of the be- choice ought to be analyzed according fice of the Comptroller of the Cur- nevolent bureaucrats. to the market’s stance towards human rency, our national bank regulator, is The supporters of this massive new fallibility.’’ currently $750 million, and that agency government agency trust the bureau- On regulation, he writes that: ‘‘Prod- does both consumer protection and crats. I trust American small business uct regulation would also reduce cog- prudential supervision. owners. nitive and emotional pressures related Under the Republican plan, industry, The PRESIDING OFFICER. The Sen- to potentially bad decisionmaking by not taxpayers, would pay the costs of ator from Tennessee. reducing the number of choices. . . .’’ consumer protection. Mr. ALEXANDER. Madam President, He is talking about choices in the Despite giving the bureau a huge I congratulate the Senator from Ala- market place. Yes, the administra- budget and vast powers, the Dodd bill bama for his comments and for his pro- tion’s chief advocate believes that be- fails to take any reasonable steps to posal, which he described as a Repub- nevolent regulators need to reduce hold the bureau accountable. lican proposal. Of course, what all of us choices for the consumer so that they The bureau receives all of its funding hope is that it becomes a bipartisan can be protected from bad decision from the Federal Reserve, beyond both proposal as our friends on the other making and their own inherent falli- congressional and executive oversight. side look carefully at it. That is what bility. The bureau has complete discretion happened with the big bank bailout He also opines on the topic of disclo- on how it spends its budget, allowing it provision we worked on yesterday. Sen- sures where he states that: to devise programs for backdoor fund- ator DODD and Senator SHELBY worked [D]isclosures are geared towards influ- ing of special interest groups like for a while, Senators CORKER and WAR- encing the intention of the borrower to ACORN and other liberal activist NER had worked before that, and we change his behavior; however, even if the dis- groups. closure succeeds in changing the borrower’s came up with a conclusion that all but intentions, we know that there is often a The more we learn about the Dodd five Senators agreed to. Now we have large gap between intention and action. bill’s approach to consumer protection, moved to address two of the other I believe that regulators need to en- the more I believe the Republican ap- major deficiencies in the Dodd bill that sure that consumers have the informa- proach makes more sense and strikes we have wrapped up in one proposal tion they need to make their own deci- the right balance. here, and it is really wrapped up with sions based on their needs and cir- The Republican amendment wisely the central issue that is before the cumstances. places consumer protection in a finan- American people. The proponents of behavioral eco- cial regulator, the FDIC, but enhances President Obama said in September nomics believe, however, that regu- the status of consumer protection by of last year that the health care bill lators need to influence peoples’ inten- creating a new division of consumer was a proxy for a larger issue about the tions and change their behavior so that protection. role of government in Americans’ lives. they make decisions that the regulator It holds regulators accountable and The President was exactly right about deems appropriate for them. As I have ensures that repeat violators of con- that, and we have seen the issue of gov- said before, this is the nanny state at sumer protection laws face stiffer pen- ernment’s role over and over again. I its worst. alties and regulation. don’t think it will change between now Finally, he writes of a proposal on The Republican amendment avoids and the November election. In fact, the late fees charged by financial service creating costly new bureaucracies and President said at our health care sum- providers. imposing unnecessary costs on small mit that is why we have elections, and

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00019 Fmt 4624 Sfmt 0634 E:\CR\FM\A06MY6.005 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3314 CONGRESSIONAL RECORD — SENATE May 6, 2010 I think he is correct about that. We new jobs around here. But out across sensible way that will avoid as many have seen a Washington takeover of America, we are not creating enough future recessions as possible and, at banks; we have seen a Washington new jobs, and too many of the things the same time, about creating an envi- takeover of car companies; we have we are doing here make it harder to ronment in which we can grow the seen a Washington takeover of many create new jobs. largest number of good new jobs. But aspects of health care; we have seen a The health care bill makes it harder suddenly, we have this new Washington gratuitous Washington takeover of stu- to create new jobs because it imposes agency not only possibly regulating dent loans. In this financial regulation taxes on job creators and it imposes Main Street lending but creating an bill, instead of dealing with the high taxes on investors. Tax increases make unaccountable person at the top to jinks of big banks, we are going to take it harder to create new jobs. Running write the rules and the regulations. over Main Street lending and, on top of up the debt—the President’s budget When I say ‘‘unaccountable,’’ that it, create a new czar or czarina to doubled the debt in 5 years and tripled means she or he is just over here at the make decisions about millions of trans- it in 10 years—makes the economy less Fed. Once confirmed by the Senate, actions across America that are on certain and it makes it harder to cre- this person has no boss. This person Main Street. ate new jobs. And the threat of cre- doesn’t report to the President, doesn’t So what Senator SHELBY’s proposal ating a czar or czarina in Washington, have to come before Congress for ap- offers—and we hope it receives the DC, and a new bureau to supervise and propriations, and has a steady stream same kind of bipartisan consideration make Main Street lending more dif- of money and really unlimited author- that the resolution authority or the ficult and expensive makes it harder to ity. There is nothing to keep this new big bank bailout discussion did yester- create new jobs. We should take it out czarina or czar from writing the kinds day that we finally agreed on—is that of the bill. of regulations and rules that got us we would like to change this bill in two If the Senator from Connecticut, who into trouble in the first place with ways. Republicans would like to say: is one of our finest Senators, and is housing. Nothing to keep this person Let’s take Main Street lending out of well intentioned, wants Main Street from writing rules that might encour- it. The Senator from Connecticut, Mr. lending out of the bill, let’s just take it age irresponsible home ownership. DODD, said it is not in there. But the out of the bill. Let’s don’t leave in That is what we had before. So the language makes it look as if it is in there the possibility that someone Dodd bill might encourage irrespon- there. It looks like we’re about to start might come along and interpret ‘‘sig- sible borrowing. regulating your daughter’s dentist bill, nificantly’’ involved financial activi- So the second major idea in the Re- the plumber, and the store owners up ties to include the plumber and the publican amendment is, let’s make this and down Main Street who give you dentist. person accountable. The President ap- flexible credit. In other words, if you This has attracted the attention of a points a Director who is confirmed by say: You can pay me over time—it lot of people from Tennessee: commu- the Senate, but this person would be in looks as if Congress is going to start nity bankers, credit unions, and the the Federal Deposit Insurance Corpora- regulating that transaction. National Federation of Independent tion. This Director would be account- That is going to make credit harder Businesses. They are talking about of- able to other people appointed by the to get because the dentist or the fice suppliers, jewelers, health profes- President and confirmed by the Senate plumber or the store owner is going to sionals, and furniture stores who are and would have to come before the say: I’m not going to fool with it. I all concerned with this bill. The NFIB Congress multiple times annually to don’t want to be regulated by some estimates that about 50 percent of give us a chance to inquire about Washington bureau, so if you want to small businesses let you pay over time. things. buy my goods, go to the bank and get In other words, they offer you credit. I have come to the floor today to say we made an important step in the right some money or get another credit card. They make special arrangements. They And you know what that is going to say: OK, we know you don’t have all of direction when we worked on the first do? That’s going to slow down the the cash right now. You might not part of this bill yesterday across party economy. That’s going to make jobs want to run up your credit card or lines. We addressed one of the five harder to create because it is going to maybe your credit card is near the issues we need to deal with. The issue of, what to do with banks make credit harder to obtain and cred- limit, so we will sell you whatever we that are too big to fail and get the rest it harder to offer. have to sell you or we will provide the Making credit harder to get is not of us into trouble, has been addressed. service you need. You can pay us in 6 But we have four more big issues to what we need at this time. We just had months. You can pay us in 5 months. deal with here and other smaller the reports of the economic growth of Well, under this bill, if you offer pay- issues. Two of the big issues are ad- our country during the first quarter. It ment plans you could be ‘‘signifi- dressed in this Republican amendment. was 3.2 percent. That is not very good. cantly’’ involved in financial activi- One is: let’s not take over Main Street I can vividly remember flying on a hel- ties. Then this czar or czarina in Wash- lending and make it harder to loan icopter with President Bush when I was ington, DC, is going to be regulating money, harder to get money, and hard- Education Secretary in 1992, and the you. You might be a very small busi- er to create jobs. economic growth of the third quarter ness and you might not have a lot of No. 2 is: let’s not create another czar of the year was better than that; it was extra money to fill out regulatory in Washington. The last thing we need 4.2 percent. And Bill Clinton beat forms, but you are going to be filling is another Washington takeover and George Bush, Sr., on the ‘‘It’s the out forms and suffering more regula- another Washington czar. Economy, Stupid’’ campaign. So 3.2 tions. And you are going to be offering We hope our amendment will attract percent is not going to cut it for our less credit and credit will be harder to significant bipartisan support, and country. Most economists say that if get up and down Main Street. then we can move on to the other im- our economy continues to grow over If our real intention in this body on portant questions in this legislation. the next year, through 2010, at the both sides of the aisle is to not inter- I yield the floor. same rate it grew in the first quarter, fere with Main Street lending, then The PRESIDING OFFICER. The Sen- the unemployment rate will not let’s actually do that. That is what the ator from Maryland. change. The unemployment rate will Republican amendment—which we Mr. CARDIN. Madam President, first, still be about 9 or 10 percent at the end hope becomes a bipartisan—does. let me thank Senator DODD for bring- of this year, as it is today. Then there is the second big idea ing forward a strong bill to regulate What can we do to change that? Well, that is in this Republican amendment. Wall Street. The bill provides for strict we have to create an environment for So far as I am concerned—we don’t new regulations to stop Wall Street’s job growth. We have done pretty good need another czar. This bill is supposed reckless gambling. in creating job growth in Washington. to be about big banks, about financial I think one needs to understand the The one place the stimulus has really high jinks on Wall Street, about this current system and how we got to worked is in Washington, DC. Salaries recession we are in, and about issues where we are today. We have eight Fed- are up. Jobs are up. There are plenty of that will change the regulations in a eral regulatory entities that oversee

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00020 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.026 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3315 the financial sector. Their authority is home buyers who could have qualified tractive industries companies would be different, their powers are different, for traditional home mortgages were covered by this law, setting a new their ability to respond to a particular steered into the subprime market be- international standard for trans- problem is different, and the entity cause the mortgage company or the parency, for openness. that is regulated today can shop for seller made more money by steering We have seen the devastating effects the regulator they want by what they them into subprime loans. Well, those of a lack of transparency in this coun- call themselves and the types of activi- practices have to come to an end. try, what happens when Wall Street is ties they try to define themselves as. Those housing practices sparked, as we left unchecked and barons cloaked in They can shop and look for the regu- know, the trigger for this recession. secrecy make off with millions while latory entity they believe they can cir- These practices helped create that bub- others lose their homes. This is why we cumvent the easiest. They can escape ble that burst and the damage that was are addressing openness and trans- and did escape proper supervision. caused when it did burst. parency in the underlying legislation Well, this legislation ends that prac- We can take a look at the cost of this today. We would be remiss to create tice by a clear regulatory framework in recession. The Pew Financial Reform this sweeping reform of our financial order to regulate all financial institu- Project estimated that just a slowdown sector without addressing the need for tions. The regulatory entity that does in economic growth will cost every adding a new layer of transparency to the regulation is based upon size and family in America close to $6,000. Well, a set of companies already under the jurisdiction. And we have the Financial that is money that will never be made SEC’s jurisdiction—the oil, gas, and Stability Oversight Board that pro- up. We have to make sure it never hap- mining companies that make up the vides uniformity. No more gaps in the pens again. The Federal spending, in extractive industries. regulatory system. And it provides the order to prevent the economic collapse This amendment would create an en- tools for the regulators for early inter- of Wall Street, is estimated to cost vironment of transparency to reassure vention. That means we end, once and $2,000 per household. If you look at just investors, help stabilize global energy for all, too big to fail. By early inter- the decline in real estate values, in 9 markets, and thus support goals of en- vention on takeovers, closing down fi- months, from July 2008 to March 2009, ergy security. nancial institutions, requiring the sale the wealth lost equaled about $30,000 Current Federal Accounting Stand- of financial institutions, we can pre- per household in real estate and over ards Board standards require reports of vent the need for too big to fail. The $60,000 per household in the stock mar- tax, royalty, and bonus payments to risk will be on the investors, not on the ket. We lost millions of jobs. I could go host governments, but the numbers taxpayers of this country. The Boxer on and on. We have an obligation to need only be reported in aggregated amendment makes that clear. make sure our economy and our people categories, such as ‘‘production costs Tools that are needed for orderly liq- are protected from that type of finan- excluding taxes’’ and ‘‘taxes other than uidation to minimize the impact on the cial meltdown in the future. income.’’ These payments are reported financial sector and our economy are This legislation properly regulates on a country level where a company’s provided in this legislation. risky gambling by financial institu- operations are very substantial, but It recognizes the need for special at- tions by putting in place prohibitions otherwise they are reported on such a tention to our community financial in- and disclosures. It puts an end to de- broad basis that a company can simply stitutions. They were not the cause of rivatives markets that have no eco- report on which continent it was oper- the financial crisis we went through. nomic value to our economy. It re- ating. Such disclosure is not useful in We know it came from Wall Street. Our quires disclosure on the derivatives determining the extent of a company’s community banks were very much vul- markets, so we can take Justice Bran- operations in or its ongoing financial nerable as a result of the financial col- deis’ advice and use sunlight as the arrangements with a country. lapse. We need to streamline the regu- best disinfectant. It provides for the In terms of energy security, the oil, latory process as it relates to our com- Volcker rule, codifying that, by re- gas, and mining revenues are critically munity banks. Regulation is cost. We stricting certain types of high-risk fi- important economic sectors in about 60 have to have regulation. We need regu- nancial activities by banks and bank developing and transition countries lation. They need regulation. But we holding companies. which are paradoxically home to more need to make sure it is sensible. This This legislation regulates credit rat- than two-thirds of the world’s poorest bill streamlines the regulatory struc- ing companies. We know credit rating people. Despite receiving billions of ture as it relates to our local financial companies—their rating will very dollars per year from extractive rev- institutions. much affect the price of a security and enue, these countries rank among the We need strong and adequate regula- the viability of the security. lowest in the world on poverty, eco- tion, and it provides it. We need to In this recession, many Marylanders nomic growth, authoritarian govern- write a balance, and this legislation and people from every State in this Na- ance, conflict, and political instability. provides that. I might say, there are tion have lost their homes, their jobs, Unaccountable management of natural amendments we have already consid- and savings. We have a responsibility resource revenues by foreign govern- ered that I think were the right thing to act to end the reckless practices on ments leads to corruption and mis- in order to make sure this balance is Wall Street that helped plant the seeds management, which in turn creates un- correct. I am sure there will be other for this recession. This legislation is a stable and high-cost operating environ- amendments we will consider to make giant step forward. ments for multinational companies and sure we get that balance right between AMENDMENT NO. 3732 threatens the security of the energy adequate regulation and the cost of Madam President, I will now speak supply of the United States and other regulation to small community finan- briefly about an amendment I intend to industrialized nations. So we are talk- cial institutions. offer. ing about in these countries where This legislation puts the consumer I rise to urge the inclusion of amend- mineral wealth becomes a mineral first, as it should, with a strong con- ment No. 3732 to S. 3217. This amend- curse. It becomes a source of revenue sumer bureau. Some say: Why do we ment is a critical part of the increased for corruption rather that a source of need that? Isn’t the current regulation transparency and good governance we revenue for economic growth so a coun- adequate? The answer is no. All you are striving to achieve in the financial try can grow. It runs counter to our need to look to is what happened in the industry. foreign policy objectives of good gov- residential mortgage marketplace. All This is a bipartisan amendment that ernance and economic growth for the you need to look at are the advertise- would require all foreign and domestic developing world. Transparency will ments that were taking place just 2 companies registered with the U.S. Se- help make sure the mineral wealth years ago for no-doc or stated-income curities and Exchange Commission, the goes to the people of that nation. loans or no-down-payment loans—loans SEC, to report in their annual report The provisions of this amendment that provided over 100 percent of the to the SEC how much they pay each would apply to all oil, gas, and mining cost. And look at the subprime lending government for access to their oil, gas, companies required to file periodic re- in each of our communities, where and minerals. Most of the world’s ex- ports with the SEC; namely, 90 percent

VerDate Mar 15 2010 04:41 May 07, 2010 Jkt 089060 PO 00000 Frm 00021 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.026 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3316 CONGRESSIONAL RECORD — SENATE May 6, 2010 of the major internationally operating ample, $500 million is not an unusual to make to people who could not afford oil companies and 8 out of the 10 larg- signature bonus that has to be paid for them. est mining companies in the world— a single field, and a single field can The irresponsible actions in the mar- only 2 of which are U.S. companies. We cost more than $2 billion to develop. ketplace by Fannie and Freddie turned are talking about foreign-owned com- Such costs take years for companies to the American dream into the American panies, not U.S. companies, by and recoup through their production-shar- nightmare for far too many families large. Of the top 50 largest oil and gas ing arrangements with host companies. who faced foreclosure. They then dev- companies by proven oil reserves, 20 For this reason, it is in the interest of astated entire neighborhoods with the are national oil companies that do not the investors to know the amount and foreclosed homes and communities usually operate internationally. These timing of payments of high-risk oper- where property values diminished. Ul- companies are not registered with the ating environments. timately, it led to a national and inter- SEC or any other exchange and only When a company they have invested national financial crisis. No one—espe- operate within their own country, in becomes targeted by a campaign of cially those of us who are taxpayers— which means these national oil compa- misinformation, only the transparency can forget what happened after Fannie nies do not compete with internation- of their financial information will help and Freddie got done wreaking havoc ally operating companies. Of the re- the investor. Disclosure of payments is on families and neighborhoods. They maining 30 companies that do operate one way to address risk, helping com- went belly up. That is right. Over a internationally, 27 would be covered by panies protect themselves from false or year and a half ago, the government this legislation—27 of the 30. These in- unfair accusations and blame-shifting had to take over the GSEs, leaving tax- clude Canadian, European, Russian, by host governments that can tarnish payers to foot the bill. Chinese, Brazilian, and other inter- their image in the investor community To make matters worse, I am sure national companies. and the general public. everybody read with shock just yester- We currently have a voluntary inter- I urge my colleagues to join me in day when the press reported that national standard to promote trans- supporting the creation of a historic Freddie lost $8 billion in the first quar- parency. A number of countries and transparency standard that will pierce ter. That is a lot of work. Then they companies have joined the Extractive the veil of secrecy that fosters so much had the nerve to request another $10.6 Industries Transparency Initiative, the corruption and instability in resource- billion from the American taxpayers EITI, an excellent initiative that has rich countries around the world. and warned that this $10.6 billion is made tremendous strides in changing I thank the Presiding Officer and just a downpayment on the money they the culture of secrecy that surrounds yield the floor. will need in the future. Is it time to the extractive industries. But too The PRESIDING OFFICER (Mr. call a halt? Is it time to get a handle on it? It is well past time. many countries and companies remain BURRIS). The Senator from Missouri is recognized. In case my colleagues need a re- outside this voluntary system. minder, this latest $8 billion Freddie The notion of transparency has been Mr. BOND. Mr. President, Americans lost is on top of the $126.9 billion endorsed by the G8, the IMF, the World have sent Congress a message: Reform Fannie and Freddie had already lost Bank, and a number of regional devel- Wall Street, hold the bad actors ac- countable, but do not hurt the folks on through the end of 2009. The Wall opment banks. It is clear to the finan- Street Journal today hit the nail on Main Street who had nothing to do cial leaders of the world that trans- the head when they referred to Fannie with the financial crisis. That is what parency in natural resources develop- and Freddie as the ‘‘toxic twins.’’ we are debating about here in the Sen- ment is key to holding government These toxic twins are far and away the ate this week. leaders accountable to the needs of biggest losers in the entire financial Senators on both sides of the aisle their citizens and not just building up crisis—bigger than AIG, Citigroup, and agree on one thing: All of us want to their personal offshore bank accounts. all the rest. It is now time to create in law an hold Wall Street accountable for the So when we focus our anger, let’s not international standard for trans- havoc wreaked on Main Street. We all forget our friends at Fannie and parency. It will only happen if the agree we need to enact reform to pre- Freddie. You talk about doing some United States is in the leadership. The vent another financial crisis. But we damage. Here is where the damage is. international community looks to us have some disagreements on what re- Here is where the burden comes, not to be a leader on this issue. sponsible reform looks like. just on us but on the credit cards of our Investors need to be able to assess While we all agree on the need to re- children and grandchildren, the young the risks of their investments. Inves- form Wall Street to protect Main people here as pages. They don’t realize tors need to know where, in what Street, the current bill, even with how heavy a debt burden we have al- amount, and on what terms their amendments so far, does not, in my ready put in their wallets. Sorry about money is being spent in what are often view, do the trick. We are making that, folks, but you and your genera- very high-risk operating environments. progress, but there is still a lot of work tion and generations to come are going These environments are often poor de- to do because, in its current form, the to be paying for it. veloping countries that may be politi- bill is still a massive government over- Taxpayers now and taxpayers in the cally unstable, have lots of corruption, reach, punishing Main Street, hurting future will be the biggest losers, since and have a history of civil unrest. The families, and costing jobs by stifling according to the Congressional Budget investor has a right to know about the small business and entrepreneurs. Office’s optimistic estimates, these payments. Secrecy of payments carries Today, I will highlight some of the toxic twins will cost the taxpayers real bottom-line risks for investors. concerns I have heard from Main close to $380 billion. Even for those of Creating a reporting requirement Streets in Missouri and elsewhere and us in Washington, $380 billion is a big with the SEC will capture a larger por- some of the amendments that have number. tion of the international extractive in- been filed to improve the bill. After all this pain to families, neigh- dustries corporations than any other First, on the GSEs, none of us can borhoods, and taxpayers, one would single mechanism, thereby setting a deny that Fannie Mae and Freddie Mac think the oversight of Fannie and global standard for transparency and were significant contributors to the fi- Freddie would be a top priority, which promoting a level playing field. nancial crisis. Just like any real re- is why it is stunning to me that the Investors should be able to know how form, to prevent a future financial cri- Obama administration has only re- much money is being invested up front sis, we have to deal with Wall Street, cently nominated someone to fill the in oil, gas, and mining projects. For ex- and we must also deal with Fannie Mae critically important position of inspec- ample, oil companies often pay very and Freddie Mac. Unfortunately, this tor general of the Federal Housing Fi- large signature payments to secure the bill totally ignores it. It turns a blind nance Agency to oversee the GSEs. rights for an oilfield, long before the eye to these government-sponsored en- How can we have proper and effective first drop of oil is produced. Such pay- terprises, these GSEs which contrib- oversight of Fannie and Freddie when ments are in addition to the capital in- uted to the financial meltdown by buy- the office has been vacant at the high- vestment required. In Angola, for ex- ing high-risk loans banks were directed est level for so long?

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00022 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.027 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3317 The bottom line is, responsible re- souri is also happening today across able to deal with financial institutions. form must address Fannie Mae and the Nation. According to the Kauffman It deals with the financial institutions Freddie Mac. Responsible reform would Foundation, between 1980 and 2005, that get into problems. It is in the put an end to the taxpayer-funded bail- companies less than 5 years old ac- banks. Any institution that is regu- out of Fannie and Freddie and refocus counted for all—all—the net job growth lated by the FDIC, they are in there them on affordable housing. Senators in the United States. As a matter of looking over their shoulder. MCCAIN, SHELBY, and GREGG have filed fact, that same study showed that in Our amendment would create a divi- an amendment to protect taxpayers 2008, angel investors provided roughly sion of consumer financial protection and put an end to the government bail- $19 billion to help start up more than within the FDIC so they can protect out of Fannie and Freddie. In short, 55,000 companies. Why would we want consumers without adding burdensome this amendment cuts up the Federal to limit that? The bill, if enacted, and duplicative regulations. It would credit card by putting an end to the would deny immediate access to the avoid costs being passed on to con- limitless line of credit Fannie and capital and, if enacted, would say to sumers, the very folks we are trying to Freddie currently enjoy, compliments these innovators and entrepreneurs: protect, not saddle them with new of us as taxpayers. You are too small to succeed, too small costs. The amendment will ensure that This amendment puts an end to the to survive—not too big to fail. the consumer protection division fo- conservatorship and requires each to But there is good news here, and cuses on the real problems currently operate eventually without govern- there is a bipartisan solution in the operating under the radar—the shadow ment subsidies and on a level playing works. I am very thankful and grateful banking I call it—or, as I like to say, field with the private sector. to Senator DODD, who has agreed to the clicks, not the bricks. These are Next of great importance is seed cap- work with me to fix the problem. We the people who have preyed on vulner- ital. It is critical in reforming Wall both want to protect these small busi- able Americans. Street that we not punish Main Street ness startups that are vital to job cre- Before the financial crisis that was and the very specific small business ation across the country. I think we brought on by bad loans, especially startups that are so critical to job cre- are close to an agreement to fix this, too-good-to-be-true home loans pushed ation. If there is one thing we are wor- and we hope to have a bipartisan on families who could not afford the rying about it is, Where are the jobs? amendment soon. I urge all my col- loans, my fax and inbox were cluttered, Well, I will tell my colleagues where leagues to take a look at it and to join despite my best spam filters, with 1 the jobs are. They are the jobs the en- us in supporting it. percent or no down payment loan of- trepreneurs and the innovators and the Next and finally for today, one of the fers. These offers were not regulated ef- inventors can start. Unfortunately, in biggest problems in the bill—which I fectively by State regulators, the SEC, the current form of this bill, there are believe will undoubtedly hurt ordinary the Federal Reserve or the OCC. They provisions that will kill the business Americans who had no role in causing succeeded in escaping effective regula- startups. While title IX of the Dodd bill the financial crisis—is the creation of tion entirely, although some have later has been little talked about—far too the so-called Consumer Financial Pro- fallen to regulation by U.S. attorneys little, in my opinion—it could have tection Bureau, CFPB. Those initials who filed criminal fraud suits a little devastating consequences. Specifically, could, in the future, scare people more bit too late in the game. this provision would kill small business than all the combined deadly 10 acro- Also, it is important this new divi- startups by delaying and eliminating nyms, including the IRS, EPA, and sion be tasked with providing financial the availability of private investor SEC. This new massive supergovern- literacy, as I will continue to stress. seed capital, and that is essential for ment bureaucracy would have unprece- We have to improve consumer edu- these startups to survive and grow. dented authority to impose expensive cation in any and all areas where loans According to new regulations by the mandates on any entities that extend are made. While foreclosure counseling SEC, innovators and entrepreneurs credit. We are not talking about Gold- is important—another bipartisan pro- would be subject to registering with man Sachs or big Wall Street banks. gram on which I worked with Senator the SEC for a 4-month review; thus, Instead, this new superbureaucracy DODD in December of 2007 and in which tying up vital venture capital needed could hit hard the community banker, we put $180 million to reach out to fi- for immediate use by new business. farm lender, local dentist or auto deal- nancial counseling groups. They are This could cripple new businesses. er. The pain on Main Street will not doing a good job trying to help counsel Next, the bill proposes to add a fur- just be borne by small business, but the families in danger of losing their home ther requirement to raise the net costs will be passed on to consumers, and ways to solve the problem. Those worth threshold on those who can in- the ordinary Americans the bill seeks counselors came back to us unani- vest to $2.3 million and raise the an- to protect. It might even cost them mously and pleaded with us to make nual household income to $450,000. This their jobs. available preloan counseling before would disqualify two-thirds of current The National Federation of Inde- somebody buys a home, to make sure accredited investors, according to the pendent Business, a strong voice for they understand the terms and can af- Angel Capital Association. small business, stated their concern ford to service the loans. Small businesses and startup compa- These are just some of the things we clearly when they said: nies are the backbone of our country. need to do. These small businesses had nothing to do Missourians and people across Amer- They are where we are looking to get with the Wall Street meltdown and should the new jobs of the future, and a crit- not be faced with onerous, new, and duplica- ica are angry. They are angry bad ac- ical role is played by angel investors in tive regulations because of a problem they tors caused the financial crisis that creating and developing new compa- did not cause. Further, as the most recent left many of them with a pink slip in- nies, small or large. NFIB Small Business Economic Trends sur- stead of a paycheck. They are angry I will confess, this is of particular vey shows, small businesses continue to Wall Street bad actors left them with a concern to my State of Missouri, where struggle with lost sales, and such regulations nightmare of foreclosure instead of the I have been working for a long time to could make these problems worse, stifling American dream of home ownership. build an agricultural biotech corridor any potential small business recovery. They are angry government has com- across the State. In Missouri, we have That is why I have joined with Sen- mitted trillions of taxpayer dollars for the research institutions, the scientific ators MCCONNELL, SHELBY, GREGG, and rescuing the financial industry when so leaders, and advanced agricultural re- others on an amendment to fix the many of them are still struggling to search and biotechnology. Research in problem. Instead of creating a pay bills. Is it any surprise that Mis- the biotech industry is our best hope brandnew superbureaucracy with un- sourians and Americans across the for a stimulus to create high-paying, limited authority and reach, our country are skeptical about financial skilled jobs in rural as well as urban amendment would empower the FDIC reform? Missouri and, I would say, across to look out for consumers. This makes These folks were made more skep- America. sense. The FDIC is the one that has a tical when they heard and saw on TV The stimulus these biotech and re- strong record of providing consumer and read in the paper that it is the ac- search companies are spurring in Mis- protections. It has a record of being tors on Wall Street, with whom the bill

VerDate Mar 15 2010 04:41 May 07, 2010 Jkt 089060 PO 00000 Frm 00023 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.029 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3318 CONGRESSIONAL RECORD — SENATE May 6, 2010 was supposed to deal and who caused As a matter of fact, we will weaken Let me give you an example. People the financial crisis, who are now current law, and not only will con- were offered mortgages at a teaser cheerleading this bill. Missourians ask sumers be hurt but they will actually rate—a very low rate—and were not me how this bill can be real reform lose ground—when the purpose of the being told in clear terms that in a cou- when the head of the investment bank Dodd bill—our bill—is to elevate con- ple of years that teaser rate would go Goldman Sachs, who is supporting the sumers, give them protection from up and go up and go up. bill, said—let me make sure you under- these kinds of schemes that brought I have to say, some in the mortgage stand. This is from the head of the our economy to its knees and resulted business were paid more commissions largest investment bank on Wall in 700,000 jobs a month being lost then, to put unsuspecting consumers into Street: ‘‘The biggest beneficiary of re- and the wealth of the average Amer- these exotic mortgages. So they pushed form is Wall Street itself.’’ ican, who had even a 401(k), was down those mortgages. That is wrong. We That is a quote about the original 20, 30, 40, and maybe 50 percent and, as need a consumer protection agency bill. a result of that, the lack of consumer that notes it is wrong and puts a stop Missourians have asked me not to confidence that followed. to it. pass a bill that will bail out Wall We know our economy is based on We have a situation that weakens the Street. We need to take care of Main consumer confidence. Seventy percent current law. If you think that is right, Street. There is no bailout for strug- of our economy is attached to con- if you think, for example, that con- gling families. We don’t want anymore sumer spending. When people see the sumers caused the Wall Street melt- Wall Street bailouts. We need to pass a stock market and their wealth going down—I think you are living on an- bill that reforms Wall Street and pro- down, and see neighbors losing their other planet—vote for this amendment. tects Main Street. I believe we have an homes and jobs, they feel threatened We know who caused this crisis. We opportunity to pass real, responsible, and they pull back, and rightly so. It know the greed on Wall Street. We and bipartisan reform, if Senators of started from deregulation on steroids know even while these companies were both parties will listen to the concerns on Wall Street, where the regulators getting bailed out, they were paying raised by ordinary Americans who didn’t even use the powers they had to their people huge bonuses. The word didn’t cause but are paying for the fi- protect consumers. An essential part of ‘‘outrageous’’ really can be defined by nancial crisis. this bill is putting a cop on the beat for what these people did. I have heard similar concerns dis- consumers, finally. So whether you are If my colleagues want more of the cussed by speakers on the other side of a consumer of credit cards, or a con- same—I cannot understand why they the aisle who seem to indicate we share sumer in terms of the housing market, would—but if they want more of the the same concerns. I hope we can work or a consumer in terms of the stock same, if they do not want to strengthen together to get a good, strong reform market or the commodities market, consumer protection, then vote for the bill that will deal with the problems you are finally going to have a watch- Shelby amendment. that caused the last financial crisis, dog. Let’s be clear. This amendment is a protect consumers, and ensure the safe- We know the regulators didn’t care gutting amendment. Instead of cre- ty and soundness of all financial insti- about consumers. We know that. We ating an independent consumer watch- tutions and not subject them to special know, for example, that the Fed had dog, the Shelby amendment creates a interests who may have pushed for the the authority to intervene in the hous- weak sister, a weak division of the con- bad loans that caused the last crisis. ing market, if they felt these subprime sumer protection in the FDIC. This I thank the Chair, yield the floor, loans were wrong, and stop them. They new idea of Senator SHELBY’s, this new and suggest the absence of a quorum. didn’t do it. We know the SEC was division of consumer protection, would The PRESIDING OFFICER. The warned about Madoff. There were whis- no longer be independent. It would be clerk will call the roll. under the FDIC. It would not have any The assistant legislative clerk pro- tleblowers to that Ponzi scheme, and authority to adopt any rule without ceeded to call the roll. many more Ponzi schemes were going Mrs. BOXER. Mr. President, I ask on. They didn’t even follow the lead. the approval of the same bank regu- unanimous consent that the order for We need to have a strong, inde- lators who have routinely ignored or the quorum call be rescinded. pendent consumer agency that says to opposed the needs of consumers. The PRESIDING OFFICER. Without the regulators: You are not doing your Let me repeat that. The weak con- objection, it is so ordered. job. We are going to make sure you do sumer protection agency created in the Mrs. BOXER. Mr. President, what is it. Shelby amendment would have no au- the pending business, or the order? That is what is in the bill before us. thority to adopt any rule without the The PRESIDING OFFICER. Amend- But the Shelby amendment takes us approval of the same bank regulators ment No. 3826, offered by Senator SHEL- back. The new Consumer Financial who have routinely ignored or opposed BY, is the pending business. Protection Bureau will enforce existing the needs of consumers. It even would Mrs. BOXER. Mr. President, I want consumer protection laws—those same give bank regulators a veto over con- to take some time to speak out against laws that went unenforced by current sumer protection regulations. That is the Shelby amendment and urge that it regulators. I gave you the example of totally unacceptable. be defeated. If that is appropriate at the SEC and the Ponzi schemes, and of If my colleagues are for Wall Street this time, I will use as much time as I the Fed overlooking the mortgage cri- reform, they have to vote no on the may consume. sis, and there are many others. It Shelby amendment. This is the mo- The PRESIDING OFFICER. The Sen- would also ensure clear disclosure to ment of truth. Either my colleagues ator from California is recognized. consumers of all the terms and condi- are going to stand with the people of Mrs. BOXER. Mr. President, this is a tions of the financial products they this country who are innocent victims pivotal point in the debate on Wall buy. of greed on Wall Street or they are not. Street reform. We never want to see Believe me, you would have to have a If they want to stand for the greed on what happened to this country happen degree in economics and finance and Wall Street, if they want to stand for again, where they essentially crashed everything else to understand some of no protection for consumers, a weak- the stock market. People had been the fine print in a credit card bill. Peo- ening of the protections they already talked into very difficult to understand ple are stunned to know they are pay- have, which are far too weak, vote for and exotic subprime mortgages. We had ing 20, 30-percent interest rates on this amendment, and let’s go forward such greed running rampant on Wall their credit cards, because there is no with a Dodd bill which has a strong Street, and instruments were created clear way of knowing. independent consumer protection agen- that were even difficult for the Sec- In this bill, that is over. You have to cy. retary of the Treasury to explain—de- know the terms and conditions of the I would add that the Shelby amend- rivatives that were so complex they financial products you buy. This bill ment would burden the new consumer were in about the third order. will bring protections to home buyers protection division that he has in his If we were to adopt the Shelby from the kinds of exotic mortgages amendment with incredible procedural amendment, we would weaken this bill. that led to the current crisis. hurdles—hurdles that have effectively

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00024 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.030 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3319 prevented the FTC, that has similar Even for small businesses that do sell billion-dollar quarterly profits on Wall rules, from writing any new rules pro- financial products—including commu- Street. We should measure it by the tecting consumers since 1984. nity banks and all kinds of small lend- success of our families. Mr. President, 1984 was an inter- ers—the Consumer Financial Protec- This bill is absolutely essential to re- esting year for me. It was a long time tion Bureau will have no direct en- storing those financial foundations; ago. I was a lot younger. It was before forcement authority. Enforcement of whereas this amendment before us does my hair turned blond. In that year, I rules will be handled by the current the opposite. The Shelby amendment was in the House of Representatives, regulator or State attorneys general. No. 3826 carves the heart out of this and I was pushing the Federal Trade I will give one more example I think bill. This dog don’t hunt. In fact, this Commission to help consumers. They is very important. I told you the tem- dog doesn’t bite. I don’t even think this had too many hurdles. They have not plate for Senator SHELBY’s new con- dog barks. For that matter, I am not so done anything in all those years. Yet sumer protection agency is the FTC. I sure it is a dog. That is how bad the this is the template that Senator SHEL- told you under those rules, the FTC has Shelby amendment is. BY is using for this watered-down con- not done anything since 1984. Let’s say The background is this: Predatory sumer protection division. they were able to get new rules writ- mortgages and securitization of those I see Senator MERKLEY on the floor, ten. Let’s say they were able to do mortgages on Wall Street built a and I am going to yield in a minute. He that. Senator SHELBY ensures that the house-of-cards economy that came fall- is such a leader on all these issues and rules they write could never be en- ing down last year. The predatory such a great populist leader in this forced. mortgages were done at the retail Senate. How does he do that? Because he says level, but the securitization and selling Maybe my colleagues who support the only time the weakened consumer of those packages occurred on Wall this amendment think the regulators division could do any examinations of Street. They built investments that who allowed all of these abuses to hap- some financial companies would be were taken in by every major financial pen under their watch, despite repeated after consumers have been harmed re- house practically in the world, and warnings, did a fine job and are the peatedly. This is after-the-fact author- those investments, those securities had best protectors of consumers. ity. I have seen too many people crying a 2-year fuse on them, essentially a 2- But even if those regulators have because of what happened on Wall year teaser rate on every underlying somehow had a change of heart and are Street. I have seen too many people mortgage. determined to change their ways, this crying because they lost their jobs be- At the end of the 2 years, interest rates doubled, families could not make amendment would leave them with cause of what happened on Wall Street. the payments, securities went bad, and even fewer powers to protect con- I have seen pictures in the paper of we had financial firms one after an- sumers than exist under the current Americans crying because of what Ber- other collapse. We had Lehman col- system.. nie Madoff did to them and their chil- lapsing. We had Bear Stearns col- The Shelby amendment would burden dren. lapsing. We had Merrill Lynch col- the new Consumer Protection Division I want this stopped. I do not want it lapsing. We had major problems at with the same incredible procedural stopped after the fact. Yes, thank good- Bank of America needing a bailout, a hurdles that face the Federal Trade ness Bernie Madoff is in prison where $4 billion TARP bailout. We had Commission—hurdles that have effec- he belongs. But it is very difficult to Citibank collapsing. We had Wash- tively prevented the FTC from writing make the people whole who were ington Mutual collapsing—all built on any rules in the consumer finance area harmed by that Ponzi scheme. predatory mortgage practices, every since 1984. We do not want after-the-fact author- single piece. That is why consumer pro- In addition, the amendment would ity; we want before-the-fact authority. tection is so important. That is why it actually prohibit the proposed con- We want this consumer protection is at the very heart of this bill. And sumer division from doing any agency to be on its toes, to intervene, that is why we need a Federal con- rulewriting under the FTC Act for pay- to see if there is a scam going on; to sumer protection agency. day lenders, debt collectors, fore- see if there is a credit card scam that I have friends back in Oregon who closure scam operators, mortgage bro- leads to 30, 40, 50 percent interest rates; write to me, citizens back in Oregon, kers and other nonbank consumer fi- to see if there is a scam on mortgages constituents who will say: Here is what nance companies. where people unknowingly walk into a went on, and how can that be fair? Let If the new division did somehow man- mortgage where the rate goes up to 12 me just give an example. age to get new rules written, the percent. A woman from Salem wrote to me amendment would make sure that they At the end of the day, we know con- and said: I always pay my credit card could not be enforced. sumers were hurt hard by Ponzi on time, always have for years and Under this amendment, the new schemes, by markets in the dark, con- years. But I got my credit card state- weakened consumer division could do fusing mortgage options, some bor- ment, and it had a late fee. So I called examinations of some finance compa- dering on fraud by credit card scams up the credit card company, and I said: nies only after consumers have been and worse. How is it possible? I always mail my harmed repeatedly. Let’s take a stand in a bipartisan payment on this day. It should have This after-the-fact authority closes way and vote no on this amendment had plenty of time to get there. the barn door after the horse is out, and support the consumer protection The credit card company said: Yes, as and handcuffs regulators from pro- agency, the strong one that is in this a matter of fact, your payment did tecting consumers until the harm is al- bill. I can tell my colleagues, if we do come on time. But you know, Madam, ready done. that, the American people can take a we are not required to post your pay- Some of my colleagues want us to be- deep breath and know that they will be ment on the day we receive it. In fact, lieve that the Consumer Financial Pro- protected. in the contract we have, we can sit on tection Bureau that we have proposed I yield the floor. your payment for 10 days and then post in our Wall Street reform bill would The PRESIDING OFFICER. The Sen- it, and then your payment is late and harm small businesses. ator from Oregon is recognized. we get to charge you this fee. We are Nothing could be further from the Mr. MERKLEY. Mr. President, I ap- just following the rules. truth. plaud my colleague from California She said: How can that be fair? Merchants, retailers, and sellers of who has been an extraordinary cham- It is not fair. Everyone knows it is nonfinancial goods are specifically ex- pion of consumers throughout her ca- not fair. Let me give another example. cluded from the oversight of our pro- reer. She understands that the basis of Citizens wrote saying: Hey, I had a posed new Consumer Financial Protec- a successful nation is successful fami- whole series of transactions with my tion Bureau. lies. That depends on them having a bank, and then the bank changed the This includes retailers who provide strong financial foundation. We should order of those transactions to put the ordinary credit to their customers to not measure the success of our country biggest transaction first. It so hap- buy their goods. by the million-dollar bonuses or the pened that biggest transaction made

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00025 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.032 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3320 CONGRESSIONAL RECORD — SENATE May 6, 2010 me $10 over the funds I had in the stripped wealth from working Ameri- Sachs hearing—when there was this bank. I had an overdraft. By putting cans. They are going to decide what is embarrassing testimony from execu- that big transaction first, it meant in- covered. tives, telling America what they were stead of one overdraft fee, I have 10 I echo my constituent from Salem up to, and it all became very public— overdraft fees. Instead of only $35 for and say: Where is the fairness in that? that the Republicans finally backed off one overdraft, I owe $350 for an over- Mr. DURBIN. Will the Senator yield their filibuster, backed off their delay draft series. How can it be fair that the for a question? of this legislation and let us come for- order of the transactions was changed Mr. MERKLEY. Certainly. ward to debate; and that now, one of in order to multiply the fees I owe ten- Mr. DURBIN. Let me ask the Sen- the first amendments they offer is to fold? ator: As I understand the amendment weaken this bill so the financial insti- Everyone knows that is not fair. Ev- of the Republican Senator, it goes back tutions and the banks are going to eryone knows it. We simply need to to the old days when there was vir- have more power over the economy, have an agency that is able to say that tually no consumer financial protec- more power over consumers than this is not OK. We do not want to have a tion. The bill we have before us here— bill provides? process where something that is unfair that Senator DODD and the Banking Isn’t that the real history of how we goes on for 10 years or 15 years or 20 Committee brought forward—has the got to this moment in this debate? years before there is legislation to ad- strongest consumer financial protec- Mr. MERKLEY. My friend and col- dress it. tion law in the history of the United league is absolutely correct; that, in- You cannot address a consumer prod- States. It has an agency with inde- deed, my colleagues across the aisle, uct’s choking hazard by doing it in leg- pendent authority to protect Ameri- the Republicans, voted three times to islation. You have to empower an agen- cans, but more importantly to em- say they did not want to proceed to the cy to say: No, that part is too small. power Americans to make the right de- bill, where their ideas would bear pub- You cannot address lead paint by doing cisions when they are taking out a lic scrutiny. Instead, they wanted to legislation every time something is mortgage, a loan for a car, a home loan talk behind closed doors. You know painted. No, you have to have an agen- or a student loan. What the Repub- what they were looking to do was not cy that says they will test that paint licans are suggesting in the Shelby to strengthen this bill. and say lead paint is not OK. amendment is to go back to the old Now that the amendment has come It is the same with consumer finan- days when there was no protection, out and been placed before us publicly, cial products. We need the same power there was no authority. we do see that it does what we feared. to fix traps and tricks in real time for The argument is made about the fact It is designed to take a knife and carve fairness to America’s families so they that when it comes to mortgages, they the heart out of this financial reform. can rebuild their financial foundations weren’t the problem, the problems were Mr. DURBIN. I would ask the Sen- because that is what a strong country with Wall Street. But at the heart of ator from Oregon if he would yield for is, families with strong financial foun- the issue on Wall Street was the mort- one last question. dations, not million-dollar bonuses, not gage being signed by the family in Now that we have been through this billion-dollar quarterly profits based Springfield, IL, and Portland, OR. So I experience where we have lost $17 tril- on stripping funds from working Amer- ask the Senator: In your State, in your lion in American value in this econ- icans. It all comes down to the heart of experience, as you look at this, if the omy—$17 trillion accounted for in the it: fairness in consumer financial docu- Republicans have their way and move savings accounts of ordinary Ameri- ments. us back to the old days when it comes cans in Illinois and Oregon, $17 trillion Let’s take a look at amendment No. to this consumer empowerment, con- in businesses that failed and jobs that 3826 and why it carves the heart out of sumer protection, don’t we run the risk were lost—isn’t it critically important this important bill for America’s fami- of falling into another economic crisis, that this bill from the Senate Banking lies, America’s Main Street families losing millions more jobs across Amer- Committee move forward, and that and businesses. ica? Isn’t that the risk we run if we go each amendment take this strong bill Here is what it does: First, it says the route suggested by the Republican and make it stronger, instead of the virtually no one is covered. Let’s look amendment? Republican amendments, which clearly at the list. What is covered under the Mr. MERKLEY. My colleague is abso- are designed to weaken this amend- language of the amendment are large lutely right. Because predatory mort- ment and to open us up to the vulnera- nonbank mortgage originators. Large gage practices were at the heart of this bility of facing more job loss and more nonbank mortgage originators do not crisis that led to securities that blew economic crisis? exist anymore. So it covers firms that up the economy and led to the loss of Mr. MERKLEY. Well, my colleague is do not exist anymore. It is kind of like millions of jobs around our Nation, absolutely correct. The failure of fi- saying we are going to have the regula- with an unemployment rate in my nancial rules has become so obvious tion of safety on cars, but it is only for State that has been over 12 percent. We and had such devastating impact for cars that are powered by gasoline and not only have the risk of going back our families—as my colleague put it, were built before 1850. No such cars there, we are perhaps more at risk be- $17 trillion worth of damage. That exist. All the other cars, the ones actu- cause we have fewer larger banks. means families lost their retirements, ally on the road, we are not going to Many investment houses that were families lost their savings for their cover them. independent are now inside those children to go to college, and it means We have a list. We have commercial banks, in a position where, if they blow families have houses under water, if banks, not covered; investment banks, up, they will blow up the banks as well. they are lucky. For many families, it not covered; credit card companies, not So unless we have this strong con- means the loss of a job, the loss of in- covered; car lenders, not covered; pay- sumer financial protection agency, it is come, and the inability to make those day lenders, not covered; nonbanks like taking this bill before us and mortgage payments, which means they that sell financial products of a whole sticking it in the shredder, and with it are in foreclosure and have lost their sort, not covered. shredding the hopes and aspirations of dream at every single level. That is the I think you get the picture that this America’s working families to build damage $17 trillion did to our families, amendment is meant to make sure strong finances in the future. and that is why every amendment to nothing is covered. Then, just in case Mr. DURBIN. If the Senator will the bill we have before us should seek there is some little piece that does get yield for another question. to say: Here is the bill and here is how covered, it says: You know what. This Mr. MERKLEY. Yes. we should make it stronger. agency is not independent. It cannot Mr. DURBIN. Is it not true that last With that, Mr. President, I yield the write rules. It has to have everything week, on three different occasions, the floor. it does approved by the financial Republicans filibustered this bill to Mr. DODD. If my colleague would world—the financial world that stop us from even starting the debate yield quickly, I appreciate everyone brought us all these problems, that on this bill, and it was only when we wanting to make my bill stronger. We brought us to tricks and traps, that reached the point after the Goldman have a pretty good bill here, but every

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00026 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.033 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3321 bill could use a little improvement, I major amendment, a major change, a And decisions made by the bureau admit. wanted change, an expected change, would be made without regard to the I want to compliment the Senator and a change that makes the bill far impact those rules would have on the from Oregon, a member of the Banking better. If every amendment the Repub- health of our economy. Where is the Committee. He has been a very valued licans bring up is going to get the kind transparency in this power? Where is member of the committee. I mentioned of treatment this amendment is get- the accountability of this proposal? I earlier—I say to the majority whip—in ting and not looking for that piece in haven’t even touched on what the title the committee meetings we have had, there that might make a difference, we could do to consumers’ personal infor- it is by seniority, and so I have this are not going to have much success on mation or financial decisions. cluster of new members down at the this bill. To achieve independence, this bureau end of that committee table. The Sen- I heard the other side mention Gold- would consolidate all financial protec- ator from Illinois and I have been in man Sachs. Goldman Sachs said they tions and efforts from the various Fed- that position at those tables over the like this bill; one of the offenders, and eral Government agencies, all in the years. But Senator TESTER, Senator they like it. That encourages me that name of better protecting consumers. MERKLEY, and Senator BENNET kind of it is a good bill. Don’t get me wrong, there are issues occupy those last three seats on the I appreciate the Senator from Oregon needing to be addressed for consumer Banking Committee. giving the examples of some things protection. But right now, each Fed- I say that with great respect to all that are terrible in our economy—some eral agency acts as a check on its the rest around the committee. Those of the credit card examples he gave. It neighbor when it comes to consumer three new members on the committee absolutely shouldn’t happen in Amer- protection. My fear is that once this have added tremendous value to our de- ica. I don’t think this bill fixes it, and bureau has consolidated power, it will bates, and in particular, the Senator I will explain that in a few minutes. not stop at protecting consumers from from Oregon has been wonderful in his If our amendment is too open-ended, fraud or deceptive practices. This agen- concern about mortgages, prepayment the Democratic amendment raises the cy would only be getting started. I am deeply troubled about the cre- penalties, what has happened to the 7 possibility of controlling every single ation of this bureau because it would million foreclosures in our country, the thing for middle America—every single place the bureau within the jurisdic- 81⁄2 million jobs that got lost in our Na- thing—and I will explain how that tion of the Federal Reserve. Too many tion, why we need to address this issue, works. I don’t think it was what was intended, and that is why we go of my constituents already believe the and why it is so critically important. Federal Reserve gaining additional I want to make one more point about through an amendment process, to power is an alarming thought. How- this Shelby amendment that may be clear up problems such as that. ever, what is most alarming to me is lost on our colleagues, and that is in But I am going to talk today about the fact the Federal Reserve would our bill there is no assessment on a consumer financial protection. I want to be clear when I speak about this pro- have little authority over this proposed nonbank or a bank, but there are as- bureau. Mostly, they provide the sessments in this amendment. We just tection that I am talking about pro- tecting consumers from bad actors. I money. went through the Tester-Hutchison Right now, as this bill is written, the am talking about educating consumers. amendment to actually lower the as- Federal Reserve would be required—re- When I talk about consumer protec- sessments on community banks. What quired—to give the bureau a designated tion, I am not separating consumer a great irony that the next amend- 12 percent of their operating budget. ment—there will be those having sup- protection from the health of the econ- The catch here is that Congress would ported the earlier amendment to re- omy. I rise today to talk about what is have no budgetary authority and would duce cost—sets assessments. In fact, it flawed in title X—called the Consumer not approve this money. And it is ad- asks community banks to have assess- Protection Title—of the financial re- justed for inflation. If you are going to ments on the nonbanks out there in form bill, and to raise awareness about get a percentage of a budget, how do order to pay for their consumer bureau an alternative to the current language you adjust a percent for inflation? But within the FDIC. in title X. aside from that, it is adjusted for infla- So for those who are concerned about I believe an alternative to this sec- tion. It works up to be 12 percent of the the burdens on community banks—and tion is desperately needed because the operating budget of the Federal Re- I think it is a legitimate concern, one Federal Government should not be in- serve. I think the Hutchison-Tester amend- volved in our daily lives and everyday In addition, they can even invest any ment did a great deal to alleviate—we decisions. Under the proposed con- of the money they do not spend. You are going to turn right around on these sumer protection title, we would be will find that on page 1,073. I know it is institutions that are struggling to stay opening the floodgates of government a huge book, so I didn’t want you to alive to serve their communities and involvement. The Federal Government have to look through the whole thing. add a financial burden to them. So for could be telling us how we can spend On page 1,074, it even says these aren’t all those reasons the Senator from Or- our money, how we save for the future government funds. You know why. egon mentioned, plus that one, the by making decisions for us, and could That way it doesn’t cost under the Shelby amendment deserves to be de- truly limit financial markets to the scoring. Even though it will drive up feated. point of economic decline. The Federal the deficit and the debt, it doesn’t I yield the floor. Government should not operate with count that way. It looks like a free The PRESIDING OFFICER. The Sen- the belief that it is protecting us from program, but that is not true. So they ator from Wyoming. ourselves. However, that is where title get to keep the money and invest what Mr. ENZI. Mr. President, I want to X language begins to work. they do not spend—I don’t know of an- point out that you have just seen an From supporters of this bill, we have other entity that gets that right—and example of why there isn’t bipartisan- heard that in order for consumer pro- it is not considered to be government ship in this Chamber. You cannot deni- tection to be truly effective it needs its funds. That provides a little latitude. grate the other party and denigrate own independent agency—or bureau The bureau not only has an every single thing they put up as an now—and that this Consumer Finan- uncontested budget, but the bureau amendment and suggest there is going cial Protection Bureau should be free would be the single most powerful to be bipartisanship. The amendment from outside influence. Independence agency in the Federal Government. Not that is before you is an attempt to cor- from outside influence is a fine goal, only could the bureau write their own rect some of the things that are in the but our government was built on using rules for our States’ businesses and bill. a system of checks and balances and local banks to follow, it would oversee The filibuster was mentioned. Well, this bureau would be totally un- consumer decisions, and the bureau the filibuster bought enough time that checked. It would have unprecedented would be the enforcer of their own Senator DODD and Senator SHELBY power and authority to write its own rules. No other agency has that kind of were able to work out the agreement rules—no review. It would have an unchecked power. Where is the ac- for the amendment that has passed—a uncontested budget—no appropriation. countability in this? Unchecked power

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00027 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.034 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3322 CONGRESSIONAL RECORD — SENATE May 6, 2010 doesn’t lend itself to accountability ei- than four installments, the govern- mortgage originators and addressing ther. ment, through the bureau, would have the risk-based supervision of our non- What is important is for the public, a say in approving that loan. depository institutions. for the average American, to know this The bureau, also in the name of pro- Very importantly, this new alter- bill could protect people. But it could tecting us from ourselves, would re- native leaves current prudent regu- also go potentially 10 steps further and quire banks to keep and maintain lators in place for banks, savings asso- take some of their decisionmaking records of all bank account activity ciations, and credit unions. While the power and transfer it to the Federal and financial activity of their clients division would watch over the large in- Government. We don’t do that in for at least 3 years, while also requir- stitutions that have already violated America. ing this information be sent regularly consumer protection statutes, this al- For example, as the bill stands, it is to the bureau for safekeeping. I have ternative would provide an infrastruc- so overreaching and ambiguous in serious concerns about our Govern- ture with regulatory experience that areas that it could impact everyday ment collecting information on the would also meet the demands of grow- purchases for most Americans. How daily activities of our citizens and ing consumer financial protection con- would they do that? Under the rules equal concerns about the Government cerns. This proposal creates a balance they write that nobody takes a look at. approving or disapproving the financial between past regulating experience and There is nothing to hold this bureau in choices of its citizens. the call by consumers to have more check. I have just outlined why the Con- protection, without losing the rights to Here is how the bureau would regu- sumer Financial Protection Bureau is make personal financial decisions. late consumer financial products or bad for consumers, why it is bad for I am a cosponsor of the title X alter- services, as well as service providers, small businesses and our communities, native because I believe in its ability sweeping thousands of already regu- and why it is bad for individual con- to address consumer protection with- lated small businesses into the bu- sumer choices and freedoms. I point out regulating consumers out of their reau’s purview. Then you add in sec- out all these things to you because rights as citizens. I am a cosponsor be- tion 1027 of the bill, and it could penal- there is an alternative to this bureau cause I believe this alternative regu- ize anyone who buys or sells something that is being proposed by my col- lates the bad actors without tossing on an installment plan or it could af- leagues from Kentucky, Alabama, and small business into the mix and regu- fect any local small business that of- Tennessee. This alternative proposal lating them out of business. fers some kind of monthly payment on addresses each of the concerns I have It doesn’t form a new agency that has credit. That is why we are being flood- just raised about accountability, over- to go through a whole rulemaking ed right now with people who want to sight, consumer protections, consumer process over a period of time before we be exempted from this bill. They are education, and consumer rights. This even know what they are doing. worried about not being able to provide new proposal keeps our current regu- Putting this bureau under the Fed- their service anymore. latory infrastructure intact and im- eral Reserve, with all the concerns and Have you ever bought a car and paid proves on it. This alternative would pressures focused on the Fed right now, for it over a few years with a financing not scramble all our current regulators is a very bad idea. Moving consumer plan from the dealer? Many of us prob- in the name of a change, but, instead, protection to an unregulated, non- ably have. This bill’s language is so has carefully and thoughtfully made transparent, not accountable new agen- ambiguous and unclear that it looks our current system better, creating cy that can write its own rules without like people who want to pay for a serv- more effective checks and balances. review and operate using unchecked ice on an installment plan or those who The consumer protection alternative money is beyond my comprehension, offer those plans will be penalized and title would create a consumer protec- and I think it is beyond the com- regulated by the new consumer protec- tion division to be housed within the prehension of the American people tion agency—I should say consumer FDIC. when they find out about it. I am not protection superagency. Nobody has The FDIC already oversees consumer sure they are aware of it or I think ever had this kind of power. deposit protection, so it is a logical there would be a huge hue and cry Small business owners, regular peo- step to place consumer protection in- across this country. People are more ple off the streets and from our States terests here. While the new consumer concerned over their freedoms right have been streaming into the congres- protection division is shielded from now than they ever have been, and this sional offices, looking for these exemp- outside influence and has autonomy, will take away freedoms. You have to tions that I just talked about because the division is, at the same time, pre- have the freedom to make your choices of this title in this bill. As drafted, this vented from wielding absolute power and even to make bad choices. But in title is so ambiguous, so far-reaching, like the bureau. When rule changes or America that is the way it works and that consumers and good actors are actions are proposed, the FDIC Board Big Brother is not allowed to hang over being swept up with the bad. would be better able to use their regu- your shoulder and decide for you Anyone who ever paid for dental care latory experience to protect con- whether you are making a good deci- in installments could, in the near fu- sumers, while at the same time ensur- sion. ture, be facing the prospect of paying ing safety and soundness are not dis- I yield the floor. for dental work upfront, as dentists re- regarded. The PRESIDING OFFICER. The Sen- alize they cannot afford to keep up This division would still have a ator from Florida is recognized. with the new regulations, additional Presidentially appointed and Senate Mr. LEMIEUX. Mr. President, I could regulators or the cost of compliance confirmed Director who serves a 4-year not have said better what my friend with the bureau’s demands. term in office. Instead of needlessly and colleague from Wyoming just For auto dealers, where financing is looping all kinds of small businesses talked about in terms of this consumer hardest to come by in rural towns in into the fold for additional regulation, protection bill. Every Member of this small America, this would, in fact, be a the division’s mission would be of a body is in favor of consumer protec- direct hit on their business. Right now proactive consumer education, ensur- tion. The goal is to get it right, not to the financial burdens of the bureau ing consumers are able to receive time- do too much and not to do too little. would also be borne by auto dealers ly and understandable information on I think it is important for us to re- that direct clients to available financ- consumer financial products. The divi- member what we are trying to address. ing but don’t originate or authorize car sion would partner with other agencies, We are trying to address the financial loans themselves. That is pretty far- such as the Federal Trade Commission, market meltdown that happened in reaching. to develop guidelines for market over- 2008 and the ramifications that have Additionally, though, if a consumer sight. Through these types of partner- been so devastating to this economy. purchases something on an installment ships, the division would pursue They were very devastating in my plan, whether the loan is for a bike, a fraudsters and the bad actors in our home State of Florida. But what we minivan, braces, an engagement ring, market. They would be developing best should do is address the problem. What livestock or a home, if there are more practices for overseeing nondepository we should do is try to make sure the

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00028 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.035 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3323 problem does not happen again and not that put products in front of them for in Federal law. Let’s get rid of one of use this crisis as an opportunity to cre- them to rate. So here is a real easy the reasons we had this financial melt- ate a huge, new, all-powerful bureau of way to understand this. We all buy down to start with. Let’s not create a government that is going to regulate Consumer Reports Magazine. Consumer whole now huge consumer agency that orthodontists and folks who had noth- Reports Magazine evaluates everything does way too much, gets involved in ing to do with this financial crisis. from toasters to Toyotas, but they too many things that had nothing to do Let’s think back about what hap- don’t take any money from the people with this financial meltdown. Let’s go pened. To me there are three or four they rate. They don’t have advertisers. after the problem, solve that problem. parts of this story where you can find But for these rating agencies, they are I believe we can do so by passing the culpability, places where we should be paid by the people they rate, by the amendment I have introduced today. regulating, some of which is not done products these banks bring in front of I yield the floor. in this bill. One is we know mortgages them. Our law says they are the ones The PRESIDING OFFICER. The Sen- were given to people who should not that are going to determine whether ator from South Dakota. have had mortgages—people who had something is creditworthy. Mr. THUNE. Mr. President, I com- no income and no jobs. They called I wish to make sure we have, as Sen- pliment my colleague from Florida. He them ninja loans—no income, no jobs. ator SHELBY has put forward, a good has addressed an issue which is an im- There were a lot of them in my State consumer protection law in this coun- portant part of this debate; that is, of Florida. Why were they written? try. But I also wish to make sure we making sure loans that get made in Many of them were written because are addressing the problems that this country, both on the borrower side they were written by mortgage brokers caused this failure in the first place, and the lender side, are responsible and banks that did not have to retain and one of the ways to do that is to loans. any of those mortgages on their books. make sure we have underwriting on I think the amendment he will offer There were no underwriting standards. these mortgages so people have some is one on which we ought to have a de- They could just ship them off. They skin in the game: You are putting a bate and on which we ought to have a had no skin in the game and no respon- downpayment on your house, you are vote. I hope this body will act in a way sibility. showing you are creditworthy. That is that leads to more responsible prac- Then, on Wall Street, this huge mar- the way it always was. It is only re- tices, a higher level of responsibility, ket was created to suck in all these cently that went away. We need to go both with borrowers and lenders in this mortgages, to create these new invest- back to that. country, which was at the heart of why ment vehicles that put all these mort- That is why I join my colleagues, we ended up where we did. gages together—mortgages that did not Senator CORKER, Senator ISAKSON, Sen- It is interesting to me that we con- have the underwriting standards so you ator GREGG, on their amendment to tinue to watch the problems we are ex- could make sure they were sound. In put the underwriting back in the mort- periencing in our economy. Probably the need to create more and more in- gage business. by far the most important one is the vestment instruments, they created But another thing we need to do, we high level of unemployment. That has what are called synthetic investment need to take the credit rating agencies become sort of a chronic problem. Even entities. Those are not even ones that and write them out of the law. They though the economy appears to be re- held these actual mortgages. They should no longer get their preferential covering and growing again, we still were just merely a shadow that treatment. No longer should the FDIC continue to see these very high rates of tracked them. So we compounded the abdicate its responsibility to deter- unemployment, certainly worse in problem into hundreds of trillions of mine creditworthiness. The market some parts of the country than in oth- dollars, betting on mortgages that should take care of this. If people know ers, but, nonetheless, something that should never, in many ways, have been they can’t just rely upon three or four we cannot tolerate. written in the first place. or five rating agencies and they are We ought to be attacking every sin- Then, what was the third part of the going to have to do their evaluation gle day. Everything we do ought to be problem? These mortgages got bundled themselves, we may prevent this prob- focused on what we can do to eliminate into these mortgage-backed securities, lem from happening in the future and this high level of unemployment, to sold on Wall Street, and the world the next way this problem may mani- provide incentives to small businesses looked to the rating agencies to stamp fest itself. to create jobs, to grow their businesses their approval on them. The I have filed an amendment, amend- and expand, get the economy going Morningstars and the Moody’s and the ment No. 3774, which will do this. It again, and, obviously, in my view at Fitches and the S&P’s stamped their will take these credit rating agencies least, the small businesses in this rating and said they are AAA, without out of law. In that way, I believe we country are the economic engine of our understanding them, without evalu- can stop one of the reasons why we had economy. They are our job creators. ating them. That is another one of the this financial collapse. It is not just me We ought to be focused on making it culprits that caused this financial who believes in this. On the other side easier for them to create jobs rather crash that we had that has devastated of this building, in the House of Rep- than harder. That is why I think it is our economy. But for those rating resentatives, this same language was ironic that almost everything the Con- agencies putting the AAA grade on put forward in the package that was gress has been doing of late makes it these mortgage-backed security invest- passed. even more difficult for small businesses ments, I don’t believe we would have So this should not be a Republican to do that. had the crash that occurred. People issue, it should not be a Democratic We passed a big, massive expansion of would not have placed their confidence issue because the Democrats in the the health care entitlement in the Con- in them. House supported something very simi- gress a while back. That is going to im- Why did that happen? Why did these lar to what I am proposing. This just pose lots of new taxes, lots of new man- rating agencies stamp them? Why did makes common sense. Let’s go after dates on small businesses. It is going to so many people rely upon them? What one of the problems that caused this fi- raise their insurance premiums, which we come to find out is these rating nancial mess. we are seeing now more and more. The agencies are written into law. They are I would like to point to the August 21 CMS Actuary, with their recent report, written into the Federal law as the edition of the Wall Street Journal. In suggests what we suggested all along; way to determine the creditworthiness their editorial they say: that is, this is going to drive up the of investments. The FDIC abdicates its When the government ordains Moody’s and cost of insurance and health care in authority and allows rating agencies to Standard and Poor’s as official arbiters of this country. It is not going to drive it be the ones that say something is a risk, the damage can be catastrophic because down, it is going to drive it up. good investment or not. That is in the so many people rely on them. So I think what we are going to see law. Well, let’s no longer abdicate the with small businesses across this coun- How do these rating agencies get government’s responsibility. Let’s no try is not only a higher tax burden as- paid? They get paid by the very banks longer enshrine these rating agencies sociated with paying for that, and also

VerDate Mar 15 2010 01:48 May 07, 2010 Jkt 089060 PO 00000 Frm 00029 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.037 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3324 CONGRESSIONAL RECORD — SENATE May 6, 2010 many of the new mandates that are as- was at the very heart of that economic Wall Street—they told me about how sociated with it, but you are also going meltdown; that is, the issue of Freddie this bill does not level the playing field to see them having to deal now with Mac and Fannie Mae. It is ironic to me, and how they are going to be subject to higher insurance costs that will be as- at least, the focus of this legislation is a whole now layer of regulation they sociated and come with this massive to deal with the issues that lead to the cannot afford. They told me stories health care expansion that was passed, economic malaise that we found our- about how they would make sure their not to mention the fact that, in my selves in and the collapse that we expe- customers are always satisfied and how view, this is going to end up in a tre- rienced a couple of years ago that they cannot afford to make bad loans. mendous amount of growth in the debt would attempt to accomplish the ob- In these smaller banks in smaller com- in the outyears when we realize this is jective of preventing that in the future, munities where there is a tremendous going to cost way more than it was an- absent dealing with Freddie Mac and amount of accountability, obviously ticipated, and that many of the offsets Fannie Mae, which was a huge contrib- these are not the types of banks at or pay-fors are probably not going to uting factor to what we witnessed a which this legislation should be tar- come to fruition. couple of years ago. geted or directed. But that being said, it seems to me So it does not include that. It does These are banks that provide capital at least that having all of this uncer- get at derivatives; it does address, in to our farmers, our small business own- tainty coming out of Washington, some fashion, the issue of too big to ers. In my State of South Dakota, whether it is the implementation of fail. Then it also addresses this issue these are the people who—most of my the new health care bill, whether it is that we are debating right now, which constituents would rather bank with questions about a climate change bill is the issue of consumer protection. I these big, large chain banks that we that could impose a crushing new en- would argue this is an important part talk about when it comes to the issue ergy tax on our economy, questions of the debate when it comes to the reg- of systemic risk. The Democrats’ bill, about what is going to happen with tax ulation of our financial markets, per- in its current form, places new burdens rates with regard to dividends and cap- haps even the most important part; on these banks, costly regulation on ital gains and marginal income tax that is, protecting consumers. banks that are already heavily regu- rates next year, what is going to hap- Having said that, I think what the re- lated, that have already proved to be pen with the death tax—all of this un- cent financial crisis highlighted was sound financial entities. I also recently sat down with some certainty is just hanging a cloud over the fact that there were a number of car dealers from my State, again small this economy and making it very dif- bad actors out there in the market- Main Street businesses in South Da- ficult for our small businesses to do place who were out for a quick profit, kota, who have personal relationships what they do best; that is, to exercise without concern for the consumer, and this consumer protection effort as part with their customers. They told me that entrepreneurial spirit, to grow the how they may have to cut some of the of this legislation is designed to cor- economy, to create jobs. services that they provide to their cus- It is very difficult to do that when rect that, or at least address and get at tomers because of the broad authority you pile more and more burdens and that problem. I strongly support some of the con- that is granted to this brandnew agen- more and more costs on top of the very cy, this Consumer Financial Protection sumer protection ideas that have been small businesses that we are hoping Bureau. will lead us out of this recession. That put forward. There is a Republican al- These business take great pride— is why I think in all of our efforts we ternative amendment that has been of- when I say ‘‘these,’’ the auto dealers— ought to have a very close eye on what fered to the base bill. But as is typi- in the service they provide to their impact they are going to have on the cally the case in the Congress, instead friends and neighbors who come into small business sector of our economy. of just dealing with the issue that their businesses to buy a car. To have This is no exception. The debate on needs to be fixed, trying to fix the issue bureaucrats in Washington, DC, look- financial services reform is about some that needs to be fixed, it seems like the ing over their shoulder does not seem very critical issues, issues that need to pattern is that we try to go beyond like the right approach to me. be addressed, issues that we should be that and fix issues that do not need to I have heard the arguments that focused on: how to deal with the issue be fixed; in fact, in this particular case, these small banks are somehow not of systemic risk and make sure that with a whole new bureaucracy, cre- going to be affected because of the $10 systemically risky enterprises in this ating the whole new Consumer Finan- billion exemption, but I think it is im- country, that that risk is constrained, cial Protection Bureau manned with portant that we point out here, and that there is appropriate oversight, lots of new Federal Government em- that we clear up some of the facts on there is appropriate transparency. ployees with lots of new powers, in my this issue. That $10 billion exemption is I think there is an important issue to view, extending a reach way beyond from enforcement and examination au- be debated in terms of derivatives, what should ever have been con- thority by the new Consumer Financial which is a $600 trillion economy in this templated to deal with the important Protection Bureau. The new bureauc- country that has been operating in the issue of protecting consumers in this racy still has the ability to oversee shadows. The legislation that is before country. every product and loan and transaction us, I think if it is amended the right Why do I say that? I had in my office these small banks enter into with their way—and I hope it will be on the Sen- last week a bunch of community bank- customers. ate floor—will bring all of that into the ers. I have met with credit unions. I I have also heard the argument that light. There will be transparency, have met with auto dealers. I have met section 1027 excludes many of the small something that I think is desperately with a lot of small businesses. I would businesses that are calling me and e- needed in that area. argue these are not the types of enti- mailing me and coming to my office I hope this will be done in a way that ties that led to all of the problems we because they are concerned. However, does not impose new burdens on end experienced. Those are not system- it seems to me, once a small business users, those who are trying to legiti- ically risky entities or companies. decides to give their customers an op- mately hedge against higher com- These are hard-working, in most cases, tion to pay for their goods or services modity prices, currency rates, and in- small businesses. over time, this new Consumer Finan- terests rates and those sorts of things. When I sat down with my community cial Protection Bureau can come But there is work to be done in this bankers—I am not talking about big knocking on their door. What Wash- legislation to deal with the issue of Wall Street banks; I am talking about ington bureaucrats are going to tell systemic risk, to ensure that we take Main Street banks, local banks, banks them is what is in the best interest of all of the steps we possibly can to avoid that are about their customers because their customers in South Dakota. So and prevent the type of economic col- they care about their customers; they you can imagine the implications of lapse and meltdown we witnessed a are their neighbors; they are the folks this type of authority. Currently, the couple of years ago. they hang out with; their friends and legislation provides very few checks on I think it is ironic this legislation their kids go to school together; these this new bureau’s broad new authori- does not encompass something that are people who are far removed from ties.

VerDate Mar 15 2010 03:08 May 07, 2010 Jkt 089060 PO 00000 Frm 00030 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.038 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3325 I want reforms to our current regu- lengths and this great cost, expense to independent rule-writing authority and latory oversight structure. We need the taxpayer, and great new burdens authority over banks and nonbanks, better protections for our consumers. imposed upon small businesses in this while maintaining strong State con- But the bill that is before us creates a country. sumer protection laws; one that will new bureaucracy that has a funding So I am one who will be supporting stop the ongoing attempts by credit stream outside of congressional over- not only the amendment that is before card companies to circumvent the rules sight with very few checks and bal- us but other amendments that address this Senate and Congress have already ances, and that is not reform. this title in the bill. I have one I am enacted. They are already working at What I would like to see is this bu- working on that would exempt many of it. reau removed from the bill. There are the small businesses that would be cov- As Harvard Law Prof. Elizabeth War- other ways to provide better protection ered by this bill, some of which I men- ren has noted: Thanks to product safe- for consumers without burdening small tioned in my remarks earlier. But I ty rules, you can’t buy a toaster that businesses, which, as I said earlier, are think this is an issue that is incredibly would burn down your house. But you the engine of our economy. consequential in this legislation and so can buy a faulty mortgage that could Just to illustrate or to put a fine far removed—so far removed—from the take your house away. point on that, I have a letter from the purpose of this bill in the first place. The bank regulators have been of no National Federation of Independent As I said earlier, we ought to fix the great help because they are looking out Business, which represents businesses things that need to be fixed. But we for the banks—not for us, not for you, all across this country, has a very should not try to fix things that do not not for unsuspecting families who need large membership, including many need to be fixed, particularly when it the full force protections of robust reg- businesses in my State. They write to calls for creating a whole new govern- ulations implemented by a muscular express their concerns with certain ment bureaucracy in Washington, DC, agency that is on your side. parts of the bill that are too far reach- with new government employees, at In my view, a new independent agen- ing and would impose major new costs great additional cost and, of course, as cy would provide not only the comfort on small business. I said earlier, at great additional ex- they need but the protection they de- They go on to say: pense to America’s small businesses, serve. We can argue about details, but The establishment of the Consumer Finan- which are the economic engine and job I doubt there is much disagreement cial Protection Bureau will cover many creators in our economy. after what we have been through that small businesses strictly because they set up Mr. President, I yield the floor. Wall Street needs a watchdog, one that flexible payment arrangements with their The PRESIDING OFFICER. The Sen- has jurisdiction over all financial prod- customers. ator from New Jersey is recognized. ucts no matter who offers them, not According to a study they did a few Mr. MENENDEZ. Mr. President, I just the products offered by big banks. years back on getting paid, approxi- wanted to come to the floor to talk Chairman DODD has worked very mately 50 percent of small businesses about the Shelby amendment. I think hard over many months to craft the de- offer special terms or credit-type ar- we need to be 100 percent clear about tails of an agency that strikes the rangements to allow customers to pay one thing; that is, we need to pass a right balance. I was happy to see that for goods or services. Then they go on consumer protection bill—not a Wall finally our Republican colleagues were to describe the nature of some of those Street protection bill—with a strong saying: We are on the Wall Street re- arrangements. But I think it is fair to independent agency that can aggres- form train. But now I begin to won- say a lot of small businesses—and car sively defend families in all sectors of der—when I see amendments such as dealers are probably the most notable the financial industry. That is con- this—that they jumped on the train to example. But as was said earlier, that sumer protection. strike the emergency brake on con- could extend to furniture stores, jewel- A weak agency that cannot defend sumer protection enforcement. ers; that could extend to orthodontists families against commercial banks, in- The Shelby amendment offers noth- and dentists. People who allow their vestment banks, credit card companies, ing in the way of consumer protection. customers to spread out the payments car dealers, payday lenders, and enti- There is no independence. The CFPB over time to pay on terms and have ties such as AIG, that is Wall Street would simply be a division within the these flexible types of payment ar- protection. That is, in essence, what FDIC with no autonomy of its own. It rangements would be covered by this. this amendment does. The fact is, the could not even finalize a rule without That makes no sense. At a time when Republicans’ proposal on this issue FDIC approval. It will not have any re- we are trying to have our small busi- seems to symbolize America’s worst sources. And that is how Republicans nesses help lead us out of this reces- fears about how the powerful operate— want it: no resources, no supervisory sion, start creating jobs instead of the powerful protecting the powerful. authority, no enforcement power. dealing with the systemically risky en- The problem isn’t that families have Guess who wins in that scenario. tities that got us into this mess in the too much protection on Wall Street; Nonmortgage companies will never first place, we are talking about piling the problem is they have not been pro- be subject to supervision unless they a whole new burden and lots of new tected enough. have a pattern or practice of breaking costs on top of our small businesses at The Shelby substitute is just the sta- the law within the past 3 years. So a time when they can least afford it. tus quo. It is a cynical attempt to pre- what does that mean? ‘‘Let’s have a lot So I would hope the amendment that tend they are doing consumer protec- of people get hurt before we actually is being offered, the alternative to the tion. In reality, it is meant to make would say we should now give them Consumer Protection Financial Bureau sure there is no meaningful consumer protection.’’ It is not my sense of how in this bill, will be adopted; that my protection at the end of the day. It the law should operate. colleagues in the Senate will take willfully ignores the lessons we should The Shelby amendment would estab- steps to improve the way this bill have learned: that left to their own de- lish the Division of Consumer Protec- treats consumer protection and in the vices, there are lenders who can and tion at the FDIC. It maintains, in es- way it treats small businesses under will take advantage of consumers. That sence, the status quo. Consumer pro- this bill. is what the marketplace—as it is right tection rule writing will still be under I, frankly, as I said earlier, would now—has taught us. the same authority, the same regu- like to see this title removed entirely We absolutely need a muscular, inde- lators who routinely ignored or op- and us deal with this in a way that pendent agency—however it is config- posed the needs of consumers. The makes more sense; that does not create ured, wherever it is housed—one that amendment provides no safeguards to a whole new bureaucracy, with all will have full and comprehensive au- prevent the FDIC Chair or board from kinds of new government employees thority to develop and implement real, overriding decisions by the division di- with all kinds of new powers. There are honest, proconsumer rules so they will rector. certainly ways in which we can address no longer be fooled by 30 pages of fine The amendment would actually pro- the issue of consumer protection ab- print that no one except bank lawyers hibit—prohibit—the proposed consumer sent having to go to these great could possibly understand; one that has division from doing any rule writing

VerDate Mar 15 2010 03:08 May 07, 2010 Jkt 089060 PO 00000 Frm 00031 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.039 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3326 CONGRESSIONAL RECORD — SENATE May 6, 2010 under the Federal Trade Commission them into it by promising them they sanity is doing the same thing time Act for payday lenders, debt collectors, could meet all their obligations. and time again and expecting a dif- foreclosure scam operators, mortgage To suggest the system is not bro- ferent result. If we want to see what brokers, and other nonbank consumer ken—you would almost have to have has happened to the American con- finance companies. It could only do ex- been living on a different planet over sumer in this country continue—facing aminations of nonbank consumer fi- the last few years not to recognize the same consequences they have had nance companies if they ‘‘demonstrate what happened because consumers were to face over the last couple years—then a pattern or practice of violations’’ of forgotten. Safety and soundness, we we adopt this amendment. But if we consumer law. So only after the con- were told, were in great shape. Institu- want to change that, then we would sumer has been harmed repeatedly— tions were making money. This was a support the underlying provisions in after they have been harmed repeat- very stable situation. his bill. edly—could the consumer division do We had a hearing almost 3 years ago I thank the Senator for his leader- any examination of the business. in our committee. It was in June of ship. This is simply saying: I am going to 2007. A guy by the name of David Mr. DODD. Mr. President, I thank tell you that I am going to put a cop on Berenbaum from the National Commu- the Senator. the beat. He has no uniform, he has no nity Reinvestment Coalition came be- The last point I want to make on the equipment, and he cannot stop the bad fore the committee. Let me quote, if I amendment is, under this proposal, any guys. What a falsehood. We need to de- can—this is 3 years ago—from his testi- person who is subject to one of the enu- feat this amendment, and we need to mony: merated statutes could be assessed— have a bill that ultimately gives strong For the past 5 years, community groups, under this bill, in section 1015(a)—and consumer protections for millions of consumer protection groups, fair lending this amendment, by the way—talk families in this country who have al- groups, and all of our members in the Na- about a bureaucracy, it is a long ready faced the consequences of the tional Community Reinvestment Coalition amendment—but in 1015(a), it says: system that is going on unregulated in have been sounding an alarm about poor un- The Chairperson shall establish, by rule, a way that it allows greed and excesses derwriting—underwriting that not only en- an assessment schedule— dangered communities, their tax bases, their to take place and that puts protec- municipal governments, their ability to have So we are going to assess now these tions, yes, for Wall Street but not for sound services and celebrate home owner- various institutions that are already Main Street. ship—but [underwriting that] was going to burdened with assessments— Senator DODD has struck the right impact on the safety and soundness of our including the assessment base and rates, balance. We need to preserve it. I look banking institutions themselves. Those cries applicable to covered persons subject to sec- forward to supporting him and oppos- for action fell on deaf ears, and here we are tion 1023. . . . ing this amendment. today. I know this sounds like a lot of gib- With that, Mr. President, I yield the I remember my colleague from New berish, but what is section 1023? What floor. Jersey, almost 3 years ago—I remem- does it say? Section 1023 talks about The PRESIDING OFFICER. The Sen- ber his words—I do not have them writ- nondepository institutions subject to ator from Connecticut is recognized. ten down in front of me, but I remem- consumer laws—just consumer laws. Mr. DODD. Mr. President, let me ber them very clearly. I say to the Sen- One of the complaints about our under- briefly express my gratitude to my ator, your words that day were: This is lying bill—which is totally false—is great pal and friend from New Jersey, going to be a tsunami. It was the first that florists and butchers and dentists BOB MENENDEZ, once again. We look time I heard those words used to de- and accountants and lawyers would be around. There are 100 of us here. I do scribe the looming foreclosure crisis. subject to the provisions of this act. not often acknowledge these things, We were told then there would be Nothing could be further from the but if I had to pick one of our col- maybe 1 million, maybe 2 million fore- truth, and the language in our bill leagues to be in my corner as an advo- closures. Now we know the number is makes it explicitly clear that you must cate, I would pick BOB MENENDEZ every in excess of 7 million that have oc- be significantly involved in financial time. He is a strong advocate. When he curred—not to mention job loss and the services or products. That is the lan- is focused and passionate about a mat- like. guage of our bill. ter, as he is on this one, there is no bet- The consumer people were arguing Section 1023: Nondepository institu- ter advocate in the Senate. He has been for underwriting standards. It was the tions subject to consumer laws could a great member of our committee and safety and soundness regulators who be levied with assessments. That is a great help over the last few years were refusing to acknowledge we did your florist, your butcher, your den- where we have worked together on a not have underwriting standards or tist, your accountant, your lawyer. So number of bills coming out of the com- were refusing to acknowledge we need- as to those who argue against my bill mittee. ed to do something about it. So I want- and argue for this alternative—in fact, His understanding of this issue is ex- ed to commend my colleague. explicitly in here, at least as I read actly right. I say, there are ideas peo- Mr. MENENDEZ. Mr. President, if I this—it could very well impose assess- ple can offer on which they can make a may ask my distinguished chairman to ments on the very people they claim case that they strengthen our par- yield for a moment, the Chairman is are affected by our legislation. ticular provision. But I say, respect- absolutely right. As a matter of fact, Again, I invite my colleagues to read fully, this is such a step backward, it is when I made that comment that we it. It is not a speech I am reading. I am even hard to imagine someone could were going to have a tsunami of fore- reading from the proposed amendment. actually conjure up an amendment closures, the administration witnesses That section 1023—specifically, you can that would step us this farther away at the time—the previous administra- look it up in here; it is a section of the from even the status quo. tion, of course—said, with all due re- bill—it speaks about nondepository in- I thought I might get an amendment spect, that is an exaggeration. stitutions subject to consumer laws. that would strike this and leave the Mr. DODD. Right. And the definition, accordingly, is the world as it is. Senator THUNE made Mr. MENENDEZ. I wish they had very people who are not financial insti- that argument, that somehow this is been right and we had been wrong. But tutions, who could be levied with those not broken, leave it alone. Yet there is I think the chairman hits it right on assessments. not a person I know of in the country point. In the context of the rating So for all those reasons, respectfully, who does not recognize this problem all agencies, they were playing coach and I would urge my colleagues to reject began because there were unscrupulous referee. When you are playing coach this amendment. I do not claim perfec- brokers, there were people willing to and referee, somehow the game does tion in our underlying consumer pro- put ratings on bundled securities that not work out quite all that well. tection language. We think we have a were worthless, there were bankers I appreciate what the Senator done very strong bill. I am always anxious willing to turn a blind eye and a deaf in that respect here as well. to hear from people who think they can ear, pushing out mortgages they knew I think the chairman makes the case make it stronger or better in some people could not possibly afford, luring very clearly that the definition of in- way. Fine. But to propose a whole new

VerDate Mar 15 2010 03:08 May 07, 2010 Jkt 089060 PO 00000 Frm 00032 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.040 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3327 regulatory structure here, with new ing—at least in part—to the annual ap- that after the McCain amendment has people coming on, at great cost, with propriations process. That model is a been reported by number, the Senate no power whatsoever to do anything better way of helping consumers than then resume consideration of the Sand- about the very problem that confronts exempting the budget of the consumer ers amendment. us, seems to me to be the height of protection agency from congressional The PRESIDING OFFICER. Is there what we are trying to avoid: creating a review. objection? bureaucracy that does not do much. Mr. SHELBY. Mr. President, it is my Without objection, it is so ordered. That, it seems to me, is what the understanding that Chairman DODD has Mr. DODD. Mr. President, again, be- American taxpayers want us to avoid. asserted that the Shelby consumer pro- fore we get to this vote, let me make With that, we have completed on our tection substitute would lead to addi- this appeal. We are going to have this side the debate against this amend- tional assessments on community vote, and then we will go to the Sand- ment. Unless there is some further banks. I want to make it clear for the ers amendment and then to the McCain comment, then I would ask for the yeas record that this is not true. amendment. Again, we are going to try and nays on the amendment and call But before doing so, I do want to to go back and forth and move along. for a vote. highlight that the basic thrust of The number of amendments now has Mr. BYRD. Mr. President, I oppose Chairman DODD’s assertion is based on increased to over 150. I say to my col- the Shelby amendment. the belief that placing the taxpayer on leagues, there are actually more In our zeal to protect consumers the hook for the costs of regulating amendments on the Democratic side from egregious banking and lending Goldman Sachs, Citigroup, and J.P. than the Republican side—not many practices, I fear the Senate is paying Morgan is the preferential way of pro- more but more. I urge my colleagues, if too little attention to basic constitu- ceeding. you have very like minded amend- tional tenets. Again, Chairman DODD believes that ments, it may be in your interests to The Shelby amendment proposes to taxpayers paying the freight for Gold- combine these ideas in a single amend- create a division for consumer finan- man is the way to go. ment—maybe rally around one that ac- cial protection within the Federal De- But I want to set the record straight tually makes the point, to either ex- posit Insurance Corporation, FDIC, to about my amendment. First, my provi- tract from the bill or add to the bill be- exempt that new entity from the con- sion ensures that any nonbanks that cause we all realize we are not going to gressional appropriations process. The are subject to regulation pay the full be on this bill forever, and I want to underlying substitute amendment pro- cost of that regulation themselves. accommodate as many people as I can poses a similar model—a new Bureau of They get no handouts from the tax- and have the kind of discussion we just Consumer Financial Protections within payer. had on this amendment. But to do that the Federal Reserve System, which Secondly, community banks are not in the timeframe we have is going to would also be exempt from the congres- presently assessed by the FDIC for the require cooperation and some indul- sional appropriations process. This is cost of regulation, and my amendment gence on the part of people to not be in addition to several exemptions pro- does not provide the FDIC with any demanding. posed in the underlying substitute new authority to make such assess- To the extent you have an amend- amendment—exemptions for the Secu- ments. ment up, let’s try to get to it and have rities and Exchange Commission, and Funding for the new division will be a good discussion but not too long so for new funds for the Securities and provided by assessments on nonbank we give other people a chance to be Exchange Commission and exemptions mortgage originators, the other heard as well. I make that plea to ev- for the Commodities and Futures Trad- nonbank entities that are subject to eryone involved. ing Commission fund to reward whis- regulation and large banking institu- With that, I yield the floor. tleblowers. tions. I would point out that the as- AMENDMENT NO. 3826 TO AMENDMENT NO. 3739 I understand the desire by some to sessments on large banks will increase The PRESIDING OFFICER. The yeas create a new consumer agency, and to considerably following passage of the and nays have been ordered. elevate its status to that of a banking Tester amendment, which Chairman The question is on agreeing to the regulator but, these proposals—the DODD supported. amendment. Shelby amendment, and the underlying Finally, in an effort to protect de- The clerk will call the roll. Democratic substitute—are alarming posit insurance, my amendment cre- The assistant legislative clerk called in the aggregate spending latitude they ates a separate consumer financial pro- the roll. are recommending for one agency. The tection fund which will ensure that Mr. KYL. The following Senator is usual procedure of executive review by funds for deposit insurance and con- necessarily absent: the Senator from the White House budget office, and sumer protection are never comingled. public discussion of the President’s Mr. President, let’s be clear about Utah (Mr. BENNETT). budget submission through hearings, the differences in the funding sources The PRESIDING OFFICER. Are there testimony, questions, debate and in the two bills. The Dodd bill uses tax- any other Senators in the Chamber de- amendment—would not apply to the payer funds to give a free ride to Gold- siring to vote? new consumer agency under both the man Sachs and the other big Wall The result was announced—yeas 38, Republican and Democratic proposals. Street Banks while my amendment nays 61, as follows: I support stronger consumer protec- makes big banks and bad actors cover [Rollcall Vote No. 133 Leg.] tions in the financial services industry, their own costs. YEAS—38 but I do not believe that the elected The PRESIDING OFFICER (Mr. Alexander Crapo Lugar representatives of the people have to FRANKEN). Is there a sufficient second? Barrasso DeMint McCain There is a sufficient second. Bond Ensign McConnell forfeit their constitutional oversight Brown (MA) Enzi Murkowski responsibilities in order to make that The yeas and nays were ordered. Brownback Graham Risch happen. Mr. DODD. Mr. President, before call- Bunning Gregg Roberts We need to remember that the finan- ing for the vote, I ask unanimous con- Burr Hatch Sessions Chambliss Hutchison Shelby cial regulators have their directors ap- sent that the Senate now proceed to a Coburn Inhofe Thune vote with respect to the Shelby amend- Cochran Isakson pointed by presidents, and that the Vitter Collins Johanns Congress needs to be able to exercise ment No. 3826, with no amendment in Voinovich Corker Kyl oversight. If enforcement is inad- order to the amendment prior to the Cornyn LeMieux Wicker equate, or abusive, the people’s most vote; further, that the previous order potent weapon to effect change is the with respect to the Sanders amend- NAYS—61 congressional power of the purse. ment remain in effect, and provided Akaka Boxer Carper Baucus Brown (OH) Casey In the bill passed by the House of that after the Sanders amendment has Bayh Burris Conrad Representatives last year, the House been called up and reported by number, Begich Byrd Dodd proposed to create a new consumer pro- Senator MCCAIN be recognized to call Bennet Cantwell Dorgan tection agency, and to subject its fund- up an amendment relating to GSEs; Bingaman Cardin Durbin

VerDate Mar 15 2010 04:41 May 07, 2010 Jkt 089060 PO 00000 Frm 00033 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.041 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3328 CONGRESSIONAL RECORD — SENATE May 6, 2010 Feingold Leahy Sanders votes. I hope they are on amendments will be around and my staff will be Feinstein Levin Schumer people want to debate. around to work on their amendment to Franken Lieberman Shaheen Gillibrand Lincoln Snowe Senator SANDERS has an amendment. see if we can accommodate it, modify Grassley McCaskill Specter Has he agreed to a time? it, or talk about it. I will spend Satur- Hagan Menendez Stabenow Mr. DODD. Yes, he has. day and Sunday here all day for people Harkin Merkley Tester Mr. REID. Senator MCCAIN, has he to go over their products so maybe we Inouye Mikulski Udall (CO) Johnson Murray agreed to a time? can expedite things next week as well. Udall (NM) Kaufman Nelson (NE) Mr. REID. Mr. President, if I may Warner Mr. SHELBY. It is on GSE. It will Kerry Nelson (FL) Webb take a while. talk to the two managers through the Klobuchar Pryor Chair, I know how important everyone Kohl Reed Whitehouse Mr. DODD. If everybody demands Landrieu Reid Wyden more time, everyone suffers. There is thinks their amendment is. But you Lautenberg Rockefeller not unlimited debate. With 141 amend- can have half an hour on each side, an NOT VOTING—1 ments equally divided between us, we hour for an amendment. Someone can say quite a bit in 5 minutes. I think we Bennett have to provide time for people. I can- not do that if people insist on unlim- are going to have to have some guide- The amendment (No. 3826) was re- ited time or more time. We know these lines as to what we are going to do. Ev- jected. issues pretty well. It is not as if it is a eryone thinks their amendment is the Mr. DODD. Mr. President, I move to new bill. most important, and I am sure in their reconsider the vote. Mr. MCCONNELL. If my friend from mind it is. We have to set some stand- Mr. SHELBY. I move to lay that mo- ard. I have been very accommodating tion on the table. Connecticut will yield for an observa- tion, Mr. President, we may have 141 in this last 24 hours because I think so The motion to lay on the table was much of the comanager of the bill, Sen- agreed to. amendments, but they are not all ator SHELBY. We could have moved to The PRESIDING OFFICER. The Sen- equal. We are going to try to work our way through the major amendments in table his amendment a long time ago. ator from Connecticut. Let’s understand, there are other Mr. DODD. Mr. President, let me give a serious way. This is a very important piece of legislation. The majority lead- ways we can move forward. If some- my colleagues some idea of how we are body says: I need 3 hours on an amend- going to proceed. er and I had a conversation earlier today on how to go forward. We will ment—there is not an amendment on Senator SANDERS has the next this bill that is worth 3 hours, OK? We amendment. We entered into a unani- keep working on it in a systematic way and maximize a way for people to have have had a good conversation. mous consent agreement a few minutes I hope the two managers can give us votes on important amendments. ago. Senator SANDERS has asked for 80 some guidelines as to what they expect minutes to be equally divided on his Mr. DODD. I agree. I say to my friend the Republican leader, we spent 24 to do tonight and tomorrow because amendment. We then turn to the Members have other things to do than hours on one amendment. We have to McCain amendment. I am hoping we listen to the three of us. do better than that. I cannot accommo- get a time agreement on that amend- Mr. DODD. Senator SANDERS. ment as well. date people if we are going to spend a The PRESIDING OFFICER. The Sen- There are 141 amendments, about day on one amendment. It just does not ator from Vermont. work. All amendments may not be equally divided between us. I want to AMENDMENT NO. 3738 TO AMENDMENT NO. 3739 accommodate everybody as much as I equal, but all Members are, and all Mr. SANDERS. Mr. President, I call can. If some people take too much Members deserve an opportunity to be up amendment No. 3738. time, it means others do not get a heard. The PRESIDING OFFICER. The chance to offer their amendments. I appreciate the majority leader’s clerk will report the amendment. I make a request of my good friend point of trying to consolidate if several The assistant legislative clerk read Senator SHELBY to inquire, before we Members have the same idea about as follows: get to the McCain amendment, what something. Maybe it can be brought to- The Senator from Vermont [Mr. SANDERS], kind of time agreement we can have on gether in one amendment rather than for himself, Mr. FEINGOLD, Mr. DEMINT, Mr. his amendment. Then my intention is five—I say that to both Democrats and LEAHY, Mr. MCCAIN, Mr. WYDEN, Mr. GRASS- to go to a Democratic amendment and Republicans—as a way of moving the LEY, Mr. DORGAN, Mr. VITTER, Mrs. BOXER, possibly a Republican amendment to- process along, and we can have a good Mr. BROWNBACK, Mr. RISCH, Mr. WICKER, Mr. discussion. I cannot spend 24 hours on GRAHAM, Mr. HATCH, and Mr. CRAPO, pro- night. poses an amendment numbered 3738 to There are going to be votes tomor- one amendment and accommodate peo- amendment No. 3739. ple. It just is not going to happen. That row. I am letting my colleagues know Mr. SANDERS. Mr. President, I ask is my point. we will have votes tomorrow. I gather unanimous consent that the reading of The PRESIDING OFFICER. The Sen- Monday and Friday of next week are the amendment be dispensed with. nonvote days. If we have 141 amend- ator from Alabama. The PRESIDING OFFICER. Without Mr. SHELBY. Mr. President, we are ments and Members want to be heard— objection, it is so ordered. and I want to give them time to be making progress. We might not be The amendment is as follows: heard and have good debate—obviously making progress as quickly as some (Purpose: To require the non-partisan Gov- we cannot go on forever. people would like. Maybe we did spend ernment Accountability Office to conduct Mr. REID. Will my friend yield? a lot of time on this amendment, but it an independent audit of the Board of Gov- Mr. DODD. I will be happy to. is very important. We have debated it. ernors of the Federal Reserve System that Mr. REID. Mr. President, for all the I guess it has been disposed of, at least does not interfere with monetary policy, to Senators here, we may have 141 amend- that part of it, now. But there are a lot let the American people know the names of ments, but this is not the first time we of other important amendments com- the recipients of over $2,000,000,000,000 in have had 141 amendments on a bill. I ing up. We can work together and work taxpayer assistance from the Federal Re- serve System, and for other purposes) have looked at a catalog of the amend- through some of them because a lot are duplications to some degree, and some On page 1525, strike line 20 and all that fol- ments, and a lot are on the same sub- lows through page 1528 line 3 and insert the ject. What we are trying to do is find of them we can take. Senator DODD and following: ‘‘to the taxpayers of such assist- out different categories and not have I can help our staffs on that. Remem- ance.’’. everybody offer the same amendment. ber, this affects all of our economy— SEC. 1152. INDEPENDENT AUDIT OF THE BOARD Our goal tonight should be to try to everything. OF GOVERNORS. get rid of four amendments. If we could Mr. DODD. I will take advantage of (a) AMENDMENTS TO SECTION 714.—Section have four amendments out of the way the moment to say that I will be here 714 of title 31, United States Code, is amend- tonight, we could look—and I thank all weekend. We are not going to have ed— (1) in subsection (a), by striking ‘‘the Of- my friend because I told him we are votes on the weekend. I will be here all fice of the Comptroller of the Currency, and going to have votes in the morning, or weekend. For people who would like to the Office of Thrift Supervision.’’ and insert- at least a vote. I can create a vote. I have amendments and would like us to ing ‘‘and the Office of the Comptroller of the hope we don’t have to start creating consider them, Senator SHELBY’s staff Currency.’’;

VerDate Mar 15 2010 03:08 May 07, 2010 Jkt 089060 PO 00000 Frm 00034 Fmt 4624 Sfmt 0634 E:\CR\FM\A06MY6.014 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3329 (2) in subsection (b), by striking all after (3) the value or amount of that financial terest loans, he apparently believes the ‘‘has consented in writing.’’ and inserting assistance; American people do not have a right to the following: ‘‘Audits of the Federal Re- (4) the date on which the financial assist- know who received that money. serve Board and Federal reserve banks shall ance was provided; On that very same day, I introduced not include unreleased transcripts or min- (5) the specific terms of any repayment ex- utes of meetings of the Board of Governors pected, including the repayment time period, legislation requiring the Fed to put or of the Federal Open Market Committee. interest charges, collateral, limitations on this information on its Web site, just To the extent that an audit deals with indi- executive compensation or dividends, and as Congress required the Treasury De- vidual market actions, records related to other material terms; and partment to do with respect to the $700 such actions shall only be released by the (6) the specific rationale for providing as- billion TARP. And here we are today. Comptroller General after 180 days have sistance in each instance. Whatever one may think of TARP, one elapsed following the effective date of such (b) TIMING.—The Board of Governors shall can get information as to who received publish information required by subsection actions.’’; that money, when it was paid back— (3) in subsection (c)(1), in the first sen- (a)— tence, by striking ‘‘subsection,’’ and insert- (1) not later than 30 days after the date of the details. It is right there on the ing ‘‘subsection or in the audits or audit re- enactment of this Act; and Internet. I believe that same informa- ports referring or relating to the Federal Re- (2) in updated form, not less frequently tion should be made available in terms serve Board or Reserve Banks,’’; and than once annually. of the Fed’s zero interest and near zero (4) by adding at the end the following: Mr. SANDERS. Mr. President, this interest loans. ‘‘(f) AUDIT OF AND REPORT ON THE FEDERAL amendment, which calls for trans- What the Fed apparently does not RESERVE SYSTEM.— parency at the Fed, is, frankly, one of understand—and this is the important ‘‘(1) IN GENERAL.—An audit of the Board of the more unusual amendments I have point—is that this money, these tril- Governors of the Federal Reserve System lions of dollars, do not belong to the and the Federal reserve banks under sub- ever participated in, not so much for section (b) shall be completed within 12 its content but for the kind of coalition Fed; they belong to the American peo- months of the enactment of the Restoring that has come together around it. How ple. It is incomprehensible to me—and American Financial Stability Act of 2010. often do you have the AFL–CIO and I think to the overwhelming majority ‘‘(2) REPORT.— FreedomWorks supporting the same ef- of people in our country—that the Fed ‘‘(A) REQUIRED.—A report on the audit re- fort? How often do you have the SEIU, believes they can keep this informa- ferred to in paragraph (1) shall be submitted which is the largest trade union in this tion secret. by the Comptroller General to the Congress country, moveOn.org, which I believe This amendment not only requires before the end of the 90-day period beginning has some 5 million progressive mem- that the Fed tell us who has received on the date on which such audit is completed and made available to— bers, and Public Citizen striving for the the $2 trillion it lent out, but, similar ‘‘(i) the Speaker of the House of Represent- same goal as the National Taxpayers to the language incorporated in the atives; Union or the Eagle Forum or the Con- House bill, it calls for an audit of the ‘‘(ii) the majority and minority leaders of servative Americans for Tax Reform? Fed by the GAO. That is it. That is the House of Representatives; There is a coalition representing tens what we are attempting to do with this ‘‘(iii) the majority and minority leaders of of millions of grassroots activists. amendment: transparency and a the Senate; Some of them are progressive, some straightforward audit. Who got what ‘‘(iv) the Chairman and Ranking Member where I come from, some of them are when, on what basis, on what terms, of the appropriate committees and each sub- conservative, but they are all united committee of jurisdiction in the House of who was at the meetings, who made Representatives and the Senate; and around a very basic principle: We need the decisions, and taking a look at pos- ‘‘(v) any other Member of Congress who re- transparency at the Fed, and we need sible conflicts of interest—simple, fac- quests it. it now. tual questions that people from the ‘‘(B) CONTENTS.—The report under subpara- I want to use this opportunity—and I State of Vermont ask me and I suspect graph (A) shall include a detailed description thank Chairman DODD for allowing me people from Minnesota ask you, Mr. of the findings and conclusion of the Comp- to do this—to talk about the amend- President, and people all over this troller General with respect to the audit ment, what it does, and why so many country, regardless of their political that is the subject of the report. diverse groups are coming together in persuasion, are asking. ‘‘(3) CONSTRUCTION.—Nothing in this sub- support of it because you do have to section shall be construed— I understand this amendment may ‘‘(A) as interference in or dictation of mon- ask yourself: What is bringing together not be supported by everyone. Some etary policy to the Federal Reserve System some of the most progressive groups in may suggest, inaccurately, that this by the Congress or the Government Account- the country with some of the most con- amendment—and I quote from a state- ability Office; or servative groups, some of the most pro- ment—‘‘takes away the independence ‘‘(B) to limit the ability of the Government gressive members of the Senate with of the Federal Reserve and puts mone- Accountability Office to perform additional some of the most conservative? I also tary policy into the hands of Con- audits of the Board of Governors of the Fed- want to tell my colleagues not only gress.’’ That is one of the charges being eral Reserve System or of the Federal re- what this amendment does but to clar- serve banks.’’. made against this amendment. ify as best I can what it does not be- Let me address that concern by sim- SEC. 1153. PUBLICATION OF BOARD ACTIONS. cause there has been some distortion ply reading to the Members of the Sen- (a) IN GENERAL.—Notwithstanding any other provision of law, the Board of Gov- about this amendment, and those dis- ate exactly what is in the amendment ernors shall publish on its website, with re- tortions are blatantly untrue. I want to so that we know what we are talking spect to all loans and other financial assist- touch on that also. about. I quote from page 4 of a six-page ance it has provided since December 1, 2007 The origin for this amendment came amendment. It is not a long amend- under the Asset-Backed Commercial Paper on March 3, 2009. That was the date ment. It cannot be clearer than this. Money Market Mutual Fund Liquidity Facil- that, as a member of the Budget Com- This is what it says: ity, the Term Asset-Backed Securities Loan mittee, I had the opportunity to ask Nothing in this subsection shall be con- Facility, the Primary Dealer Credit Facility, Chairman Bernanke what I thought strued as interference in or dictation of mon- the Commercial Paper Funding Facility, the was a pretty simple question. Chair- etary policy to the Federal Reserve System Term Securities Lending Facility, the Term by the Congress or the Government Account- Auction Facility, the agency Mortgage- man Bernanke, obviously, is Chairman ability Office. Backed Securities program, foreign currency of the Fed. What I asked him was: Mr. liquidity swap lines, and any other program Chairman, my understanding is that If there are people who are saying: created as a result of the third undesignated the Fed has lent out some $2 trillion to Oh, we are going to get involved in paragraph of section 13 of the Federal Re- some of the largest financial institu- monetary policy; oh, we are going to be serve Act— tions in this country. Would you please politicizing the Fed; oh, we are going (1) the identity of each business, indi- tell me and the American people who to have, before an election, Congress vidual, entity, or foreign central bank to received that money? I thought that telling the Fed to raise interest rates which the Board of Governors has provided such assistance; was a pretty simple and straight- or to lower interest rates, that is abso- (2) the type of financial assistance provided forward question. Mr. Bernanke said: lutely inaccurate. That is not what we to that business, individual, entity, or for- No. Despite the fact that this was $2 are doing. That is not, in my view, eign central bank; trillion in zero interest or near zero in- what we should be doing.

VerDate Mar 15 2010 03:08 May 07, 2010 Jkt 089060 PO 00000 Frm 00035 Fmt 4624 Sfmt 0634 E:\CR\FM\A06MY6.015 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE S3330 CONGRESSIONAL RECORD — SENATE May 6, 2010 We want an independent Fed. We Another question people might ask: tions a GAO audit of the Fed will an- want them to develop monetary policy. Did Goldman Sachs use this money to swer. That is not—underline not—what this provide $16 billion in bonuses the next As a result of the bailout of Bear amendment does. This amendment does year? Here you have Goldman Sachs Stearns and AIG, the Fed—and this is a not tell the Fed when to cut short-term getting $13 billion out of the $182 bil- beauty, this is quite something—the interest rates and when to raise them. lion that AIG got, and the next year Fed now owns credit default swaps—lis- It does not tell the Fed which banks to they are announcing $16 billion in bo- ten up on this one—betting that Cali- lend money to and which banks not to nuses. Did they use some of this money fornia, Nevada, and Florida will default lend money to. It does not tell the Fed to provide those bonuses? on their debt. So the Federal Reserve which foreign central banks they can A GAO audit of the Fed might help stands to make money if California, do business with and which ones they explain to the American people if there Nevada, and Florida go bankrupt. I sus- cannot do business with. It does not were any conflicts of interest sur- pect that the Senators from the great impose any new regulations on the rounding this deal. I think the average States of California, Nevada, and Flor- Fed, nor does it take any regulatory American would say: Yes, there is a ida would be rather interested to know authority away from the Fed. Let’s be conflict of interest. You have a guy that if their States go bankrupt, the clear about that. from Goldman Sachs sitting in the Fed makes money. I think what the opponents of this room arguing for $182 billion. They got On the surface, this looks a little ab- amendment are doing is equating inde- $182 billion; he gets $13 billion. The surd to me, but again, I think this is an pendence with secrecy, and there is a next year his company gives $16 billion issue that the GAO might be taking a difference. At a time when our entire in bonuses. look at. financial system almost collapsed, we Is there a conflict of interest? I think It has been reported that the Federal cannot let the Fed operate in secrecy so. That is my opinion. My opinion Reserve pressured the Bank of America any longer. The American people have isn’t the important one, but that is into acquiring Merrill Lynch—making a right to know. what the GAO will be doing if this this financial institution even bigger I find it amusing that there are some amendment is passed. and riskier—allegedly threatening to people who oppose this amendment. As Just another question out there. In fire its CEO if the Bank of America Chairman DODD and the Presiding Offi- 2008, it seems to me—I may be wrong— backed out of this merger. When the cer know, we have had heated debates there was a conflict of interest at the merger went through, Merrill Lynch on the floor of the Senate over a $5 mil- Federal Reserve Bank of New York, employees received $3.7 billion in bo- lion amendment, over an $8 million when Stephen Friedman, the head of nuses. Was this a good deal for the provision that goes on for hours. Yet the New York Fed, who also served on American taxpayer? A GAO audit can where we have trillions of dollars being the board of directors of Goldman help us find out. lent out, there are some people who Sachs—let’s back it up. The head of the When the Federal Reserve provided a think the American people don’t have a Fed serves on the board of Goldman $29 billion loan to JPMorgan Chase to right to know who got that money. I Sachs, approved Goldman’s application acquire Bear Stearns, the CEO of think, frankly, that is absurd. to become a bank holding company, JPMorgan Chase, Jamie Dimon, served The American people, as we hear over giving it access to cheap loans from the on the Board of Directors at the New and over on the floor of the Senate, Federal Reserve. OK. The head of the York Federal Reserve. Let me repeat play by the rules. That is what the av- New York Federal Reserve, on the that. When the Federal Reserve pro- erage American family does; they play board of Goldman Sachs, is applying vided $29 billion to JPMorgan Chase, by the rules. Well, what are the rules for Goldman Sachs to become a bank the CEO of JPMorgan Chase served on governing the Fed? Who makes those holding company to gain cheap loans the Board of Directors of the New York rules or are they just made up as they from the Fed. Fed. Did this represent a conflict of in- go along and they do not have to tell It looks to me like there may be a terest? I think the average American anybody about it? So I have a problem conflict of interest, but what do I would say yes. Maybe some people with that, and that is what this amend- know? That is what we need a GAO re- would have a different point of view. ment is about. port to tell us. But I think a GAO audit can help ex- Here, to my mind—and these are just Here, interestingly enough, is an ar- plain all this to the American people. my issues; others may have different ticle from May 9, 2009, in the Wall Currently—and I think we have to issues, and I am sure they do—are just Street Journal. Let me quote briefly appreciate this as well; we have to shed a few of the questions the American from that article: some light on these issues—some 35 people are asking and why we need a Goldman Sachs received speedy approval members of the Federal Reserve’s GAO audit of the Fed. These are just a to become a bank holding company in Sep- Board of Governors are executives at few. Let me throw them out. tember of 2008. During that time, the New private financial institutions which Why was Lloyd Blankfein, the CEO of York Fed’s chairman, Stephen Friedman, sat have received nearly $120 billion in Goldman Sachs, invited to the New on Goldman’s board and had a large holding TARP funds, but we don’t know how York Federal Reserve to meet with in Goldman’s stock, which, because of Gold- much these big banks received from Federal officials in September of 2008 man’s new status as a bank holding com- the Fed. We know what they got from to determine whether AIG would be pany, was a violation of Federal Reserve pol- the TARP, not from the Fed. A GAO icy. The New York Fed asked for a waiver, bailed out or allowed to go bankrupt? audit could answer this question. which, after about 21⁄2 months, the Fed When the Fed and Treasury decided granted. While it was weighing the request, All of us—I believe all of us—are to bail out AIG to the tune of $182 bil- Mr. Friedman bought 37,300 more Goldman deeply concerned that small- and me- lion, why did the Fed refuse to tell the shares in December. They have since risen dium-sized businesses around this American people where that money $1.7 million in value. Mr. Friedman, who country—I know it is certainly the was going? Why did the Fed argue that once ran Goldman, says none of these events case in Vermont—are begging for af- this information needed to be kept se- involved any conflicts. fordable credit. They have the oppor- cret ‘‘as a matter of national secu- That is the Wall Street Journal arti- tunity to expand. We are beginning to rity?’’ cle from May 9, 2009. That is what Mr. see some economic recovery, but they Here is the point. When AIG finally Friedman says. Well, I kind of disagree want to expand, they want to create released the names of the counterpar- with him, but I would like the GAO to new jobs, and they are finding it ex- ties receiving this assistance, how did take a look at that. Without a com- tremely difficult to acquire those des- it happen that Goldman Sachs received prehensive GAO report, we have to perately needed affordable loans. I find $13 billion of this money; AIG, $182 bil- take Mr. Friedman at his word, and I it an important issue to ask how much lion; $13 billion going to Goldman don’t think we should. Who got what? of the trillions of dollars in zero or Sachs—100 cents on the dollar of a When did they get it? On what basis near zero interest loans that financial company that was going bankrupt and and what terms? Who was at those institutions received from the Fed that was bailed out. How is that—100 meetings? Were there conflicts of in- went out to those small businesses or, cents on the dollar? Not bad. terest? These are the kinds of ques- perhaps, as I personally believe is the

VerDate Mar 15 2010 03:08 May 07, 2010 Jkt 089060 PO 00000 Frm 00036 Fmt 4624 Sfmt 0634 E:\CR\FM\G06MY6.047 S06MYPT1 jbell on DSKDVH8Z91PROD with SENATE May 6, 2010 CONGRESSIONAL RECORD — SENATE S3331 case, were simply invested in Federal On behalf of the AFL–CIO, I am writing to try, groups that usually do not support Government bonds, earning an interest urge you to support the Sanders-Feingold- my issues. This is what they say: rate of 3 or 4 percent. DeMint-Leahy-McCain-Grassley-Vitter- We urge you to vote for Senators Sanders, A number of observers believe—and Brownback amendment to increase trans- Feingold, DeMint, and Vitter’s Federal Re- the GAO can help us discover—the Fed parency at the Federal Reserve. Working serve Transparency Amendment.... This people want to know who benefitted from the amendment does not take away the ‘‘inde- provided zero interest loans to a large liquidity provided by taxpayers during the bank, which then took that money and pendence’’ of the Fed. It simply requires the crisis and this amendment will ensure that GAO to conduct an independent audit of the bought government bonds at 3 percent. we receive this information. Fed and requires the Fed to release the If that was the case, and I suspect it I received another letter, which came names of the recipients of more than $2 tril- was, you are looking at a huge scam— from the president of the SCIU, the lion in taxpayer-backed assistance during a huge scam—when small- and me- president of the United Steelworkers, this latest economic crisis. Any true finan- dium-sized businesses needed the the president of Public Citizen and cial reform effort will start with requiring money. That was the intention of these many other progressive groups and this accountability from our Nation’s central bank. loans. But I don’t know how much of is what they say: Let me thank all of the conservative this was invested in growth bonds, you Since the start of the financial crisis, the don’t know, and the American people Federal Reserve has dramatically changed groups—in this case the Americans for don’t know. It is time we found out. its operating procedures. Instead of simply Tax Reform, the Campaign for Liberty, This amendment I am offering is vir- setting interest rates to influence macro- and the others—for their very strong tually identical to legislation that I economic conditions, it rapidly acquired a grassroots effort in supporting this have offered on this subject that has 33 wide variety of private assets and extended amendment. It is an indication, again, cosponsors. The amendment, I think, massive secret bailouts to major financial that on certain issues progressives and has 20, 22 Democrats and Republicans. institutions. There are still many questions conservatives can come together. about the Fed’s behavior in these new activi- Let me mention this because I think The original legislation had 33 cospon- ties. The Federal Reserve’s balance sheet ex- sors. Just so you can get a sense of the it is possible that some of the Members panded to more than $2 trillion, along with do not know this. This amendment is diversity of ideological opinion behind implied and implicit backstops to Wall this amendment, let me tell you the Street firms that could cost even more. Who not a radical idea. As part of the budg- names of the people on board the legis- received the money? Against what collat- et resolution debate in April of 2009, lation—not the amendment, the legis- eral? On what terms and conditions? The the Senate voted overwhelmingly in support of this concept by a vote of 59 lation: Senators BARRASSO, BENNETT, only way to find out is through a complete audit of the Federal Reserve. That’s why we to 39. I brought that up. It was a non- BOXER, BROWNBACK, BURR, CARDIN, support the amendment to increase trans- binding vote, part of the budget resolu- CHAMBLISS, COBURN, COCHRAN, CORNYN, parency at the Fed. tion, 59 to 39. So many Senators have CRAPO, DEMINT, DORGAN, FEINGOLD, That is from the SEIU, and many already gone on record supporting GRAHAM, GRASSLEY, HARKIN, HATCH, other unions. that. HUTCHISON, INHOFE, ISAKSON, LANDRIEU, That is what some of the progressive Here is also an important piece of in- LEAHY, LINCOLN, MCCAIN, MURKOWSKI, groups, quite frankly, that I work with formation. In the House of Representa- RISCH, SANDERS, THUNE, VITTER, WEBB, quite often have to say about this tives, this concept passed the House Fi- WICKER, and WYDEN. amendment. But let me quote from nancial Services Committee by a vote Those are people who are on the some of the conservative organizations of 43 to 26 and was incorporated into original legislation—33 cosponsors. As that, frankly, I usually do not have the House version of the Wall Street you can see, they range from some of very good voting records with. Very reform bill that was approved by the the most progressive Members to some often they oppose what I bring forth. House last December. of the most conservative Members. The Here is the National Taxpayers Again, what we are talking about is amendment that is now on the floor Union. I don’t know how many folks something that was passed in the has, I believe, 22 cosponsors, Repub- they have, but they are a big organiza- House, and it is in the House bill. licans and Democrats alike, and I wish tion. This is what the National Tax- There is a variation. We are not the to thank all of them for their support. payers Union says: same, to be honest, but the same con- The American people are asking: Can The National Taxpayers Union urges all cept—for a Fed audit—already exists in people work together? Can they come Senators to vote ‘‘yes’’ on S. Amendment the Wall Street reform bill passed in together on important issues? If there 3738 to the financial regulatory reform legis- the House. is an important issue that people with lation. This amendment, introduced by Sen- This concept has the support of the different ideological backgrounds have ators Sanders and DeMint, would require the Speaker of the House, NANCY PELOSI, come together on, this is that one. So Government Accountability Office to con- who has said Congress should ask the I wished to thank my Republican duct an audit of the Federal Reserve. . . . Fed to put this information ‘‘on the friends and my Democratic friends I like their next sentence. Internet like they’ve done with the re- who, every other day, are fighting like Transparency is not a Democrat or Repub- covery package and the budget.’’ That cats and mice but on this issue have lican issue, but rather an issue of right or is exactly what this amendment would come together, and I appreciate that. wrong. If the Senate insists on further ex- panding the Fed’s reach, Americans deserve do. But it is not only the Members of the Here is another point many people Senate. In terms of progressive grass- to know more about the workings of a gov- ernment-sanctioned entity whose decisions don’t know. A lot of this language is in roots organizations, this amendment directly affect their economic livelihood. A the House bill. A lot of this language enjoys the strong support of the AFL– ‘‘yes’’ vote on S. amendment 3738 [this has already been supported in the Sen- CIO; the Service Employees Inter- amendment] will be significantly weighted ate last year as part of the budget reso- national Union, the single largest as a pro-taxpayer vote in our annual Rating lution. But here is an important point union in the country; the United Steel- of Congress. many people do not know. Bloomberg workers of America; Public Citizen; the That means I may have at least a 1- News service did a very good job, and New American Foundation; Center for percent approval vote from the Na- they have aggressively demanded, as a Economic Policy; U.S. Public Interest tional Taxpayers Union. I appreciate news organization, this information Research Group; Americans for Finan- their support. That is from the Na- about who the Fed lent money to be cial Reform, which is a coalition of tional Taxpayers Union. made public. As a result of their ef- over 250 consumer, employee, investor, Let me quote from another letter of forts, two Federal courts—not one, two community, and civil rights groups. support I received from a group of con- Federal courts—have ordered the Fed There is a huge amount of support servative organizations that includes to release all the names and details of from the progressive community. It the Americans for Tax Reform, the the recipients of more than $2 trillion also has a huge amount of support from Campaign for Liberty, the Rutherford in Federal Reserve loans since the fi- the conservative community. Institute, the Eagle forum, nancial crisis as a result of a Freedom Let me read, briefly, a letter I re- Freedomworks, and the Center for Fis- of Information Act lawsuit. ceived from the legislative director of cal Accountability—again, some of the So Bloomberg News filed suit and the AFL–CIO. This is what he says: more conservative groups in the coun- two Federal courts supported

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The Fed had argued in ing the period beginning on December 1, 2007 (iii) examine the establishment and oper- court in opposition to Bloomberg that and ending on the date of enactment of this ations of each facility described in sub- it should not have to release this infor- Act by the Board of Governors under the section (a)(1) and each Federal reserve bank mation, citing, according to Reuters— Asset-Backed Commercial Paper Money Mar- involved in the establishment and operations ket Mutual Fund Liquidity Facility, the thereof; and this is what the Fed said—‘‘an exemp- Term Asset-Backed Securities Loan Facil- (iv) identify changes to selection proce- tion that it said lets Federal agencies ity, the Primary Dealer Credit Facility, the dures for Federal reserve bank directors, or keep secret various trade secrets and Commercial Paper Funding Facility, the to other aspects of Federal reserve bank gov- commercial or financial information.’’ Term Securities Lending Facility, the Term ernance, that would— However, the U.S. Court of Appeals Auction Facility, Maiden Lane, Maiden Lane (I) improve how the public is represented; in New York disagreed. Here is what a II, Maiden Lane III, the agency Mortgage- (II) eliminate actual or potential conflicts unanimous three-judge appeals court Backed Securities program, foreign currency of interest in bank supervision; panel wrote in their opinion: liquidity swap lines, and any other program (III) increase the availability of informa- created as a result of the third undesignated tion useful for the formation and execution To give the Fed power to deny disclosure paragraph of section 13 of the Federal Re- of monetary policy; or because it thinks it best to do so would un- serve Act. (IV) in other ways increase the effective- dermine the basic policy that disclosure, not (2) ASSESSMENTS.—In conducting the audit ness or efficiency of reserve banks. secrecy, is the dominant objective. If the under paragraph (1), the Comptroller General (2) REPORT REQUIRED.—A report on the Board believes such an exemption would bet- shall assess— audit conducted under paragraph (1) shall be ter serve the national interest, it should ask (A) the operational integrity, accounting, submitted by the Comptroller General to the Congress to amend the statute. financial reporting, and internal controls of Congress before the end of the 90-day period This appeals court decision upheld an the credit facility; beginning on the date on which such audit is earlier ruling by the Southern Federal (B) the effectiveness of the collateral poli- completed, and such report shall be made District Court of New York that also cies established for the facility in mitigating available to— ordered the Fed to release this infor- risk to the relevant Federal reserve bank (A) the Speaker of the House of Represent- and taxpayers; atives; mation. In other words, we now have 59 (C) whether the credit facility inappropri- (B) the majority and minority leaders of Senators who, as part of the budget ately favors one or more specific partici- the House of Representatives; resolution, voted on this issue; 320 pants over other institutions eligible to uti- (C) the majority and minority leaders of Members of Congress, the House, and lize the facility; the Senate; two U.S. courts that have all told the (D) the policies governing the use, selec- (D) the Chairman and Ranking Member of Fed in no uncertain terms: Give us tion, or payment of third-party contractors the Committee on Banking, Housing, and transparency. That is what we have. by or for any credit facility; and Urban Affairs of the Senate and of the Com- As I wind down and conclude my re- (E) whether there were conflicts of interest mittee on Financial Services of the House of marks, let me just simply say that I with respect to the manner in which such fa- Representatives; and cility was established or operated. (E) any member of Congress who requests am thankful for all of the support, all (3) TIMING.—The audit required by this sub- it. the grassroots support from progres- section shall be commenced not later than 30 (c) PUBLICATION OF BOARD ACTIONS.—Not- sive and conservative groups, and from days after the date of enactment of this Act, withstanding any other provision of law, the my fellow Senators. The American peo- and shall be completed not later than 12 Board of Governors shall publish on its ple have a right to know when trillions months after that date of enactment. website, not later than December 1, 2010, of their dollars are being spent and who (4) REPORT REQUIRED.—The Comptroller with respect to all loans and other financial General shall submit a report on the audit assistance it has provided during the period gets it. The American people have a beginning on December 1, 2007 and ending on right to know whether there are con- conducted under paragraph (1) to the Con- gress not later than 12 months after the date the date of enactment of this Act under the flicts of interest. of enactment of this Act, and such report Asset-Backed Commercial Paper Money Mar- I thank my colleagues—there are so shall be made available to— ket Mutual Fund Liquidity Facility, the many cosponsors, I will not mention (A) the Speaker of the House of Represent- Term Asset-Backed Securities Loan Facil- them all—but I thank all of them. atives; ity, the Primary Dealer Credit Facility, the Let me conclude by saying I am very (B) the majority and minority leaders of Commercial Paper Funding Facility, the proud to say we have been working the House of Representatives; Term Securities Lending Facility, the Term Auction Facility, Maiden Lane, Maiden Lane with Senator DODD’s office and some (C) the majority and minority leaders of II, Maiden Lane III, the agency Mortgage- other offices. the Senate; (D) the Chairman and Ranking Member of Backed Securities program, foreign currency AMENDMENT NO. 3738, AS MODIFIED the Committee on Banking, Housing, and liquidity swap lines, and any other program I am going to ask that my amend- Urban Affairs of the Senate and of the Com- created as a result of the third undesignated ment be modified with the changes mittee on Financial Services of the House of paragraph of section 13 of the Federal Re- that are at the desk. I am proud to say Representatives; and serve Act— these modifications have been worked (E) any member of Congress who requests (1) the identity of each business, indi- it. vidual, entity, or foreign central bank to out with Senator DODD and would which the Board of Governors has provided (b) AUDIT OF FEDERAL RESERVE BANK GOV- allow the GAO to conduct a top-to-bot- such assistance; ERNANCE.— tom audit of all of the Federal Re- (2) the type of financial assistance provided (1) AUDIT.— serve’s emergency lending activities to that business, individual, entity, or for- (A) IN GENERAL.—Not later than 1 year since December 1, 2007. In addition, the after the date of enactment of this Act, the eign central bank; modifications require the Fed to put on Comptroller General shall complete an audit (3) the value or amount of that financial its Web site all of the recipients of over of the governance of the Federal reserve assistance; $2 trillion in emergency assistance bank system. (4) the date on which the financial assist- ance was provided; (B) REQUIRED EXAMINATIONS.—The audit re- since December 1, 2007. (5) the specific terms of any repayment ex- The PRESIDING OFFICER (Mrs. quired under subparagraph (A) shall— (i) examine the extent to which the current pected, including the repayment time period, SHAHEEN). The amendment is so modi- system of appointing Federal reserve bank interest charges, collateral, limitations on fied. directors effectively represents ‘‘the public, executive compensation or dividends, and The amendment (No. 3738), as modi- without discrimination on the basis of race, other material terms; and fied, is as follows: creed, color, sex or national origin, and with (6) the specific rationale for each such fa- At the end of title XI, add the following: due but not exclusive consideration to the cility or program. SEC. 1159. GAO AUDIT OF THE FEDERAL RESERVE interests of agriculture, commerce, industry, Mr. DODD. I will just take 30 sec- FACILITIES; PUBLICATION OF services, labor, and consumers’’ in the selec- onds. I will speak longer on this a little BOARD ACTIONS. tion of bank directors, as such requirement later. But let me thank our colleague (a) GAO AUDIT.— is set forth under section 4 of the Federal Re- from Vermont. He is a remarkable indi- (1) IN GENERAL.—Notwithstanding section serve Act; vidual who brings great intelligence 714(b) of title 31, United States Code, or any (ii) examine whether there are actual or and passion to this cause. He does not other provision of law, the Comptroller Gen- potential conflicts of interest created when eral of the United States (in this subsection the directors of Federal reserve banks, which get involved in every issue that comes referred to as the ‘‘Comptroller General’’) execute the supervisory functions of the up on the floor of the Senate. I admire shall conduct a one-time audit of all loans Board of Governors of the Federal Reserve that. Some believe they have to have and other financial assistance provided dur- System, are elected by member banks; something to say about everything.

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When as drafts and bills of exchange are en- The PRESIDING OFFICER. The Sen- much American taxpayer money has dorsed or otherwise secured to the sat- ator from Kansas. been exposed as has been, we have the isfaction of the Federal Reserve bank.’’ Mr. BROWNBACK. Madam President, right to know where it is going and Essentially, this means the Fed can I wish to thank my colleagues, Sen- who is involved in it. There was a con- lend to any entity or person when it ators SANDERS and DEMINT, for putting cern about whether the independence believes there is an emergency. This is forward, bringing this amendment to of the Fed would be compromised. He an extraordinary amount of power and the floor. I am a cosponsor of this has guaranteed in his language that is discretion, and it should be exercised in amendment, along with several of my no longer an issue whatsoever. I thank the light of day. Transparency, ac- other colleagues. him for it. It is a great amendment. countability—the public’s business I would say as well to my colleague I know Senator GRASSLEY wants to ought to be public. Trillions of dollars from Vermont, my colleague from be heard, and I yield the floor. were provided to financial institutions South Carolina, and others who are Mr. SANDERS. I thank the chair- and corporations since the financial sponsors, this is an issue I hear a lot man. crisis began. The Fed helped rescue about when I am traveling around my The PRESIDING OFFICER. The Sen- Fannie Mae and Freddie Mac. The Fed State, which is often. When I am trav- ator from Iowa. eling around and listening to people, Mr. GRASSLEY. Madam President, propped up Bear Stearns and AIG when they were on the brink of failure. They this is something people are concerned you have heard me say many times to about. They are concerned about the my colleagues that the public’s busi- intervened in the business efforts of monetary policy. They are concerned ness ought to be public. I don’t know Lehman Brothers, Merrill Lynch, and about the money system. They are con- why that does not apply to the Federal Citigroup. But how much has been doled out and cerned. Reserve, at least on its regulatory ac- to whom is still a mystery. This I would note to people, and to my tivities when it gives out money. There colleagues in particular, that the Con- are all kinds of reasons it should not amendment would allow the inde- gress created the Fed, the Fed didn’t apply to monetary policy. But for ev- pendent arm of Congress, the Govern- create the Congress. So the Congress erything else, the Federal Reserve is ment Accountability Office, to review does have control over this issue, and I acting at the behest of Congress the decisions made by the Federal Re- think we need to look at it and say: through a law going way back to 1913 serve. And the Government Account- Let’s look at what is appropriate and giving them certain powers. If Congress ability Office is nothing but a group of what is proper. And this is clearly one exercised these same powers—and professional people without a political piece of it. under the Constitution we have the au- motive and the right group to get the I think the Fed has done a number of thority to do that—it would be the job done and do it on an ongoing basis. things quite well and quite right. Yet I public’s business; in fact, even more An objective review of the Fed’s ac- don’t see any problem whatsoever with than what this amendment does. So tions will serve our country well in the having a simple audit; that that is the public’s business ought to be pub- future. going to somehow reveal the genie in lic. We can learn from the mistakes that With transparency, and that is what may have been made. We can deter- the bottle and let out all of these se- this amendment is all about, you get mine if the losses or profits from the crets that are going to be harmful to accountability—it seems to me, with Fed’s investments help serve the econ- the development of monetary policy. what has happened over the last 10 omy well. Did the Federal Reserve act There seems to me to be a fair amount years, more transparency leading to in an appropriate and ethical manner? of overstatement on the other side of accountability. If we had that trans- Was the relationship between regu- the terrible damage this audit would parency we probably would not have lators and the financial industry too do. That does not seem right to me. It had the bubble in the first place that cozy, hampering the ability to make an does not seem right to my constitu- broke in 2008, which brought us to this objective decision? ents. My constituents look at this and recession. Proponents of the Federal Reserve say: Well, I do not want to harm the So I rise not hesitantly but forth- should not consider this as a threat to development of monetary policy. I rightly to support the pending amend- the independence of the Fed—an inde- want it to be wise and good and sound. ment by the Senator from Vermont. I pendence I support. They should em- But I do not see how it is harmed by an appreciate all of his hard work on mak- brace an independent evaluation as an audit of an entity that is created by ing the Federal Reserve more account- opportunity to improve its operations the government, that is created by the able to the people of this country. I am and, most importantly, strengthen Congress. So why shouldn’t we do a cosponsor of his stand-alone bill, so I public trust for future generations who something like this? am glad to be a cosponsor of this may be faced with similar financial cri- That is why I think this is a prudent amendment, to bring sunshine to the ses. amendment. It is a good commonsense Fed. As the Senator from Vermont has amendment, and I think it will be well During the last 21⁄2 years, the Fed has made very clear, the intent of his received by the constituents of this gone well beyond what was viewed as amendment is not to interfere in mone- great country who I think are pretty its historical authority. It has taken tary policy. I share that same feeling wise on these and other decisions; that on more and more risk, in complicated he has, and I would not support an as we go around, if we will listen to and unprecedented ways. It intervened amendment that went into monetary what people are saying, I think there is in the market to prop up certain firms. policy. But the Fed’s extraordinary a lot of wisdom in that. They are say- It intervened in the market to protect power outside of monetary policy ing we ought to know more about what these firms from failing, using an un- should be subject to the light of day, is taking place in the Fed. limited source of taxpayers’ dollars to, transparency and accountability. The I know we would all like to move for- in effect, pick winners and losers. public’s business ought to be public. We ward on financial regulatory reform The risks they have taken will ulti- should allow the Government Account- legislation. I have some serious prob- mately be borne by the American tax- ability Office to audit the Fed since lems in this bill. I think the consumer payers. So in the interest of account- they have moved far beyond their tra- financial product piece shouldn’t pe- ability, the taxpayers deserve to have ditional and primary mission of con- nalize auto dealers and orthodontists answers on who got money and how it ducting monetary policy. and others who did not cause any of was spent. I yield the floor. these problems.

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