Fraud Enforcement and Recovery Act of 2009

Floor Speech

FRAUD ENFORCEMENT AND RECOVERY ACT OF 2009 -- (Senate - April 23, 2009)

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AMENDMENT NO. 1006

Mr. SCHUMER. Mr. President, I thank you for recognizing me. I thank our chairman of the Judiciary Committee, Senator Leahy, and one of our senior Republican Members, Senator Grassley, for not only managing this bill but for introducing it. I am a cosponsor of the underlying bill, the Fraud Enforcement and Recovery Act, because it provides much needed tools to go after fraudsters, crooks, and thieves, and other common criminals who have taken advantage of a bad economy to rob unsuspecting Americans of their savings.

I thank Senators Leahy, Grassley, Kaufman, and Specter, and all the other cosponsors of the bill for their hard work and making sure we finally do something about financial crime.

From the beginning, however, I have been of the view that there was one major omission--a glaring omission--from this bill. The bill would authorize $165 million a year for the Department of Justice, including $75 million more for FBI agents, as well as money for prosecutors and fraud lawyers.

That is all to the good. It would also provide $30 million to the Postal Inspection Service, $30 million to the IG of the Department of HUD, $20 million for the Secret Service, all to investigate financial and mortgage fraud. But if one reads the list, one thing is missing, and that is the Securities and Exchange Commission.

Thanks to the hard work of many, including my cosponsor of this amendment, Senator Shelby, and Senator Grassley, the lead Republican sponsor of the bill, we have come up with a compromise provision. Initially, on the amendment we were going to offer, Senator Grassley raised some very valid points, and we have been working in the last 2 days to come to an agreement, and I am proud to say we have.

This amendment provides $20 million for SEC enforcement. It would also give an additional $1 million to the SEC's Office of Inspector General. I am pleased to have played a role in putting together this package which will ultimately benefit the American public through safer markets and better policing of our financial system.

The authorization to the SEC is necessary for fighting exactly the kind of fraud that is covered by this bill. Leaving the SEC out of this bill is a little like fighting a war without the marines. The SEC is often the first line of enforcement before the criminal authorities get involved.

The SEC staffing decreased by 10 percent from 2005 to 2007. The agency has only begun to recover from these decreases. It is understaffed by more than 115 employees.

Shockingly, the SEC's technology budget, the budget that determines the agency's ability to analyze what went wrong in the markets and who caused it, is still only 50 percent of what it was in 2005.

We need to pass this bill now, and we need to adopt this amendment now. Literally, every day there is a new story about a new fraud that robbed guileless consumers of millions, sometimes billions, of dollars. Our authorizations for prosecutions after the S&L crisis, which I played a role in when I was in the House of Representatives, resulted from around 600 convictions and $130 million in ordered restitution between 1991 and 1995.

So far, even while the FBI is working on 2,000 mortgage fraud cases and while the SEC has opened more than three dozen investigations into subprime-backed securities, we have not provided law enforcement with the additional funds to put the bad guys before the courts and in jail, even though white-collar enforcement by the Federal Government has been dangerously depleted.

I want to point perhaps to one of the most high profile fraud cases in the history of our country--a case that was not brought soon enough--to explain why the SEC needs help, even though it also deserves criticism and even outrage for their previous actions. This is, of course, the case of Bernard Madoff and the tens of billions of dollars he stole from sophisticated and unsophisticated investors alike.

We don't know all the facts yet, but all signs point to some kind of dereliction of duty at the SEC. When we find out what went so horribly wrong, we will figure out how to fix it. But this much we know: The SEC receives hundreds of thousands of tips a year about investment fraud. We don't know why the SEC didn't catch on to the complaints of at least one brave whistleblower, Harry Markopolos, and none of us here would ever excuse it. We can acknowledge, though, that the SEC does not have sufficient technical and human resources to assess sophisticated trading patterns, complex financial instruments, and risk factors in the marketplace.

When a complaint comes in, even a detailed complaint, such as the one received from Mr. Markopolos, they did not effectively triage it.

The SEC's budget has barely kept up with inflation and cost of living adjustments. It is not clear whether budget cuts caused them to let Madoff fall through the cracks, but certainly budget increases wisely spent--and I have faith that the new Chair will certainly do that--will help prevent future Madoffs from happening.

One of the things the SEC wants to do with the money we provide here is to hire people with specialized industry skills, develop systems for nationwide data centers----

The PRESIDING OFFICER. The Senator has used 5 minutes.

Mr. SCHUMER. I ask unanimous consent for 2 more minutes.

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

Mr. SCHUMER. One of the things the SEC wants to do with this money is to hire people with specialized industry skills, develop systems for nationwide
data searches based on tips and complaints, and include their risk modeling involving market data and intelligence.

It is incredible the chief regulator of the most sophisticated economy in the world does not have this capability. Let's help get the right cops on Wall Street and then get them the resources they need to fight crime. Everyone has to do more with less these days, but I am not in favor of less resulting in letting bad guys go free.

I thank my colleague, Senator Grassley. As I said, the compromise we have come up with I think is fair because it both beefs up the SEC and deals with Senator Grassley's concerns related to the inspector general. I hope that at some point--we are still awaiting a letter from the SEC--we can ask unanimous consent to move this amendment forward. It has bipartisan support.

With that, Mr. President, I yield the floor.

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AMENDMENT NO. 1006

Mr. SCHUMER. I ask unanimous consent that my amendment No. 1006 be called up.

The PRESIDING OFFICER. The amendment is pending.

Mr. SCHUMER. Madam President, I ask unanimous consent that the amendment be passed.

The PRESIDING OFFICER. Is there any further debate on this issue?

If not, the question is on agreeing to the amendment.

The amendment (No. 1006) was agreed to.

Mr. SCHUMER. Madam President, I wish to note to the body that this is the SEC amendment that adds $20 million for new SEC staff and investigators and another $1 million for the IG within the SEC. This was the one part of this very fine piece of legislation that wasn't included. Of course, if you are looking at financial fraud--the kind Bernie Madoff and so many others did--beefing up the SEC and making sure they are much tougher and more focused, as the technology parts of this amendment will allow, is what we need.

Senator Grassley wanted to make sure the SEC avoided past mistakes under its old leadership and made some very useful suggestions. That is why the SEC wasn't included originally. We agreed on those. I wish to thank him, Senator Leahy, as well as Senator Shelby, who has been my cosponsor for passing this legislation.

I also wish to thank our new chair at the SEC, Chair Schapiro. Mary Schapiro is a breath of fresh air within the SEC. She is trying to shake it up and focus on the kinds of mistakes we have seen in the past where the whistleblower came before the SEC and gave them the goods on Madoff and they passed it by. It won't happen again. This amendment should help make that happen and strengthen this fine legislation.

I yield the floor.

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