Providing For Consideration Of Senate Amendment To H.R. 627, Credit Cardholders' Bill Of Rights Act Of 2009

Floor Speech

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Mr. SESSIONS. Mr. Speaker, I want to thank the gentlewoman for yielding the appropriate time.

Mr. Speaker, I rise today in opposition to this rule and to the underlying legislation. This closed rule does not call for the open and honest debate that has been promised time and time again by my Democrat colleagues. Today's action by my friends on the other side of the aisle is yet another example of the Federal Government overstepping its boundaries into the private marketplace.

Mr. Speaker, today I will inform you of the parliamentary games that my Democratic colleagues are playing on this bill with a gun provision adopted by the Senate. We will discuss why Congress is pushing a bill that already exists in Federal statute, which not only limits credit and raises interest rates to responsible borrowers today. Small business will feel the impact also; and, finally, to review Congress' need to regulate every sector of the economy while they refuse to manage their own gross spending habits of the taxpayer dollar.

The Senate managed to add a provision in this legislation that would allow visitors of national parks and refuges to legally carry licensed firearms by a large bipartisan majority of 67-29. While this does not add power to the overregulated credit bill, it does provide an important legislative victory for Second Amendment rights. Yet my Democratic colleagues have separated the vote on this bill in two separate sections, one vote on the gun provision and one vote on the credit card bill.

Mr. Speaker, I would like to know why is this? Why is this that we take a piece of legislation from the Senate and because it is not liked by the Democratic leadership here, we separate that bill? Have my friends on the other side of the aisle split this vote to increase government regulation while voting against constitutional rights?

Not even 6 months ago, the Federal Reserve passed new credit card rules that would protect consumers and provide for more transparency and accountability in our credit market. These new regulations are set to take effect in July of 2010, an agreed-upon date to ensure the necessary time for banks and credit card companies to make the crucial adjustments to their business practices without adversely hurting consumers. With the growing Federal deficit, the current economic crisis and the growing number of unemployed, why is Congress now passing legislation that already exists in Federal statute?

This legislation allows for the Federal Government to micromanage the way the credit card and the banking industry does its business. If enacted into law, it is not credit card companies that will suffer. It will be everyone that has a credit card and, I might add, those who would like to have a credit card in the future. Every American will see an increase in their interest rates. And some of the current benefits that encourage responsible lending will most likely disappear, for example, cash advances and over-the-limit protection.

My friends on the other side of the aisle not only remove any incentive for using credit cards responsibly, but they punish those who manage their credit responsibly to subsidize the irresponsible.

Mr. Speaker, the Democrats also want to limit the amount of credit available to middle and low-income individuals, the very Americans who need to take most advantage of credit. A Politico article written last Friday discusses that the changes in this bill ``will dramatically raise the costs of extending loans to cardholders and cause the riskiest cardholders to be dropped altogether.'' It goes on to mention how bad this bill is in regard to the current economic downturn and how restricted access to credit cards will make it increasingly harder to purchase the essential family staples while dealing with job layoffs and temporary unemployment.

Additionally, the strain of this legislation could have a direct and adverse impact on small business. Small businesses are critical to this economy in making sure that we have economic and job growth in this country. For individuals starting a small business, this legislation will increase their interest rates, reduce benefits and shrink the availability of credit, potentially limiting their options even to succeed in the marketplace.

Meredith Whitney, a prominent banking analyst, predicts, in a Wall Street Journal article from March, a $2.7 trillion decrease in credit will be available by the year 2010 out of the current $5 trillion credit line available in this country. That means it will almost be cut well in half. Mr. Speaker, with the current state of the economy, we urgently need to increase liquidity and lower the cost of credit to stimulate even more lending, not raise rates and reduce the availability of credit. This is not a solution for the ailing economy.

This type of government control of private markets is all about what our Democratic colleagues and this administration have been exploring. Whether it is federalizng our banks, credit markets, health care or energy, the list goes on and on. That said, this administration has taken their power grab a step further. Now they are considering a take-over of the financial industry. Converting preferred shares into common equity signals a dramatic shift towards a government strategy of long-term ownership and involvement in some of the Nation's largest banks.

Millions of Americans are rightfully outraged at the mismanagement of TARP and the reckless use of their tax dollars. And I believe that taxpayers are increasingly uneasy with the Federal Government's growing involvement in the financial markets. Bloomberg.com had an article yesterday which highlighted that three of our large banks have applied to repay $45 billion in TARP funds. That means they had to tell the government we would like to pay back the money, is that okay, largely due to these burdensome regulations that the Treasury Department continues to place on them. But just last week, Secretary Geithner announced that he is considering reusing bailout repayments for smaller banks. This is completely unacceptable, and why I have repeatedly called for a solid exit plan for American taxpayers to be repaid by these TARP dollars. TARP dollars were never set up to be used as a revolving fund for struggling banks.

To preempt de facto nationalization of our financial system, on February 3, 2009, the House Republican leadership, including myself, sent a letter to Secretary Geithner regarding what was called the ``range of options'' this administration was considering in managing the $700 billion of taxpayer moneys.

Mr. Speaker, I will insert into the Record a letter that was sent to Secretary Geithner at that time.

CONGRESS OF THE UNITED STATES,

Washington, DC, February 3, 2009.
Hon. TIMOTHY F. GEITHNER,
Secretary, U.S. Department of the Treasury,
Washington, DC.

DEAR SECRETARY GEITHNER: Recent reports indicate that the Administration is considering a ``range of options'' for spending the second tranche of the Troubled Asset Relief Program (TARP) released last week and that the Administration is considering whether to ask the Congress for new and additional TARP funds beyond the $700 billion already provided. We are writing to raise serious questions about the efficacy of the options being considered and to ask whether the Administration is developing a strategy to exit the bailout business.

Because the Administration has committed itself to assisting the auto industry, satisfying commitments made by the previous Administration, and devoting up to $100 billion to mitigate mortgage foreclosures, it has been reported that President Obama might need more than the $700 billion authorized by the Emergency Economic Stabilization Act (``EESA'') to fund a ``bad bank'' to absorb hard-to-value toxic assets. In light of these commitments--which come at a time when the Federal Reserve is flooding the financial system with trillions of dollars and the Congress is finalizing a fiscal stimulus that is expected to cost taxpayers more than $1.1 trillion--it is not surprising that the American people are asking where it all ends, and whether anyone in Washington is looking out for their wallets.

Indeed, a bipartisan majority of the House--171 Republicans and 99 Democrats--recently expressed the same concerns, voting to disapprove releasing the final $350 billion from the TARP. As we noted in our December 2, 2008 letter to then-Secretary Paulson and Chairman Bernanke, we realize that changing conditions require agility in developing responses. However. the seemingly ad hoc implementation of TARP has led many to wonder if uncertainty is being added to markets at precisely the time when they are desperately seeking a sense of direction. It has also intensified widespread skepticism about TARP among taxpayers, and prompted misgivings even among some who originally greeted the demands for the program's creation with an open mind. Accordingly, we request answers to the following questions:

1. How does the Administration plan to maximize taxpayer value and guarantee the most effective distribution of the remaining $350 billion of TARP funds?

2. How is the Administration lending, assessing risk, selecting institutions for assessing, and determining expectations for repayment?

3. Will the Administration opt for a complex ``bad bank'' rescue plan? How can the ``bad bank'' efficiently price assets and minimize taxpayer risk? Will financial institutions be required to give substantial ownership stakes to the Federal government to participate in the program?

4. Is a ``bad bank'' plan an intermediate step that leads to nationalizing America's banks?

5. Can you elaborate on your plans for the use of an insurance program for toxic assets? Specifically, will you seek to price insurance programs to ensure that taxpayer interests are protected? If so, how will you do so?

6. What is the exit strategy for the government's sweeping involvement in the financial markets?

Thank you for your consideration of these important questions.

Sincerely,
John Boehner; Mike Pence; Cathy McMorris Rodgers; Roy Blunt; Eric Cantor; Thaddeus McCotter; Pete Sessions; David Dreier; Kevin McCarthy; Spencer Bachus.

This letter outlined a host of questions that deal with ensuring that the taxpayers would be paid back and also having an exit strategy for the government's sweeping involvement in the financial markets. Today is May 20, and over 3 months later, there has been no response by Secretary Geithner to the Republican leadership letter.

A couple of weeks ago, the Special Inspector General for the Troubled Asset Relief Program, TARP, published a report that reveals at least 20 criminal cases of fraud in the bailout program and determined that new action by President Obama's administration are ``greatly increasing taxpayer exposure to losses with no corresponding increase in potential profits.'' This is why you see the Republican leadership asking questions. This administration has not responded to our letter.

This administration is not above oversight and accountability. The American people deserve answers for their use of tax dollars and an exit strategy from taxpayer-funded bailouts, including how their investment in TARP will be returned. That is why I sent another letter to Secretary Geithner on April 23 of this year expressing grave concern to the recent reports of the Treasury moving taxpayer dollars into riskier investments in banks' capital structures.

Mr. Speaker, I will insert into the Congressional Record a copy of this letter dated April 23 to Secretary Geithner.

HOUSE OF REPRESENTATIVES,

Washington, DC, April 23, 2009.
Hon. TIMOTHY GEITHNER,
Secretary, Department of the Treasury,
Washington, DC.

DEAR SECRETARY GEITHNER: I am greatly concerned by recent news reports that the Administration is considering converting the government's preferred stock in some of our nation's largest banks--investments acquired through the TARP program--into common equity shares in these publicly-held companies.

As you are aware, these investments were originally made to their recipients at fixed rates for a fixed period of time--signaling that their intent was to provide these banks with short-term capital for the purpose of improving our financial system's overall position during a time of crisis. Converting these shares into common equity, however, signals a drastic shift away from the Administration's original purpose for these investments to a new strategy of long-term ownership of and involvement in these companies.

I am concerned that converting these preferred shares into common equity would have two serious and negative effects. First, it would bring the banks whose shares are converted closer to de facto nationalization by creating the potential for the government to play an increasingly activist role in their day-to-day operations and management.

Second, I am concerned that moving these investments further down the bank's capital structure into a riskier position puts American taxpayer dollars at increased risk of being lost in the event of a recipient's insolvency.

To date, no Administration official has provided the House Republican Leadership wish any comprehensive answers to the serious questions raised in our February 2, 2009 letter to you about the Administration's exit strategy for the government's growing involvement in the financial markets.

In absence of the Administration's response to that letter, I would appreciate your prompt assurance that converting these preferred shares to common equity--thereby taking these companies closer to nationalization and putting taxpayers' money at increased risk--is not a part of the Administration's yet-to-be-articulated strategy on getting out of the bailout business.

Thank you in advance for your prompt attention to this issue of critical importance to me, the residents of Texas' 32nd District and the entire taxpaying American public. If you have any questions regarding this letter, please feel free to have your staff contact my Chief of Staff Josh Saltzman.

Sincerely,

Pete Sessions,
Member of Congress.

As this Democrat Congress continues to tax, borrow, and spend American's hard-earned tax dollars, we move even closer to nationalizing our banks and credit systems, which will only deepen our current economic struggle. The Federal Government's interference in hindering our progress is apparent, while they should be there to help solidify making our system stronger and better. When Congress or the administration changes the rules, it should be in the best interest of the American public. But I can honestly say that this is not the case today.

Mr. Speaker, it is appropriate to consider new ways to protect consumer credit and consumers from unfair and deceptive practices and to ensure that Americans receive useful and complete disclosures about terms and conditions. But in doing so, we should make sure that we do nothing to make credit cards more expensive for those who need this credit or to cut off or hinder access to credit for small business with those less-than-perfect histories.

While reading the Wall Street Journal a few weeks ago, I came across an op-ed called ``Political Credit Cards'' discussing this very issue. It states: ``Our politicians spend half their time berating banks for offering too much credit on too easy terms, and the other half berating banks for handing out too little credit at a high price. The backers should tell the President that they'll start doing more lending when Washington stops changing the rules.'' This speaks to exactly what happened with TARP, health care, welfare, taxes, and lots of other legislation, including that underlying legislation today.

Mr. Speaker, the American people deserve better from their elected officials. I encourage my colleagues to vote against this rule.

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Mr. SESSIONS. Mr. Speaker, we spoke just a minute ago about how banks had accepted these TARP funds and accepted them because it was necessary at the time to ensure the financial success of the banking system. And yet now here we are a few months later and the banks have undergone their stress tests. The banks understand more about the risk that is out there. And yet even as companies like JPMorgan Chase want to refund $45 billion or give it back to the government, the government is balking at them doing that.

The reason why is, as this article in Bloomberg.com states, because the government has a methodology that they want to follow which would cause banks to be in a different position because--in other words, not run their business the way they want--because government wants to tell them what the rules and regulations would be. And it appears as though that that is what this Treasury Department wants to do, that they have delayed banks paying back the money so that they can then put rules and regulations industrywide on anyone that took this money.

Mr. Speaker, what should happen is we should have a Treasury Department that eagerly, gleefully wants to get back money that was given to them on behalf of the taxpayer. And instead what happens is we have a Treasury Department that is delaying this. It is making it, I believe, more difficult, all under the guise, then, of trying to make sure that they get what they want, and that is exacting more rules and regulations on these banks.

I think that the Treasury Department should respond back to our letter. They should tell us what the exit strategy is, how people should pay back the money, and let the free enterprise system go about its job of creating not only a better economy, but also creating an opportunity to raise stock prices and employment in this country by doing their job in the free enterprise system.

I will include this article from Bloomberg.com as part of our testimony today.

Morgan Stanley, JPMorgan, Goldman Said To Apply To Repay TARP
(By Christine Harper and Elizabeth Hester)

May 19 (Bloomberg)--Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley applied to refund a combined $45 billion of government funds, people familiar with the matter said, a step that would mark the biggest reimbursement to taxpayers since the program began in October.

The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn't public. Spokesmen for the three banks declined to comment, as did Calvin Mitchell, a spokesman for the Federal Reserve Bank of New York.

If approved, the refunds would be the most substantial since Congress established the $700 billion Troubled Asset Relief Program last year to quell the turmoil that followed the bankruptcy of Lehman Brothers Holdings Inc. Banks want to return the money to escape restrictions on compensation and hiring that were imposed on TARP recipients in February.

``It really is a way for them to break from the herd,'' said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which holds Goldman Sachs and JPMorgan shares among the $13.8 billion it oversees. ``It's a great way to attract customers, personnel, capital.''

Treasury Secretary Timothy Geithner said on April 21 that he would welcome firms returning TARP funds as long as their regulators sign off. He added that regulators will consider whether banks have enough capital to keep lending and whether the financial system as a whole can supply the credit needed to ensure an economic recovery.

GEITHNER'S ``BROAD CONSTRAINTS''

One of the people familiar with the efforts by the banks to repay TARP said he anticipates that the government would prefer to issue industrywide compensation guidelines before allowing any major banks to repay TARP money.

Geithner said yesterday that he would like to establish ``some broad constraints'' on compensation incentives in the financial industry instead of setting limits on pay. A law that went into effect in February sets a cap on the bonuses that can be paid to the highest-paid 25 employees at banks that have more than $500 million of TARP funds. Banks are awaiting guidance from the Treasury on how to implement the rules, such as how to determine which people to count in the top 25.

JPMorgan, Goldman Sachs, and Morgan Stanley were among nine banks that were persuaded in mid-October by then-Treasury Secretary Henry Paulson to accept the first $125 billion of capital injections from the TARP program to help restore stability to the financial markets.

STRESS-TEST RESULTS

The refunds would be the first by the biggest banks that participated in the program. As of May 15, 14 of the smaller banks that received capital under the program had already repaid it, according to data compiled by Bloomberg.

The 19 biggest banks were waiting for the conclusion earlier this month of so-called stress tests to determine whether they would require additional capital to withstand a further deterioration of the economy.

Goldman Sachs and JPMorgan, the fifth- and second-biggest U.S. banks by assets, were found not to need any more money. Morgan Stanley, the sixth-biggest bank, raised $4.57 billion by selling stock this month, exceeding the $1.8 billion in additional capital the regulators said the bank may require.

``WRONG TIME''

While executives at Goldman Sachs and JPMorgan have expressed a desire to repay their TARP money for months, Morgan Stanley Chairman and Chief Executive Officer John Mack told employees on March 30 that he thought it was ``the wrong time'' to repay the money.

Morgan Stanley, which reported a first-quarter loss, also slashed its quarterly dividend 81 percent to 5 cents. On May 8, when the company sold stock, it also sold $4 billion of debt that didn't carry a government guarantee. Selling non-guaranteed debt is a prerequisite for repaying TARP money.

The banks will also have to decide whether to try to buy back the warrants that the government received as part of the TARP investments. The warrants, which could convert into stock if not repurchased, would add to the cost of repayment.

JPMorgan, which has $25 billion of TARP money, would need to pay about $1.13 billion to buy back the warrants, according to a May 14 estimate by David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller. Morgan Stanley's warrants would cost $770 million and Goldman Sachs's would cost $685 million, Trone estimated, using the Black-Scholes option-pricing model.

BANK SHARES

Goldman Sachs and Morgan Stanley shares have climbed since Oct. 10, the last trading day before the banks were summoned to a meeting by Paulson and informed of the government's plans to purchase preferred stock in them. Goldman Sachs, whose stock closed today at $143.15 in New York Stock Exchange composite trading, is up 61 percent. Morgan Stanley, which closed today at $28.28, has almost tripled from $9.68.

JPMorgan shares, by contrast, are 11 percent lower at today's $37.26 closing price than they were on Oct. 10, when they closed at $41.64.

Banks could open themselves up to lawsuits if they repay the money too quickly and end up needing to ask the government for help in the future, James D. Wareham, a partner in the litigation department at Paul Hastings Janofsky & Walker LLP said last week.

CNBC on-air editor Charlie Gasparino reported on May 15 that Goldman Sachs and JPMorgan believe they have been given permission to exit the TARP. He reported yesterday that Morgan Stanley is seeking preliminary assurances that it can exit the program.

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Mr. SESSIONS. Mr. Speaker, I appreciate the gentlewoman letting me know that she has no further speakers.

Mr. Speaker, one of the things that we spoke about earlier was the letters that the Republican leadership has sent to Secretary Geithner asking questions about Treasury's plans now about not only the use of TARP funds, how they will be paid back, what that process is, and finally, the exit strategy from the TARP program.

The Republican leadership in this House sent a letter to Secretary Geithner months ago. We have not heard anything back, certainly not in writing. So we have looked across the news media for releases that came from the Secretary, and among other things, we have seen things that disturb us greatly. One of those is that the Secretary has openly talked about the wanting to have this Federal Government change the investment that was made in these banks from, in essence, one type of instrument to another. In this case, it was from preferred stock to common stock.

In other words, since they put the money in the system, in the banks, and they cut a deal about what they would do, they now want to change the rules of the game. I believe that is not only unhealthy, I think it would absolutely be against the spirit of the law that we passed about the intent.

What happens when you do this is now the Federal Government would then become a common shareholder, meaning that the government would be investing in the stock market. The government would become a partner in that effort, meaning that the government, as such a large player, could determine the stock price up and down. I think that is a bad deal. I think that's a bad deal not just for the free enterprise system, but I think that's a bad deal for this government. It puts them into a position where the government helps control the stock market and the stock price.

We've asked Secretary Geithner what he thinks about that. Secretary Geithner has not responded except to say that that is reserved as an option. And now on May 13, we see that Secretary Geithner announces that the bailout repayments will be reused for smaller banks. That means that the money that was lent as part of the TARP program, when the money comes back in, Secretary Geithner is now going to reallocate that to smaller banks.

It should be noted that what happened is a number of these banks have already received the money. But the TARP program, by the way it was set up, it said that when the money comes back in, it will go back into general funds. In other words, it was taken out of general funds. It was expected that it would be paid back plus interest and would come back to us.

Despite what Secretary Geithner says, there are some Members of this body who are very clear about what they think about that. And as this ABC News, off their Web site, dated May 13 article said, Despite the warm welcome Geithner's announcement received from the assembled bankers, some Capitol Hill lawmakers are none too happy with the plan to repay taxpayer money back out to smaller banks.

And it talks about Representative Brad Sherman, who is a Member of this body and a Democrat from California, ``blasted Geithner on the House floor today, citing part of the original TARP bill--Section 106D--that he said meant that these plans were `illegal.'

``It is being widely accepted in the press and on Wall Street and in Washington that whatever the Secretary gets back from the banks will instead be part of some revolving fund from which the Secretary of the Treasury may make additional bailouts in addition to the first $700 billion of expenditures.''

It says, ``Sherman went on, `Well, the statute is very clear to the contrary, whatever is returned to the Treasury,' '' it is returned to the Treasury. It goes into the general fund.

Mr. Speaker, what we're talking about is the Secretary of the Treasury has the authority and the responsibility to manage these funds. I do recognize that as these funds were given, there was a change of administration. I believe, and I think this Congress believes, that Secretary Geithner was a part of that transition. But now that the Secretary has been in office and he has assembled his team, it's time that the Secretary be very plain and write back at least those people who are writing letters, including the Republican leadership, asking what the plan is.

Seeing press releases as they come out one at a time as the Secretary chooses to do this is not a plan. We're after a thoughtful idea and process now that we've been through the stress test about how the American taxpayer can be paid back. And I think the $700 billion plus interest is what needs to come back to the Treasury and go into the general fund

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Mr. SESSIONS. I thank the gentleman for not only coming to the floor but for his thoughtful ideas.

Mr. Speaker, in closing, I'd like to stress that while my friends on the other side of the aisle claim to be protecting consumers with this legislation, in reality, they're going to limit credit, reduce benefits, and raise interest rates for every single consumer, whether they were a good consumer or a risky consumer.

I think the American taxpayer, really, the American public, including small businessmen and -women, really deserve the same accountability and transparency with their dollars to be used in a way that they see fit.

Mr. Speaker, we as a Nation have a real problem, and we need real solutions, and passing this legislation today when we already have a statute that will take place is simply a waste of time.

We need to protect jobs. We need to provide more jobs. We need to encourage economic growth. And we need to restore the American public's faith in their Members of Congress.

And I believe today you have heard very succinctly the Republican Party come down and talk about how this bill is a big overreach that will impact and cause problems to a system rather than making it better.

With that, I encourage a ``no'' vote on this closed rule.

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