Military Construction, Veterans Affairs And Related Agencies Appropriations Act, 2010 - Continued

Floor Speech

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Mr. SANDERS. Mr. President, I think, as most Americans understand, as a result of the greed, the recklessness, the illegal behavior of a relatively small number of financial institutions, the United States of America is currently in the midst of the worst economic and financial crisis since the Great Depression. Millions of Americans have lost their jobs. Millions of other Americans are working longer hours for lower wages. People have lost their homes, people have lost their savings, people have lost, in many respects, their hope.

On Friday we learned that the official unemployment rate is now 10.2 percent, the highest in over 26 years. But the official unemployment rate tells only half the story. If you add the number of people who are underemployed, if you add the number of people who have given up looking for work, what you find is we have 27 million people in that category of unemployed or underemployed, which is 17.5 percent of the American workforce. That is an astronomical number. Obviously there are areas of our country, in the Midwest and California, where the number is substantially higher than that.

Over a year has come and gone since Congress passed the $700 billion bailout of Wall Street. In addition, of course, the Federal Reserve has committed trillions of dollars in zero interest loans and other assistance to large financial institutions. Added together, this amounts to the largest taxpayer bailout in the history of the world.

President Bush, former Treasury Secretary Hank Paulson, and Fed Chairman Ben Bernanke told us we needed to bail out Wall Street because we could not allow huge financial institutions and insurance giants to fail. They said if any of these large institutions failed, it would lead to systemic damage to the financial system and, in fact, the entire economy.

One might think, if these institutions then were too big to fail, it doesn't take a Ph.D. in economics to figure out maybe one of the important solutions would be to make them smaller. Too big to fail? Well, let's reduce their size.

Yet in the last several years these financial institutions in many respects did not get smaller but, amazingly enough, they got larger. Too big to fail. What do we do? Make them larger. If that makes sense to somebody, it doesn't actually make sense to me, nor do I think to a majority of Americans.

Last year the Bank of America, the largest commercial bank in this country, which received a $45 billion taxpayer bailout, purchased Countrywide, the largest mortgage lender in this country, and Merrill Lynch, the largest brokerage firm in the country. So you had a huge bank--too big to fail. They became larger through the consolidations of Countrywide and Merrill Lynch by the Bank of America.

Last year JPMorgan Chase, which received a $25 billion bailout from the Treasury Department and a $29 billion bridge loan from the Federal Reserve, acquired Bear Stearns and Washington Mutual, the largest savings and loan in the country. Too big to fail? Well, what happens if you are JPMorgan Chase? You become bigger.

Last year the Treasury Department provided an $18 billion tax break to Wells Fargo to purchase Wachovia, allowing that bank to control 11 percent of all bank deposits in this country. Too big to fail? If you are Wells Fargo, make it bigger.

Today these huge financial institutions have become so big that the issue now is not just too big to fail and taxpayer liability, the issue becomes concentration of ownership. According to the Washington Post, the four largest banks in the United States--that is the Bank of America, Wells Fargo, JPMorgan Chase, and Citigroup--now issue one out of every two mortgages. Half of the mortgages in America are issued by four large financial institutions. Two out of every three credit cards in this country are issued by the four largest financial institutions of the country. These same institutions hold $4 out of every $10 in bank deposits in the entire country.

What we are looking at here is not just taxpayer liability for when huge financial institutions collapse and the taxpayers have to bail them out; now what we are also looking at is concentration of ownership where a handful--four major financial institutions--controls half of the mortgages, 2 out of 3 credit cards, and 40 percent of bank deposits in the entire country. That is wrong from a competitive point of view, from a point of view that the consumer has to have some choices and has to see some competition in order to get a break.

The face value of over-the-counter derivatives at commercial banks has grown to $290 trillion--that is an astronomical sum of money--95 percent of which is held in 5 financial institutions in the entire country. Five financial institutions control 95 percent of over-the-counter derivatives. Derivatives are nothing more than side bets by Wall Street gamblers that oil prices will go up or down or that the subprime mortgage market will continue to get worse or betting on the weather or whatever else can make them a quick buck. Risky derivative schemes led to the $182 billion bailout of AIG, the collapse of Lehman Brothers, the downfall of Bear Stearns, and precipitated the largest bailout in the history of the world and the severe recession that millions and millions of people are experiencing today through their loss of jobs.

If any of these financial institutions were to get into major trouble again, taxpayers one more time would be on the hook for another substantial bailout. In fact, the next time it might even be bigger than we saw last year. Now is the time to say clearly we cannot allow that to happen. Not only are too-big-to-fail financial institutions bad for taxpayers, the enormous concentration of ownership in the financial sector has led to higher bank fees. Every Member of the Senate has heard from constituents who pay their credit card bills on time every single month, they then bailed out Wall Street, and what they get in return is interest rates which have gone from 10 percent or 15 percent to 25 percent or 30 percent. That is what you get when four large financial institutions control two-thirds of the credit cards in this country.

According to Businessweek, ``Bank of America sent letters notifying some responsible card holders that it would more than double their rates to as high as 28 percent.''

That is what we are seeing all over this country. Credit card interest rates went up by an average of 20 percent in the first 6 months of this year, even as banks' cost of lending declined. We all know this. Here are these guys on Wall Street. We bailed them out. They become bigger. And they say: Thank you, America. Now we are going to raise the interest rates on your credit cards to usurious rates--outrageous, unacceptable. Twenty-five percent or thirty percent interest rates on hard-working people who pay their bills on time is something that should be eliminated and, in fact, on another issue we have legislation to do that.

It seems to me if you add all of that together, the fact that the largest banks that were ``too big to fail'' have grown larger, that we have a very dangerous concentration of ownership within the financial institution industry, the time is now to do exactly what good Republicans, good Republicans such as Teddy Roosevelt and William Howard Taft, did 100 years ago; that is, to start breaking up those institutions.

That is what we have got to do. We have got to start breaking up these institutions. Last week I introduced S. 2746, the Too Big to Fail, Too Big to Exist Act that would do that. I think the title of that legislation I have introduced says it all: If an institution is too big to fail, it is too big to exist. Let's break it up.

This legislation is all of two pages long. It is not 2,000 pages like the
health care bill. It is two pages. That is all. It is very simple. This legislation would require the Secretary of Treasury to identify within 90 days every single financial institution and insurance company in this country that is too big to fail. That should not be too hard to do. Which are the institutions that are too big to fail? Tell us who they are. Then within the rest of the year, within 1 year, start the process of breaking them up.

One of the further reasons we have got to break up these institutions is not just that they continue to be a liability for taxpayers, not only that the concentration of ownership leads to higher and higher interest rates, leads to the fact that Wall Street remains an entity unto itself, largely a gambling casino which makes huge amounts of money for the people on Wall Street but ignores the credit needs of small and large businesses in the productive economy, but there is another reason. The other reason is I know some of my friends here say: Well, you know, we have got to regulate Wall Street. That is what we have to do, not break them up, regulate them. But it is not the Congress that is going to regulate Wall Street, it is Wall Street that is going to regulate the U.S. Congress.

I think anybody who knows anything about politics knows that is true. We know that over a 10-year period, Wall Street has spent $5 billion on lobbying and campaign contributions. Despite their greed and the fiascos which they caused, what they are doing now is spending millions more trying to make sure that Congress allows them to go back to where they were.

I don't think it is a question of us regulating them, it is them regulating us with so much wealth and so much power. That is what they are capable of doing. What we are beginning to see, not only in the United States but all over the world, are people saying: Enough is enough.

I find it interesting that John S. Reed, who helped engineer the merger that created Citigroup, Inc., apologized for his role in building a company that has taken $45 billion in direct U.S. aid, and said ``banks that big should be divided into separate parts.''

That is what John S. Reed said, the former CEO of CitiGroup. He was one of the people who engineered the deregulation effort. He has apologized to the American people, and I respect that very much; one of the few who has had the guts to come before the United States and say: I made a mistake. I am sorry. I respect him for doing that.

Furthermore, we have Alan Greenspan, who probably more than any other person in this country led the effort to deregulate, to do away with Glass-Steagall, this philosophy that said: If we deregulate, if we allow these titans on Wall Street to do anything they want, they are going to create wealth for the whole economy.

But even Alan Greenspan, whose disastrous leadership helped lead us to where we are right now, even he, I think, has recognized the error of his ways. According to Bloomberg News on October 15, 2009, former Chairman Greenspan said:

If they're too big to fail, they're too big. In 1911 we broke up Standard Oil--so what happened? The individual parts became more valuable than the whole.

That is Alan Greenspan understanding the errors he made.

I should note, I am grateful Mr. Greenspan's views on the subject have drastically changed. Because when I was in the House, on the Financial Institutions Committee, he would come before that committee. He and I used to have a little bit of a debate on the issue of deregulation. I remember, back in 2000, I asked Mr. Greenspan the following question. I asked him:

Aren't you concerned with such a growing concentration of wealth that if one of these huge institutions fails that it will have a horrendous impact on the national and global economy?

Here is what Mr. Greenspan said in the year 2000:

No, I'm not. I believe that the general growth in large institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically--I should say fully--hedged.

Well, unfortunately, Mr. Greenspan appeared to be wrong, was wrong, and we have spent $700 billion bailing out Wall Street and trillions more on low-interest loans. But it is not just Alan Greenspan who has changed his views. According to the Washington Post, we know this to be the case:

The British government announced Tuesday it will break up parts of major financial institutions bailed out by taxpayers ..... The British government--spurred on by European regulators--is forcing the Royal Bank of Scotland, Lloyds Banking Group and Northern Rock to sell off parts of their operations. The Europeans are calling for more and smaller banks to increase competition and eliminate the threat posed by banks so large that they must be rescued by taxpayers, no matter how they conducted their business, in order to avoid damaging the global financial system.

In other words, what the United Kingdom is beginning to say is, we have got to start breaking up these institutions. If they are too big to fail, they are too big to exist.

But it is not just Alan Greenspan, it is not just John Reed, former CEO of CitiGroup, it is Paul Volcker, the former Federal Reserve Chairman and the head of President Obama's Economic Recovery Advisory Board. This is what he said:

Keep [banks] small, so that any failure won't have systematic importance. People say I'm old fashioned and banks can no longer be separated from nonbank activity. That argument brought us to where we are today.

Robert Reich, President Clinton's former Labor Secretary, has said that:

No important public interest is served by allowing giant banks to grow too big to fail ..... Wall Street giants should be split up--and soon.

That is Robert Reich.

Sheila Bair, the head of the FDIC, has said that:

We need to reduce our reliance on large financial institutions and put an end to the idea that certain banks are too big to fail.

Simon Johnson, the former chief economist of the International Monetary Fund, the IMF, has said:

Banks that are too big to fail must now be considered too big to exist.

I am under no illusions that taking on Wall Street will be an easy task. Generally speaking, Congress is never successful or very rarely successful taking on big money interests. They are too powerful, they have too much sway over this institution.

As I mentioned earlier--this is quite incredible--the banking and insurance industry has spent over $5 billion on campaign contributions and lobbying activities over the past decade in support of deregulation, and they are spending even more today to try to prevent Congress from seriously regulating their industry.

In 2007 alone--and if people want to know why the rich get richer and everybody else gets poorer, they should understand--the financial sector employed nearly 3,000 separate lobbyists to influence Federal policymaking. Remember, we only have 100 people in the Senate, 435 in the House. They have 3,000 separate lobbyists. So if anyone thinks it is going to be easy to reform the financial services sector, it clearly will not.

But if we are going to turn this economy about, if we are going to try to prevent another disaster by which taxpayers have to bail out some of the wealthiest and most powerful people, if we are going to create a situation where financial institutions provide capital to the productive economy so that we can create decent paying jobs, producing real products and real services, we are going to have to finally stand up to these very powerful institutions.

I think the issue is clear. I think all over this country people, whether they are progressive, whether they are conservative, understand that if an institution is too big to fail, it is too big to exist. Let's break them up.

I yield the floor.

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