Wall Street Reform And Consumer Protection Act Of 2009

Floor Speech

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Mr. SHERMAN. I reserve the right to close.

Mr. GARRETT of New Jersey. I believe that it's our right to close. It's our amendment.

The Acting CHAIR. The gentleman from California has the right to close.

Mr. GARRETT of New Jersey. Then I will yield to the gentleman from Texas (Mr. Sessions) my remaining time.

Mr. SESSIONS. Madam Chairman, my friends who are arguing on behalf of trial lawyers usually argue on behalf of government, and now we're hearing about how government's really not empowered and really not going to do their job. But, at the same time, we look at a lower standard in this bill where we take it from knowingly or recklessly or grossly negligent to just gross negligence, a lower standard. This lower standard is there to help the trial lawyers. Trial lawyers do not build value in this country. They diminish the value.

We need to give the SEC the authority, the responsibility. We're already giving them the money. The SEC will double in size of the amount of money that they get as a result of this bill. We're empowering the SEC to do their job. We should not lower the standard and then allow the trial bar to come after what should be an enforcement action. An enforcement action is what this statute should be all about with the credit rating agencies.

I'll support my amendment.

Mr. SHERMAN. First, let's set the record straight. Republicans are coming to this floor calling this a bailout bill. They're quoting my statement that the original draft of the bill was TARP on steroids. The fact is this bill now reins in executive branch bailout authority, and the Republican substitute is the thing to vote for if you want to be a bailout nation.

Second, I want to thank the Chair of the committee for including my revisions of section 1109 in the manager's amendment. Now as to this amendment. The bill's language is designed to hold credit rating agencies accountable. These are the agencies that gave AAA to Alt-A; that is to say, they gave the highest ratings to bad mortgage bonds, and nothing did more to put us in this recession than the trillions of dollars that investors bet on these bad mortgages, only to see the whole thing unwind.

Now we provide that they will be held accountable. The SEC has taken no enforcement action. All of the incentives in the present system push in the wrong direction. The way a credit rating agency gets business is to get a reputation for being a liberal grader, so that one issuer after another will hire them to give the high rating to their bad bonds. It's like the umpire being selected by the home team. Instead, we need to put pressure on the other side and say that if you are grossly negligent in assigning a high rating to bad bonds that hurt investors and also hurt the entire economy, you will be held accountable.

Now is the time to change the system, to make sure that the economic pressures on credit rating agencies are not all on the side of a liberal rating. We need to make it clear to credit rating agencies if you give AAA to Alt-A, you'll pay.

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