Bernanke Nomination

Floor Speech

Ms. CANTWELL. Madam President, I rise to speak on the vote we had earlier on the nomination of Ben Bernanke to be the Federal Reserve Chairman. While I did not support Mr. Bernanke's reconfirmation to that post, I would like to take the time now to talk about that vote and my concerns and the challenges I think our country faces moving forward.

When I look at this issue, I know that not one administration or not one Fed Chairman got us into the mess we are in. In fact, it is not even to be blamed on one party. What this is about is how we move forward with complete transparency and the proper regulation to give certainty and predictability to our financial markets. I will do my best to represent my constituents with the proper level of oversight on these issues, but I heard loudly and clearly from my constituents in December that they are, as small business owners, at the end of their rope without access to capital and that community banks are not lending. So that is where I am spending my time and focus now, in urging both the Fed and Treasury to act, without passing legislation but act now to get recovery programs specifically working for community banks that need access to capital and for those small businesses that are the engine of economic growth for our economy.

While I know many of my colleagues think programs that came out of the TARP funding, such as the original TALF Program or even the Treasury Secretary's announced program in December, are things that have been in the works, I can tell my colleagues that my constituents started this debate in earnest with credit default swaps and the concern about large banks but are having a hard time, as I am, understanding the logic and the strategy that one day closes one of the largest banks in America and one of the largest banks in our State, Washington Mutual, wiping out 30,000 creditors and basically putting in jeopardy the retirement of many employees, and then 4 days later we pass a TARP bill. I believe the government picking winners and losers at that point in time was the wrong approach, and I advocated for an equity program.

But today my constituents want to know why it is that it was easy to figure out how, with loans and assets and the credit activity of the Fed, over $1 trillion could be pumped into AIG at 100 cents on the dollar and yet small business owners in the State of Washington--and my guess is around the country--basically had capital cut from right under them.

When I think about what happened, it breaks my heart. To think about a company such as Vancouver's Columbia Gem, where the Bank of Clark County was shut down and assets moved over to another bank across the river, Umpqua Bank, that received TARP funds. But where was the help for the small businesses that had performing lines of credit at that bank? What happened to them? I will tell you what happened to them. Even though they had performing lines of credit, their funds were cut out right from under them. In fact, it forced the owner of that company to try to fund the operation of that business out of his own pocket.

Another business in that area, Beaches Restaurant, immediately their line of credit was frozen after the takeover.

Vancouver Iron and Steel was current on all its loans and even eked out a small profit in 2008 and never missed a bank payment. But Vancouver Iron immediately lost its $1.5 million line of credit after the FDIC took over.

How is it we can act immediately to save the AIGs but we can't act immediately to save companies such as Vancouver Iron and Steel? I guarantee Vancouver Iron and Steel was not cooking up dark market derivatives, creating credit default swaps that destabilized our economy. Nor is Vancouver Iron and Steel continuing to operate derivatives in dark markets. No, they have nothing to do with that. They are manufacturing product for America and abroad and producing jobs. The fact that we continue to make it hard for them to get access to capital is one of the reasons why I voted against Mr. Bernanke. The Fed Chairman has to realize the urgency with which the big banks have been bailed out and saved. That urgency has to be applied to Main Street. I know they are trying. I applaud the President for last night saying he is going to put forth $30 billion to help with access to capital for community banks. I urge him to do that within the administration.

While I am sure my colleagues could give input, to basically spend another 2 or 3 months waiting for small businesses to get access through community banks, more and more business bankruptcies will happen. While that is a program to get right, it is very clear to Americans that when we want to act with urgency, this government can act and the Fed can act and the Treasury can act to solve these problems.

I urge the Fed now and the Treasury to give consideration to making this their No. 1 priority, to get capital to these community banks as urgently as possible through an equity program that gives them the infusion it will take to get capital back to Main Street.

There are other reasons why I did not support Mr. Bernanke. As I said, this is not one Fed Chairman's problem or one administration's problem. This has been caused by policies over the last several decades, prior to the repeal of Glass-Steagall, in which we continued to say deregulation of these markets was unimportant. The policies at the Commodity Futures Trading Commission and other policies that allowed for this kind of dark market activity of derivatives to grow into an international $56 trillion industry are the policies that have brought us to this point. We now have to have the urgency and the leadership of everyone involved to think creatively about the urgency of getting capital to community banks and small businesses and the reforms that must be put in place now, not to check a box, not to say we did reform, not to say we are responding to something that has happened recently but to move our economy forward with the transparency and proper regulation that will provide for international stability.

When I see from some of the well-known economists and investors across the globe that another bubble is forming, that this problem we think somehow we have corrected by passing TARP and doing other things is going to be alleviated, these individuals are signalling that another bubble in the exact same situation could happen again, I want to see the Fed and Treasury advocate on the Hill the policies that will give us complete transparency and regulation to assure Americans and those participating in financial markets around the world that they will function with certainty and predictability, that they are not going to be inflated with something that has no real value behind it such as the credit default schemes or, should I say, naked credit default schemes that we are trying to outlaw on the Senate floor.

I know what has happened with the regulatory reform legislation so far that has come through Congress. There have been many attempts to water it down. I am not blind to what I think the challenges will be to pass this legislation when it comes to the Senate. That is why I want to see a Fed Chairman and a Treasury Secretary who are leading the charge for the principles of regulatory reform that will correct these problems with the markets, not to be for a few policies that might sound good, such as: Let's reduce systemic risk--I am for reducing systemic risk--or not to say: We want a consumer group. I am for a consumer group. But the heart of this issue is whether we are going to properly regulate derivatives, whether we are going to pass a law that says: Manipulative devices or contrivances of these markets are a Federal crime. Not only will you pay a penalty, you will go to jail.

I get that many in the markets believe there is no way we can possibly control all the new tools and all the new financial terms people can come up with to deviate from the standards that are set. But I know this: Setting a statute in place and going back to Glass-Steagall can separate the risk to the taxpayer of having their money and their capital used to continue to prop up dark market activities. I certainly believe we have to have derivatives regulation. But the tactic of now saying we can have that by definition, by saying no proprietary trading on these companies, I guarantee you we will be debating the meaning of the words ``proprietary trading.'' The consequence will be there will be lots of money flowing into dark markets.

I believe in the financial wherewithal to raise capital in America. It is one of the greatest things about our country. It is one of the greatest things that makes us competitive, the fact that we can create capital in such an inspiring way and that we can have, in an information age, the kind of public financing of ideas and creativity that continues to have us lead the way. But I ask my colleagues to look at how many IPOs have been created lately. I ask them to look at how much money has gone into the small businesses and community banks loaning to small business juxtaposed to the amount of money that has gone into derivatives. The truth is, you make more money on derivatives. So why would you put your money into investing in IPOs? Why would you put your money into the small businesses?

What is happening is more and more concentration into the large banks that then thwart the opportunities for small community banks to truly be competitive with them. Then what happens? Less and less capital, less and less opportunities for small business or, as I saw recently, even the fact that some of the small business newspapers in this country haven't been able to get access to capital. They are going to end up in the hands of bankers. I don't know if those are big banks or small banks, but I know this: Small businesses deserve to have a choice of lenders, a diversity of market-size banks, and a Fed chairman who will pay attention to that issue. We live in a unique time, created by at least two decades of deregulation of markets that are now going to create another bubble.

My vote against the Fed Chairman has to do not with the past but with the future, the future prevention of another bubble, of more bankruptcies of small businesses, of getting our regulatory policies and our transparency of markets in place so the United States can get back to both the innovation and job creation but financial markets that the United States leads in around the world, that we are not 10 years from now seeing the kind of dark market activity around the globe that has transpired here. Instead, the United States, as the President says, learns from a teachable moment and leads the rest of the world on the types of markets and transparency we expect.

I hope the Fed Chairman will embrace this task of a more robust leadership on the policies and regulation that need to be put into place to prevent another bubble and to helping immediately small businesses. I don't want to leave the American people with the thought that somehow Wall Street is more important than Main Street. That is not what sent me to Washington, and it is not what sent my colleagues. I hope we will work in earnest, as Republicans and Democrats, to urge the administration and the Fed to immediately adopt and implement a program to give community banks and small businesses access to capital.

One of the people I met with is a small businessman whom I used to see
while eating in his restaurant many times, particularly working late at night, when I worked for a software company. When I was home in December, I found that after 55 years he was going out of business. After 55 years in his family, they were going out of business. The downturn definitely took its toll. He wasn't getting access to capital. He held on for an entire year, not laying off one employee, keeping everybody he could instead of cutting them. The end result, after that year, without any more resources, without any more access to capital, he had to close that business. Not only that, because he mortgaged his house, he was probably going to lose his house. He put his restaurant up for auction. He told me, if he was lucky, he would probably get $10,000 for it. Fifty-five years in business, weathering several downturns, not laying off any employees, he wanted to know where his lifeline was during this crisis.

I am going to devote my time and energy, along with working with the President on his commitment, to making sure this program for community banks and small businesses gets implemented as soon as possible.

I yield the floor.

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