Mr. Sanders. Madam President, I ask Unanimous Consent that the Order for the Quorum Call be Rescinded.

Floor Speech

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Mr. REED. Mr. President, yesterday we and the nation heard from Goldman Sachs executives indicating they had no regrets about the financial crisis, a crisis that has left 8.5 million people without jobs and stripped billions of dollars of retirement savings from working Americans. In fact, the Pew Institute released a study that indicates the financial crisis and recession have already cost U.S. households $100,000, on average, in lost wealth and income.

That is a huge blow to the families who are struggling to pay for their retirement, to pay for their children's education, and provide a better life for themselves and their children.

We have seen, in the last five quarters, because of this financial crisis associated with and connected with the recession, $648 billion less in gross domestic product than was projected initially--$648 billion of productive enterprises. The cost of this crisis is something we all should not only recognize but commit to preventing in the future. We also should calculate the cost not just in terms of gross domestic product and how well executives on Wall Street are doing, who are doing pretty well, but how well the average family in this country is doing, and how well they will do in the future. We must consider how much in terms of their wealth has been diminished, if not lost, in rebuilding our economy.

One of the major functions of any financial sector in any part of the world is to efficiently allocate capital to grow domestic product--not to reduce it--to invest in productive enterprise and employ people. The financial sector shouldn't undercut companies or force them to lay off workers. All of this, in the last few months, I think has represented a failure in that basic function of making sure capital is accumulated and then efficiently allocated to productive means.

So Wall Street, I think, has a lot to regret about their role, and we have a lot to do to improve the situation, to ensure the regulatory structure is in place, and to set clear rules for the conduct of financial business that will protect families, protect consumers, and protect the taxpayers.

This is the third time our colleagues on the other side have blocked such efforts to begin the discussion. We recognize this is a complex topic, with many different parts: credit rating agencies, capital requirements, financial institutions, derivatives. You can go on and on and on. So anyone who implies they have all the wisdom, I think, will find themselves sadly mistaken. But we have to get on with this bill because unless we bring the bill to the floor, we cannot begin to, in the open, talk about those policy issues that people can disagree on--people have different approaches--and ultimately resolve this and create a better regulatory structure and a stronger foundation for our economy.

But in the last several days, this has been, again, ``say no and the problem might go away.'' Well, if they continue to say no, the problem will get worse. We are looking across the globe today at a crisis in Europe because of Greek sovereign debt. It is spiraling. Already, Spanish debt has been downgraded. If we think we are immune from these global currents, both good and bad, we are mistaken. If we do not put in a stronger structure of regulation, the next crisis might not be starting on Wall Street, but the impact on Main Street could be the same, and it could be just as devastating.

We have to look forward. We have to move on. The notion that we have all the time in the world and we can sort of nonchalantly go about our business--or in some cases, if it is a political judgment that it is better to resist--is not serving the people of this Nation well.

We recognize there are principle differences. Let's resolve them, as we do on the floor through debate, through discussion, and through a vote, and let's move on. We have a lot of work to do. The underlying bill Senator Dodd has brought to the floor already incorporates so many of these disparate views, and I think in a very sensible way.

Let me, for the record, recall that legislation like this has been pending for months and months and months. The Presiding Officer will recall--because he participated with me in the first markup last November--Senator Dodd brought a bill to the committee, opened it up to amendment, and it was quite clear there was going to be no serious discussion. In fact, our colleagues on the other side said: We need more time. We want to participate with you. I think it was done with great sincerity. Senator Dodd entertained those proposals for months. From November until a few weeks ago, we were working collaboratively and creatively to try to bridge our gaps and bring a bill to the floor.

Well, finally--and somewhat in exacerbation--Senator Dodd concluded this was leading nowhere, except to more delay, if not denial of the great problem we face. So we had a committee markup. Again, it was an opportunity for our colleagues on the other side to bring forth their proposals, their ideas, in a markup in which we would be able to consider their views, vote on them, and then move that bill to the floor. But it was a perfunctory session. They had concluded that, no, they were not quite yet ready to offer their proposals, their ideas, and to engage in the business of legislation.

So now the bill is before us, months after we started this process, months after we have entertained and incorporated proposals that have been made by our colleagues because they are very good proposals. It was Senator Corker and Senator Warner--who have done an outstanding job--who structured the whole issue of resolution, that there would be an upfront fund so that financial institutions--not taxpayers--would pay for the failure of a financial institution.

Yet when that bill was brought to the floor--or we attempted to do it--that provision, that bipartisan provision was singled out for, shall we say, criticism, if not ridicule, as a perpetual bailout bill. That was a misrepresentation of the bill and it, frankly, contradicted the whole effort, the whole bipartisan effort to come up with something that both sides could support.

But this bill incorporates so many different ideas and aspects that have been shared. In fact, it was interesting, in the lead up to this floor consideration, so many times on both sides of the aisle, people would say, routinely: well, we agree on 80 percent of the bill. I think if you have 80 percent of the bill agreed to, at least conceptually, you are probably ready to bring the bill up for debate and to vote. Yet again, the Republican side refuses to do that.

They are, I think, assuming, I guess, they have a lot of time. But as you look around the globe, at the crises in Europe, at the stock market falling dramatically yesterday because of Europe, I think we have to move aggressively to protect American families, and that means getting the bill on the floor and voting for it.

This bill will make changes that are urgently necessary. Again, the issue of too big to fail--through the extraordinary effort, painstaking effort, the hours of discussions by Senator Warner and Senator Corker, there was a proposal for resolution that effectively ends too big to fail. In fact, Sheila Bair, who is the Chairwoman of the FDIC and was appointed by President Bush, says it virtually eliminates the possibility of a taxpayer bailout. So that is part of it. Strengthening consumer protection. There has been, I think, an unfortunate generalization that consumer protections are bad for business. Frankly, we should have discovered in the last several months that good consumer protections are very good for business. Many of those consumer laws--which would have protected people seeking mortgages--which were ignored or exempted would have, I think, improved dramatically the mortgage situation. It would have improved business. It would have made that overriding issue of efficient allocation of capital much easier.

But when you have very little protections for consumers, they are at the mercy of people who will exploit them for a quick buck. And that is what happened. Mortgages were given to people who were not qualified. Why? Because no one was watching out for them. But not only that, the individual issuing the mortgage did not have, as they say, any skin in the game because they simply sent it in to the big securitization process. Someone got a fee for securitizing it. Someone wrapped it up into a big mortgage-backed security. Someone else wrapped it up into a collateralized debt obligation, which is a collection of securities. Then someone else wrapped that up into a synthetic collateralized debt obligation and sold it off. Not a lot of efficient allocation of capital for productive means, but a lot of fees for investment bankers, securitizers, and mortgage brokers. At the very beginning, good consumer protections would have been an effective way to mitigate some of that damage. They are in this bill.

We are attempting to eliminate huge gaps and loopholes in financial regulation. Our regulatory scheme has grown up over many years, in fact, through the life of this country. So we have a national bank authority that was created in the

1860s. We have an Office of Thrift Supervision that was created many years later because of thrift institutions. We have the FDIC, which was created in the 1930s by Franklin Roosevelt as a result of the Depression and the need to insure deposits. We have the Federal Reserve System that monitors local banks and large banks that was created in the Wilson administration.

All of them have a little different piece of the action, and all of them have been routinely used in what is termed regulatory arbitrage, to move to the most favorable position for your business, which may not be favorable to the overall economy. Some of the big mortgage lenders that ultimately collapsed started off being regulated by the Office of the Comptroller of the Currency, and then they decided they would have a better deal at OTS. Frankly, if they had an opportunity--if they were still with us--they would be looking elsewhere. Hit and run, I think, was probably the business plan. We have to stop that.

This bill takes a strong step forward, consolidating that supervision, by consolidating the Office of the Comptroller of the Currency and the Office of Thrift Supervision, by limiting the supervision of the Federal Reserve over a countless number of small banks, and concentrating their efforts at the big institutions, where their expertise and their focus should make a difference.

This is a huge improvement over what the present system is. Yet our colleagues are not recognizing the need to improve and the need to move forward. We have been engaged, through Senator Lincoln and Senator Dodd, with derivatives legislation, which, for the first time, recognizes and regulates those derivatives. There was a great debate here in the 1990s, and through that debate derivatives were left unregulated. Today we have to recognize we have to put them back under regulatory supervision.

The legislation creates the steps, the architecture, which will go a long way to prevent some of the problems we have seen. It requires reporting all derivative transactions to a data repository which the regulators will have access to so they can see firsthand in real time what is happening out there. Is there a big buildup in Greek debt? Are there huge positions in credit default swaps on Greek bonds? They can quickly get a macro sense of what is happening.

Then, with limited exceptions, all derivatives have to be cleared on a clearing platform. That takes away the bilateral nature of transactions. Someone says: I will sell you insurance on this interest rate for a fee. You give me the fee, et cetera. That is bilateral. If one of these parties is unable to carry out its obligations, the transaction fails. In a clearing platform, there is a central party that assumes the risk of one of the parties failing. It is a mutualization, really, of risk, and it is a step forward.

But we have to step even farther than that. We have to push as many of these trades onto a trading platform, not just clearing it and holding collateral, but actually pricing it. Because of the complexity of some of these products, unless there is a market, no one knows the real value. On a trading platform, there is a market value and people can value it because basically if someone will buy it, that is the value. So we have to do that. This legislation goes a long way to doing that.

With respect to credit rating agencies, one of the great failures is the credit rating agencies. As to all of these exotic mortgage products that collapsed in value, most of them were rated investment grade--AA, AAA, according to whatever the rating is--and yet they failed. Part of it was because of the way credit rating agencies operate.

Senator Levin conducted recently some very good hearings on this issue.

The familiarity between the investment bank that is bringing the product to the street and the raters, the interconnectedness, the failure to have the appropriate checks on the models that raters were using, an independent risk analysis within the rating agency that is going to look at these models not for the benefit of who is paying for it but for the propriety and correctness of the model. That is in the legislation.

We have done something else too: We have inserted language that would allow someone who has invested their savings through a pension plan or other method to go to court and make the case that they should find out what happened within the rating agency with respect to the poorly rated investment that caused them to lose their savings. Today, these cases are routinely dismissed before anyone can question the rating agency. Our legislation would allow them to get beyond the pleadings stage. But it would also give the rating agencies an affirmative defense. They would have to factually check their models. They would have to actually look at some of these mortgages. Frankly, this might be 20/20 hindsight, but if someone drove out to one of those counties in Florida where there were all of these exotic mortgages but no one seemed to be living there and the communities were deteriorating, I think they would pretty quickly check their rating. That appears not to have been done.

For the first time, hedge funds are regulated. They would have to register with the SEC and be subject to registration, notifying the SEC of the size of their pool and other basic information.

Well, we have had months of opportunities to share additional thoughts and work together to amend the bill in committee, which was not done, but, more importantly, to begin today--in fact, we should have begun last week--this issue of finally passing a Senate bill that responds to the crisis we saw; that builds a stronger foundation of financial expansion; that protects consumers and taxpayers as well as leads to the increase in the wealth of families, not to the dramatic decrease and decline we have witnessed because of some of these forces at work today in the marketplace on Wall Street, which still have to be addressed.

There will be parts of the proposals that come up that will be an attempt to weaken some of these provisions, particularly with respect to consumer protection. Again, I think it flows from the false logic that if it is good for consumers, it is bad for business. Actually, I always thought, in smalltown business, the customer is always right. You believed the customer, made sure you provided value for your product, and made sure he or she would come back because they were happy and satisfied. Apparently, that old-fashioned rule has been tossed out, but I think that old-fashioned rule has to be reestablished.

We have seen, as a way to deflect attention from the need to reform and the need to move this legislation, misrepresentations about the bill. I mentioned one: It is a bailout bill. Well, I think that has been dropped because it was transparently misleading. Indeed, this bailout mechanism was a bipartisan product of two of our distinguished colleagues, Senator Warner and Senator Corker. Now we are at the old standby: It is going to hurt business. I will tell my colleagues what has hurt business, and that is the behavior on Wall Street.

I can recall that several years ago there was a study by the McKinsey Company that said that if we did not loosen further the already, I think, lax rules, we would lose all the securities business; all of Wall Street would go to England or other places; we would lose thousands of jobs. Guess what. They have lost, unfortunately, thousands of jobs there. And it wasn't because regulation was too stringent; it was because it was too lax.

Again, if there is any case to be made for what hurts business, it is irrational allocation of capital; lax rules with respect to consumers; a market driven not by value but by compensation, not by long-term growth but by short-term profit. That is what has cost every family in America $100,000.

So if we move purposely and with the input of our colleagues, which we have already accepted, we can establish a framework where business will begin to grow again. So I reject the argument that what we are doing will hurt business. In fact, I think this uncertainty of whether we will have this reform or that reform continues to, at least to a degree, impede capital formation and to impede investments in the country. When there are clear rules of the road, then the economy will again begin to pick up, as it is beginning to pick up for other reasons.

If we don't take up this bill, work on it, and pass good legislation, who wins? Well, I will tell my colleagues who wins. It is the big banks that have survived this crisis today, that are reporting record profits. What are they making their money on? Giving loans to small business men and women across America? Investing in municipalities? No. They are making huge profits in trading--betting, in some respects, on how the economy is going to do. Well, we need a situation in which capital is dedicated to growth and to investment and productivity.

The speculators will continue to reap billions of dollars of profits. I am sure there are several clever people who are doing quite well over the demise of sovereign wealth in Greece, who have taken short positions on Greek bonds and are making a lot of money. That is not helping us, it is not helping the country, and indeed it is not helping our trading partners across the globe. That, unchecked, will continue.

The opaque and unregulated market that I just referred to in derivatives, a $600 trillion notional market. When you talk to people about clearing of derivatives, it is not billions, no; it is trillions of dollars. That market is unregulated, and if it goes the wrong way quickly, the consequences can be devastating. We have seen that with the mortgage crisis.

So we have to move. We have to move at every level, not just the big banks, but we have to provide appropriate regulation for people in terms of the mortgage industry so those abuses in mortgages will be corrected. We have to go ahead and look at payday lenders who are charging 900 percent interest, who are stripping people of their hard-won resources. We have to look at the credit card companies. We have passed legislation, but we have to look at what they are doing. If those people--the payday lenders and the mortgage brokers--can continue to operate with impunity, the bankers win. Who loses? Well, consumers lose--paying the excessive rates, seeing their homes devalued, all of that.

I think we have to stand up and start the work of legislating. The status quo is no longer affordable, and I think the notion that we will never see another crisis is undercut by looking around. If there are not today some steady hands at the tiller in Europe in terms of the European community and their financial arrangements, the cascading effect of Greece to Spain to Ireland, et cetera, could be another problem we have to deal with.

We have lots of work to do, and the longer we delay, the more we are neglecting the real needs of our constituents. I urge that on the next vote we get down to business.

Mr. President, I note the absence of a quorum.

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