Mr. Sanders. Madam President, I ask Unanimous Consent that the Order for the Quorum Call be Rescinded.
Floor Speech
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Ms. KLOBUCHAR. Mr. President, I rise to discuss the very important bill we are very hopeful we can move on today to start the debate on Wall Street reform. I understand there may be an agreement to move forward with this bill. We don't know that yet. If it is true that we have an agreement to start the debate on this bill, then it is very fitting that I go through why this bill is so important. If we don't have an agreement, then it is even more fitting because we know the American people got severely hurt by the crisis on Wall Street, by the fall of many of our financial institutions, and they were not the ones who were supposed to be hurt. So we need to fix this so it doesn't happen again.
Nearly 3 years after the financial system began to melt down, America continues to suffer the effects of the worst economic crisis since the Great Depression. Millions of Americans have lost their jobs, homes, and their retirement savings. Although some key indicators are beginning to move in the right direction, many families, such as those we know in Minnesota, are still struggling, and the economic damage is very slow to heal in their towns.
On Wall Street, however, it seems to be back to business as usual.
Last year, Wall Street's largest firms handed out record bonuses totaling nearly $146 billion, an 18-percent increase from 2008. Meanwhile, overall U.S. per capita income declined 2.6 percent. So it is little surprise that Wall Street financiers are not enthusiastic about reforms that could change the way they do business. In fact, some of them claim Wall Street just has a few potholes that need fixing. Well, I think they need more than that. What Wall Street needs is more stop signs and key intersections and some good traffic cops.
This bill we have is the product of months of bipartisan negotiations. For the first time ever, this bill would create a nine-member financial oversight council chaired by the Treasury Secretary and made up of Federal financial regulators. This council would serve as an early warning system for systemic risk, something that was clearly lacking 3 years ago when these institutions that people were advertising as gold and their investments as gold went tumbling down onto the people of this country.
The domino effect of deeply interconnected financial companies, such as insurance giant AIG, didn't just create economic ripples, they sent a tsunami surging through the entire economy. This financial oversight council will be charged with scanning the system for systemic risks and putting speed bumps in place to ensure we never see a crisis such as this one again. This council will, for the first time, bring the regulators together to form a picture of the entire system, so one regulator will not be dealing with one problem while another is dealing with another with no information being shared. This way there will be one place where they can look at the entire financial system and look for those warning signs of problems.
This bill will also stand at the intersection and make firms slow down by increasing the costs of being large and complex. The most interconnected firms will be required to hold larger levels of capital to minimize their risk to the system if the investments go bad. All we are asking for, so taxpayers don't have to bail out these firms, is that they have significant resources and enough resources on hand in case they face troubled times again. If firms are going to create risk to the system, they need to take some responsibility. We clearly saw in this crisis what a lack of capital can do, how it can bring a firm to the brink, and the downward spiral it can cause when they are unable to attract new investors.
As much as we would like, we simply can't predict how a future crisis might unfold. I believe one of the most important lessons we can take from this crisis is that the American taxpayer should never again be left on the hook for the unconscionable bets of Wall Street. The American taxpayers' money is not meant to be used to play games within a casino, where you can throw their money around and then maybe some of it will come back and some of it will not. We have to make sure this doesn't happen again. Preventing American taxpayers from being forced to bail out financial firms starts with strengthening big financial firms to better withstand stress, looking out for systemic risk, and putting a price on activities that pose a risk to the financial system.
In the event that a firm was to fail, this bill creates a safe way to liquidate failed financial firms that will not leave the taxpayer on the hook. First of all, it updates the Federal Reserve's authority to allow systemwide support but no longer allows it to prop up an individual firm. Second, it requires large, complex financial companies to submit plans for their rapid and orderly shutdown should they start to go under. These plans will help regulators understand the structure of the companies they oversee and serve as a roadmap for shutting them down if the company fails.
Under this plan, most large financial companies are expected to be resolved through the bankruptcy process. Bankruptcy allows those who invest in a firm to better access their risks, and it allows the possibility that a company will emerge again in some way intact. If we have a situation where a firm would not go into bankruptcy and its failure could bring down the whole system, we make the process of resolution as hard as we can on that firm. We start by shutting down the business and throwing out those who caused the mess. This is a very different route than we took in this crisis where we propped up firms and kept them alive because of the risk it was going to pose for the entire financial system. We don't want to be in that position again. The taxpayers don't want to be in that position again.
If a firm chooses our resolution, the Treasury, the FDIC, and the Federal Reserve must first all agree to put a company into the orderly liquidation process. A panel of three bankruptcy judges must then convene and agree within 24 hours that a company is insolvent. At that point, the FDIC would step in and resolve the firm through this orderly process and in a way that doesn't harm the overall system. The cost of resolution would be paid for not by the taxpayer but by a $50 billion fund built up over time--and this is key--paid for by the industry, paid for by the industry, not by the taxpayers.
Finally, I wish to talk about a key portion of the bill that came out of the Agriculture Committee, a committee on which I serve, led by Chairman LINCOLN. The portion of that bill I wish to talk about is the focus on transparency and accountability to the over-the-counter derivatives market.
Bringing transparency and accountability to the over-the-counter derivatives market is essential to our economic system and the American taxpayer and is as important as any other piece of reform we are going to be debating. Reckless trading of unregulated over-the-counter derivatives played a significant role in triggering the financial crisis in the fall of 2008. AIG, using a type of derivative known as a credit default swap, took enormous risks in guaranteeing at least $400 billion worth of other companies' loans, including those of Lehman Brothers. When the financial crisis hit and AIG was unable to make good on its commitments, Treasury and the Federal Reserve were forced to step in to accept untold, unknown risk to the financial system. In the end, the government put up $180 billion of taxpayer money to save AIG from collapse.
I bring up AIG to point out the dangers of an unregulated, over-the-counter derivatives market. Derivatives, when used properly and backed by sufficient collateral, play a crucial role in our financial and economic systems. We think about airlines that want to hedge their risk with the price of oil. You think about agribusinesses. All over this country that goes on. But this is a whole different issue we are talking about. When irresponsible financial institutions are allowed to make unconscionable bets, hidden from the view of the markets and its regulators, the stability of our entire financial system is threatened.
Right now, the over-the-counter market counts its transactions in the hundreds of trillions of dollars, but under the current system, there are almost no requirements that the most basic terms of these contracts or even their existence be disclosed to regulators or the public. Think about it: Trillions of dollars changing hands and no one even knows what is happening.
The goal of the bill we have today is to finally bring transparency and accountability to these unregulated markets. For the first time, under this bill, all trades will be required to be reported to the regulators and to the public. With this information, regulators will be able to effectively monitor risks to the system and prevent market manipulation and abuse. Transparency will also benefit those who use derivatives to hedge risks, as they will be better equipped to evaluate the market, as price information will finally be made public. By requiring mandatory clearing and trading for standardized derivatives, this bill will greatly reduce the ability of risk to build up to a point that could, once again, burst and threaten the financial stability of our financial system.
I have often said that when Wall Street gets a cold, Main Street gets pneumonia. We can't let this happen again. In this bill, careful consideration has been made to ensure that commercial entities--this was the work done in our Agriculture Committee--to make sure that commercial entities that hedge solely to mitigate their own commercial risk are not brought under requirements meant to address the failures of a market they had no hand in. We think about all the people who didn't have a hand in this problem that got affected. We think even about our small banks in the State of Minnesota. They didn't engage in this kind of risky behavior. I think about them sometimes standing there with their briefcases in the heartland, with those credit default risks swirling around their head that they never used or engaged in, saying: Toto, we are not in Kansas anymore. Because, as we know, some banks in this country had a brain. Some banks didn't go to Oz and think they could go back with the American taxpayers' money. So we have to remember that as we go forward.
But the most important thing is to make sure we put a traffic cop at those intersections, that we put some stop signs at those intersections, that Wall Street isn't allowed to drive down in their Ferraris while the government is following behind in a Model T Ford.
Enacting these reforms is not just important for our financial markets, it is important for ordinary Americans. While very few people outside of those involved in these markets understand or see the impact of derivatives on their daily lives, their misuse contributed to a recession that left millions without jobs, businesses shuttered, and trillions in household savings lost. The legislation we passed out of the Agriculture Committee and that Chairman Dodd has worked to incorporate into this bill will bring these dark markets into the light of day and ensure they will never again threaten the stability of this financial system.
It is very important that we bring this before the Senate, that we begin debate on this bill. That is why, as we look at the rumors swirling around that, in fact, there is a deal and that we are going to be able to at least begin the debate on whether to proceed--not debate on the bill--we are still working out the details. We think this is a good bill. We look forward to working with our colleagues on it, but we can't even get to ``go,'' we can't even get to ``start'' if we can't get this bill on the floor to debate.
So we are looking forward to discussing this bill, debating for the American public and getting it done. The Americans who lost their jobs, their homes and their savings and are scared every day that it is going to happen again because of the recklessness of Wall Street deserve no less.
Thank you. I yield the floor. I note the absence of a quorum.
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