The Need For Financial Reform

Floor Speech

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Ms. KAPTUR. I thank you very much, Congresswoman Jackie Speier, for spearheading this effort this evening and for the incredible work that you do for this House and for our country and for your superior knowledge of the financial markets and the banking industry. America really needs you now more than ever, and I thank your constituents for electing you here. You are the right person at the right time and the right place, that's for sure.

Ms. SPEIER. I thank the gentlelady.

Ms. KAPTUR. It's a pleasure to join you tonight to place information on the Record related to Goldman's behavior as well as other institutions that have caused our country so much harm. And as others have mentioned, on April 16, the Securities and Exchange Commission announced that it was filing a civil lawsuit at long last against the big speculator Goldman Sachs, accusing it of committing fraud, but it was a civil filing.

We know that what happened on Wall Street in the financial markets, the commodities markets, and in the housing markets led to enormous financial turmoil in our country and, ultimately, this great economic crisis that we are facing. And the American people want answers. They want to know who did what, and they ultimately want justice.

A few days after that filing, over five dozen of our colleagues signed on to a bipartisan letter sent to the Attorney General on April 23, and our letter called upon the Attorney General to begin a criminal investigation and prosecution.

One of our concerns continues to be that if, in fact, a civil case is filed by the SEC, could it be possible down the road that some of that evidence could be inadmissible in the event there is a criminal proceeding. So we urged Attorney General Holder to proceed quickly, and today we delivered--in addition to that letter--signatures from over 140,000 Americans who have been signing up on an e-petition to the Attorney General urging the same.

We thank the organizations Progressive Change Campaign Committee and MoveOn.org for alerting citizens across this country that they don't have to be neutral in this fight. They can let their views be known to the Attorney General of our country about the importance of criminal proceedings.

What makes that so important is the fact that the Attorney General's office in the Department of Justice has been understaffed throughout the last 10 years, unable to do the type of financial crimes investigations that are necessary. Back in the savings and loan crisis at the end of the 1990s and early 2000s--or I should say at the end of 1989 up until the early 1990s--we had over 1,000 investigators in financial fraud at this Department of Justice. After 9/11, that was reduced to about 75; and, therefore, we were totally unequipped at the Justice Department to deal with a lot of the wrongdoing that was proceeding through those years and those decades.

I have a bill, H.R. 3995, to close that gap and increase the number of investigators. Quite frankly, I have a deep concern about some of the self-serving individuals that may have been representing private interests rather than the public interest as they were conducting their business through Goldman Sachs and other firms.

I would like to place on the record, for example, the following: Joshua Bolten, who was President Bush's chief of staff in the White House at the time that the markets melted down, had actually been the person who ran Goldman Sachs' London office, and yet then he came to be President Bush's chief budget officer and then went to be chief of staff at the White House at the key moment when decisions had to be made about how to handle the financial markets

In the current administration, it is no secret that the chief of staff to the current Secretary of the Treasury, Mark Patterson, had come directly from Goldman Sachs as its top lobbyist. In addition, Neel Kashkari from Goldman Sachs had gone to handle the TARP. I think this goes far beyond party, this has to do with America and standing up as patriots for this country and asking the question: Isn't that too much insider dealing? How do you know that they are really representing their client's interest or the public interest when they are personally involved both on the private side and then on the public side like a very fast revolving door?

I will also place on the Record tonight the fact that since the crisis started the six institutions in addition to Goldman Sachs, that includes Citibank and Wells Fargo, HSBC, Morgan Stanley, all these big banks now control two-thirds of the deposits and GDP of this country. Six institutions. They are raiding equity out of our local communities. They are just simply too powerful and they are too irresponsible. They are not doing loan workouts in places I come from. I thank the gentlelady for calling into question their business principles as you so ably put on the floor here as to who their interests really are.

That is my bottom line question: Who do these people represent? They seem to be getting bonuses at extraordinary levels, in the millions of dollars. When people in my district have fallen off unemployment benefits, these companies like JPMorgan Chase do not return phone calls to do loan workouts. Wells Fargo, they are totally irresponsible. They have too much power and they are thumbing their nose at the American people at a time when our people are just hanging on.

I want to thank the gentlelady for holding this Special Order this evening and for giving us a chance to place on the Record the letter that we sent to the attorney general asking for criminal proceedings, and also the names of the Members of Congress who have signed on this letter. I urge other colleagues who wish to join us to please give us a call. I thank you for allowing me to place this information into the Record.

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Ms. KAPTUR. Do you happen to know what the bonuses were for Goldman Sachs? I know they totaled into the billions.

Mr. DeFAZIO. Last year it was rather modest for Mr. Blankfein, he only got a $9 million bonus which was considerably less than previous, but that does figure out to $1,000 an hour, 24 hours a day, 7 days a week, 365 days a year. Most Americans would be happy to have that salary for a fraction of a week.

Ms. KAPTUR. I think he thought it was too little, didn't he?

Mr. DeFAZIO. Well, compared to the enormous wealth that he created by shorting and manipulating and synthesizing. You know, the one thing I would reflect on, I was a little puzzled yesterday when I kept hearing him say, We are the market makers. We are the market makers.

After awhile I started thinking about book makers, market makers, is there a difference. What is the difference when they are not dealing in reality or productive investment, they are dealing in manipulated investments, products that are designed to fail. I mean, we have too-big-to-fail institutions that create products that are designed to fail, and they profit immensely by doing that. What's that about market making?

Ms. SPEIER. The hardest thing to try to explain to the American people is what is a synthetic CDO and liken it to what goes on in our lives. So I have been scratching my head trying to think of what it would be like. This may not be a good analogy, but I offer it up. It would be like a doctor going in and doing open heart surgery knowing that his patient was very close to death anyway, and then taking out a life insurance policy on that patient because he was clearly going to win each way.

Ms. KAPTUR. Excellent analogy. They created rules by which only they could win, and that doesn't seem to me to be the spirit of free enterprise. They created so much collateral damage it brought down the economy of the whole country. They keep using the argument if we didn't have the TARP, then things would have really gone wrong. I thought, How could it be worse? How could it be worse than this? Is what they did with the TARP just bailing themselves out, because they certainly have not done anything for the American people. They have thrown all of the bills of all of their mistakes on Fannie Mae, Freddie Mac, FHA, all of the instrumentalities of the United States for decades to come. They didn't take any losses on those themselves. They were enriched by the taxpayers of the United States who lifted them right up. And they are not dealing with the damage across this country where foreclosures continue to go up.

I place on the Record the names of the six companies that now hold two-thirds of the wealth of this Nation,

and they are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo. They have enriched themselves handsomely. They doubled their importance since the beginning of this crisis while quashing community banks across this country, seeing forced mergers as institutions like PNC bought up National Citibank in Ohio, as local community banks that didn't do anything wrong and were not permitted to do this kind of wild-eyed business deal, found themselves having to pay huge FDIC fees. And the net yield of all of this is the big ones got bigger and the American people are continuing to be kicked out of their homes and these institutions won't return phone calls and they have hold of the auction process and their investment intermediaries are holding the equity and the ownership in these properties. How is that good for this country?

Ms. SPEIER. I thank the gentlelady from Ohio. It is very important to make the point that Goldman Sachs has never loaned a dime, has never offered a loan to an American trying to buy a house. They have never been a commercial bank as we know them, and yet they have the luxury of being at the discount window getting the money cheap even though they have not been a commercial bank as we know a commercial bank to be. All they have done is bet on how to rig these various mortgage-backed securities and make a truckload of money off them.

Ms. KAPTUR. What amazed me is when all of the house of cards started to fall, sometimes in my part of the country you see chipmunks tearing across the concrete, and they go so fast. The minute they got in trouble, what did they do, they came under the umbrella of the Bank Holding Company Act so they could not be a speculator any more, now they are a legitimate bank; right? Even though they were trafficking in all of those securities, they were just like those little chipmunks. They hid themselves right under the Bank Holding Company Act. I don't agree with what was done, but they took good care of themselves.

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