Restoring American Financial Stability Act of 2010--Continued

Floor Speech

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Mr. SCHUMER. Mr. President, more than 18 months after the collapse of Lehman Brothers put our financial system into a deep freeze, we are at a crossroads in history. We can continue to turn a blind eye to the very real threat that excessive risk taking and reckless deregulation pose to our economy or we can choose to learn from the financial disaster that nearly brought our economy to a screeching halt. I urge my colleagues to choose reform.

We can't wait any longer to take on the challenge of overhauling the rules of the road for our financial system. We have a regulatory system based on the 1930s and 1970s and a financial world in the year 2010. We have an economic imperative to pass a strong set of financial reforms. The shock waves in the real economy that resulted from the financial crisis are still being felt today by the millions of Americans who can't find a job or are facing foreclosure, who can't pay their children's college tuition or have to put off retirement because their savings have been decimated.

We have 9.7 percent unemployment in this country, not because of any reform proposal that has yet to become law but because of an irresponsibility in the financial system and a broken-down financial regulatory system that was last updated in the 1930s and allowed too many firms, and even whole markets, to slip through the cracks. If we do nothing, we will surely find ourselves facing a similar crisis in the not too distant future.

Senator Dodd and my colleagues on the Banking Committee have put together a bill with strong forward-looking reforms that make our financial system stronger and more stable so it can return to its fundamental role--helping our economy grow and innovate and create jobs. The bill lays out new rules of the road, fills gaps in our regulations, and protects consumers and investors. Most importantly, by creating a new resolution authority--which I know my colleague from Virginia, who is sitting on the floor here now, has worked very hard on--this bill ensures that taxpayers will never again have to bail out large financial institutions. Firms that fail, will fail, period. There will be no rescue or bailout, only an orderly unwinding that forces stockholders and bondholders to suffer, not taxpayers.

As a New Yorker, I see the connection between Wall Street and Main Street every day. The financial industry is responsible for 500,000 jobs in New York City, and most of them are not the kind of fancy, high-paying jobs you read about or see in the movies. The average salary for these jobs is about $70,000. But I realize the financial system plays a special role far beyond Manhattan. There are many analogies. It is the heart of the economy, the lifeblood, the circulatory system, the engine of the economy or the oil that greases the gears. Whatever image you choose, it is absolutely critical to helping businesses grow and innovate and create new jobs. So our reform must be forward thinking and strong but not punitive or vindictive or vengeful, because that will hurt the whole economy.

With the special status of the financial system come special responsibilities. The industry has reacted to many of the new proposals by arguing that they will kill innovation. But because we can make cars that go 200 miles per hour doesn't mean we shouldn't have speed limits. In general, I think this bill strikes the necessary balance between maintaining an innovative and competitive financial system while ensuring that the recklessness that occurred by some on Wall Street will never again threaten the financial health of Americans on Main Street. Make no mistake about it, these reforms will be good for both Wall Street and Main Street.

The bill will create a financial system where consumers and investors on Main Street can have confidence in the products and services they receive and where they put their money; a financial system focused on getting capital into the real economy, so people can start new businesses and grow their existing ones. At the same time, the certainty and stability that reform will provide will make our financial system even more attractive to investors around the world and will help keep America at the forefront of the world's economy.

I believe this bill will strengthen jobs and income creation in my State of New York, not leak it, because it will make the system stronger. It will make people have more confidence in that system, and money from around the world will flow into New York, which is the capital of the financial system for our Nation and our world.

The bill Senator Dodd put together is stronger in many ways than most people expected it to be a couple of months ago. It contains several core reforms that will go a long way toward fixing the problems that crept up in our financial system over decades. The bill would make sure taxpayers never again have to foot the bill when large institutions fail; make sure every large financial institution has a regulator looking over its shoulder to prevent excesses, and a council of regulators looking at risks across the whole system; make sure derivatives--which, when abused, can put the whole system at risk--are traded transparently, at the very least, and on an exchange whenever possible.

I should note this is a huge change from the way the derivatives market works now. We would go from a totally unregulated market to one that is regulated, where regulators know every trade that happens and risks can't build up in the system without anyone knowing better.

The bill will also make sure there are stronger consumer protections to ensure institutions can't take advantage of average Americans in their mortgages, credit cards, or other financial instruments. It would give investors additional power to hold their boards accountable so they are not asleep at the wheel the next time their management is loading up the company with risk.

Like many of my colleagues, however, I believe there are areas of the bill I wish to see improved, and I will continue to work with my colleagues on the floor to do that. First, I wish to see even stronger consumer protection in the financial services area, and I am working with Senators Reid and Durbin and others to strengthen this part of the bill. This is an area where I have worked hard for decades now in Congress, both in the House and Senate. It is clear to me we can't force Congress to pass a new law every time a credit card company figures out a way to skirt the old laws. We need an independent agency whose only mission is to protect consumers, and that agency needs to write and enforce rulings across the board for all financial institutions.

I am sponsoring an amendment to expand the enforcement authority of the Consumer Protection Bureau over all nonbanks, such as payday lenders and rent-to-own companies, to make sure consumers are protected no matter who they rely on for financial services.

In the area of consumers, small companies can rip off consumers just the way large companies can. And while large companies can pose a greater risk to the system as a whole, small companies can pose every bit as great a risk to the individual consumer, and the distinction between the two is faceted and unfair.

I also think the bill could go farther in dealing with credit rating agencies, and I am working with Senator Franken on a proposal that would reduce the conflicts of interest inherent in their current business model. There are other changes I will proposal as well.

In conclusion, we have many tasks in front of us if we are to rebuild the American economy, but a stronger financial system focused on the needs of the real economy is crucial in that effort. There should be no doubt that part of putting us back on the path to prosperity requires instituting smart, thoughtful financial reforms.

Mr. President, I yield the floor.

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