Restoring American Finacial Stability Act of 2010 - Continued

Floor Speech

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Mr. MERKLEY. Mr. President, I applaud my colleague from California who has been an extraordinary champion of consumers throughout her career. She understands that the basis of a successful nation is successful families. That depends on them having a strong financial foundation. We should not measure the success of our country by the million-dollar bonuses or the billion-dollar quarterly profits on Wall Street. We should measure it by the success of our families.

This bill is absolutely essential to restoring those financial foundations; whereas this amendment before us does the opposite. The Shelby amendment No. 3826 carves the heart out of this bill. This dog don't hunt. In fact, this dog doesn't bite. I don't even think this dog barks. For that matter, I am not so sure it is a dog. That is how bad the Shelby amendment is.

The background is this: Predatory mortgages and securitization of those mortgages on Wall Street built a house-of-cards economy that came falling down last year. The predatory mortgages were done at the retail level, but the securitization and selling of those packages occurred on Wall Street. They built investments that were taken in by every major financial house practically in the world, and those investments, those securities had a 2-year fuse on them, essentially a 2-year teaser rate on every underlying mortgage.

At the end of the 2 years, interest rates doubled, families could not make the payments, securities went bad, and we had financial firms one after another collapse. We had Lehman collapsing. We had Bear Stearns collapsing. We had Merrill Lynch collapsing. We had major problems at Bank of America needing a bailout, a $4 billion TARP bailout. We had Citibank collapsing. We had Washington Mutual collapsing--all built on predatory mortgage practices, every single piece. That is why consumer protection is so important. That is why it is at the very heart of this bill. And that is why we need a Federal consumer protection agency.

I have friends back in Oregon who write to me, citizens back in Oregon, constituents who will say: Here is what went on, and how can that be fair? Let me just give an example.

A woman from Salem wrote to me and said: I always pay my credit card on time, always have for years and years. But I got my credit card statement, and it had a late fee. So I called up the credit card company, and I said: How is it possible? I always mail my payment on this day. It should have had plenty of time to get there.

The credit card company said: Yes, as a matter of fact, your payment did come on time. But you know, Madam, we are not required to post your payment on the day we receive it. In fact, in the contract we have, we can sit on your payment for 10 days and then post it, and then your payment is late and we get to charge you this fee. We are just following the rules.

She said: How can that be fair?

It is not fair. Everyone knows it is not fair. Let me give another example.

Citizens wrote saying: Hey, I had a whole series of transactions with my bank, and then the bank changed the order of those transactions to put the biggest transaction first. It so happened that biggest transaction made me $10 over the funds I had in the bank. I had an overdraft. By putting that big transaction first, it meant instead of one overdraft fee, I have 10 overdraft fees. Instead of only $35 for one overdraft, I owe $350 for an overdraft series. How can it be fair that the order of the transactions was changed in order to multiply the fees I owe tenfold?

Everyone knows that is not fair. Everyone knows it. We simply need to have an agency that is able to say that is not OK. We do not want to have a process where something that is unfair goes on for 10 years or 15 years or 20 years before there is legislation to address it.

You cannot address a consumer product's choking hazard by doing it in legislation. You have to empower an agency to say: No, that part is too small. You cannot address lead paint by doing legislation every time something is painted. No, you have to have an agency that says they will test that paint and say lead paint is not OK.

It is the same with consumer financial products. We need the same power to fix traps and tricks in real time for fairness to America's families so they can rebuild their financial foundations because that is what a strong country is, families with strong financial foundations, not million-dollar bonuses, not billion-dollar quarterly profits based on stripping funds from working Americans. It all comes down to the heart of it: fairness in consumer financial documents.

Let's take a look at amendment No. 3826 and why it carves the heart out of this important bill for America's families, America's Main Street families and businesses.

Here is what it does: First, it says virtually no one is covered. Let's look at the list. What is covered under the language of the amendment are large nonbank mortgage originators. Large nonbank mortgage originators do not exist anymore. So it covers firms that do not exist anymore. It is kind of like saying we are going to have the regulation of safety on cars, but it is only for cars that are powered by gasoline and were built before 1850. No such cars exist. All the other cars, the ones actually on the road, we are not going to cover them.

We have a list. We have commercial banks, not covered; investment banks, not covered; credit card companies, not covered; car lenders, not covered; payday lenders, not covered; nonbanks that sell financial products of a whole sort, not covered.

I think you get the picture that this amendment is meant to make sure nothing is covered. Then, just in case there is some little piece that does get covered, it says: You know what. This agency is not independent. It cannot write rules. It has to have everything it does approved by the financial world--the financial world that brought us all these problems, that brought us to tricks and traps, that stripped wealth from working Americans. They are going to decide what is covered.

I echo my constituent from Salem and say: Where is the fairness in that?

Mr. DURBIN. Will the Senator yield for a question?

Mr. MERKLEY. Certainly.

Mr. DURBIN. Let me ask the Senator: As I understand the amendment of the Republican Senator, it goes back to the old days when there was virtually no consumer financial protection. The bill we have before us here--that Senator Dodd and the Banking Committee brought forward--has the strongest consumer financial protection law in the history of the United States. It has an agency with independent authority to protect Americans, but more importantly to empower Americans to make the right decisions when they are taking out a mortgage, a loan for a car, a home loan or a student loan. What the Republicans are suggesting in the Shelby amendment is to go back to the old days when there was no protection, there was no authority.

The argument is made about the fact that when it comes to mortgages, they weren't the problem, the problems were with Wall Street. But at the heart of the issue on Wall Street was the mortgage being signed by the family in Springfield, IL, and Portland, OR. So I ask the Senator: In your State, in your experience, as you look at this, if the Republicans have their way and move us back to the old days when it comes to this consumer empowerment, consumer protection, don't we run the risk of falling into another economic crisis, losing millions more jobs across America? Isn't that the risk we run if we go the route suggested by the Republican amendment?

Mr. MERKLEY. My colleague is absolutely right. Because predatory mortgage practices were at the heart of this crisis that led to securities that blew up the economy and led to the loss of millions of jobs around our Nation, with an unemployment rate in my State that has been over 12 percent. We not only have the risk of going back there, we are perhaps more at risk because we have fewer larger banks. Many investment houses that were independent are now inside those banks, in a position where, if they blow up, they will blow up the banks as well.

So unless we have this strong consumer financial protection agency, it is like taking this bill before us and sticking it in the shredder, and with it shredding the hopes and aspirations of America's working families to build strong finances in the future.

Mr. DURBIN. If the Senator will yield for another question.

Mr. MERKLEY. Yes.

Mr. DURBIN. Is it not true that last week, on three different occasions, the Republicans filibustered this bill to stop us from even starting the debate on this bill, and it was only when we reached the point after the Goldman Sachs hearing--when there was this embarrassing testimony from executives, telling America what they were up to, and it all became very public--that the Republicans finally backed off their filibuster, backed off their delay of this legislation and let us come forward to debate; and that now, one of the first amendments they offer is to weaken this bill so the financial institutions and the banks are going to have more power over the economy, more power over consumers than this bill provides?

Isn't that the real history of how we got to this moment in this debate?

Mr. MERKLEY. My friend and colleague is absolutely correct; that, indeed, my colleagues across the aisle, the Republicans, voted three times to say they did not want to proceed to the bill, where their ideas would bear public scrutiny. Instead, they wanted to talk behind closed doors. You know what they were looking to do was not to strengthen this bill.

Now that the amendment has come out and been placed before us publicly, we do see that it does what we feared. It is designed to take a knife and carve the heart out of this financial reform.

Mr. DURBIN. I would ask the Senator from Oregon if he would yield for one last question.

Now that we have been through this experience where we have lost $17 trillion in American value in this economy--$17 trillion accounted for in the savings accounts of ordinary Americans in Illinois and Oregon, $17 trillion in businesses that failed and jobs that were lost--isn't it critically important that this bill from the Senate Banking Committee move forward, and that each amendment take this strong bill and make it stronger, instead of the Republican amendments, which clearly are designed to weaken this amendment and to open us up to the vulnerability of facing more job loss and more economic crisis?

Mr. MERKLEY. Well, my colleague is absolutely correct. The failure of financial rules has become so obvious and had such devastating impact for our families--as my colleague put it, $17 trillion worth of damage. That means families lost their retirements, families lost their savings for their children to go to college, and it means families have houses under water, if they are lucky. For many families, it means the loss of a job, the loss of income, and the inability to make those mortgage payments, which means they are in foreclosure and have lost their dream at every single level. That is the damage $17 trillion did to our families, and that is why every amendment to the bill we have before us should seek to say: Here is the bill and here is how we should make it stronger.

With that, Mr. President, I yield the floor.

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