Restoring American Financial Stability Act of 2010 - Continued

Floor Speech

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Mr. DURBIN. Mr. President, I stand in support of the Merkley amendment.
This is an effort by JEFF MERKLEY of Oregon and CARL LEVIN of Michigan to try to strengthen the bill that is before us on Wall Street reform; to try to minimize the types of investments made by banks which could, in fact, jeopardize those government institutions that guarantee the deposits at banks because some bankers make bad decisions and bad investments. What Senator Merkley is trying to do is to reduce that likelihood, which means banks are less likely to fail and taxpayers are less likely to be holding the bag.

Senator Levin of Michigan, you will remember, 3 or 4 weeks ago held a historic hearing with Goldman Sachs representatives, including Mr. Lloyd Blankfein, their CEO, to discuss some of their practices. Those of us who know Senator Levin know he is a very studious and thoughtful individual and he doesn't take on complex issues lightly. He spent months in preparation for that hearing, and coincidentally it came up just as we began the debate here on Wall Street reform. It was quite a hearing. It went on for many hours because there was an effort by the witnesses to avoid answering questions, so the committee decided they would keep the witnesses there until the questions were answered. As a result, they stayed into the night. At the end of the day, I think people had a better understanding of some of the practices at Goldman Sachs, one of the largest financial institutions on Wall Street. I think they also may have had some second thoughts about some of the standards being used by that firm and others.

We know Goldman Sachs is currently being investigated by the government for alleged wrongdoing when it comes to the sale of investment products. It turns out, as best I understand it, that this Wall Street firm of Goldman Sachs was selling investments to individuals and then basically betting they would fail--with their own money. It strikes me as a complete abdication of any financial or fiduciary responsibility, to put their customers in that kind of compromised position. It is interesting that I have had a conversation with people in other firms on Wall Street who think this is routine and not extraordinary. That makes it all the more troubling.

The Levin portion of the Merkley-Levin amendment addresses this issue about the ethical considerations of these companies that, in fact, are selling products to their customers and then turning around and secretly, quietly betting with their own investments that those products will fail.

So that sort of thing should be addressed in this bill. The Merkley-Levin amendment is an amendment which would have been considered regardless of whether today's cloture motion had passed.

For those who do not follow the Senate, the cloture motion is an attempt to at least bring a close to the beginning of a debate and start to wind down the debate toward a vote. So we had a vote today. We needed 60 votes in the Senate out of 100 Members to vote in favor of the cloture vote.

After 4 weeks on the floor of the Senate on this Wall Street reform bill, the majority leader and many of us felt we had reached a point where we needed to start winding this bill down and bring it to a final vote. Well, we needed 60 votes to do it. There are 59 Democratic Senators here when all are present and accounted for. One of our Senators, Mr. Specter of Pennsylvania, was not here today, and as a consequence we found ourselves needing help from the other side of the aisle.

We needed at least one--it turns out three--Republican vote in order to move forward and to bring this bill to a vote. At the end of the day, we did not have them. We fell one vote short. We had two Republican Senators who crossed the aisle and voted with us--that would be the two Senators from Maine, SUSAN COLLINS and OLYMPIA SNOWE--and no other Republicans who would join us in trying to bring this bill to a close with some closing amendments and a vote.

If you followed the debate on this bill, it is no surprise that the Republicans are reluctant to be part of Wall Street reform. When the debate started, it started with three--not one but three--straight filibuster votes. Those were efforts by the Republicans to stop us from even bringing this issue and subject to the floor of the Senate. Many of us felt this discussion and debate over this bill was long overdue. We know this recession has cost us dearly in the United States. We know it extracted $17 trillion out of the American economy.

We felt it personally. You felt it in your savings account, your IRA, your retirement account. You saw it when the business down the street started to lay off its employees and another one closed. You noticed the home across the street going into foreclosure.

You heard all the stories about unemployed people, maybe some in your own family. So we knew what this recession meant and what it cost us, $17 trillion. What we are trying to do with this Wall Street reform bill is to change the way they do business on Wall Street so we never face another recession such as the one we are in, brought on by the greed and stupidity of the so-called banking experts on Wall Street.

We know what happened. Wall Street got away with murder for years, and taxpayers ended up holding the bag. Hundreds of billions of dollars out of the Treasury, out of the wallets of families across America in terms of tax payments, that ultimately found their way to Wall Street to rescue the failing businesses there.

Why were they failing? Well, try reading ``The Big Short'' by Michael Lewis, one of the most popular books now in America. Mr. Lewis was in my office today. He has written a number of books, and he is pretty good at it. He talked about his experience sitting down with people who were insiders on Wall Street who were describing what went on literally for years.

What you think is that when you get to the top, you will find the smartest people. I guess that is possible and likely. But in this case, when you got to the top, you found some of the dumbest people who were involved in constructing investment ideas that were fundamentally flawed, taking failing mortgages across the United States and packaging them together and then trying to sell them locally and globally and watching the bottom eventually fall out.

Lewis wrote this in this his book, ``The Big Short.'' Many of us have read it. He and I had a chance to talk about it today. But it was that kind of conduct that led to this recession that cost us all these jobs, that wrecked the savings accounts of American families, that has set us back on our heels, and we are finally coming out of it slowly. But it has cost us dearly as a nation.

We are trying to change the way Wall Street does business so we never have to face a recession such as this again. The Republicans in the Senate, with only a few exceptions, have resisted our efforts to pass this bill.

First, with three straight filibusters to stop us from bringing the Wall Street reform bill to the floor, three efforts to stop us from even debating the bill, then 4 weeks of debate on the floor of the Senate, and I will tell you, that is rare. I have been around here for a few years. It is very rare that you would spend 4 weeks on one bill. Well, this is our fourth week on this bill.

During that time, Senator Dodd, the chairman of the Senate Banking Committee, has been working with Senator Shelby, the ranking Republican from Alabama, who is on the floor, and they have been going back and forth with amendments.

I think Senator Dodd said today almost 60 amendments have been considered, pretty close. A lot of different ideas have come to the floor back and forth. Some Democratic amendments have been considered and failed, some passed. Some Republican amendments were considered and failed. There were bipartisan rollcalls. It has been a real Senate debate.

It feels good. It does not happen enough around here. This so-called deliberative body spends a lot of time, such as at this moment, where nothing is going on, on the floor except some profound speeches by the Members. What we have tried to do, during the course of this debate, is give everybody a chance to bring out their point of view. Points of view are much different. That is OK. That is why we are here. We are supposed to debate these things and vote on them.

I had an amendment last week, one that I have been working on for literally 3 years or more, that deals with the credit card companies' charges to merchants and retailers. When a customer uses a credit card, they not only get credit to buy a meal, for example, that restaurant has to pay a percentage of the bill, the cost of the meal, back to the credit card company. This interchange fee has become unfair to small businesses.

Well, after working at it for more than a week, we finally had the amendment called 6 days ago, and it was enacted, passed by the Senate, with a vote of 64 to 33, 17 Republicans joined me. So it was a good bipartisan amendment. It was a surprise to many because the credit card companies and the banks that support them are very powerful. In this case, they came up short. The retailers, the merchants, the convenience stores, the gas stations, the restaurants, grocery stores all across America finally prevailed in this long battle against the credit card companies.

But that was the best of the Senate, I thought, and of course I am partial because my amendment passed. But it was the best of the Senate because it was a real debate and a real vote and an outcome which was bipartisan.

We felt this was a good time, in the course of the debate, to start winding it down and come down to a handful of amendments, vote on them, and then vote for final passage so we can conference this bill, work it out with the House, send to it the President to be signed into law. But we could not get the votes.

The Republicans, but for two Senators, refused to give us the votes to end this part of the debate and bring this bill to a final vote. It is frustrating. I do not know that they can argue that we have been unfair. We have given pretty wide berth to the Republican side to offer the amendments they wanted to offer. They have offered quite a few, and we have, too, on our side of the aisle.

So I do not think you can argue that we should not stop debate over fairness in the course of the debate. They might be arguing they do not want a bill at all. That is possible. First, they filibustered to stop us from bringing
the bill to the floor. Now they are basically filibustering to stop us from ending the debate on the bill and bring it to a final vote.

I only know of several groups across the country that want to stop the debate on this bill: Wall Street, the biggest credit card companies, and the biggest banks. They want to stop this bill. They want to kill it. They have spent a fortune on lobbyists, roaming around our offices on Capitol Hill, to try to convince Members to stop this Wall Street reform bill.

Well, they at least were successful today. They convinced all but two Republican Senators to come to their side of the issue and to stop this debate on Wall Street reform. That is unfortunate because I think the American people expect us to get something done. They expect us to hold Wall Street accountable, to make sure the reckless gambling by Wall Street institutions that led to the loss of more than 8 million American jobs comes to an end.

They want to end taxpayer bailouts once and for all. They do not ever want to hear the word ``TARP'' again, unless it is something you can put over the top of your station wagon. They certainly do not want us in a situation where we are coming up with hundreds of billions of dollars to bail out these banks. Thanks to an amendment by Senator BARBARA BOXER of California, one of the first, we made it clear that we are prohibiting any future bank bailouts under this bill. Senator Boxer was a real leader on that issue.

I think most Americans believe we need to have an agency that is going to be here in Washington which will administer the strongest consumer financial protection law in the history of the United States, a law that will empower consumers when they go through a real estate closing or sign a credit card agreement or sit down next to their son or daughter to sign the student loan forms or take out a loan for a car, knowing they are not going to be cheated and treated poorly.

This agency is there to empower consumers so they are not, in fact, swindled out of their life savings and are not brought into legal deals which are totally unfair. We want to bring sunlight and transparency to shadowy markets. Some of the things we voted on will move us in that direction, to start eliminating some of the trading that has gone on that is an outrage.

I do not think business as usual is the right way to go. But the Republican votes today, all but two Republican Senators voted to continue business as usual on Wall Street. They do not want this bill to pass. So they voted that way today. At the end of the day, 39 out of 41 Republican Senators voted for the status quo, keep things as they are on Wall Street.

In addition, of course, we understand that Wall Street is powerful. When my amendment came up on interchange fees, the banks warned Senators: If you vote for the Durbin amendment, we are not going to support you; that is, contribute, in the next election campaign. That was on the front page of the New York Times last Saturday. It is the most bald-faced admission I have ever seen by special interest groups that they are putting the pressure on Members who vote for Wall Street reform.

So I say to my colleagues: They may have won today and kept the banks happy. But, ultimately, it is more than the bankers who will be voting in November. It is people all across America who are angry at what happened on Wall Street and do not want it to happen again. They are going to remember the Senators who voted with Wall Street and those who voted for reform, and today we have a rollcall that indicates it.

We have to make sure we make the changes that make the difference across America. Some of the things that have happened here are pretty graphic. Paul Krugman, a writer from the New York Times, wrote a few weeks ago:

The main moral you should draw from the charges against Goldman, though, doesn't involve the fine print of reform; it involves the urgent need to change Wall Street. Listening to financial industry lobbyists and the Republican politicians who have been huddling with them, you'd think that everything will be fine as long as the federal government promises not to do any more bailouts. But that's totally wrong--and not just because no such promise would be credible.

For the fact is that much of the financial industry has become a racket--a game in which a handful of people are lavishly paid to mislead and exploit consumers and investors. And if we don't lower the boom on those practices, the racket will just go on.

That is why this vote today was so critically important. Those who want to stick with the status quo, who want to reward the special interests, who want to load up this bill with lobbyists' loopholes, prevailed today on this vote today by one vote on the floor of the Senate. There will be another vote tomorrow and maybe the day after too. The question is, Will any other Republicans, aside from the two Senators from Maine, break ranks and join the Democrats for Wall Street reform?

This is a once-in-a-political-lifetime opportunity. If they want to stand with the special interests and Wall Street to stop this reform, they will certainly have to answer for it when the time comes and they face the voters.

This attempt we are making to change the rules on Wall Street is an attempt to empower the people of this country to help them make the right decisions personally and to make certain that they do not end up losing their savings and their homes and their jobs because of the greed and selfishness of those on Wall Street.

I can remember many years ago on the floor of the Senate, when I was a brand new Senator, way in the back row there, and offered an amendment to a bankruptcy bill. The amendment said: If you are a predatory lender; that is, if you violated the laws of America in the loans that you are making, such as mortgages, you cannot then turn around in bankruptcy court and recover from the debtor who has been the victim of your predatory lending practices.

I was arguing on the floor with Senator Phil Gramm of Texas, who was here arguing against my amendment. He was high ranking on the Senate Banking Committee. He said: If the Durbin amendment passes, it is going to kill the subprime mortgage market in America. Well, I lost by one vote. If my amendment had prevailed, who knows, history might have been a little different. That is why one vote makes a difference.

Today, we needed one more Republican Senator to vote for Wall Street reform. We had two. We needed one more. I understand two of our Democratic Senators withheld their votes because they want this bill to be stronger. I hope they will come around. I hope they will vote with us. But at the end of the day, we only had two Republican Senators who stepped up and said they favored Wall Street reform.

Well, I lost my amendment by one vote that might have changed a little bit of financial history if it had passed. Today, we lost by one vote when it came to Wall Street reform.

We are not going to quit. President Obama is committed to it. Democrats in the Senate are committed to it. Democrats in the House already passed their bill. We need to get this done. It is time to stop the obstructionism. It is time to stop the stonewalling. It is time to bring this to a close with a handful of amendments on both sides of the aisle. Let's have an up-or-down vote, and let's get on with it. Let's pass this bill.

On final passage, a number of Republicans who have been holding back and would not support this bill may have second thoughts. They may decide they don't want to be found on the wrong side of history again; that it isn't worth standing up with the special interest groups or Wall Street lobbyists when America is crying for basic reform and accountability.

I yield the floor.

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Mr. DURBIN. Mr. President, at the risk of a real debate, I invite the Senator from Georgia to stay, if he would, for a moment so we can engage.

Mr. ISAKSON. I am happy to.

Mr. DURBIN. I have the highest respect for the Senator from Georgia personally, and I thank him for his support on my interchange amendment. We have worked on many other issues, and we will in the future. I will concede what he pointed to as a fundamental flaw, a mistake that was made. There was a presumption made that owning a home was such a valuable American ideal--and I know your background; you certainly agree with that--but we went too far. We extended the opportunity for home ownership to people who were not ready. We believed if we pushed them to the limit of how much they could pay, the home would appreciate in value, their incomes would go up, and everything would work out. It turned out that gamble was wrong for some people. Certainly, Fannie Mae and Freddie Mac, as the ultimate guarantors of mortgages, were part of that. There is a government element here. I don't question that for a moment. Certainly some blame lies there.

Blame lies with those people who overextended, bought more than they could afford. They may have been misled into it, but the fact is, they did it. They made mistakes.

Having said that, though, there were a lot of people involved in financial institutions which led them into this, misled them into this. No-doc closings, where people didn't have to present a document proving the amount of income they had, basically telling people: We will give you a mortgage where it is; you will be paying just interest for a few years, and everything will be just fine.

These mortgages where the interest rates would explode in the outyears, and people would not be able to pay, there was a lot of things that went wrong there. But I hope the Senator from Georgia will agree that behind this bill is the notion that some things happened on Wall Street which were outrageous. The fact that we ended up coming up with somewhere in the range of $700 or $800 billion to save most Wall Street institutions is an indication that things were out of hand on Wall Street, that we never want to return to that again.

I will concede to the Senator from Georgia his premise. Do we need to reform Fannie Mae and Freddie Mac? Yes, we do. If we don't, we will pay dearly for it. I don't know if we can accomplish it in this bill, accomplish it at this moment, but it literally has to be done. I have never quarreled with that premise in the debate, nor do I question his starting point that this was part of the problem that led to where we are today.

It is always the best is the enemy of the good around here. We have a good Wall Street reform bill that moves in the right direction to avoid some of the abuses there. To argue that it doesn't include Fannie Mae and Freddie Mac and therefore we can't support it, perhaps we just have a different point of view. I think this is a valuable thing to do to move forward. I will concede his point. He is right in what he said.

Mr. ISAKSON. Will the Senator yield?

Mr. DURBIN. Yes.

Mr. ISAKSON. I appreciate his comment. That was my point. When I was listening to the Senator's speech, I got a little irritated. Then I realized I have probably done the same thing before too. I leaped over some facts that belong in the debate. The fact that the Congress directed Freddie and Fannie to own a percentage of their portfolio in subprime loans was the source of the capital that bought the first securities that created the subprime securities. I do not argue that there are not good things in this bill.

In fact, when the Senator was referring to the liar loans, it was the Isakson-Landrieu amendment that we successfully added to this bill that defined that a qualified loan is to be exempt from risk potential because it requires income verification, requires an employer statement that the employee is hired, and it requires an income ratio that is sufficient to retire debt that is borrowed. I agree with the Senator.

My point was that when all of us make these remarks of what bills are and they are not, we ought to include all of the facts that are in there, not just a select few. I appreciate the Senator's comments. I was proud to be a part of his amendment.

Mr. DURBIN. I thank my colleague from Georgia. It depends on one's perspective. The amendment he just described that he added to the bill is a valuable part of this bill. It wasn't there originally. It is now. I am glad it is. I am happy to support it. That is what we are trying to do today, to move its passage so it becomes the law of the land. But because we fell short by only two Republican votes coming forward today, we can't move forward.

If the position of the Senator is we should not pass his amendment or this underlying bill until we reform Fannie Mae and Freddie Mac, I am with him in terms of the reformation. I don't believe it is reasonable to require this bill to do everything that needs to be done. That is my only difference with the Senator from Georgia.

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Mr. DURBIN. Mr. President, I rise today to commend and thank Senators DODD and SHELBY for their extraordinary leadership and tenacity in shepherding this complex bill through the arduous floor consideration process over the past several weeks, and for their years of work to reach this point. Their task has not been an easy one. The amendment process was delicate at times, but certainly collegial and fair. The fruits of our labor are an improved product emerging from the Senate, albeit not a perfect one. Invariably, in a bill of this scope and significance, some matters were not fully addressed or resolved to everyone's satisfaction.

I am disappointed that we did not consider an important bipartisan amendment submitted by Senators INOUYE and COCHRAN relating to the funding of the Securities and Exchange Commission.

Section 991 of the bill would permit the Securities and Exchange Commission to be ``self-funded,'' thus removing a critical oversight role for the Appropriations Committee. The Inouye-Cochran amendment would have stricken this section.

Retention of the language in the bill is objectionable for a host of reasons. Section 991 removes the role of Congress in dictating how potentially limitless funds, up to whatever level is generated in fees under a budget that would be set by the SEC itself, are to be spent. It would make the agency potentially less, rather than more, responsive to congressional priorities. Spending would go unmonitored. The critical role of the Office of Management and Budget for apportionment of funds would also disappear.

Congress oversees Federal agencies primarily through two distinct but complementary processes--authorizations and appropriations. The authorizing committees are responsible for creating a program, mandating the terms and conditions under which it operates, and establishing the basis for congressional oversight and control. The appropriations committees and subcommittees are charged with assessing the need for, amount of, and period of availability of appropriations for agencies and programs under their jurisdiction.

Exempting an agency from the appropriations process reduces opportunities for annual congressional oversight. The appropriations process, with its annual budget justifications, hearings, and markups, provides a useful layer of congressional review and scrutiny of agency operations, in addition to what is provided by the authorizing process. In the appropriations subcommittee I am privileged to chair, I have conducted annual hearings on the SEC's budget through which I have learned much about this agency's requirements, particularly its staffing and information technology needs.

Allowing an agency to set its own budget is an abdication of the constitutional responsibility of the legislative branch of government. It is a dangerous surrender of the congressional power of the purse.

It does not make sense--in this comprehensive bill aimed at bolstering oversight, transparency, and accountability of the world that the SEC regulates--that we would weaken, in fact, abolish, the vital role of the appropriations committee to evaluate the resource needs and spending by this agency.

This comprehensive bill confers significant new responsibilities on the SEC as a financial regulator. Shouldn't we evaluate on a regular basis whether this agency is responsive to the mandates we impose? Shouldn't Congress determine if the SEC has adequate funds and is using those resources wisely, in the right places, to accomplish its mission? Under section 991, we toss out the important, longstanding role and responsibility of appropriators to do just that.

Public opinion of the SEC as a vigilant investor-protector has been less than stellar in recent years. The SEC has been under withering criticism over the past years with the release of the inspector general's report chronicling the SEC's failure to identify Madoff's Ponzi scheme as far back as 1992. The recent IG report on the Stanford case is another example of years of SEC inaction to act against a Ponzi scheme.

Under the leadership of Chairman Mary Schapiro, the SEC is making strides to turn things around. I think Chairman Schapiro is doing a commendable job leading the charge for reform. However, she herself admits that there's more to do and much room for improvement. Our interest in leaving the appropriations oversight process intact is not a verdict on Chairman Schapiro's ability to effect meaningful change.

Those who contend that the SEC ought to set its own budget argue that requiring the agency to compete for funding in the annual appropriations process will lead to chronic underfunding and limited flexibility. Recent experience suggests to the contrary. My Financial Services and General Government Appropriations Subcommittee has placed high priority on the budgets of several agencies including healthy and justified increases above the President's request. For the current fiscal year, Congress provided $1.111 billion, a 25-percent increase over the fiscal year 2007 level--and $85 million above the amount that the President and the SEC requested. We have also acted promptly to consider and approve reprogramming and internal reorganization requests.

Those who claim that the SEC has been shortchanged in past years should consider that in each of the past 7 years, the SEC has had substantial amounts of unobligated balances from prior years. This means there were appropriations provided that the SEC was not able to use.

The SEC has not been reauthorized since the Sarbanes-Oxley Act of 2002, when Congress authorized $776 million for fiscal year 2003. Instead of putting this agency beyond the reach and oversight of appropriators, we should act to authorize levels of robust funding for each of the ensuing 5 years--like the House did--and thus clearly express the intent of Congress that this agency be adequately funded.

Reauthorization of suitable and reasonable funding levels would certainly send a strong signal about the amount of resources that Congress believes are necessary for this agency to thrive and grow to meet its important mission and satisfy its many new responsibilities. Leaving this agency unchecked in its budgeting and spending activities is simply the wrong way to go.

I trust that as we reconcile this bill with the version adopted in the House that this matter will be favorably resolved and that the conference agreement will acknowledge and preserve the critical oversight role of the appropriations process.

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