Restoring American Finacial Stability Act of 2010 - Continued
Floor Speech
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Mr. WYDEN. Mr. President, I rise to talk about a bipartisan amendment I have spent many weeks working on with Senator Brown of Massachusetts. It is an amendment dealing with a very crucial issue--a major gap in our system of financial regulation. It has been approved by Senator Shelby, the distinguished ranking Republican, and also by Senator Dodd. In fact, I think it is fair to say that if we can get a vote on it tonight, it would have enormous bipartisan support in the Senate.
I am concerned that we won't get a vote on amendment No. 3982, and as a result it is very likely this bill will pass.
After all the problems the country has seen with these large banks and large financial institutions, it still will be possible for a bank to sell a product to an institution or a consumer, bet against that product, and it will not be disclosed to the buyer. That is not right.
What Senator Brown and I have been able to do, working with Senator Shelby's very capable staff and Senator Dodd's very capable staff, is we have been able to put together a bipartisan amendment--the new Senator from Massachusetts and myself--that would close this loophole, that would ensure there is at least simple, garden-variety, basic disclosure so that someone purchasing one of these financial products would know that the seller is actually betting against the product that is being sold to the consumer.
If I were to sell you a financial product and without your knowledge placed a separate bet that the product would decline in value, there is no question in my mind that the distinguished Presiding Officer, the Senator from Illinois, would feel wronged by that transaction and everyone would say: Rightly so. If I stood to gain by convincing my clients to buy something that I knew would fail, they would have every reason to feel betrayed, to feel swindled, to feel they had been had.
The fact is, some of these major financial institutions invented and sold incredibly complicated financial products that they actually were hoping would fail, and they hid their positions behind a wall of omission and complexity.
I think it would surprise most Americans to learn that somehow this kind of mischievous--actually devious--business behavior was actually legal. The tragedy, of course, is it may be legal but it is certainly not right.
At present, under current law and if this bill clears the Senate tonight in its current form, the major financial institutions, these Wall Street banks, would not be required to disclose an absolutely essential piece of information to a client, what, in my view, would be a material conflict of interest.
From everything I have heard, the folks on Wall Street see these transactions in which a bank constructs and invests in a financial product that is designed to fail and then markets this product to those with an interest in its success as an honest transaction. Boy, I do not know of anybody at home in Oregon who sees something like this as honest or, in light of the recent hearings, fabulous.
Senator Brown of Massachusetts and I said: We are going to get together on a bipartisan basis and do something about it. We put together an amendment, which I wish to point out to colleagues tonight is acceptable to Senator Shelby, is acceptable to Chairman Dodd. We are getting ready to vote on an amendment where we have bipartisan Senate sponsorship, we have the very constructive and very valuable input of Senator Shelby's staff, and we have Chairman Dodd's involvement. If we got it before a vote, we would have an overwhelming, bipartisan vote for a simple proposition that everybody can understand on the streets of Illinois, Oregon, or anywhere else, and that is, you ought to disclose when, in fact, you are selling a product that you are betting against.
The disclosure of conflicts amendment I am describing, coauthored by Senator Brown of Massachusetts, would direct the new financial stability oversight council, which is established in the underlying bill, to put forward rules requiring banks to disclose to their clients whether they have a material conflict of interest with respect to a financial product they are selling. It comes down to a simple proposition: If these firms are willing to create and sell these products, they ought to stand behind them and be honest with their clients. It is a very short amendment.
On Main Street, all across the country, everybody would understand what the bipartisan amendment that Senator Brown and I are offering--disclosure. We are not saying we are going to ban all of these sales. Colleagues made a very compelling case, by the way, on going further than we do. But certainly there ought to be disclosure. We want to bring greater honesty and transparency to the relationship between buyers and sellers of complicated financial products.
It is fair to say--and I surely consider myself a market-oriented Democrat. That is what I tried to do on health care and what I continued to try to do in a bipartisan proposal with Senator Gregg to fix our tax system--you cannot have functioning markets without honesty and transparency. Without it, we end up with a game that is rigged against the typical American investor and taxpayer.
I also wish to express my appreciation to my new colleague from Massachusetts for working with me to advance this simple and straightforward proposition. As I stated, I am very appreciative of Chairman Dodd and Senator Shelby and their counsel with respect to our bipartisan idea.
I also want to make it clear that I do not see a problem with financial firms taking steps to manage their risks. In fact, I encourage it. If firms had done so in the early part of this decade, our economy might not have suffered in the meltdown we have seen in financial services.
My concern--and I see the chairman of the full committee, Senator Dodd, in the Chamber--my concern from the very beginning, as Chairman Dodd has done his very good work on this legislation, is the opaque nature of these transactions. The fact is, it is so hard for the American people and the purchaser to understand what these transactions are all about, and certainly they ought to be given information when the person selling it is taking a very different financial position than the person who is buying.
We ought to turn this curtain back on the current financial model and show it to the rest of the country. Let's pull the curtain back on the Wall Street business model and show it to the rest of the country.
I have wracked my brain to try and find another industry that would bet against their own product while selling it to the American people. Does the person selling me a toy for the Wyden twins stand to make additional money if the toy breaks? Obviously not.
Mr. President, I ask unanimous consent for 3 additional minutes.
The PRESIDING OFFICER. Without objection, it is so ordered. The Senator still has 30 seconds left on his original time.
Mr. WYDEN. Mr. President, it is obvious that in no other part of the American economy do we have people betting against their own product while selling it to the American people. You do not see Apple creating the iPod in the hope that sales will be far below expectations and then going out and betting some of its own money on the failure. No industry--none--thinks of betting against their own product while selling it to the American people. I do not even think that owners of racehorses bet against their own ponies.
The kind of disclosure that Senator Brown and I have called for is fundamental for investment confidence in the integrity of the U.S. financial system. If financial firms can market products they are betting will fail without disclosing that to their clients, the conditions that caused the current financial crisis, in my view, will be recreated with Wall Street firms packaging up toxic assets and marketing them as securities to unsuspecting buyers. ``Buyer beware'' will again become ``taxpayer beware.'' That should not be acceptable to any Senator.
I know colleagues are waiting to speak. I repeat, amendment No. 3982, authored by Senator Brown of Massachusetts and myself, will fill a loophole in this bill that is going to be passed tonight that, in my view, is a glaring omission that does not meet the test of the consumer protection the American people deserve.
This bill is clearing the Senate tonight without even minimal consumer protection, without even disclosure of financial institutions betting against products they are going to sell. That is not right. I hope we will return to this subject as soon as possible.
I see Chairman Dodd on the floor. I thank him for the time he has given me in the course of this legislation. I commend him for all his efforts on this bill.
I also thank Senator Shelby and his very able staff director, Mr. Duhnke, whom we know from our Intelligence work, for their support in putting together this amendment. I surely hope it will come out of conference because the American people deserve this kind of consumer protection and this kind of disclosure.
I yield the floor.
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