Wall Street Versus Main Street

Floor Speech

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Ms. KAPTUR. Mr. Speaker, it's no secret that Wall Street is rampant with cases of outright fraud, backroom deals and very, very special political access. Meanwhile, Main Street is pushing back hard against this tide by investing in our communities and struggling to create jobs so our economy can grow.

A steady series of probing news stories have begun to expose the depth of corruption that precipitated the Wall Street meltdown and why it is so hard for Main Street to recover.

Bloomberg just released a story detailing how the former Secretary of the Treasury, Hank Paulson, provided special insider information to well connected Wall Street executives in July of 2008, just before the meltdown. According to Bloomberg, on the very same day the former Secretary told The New York Times that he expected the examinations of the Federal Reserve and the Office of the Comptroller of the Currency into Fannie Mae and Freddie Mac would ``give a signal of confidence to the markets,'' he informed a select group of his friends on Wall Street later in the day that in reality, there was a plan for placing ``Fannie and Freddie into conservatorship,'' which amounts to a government seizure. Those firms got insider information, and one can ask, did they then place bets to protect their interests? I bet they did.

One of the fund managers in that meeting said ``he was shocked that Paulson would furnish such specific information, leaving little doubt that the Treasury Department would carry out that plan.'' In the words of William Black, law expert at the University of Missouri, ``There was no legitimate reason for these disclosures.''

The Secretary of Treasury is supposed to be a public steward of our Nation's financial well-being. But when he told the public one story and then shared the inside track with his friends and colleagues from Goldman Sachs and other large firms, he broke that trust.

To be blunt, this is self-serving crony capitalism at its worst.

This is hardly the only case of special treatment of Wall Street insiders by Washington, insiders like Paulson, who was the former head of Goldman Sachs. Earlier this week, we saw a U.S. District Court throw out a settlement between the Securities & Exchange Commission and Citigroup. In 2008, Citigroup reportedly created, marketed, and sold a fund to investors. What Citigroup did not disclose is that the bank itself was actually betting against their own fund. This fraudulent deal made Citigroup $160 million while costing the fund's investors $700 million in losses, and counting.

The SEC's response to this fraud was a $285 million settlement, slightly more than a third of the reported losses incurred by the victims of this fraud. Citigroup was not even required to admit any wrongdoing. The federal judge was absolutely correct to throw this case out. The SEC's policy of allowing large Wall Street firms to walk away from fraud cases without so much as admitting any wrongdoing is completely inappropriate and invites more corruption.

Growing reports of fraud are staggering, and they underlie the Wall Street dealing that has so harmed our Nation. Throughout November, we saw headline after headline of how MF Global took money from its own private customer accounts as it tried to stay afloat in the days before it filed one of the largest bankruptcies in American history. There may be as much as $1.2 billion unaccounted for. We used to call that stealing.

The fact is our Justice Department has only a handful of FBI agents to properly investigate the volume of corruption infecting our markets. After reviewing the FBI's own testimonies, I introduced H.R. 1350, the Financial Crisis Criminal Investigation Act, to authorize an additional 1,000 FBI agents and forensic experts to prosecute white collar crime, especially Wall Street. Back in the 1990s when we had the S&L crisis, we had a thousand agents. When this crisis started, there were but a handful because they had all been switched to terrorism investigations.

When you look at these cases, what is astounding is just how well connected so many of these institutions on Wall Street are to the corridors of power in Washington. It now appears even former Speaker Newt Gingrich was paid millions of dollars by Freddie Mac before it went bankrupt.

At a minimum, our Nation needs an independent commission to investigate what actions led to the eventual collapse of Fannie Mae and Freddie Mac by which Wall Street turned over all of its toxic mortgage paper to the taxpayers of the United States for the next three generations.

I have a bill to do just that, H.R. 2093. I ask other Members of the House to sponsor the Fannie Mae and Freddie Mac Criminal Investigative Commission Act.

So while real justice for Wall Street languishes in places from Cleveland to Toledo, Main Street America is trying to create jobs. It's over time for Washington to get its House in order to restore accountability to Wall Street so that full confidence can be restored to our economy. Exacting justice for Wall Street wrongdoing is long overdue. That task remains fundamental to economic recovery and job growth.

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