Congressional Commission on Financial Accountability and Preparedness Act of 2009

Mr. Speaker, I rise today to recognize the 20th anniversary of the Brady Plan and in honor of former Treasury Secretary Nicholas Brady. The Brady Plan launched a new era of growth, development, and capital market access for emerging market economies.

While Brady Bonds themselves have been largely superseded by newer instruments, the Brady Plan encouraged

many emerging market countries to adopt and pursue ambitious economic reform programs which have been instrumental in the progress achieved during the last 20 years.

On April 25, I attended a commemorative dinner in honor of Nicholas Brady and his many accomplishments. As Secretary of the Treasury under President George H.W. Bush, Mr. Brady was instrumental in resolving Latin American debt problems.

I was honored to hear Mr. Brady speak on the current economic crisis and credit crunch, as well as present his proposal for reform. As he stated, we must have boldness, clarity, and determination today, just as they did in 1989 in order to build prosperity out of this crisis.

International economic experts who attended the dinner praised Mr. Brady's work, while also noting how important trust, integrity, and personal relationships are in formulating global policy. The same is true today.

Our actions today to solve the economic crisis cannot and should not be done in haste. The politically charged environment of Congress makes the creation of effective long-term policy extremely difficult. Consequently, Mr. Brady's remarks supported the creation of an independent commission, to find the root cause of our economic situation and to propose reforms to our financial system.

I support such a bipartisan commission. As Mr. Brady stated, ``It is vital not just that far-reaching, complex reform of the financial system be pursued prudently but in a bipartisan manner in order to gain national support. After all, the purpose is to revive public confidence in the system itself.''

I was disappointed to see the Financial Markets Commission in S. 386, the Fraud Enforcement and Recovery Act, pass the House with a makeup of six Democrats and four Republicans. That is why last week I opposed this commission while at the same time agreeing to cosponsor H.R. 2111, the Congressional Commission on Financial Accountability and Preparedness Act of 2009. H.R. 2111's commission will have two members appointed from each side of the aisle and a mutually agreed upon fifth member to chair. This is true bipartisanship and is what is needed to find the real root causes and solutions to our financial crisis.

I hope that submitting Mr. Brady's speech for the Record will spark a debate in Congress over the necessity for a bipartisan commission and how we, as a Nation, will move forward.

April 25, 2009.

20th Anniversary of the Brady Plan

(By Nicholas F. Brady)

Washington, DC.--Good evening. I'd like to thank Charles

Dallara and the IIF for organizing this gathering of old and

new friends to celebrate the 20th anniversary of the Brady

Plan. Although I've been given the honor of speaking, I'd

like to note that a great many of you here tonight share the

credit for making the Brady Plan a success. And I want to

thank you all of you who have spoken so generously.

Let's start with why the Brady Plan was called the Brady

Plan. We had been negotiating with Mexico since March 1989

under the rubric of what we called ``the new debt strategy.''

In July, while we were in Paris for the Group of Seven

Summit, we had a major breakthrough with Mexico. When

President Bush, No. 41, held the traditional end-of-summit

press conference before 1,000 reporters, one journalist asked

the president if he was going to call the new strategy the

Bush Plan. He didn't miss a beat before answering, ``No,

we're going to call it the Brady Plan. Then if it works,

we'll call it the Bush Plan.'' The audience erupted into

laughter, and the president, with his marvelous sense of

humor, repeated the line so many times in the following days

that the name stuck.

There are uncanny parallels between the situation we find

ourselves in today and the one the Bush administration

confronted a generation ago. We faced a three-pronged crisis,

including the credit markets, the real-estate market, and the

budget just as the Obama administration does now. So it may

be useful to recall the issues and challenges of the late

'80s and early '90s as we try to resolve current problems and

move into the future.

First of all there was a serious LDC debt crisis. It's easy

to forget that in 1988 our banking system was in dire straits

because the commercial banks held billions of dollars of

loans in countries whose economic prospects had ground to a

halt. Three weeks into my job as Treasury secretary, the late

Gustavo Petricioli, then Mexico's ambassador to the United

States, called for an urgent meeting at the Treasury

department to tell me that Mexico was threatening to default

on its international bank loans. Talk about reality. It

didn't take much imagination to grasp that if Mexico took

that route then a string of Latin American economies likely

would follow and that a volatile region would move from chaos

to danger.

Clearly a new approach was needed. For several years before

I got to the Treasury, people had come in with various papers

and solutions, all aimed at alleviating the debt overhang,

but none really accomplished that. In a huge stroke of good

fortune, I inherited two brilliant people at Treasury--David

Mulford and Charles Dallara--and the first thing we did was

to write a paper that came to be known as the ``Truth Serum

Paper.'' We worked days, nights, and weekends to establish a

detailed description of the problems we faced, of what the

fundamental realities were. No troublesome obstacle was

passed over. Among the indisputable points we laid out were

that new money commitments had dried up in the past 12 months

and that many banks were negotiating private sales of LDC

paper at steep discounts while maintaining their claim on the

countries that the loans were still worth 100 cents on the

dollar. There were more, and they were equally sobering.

We used these irrefutable facts as a starting point in all

subsequent meetings. Our rule was that no suggestions were

permitted to be discussed if they didn't accept the Truth

Serum. They were off the table. Goodbye. Don't waste time.

I felt that the solution to too much debt was not more debt

but less. From there, you know the rest: we persuaded the

international commercial banks--at first with great

difficulty--to write down the stated value of the loans on

their books to something close to market value in exchange

for that lesser amount of host-country bonds backed by U.S.

zero-coupon Treasuries. The Brady Plan was achieved at a

negligible cost to the U.S. government. Yet it led to the

restructuring, for example, of more than $100 billion of

foreign bank debt for Mexico, Brazil, and Argentina alone.

The plan broke the debt gridlock and opened the door for

economic growth and social development in Latin America after

the lost decade of the 1980s. And it created a new asset

class: publicly traded sovereign debt--Brady Bonds--that grew

to exceed half a trillion dollars. The process bought time,

and the bonds helped to provide funds to developing nations

in exchange for long-lasting reforms by the participating

countries.

A second initiative the Bush 41 administration had to

undertake was to reconstitute the savings and loan industry

and the real-estate market it financed--a problem not of

President Bush's making. We created the Resolution Trust

Corporation to take over some 750 insolvent savings banks,

which reintroduced vibrancy into the real-estate market. In

order to do this, we had no choice but to seek funding from

Congress and undergo the intense political criticism that

came with it. So we took the heat and moved on to solve the

problem. Leadership can be painful. The final tab for

cleaning up the S&L mess was $165 billion, including what was

spent before we arrived. While this is not trivial, it didn't

come close to estimates by businesses, politicians, and the

media, which estimated that it would cost us $500 billion.

I've been asked a number of times what reversed that era's

negative thinking--and when. My firm conclusion is that it

subsided in direct proportion to the weekly successful

results recorded by the RTC to close the bankrupt S&Ls,

gather up the real estate they held, and sell it promptly

into the market.

Third, in a major contrast to today, we set about to reign

in escalating spending by the U.S. government, which was, for

that day and age, clearly out of control. The Budget Act of

1990 established binding caps on the amount that Congress

could spend on discretionary items. It was easy to see--and

it was easy for me to recommend--that that's what the country

needed. But President Bush, who had uttered the famous words,

``No new taxes,'' in his 1988 election campaign, said to me

more than once, ``The trouble with you, Brady, is that you

never ran for sheriff.'' The record should be clear that

George Bush fully grasped the political ramifications of

designing this legislation, but he decided it was the right

thing to do for the country. And while the Budget Act

probably contributed to his reelection defeat in 1992, it was

an essential building block for the decade of economic growth

that followed.

People constantly tell me that the problems we're dealing

with today are much more complex than those we faced 20 years

ago. Maybe. Maybe not. The issues didn't feel simple to us

back then, just as I'm sure they don't feel simple to

Secretary Tim Geithner and his associates at the Treasury

now.

I won't spend a lot of time tonight trying to assign blame

for the current crisis; I've been gone from Wall Street too

long. In broad strokes I would say that when I came to Wall

Street in 1954, it was a profession, one that financed the

building of this country's industrial capacity and

infrastructure. Year by year, however, the industry's

emphasis has moved away from that purpose and toward

financial innovation for financial profit's sake. Of course,

many banks have served their clients well and their hard work

has been a positive factor. Nevertheless, the U.S. Department

of Commerce figures show that from 1980 to 1982, the

financial sector accounted for an average of 9.1 percent of

U.S. total corporate profits. By 2005 to 2007 that three-year

average had more than tripled, to 28.6 percent.

The particulars of today's collapse in judgment and common

sense have been laid out

in chapter and verse, so just I'll say briefly, first, that

the whole notion that risk can be measured by a mathematical

formula is based on the illusion of reality. Second, the

desire for the improved returns generated by high leverage

led the purveyors of this risk to push it beyond any

reasonable boundaries.

But while assigning villainy to CEOs of banks and other

institutions may be high theater, playing to our country's

justifiable anger is counterproductive. There are many good

people in the industry, people who inevitably will--and

should--be called on to work through the malfunctions in the

system. The political process should concentrate now on how

to fix the financial system and let the country's legal arm

ferret out and deal with the wrong doers.

A core issue today is that the government has yet to

adequately describe the roots of the financial crisis to its

citizens and therefore to fully pinpoint its size. It's been

my experience that you can't fix what you can't explain. This

leads one to think that the solution lies in providing

ringing clarity on how the housing market burst, how the

market excesses spread beyond housing, how these forces were

fueled and then accelerated by our outsized external

imbalances, and, with this knowledge, decide how markets can

now be stabilized.

At the same time, it's hard to see how our national leaders

have helped the country dig out of its very real problems

when they devalue each public pronouncement with the caveat:

``Remember, it's not over yet.''

Their caution reminds me of a story that was told to me by

a friend, Bob Kleberg, who was the head of the King Ranch,

the largest ranch in the United States, about a college

commencement ceremony in his hometown of Kingsville, Texas,

during the worst of the Great Depression. Bob had invited two

speakers. One was an earnest Ivy League economist and the

other was this country's most famous cowboy-philosopher, Will

Rogers. The economist, who spoke first, read a long and

languorous speech about how bad things were, leaving the

roomful of 21-year-olds wondering if there was any hope to be

had about their prospects. The conclusion of his speech was

met with nervous and polite applause, after which Will

Rogers, who was sitting in the front row, literally vaulted

up onto the stage. Facing the audience squarely he looked out

and said just six words: ``Live through it if you can.'' Then

he jumped off the stage and returned to his seat. Terse,

maybe. But they did live through it.

And we will, too. So what should we do as the crisis

abates? Here, there is real work to be done. First we should

just come out and say it: the financial system that led us to

the brink of disaster is broken.

How do we proceed?

The first step would be to reduce the number of and

simplify the U.S. regulatory authorities, which include the

Federal Reserve, the OCC, the FDIC, the OTS, the CFTC, the

SEC, and state regulators too numerous to list. The easiest

part of this process is naming them! Nowhere else in the

world is the implementation of banking authority so diffuse,

and the choices they present to the governed result in

regulatory shopping for the softest touch. Be forewarned:

each one of these organizations has a protector in Congress,

and it will take a thunderbolt from the White House and

Congress to reorganize and streamline them. Tough as it will

be, the necessity is apparent to all, both here and abroad.

The next step after marshaling the regulatory authorities

is to move on to the banking institutions themselves. Of

course we must be attendant to the fact that markets are

international and by definition interrelated and

interdependent. Yet a sense of order would dictate that we

tend to our own backyard before trying to gain consensus with

19 other countries.

As I see it, we have two choices. The first is to repair

the current system, which is made of deposit-taking

institutions on the one hand and what's known as the shadow

banking system, or non-bank financial institutions, on the

other. Under this approach, we would subject the entire group

to one large, all-seeing regulatory system. Doing so would be

enormously complicated, and the more complicated the

regulatory system the less effective the regulation. In my

opinion it is a bridge too far.

We need a stronger identity of purpose between the

regulators and the businesses subject to regulation beyond

mere adherence to the law. My own view is that in addition to

too many regulators, there is the further problem that the

regulators did not use their existing powers. They could have

halted the growth of the excessive leverage but did little. A

culture of systemic risk awareness has to be developed, with

clear guidelines to be followed regularly.

Equally important, we need a financial system that has

untouchable safety and survivability as its main stem. This

would remove debate over whether any of its parts is too big

to fail. After all, we're talking about the people's money.

Is it operationally possible to combine the mechanics of the

shadow banking system, which has emphasized gigantic leverage

under-girded by stratospherically complex mathematical

formulae, with the principle of securing the people's money?

And as tempting as it is to tinker with the present system

instead of building a new one, is it the best we can do to

prevent another crisis?

I believe that we need a simpler system centered on

deposit-based banks. Under this approach, individual accounts

in the depository banks would continue to be protected up to

$250,000 and these banks would have access to the country's

central bank. These institutions would not be allowed to

participate in markets involving inordinate leverage or

equity transactions that would risk their deposit-protecting

charter. In contrast to the current mode, when asked what

their primary purpose is, the banks' chief executives

wouldn't talk first about shareholder return. Instead they

would stand up and say: ``Our institution's primary purpose

is to repay the depositors' money. Of course this is not the

institutions' only purpose, and innovation within them as it

relates to the asset side of the balance sheet should be

encouraged as long as they keep a weather eye on leverage and

equity risks.

The highly innovative shadow banking system with its mantra

of lower transaction costs, which would continue to introduce

new concepts, would fund itself from the money markets and

other sources but without federal guarantees and access to

America's central bank. Institutions that currently straddle

the two funding markets would have to choose which type of

business to pursue. I know this would provoke the immediate

cry that the financial system would be further pinched and

credit would further shrink. My answer is that any deposit-

gathering system with a $250,000 guarantee from the U.S.

government and access to the central monetary authorities

would get all the deposits it needed to provide a vibrant

credit system.

Admittedly, ironing out the details of such a vastly

complicated system is a task of the highest order, but I

believe it is attainable. You may have noticed that the

Senate voted this week to create an independent commission to

examine the root causes of the economic collapse and provide

a blueprint for the future, and the Speaker of the House

called for an inquiry similar to the Pecora Commission held

in the early 1930s that gave rise to that generation's new

securities laws. It takes me back. My first assignment as a

new hire at Dillon Read in 1954, where I stayed for the next

35 years, was to read the volume on securities from the

Pecora findings as an explanation for why we did things the

way we did.

This country has had a long and important history of

independent commissions aimed at laying the groundwork for

solutions to national problems of huge moment. Independent is

the key word. Such commissions, which call on people with

deep knowledge of the underlying problem, have had as their

precept exposing fundamental realities. It's unfathomable why

such a suggestion has been so long in coming, except to note

that commissions terrify the powers that be, both inside and

outside the government. If properly constituted, however,

they bring together the best of the country's thinkers and

thinking, and they're often the only force that unifies the

nation. I've been dismayed to read that a number of lawmakers

who say they're for a commission nonetheless don't want it to

get in the way of acting now. That's exactly backwards. In my

view what we need is a rigorous debate and that takes time.

As the American writer and philosopher Ralph Waldo Emerson

once said, ``Counsel to which time hath not been called, time

will not ratify.''

The composition of the commission is critically important:

it can shape the whole outcome. It should have the word

``independent'' in its title. I believe its chair or chairs

should be appointed by the president and that its expert

membership should be appointed in equal numbers by the

Democratic and Republican leadership of both houses of

Congress. It is vital not just that far-reaching, complex

reform of the financial system be pursued prudently but in a

bipartisan manner in order to gain national support. After

all, the purpose is to revive public confidence in the system

itself.

In conclusion, let me thank all of you for the great warmth

of your reception. We can all agree that thanks to so many of

you in this room tonight, including Charles and David, Bill

and Pedro and Angel, that the Brady Plan worked and that it

indeed set the base for significant prosperity over the past

20 years. I believe that if we can muster similar boldness,

clarity, and determination today, we can build prosperity

from this crisis and I look forward to working with you in

this endeavor.

At this time, I would like to yield 3 minutes to the gentlewoman from Illinois (Mrs. Biggert) for her statement.

Mr. Speaker, as I recognize the former chairman of the full Committee on the Judiciary, I would like to thank the gentleman from Connecticut for his bipartisan work on coming to an agreement between our two bills that I believe led to the suspension today on the Senate bill.

With that, I yield 3 minutes to the gentleman from Wisconsin (Mr. Sensenbrenner).

Mr. Speaker, I yield 3 minutes to the distinguished gentleman from Texas (Mr. Burgess).

I yield the gentleman 1 additional minute.

Mr. Speaker. It's now my privilege to yield 2 minutes to the gentleman from Texas (Mr. Gohmert).

Mr. Speaker, can I inquire how much time I have remaining?

I yield myself such time as I may consume.

Mr. Speaker, in closing, this legislation is a combination of two well thought-out compromises. First of all, the Fraud Enforcement and Recovery Act, in fact, is going to take the place of a piece of legislation that is far more reaching and, in my opinion, overreaching, that passed out of Judiciary just this past week. In fact, by making this narrower, what we do is help the whistleblowers and those who would support them, while not going too far as to cripple the legitimate enforcement by cities and States and the right for them to discover waste, fraud

and abuse themselves, make those in corrections without seeing both punitive fines and perhaps 30 percent going to plaintiffs' trial lawyers.

The fact is, Mr. Speaker, this narrowing is a good compromise coming from the Senate, and I want to thank all of those in both parties who worked on this. I think it makes moot the legislation that was passed under Judiciary.

Secondly, another compromise, and one that I want to speak to, this 9/11-style commission, something that, as you can see, many people on both sides of the aisle--on both sides of the Capitol--thought was necessary. Over the last period of months, we have seen the Speaker of the House going from not supporting, and supporting only that her committee chairmen do the work, to supporting the concept of a House committee, to then a House-Senate committee, and, finally, I believe today, support for something that gets it almost right.

Mr. Speaker, I believe that, on nearing the third anniversary of the 9/11 Commission, we should begin looking at what we did in the 9/11 Commission.

In 2007, on the third anniversary, Speaker Pelosi praised the bipartisan, independent commission for its work, calling the recommendations made by the commission earned and achievable, and, in fact, speaking to its bipartisan nature.

This year, as we pass legislation to make a similar-type commission to deal with the meltdown last year in our markets, I would call on Speaker Pelosi to help make the balance right.

As was previously stated, based on the current nominating system in the ordinary course, this would end up being a 6-4 split and be questioned by the American people as to whether or not it was Democratically led and Democratically dominated.

The Speaker has the ability, with her three appointments, to make this right, either by appointing one Republican and one Democrat, or, in this case, two; or I might suggest that even if she cannot find a Republican appropriate to be appointed from her allocation, that she could look to an independent or somebody independent of party politics.

I have previously supported, when asked, Sandra Day O'Connor, a retired Justice, or somebody of her stature who rises well above party politics, who may be considered to have some Republican background but who, clearly, in the eyes of the American people, would be a consensus- builder, able to look for the truth and look for compromise so as to reach the consensus, not a majority decision, but a consensus of this commission, as in almost every case--I believe in every case--the 9/11 Commission did.

I understand that this bill is the best bill we can get here today and I intend to vote for it, support it, and urge my colleagues to support it; not because I don't believe it should be above party politics and should be a 5-5 split, but because this is so much better than nothing at all and because I believe that the Speaker has it within her appointment powers to make this a perfectly good commission, one that we can all be proud of, and one that lives up to exactly what Speaker Pelosi asked for when the shoe was on the other foot after September 11, when we were looking at the need to get above party politics and we were looking to find people of stature to appoint.

Mr. Speaker, I hope my suggestions over and above my support for this legislation will be heeded.

Mr. Speaker, S. 386, the Fraud Enforcement and Recovery Act of 2009, improves current criminal and civil fraud statutes to help the federal government bring predatory lenders and unscrupulous financial institutions to justice.

Judiciary Chairman Conyers and Ranking Member Smith sponsored the companion legislation in the House, H.R. 1748, the Fight Fraud Act of 2009. The bill before the House today is a true example of bipartisan, bicameral cooperation.

S. 386, as amended, merges these two important pieces of legislation together to provide comprehensive and effective solutions to combating mortgage fraud, securities fraud, and other financial crimes.

In times of crisis, crime often flourishes. Following the 9/11 terrorist attacks and Hurricane Katrina, unscrupulous people chose to exploit these tragedies to pad their pockets with money intended to help the victims.

The country's housing crisis is no exception. America's economic downturn, brought on by the housing crisis and other factors, exposed a significant amount of fraud and corruption within the mortgage, banking, and securities industries.

The drive for expanded homeownership along with unchecked lending practices and inflated property values, encouraged mortgage fraud, predatory lending, and institutional corruption.

Mortgage fraud comes in many forms, including deceptive practices by borrowers, predatory lending and institutional fraud.

And now, the fraud is spreading to schemes targeting homeowners who are facing foreclosure as a result of the plummeting housing market. Foreclosure scams are targeting cash-strapped consumers on the verge of losing their homes. Victims are lured into the fraud scheme with promises of financial assistance that never materializes.

S. 386 amends federal fraud statutes to specifically prohibit false statements by mortgage brokers and agents of mortgage lending businesses.

The bill also expands the major fraud statutes to include fraud against the Troubled Assets Relief Program, economic stimulus funds, or other federal rescue or recovery plans.

The Fight Fraud Act authorizes additional funds for federal law enforcement agencies, the Departments of Justice and Housing and Urban Development, and the Securities and Exchange Commission.

This legislation promotes the ongoing investigative partnerships between federal, state and local law enforcement agencies.

The bill also supports programs that provide critical training and investigative support services, intelligence services, research support and other resources necessary to investigating these financial crimes.

Additionally, this legislation will strengthen the liability provisions of the False Claims Act as well as make some necessary technical changes to the Act.

The False Claims Act provisions in this bill will undoubtedly enhance the Federal government's ability to recover government money and property that would otherwise be lost to waste, fraud, or abuse.

What's more, these provisions do so in a responsible manner that will not encourage the filing of frivolous or unfounded False Claims Act cases.

Simply put, the False Claims Act provisions in this bill go the proper distance in ensuring that the Act remains a viable tool in the government's continuing fight to protect taxpayer dollars from fraud.

(COMMISSION)

The Fraud Enforcement and Recovery Act also contains provisions to create a bipartisan, independent ``Financial Markets Commission.''

This Commission will examine the questions of ``Why?'' and ``How?'' the current financial and economic crisis occurred.

We have seen the success of past blue-ribbon panels, such as the 9/11 Commission.

In 2007, on the 3rd anniversary of the 9/11 Commission report, Speaker Pelosi praised the bipartisan, independent Commission for its work--calling the recommendations made by the Commission ``urgent and achievable'' making the country more ``unified'' and ``effective.''

Speaker Pelosi is right. A bipartisan, independent commission can produce valuable results.

Which is why I proposed a similar bill last fall and again this Congress, H.R. 74.

I view the effort to create this commission as a vehicle for this Congress to demonstrate a willingness to set aside partisanship and put the interests of our country first.

As with the 9/11 Commission, the Financial Markets Commission report should be free of accusations of political showmanship and a partisan slant that have tainted current investigations.

This Commission is not the place for partisanship OR Congressional meddling.

It is a place for the American people to get answers.

Ideally, in today's bill, the composition of this Commission would have been bipartisan down the line, with a 5-5 split like the 9/11 Commission that was adopted by a Republican Congress instead of the 6-4 divide that has come to the floor today at the direction of the Democratic Leadership.

Speaker Pelosi said in 2005, when discussing a possible Commission to review Hurricane Katrina events, a ``real commission'' is bipartisan and independent.

The decision to depart from the 5-5 model of the 9/11 commission in favor of a commission whose composition has a partisan slant is disappointing.

But I believe the credibility of this commission's report will still depend on its ability to deliver conclusions and recommendations that all the members of the commission will embrace.

I am hopeful that the members of Congress who will be responsible for appointments to

this Commission will ensure that the panel's composition is bipartisan, independent, and focused on producing a nonpartisan report--not scoring political points.

In closing, The Fraud Enforcement and Recovery Act of 2009 is a good government bill.

I urge my colleagues to support this legislation.

I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I thank the distinguished chairman and I thank the Speaker.

Mr. Speaker, whenever we attended to matters in our district over the last year, when many of our constituents are facing the most catastrophic time in their life, it may be a catastrophic illness or a personal matter that changes or skews their whole life-style. We are seeing the financial markets and the structure of financial calamity alter the lives of Americans.

I think it is important to note that this Congress, this new Congress, has made an effort step by step to respond to the needs of Americans. I thank Mr. Issa for his work and that of our full committee and the leadership of the Senate to bring us S. 386 which amends the Federal criminal fraud statutes to reach the full range of fraud and other financial crimes that have come to light as the financial crisis has unfolded.

It is important for America to know that we will hold those accountable for the malfeasance and the criminal acts that they have engaged in; for example, the Bernie Madoff issue, with so many people losing not only their sole possessions and resources, but in essence some would say losing their lives.

This amends the security fraud statute to include commodities fraud. It clarifies that it is a felony for a mortgage banker to knowingly make materially false statements on a loan application or overvalue property. We can attest to the fact that this has happened.

And in keeping with that, I am also supportive of H.R. 1728, that is, the Mortgage Reform and Anti-Predatory Lending Act.

For those of us at town hall meetings and who have listened to any number of those who are in foreclosure, they told us that they would see papers that they had signed come back with the altering of their rates, with the altering of their income, with the altering of certain vital points that would then, in essence, put this fraudulent document in a position for the individual to receive a loan on false premises. Therein lies the underpinnings, if you will, of this collapse; the overexerting, if you will, of the market by lending to people who could not afford the homes, by miswriting on the documents. All of this came about.

In the mortgage bill that we will be discussing over the next 24 hours, I was glad to argue on the point of language dealing with predatory lending which is also covered in S. 386, as we have indicated, and as well to provide an amendment that provides for an individual knowing how much their mortgage and interest would cost over a period of time. It is all right to be able to go in and fill out papers that indicate that you have a down payment of $2,000, but it is another thing to know that you are buying a house for a million dollars or $5 million, or more over a period of your lifetime, and whether or not that individual, that particular purchaser, understands the facts in the documents before them.

The bill that we have before us amends Federal money laundering statutes to make them more effective in the context of fraud, prosecutions and ensures their appropriate use, and explicitly made fraud against the TARP and economic stimulus programs also a felony.

There is a lot of money out there, Mr. Speaker, and there is certainly the possibility that all of those moneys can be used in a fraudulent manner.

I believe it is important for the Members of this body but also the American people to know that we are working. And I also add in conclusion, Mr. Speaker, we are doing a lot of good work today. I also support the legislation, H. Res. 14, that acknowledges the importance of the Border Patrol in combating human trafficking. I am working to ensure that they have extra language to help them with additional Border Patrol agents and also to fight the guns and drugs that have a lot to do with human smuggling. The American people need to know the work that we are doing.

I am in support of S. 386 because it puts a pin in the balloon of fraud that has hurt so many people. I would ask my colleagues to support this legislation.

Mr. Speaker, I rise in strong support of S. 386, Fraud Enforcement and Recovery Act that was introduced in this Congress by the Chairman of the Judiciary Committee, Representative John Conyers from Michigan. This timely legislative initiative is aimed at fighting fraud and protecting taxpayers. If passed, this bill will help Americans recover from the present economic crisis. I urge my colleagues to support this bill.

This legislation is designed to combat fraud by increasing vigilance and accountability concerning the manner how American tax dollars are spent. The types of fraud covered by this legislation include financial fraud, corporate fraud, contracting fraud, and mortgage fraud.

Because recent history has demonstrated that large government outlays of money has attracted persons attempting to create fraud, this legislation provides the Congress with the opportunity to identify viable solutions to fraud and misuse.

Current federal law enforcement uses a number of criminal statutes to prosecute fraud. The criminal penalties for fraud are found in Title 18 of the United States Code. This bill extend the application of these penalties to new areas.

Specifically, this bill will increase accountability for corporate and mortgage fraud and will safeguard against future fraud on those programs that Congress recently developed to restore America's economy. This bill provides increased funding for the expanded role of the Department of Justice. Financial institutions, mortgage lenders, and other private entities are held accountable. This bill will target face statements made to financial institutions and false statements made by financial institutions, i.e. in the overvaluation of property.

H.R. 1292, To amend Title I of the Omnibus Crime Control and Safe Streets Act of 1968, establishes a grant program to authorize funds to states to work with information sharing and training programs focused upon the prevention, investigation, and prosecution of terrorism, economic and high-tech crimes and will aid in the creation and maintenance of intelligence led police and information sharing.

The bill provides the FBI with additional funding to combat financial fraud and identity theft. This additional provision of funding is responsive to the role that fraud has played in the housing crisis. This bill provides the FBI with greater funding to combat fraud. Its purpose is to address the corrupt and fraudulent practices of ``flippers'', ``scam artists'', and ``mortgage fraud rings.''

President Obama has signaled that he will freeze releasing additional TARP funds to AIG because of its mismanagement (i.e., AIG was using TARP funds to pay for employees bonuses). The TARP bill proscribed the use of the TARP funds and specified that there would be repercussions if the TARP funds were used wrongly. There are many companies that used these funds inappropriately.

The fist sign of the crisis that America presently finds itself in occurred in March 2008 when investment bank Bear Stearns turned to the federal government and competitor JP Morgan Chase for assistance in addressing a sudden liquidity crisis. At that time, the Federal Reserve provided JP Morgan with funds to complete the merger. Later, in July 2008, the Federal Deposit Insurance Company seized control of IndyMac, the nation's largest home lender.

In September, the federal government put Fannie Mae and Freddie Mac into conservatorship. Since August 2008, the federal government has invested billions of dollars into financial institutions. Much of this money was given directly to large banking institutions. Other money was distributed through the Troubled Asset Relief Program. This program was supposed to increase liquidity in the credit and lending markets. Some of this money, it was later found was mismanaged and was used to buy other banks.

On October 3, 2008, under the TARP, Congress authorized $700 billion for the Treasury to buy troubled assets to prevent further disruption in the economy. After the Act was passed, the Administration decided to use a portion of the $700 billion to recapitalize some of the nation's leading banks by buying their shares. Despite this purchase by the government, many banks had no intention of making new loans. In allocating the TARP fund, Treasury made a determination about which banks would survive and receive funds and which banks, usually smaller, would not. By the end of 2008, nine of the largest banks were participating in the TARP program. AIG, Bank of America, Citigroup all benefitted.

For some aspects of the present crisis, I believe that there were a number of conscious decisions undertaken by bankers, financial institutions, and other lenders that have had a direct and adverse effect on borrower.

I also understand that some Mr. and Mrs. Main Street Americans played a role. Many made false statements or exaggerated their income or engaged in other types of fraud in an effort to secure a mortgage that they could not afford. This bill is designed to take an even-handed approach and to stamp out fraud, mismanagement, and false statements whether they occur on Main Street or Wall Street. I urge my colleagues to support it.

I thank the gentleman for yielding.

Mr. Speaker, I am generally not in favor of commissions. I think Congress gives up too much of its power to commissions in my brief experience here. But this is one point that I think does call out for a commission. Certainly just as egregious as what happened to this country on 9/11 was what happened to this country in September 2008 when we experienced a financial meltdown. And to date, we have not looked back into the causes of the crisis and held anyone accountable.

In fact, Congressman Brady from Texas and myself introduced a bill earlier this year for just such a commission, H.R. 2111, that differs substantially from the bill under consideration today.

The bill that we are considering today creates a 10-member commission with subpoena power. It is going to be composed of six Democrats and four Republicans. When we did the 9/11 Commission, was that not a 50/50 split with some members being named by agreement amongst the commissioners who were already selected? Why would we unbalance this commission when, quite frankly, Mr. Speaker, there is just as much guilt on one side of the aisle as there is on the other.

Senate 386 allows the chairman of the Senate Banking Committee to select a commissioner. The chairman of the Senate Banking Committee may have been part of the problem.

The bill allows the chairman of the House Financial Services Committee to appoint a representative to the commission. Mr. Speaker, the chairman of the House Financial Services Committee may have been part of the problem.

Senate 386 creates an accountability commission focused on protecting the government. H.R. 2111 creates an accountability commission focused on protecting taxpayers and restoring public confidence, something that is critical at this juncture.

Importantly, Mr. Speaker, we do things like this all the time. We bring up an important concept and we pass it under suspension of the rules. This is an important commission that should be created with all due care and caution by this Congress, and then empowered to go out and do the work that we want it to do, not slipped in in the middle of a very quiet legislative day when Members don't even have any idea what they're coming to the floor to vote on.

I just want to end by quoting from the Investors Business Daily, an article entitled, Probe Yourselves, from April 16, 2009. The article says, `` `Regulators also deserve blame for lowering lending standards that then contributed to riskier home ownership and the housing bubble.' Exactly correct.''

Continuing to quote, ``As such, Pelosi's proposed commission will be little more than a fig leaf to cover Congress' own multitude of sins-- letting its Members, the true creators of this financial mess, bash business leaders as they pose as populist saviors of Main Street from Wall Street.''

Continuing to quote, ``On NPR Thursday, a reporter confronted Representative Frank, chairman of the Financial Services Committee, with the fact that his $300 billion `Hope for Homeowners' program''----

``Chairman Frank was asked about his $300 billion `Hope for Homeowners' program, passed with much fanfare a year ago that had so far helped one homeowner. One. Frank's response: `It was the fault of the right.' ''

Continuing to quote, ``The truth is, Mr. Frank's party has been in charge since 2006. And during that time, Democrats have presided over one of the most disgraceful and least accomplished Congresses in history. This financial mess began on their watch, yet they pretend otherwise.''

Further quoting from the Investors Business Daily, the commission that is outlined ``won't get to the bottom of our financial crisis; it will carefully select scapegoats to be ritually shamed by the liberal media, stripped of their wealth, and exiled. The new rules will be imposed that will no doubt make things worse. And the cycle will begin again.

``Wall Street didn't create this subprime mess, Congress, through repeated interventions, did. When the whole thing failed, it was Congress' fault.''

They conclude by saying, ``We'd be happy to support a 9/11-style commission to look into the causes of the financial meltdown. But only if Congress agrees to put itself under the microscope. Anything less would be a sham.''

[From Investor's Business Daily, Apr. 16, 2009]

Probe Yourselves

Named for its chief counsel, Ferdinand Pecora, the 1932

congressional commission dragged influential bankers and

stockbrokers before its members for rough questioning--both

of their business practices and private lives.

The Pecora Commission led directly to the Securities Act of

1933, the Securities Exchange Act of 1934 and the creation of

the Securities Exchange Commission in 1935 to oversee Wall

Street.

Now Pelosi's calling for an encore. ``People are very

unhappy with these bailouts,'' she noted, especially the

bonuses that went to executives. ``Seventy five percent of

the American people, at least, want an investigation of what

happened on Wall Street.''

No doubt, that's true. The problem is, what ``happened on

Wall Street'' was a direct result of what happened on Capitol

Hill. And we're not the only ones who believe that, by the

way.

``Government policies, especially the Community

Reinvestment Act, and the affordable housing mission that

Fannie Mae and Freddie Mac were charged with fulfilling, are

to blame for the financial crisis,'' wrote economist Peter

Wallison, a fellow at the American Enterprise Institute,

recently.

``Regulators also deserve blame for lowering lending

standards that then contributed to riskier homeownership and

the housing bubble.'' Exactly correct.

As such, Pelosi's proposed commission will be little more

than a fig leaf to cover Congress' own multitude of sins--

letting its members, the true creators of this financial

mess, bash business leaders as they pose as populist saviors

of Main Street from Wall Street predators.

Why do this now? Pelosi and her Democrat colleagues are

feeling the heat from Tea Party demonstrations and growing

voter anger over the massive waste entailed in the $4

trillion (and rising) stimulus-bailout bonanza. Again, the

Democrats created all this spending. Now, as it proves

unpopular, they just walk away from it.

On NPR Thursday, a reporter confronted Rep. Barney Frank,

chairman of the Financial Services Committee, with the fact

that his $300 billion ``Hope for Homeowners'' program, passed

with much fanfare last fall, had so far helped just one

homeowner. One.

Frank's response: It was the fault of the ``right.'' And

Bush.

Truth is, Frank's party has been in charge since 2006. And

during that time, Democrats have presided over one of the

most disgraceful and least accomplished Congresses in

history. This financial mess began on their watch, yet they

pretend otherwise.

What better way to take the heat off yourself than by

pointing accusing fingers at those most unlikable of people--

Wall Street bankers? That's what the Pelosi-Pecora Commission

will do.

It won't get to the bottom of our financial crisis; it will

carefully select scapegoats to be ritually shamed by the

liberal media, stripped of their wealth, and exiled. Then new

rules will be imposed that will no doubt make things worse.

And the cycle will begin again.

We're not saying Wall Street has no blame for the financial

meltdown. But Wall Street didn't create the subprime mess.

Congress, through repeated interventions in healthy markets,

did. And when the whole thing failed, it was Congress' fault.

We'd be happy to support a 9/11-style commission to look

into the causes of the financial meltdown. But only if

Congress agrees to put itself in the dock. Anything less

would be a sham.

Mr. Speaker, I move to suspend the rules and pass the Senate bill (S. 386) to improve enforcement of mortgage fraud, securities fraud, financial institution fraud, and other frauds related to federal assistance and relief programs, for the recovery of funds lost to these frauds, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days to revise and extend their remarks and include extraneous material on the bill under consideration.

I yield myself such time as I may consume.

The Fraud Enforcement and Recovery Act of 2009 is crafted to combat financial fraud that contributed to causing and worsening our Nation's current economic crisis. We are bringing to the floor a bill that represents a consensus of efforts for the House and Senate, each acting on a bipartisan basis, blending the Senate-passed bill with H.R. 1748, the Fight Fraud Act of 2009, which the House Judiciary Committee reported last week.

This bill amends the Federal criminal fraud statutes to reach the full range of fraud and other financial crimes that have come to light as the financial crisis has unfolded. The bill amends the definition of ``financial institution'' and fraud statutes to make it clear that financial institutions include mortgage lending businesses. It amends the securities fraud statute to make it clear that securities fraud includes commodities fraud. It makes it clear that it is a felony for a mortgage broker to knowingly make a materially false statement on a loan application or fraudulently overvalue property in order to influence any action by a mortgage lending business. Of course, that is already a crime, and the bill clearly states this fact just in case anybody thought it was okay to cheat and defraud a mortgage lending business during the mortgage process.

It amends Federal money laundering statutes to make them more effective in the context of fraud prosecutions and to ensure their appropriate use. It also seeks to deter fraud from undermining the TARP and economic stimulus package efforts recently passed by explicitly making fraud in those cases a felony.

In addition to amending criminal statutes, S-386 clarifies key provisions of the False Claims Act in order to more effectively enlist private citizens in helping root out fraud against the government and bring its perpetrators to justice.

Now, Mr. Speaker, I think the most important part of the bill, in my judgment, is not the clarification of various fraud sections in the criminal code, but its authorization of resources to investigate and prosecute fraudulent activities. Additional authorization for the FBI, for example, would enable it to nearly double the size of its mortgage and financial fraud program. The U.S. Attorneys offices and other components of the Justice Department and other Federal agencies involved in investigating fraud would also receive increased authorizations. Additional funds provided pursuant to the new authorizations can be used not only for Federal investigations and enforcement, but also to support State and local law enforcement efforts in this area, including training, technical assistance, expertise and other support provided through programs such as the National White Collar Crime Center.

Mr. Speaker, many financial crimes today go unpunished because law enforcement agencies simply lack the resources to investigate and prosecute financial crimes such as ID theft, mortgage fraud or organized retail theft. This bill will empower Federal law enforcement officials to hold criminals accountable for their crimes.

And finally, Mr. Speaker, the bill incorporates legislation by the gentleman from Connecticut (Mr. Larson) which will create an independent, bipartisan commission with subpoena power to examine more broadly the circumstances giving rise to the current financial crisis.

I would like to commend the Judiciary Committee's chairman, the gentleman from Michigan (Mr. Conyers), the ranking member, the gentleman from Texas (Mr. Smith), the ranking member of the subcommittee, the gentleman from Texas (Mr. Gohmert) and others on the committee, as well as the gentlelady from Illinois (Mrs. Biggert) and our colleagues from the other body for their help in making this such a strong bipartisan bill. I urge my colleagues to support it.

I reserve the balance of my time.

Mr. Speaker, I yield such time as he may consume to the gentleman from Connecticut, the chairman of the majority caucus, Mr. Larson.

Mr. Speaker, I now yield such time as she may consume to a member of the Judiciary Committee, the gentlewoman from Texas (Ms. Jackson-Lee).

(Ms. JACKSON-LEE of Texas asked and was given permission to revise and extend her remarks.)

I yield 4 minutes to a member of the Judiciary Committee, the gentleman from New York (Mr. Maffei).

(Mr. MAFFEI asked and was given permission to revise and extend his remarks.)

I yield 2 minutes to the gentleman from Florida (Mr. Klein).

Mr. Speaker, finally, in closing, I would remind the body that this is a bipartisan, bicameral consensus. We have worked together on a bipartisan basis in the House and the Senate.

The bill will prevent fraud by clarifying the fraud statutes and strengthen the False Claims Act. It will, I think very importantly, provide significant resources for fighting the fraud.

Finally, the value of the commission will be judged by its product, and we would all assume that the appointments would be people whose reputation is beyond reproach and we will get a good product from the commission.

With that, Mr. Speaker, I urge my colleagues to support the bill.

I yield back the balance of my time.