Financial Crisis of 2008 Criminal Investigation and Prosecution Act of 2009

Mr. Speaker, thank you so very much.

What we intended to talk about was the Wall Street meltdown and the necessity of the reform of Wall Street. However, having listened to our colleagues on the Republican side carry on for the last hour, there are some things that need to be said about their discussion.

Health Care

First of all, they started off with this issue of health care, with the government takeover of health care. That is absolutely not true. We have passed major health care reform, and it is not a government takeover. In fact, it builds on the present American system. There is some government--some very, very good government programs.

You tell me what senior in America wants to have Medicare done away with. None of whom I know. There is always room for improvement. In every program, there will be problems from time to time, but no senior of whom I am aware anywhere in America wants to do away with that government program.

What this bill really does is to help organize the American health care system so that it will be more effective and efficient and so that it will build on the private insurance system, which is much a part of America.

I know this business because I was the insurance commissioner in California for 8 years, and I regulated the insurance company. In this legislation, there is heavy-duty regulation of the insurance industry because there was a lot of talk--a lot of talk from our Republican colleagues--about a death panel. I'll tell you what the ``death panel'' is. It is the private insurance company that has heretofore denied coverage for people who have been seriously ill. When people would have illnesses, they would just dump them from the rolls. They would not insure people who had preexisting conditions.

I will tell my Republican colleagues and the American people that those days of insurance excesses and that those days of insurance discrimination are over. They are over. For men and women who are working their 8-, 10- and 12-hour shifts every day, they will be able to have their own doctors. That is what this reform does. It is not a government takeover. In fact, it builds upon the American system, which is unique here, and that is a fact.

Taxation

They also talked about taxation. Well, let's understand that more than 80 percent of the Bush tax cuts went to the top 10 percent of wealthy people in America. They got the tax break, and the other Americans got the shaft. That is not the way we see tax cuts on our side. In fact, my colleague from Minnesota, who will join me in just a moment, was there to vote for the American Recovery and Reinvestment Act. That is the largest middle class tax cut in America's history.

The issue here is that Democrats will cut taxes for the working men and women--for middle class America. As for the wealthy, that's where the Republicans are. They will cut the taxes of the wealthy every single time.

If you listened carefully to the previous discussion from our Republican colleagues, they said it very clearly. They were talking about taxes for those who have limited liability companies. You tell me. Do small businesses out there in my community--the painting contractors, the plumbing contractors--have limited liability companies? No. No. They are sole proprietors. Their taxes were cut by Democrats, and Republicans cut the taxes for Wall Street.

My good colleague from Minnesota (Mr. Ellison), you had some thoughts about this as you were sitting there, listening to them talk about the things that are going on. Please share with us your thoughts.

The Reform of Wall Street

Mr. Ellison, thank you so very, very much for pointing out what was the history of the great 2008 collapse.

You saw those enormous job losses that were occurring during the Bush period and then the slow but steady improvement in the number of jobs that were lost so that now we are in a situation where we are actually seeing jobs added. We don't see the unemployment rate coming down as we would like to, but we are on the correct road, and we are making great progress on that.

I would like to ask my colleague to join us in carrying on this discussion, if you would.

You have raised a very, very important point, and it's the history of how all of this came to pass, about a mortgage industry that had run amok, that had engaged in predatory pricing and predatory mortgages and selling products, mortgages and loans, that they knew the homeowner could not possibly afford, maybe during the teaser rate period, but when that teaser rate was over in a year or two and the rate readjusted and reset, it was all over. That's the history of what was going on. It was Wall Street and its minions out there throughout the United States, the mortgage companies, that were all playing a part of this game.

It comes down to basic American values that were not honored. The basic American value. You know, you work hard, you get a wage, you can get a home. But in this case, they were selling people products and mortgages that no way could they possibly afford, and they had no skin in the game. They had no ongoing obligations. You explained it so well, Mr. Driehaus, how that was going on.

It comes back to certain values. Wall Street's value was greed is good. That's not an American value. That's a unique Wall Street value. Greed is not good. Greed leads to some real serious problems. You go back through all of the writings in the Bible and other religious writings down through the millennium, and it comes down to the same thing. Greed's not good, folks. Yet Wall Street was engaged in that very un-American practice of extraordinary greed, unbridled greed that led to the creation of these bogus and unsubstantiated mortgage instruments that were--by their own admission 2 weeks ago or a week ago when Goldman Sachs testified here, the guy that created them used some extraordinary language, that these were monsters, these were things that were unintelligible, that couldn't be understood and couldn't be priced, and yet that was Wall Street. Why did they do it? They did it because they wanted the money and they played the games.

This was a chart that was used last night by Congresswoman Jackie Speier as she explained one of the things you talked about, Mr. Driehaus, how Goldman Sachs would create a mortgage-backed security. In fact, this one didn't even have mortgages backing it. It was totally ephemeral. It was a figment of the imagination of Wall Street bankers. They created this thing.

Then down here at the bottom, these were the less risky portions of it. Each one of these are what they called tranches. They would sell it off, saying this was an A-rated. That's relatively good strength. Then down here at the very bottom, which was pure junk, they managed to get the rating houses, Standard and Poor's and other rating houses, to say, well, maybe this piece of junk is actually of some value if we go back and look not at the ability of the homeowner to pay but rather at the FICO score. Well, they did, and they rated it as an A, and then they sold it to unsuspecting investors, and the result was, at the end of the day, junk is junk and the thing collapsed. So we had the great collapse of 2008. So what do we do about it now?

And, by the way, you mentioned the Community Reinvestment Act. I was the insurance commissioner in California for 8 years, and I watched the banks use the Community Reinvestment Act to bring bank offices and branches into the underserved communities. It ended the redlining. It's a very, very good law. If only the insurance industry had a similar law so that they would provide insurance products in those communities, but it doesn't. The Community Reinvestment Act isn't to blame here. Greed, unbridled greed is the problem.

And to our Republican friends that ranted for the previous hour about government regulation, we need it, serious government regulation of Wall Street.

Let's talk about where we go from here. Mr. Driehaus.

That's in the bill that you and the other members of the Financial Services Committee put together. It was voted on here on this floor in December, as I recall. I had the pleasure of being elected in November, and I was here for that vote. Very, very important.

I am going to just put this up here, and maybe the three of us together can refer to this as we go on. Right there, number one, consumer protection, watchdog with teeth.

I know, Mr. Ellison, you were talking to me earlier about some of these things.

Please.

It's really very, very important that we do focus on the community banks. This is Main Street. This is where the small businessman--the men and women that own the local grocery store, the shop, the person who is the carpenter, the painter, this is where they will get the money that they need, the loan that they need to carry on their business. It's the community banks. But what has happened in America over the last decade is a concentration of economic strength in the hands of just a few.

A very, very few of the large banks, Wall Street banks now, control 80 percent or more of the American financial strength. We need to take that into account, not only because it will give the community banks an opportunity to compete and to have capital available to them so that they can make those loans, but also because of this problem of too big to fail. Too big to fail. That's what happened over the course from 2000--maybe beginning in the nineties--until 2008, when the great collapse occurred. The banks grew bigger and bigger and fewer and fewer so that at one point just a handful controlled most of the financial assets of America. And they grossly mismanaged those assets. AIG, a famous name. Lehman Brothers, another bankrupt company. All of the games that they played, those roosters came home to roost and the droppings were on American homeowners and the hardworking men and women of America that lost their jobs as a result of Wall Street excesses.

So now what are we going to do about too big to fail? The Senate, which is now moving a piece of legislation that would accompany the House bill, which we passed 4 months ago, that piece of legislation may be amended to say that no financial institution in America can control more than 10 percent of the financial strength of this Nation. That is something I really like. Back in college, I learned about the need for competition. I took an economics class. You have to have competition. You've got to have a lot of players. You've got to have a robust free market. Well, we don't really have that in the financial institutions anymore because they've grown too big. Well, if we just make them a little smaller: You get to 10 percent, I'm sorry, you're going to have to shed some business. We'll have to have others pick up the rest of it. But this too big to fail is part of the reform bill. Exactly how it's going to come out of the Senate, we don't know for sure. But it is certainly going to deal with this issue.

Mr. Ellison, I know that you worked on this.

Well, now that's an interesting question. Clearly, we have institutions that are too big to fail. That's where the TARP legislation that was the last act--one of the last acts of the Bush administration--came into being. The Treasury Secretary, Mr. Paulson, who actually was the CEO of Goldman Sachs, as I recall, came to this House, came to the Senate, and said, Oh, my. Oh my. The world is going to collapse unless you immediately cough up a trillion dollars to the banks to stabilize the banks. Fortunately, this House said, Wait a minute. Let's see what we're doing here. Instead of a 1-page bill giving the Treasury Department a trillion dollars, the TARP program was put in place. And it did stabilize the financial institutions but it was a clear sign that Wall Street banks had become too big. AIG. How much have they taken? Twenty-three billion dollars of our money. Are we going to get it back? We don't know.

Mr. Driehaus, if you will carry on here. I know that you were involved in that TARP legislation. Share with us.

That's a very, very important point about how things will move forward. It's also extraordinarily difficult for me to understand the Republican Party in this matter. On the Senate side, at the moment it looks as though they want to maintain the status quo. They want to maintain business as usual. That business as usual took this economy and nearly the entire world's economy into the tank. We need change. We need to put in place the reforms so that these kinds of financial meltdowns don't occur again. And for too big to fail, the use of wise processes within the government to unwind those companies that are too big, bring them back to size; when they're in financial trouble, unwind it and to bring us back to some sane situation.

There are a couple of other things that are in this thing that are really important. This number three of the kinds of reforms that the Democrats want to put forward: Stop Wall Street firms from betting against their customers. Also, Wall Street is not a gambling house. Wall Street isn't the shore of New Jersey or Las Vegas. Wall Street is where the financial strength of this Nation and indeed the world should be, based on fundamental American values of fair play, of honesty, of no games, straightforwardness, of visibility, of what is going on.

We have seen far too much of Wall Street hiding the ball, of gambling as though they were some casino in Las Vegas, and creating products and selling products that they know are detrimental to their customers' well-being--their financial well-being. So this is part of the reform that's going to go into place when the Republicans in the Senate finally allow the Senate to move forward with its reform.

I know you were involved here in the House as you took up this issue, Mr. Driehaus. Share with us, if you would, some of the things that took place that are in the House reform.

It's one of those basic American values that Wall Street seems to have forgotten and the Republican Party seems to want to be absent from Wall Street, and that is honesty, transparency. That is, explain what this product is all about, and also, the requirement that when you're selling something in a financial institution, you have the obligation of good faith to your customer; that you're being honest--a fundamental American value that was largely forgotten by Wall Street. As this reform goes into place, I think we will see it returned, because it will be the law. Sometimes you simply have to say you have to change because the law now requires you to be honest, to be straightforward, to be transparent; that is, to explain your product.

I notice that we have now been joined by your colleague from Ohio, the gentlewoman, Ms. Kaptur. She has a chart up there that I think goes right to the heart of this. If you would, please, share with us.

Thank you very much. That history is not a good chapter in America, and these men that were involved in all of this, to whom did they owe their allegiance?

I've said many times, it's about the fundamental American values. I know that in my community, a small community in California of farmers and hardworking men and women, that they go to work every day and they expect to be paid a fair wage, but they don't expect to make that wage by cheating somebody, by playing a financial game. They expect to make it by working hard and carrying on for their family.

Mr. Driehaus, if you would share with us some of the additional experiences that you had on the Financial Services Committee.

Back in December.

Let's be very clear that those closed-door meetings were the leadership of the Republican Party sitting down with Wall Street and talking about how to preserve the present system that led to this great collapse.

You said something that just ticked me off--not at you, but at the situation--and it's the Wall Street bonuses. At a time when hardworking men and women, more than 8 million Americans were losing their jobs as a result of the financial games of Wall Street, 8 million--in my district, tens of thousands of men and women that worked hard every single day to put bread on their table for their family, to keep their roof over their head lost their jobs because Wall Street was playing financial games, thinking of the financial market as some sort of gambling casino while my constituents were losing their houses, losing their jobs, forced to go on unemployment, losing their health insurance.

What was going on, on Wall Street? Well, here it is: Wall Street was paying some of the highest salaries and bonuses ever in America's history. In 2007, before the collapse, look at that, $137 billion, $137 billion in pay and bonuses. During the great collapse in 2008, when 750,000 people were losing their job every month, Wall Street was paying its fat cats $123 billion. And then in 2009, using the recovery money, using our taxpayer money, what did Wall Street do? They paid themselves $145 billion.

There ought to be a law--in fact, there ought to be a tax law that says when you get a fat-cat bonus and you've taken your company into virtual bankruptcy, we're going to tax that bonus and we're going to bring it back. We're going to bring it back to the local bank so that they can make a real loan to real businesses and put aside the financial gains. There ought to be a tax on those kinds of unconscionable bonuses and pays that are going to these Wall Street fat cats that nearly brought down the world's financial economy. There ought to be a law, and that law is being held up now by the Republican Party. We need Wall Street reform right now.

I would be delighted to yield.

More like tyrannosaurus rexes.

Did you say at the beginning of this crisis in 2007 they had something like one-third of the financial assets----

And today the largest five have over 60 percent?

Sixty-six percent. Now we really have a serious problem called ``too big to fail.'' Now we're in a very, very serious problem.

I want to refer back to this chart that we were using before. The legislation does deal with this issue of too big to fail.

Now, we passed a good bill out of here in December that dealt with this, but on the Senate side there are some Senators who are progressive and thinking about this and they're saying, Wait a minute. Maybe we should limit to 10 percent, no company can have more than 10 percent of the total assets. When you get that big, that's it. You're going to have to shed assets. Someone else is going to have to pick it up.

But now we have seen even more concentration in Wall Street. We can't wait any longer for the reforms. We can't wait any longer. America can't wait any longer. How many more hardworking men and women are going to lose their job as Wall Street continually declines to provide loans to Main Street?

Let's take a look at some of the facts about that.

I heard you, in one of our discussions, talk about this and the effect in your community in Ohio, the men and women, the small businesses, their inability to get loans. Why don't you pick that up and share some of the stories.

Well, just before we took the floor here for this discussion, I was listening to our Republican colleagues say that government regulation is wrong. Well, no, not in the case of Wall Street. The statistics you just gave us, did you say the FBI had 75 agents for all of the United States to deal with Wall Street?

At a time when the Wall Street behemoths were going from 33 percent of their total financial wealth in the Nation to 66 percent? And 30-something people for the Securities and Exchange Commission?

I hope your bill passes. We need watchdogs. We need watchdogs with teeth that are willing to bite into the arrogance and the greed of Wall Street. We need those people there to watch and to make sure that the kind of financial rip-offs that occurred that nearly took down this Nation's economy--and the world's economy with it--and put hardworking men and women that were out there on the production lines in your community, that were building the homes in my community, the farmers, they're out of work. They are unemployed. Why? Because of the extraordinary greed, arrogance, and mismanagement of Wall Street thinking that the financial institutions of America are nothing more than a Las Vegas casino, where a bet is placed on a product that they could not even describe. Enough already. Enough already.

The Republican Party has got to come to its senses and give us the opportunity to pass a strong financial reform of Wall Street. The people in my district, my homeowners, my small businesses are trying to get a loan at a time when we're seeing more and more concentration of power on Wall Street.

I would be delighted to share with you.

Well, the big fix is available. The big fix is to reform Wall Street, to stop the kind of greed that has nearly destroyed this Nation's economy and the world economy along with it.

The bill that was passed by the House of Representatives in December is a good, strong bill. We beg our Republican colleagues over in the Senate to stand aside. If you don't want to work towards a decent reform, then get out of the way and let the Democratic Party put in place a strong reform that will bring Wall Street to its senses, that will once again make Wall Street a legitimate, honest, transparent place where the financial inner workings of this Nation can take place. That's our plea, and we need to have it done, not next month. We need to have it done this week.

Thank you so very much.

I yield back my time, Mr. Speaker.

Thank you very much. I appreciate the gentleman yielding this evening and I thank you both for sponsoring this Special Order. Part of our responsibility is to restore trust in the most important financial institutions in our country--restore trust to the American people in those--and to change the laws in order to make sure that that trust in our capital markets and in our banking system is restored. We're a long way from doing that, and financial reform is a part of it. I hope that the bill improves as it moves through the Senate.

The chart that I brought to the floor tonight--and this is just one chart. I would like to put in the Record, CBS News Investigates Goldman Sachs' Revolving Door, with a full list of individuals just from that company. There are many other companies, but the kind of incredible power that they wield in this city.

If you just look at Goldman Sachs and then at people from Goldman Sachs who came to work for the government of the United States in the highest positions, you begin to question whether they were representing the public interest or their personal interest in many of the dealings that occurred on Wall Street.

For example, you have an individual during the last administration that worked for President Bush by the name of Joshua Bolten. He was the President's Chief of Staff during the time when the TARP was voted through this Congress in the bailout in the fall of 2008. He had been the director of OMB through most of the Bush administration. But what a lot of people don't know is that before that he had been the Executive Director of Legal Affairs for Goldman Sachs based in London. That is the bank's chief lobbyist to the European Union. So when you look at the collapse of institutions in Europe, whether it was Dresdner Bank in Germany or Societe Generale, which was a counterparty in the AIG insurance situation, those deals were brokered through London. And there he sat for the whole decade of the nineties, putting together the architecture that then collapsed in this decade.

But he's not alone. It's important that people understand this just didn't start in 2007 or 2008 or 2005. The pieces were put together starting in the 1980s, and then the foundation stones and all the regulatory changes were made that allowed this type of hyperinflation of the housing market and the pyramiding of equity to a point that it simply couldn't hold. These men were a part of that.

If you look at the former Secretary of Treasury in the past administration, before President Obama and during President Clinton, he had come from Goldman Sachs, Robert Rubin, and he was Secretary of the Treasury from 1995-1999, when so much of the deregulation was done. But they all go back to Goldman Sachs. That's the beehive. The bees come out, they go somewhere else, and then they come back. We have to begin to unpeel this and unwind and understand who these individuals are. We heard the name of Hank Paulson, who was Secretary of the Treasury during the period time that the bailout was voted. He was the CEO of Goldman Sachs. So they come in, collect a little bit of honey, and then they go back. What the American people have to understand is what exactly did they do; who made these decisions.

Now, we have over at the Secretary of Treasury the chief of staff to the Secretary of Treasury, Mark Patterson. Guess where he came from? Goldman Sachs. And the recent general counsel from the White House, Mr. Craig, he left the White House. Where did he go? Goldman Sachs.

So it rises above party. We have to stand up for what's right for America, and we have to unwind these private interests that have caused such harm to our country.

[From CBS News Investigates, Apr. 7, 2010]

Goldman Sachs' Revolving Door

(By Paula Reid)

A CBS News analysis of the revolving door between Goldman

and government reveals at least four dozen former employees,

lobbyists

or advisers at the highest reaches of power both in

Washington and around the world.

The Influence and Power of Goldman Sachs

For example, former Treasury Secretary Henry Paulson is a

former Goldman CEO; Arthur Levitt, the head of the Securities

and Exchange Commission is a now a Goldman adviser; and

former House Majority Leader Dick Gephardt is now a paid

lobbyist for the firm.

Our alphabetical list:

Joshua Bolten

Government: President George W. Bush's Chief of Staff from

2006-2009; Director of Office of Management and Budget from

2003-2006; White House Deputy Chief of Staff from January 20,

2001-June 2003.

Goldman: Executive Director of Legal Affairs for Goldman

based in London, aka, the bank's chief lobbyist to the EU

from 1994-1999.

Kenneth D. Brody

Government: President and Chairman of the Export-Import

Bank of the United States (1993-1996).

Goldman: Former general partner and member of the

Management Committee at Goldman Sachs where he worked from

1971-1991.

Kathleen Brown

Government: Former California State Treasurer.

Goldman: Senior Advisor responsible for Public Finance,

Western Region.

Mark Carney

Government: Governor of the Bank of Canada since 2008.

Goldman: Mr. Carney had a thirteen-year career with Goldman

Sachs in its London, Tokyo, New York, and Toronto offices.

His progressively senior positions included Co-Head of

Sovereign Risk; Executive Director Emerging Debt Capital

Markets; and Managing Director, Investment Banking. He

started at Goldman in 1995.

robert cogorno

Government: Former Gephardt aide and one-time floor

director for Steny Hoyer (D-MD.), the No. 2 House Democrat.

Goldman: Works for [Steve] Elmendorf Strategies, which

lobbies for Goldman.

Kenneth Connolly

Government: Staff Director of the Senate Environment &

Public Works Committee 2001-2006.

Goldman: Vice President at Goldman from June 2008-present.

E. Gerald Corrigan

Government: President of the New York Fed from 1985 to

1993.

Goldman: Joined Goldman Sachs in 1994 and currently is a

partner and managing director; he was also appointed chairman

of GS Bank USA, the firm's holding company, in September

2008.

Jon Corzine

Government: Governor of New Jersey from 2006-2010; U.S.

Senator from 2001-2006 where he served on the Banking and

Budget Committees.

Goldman: Former Goldman CEO. Worked at Goldman from 1975-

1998.

Gavyn Davies

Government: Former chairman of the BBC from 2001-2004.

Goldman: Chief Economist at Goldman where he worked from

1986-2001.

Paul Dighton

Government: Chief Executive of the London Operating

Committee of the Olympic Games (LOCOG).

Goldman: Former COO of Goldman where he worked for 22 years

beginning in 1983.

Mario Draghi

Government: Head [Governor] of the Bank of Italy since

January 2006.

Goldman: Vice chair and managing director of Goldman Sachs

International and a member of the firm-wide management

committee from 2002-2005.

William Dudley

Government: President Federal Reserve Bank of New York City

(2009-present).

Goldman: Partner and Managing Director. Worked at Goldman

from 1986-2007.

Steven Elmendorf

Government: Senior Advisor to then-House minority Leader

Richard Gephardt.

Goldman: Now runs his own lobbying firm, where Goldman is

one of his clients.

Dina Farrell

Government: Deputy Director, National Economic Council,

Obama Administration since January 2009.

Goldman: Financial Analyst at Goldman Sachs from 1987-1989.

Edward C. Forst

Government: Advisor to Treasury Secretary Henry Paulson in

2008.

Goldman: Former Global Head of the Investment Management

Division at Goldman where he worked from 1994-2008.

Randall M. Fort

Government: Assistant Secretary of State for Intelligence

and Research from November 2006-Jan 2009.

Goldman: Director of Global Security 1996-2006.

Henry H. Fowler

Government: Secretary of the Treasury from 1965-1968.

Goldman: After leaving the Treasury Department, Fowler

joined Goldman Sachs in New York City as a partner.

Stephen Friedman

Government: Chairman of the President's Foreign

Intelligence Advisory Board and of the Intelligence Oversight

Board; Chairman Federal Reserve Bank of New York from 2008-

2009; former director of Bush's National Economic Council.

Economic Advisor to President Bush from 2002-2004.

Goldman: Former Co-Chairman at Goldman Sachs and still a

member of their board. Joined Goldman in 1966.

Gary Gensler

Government: Chairman of the U.S. Commodity Futures Trading

Commission since 2009; Undersecretary to the Treasury from

1999 to 2001; Assistant Secretary to the Treasury from 1997-

1999.

Goldman: Former Co-head of Finance for Goldman Sachs

worldwide. Worked at Goldman from 1979-1997.

Lord Brian Griffiths

Government: Head of the Prime Minister's Policy Unit from

1985 to 1990.

Goldman: International Advisor since 1991.

Jim Himes

Government: Congressman from Connecticut (on Committee on

Financial Services) since 2009.

Goldman: Began working at Goldman in 1990 and was

eventually promoted to Vice President.

Robert D. Hormats

Government: Under Secretary of State for Economic, Energy

and Agricultural Affairs-designate since July 2009; Assistant

Secretary of State for Economic and Business affairs from

1981 to 1982.

Goldman: Vice Chairman of Goldman Sachs International and

Managing Director of Goldman Sachs & Co. He worked at Goldman

Sachs from 1982-2009.

Chris Javens

Government: Ex-tax policy adviser to Iowa Senator Chuck

Grassley.

Goldman: Now lobbies for Goldman.

Reuben Jeffery III

Government: Under Secretary of State for Economic,

Business, and Agricultural Affairs from 2007-2009; Chairman

of the Commodity Futures Trading Commission from 2005-2007.

Goldman: Former Managing Partner of Goldman Sachs Paris

Office. Worked at Goldman Sachs from 1983-2001.

Dan Jester

Government: Former Treasury Advisor.

Goldman: Former Goldman Executive.

James Johnson

Government: Selected to serve on Obama's Vice Presidential

section committee but stepped down.

Goldman: Board of Director of Goldman Sachs since May 1999.

Richard Gephardt

Government: U.S. Representative (1977 to 2005).

Goldman: President and CEO, Gephardt Government Affairs

(since 2007). Hired by Goldman to represent its interests on

issues related to TARP.

Neel Kashkari

Government: Interim head, Treasury's Office of Financial

Stability from October 2008-May 2009; Assistant Secretary for

International Economics (confirmed in summer 2008) Special

assistant to Treasury Secretary Henry Paulson from 2006-2008.

Goldman: Vice President at Goldman Sachs from 2002-2006.

Lori E Laudien

Government: Former counsel for the Senate Finance Committee

in 1996-1997.

Goldman: Lobbyist for Goldman since 2005.

Arthur Levitt

Government: Chairman, SEC 1993-200;

Goldman: Advisor to Goldman Sachs (June 2009-present).

Philip Murphy

Government: U.S. Ambassador to Germany since 2009.

Goldman: Former Senior Director of Goldman Sachs where he

worked from 1983-2006.

Michael Paese

Government: Top Staffer to House Financial Services

Committee Chairman Barney Frank.

Goldman: Director of Government Affairs/Lobbyist (2009).

Mark Patterson

Government: Treasury Department Chief of Staff since

February 2009.

Goldman: Lobbyist for Goldman Sachs from 2003-2008.

Henry ``Hank'' Paulson

Government: Secretary of the Treasury from March 2006 to

January 2009; White House Domestic Council, serving as Staff

Assistant to the President from 1972 to 1973; Staff Assistant

to the Assistant Secretary of Defense at the Pentagon from

1970 to 1972.

Goldman: Former Goldman Sachs CEO. Worked at Goldman from

1974-2006.

Romano Prodi

Government: Two time prime minister of Italy.

Goldman: From March 1990 to May 1993 and when not in public

office, Mr. Prodi acted as a consultant to Goldman Sachs.

Steve Shafran

Government: Advise to Treasury Secretary Henry Paulson.

Goldman: Worked at Goldman from 1993-2000.

Sonal Shah

Government: Director, Office of Social Innovation and Civic

Participation (April 2009); advisory board member Obama-Biden

transition Project; former previously held a variety of

positions in the Treasury Department from 1995 to early 2002.

Goldman: Vice President 2004-2007.

Faryar Shirzad

Government: Served on the staff of the National Security

Council at the White House from March 2003-August 2006;

Assistant Secretary for Import Administration at the U.S.

Department of Commerce in the Bus Administration.

Goldman: Global head of government affairs (Lobbyist) since

2006.

Robert K. Steel

Government: Under Secretary for Domestic Finance of the

United States Treasury from 2006-08.

Goldman: Former Vice Chairman of Goldman Sachs where he

worked from 1976-2004.

Adam Scorch

Government: COO the SEC's Enforcement Division (October

2009-present). He was 29 years old at the time of his

appointment.

Goldman: Former Vice President at Goldman Sachs where he

worked from 2004-2009.

Richard Y. Roberts

Government: Former SEC commissioner from 1990 to 1995.

Goldman: Now working as a principal at RR&G LLC, which was

hired by Goldman to lobby on TARP.

Robert Rubin

Government: Treasury Secretary from 1995-1999; Chairman of

the National Economic Council from 1993-1995.

Goldman: Former Co-Chairman at Goldman Sachs where he

worked from 1966-1992.

John Thain

Government: CEO resident of NYSE (2004-07).

Goldman: President and Co-Chief Operating Officer from

1999-2004.

Marti Thomas

Government: Assistant Secretary in Legal Affairs and Public

Policy in 2000. Treasury Department as Deputy Assistant

Secretary for Tax and Budget from 1998-1999; Executive Floor

Assistant to Dick Gephardt from 1989-1998.

Goldman: Joined Goldman as the Federal Legislative Affairs

Leader from 2007-2009.

Massimo Tononi

Government: Italian deputy treasury chief from 2006-2008.

Goldman: Former Partner at Goldman Sachs from 2004-2006.

Malcolm Turnbull

Government: Member of the Australian House of

Representatives since 2004.

Goldman: Chairman and Managing Director, Goldman Sachs

Australia from 1997-2001 and Partner with Goldman Sachs and

Co. from 1998-2001.

Sidney Weinberg

Government: Served as Vice-Chair for FDR's War Production

Board during World War II.

Goldman: Worked at Goldman from 1907-1969, eventually

becoming CEO after starting as a $3-a-week janitor's

assistant.

Kendrick Wilson

Government: Advisor to Treasury Secretary Henry Paulson.

Goldman: Senior investment banker at Goldman where he

worked from 1998-2008.

Robert Zoellick

Government: President of the World Bank since 2007.

Goldman: Vice Chairman, International of the Goldman Sachs

Group, and a Managing Director and Chairman of Goldman Sachs'

Board of International Advisors (2006-07).

Would the gentleman be kind enough to yield?

Congressman Garamendi, I want to compliment you and Congressman Steve Driehaus of Ohio for putting this information on the Record.

I think it's important to state that at the beginning of the financial crisis, these large institutions, the six of them that are the most culpable--JPMorgan Chase, Morgan Stanley,

HSBC, Wells Fargo, Citigroup, Goldman Sachs--had one-third of the capital in this country, one-third of the assets in those institutions. And while they were taking all those bonuses and while this Nation has gone through this terrible washout, they now command 66 percent. They doubled the size and their importance inside this economy.

So while they're taking those horrendous bonuses, they've also been gobbling up institutions. States like my own are losing their money center banks. The fees that banks that didn't do anything wrong are having to pay have gone up extraordinarily. We don't know if some of them will make it. But they are just huge leviathans that are taking over this economy, and look at what they've done.

I love that.

That's right.

Sixty-six percent.

Yes.

I just did that again this weekend. I went into a bakery in our district, and the owner said, Marcy, I could hire three more people and I want to add some machines and so forth because I've got orders I can't fill, but I can't get operating loans from the bank.

Credit is frozen across this country because they are these big, giant, inefficient institutions, and credit needs to be more decentralized. We need more financial institutions not fewer financial institutions. And the financial reforms that this Congress should pass should go to that level to restore a robust, competitive financial system in this country. And, by the way, we not only have to make the future better; we have to go back and catch the crooks that put us on this path.

I have a bill, H.R. 3995, that would add 1,000 agents to the FBI, to the SEC, and to the FDIC in order to fully investigate and go after these big institutions, because what happened after 9/11 was that the White Collar Crime division of the FBI was reduced to 75 investigators, 75. The SEC has 25 going after the largest financial institutions in this country? We need to, both on the civil side and the criminal side, investigate and prosecute.

When you have this level of implosion in an economy and a few people are getting very rich and everybody else is suffering, doesn't that tell you that something was fundamentally wrong? Some people say it was rigged, that control fraud may be, in fact, what has riddled through the system from the very top down through every community that we represent. So H.R. 3995 would add 1,000 more agents and help beef up prosecution in this country.

Would the gentleman yield?

What is unbelievable is the public relations on this, because companies like Goldman Sachs now have whole new lobbying offices here in Washington to hire people to try to convince us that the real is unreal. And what they're saying is that, well, you know, it isn't our fault that this happened. It's the fault of those Americans down there who lost their jobs and they maybe won't be able to pay their mortgages, right? Well, wait a minute. Wait a minute. Why did they lose their jobs, and why can't unemployment benefits at least be used in the interim to help people stay in their homes for the next year until we can try to get this economy to recover?

And so the very institutions that are not working out loans at the local level and making billions and billions and billions of dollars more in profits and in bonuses are saying to us, Oh, it's not our fault. It's the fault of the American people who wanted to own a house. You know, it's really their problem that they got put out of work, when, in fact, these institutions aren't loaning money to our small businesses that want to employ people. They're not doing mortgage workouts at the local level. They are not taking any principle write- downs, which they could do, and in a formal FDIC bank regulatory process that would happen. They're not serious. They're not serious at the bargaining table. They are not even returning calls to our Realtors at the local level. We're trying to reach accommodation on short sales. We've been trying to reach accommodation on short sales for 2 years. They're standing up the Realtors across this country as we get more and more foreclosures around this Nation. We have to focus on the big six.

Thank you, Congressman Garamendi. I appreciate very much your taking the leadership tonight on this issue, which is so critically important.

There is a tremendous amount of misinformation out there about what has gone on in terms of the financial markets. I happen to sit on the Financial Services Committee, so I've seen firsthand what we have been able to do in terms of structuring a fix for what is going on on Wall Street and for what happened on Wall Street.

Yet it would be a mistake just to talk about the fix without talking about the history. Far too often, the Republicans would have us believe that all of this history began in January of 2009, which is when Barack Obama took the oath of office and when we took the oath of office. The facts are far different, and I think it is important to help voters and folks out there to better understand exactly how we got to where we are.

I remember as a State legislator, when I served in the Ohio House from 2001-2008, that these issues of predatory lending and of foreclosure came up over and over again. I pushed Governor Strickland to create a foreclosure task force in the State of Ohio, and I was proud to serve on that task force. Yet what we realized way before the task force was formed was that so many of these problems were Federal in nature. They were Federal in scope; though, the Federal Government was doing very little to regulate Wall Street, to regulate the mortgage industry.

My colleague Mr. Ellison mentioned predatory lending and the failure to enact predatory lending legislation. I will remind the viewers and I will remind this body, Mr. Speaker, that it was in 2000 that Congresswoman Stephanie Tubbs Jones from Ohio--God rest her soul-- introduced predatory lending legislation here in the House. They could have enacted that in 2000. They could have enacted it in 2001, in 2002, in 2003, in 2004, in 2005, and in 2006. Every year, she brought forward legislation concerning predatory lending because she understood the impact this was having in neighborhoods across Ohio and across the country, but they failed to act. We knew that these things were being created on Wall Street, things like mortgage-backed securities and credit default swaps, which backed up the mortgage-backed securities, and collateralized debt obligations, which backed those up. The vast majority of the people had no idea that these things even existed much less what they were doing.

What we soon found out was that these mechanisms on Wall Street were allowing for the bubble to occur, which then led to the collapse when we found out what was actually contained in them.

For just a minute, Congressman, I'll talk about how the risk was shifted, because this is fundamental to what happened. You know, years ago, you would go to a savings and loan or you would go to a bank, and you would try to get a mortgage on your house. The risk would be shared between the financial institution and the homeowner, and they would hold onto the paper. The financial institution would hold onto that mortgage paper, and it would be part of their investment portfolio; but that is not what happened in the 2000s.

What happened in the early 2000s was that investment vehicles were created on Wall Street that no longer required that bank or that savings and loan to hold onto that paper. They sold it immediately. They sold it immediately onto a secondary market that was created. These things were then brought together in thousands of mortgages, called ``mortgage-backed securities.'' They were then sold to international investors, to pension funds--to all kinds of entities.

In the meantime, the rating agencies were rating these things at AAA despite the fact that many of the mortgages contained in these packages were bad mortgages. Oftentimes, they were 2- or 3-year adjustable rate mortgages to subprime borrowers. ``Subprime borrowers'' are simply borrowers who have poor histories of paying back in the first place.

So what behavior did this incentivize? Well, at the front end, I will tell you what it incentivized.

You had mortgage brokers and financial entities going out there trying to qualify anybody they possibly could for a mortgage at the highest prices they could possibly get because they were no longer holding onto the paper. It was no longer a long-term investment of the property value of that home; it was at the close of the deal. If it's at the close of the deal, you're going to close as many deals as you possibly can. That's why they were qualifying people who should never have qualified for mortgages. That is how this bubble was created.

Now, I have heard a lot of my colleagues come down here and blame the Community Reinvestment Act over and over again. If you listen to conservative talk radio, they say the banks were forced to lend into these neighborhoods and the banks were forced to make bad loans. Now, I've never come across a bank that didn't have the power to say ``no'' to a loan, but they would have you believe that it was the banks that were forced to do this because of the Community Reinvestment Act. So I just want to bring a few things to the attention of the public.

First of all, the Community Reinvestment Act was established in 1977. So if the Community Reinvestment Act was the problem, you would think that maybe we would have seen this in the 1980s and the 1990s. But we didn't because the Community Reinvestment Act wasn't the problem.

What the Community Reinvestment Act did was it provided incentives for financial institutions to go into neighborhoods where there were depositors in those financial institutions but folks weren't qualifying for loans because they had red-listed entire areas. They weren't required to make bad loans. They were just required to go into the neighborhoods and make good loans.

And if I can just refer to Ben Bernanke in a letter November 25, 2008, who said this, and he's responding to one of our Senate colleagues:

``Thank you for your letter of October 24, 2008, requesting the Board's view on claims that the Community Reinvestment Act is to blame for the subprime meltdown and current mortgage foreclosure situation. We are aware of such claims but have not seen any empirical evidence presented to support them. Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.''

The fact of the matter is over 80 percent of the bad loans that went into default, that caused the foreclosure crisis, over 80 percent, were from financial entities and nonfinancial entities that didn't even participate in the Community Reinvestment Act.

I think it's a good point, Congressman. There was no regulation. There was no regulation of mortgage-backed securities. There was no regulation of credit default swaps. So when folks get up and say we have enough regulation on Wall Street, well, there may be regulation, but the regulation was in the wrong place.

So if you look at the bill that came through the House when it comes to regulatory reform, we focused on some sound principles. First, the creation of a Consumer Financial Protection Agency, an independent agency that provides consumers with information, good information, about the products that they are being offered. Now, this isn't a crazy idea. You know, we often said in the State of Ohio that you were safer purchasing a toaster than you were a home loan because you had more consumer protections purchasing a toaster. And that's true. You have consumer protections when it comes to purchasing a vehicle. You have consumer protections if you purchase toys for your kids. But you don't have those same consumer protections when it comes to a home loan.

I appreciate that. And picking up on that point, the CFPA is critical to provide consumers information. But if you go back down to No. 5 on that list, strengthening community banks, this strengthens community banks because so much of the problem occurred outside of the financial institutions in the first place.

Many of these subprime mortgages, many of these bad loans didn't originate with community banks. The community banks were doing the right thing. But there was no regulation of the behavior of these nonfinancial entities. So for the first time, the CFPA will step in and provide regulation over the product itself. So it doesn't matter how you structure your entity to avoid regulation. The regulation will come in the form of the product. So if you're offering a consumer product which is determined to be a bad product for consumers, you will be prohibited from offering that, regardless of the type of entity that you are.

This is important because banks are very wary of regulators and for good reason, especially community banks, who have regulators coming in all the time to make sure that safety and soundness is being complied with and to make sure that consumers are being treated fairly. But what the CFPA gets at isn't additional burdens on community banks, but it's going after those previously nonregulated entities to make sure that they are following the law and that the products they are offering are fair and that the disclosures they are providing are clear, that they're transparent, and consumers know what they are getting themselves into.

Yes, I believe it will absolutely strengthen the community banks.

And as you know, many of the community banks were provided additional protections, Mr. Speaker, by making sure that the CFPA was only part of the regulatory structure when we went into community banks so that we didn't place yet an additional burden in terms of an examination on that community financial institution.

So I believe this is an additional protection because for far too long, these entities were existing outside of a regulated marketplace, which put community banks, the guys that were doing the right thing, the guys that so many of us rely upon, and lend to small businesses, lend to people trying to purchase their homes--they were at a competitive disadvantage, and this really does strengthen those community banks because it forces everybody to have an even playing field.

Getting back to the issue of too big to fail, because I think this is really a critical issue for people to get their arms around. I think it's important that we have strong capital markets; that the private sector works well in providing capital to allow our businesses to grow, to allow people to invest in the economy. That's critically important. But the issue of too big to fail really comes back to our responsibility, because when an entity is too big to fail, then it suggests that they go well beyond losses that might just impact the shareholders or losses that might just impact the owners or the employees of a business, but in fact it impacts all of us.

We then have a responsibility so that when the harm that's caused by these institutions is so great that it impacts the public good, then the United States Congress has a responsibility. In this case, the foreclosure crisis. Not only have we seen the greatest recession in our lifetimes but we have seen neighborhoods just devastated by foreclosures all across this country. Certainly, in the State of Ohio, where I come from.

The cost is enormous. That's not being repaid by Goldman Sachs. Lehman Brothers isn't around to do it. The big investment firms on Wall Street aren't there when we're having crime in our neighborhoods due to the foreclosures. It's the residents and the local governments that are left to pick up the pieces. That's what we mean by too big to fail.

So never again will we allow an entity to get so big that its failure will cause such a calamity not just to the economy but to our neighborhoods, to our communities, and obviously to jobs across the country. So we've put mechanisms in place to prohibit entities from growing that large. And if they are so large that their collapse would have this tremendous impact, we provide for a provision to allow the Fed to

wind them down and allow Treasury to wind them down--not at taxpayer expense but at their own expense and at the expense of financial entities who are contributing to a pool. We don't believe in the government bailouts. We are trying to put an end to government bailouts. What we are trying to do is allow these to be dissolved in a way that's fiscally responsible. That's what we mean by too big to fail.

I think it's critically important as you move through this list to help people better understand exactly what it is that we're doing. One of the big issues that comes up time and time again is the issue of transparency. Because transparency was a big problem. It wasn't that the regulations didn't necessarily exist on some of these products, but people didn't know what was in the products. And so the Wall Street banks were intentionally hiding the risk associated with some of these derivative products.

Derivatives by their very nature are derived from other capital. But they're critically important. They're critically important to our system, our economic system, because they provide capital investment that creates jobs in our economy. So we don't want to stop derivatives. We want to create investment vehicles. Derivatives are okay, but these investment vehicles need to be transparent. That's all we're asking through the legislation, is that the risk associated with the product be clear so that the people investing in these products know the risk associated with their investment. This is basic. This is basic finance, that people asking to invest in products should know the risk associated with those investments. That's what we're trying to achieve through the regulatory reform bill.

Well, I would just share with you and share with everyone here that the reality is that, from a legislative standpoint, nothing has changed. Despite the fact that we're in the worst recession that we've ever experienced--we all know what caused this. We know how we got here. We know the lack of regulation on these very sophisticated financial instruments caused the mortgage meltdown which led to the recession. But the fact of the matter is, legislatively, nothing has changed in statute.

We passed a good bill out of the House----

We passed a good bill that had a lot of measures. Subsequent to that, after it went over to the Senate, there has been stalling by the Republican Senators. We've had closed-door meetings by leadership of the Republicans in the House and in the Senate, both here in Washington and on Wall Street, because the financial firms on Wall Street like the status quo. We've seen their profits. They're back to the days of big bonuses. But our neighborhoods are still struggling. Our neighborhoods are still trying to get out of the foreclosure crisis that has impacted them, And it's going to be years before they come out of that crisis. It's the most important thing that we can do here is make sure that this never happens again, but our Republican colleagues in the Senate are standing in the way. At least here, the Republicans just voted ``no,'' but they couldn't stop the process from moving forward.

We, as a Congress, have an obligation to the people. We, as a Congress, have an obligation to the people to ensure that the crisis that we found ourselves in never happens again. We do that through strong regulatory reform. We've passed a strong measure in the House. We're waiting upon the Senate to tell the American people that we won't let this happen again. That is our responsibility, and that's what we need to impress upon people as we move forward.

Enough of the closed-door meetings with Wall Street; it's time to act on behalf our constituents.

I thank you very much, Congresswoman Jackie Speier, for spearheading this effort this evening and for the incredible work that you do for this House and for our country and for your superior knowledge of the financial markets and the banking industry. America really needs you now more than ever, and I thank your constituents for electing you here. You are the right person at the right time and the right place, that's for sure.

It's a pleasure to join you tonight to place information on the Record related to Goldman's behavior as well as other institutions that have caused our country so much harm. And as others have mentioned, on April 16, the Securities and Exchange Commission announced that it was filing a civil lawsuit at long last against the big speculator Goldman Sachs, accusing it of committing fraud, but it was a civil filing.

We know that what happened on Wall Street in the financial markets, the commodities markets, and in the housing markets led to enormous financial turmoil in our country and, ultimately, this great economic crisis that we are facing. And the American people want answers. They want to know who did what, and they ultimately want justice.

A few days after that filing, over five dozen of our colleagues signed on to a bipartisan letter sent to the Attorney General on April 23, and our letter called upon the Attorney General to begin a criminal investigation and prosecution.

One of our concerns continues to be that if, in fact, a civil case is filed by the SEC, could it be possible down the road that some of that evidence could be inadmissible in the event there is a criminal proceeding. So we urged Attorney General Holder to proceed quickly, and today we delivered--in addition to that letter--signatures from over 140,000 Americans who have been signing up on an e-petition to the Attorney General urging the same.

We thank the organizations Progressive Change Campaign Committee and MoveOn.org for alerting citizens across this country that they don't have to be neutral in this fight. They can let their views be known to the Attorney General of our country about the importance of criminal proceedings.

What makes that so important is the fact that the Attorney General's office in the Department of Justice has been understaffed throughout the last 10 years, unable to do the type of financial crimes investigations that are necessary. Back in the savings and loan crisis at the end of the 1990s and early 2000s--or I should say at the end of 1989 up until the early 1990s--we had over 1,000 investigators in financial fraud at this Department of Justice. After 9/11, that was reduced to about 75; and, therefore, we were totally unequipped at the Justice Department to deal with a lot of the wrongdoing that was proceeding through those years and those decades.

I have a bill, H.R. 3995, to close that gap and increase the number of investigators. Quite frankly, I have a deep concern about some of the self-serving individuals that may have been representing private interests rather than the public interest as they were conducting their business through Goldman Sachs and other firms.

I would like to place on the record, for example, the following: Joshua Bolten, who was President Bush's chief of staff in the White House at the time that the markets melted down, had actually been the person who ran Goldman Sachs' London office, and yet then he came to be President Bush's chief budget officer and then went to be chief of staff at the White House at the key moment when decisions had to be made about how to handle the financial markets

In the current administration, it is no secret that the chief of staff to the current Secretary of the Treasury, Mark Patterson, had come directly from Goldman Sachs as its top lobbyist. In addition, Neel Kashkari from Goldman Sachs had gone to handle the TARP. I think this goes far beyond party, this has to do with America and standing up as patriots for this country and asking the question: Isn't that too much insider dealing? How do you know that they are really representing their client's interest or the public interest when they are personally involved both on the private side and then on the public side like a very fast revolving door?

I will also place on the Record tonight the fact that since the crisis started the six institutions in addition to Goldman Sachs, that includes Citibank and Wells Fargo, HSBC, Morgan Stanley, all these big banks now control two-thirds of the deposits and GDP of this country. Six institutions. They are raiding equity out of our local communities. They are just simply too powerful and they are too irresponsible. They are not doing loan workouts in places I come from. I thank the gentlelady for calling into question their business principles as you so ably put on the floor here as to who their interests really are.

That is my bottom line question: Who do these people represent? They seem to be getting bonuses at extraordinary levels, in the millions of dollars. When people in my district have fallen off unemployment benefits, these companies like JPMorgan Chase do not return phone calls to do loan workouts. Wells Fargo, they are totally irresponsible. They have too much power and

they are thumbing their nose at the American people at a time when our people are just hanging on.

I want to thank the gentlelady for holding this Special Order this evening and for giving us a chance to place on the Record the letter that we sent to the attorney general asking for criminal proceedings, and also the names of the Members of Congress who have signed on this letter. I urge other colleagues who wish to join us to please give us a call. I thank you for allowing me to place this information into the Record.

Congress of the United States,

Washington, DC, April 23, 2010.

Hon. Eric Holder

U.S. Attorney General, U.S. Department of Justice,

Washington, DC.

Dear Attorney General Holder: The U.S. Securities and

Exchange Commission (SEC) announced on Friday, April 16,

2010, that it had filed a securities fraud action against the

Wall Street company Goldman Sachs & Co (GS& Co.) and one of

its employees for making materially misleading statements and

omissions in connection with a synthetic collateralized debt

obligation (``CDO'') that GS & Co. structured and marketed to

investors. The SEC alleges that:

1. This synthetic CDO, ABACUS 2007-AC1, was tied to the

performance of sub-prime residential mortgage-backed

securities (``RMBS'') and was structured and marketed by GS &

Co. in early 2007 when the United States housing market and

related securities were beginning to show signs of distress.

Synthetic CDOs like ABACUS 2007-AC1 contributed to the recent

financial crisis by magnifying losses associated with the

downturn in the United States housing market.

2. GS & Co. marketing materials for ABACUS 2007-AC1--

including the term sheet, flip book and offering memorandum

for the CDO--all represented that the reference portfolio of

RMBS underlying the CDO was selected by ACA Management with

experience analyzing credit risk in RMBS. Undisclosed in the

marketing materials and unbeknownst to investors, a large

hedge fund, Paulson & Co. Inc. (``Paulson''), with economic

interests directly adverse to investors in the ABACUS 2007-

AC1 CDO, played a significant role in the portfolio selection

process. After participating in the selection of the

reference portfolio, Paulson effectively shorted the RMBS

portfolio it helped select by entering into credit default

swaps (``CDS'') with GS & Co. to buy protection on specific

layers of the ABACUS 2007-AC1 capital structure.

3. In sum, GS & Co. arranged a transaction at Paulson's

request in which Paulson heavily influenced the selection of

the portfolio to suit its economic interests, but failed to

disclose to investors, as part of the description of the

portfolio selection process contained in the marketing

materials used to promote the transaction, Paulson's role in

the portfolio selection process or its adverse economic

interests.

As the SEC notes, financial manipulations such as this

contributed to the near collapse of the U.S. financial system

and cost American taxpayers hundreds of billions of dollars.

On the face of the SEC filing, criminal fraud on a historic

scale seems to have occurred in this instance. As an ever

growing mountain of evidence reveals, this case is neither

unique nor isolated.

If both global and domestic confidence in the integrity of

the U.S. financial system is to be regained, there must be

confidence that criminal acts will be vigorously pursued and

perpetrators punished.

While the SEC lacks the authority to act beyond civil

actions, the U.S. Department of Justice (DOJ) has the power

to file criminal actions against those who commit financial

fraud. We ask assurance from you that the U.S. Department of

Justice is closely looking at this case and similar cases to

further investigate and prosecute the criminals involved in

this, and other financially fraudulent acts. Furthermore, if

the DOJ is not currently looking into this particular case,

we respectfully ask you to ensure that the U.S. Department of

Justice immediately open a case on this matter and

investigate it with the full authority and power that your

agency holds. The American people both demand and deserve

justice in the matter of Wall Street banks whom the American

taxpayers bailed out, only to see unemployment and housing

foreclosures rise.

This matter is of deep importance to us. As you may know,

H.R. 3995, the Financial Crisis of 2008 Criminal

Investigation and Prosecution Act, has been introduced, which

authorizes you to hire more prosecutors, Director Mueller of

the Federal Bureau of Investigation to hire 1,000 more agent

as well as additional forensic experts, and Chair Mary

Schapiro of the U.S. Securities and Exchange Commission to

hire more investigators to continue to pursue justice and

route out the criminals in our financial system. Part of

financial regulatory reform should include removing the

criminals and crafting a system that supports those who

follow the law.

We in Congress stand ready to support you in protecting the

American taxpayers from financial crimes such as the fraud

that the U.S. Securities and Exchange Commission has charged

Goldman Sachs with committing. We ask that you take up this

case, and others, to pursue justice for the American people,

to put criminals in jail, and seek to restore the integrity

of our nation's financial system.

Sincerely,

Marcy Kaptur, John Conyers, Michael Burgess, Jim

McDermott, Diane E. Watson, Christopher P. Carney, Raul

Grijalva, Keith Ellison, Charlie Melancon, Tom

Perriello, Betty Sutton, Jay Inslee, Pete Stark,

Michael Honda, John T. Salazar, Niki Tsongas, Alan

Grayson, David Loebsack, Bob Filner, Betsy Markey, John

Barrow, Jesse Jackson Jr., Eleanor Holmes Norton, Grace

F. Napolitano, Maurice Hinchey, Peter Welch, Marcia L.

Fudge, Rush Holt, Peter DeFazio, Michael E. Capuano,

Bill Pascrell, Jr., Michael H. Michaud, Steve Cohen,

Bruce L. Braley, Bart Stupak, Mark Schauer, Chellie

Pingree, Martin Heinrich, Jackie Speier, Janice D.

Schakowsky, Sheila Jackson Lee, Tammy Baldwin, Barbara

Lee, Mike Doyle, Gene Taylor, Wm. Lacy Clay, Jr., James

Moran, Danny K. Davis, Ben Chandler, Dennis Kucinich,

Carol Shea-Porter, Bennie G. Thompson, Laura

Richardson, Loretta Sanchez, Dale Kildee, Leonard L.

Boswell, Donna F. Edwards, Frank Pallone, Jr., Ann

Kirkpatrick, Carolyn C. Kilpatrick, Mazie K. Hirono,

James P. McGovern.

Do you happen to know what the bonuses were for Goldman Sachs? I know they totaled into the billions.

I think he thought it was too little, didn't he?

Excellent analogy. They created rules by which only they could win, and that doesn't seem to me to be the spirit of free enterprise. They created so much collateral damage it brought down the economy of the whole country. They keep using the argument if we didn't have the TARP, then things would have really gone wrong. I thought, How could it be worse? How could it be worse than this? Is what they did with the TARP just bailing themselves out, because they certainly have not done anything for the American people. They have thrown all of the bills of all of their mistakes on Fannie Mae, Freddie Mac, FHA, all of the instrumentalities of the United States for decades to come. They didn't take any losses on those themselves. They were enriched by the taxpayers of the United States who lifted them right up. And they are not dealing with the damage across this country where foreclosures continue to go up.

I place on the Record the names of the six companies that now hold two-thirds of the wealth of this Nation, and they are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo. They have enriched themselves handsomely. They doubled their importance since the beginning of this crisis while quashing community banks across this country, seeing forced mergers as institutions like PNC bought up National Citibank in Ohio, as local community banks that didn't do anything wrong and were not permitted to do this kind of wild-eyed business deal, found themselves having to pay huge FDIC fees. And the net yield of all of this is the big ones got bigger and the American people are continuing to be kicked out of their homes and these institutions won't return phone calls and they have hold of the auction process and their investment intermediaries are holding the equity and the ownership in these properties. How is that good for this country?

What amazed me is when all of the house of cards started to fall, sometimes in my part of the country you see chipmunks tearing across the concrete, and they go so fast. The minute they got in trouble, what did they do, they came under the umbrella of the Bank Holding Company Act so they could not be a speculator any more, now they are a legitimate bank; right? Even though they were trafficking in all of those securities, they were just like those little chipmunks. They hid themselves right under the Bank Holding Company Act. I don't agree with what was done, but they took good care of themselves.

Mr. Speaker, I am joined this evening by a number of colleagues who are going to give us, I think, the reasons why financial reform is a must in this country. And the biggest poster child for why we have to do financial reform really is in Goldman Sachs.

So we thought we would start our discussion tonight by looking at the principles that Goldman Sachs has promoted on its Web site. There are 14 principles that Goldman Sachs has promoted on its Web site. The very first, and one I would like to start out with, is ``Our clients' interests always come first.'' Well, let's talk about their clients' interests coming first.

Let's speak precisely about one deal, the deal called Abacus. And in Abacus their clients were many people. They had a client named John Paulson, the biggest hedge fund individual in this country. He wanted Goldman to sell mortgage-backed securities that were bad. They were subprime. And he precisely wanted them to sell them to many of their clients, and he was going to short them, meaning he was going to bet against them.

But it just doesn't end there. He specifically designed the package. He handpicked the mortgages that were going to be in the package. And then Goldman sold them to unsuspecting buyers. And lo and behold, what happened? What happened was Mr. Paulson made a billion dollars, and the other clients of Goldman Sachs lost a billion dollars, and Goldman Sachs walked away with $50 million of fees that were paid to Goldman Sachs by Mr. Paulson. Now, that is the basis of the SEC complaint filed against Goldman Sachs for civil fraud.

So what is civil fraud, you might ask? Civil fraud is, It shall be unlawful for any person in the offer or sale of any securities to obtain money or property by means of any untrue statements of a material fact or any omission to state a material fact necessary.

So the question is, was it a material fact that Abacus was made up of these mortgage-backed securities, 90 percent of which were what are considered no doc mortgages? That means there was no documentation that the people that got those mortgages could pay for them. There was no documentation of income, no documentation of debt. Those were no doc loans. And there was a history of no doc loans going back. So it was fixed from the very beginning.

They were arranged by John Paulson, a material fact that was not disclosed to the other buyers, and it was not disclosed to the other buyers that John Paulson created this because he wanted to short them, because he wanted to bet against them. So if there ever was a case of fraud, I would argue that that was a case of fraud. Yet Goldman Sachs says, ``Our very first priority is that our clients come first.''

Let's move over here to No. 14: ``Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.''

Well, there is one gentleman who has worked for Goldman Sachs that they referred to as the Fabulous Fab. He's a gentleman by the name of Fabrice Tourre out of their office in London. Well, I wouldn't suggest to you that Mr. Tourre is fabulous. I would suggest to you that he is fraudulent.

In some of the e-mails that the Senate Committee on Investigations was able to collect, this is what Mr. Tourre was saying. Now, Mr. Tourre is the individual who was selling these synthetic collateralized debt obligations. He was the one that was doing the work on behalf of Mr. Paulson. So what did he say? He said, ``The whole building is about to collapse anytime now.'' Those were Mr. Tourre's words. He described himself in an e-mail as the only potential survivor, the Fabulous Fab, standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all the implications of these monstrosities. He then went on to say in an e- mail in 2007, he described the mortgage business as ``totally dead and the poor little subprime borrowers would not last too long.'' Yet 2 months later, he was boasting that he continued to dump some of the worthless mortgage securities on, and I quote, ``widows and orphans that I run into at the airport.''

This is a man of integrity and honesty. I would suggest that is not the case.

And, finally, in an e-mail to his girlfriend, he called his Frankenstein creation, these synthetic CDOs, a product of pure intellectual masturbation, the type of thing which you invent telling yourself, well, what if we created a thing which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price? That's Mr. Tourre, who yesterday when he testified said, and I quote, ``I firmly believe that my conduct was correct.'' That is Mr. Tourre. That is Goldman Sachs.

I would like to now ask my good friend, John Yarmuth from Kentucky, to join me in this colloquy.

Reclaiming my time, you mentioned that they paid a tax rate of less than 1 percent. The average American pays a tax rate of what?

Thank you.

I now yield to my good friend from the State of Oregon, Peter DeFazio.

I thank the gentleman for his great commentary. I now would like to recognize from the State of Maryland (Mr. Cummings).

Fraudulent Fab.

Will the gentleman yield?

When you speak to the term ``transparency,'' do you think that Goldman would have sold a dollar's worth of those synthetic collateralized debt obligations if people knew that their other client was shorting them and that 90 percent of them were no-doc loans that were destined to fail?

Very first principle. Our clients' interests always come first.

I thank the gentleman from Maryland, who's been passionate about trying to get to the bottom of AIG. I think it's important to point out--and this may curl the hair on top of your head, my dear friend--but on top of everything else, Goldman Sachs' directors, the CEO, Mr. Blankfein, all have insurance for any omissions or conduct that they may become the subject of any inquiry for. If they commit any civil fraud or criminal fraud, they have insurance for that. You won't be surprised probably to know who their insurance is with.

None other than AIG. And who owns AIG today but the American people.

The U.S. taxpayers.

Correct. What is even more disconcerting, and we will find that out in the upcoming weeks, just like the synthetic CDO known as Abacus, it appears that Mr. Blankfein and Goldman Sachs also sold to AIG more of the CDOs that were rigged.

Clearly.

I thank the gentleman.

I now would like to invite my good friend from the State of New York, Congressman Hinchey, to engage.

You make the case for this great poster that shows the cracks in Wall Street. And back in 1996, the Federal Reserve reinterpreted the Glass-Steagall Act several times at the behest of Wall Street, eventually allowing bank holding companies to earn up to 25 percent of their revenues in investment banking.

But you know what? That wasn't enough for them. They then came back in 1999 and repealed the Glass-Steagall Act that worked for over 60 years in this country, brought about, as you pointed out, because of the Great Depression that created those firewalls between investment banking, commercial banks, and insurance companies.

And then in 2000, what was the next thing that happened? The next thing that happened in 2000 when Brooksley Born, who was then the Commodity Futures Trading Commission Chairman, said, We should regulate derivatives, and our friends in the White House and around basically said, Oh, no. We can't. We passed a law that basically prevented Congress from regulating derivatives. Those derivatives are the things we're talking about today, these credit default swaps that brought AIG down; these collateralized debt obligations, synthetic or otherwise, that brought the entire financial services industry down.

And as you can see, the other cracks, the regulation that was created in 2004 that took away the leverage cap of 12 to 1, and as a result, where were they leveraged at but at 30 to 1, the Lehman Brothers, the Goldman Sachs of the world.

And then again in 2005, a very interesting rule that basically exempted stockbrokers from the Investment Advisers Act. Do you know why? Because they didn't want to have a fiduciary duty to their clients. They only wanted to have a duty to themselves.

I thank the gentleman from New York for his well-placed comments and his recommendations to our colleagues in the other House.

I now have the great pleasure of joining in colloquy with my good friend from the State of Ohio, the great and passionate Marcy Kaptur.

I thank the gentlelady.

I thank the gentlelady from Ohio. You referenced the number of people in the Department of Justice that are tasked with doing the investigations. It was very interesting this week when we had the hearing on Lehman Brothers and Mary Schapiro spoke to their ability to do their job when they only had 24 staff members in that specific division to do investigations of all of the Wall Street firms.

If you ill-equip your very agencies to do the job, they won't be able to do the job. Between 2003 and 2007 under the Bush administration with Christopher Cox as the head of the SEC, you will not be surprised to know that there was an 80 percent reduction in enforcement actions at the SEC and 60 percent reduction in disgorgement actions at the SEC.

So no surprise that we had an SEC that was ill-equipped, and also a different perspective. It was not there to protect the American people but to allow business to flourish. And the business that flourished was much like what Goldman Sachs was doing where they actually put AIG in some of these synthetic collateralized debt obligations that they knew were going to fail.

Lehman Brothers, Goldman Sachs shorted Lehman Brothers and helped make sure it did come down. It was reportedly in many of the e-mails at Goldman Sachs by employees when they were communicating with some of their clients that they said that they were no longer going to support or back up Bear Stearns, and then all of a sudden Bear Stearns went down.

We now have China suing Goldman Sachs over bad derivative deals. We have Germany, France, and the U.K.; and God knows, what did they do with Greece? Much like Enron, Goldman Sachs went to Greece and created a way by which they could take some of their debts off their balance sheet so they could get support from the EU, and in the course of doing so, hid much of the debt. And now we all know what has happened to Greece. We all know what has happened to the stock market just yesterday as a result of the rating agencies taking the steps they did.

This company has no shame. This company is willing to do any deal as long as it makes them money.

The hardest thing to try to explain to the American people is what is a synthetic CDO and liken it to what goes on in our lives. So I have been scratching my head trying to think of what it would be like. This may not be a good analogy, but I offer it up. It would be like a doctor going in and doing open heart surgery knowing that his patient was very close to death anyway, and then taking out a life insurance policy on that patient because he was clearly going to win each way.

I thank the gentlelady from Ohio. It is very important to make the point that Goldman Sachs has never loaned a dime, has never offered a loan to an American trying to buy a house. They have never been a commercial bank as we know them, and yet they have the luxury of being at the discount window getting the money cheap even though they have not been a commercial bank as we know a commercial bank to be. All they have done is bet on how to rig these various mortgage-backed securities and make a truckload of money off them.

I now yield time to my good friend, the gentleman from Rhode Island (Mr. Langevin).

I thank the gentleman and recognize we could have spoken for 2 hours this evening, and we will continue this.