Liability for Aiding and Abetting Securities Violations Act of 2009

Mr. President, I commend my colleagues for their work on this amendment. But, as I have stated, I believe it will fuel, and not limit, the type of charter shopping in search of the most lax regulator that we have seen in this past crisis.

The Hutchinson amendment would preserve the status quo by allowing the Federal Reserve to continue regulating about 845 State banks that are members of the Federal Reserve System out of a total of approximately 6,000 State banks.

This is a tremendous shame. Over the last 2 years, I sat through 80 hearings, listening to witnesses discuss the failings of the Fed--the failure of the agency to write rules protecting consumers, the failure of the agency to regulate derivatives, and its failure to properly supervise holding companies.

In response to these hearings, I initially introduced a bill that would have both streamlined our bank regulatory system and stopped banks from being able to engage in regulatory arbitrage. It would have consolidated the bank supervisory functions of four regulatory agencies--the OCC, the OTS, the FDIC, and the Fed--and would have created a single new agency to supervise banks. In other words, it would have taken the Fed out of the business of bank supervision entirely.

I ended up modifying this proposal in response to concerns raised by my colleagues, but the bill that we passed out of committee still consolidates bank regulatory functions in a clear and logical way. It eliminates the OTS, and gives supervision of all federally chartered depositories to the OCC, and all State-chartered depositories, including both State member and nonmember banks, to the FDIC.

And small holding companies and their banks are supervised by a single regulator. We looked into how these companies are structured and determined that in most cases these holding companies are just shells and their primary assets are just simply banks. In these circumstances, it just makes no sense to have a separate holding company regulator. So, under the bill, small national banks and their holding companies are regulated by the OCC. And small State-chartered banks and their holding companies are regulated by the FDIC.

Meanwhile, the bill requires the Fed to focus on several key areas-- its monetary policy role, and its role as lender of last resort. It also expands the Fed's reach into areas that compliment these central bank functions.

The bill gives the Fed supervision of bank holding companies with $50 billion in assets and over, and the supervision of other nonbank financial companies if the failure of these companies would pose a risk to the U.S. financial stability.

The Fed is given the responsibility to establish heightened prudential standards for these companies, including tougher capital and liquidity requires.

And, the bill gives the Fed additional authority to regulate the payments system.

But apparently this isn't enough.

One of the main arguments the Fed makes for retaining this authority is that it needs a window into the workings of small banks in order to formulate monetary policy.

I say to my colleagues--this is a red herring. Take a look at the Fed's Beige Book. The Fed is able to collect information about a variety of sectors in the economy--about manufacturing, real estate, the energy sector, and the agricultural sector without direct regulation in these areas.

And by law, the Fed can already gather any information it wants from any depository institution--whether it regulates that institution or not. Let me read from the relevant parts of the law:

The Board of Governors of the Federal Reserve System shall

be authorized and empowered . . . to require any depository

institution specified in this paragraph to make, at such

intervals as the Board may prescribe, such reports of its

liabilities and assets as the Board may determine to be

necessary or desirable to enable the Board to discharge its

responsibility to monitor and control monetary and credit

aggregates. [12 USC 248(a).]

The Fed also is arguing that it needs to be the regulator of all holding companies so that it can respond effectively in the event of a regional crisis.

I ask my colleagues--do we need a regulator that can respond effectively in the event of a regional crisis or that can effectively prevent the next crisis from occurring?

I would like to point out the possible downside of allowing the Fed to continue supervising State member banks.

Let me play this out. The agency that regulates this country's largest national banks is the Office of the Comptroller of the Currency, which is a bureau of the Treasury Department. The OCC is funded through assessments on the banks that it regulates.

By contrast, the FDIC and the Fed use revenues from their other operations to pay for their supervisory activities and don't charge their banks for examinations. State banks are examined by State authorities every other year, but the States do not charge as much as the OCC. So, it is much cheaper to be a State bank.

I fear that the very largest national banks will have tremendous incentives to become State member banks so that they will have a single Federal regulator--the Federal Reserve. This will concentrate enormous power in the Federal Reserve System--an agency that the financial crisis has shown is already stretched too thin with its many and varied responsibilities.

This could also result in increased regulatory arbitrage. Since the OCC depends on assessments from the banks it regulates to fund its operations, the agency may go to great lengths to keep its banks from converting to State charters. We have seen what happens when depository institutions exploit these weaknesses in our bank regulatory system and when agencies compromise their supervisory integrity to maintain companies within their domain.

If this happens, we could have another race to the bottom--just like the competition and regulatory arbitrage that lead to the financial crisis.

Some will argue that my fears are unfounded, but I remain concerned about the unintended consequences that will flow from the Fed's continued regulation of State member banks.

And therefore I oppose the Hutchison amendment.

I thank my colleague from Tennessee. He has been a positive, constructive Member of this effort before us, but I oppose his amendment for two reasons.

First of all, it creates a very bright line of mandating 5 percent. Every nonprofit, all FHA mortgages would be subject to that rule, which would exclude an awful lot. The Merkley-Klobuchar amendment we just adopted establishes underwriting standards.

Further, what the Corker amendment does is it strips out the skin in the game. One of the things we learned is that brokers and mortgage dealers had no skin in the game. They were selling off these items and they didn't care what was in it because they were being paid.

Under an amendment we will adopt after the Corker amendment is considered--the Isakson-Landrieu amendment--we will set a standard allowing for the option of that skin in the game, which I think strengthens the bill even further, and I appreciate Senator Isakson and Senator Landrieu offering that idea to this bill that will come right after this.

For those reasons, I urge my colleagues, respectfully, to reject the Corker amendment.

I yield back.

Mr. President, I move to reconsider the vote and I move to lay that motion on the table.

The motion to lay on the table was agreed to.

Amendment No. 3759, as Modified

Mr. President, I yield my time. Unless someone wants to speak in opposition, I oppose the amendment but I am not going to speak against it.

Mr. President, I ask for the yeas and nays.

Mr. President, I move to reconsider that vote and lay that motion upon the table.

The motion to lay upon the table was agreed to.

Mr. President, what I wish to do at this juncture, if we could, is we have an amendment being offered by our colleague from Louisiana, Senator Landrieu, and our colleague from Georgia, Senator Isakson.

I believe if they take 10 minutes or so, we could do it on a voice vote. I support and, in fact, I am a cosponsor of their amendment. I think it strengthens our bill tremendously. I want to thank my colleague from Georgia very much, who has forgotten more about real estate than most of us will ever know, having spent a good separate part of his life involved in the business.

We have worked together on a lot of issues over the last couple of years related to real estate. I thank him for his contribution, as well as my dear friend from Louisiana.

I yield the floor to them.

I appreciate that. I suggest the absence of a quorum.

I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I ask unanimous consent that we temporarily lay aside the Landrieu-Isakson amendment.

Mr. President, I thank both of my colleagues, not only for their work on this particular amendment but for the way they have approached the bill. They have been tremendously constructive in offering very solid ideas.

This is one amendment that does a great deal of service to the legislation. As the Senator from Maine pointed out, it was certainly always our intent not to include retailers and merchants under the auspices of the consumer financial product safety commission. The language they have now offered and on which they worked so hard makes that abundantly clear. The word ``significantly'' clearly is an opaque word. No matter how much I tried to make clear what my intentions were with that language, this amendment strengthens it tremendously. As I have said, this was never intended to affect Main Street merchants.

I am delighted that the National Federation of Independent Business, along with the American Dental Association and the American Association of Orthodontists, is now in support, because they were two groups about which it was unclear whether they would be included. As a result of what we have been able to craft, with the leadership of Senators Snowe and Landrieu, we now have their support. I thank them.

I yield the floor.

Mr. President, I thank my friend and colleague from Virginia. He is absolutely right. That is exactly the case. Under the Constitution of the United States, all revenue-rising measures must originate in the other body, the House of Representatives.

Despite the merits of his amendment, with which I agree, we have what we call a blue slip. When an amendment originates over here and it impacts the Internal Revenue Code, it is subject to an objection, what we call a blue slip. It does not go to the merits of the amendment. It goes to the constitutionality of such a proposal where revenue is affected. Those matters must begin in the House.

I say to my colleague from Virginia, there will be opportunities, I am sure, with revenue measures coming from the House for our consideration to raise this amendment again. I, for one, am attracted to the amendment and what he is proposing and hope at another point-- and I presume that opportunity will arise in the next couple months because I gather revenue measures will be coming over--that we will have another chance to address this issue.

I appreciate his consideration of this matter and look forward to working with him on this question the next opportunity we have to do so. It is my understanding the amendment would suffer from that constitutional question at this point.

Mr. President, while we are waiting, there are two pending amendments which we can voice vote, but I gather there may be a second- degree amendment offered to one of these amendments. It will be the first time a second-degree amendment has been offered to one of these amendments.

We are trying to go through the process and give everybody a chance to air their ideas. There have been no tabling motions, no filibusters, at least none declared on the bill at this point. Nonetheless, Senators have the right to offer second-degree amendments, if they wish. We have avoided it up to now, having considered quite a few proposals on the floor of the Senate.

I count about 15, 16, at least on my list of amendments, on the Democratic side Members who would like to be given the opportunity to raise. I cannot speak to the number on the other side, but it is not a large number. Our Republican colleagues, at least based on the list I have seen--it is about six or seven or eight. I may be off a little bit on that count, but it is not a large number.

Here we are again, it is almost 12:30 p.m. and sitting here, potentially going to a quorum call. I am hearing again my colleagues say we have to stay on this bill and don't get off it. I am prepared to stay and work, but we cannot work when Members will not come over and at least allow us to vote up or down on rollcall votes on these amendments.

On Saturday, I submitted to my good friend from Alabama, Senator Shelby, and his staff a list of technical amendments, as well as bipartisan amendments and others that I thought were noncontroversial that we could make part of a managers' amendment. We can only do a managers' amendment when we get consent. Obviously, any objections to any of the suggestions I sent over on Saturday would exclude them from a managers' amendment.

It is now Wednesday, and I have not heard back whether we can subtract or add to those amendments. It would help tremendously to clean out a lot of issues on which I believe there is consensus.

I made it privately and I make a plea publicly. At some point, the leader is going to say enough is enough on the bill. We are trying to go back and forth in an orderly fashion so Members will have a chance, on either side of this so-called political divide, which I wish did not exist--even in this Chamber--for people to offer amendments. In a dead time such as this, the clock is ticking. We have no votes this Friday. We will not be in on Saturday or Sunday. We would like to move on to other issues.

We have taken a lot of time on this bill. I am a strong advocate of doing that to prove this body can function, we can consider each others' ideas, modify them, vote for them, vote against them but to do what we tell every high school class or elementary school class we talk to as Senators about how the Senate functions. I think we are proving we can do that on this bill, despite the significance of it--the first time in almost 100 years reforming the financial structure of our Nation.

My hope is we will continue and finish it without having to get involved in procedural motions that would deprive people of being heard on their ideas, whether you like it or not, but at least have the opportunity for it to come up.

I am trying to orchestrate the votes that relate to the matters with which we are dealing. It does not work perfectly. It is what every manager tries to do. I know some Members are frustrated because they have not been able to be heard yet on their ideas. I wish to give them an opportunity to do so.

When we get delays such as this, when the time could be filled on considering these matters, it sets us back from the goal of having a bill completed in this Congress where all Members have had a chance to be heard, that we were able to tackle a significant issue and come to a conclusion about it.

There are those who think we cannot do that any longer. I believe we can, and we have been proving it in the last couple weeks. After 2 weeks of a good, spirited, civil, in some cases partisan but civil debate, let us complete the work as we have begun it.

My plea to my colleagues, particularly on the minority side right now, is please respond to these requests so we can have some idea of what can be accepted, what can be modified and not accepted so we can move forward with the legislation.

I yield the floor.

Mr. President, if my colleague will yield for a minute, I thank the Senator from Arkansas. She is chairperson of the Agriculture Committee, which is a huge undertaking. Every State is affected by decisions made in that committee. Even small States in New England, contrary to what many people may think, have agricultural interests, maybe not to the extent of Oregon and Arkansas but we have them.

I am very grateful to her and members of her committee for the work they engaged in. We are truly fortunate to have the Senator from Arkansas in the position she is in--making decisions, providing valuable contributions, not just to this effort; we have worked together on a lot of issues over the years. She is a great advocate of her State, but I also say she is a great advocate of our country. That is the quality we hope people bring. We have an obligation to keep an eye out for what happens in our States but also to keep an eye out for what happens to our country. Striking that balance is a challenge we face at one time or another. No one does it better than the Senator from Arkansas, striking a balance.

I have heard that word about Arkansans over and over during her tenure. She is as tenacious a fighter as any State has had in my 30 years here. She is also mindful that Arkansas, similar to Connecticut, is part of a country, and we all have to be mindful of each other's interests. Striking that balance has been invaluable in this debate.

I did not want the moment to pass without thanking her immensely and her staff and others for the contributions they have made.

First, Mr. President, are we temporarily laying aside the Snowe-Landrieu? What is the pending amendment?

OK.

First, let me acknowledge the contributions of Senator Crapo to the Banking Committee efforts. While not endorsing the bill as it presently reads, he has been a valuable member of the committee for many years. I deeply appreciate his input. His ideas are always tremendously constructive in any debate we have. I thank him for that.

I have asked my staff to meet with his staff to try to clear up some things. I would like to be in a position of where we can accept the amendment. I am not trying to prejudice one over the other. We would like to keep some risk retention or good underwriting standards so the choice is there. We are not trying to impose both.

I know the staffs are talking. On page 2 of the amendment, beginning around line 18, paragraph (I), beginning ``retention of'' and then it lists three paragraphs and possibly a fourth. We are looking for some clarity on the meaning of ``the value of securities sold to investors or the interest of the seller in revolving assets.'' On those two, we particularly need some clarity on what that means. It seems vague to us as to how that would apply.

Rather than rush this along, we would like to take a few minutes and see if we can come to some resolution of that and possibly accept it. Senator Landrieu will have to come over. It is her amendment we are amending. We will see if we can reach accommodation and adopt it, if possible.

Let's take a few minutes and look at how we might work on this together. If we can come to a conclusion, I will be prepared to support the Senator's amendment. I am not trying to distinguish real estate from commercial. I realize there are some differences. They are different transactions, obviously, but the point is the same. We would like to make sure the securitization, on which the Senator is absolutely correct--I think these words become pejorative. When done well, it expands opportunities tremendously in terms of creating additional liquidity, making resources more available for more loans, home sales, and the like, providing there are sound underwriting principles involved so we are not getting ourselves into trouble again. That is why we have had an insistence on strong underwriting standards and risk retention, the old skin in the game. That is what risk retention means. If you have equity in it, you will be careful about what goes out the door and becomes securitized.

I am not interested in having risk retention if, in fact, we have good standards that apply and we don't end up where we were 2 years ago, discovering a lot of these instruments that got securitized ended up being worthless, even worse than worthless, in some cases, because of the problems they caused.

I respect where my colleague is coming from. If we can spend a few minutes and try and resolve this, then maybe we can come to some agreement. That would be my hope.

Mr. President, I suggest the absence of a quorum.

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I ask unanimous consent to temporarily lay aside the Landrieu-Isakson amendment.

Mr. President, I believe we are prepared to have a voice vote on the Snowe-Landrieu amendment, which is the pending amendment, if I am not mistaken.

Mr. President, I move to reconsider the vote, and I move to lay that motion on the table.

The motion to lay on the table was agreed to.

Mr. President, let me once again thank Senators Snowe and Landrieu for their very valuable contribution to this bill in more clearly refining and making it abundantly clear that merchants and retailers and others are not included as financial services or financial products companies and are not to be covered by the consumer financial product bureau. I am very appreciative to both of them for their contribution.

With that, Mr. President, I see my colleague from North Dakota is here, and I yield the floor.

Reserving the right to object, and I will not object at all, I have chatted with my friend, Senator Chambliss, as well. I know he is inquiring among his members, as is my colleague from Arkansas as well, about a time agreement on the Chambliss amendment.

My hope would be it would not take too long. I know that is the plea of every manager, majority and minority leader. So if they can inquire as soon as possible on a time. There are several other amendments tonight I think we will be able to deal with, some of which will not require any rollcall votes.

But, obviously, Members like to get some sense of when votes will occur. I am not trying to suggest we truncate anything. I know my colleagues agree that we need to find a time agreement. So I make that plea to both the chairman and the ranking member of the subcommittee.

With that, I have no objection.

I say to my good friend, he is on the list. We are going to try to get to that amendment as soon as we can. I promise the Senator that.

I thank my colleague.

Mr. President, let me begin by expressing my gratitude to Senator Lincoln of Arkansas and Senator Chambliss of Georgia and members of their committee for their tremendous work. In fact, there is some overlap in membership. I think a couple members of the Banking Committee are also members of the Agriculture Committee.

I know how hard they have worked on what is such a critically important piece of this legislation. It is probably an area with which a lot of people are not terribly familiar. A lot of the language we use in describing this area of the bill sounds pretty foreign to a lot of people, but it is terribly important we get this right, for reasons I will try to briefly explain this afternoon.

For many Americans who aren't necessarily experts on our financial system, this is one of the most confusing parts of our work, but it is also incredibly important in terms of our overall reform of the financial system. I am sure this has already been described by the Senator from Arkansas and the Senator from Georgia, so this may be somewhat repetitive.

People ask me: What is a derivative? It is a fancy word, ``derivative.'' Really, what it amounts to, in simple terms that most Americans can understand is, it is a bet. It is a wager, in a sense--an important wager but nonetheless a wager. It is a wager placed on the future value of something, either as a future protection against change in the

value of that instrument or a way to make some money off of it. It is a legitimate operation, provided it is done properly. There is nothing wrong with them. In fact, they play a very important role. If used responsibly as a way to hedge a commercial risk, they are tremendously important.

Many of us have heard about, for instance, the candymakers. We hear this example all the time. Candymakers are able to keep their costs stable as a production company through the use of derivatives. If you are an end user, as they are called, and your costs depend upon future prices of a commodity such as sugar or other additives, that is a way to stabilize those costs and provide some certainty to that particular company; or it can be the future direction of interest rates which can have a huge impact on the cost of a product and the success and well- being of a company as well.

Derivatives can serve as a form of insurance against an unexpected spike in either the price of a product or interest rates. But the problem is this: As companies have come up with new and innovative ways to use derivatives--and they have--much of this activity has taken place in the shadow economy where there is little sunlight at all to expose what these instruments are and how they affect the overall economy of our country. They operate outside the supervision of any regulator, and that is where the problems arise. Not in derivatives themselves, but how they are perceived, how they are seen.

That is how one night in September of 2008, I found myself, along with several other Members of this body, in a room not far from where this Chamber exists listening to the Chairman of the Federal Reserve Bank, Mr. Benjamin Bernanke, and Treasury Secretary Hank Paulson as they explained what had happened to AIG, the largest insurance company in the world, and what would need to happen to fix the problems posed by the activities in which the company was involved.

Just as some international corporations create shell companies in the Cayman Islands to avoid tax responsibilities, AIG created a subsidiary called AIG Financial Products to sell complex and risky products. It was thus able to take advantage of the fact that there was no regulatory requirement that AIG hold enough capital to cover its exposure to these products.

Meanwhile, because AIG was rated AAA by the rating agencies as a company, their counterparties didn't demand much in the way of collateral or margin. Essentially, AIG guaranteed other people's bets; that is, these counterparties--Goldman Sachs, Societe Generale, a French bank--without having the money to pay them if those bets failed. AIG was able to do so without anyone knowing how many of these guarantees they had actually sold. As we now know, they sold trillions of dollars' worth. When it turned out that AIG couldn't pay up, our government--or more sadly, the American taxpayer--was left holding the bag. We were faced as a country with the unprecedented and unpleasant taxpayer bailout to prevent this shocking failure from bringing down our whole economy, or melting down as we were warned.

To make the problem worse, we now know AIG wasn't alone. Unregulated derivatives also helped to mask the credit-worthiness of nonfinancial users such as the Government of Greece. We all know about that and what has happened over the last few days and the problems created in Europe as a result of that problem, to their own ultimate or eventual detriment, as we now know. Hedge funds such as Long-Term Capital Management, energy companies such as Enron, industrial concerns such as Proctor and Gamble, and a wide array of governments at home and abroad have all fallen prey to the problems in the derivatives market.

I think the solution is becoming obvious--at least we hope it is--to put an end to risky, uncovered bets that leave taxpayers and our financial system as vulnerable as it has been. That is why capital and margin requirements, imposed either by regulators or by central clearinghouses, are so critically important in this area of our economy.

Chairman Bernanke of the Federal Reserve described margin requirements as ``an appropriate cost of protecting against counterparty risk.''

The sad truth is this solution has been obvious for some time. You don't need to have just the events of the last couple of years to understand this problem. You can go back 16 years ago. At that time, in 1994, the General Accounting Office produced a report entitled ``Financial Derivatives: Actions Needed to Protect the Financial System.''

At the time of their report, the General Accounting Office determined that the size of the derivatives market was $12.1 trillion--not an insignificant amount in 1994. The report described risks arising from the interconnected relationships between dealers of derivatives and end users, not to mention the rapid growth and increasing complexity of derivative activities because the relationships between the major derivatives dealers and end users, and the exchange-traded markets were so close, the failure of any one part of this system could prove devastating to our entire financial system. This, we knew in 1994, 16 years ago. That was their report.

By 2008, 16 years later, the derivatives market had grown from $12.1 trillion that I mentioned a few minutes ago to an astonishing $600 trillion in 16 years. In a related story, it had gone almost entirely underground.

Each time the Congress had a chance to act, it chose a legislative path that created even more loopholes, more opportunities for these risks to migrate to unregulated pockets of our economy. In 2000, the Congress passed the Commodities Futures Modernization Act which, to a large extent, explicitly exempted over-the-counter derivatives from regulation by the CFTC and the SEC.

So whereas in 1998, 41 percent of derivatives were traded in the shadows, by 2008, 10 years later, that proportion grew to 60 percent-- almost a 20-percent increase in 10 years.

Essentially, over time, our financial system came up with more and more ways to take bigger and bigger risks with fewer and fewer safeguards and less and less supervision. That, of course, as we now painfully have learned, was a recipe for disaster, and disaster is what we got. That is why Chairman Lincoln, Senator Jack Reed of Rhode Island, Senator Judd Gregg, Senator Saxby Chambliss, and others of our colleagues have worked so hard over these last number of months to bring the derivatives market out of the shadows and into the sunlight where they belong. That is why the derivatives language in this bill is so critically important if we are going to live up to our descriptions of this bill as a major reform of the financial markets in our country.

For the first time in our Nation, over-the-counter derivatives would be regulated by the Securities and Exchange Commission and the Commodities Futures Trading Commission. It includes the Banking Committee's tough requirements for central clearing, exchange trading, capital margin, and reporting that are critical to reducing systemic risk and ensuring that taxpayers would not have to clean up the mess resulting from another AIG implosion.

I know the financial sector lobbyists don't like these rules. In fact, over 1,000 corporate lobbyists have flooded this town--this body, in fact--in an attempt to water down these proposals.

But Joe Dear, the chief investment officer of the California Public Employees Retirement System, explained it well when he said:

Every firm has reasons why its contracts are

``exceptional'' and should trade privately; in reality, most

derivatives contracts are standardized--or standardizable--

and could trade rather on exchanges.

Thanks to the work of Senator Lincoln and the Agriculture Committee, commercial end users have been carefully exempted from these new rules, so companies such as those candymakers I talked about can keep hedging their commercial risks. In fact, the market in which these companies operate will become safer and less expensive because of the new rules for big players: the swap dealers and major participants.

Those big players--the VIPs in the derivatives casino--will have to register with the SEC and CFTC and meet strict requirements for business capital, business conduct, and reporting.

Every single transaction will be reported through a clearinghouse or trade repository or directly to a regulator.

The SEC and CFTC will have enhanced authority to police these markets for fraud, manipulation, and abuse. Those don't sound like radical ideas. Those are commonsense proposals that I think most Americans can understand, even if they don't appreciate the complexities of these instruments.

The combination of these regulatory tools will provide market participants and investors with a lot more confidence during times of crisis, taxpayers with protection against the need to pay for mistakes made by companies, derivatives users with more price transparency and liquidity, and regulators, of course, with more information about the risks in the system.

Instead of an underground gambling club, derivatives will be traded in a well-regulated, transparent market, with rules that must be followed and safety provisions that must be respected.

Everyone is a winner. Derivatives are valuable and important, and we need to have them out there to help our economy grow. Why should some of these ideas be so frightening to people? It seems to me that if we do exactly what we are talking about here, everybody is a winner in the chain, particularly the derivatives users who will have much more clarity, and regulators and taxpayers are protected against abuses that will occur if we don't try to provide what is being proposed with this legislation. I welcome these improvements. Again, this is a debate back and forth.

Despite a lot of hard work between Members of this body to come to some common answers, there are differences that emerge in this debate. The substitute being offered by my friend from Georgia has no requirement for transparent trading and weakens, in my view, those safeguards for major market players.

It loosens capital requirements on the large Wall Street firms. That is a huge mistake, in my view, after what we have gone through that would practically beg for another AIG-type crisis.

The substitute limits the central clearing requirement to only those trades that take place between the very largest firms, providing a blanket carve-out to other financial firms, and letting much of the market continue to operate without the accountability, transparency, and regulation that I think is so critically important.

Unfortunately, there is sort of the status quo. There is some improvement. I acknowledge that. We have an opportunity to make a difference now with the proposals being made by the Agriculture Committee. The status quo is a system in which companies you have never heard of take risks they cannot back up in markets nobody can see.

When they collapse, as they inevitably will--one of the things we have said over and over again in this bill is that we are not going to stop the next economic crisis. We are going to have them. The question is, Do we have the tools in place to minimize collapses when they occur? That is what we are trying to do with this bill. Even with the Agriculture Committee proposals, I cannot imagine--and I am sure I am speaking for her when I say this--there is no suggestion that we are going to stop another company from having great difficulties. We want to minimize that when it happens so it doesn't migrate into the rest of the economy. So we are looking to minimize that kind of chaos that can occur when some company collapses for reasons unrelated to this, as we saw with AIG. When they fell, the price the country paid was vastly in excess of one company having difficulties. Taxpayers were put on the hook to fill the capital holes when they occurred.

This has to stop. This market needs oversight and regulation. It needs to exist, as well, if our economy is going to grow and jobs are to be created. It has been 18 months since AIG proved that once and for all. It is time to bring this trail of destruction to an end and take the steps necessary to allow this market to operate and people to make these kinds of investments and hedge against the kinds of problems that can emerge down the road, so they don't collapse for reasons unrelated to their own difficulties.

That is why hedging is important and why derivatives are important. But also, these safeguards need to be in place if everyone is going to be a winner, as a result of what we are trying to achieve with this legislation. There are debates about various aspects of this bill, and I look forward to that discussion.

I hope we will reject this particular proposal, with all due respect to it, and adopt what has been proposed by the Agriculture Committee and consider that there are additional changes we may work on in order to satisfy some legitimate interests. It seems to me we ought to vote on this proposal and move on to other aspects of the legislation.

With that, I yield the floor. I see my friend from Nebraska as well as my colleague from Rhode Island.

Mr. President, if I could have the attention of our colleagues to give them some sense of things.

Senator Reed and Senator Brown of Massachusetts have an amendment which will take just a very few minutes to discuss, and then they would like to have a vote on that, which we have agreed to. At the conclusion, that would be the last vote of the evening.

Then the next amendment would be the Sessions amendment. Senator Sessions has agreed to debate his amendment tonight. We will vote on that in the morning. Senator Specter would be the following amendment and we will debate his amendment this evening and vote on that tomorrow as well. Senator Collins, I know, has an amendment and she can debate, if she would, this evening and we will try and

line that up in the morning so we have a series of votes when we come in.

So the last vote today would be on the Reed-Brown amendment, if Members would stay around for just a few minutes to hear that, and then we could be free of any more votes. At least that is the plan.

I strongly support the amendment offered by our two colleagues from New England, Senator Jack Reed of Rhode Island and Senator Brown of Massachusetts. Both of these colleagues speak with some authority on this amendment. Jack Reed is a graduate of West Point and served in uniform for our country for a number of years with great distinction. Senator Brown has spent some 30 years in the National Guard in Massachusetts and also speaks with more than just passing authority about the importance of the amendment they offer.

It is a very important amendment because it sets the table for a debate tomorrow regarding a certain area of finance companies. The amendment establishes an Office of Military Liaison within the consumer bureau we have created in the overall legislation.

In today's New York Times, there was a description of the case of Matthew Garcia, a 25-year-old Army specialist who was recently subjected to a trick called yo-yo financing by an unscrupulous car dealer, just as he was preparing to deploy to Afghanistan. According to the story, Specialist Garcia, stationed at Fort Hood, TX, bought an automobile at a used car lot and signed up for a loan at a 19.9-percent interest rate. That is not even the abuse, believe it or not, as high as that rate is. The problem came when Specialist Garcia drove the car home. The dealer called Specialist Garcia several days later to say that the financing contract had actually fallen through and demanded an additional $2,500 in cash. To make sure he paid up, the dealer blocked the soldier's car in so that no one could leave. That is the way some-- few but some--auto dealers are treating our men and women in uniform. That is why we need the Office of Military Liaison within the Consumer Financial Protection Bureau.

Unfortunately, the story of Specialist Garcia is not unique. It is all too common, whether it is in the area of auto financing, payday lending, mortgage lending, check cashing, these unregulated areas of finance so many of our fellow citizens are subjected to on an hourly basis, let alone a daily one.

Creating an office within the Consumer Financial Protection Bureau to focus on the problems of our young men and women in the military and their families is an important contribution to this legislation. I thank both of our colleagues for offering this proposal.

The office we are creating with this amendment will help resolve many of the complaints brought to the office by our service men and women. It will help advise the director of the bureau's rule writing to take into account the special needs of military families. By doing this, it will help our military readiness as well.

I have letters from the Secretary of Defense and the Secretary of the Army, sent to me and to other Members, laying out the value of having some protection within the automobile financing area.

It is important we have this language in the bill. Let me emphasize as well that unfortunately we are not talking about many auto dealers that engage in financing that cause these problems, but, like most laws on the books, if they were only written because there were a majority of people committing the offenses, it would be hard to make the case against them. But we don't write laws for the many; we write laws for the few, those who will abuse their offices, abuse their operations in such a way as to cause harm to people who otherwise have no protection.

I have talked a lot about the Consumer Financial Protection Bureau over the last number of days. The importance of this is that for the first time in the history of our country, individuals who are taken advantage of in the financial services sector will have someplace to seek redress for the grievances to which they have been subjected. I don't think this is a radical idea, particularly in light of what so many of our fellow citizens have been through over the last several years where homes have been lost, jobs lost, the tremendous abuse that has occurred in too many of the areas of what I call the shadow economy, the unregulated areas of our economy.

The most important purchase the average American makes is buying a home, and we all know what can happen, as we have seen with brokers and mortgage lenders who were unregulated taking advantage of people by getting them into situations they knew they couldn't afford. People say it ought to be buyer beware. I don't argue with that. Obviously, we all bear responsibility to be better informed about financial arrangements. But to suggest this is a level playing field when it comes to home mortgages or car financing is to belie the facts. The analogy may not be perfect, but it has some value.

We don't expect patients necessarily to be as well informed when they are making decisions about their health care. There is something called medical malpractice. Obviously, we have an obligation to ask questions before we submit ourselves to surgery or other things. But we know in the end that if a doctor has abused the Hippocratic Oath and put a patient at risk, there is an ability to seek redress of those harms. It is called medical malpractice. It allows a person who has been injured or harmed because of the misfeasance or malfeasance of someone in the medical profession to get recovery. We understand it is not exactly a level playing field when the average person is trying to make intelligent decisions about their medical care.

The same could be said for mortgage lending. You can't expect the average person to understand all of the details, necessarily, involved. I suggest there is a higher degree of responsibility in the area of mortgage financing by a borrower than there would be necessarily in the case of medical malpractice, but nonetheless there are some legitimate comparisons.

Some have suggested mortgage malpractice may be an appropriate description for what happens when you are across that table from a lender. You have picked out the home you have fallen in love with. Your family is excited about this new place. In many instances, it is the first home you are buying. The idea that you will have your own home to raise your family in is a very emotional time. That lender across the table who is being unscrupulous in his or her behavior can extract commitments, and so forth, from that borrower that could put them at a distinct advantage. We believe in those instances there should be good underwriting standards by law. And if there is some harm done through the misfeasance or malfeasance of someone in the mortgage lending business, you can get some redress when that occurs.

Car financing is not the same as a home mortgage, but if you are an 18- or 19-year-old young person in uniform and you find that automobile you love and you are so attracted to it--I am not suggesting borrowers don't have a responsibility to be well informed--most Americans know what happens. All of a sudden, you end up like Specialist Garcia. You think you have bought the automobile. And at 19, almost 20 percent financing, that in itself ought to be illegal. But the fact that you then find you have a $2,500 extra charge and the wheels have been blocked so you can't drive away--that is the kind of individual who ought not to be allowed to continue to operate under those circumstances.

We believe when it comes to financing such as this we should not say to one sector: You are exempt; we will carve you out; you don't have to worry about any of the laws.

We make that local banker, who also might like to extend that loan, subject to the law's protections. The credit union is subject to the same laws. Why should someone engaged in the financing of a product--an automobile--be exempt? The local bank isn't. They

have to meet their requirements under the law to make sure they are not abusing--not that many do but some do--the rights of an individual and protect them from a disadvantage in that second largest purchase a person may make aside from their home.

I know tomorrow there will be a debate. Senator Brownback will offer an amendment to exempt auto dealers and financing. Auto dealers are not covered. If you are a dealer, you are not affected by this any more than you are if you are a butcher or a dentist or any other retailer merchant. If you are in the financing business, you are the one who is engaging in that contract despite the fact the papers may have been written up by some other lender that is doing business with the auto dealer. Shouldn't we provide to that individual the same kind of protection they would expect if they went to the local bank, the community bank to get a car loan or to the credit union to get a car loan? We require them to meet basic rules, not exaggerated rules but basic protections so you are not taken advantage of.

I have a wonderful relationship with the auto dealers in my State. I fought hard for them last year. The program we had on the clunkers that allowed for people to turn in older automobiles, I fought hard for that. I have a great relationship. In fact, they offered me a nice award last year for my efforts on behalf of auto dealers in my State. I am very proud of it. The overwhelming majority of my dealers, as I know is the case in all of our States, do a good job and are fair. They wouldn't be in business very long if they did not. But all of us also know there are people who take advantage. Certainly to be exempt from any kind of rulemaking when it comes to protecting people ought not to be the decision we are making.

Here we have the Reed-Brown amendment that says we will establish within the office of consumer financial protection an office to protect the men and women in uniform from the abuses of people who would take advantage of them. Then less than 24 hours later we write an exemption and take away one of the major problems these young men and women have. What an irony. What is this institution saying? On the one hand, we say our young men and women in uniform ought to be protected from people who take advantage of them. Then less than 24 hours later we say: But, by the way, in a major area of abuse that occurs, you are exempt. Don't worry about it. The law doesn't apply to you. I am sorry, Mr. Community Banker. I am sorry, Mr. Local Credit Union. You will have to live by the rules. So there is a great disadvantage at the local level. The community bankers and credit unions are rightfully annoyed that they may be subjected to one set of rules and the person down the street who finances an automobile for an unsuspecting purchaser is exempt. That doesn't make any sense to me.

I hope that tomorrow my colleagues will react as I am to this. Again, I am not in any way indicting automobile dealers--quite the contrary. They have been through an awful lot. They have seen the struggle with major problems of the industry in this country. We made major efforts here to get them back on their feet. I am proud to have been involved in that, to see to it we restore and maintain a strong manufacturing sector in our country of automobile dealerships and manufacturers. But to turn around at the local level and say: I will give you a pass on those who would abuse the law and take advantage of people--in fact, it is an invitation to do it. It seems to me, by carving this out, we are not just sending a message to those who are presently engaging in this but to those who may decide this isn't a bad area of business in which to get involved.

The local bank has to meet those obligations and the local credit union or some other financing operation covered under our legislation. Now we will no longer have shadow operators. We cover payday lenders. We cover the check-cashing operations involved in financial services or products. But in the second largest purchase the average American ever makes, you are going to be exempt from any of the laws involving consumer protection when it comes to financing.

I know there is a lot of pressure, a lot of lobbying going on all over the place to carve out this exception. But I urge my colleagues to please be careful about this, to walk in tomorrow and to basically gut the Reed-Brown amendment by saying in this one major area of abuse-- read the letter from Secretary Gates. Read the letter from the Secretary of the Army. Listen to our colleagues who are listening to the people on their military bases in the respective States, what goes on every single day by those who take advantage of people who are in uniform.

I urge my colleagues, tomorrow, when we have an opportunity to debate the Brownback amendment, not be lured away from their support of putting an office within the Consumer Financial Protection Bureau and basically gut the very bureau before the ink is dry on the amendment by allowing for a massive exception which would allow for consumers, particularly men and women in uniform, to be taken advantage of.

Mr. President, I yield to the minority leader.

Mr. President, I ask unanimous consent, if I may, that the pending amendments be set aside and that it be in order to call up the following amendments and that once reported by number, they be set aside:

Senator Leahy's amendment No. 3823; Senator Durbin's amendment No. 3932, and Senator Franken's amendment No. 3808.

Mr. President, at some point fairly soon, I hope to be able to--at the request of the authors of the two amendments--propose two amendments I believe will be accepted. In fact, I know they will be accepted on a voice vote. There is some language being worked out. That will come before we adjourn for the evening.

We have also laid down--I believe there will be nine amendments tomorrow, equally divided between the minority and the majority, including the amendment we just heard proposed by my good friend from Alabama, Senator Sessions, along with others. It will be a busy day tomorrow.

Today we have done eight amendments, by the time we are finished, which is a good day's work. Obviously, more needs to be done. Five of them were done by recorded votes and three by voice votes. We hope they will be voice-voted.

I want to take a minute or so, if I may, to express my feelings about the Sessions amendment. First of all, I am joined in these sentiments by the chairman of the Judiciary Committee, Senator Leahy, who opposes the Sessions amendment as well. Let me explain why I oppose this amendment.

I say this respectfully of Senator Sessions, who is a good friend. I noticed in his remarks he did not cite any bankruptcy lawyers opposed to the provisions in the bill. I am not terribly shocked that bankruptcy lawyers would be opposed to a provision in the bill short of bankruptcy, although the presumption is bankruptcy in titles I and II.

If my colleagues remember, it was the Shelby-Dodd amendment which we voted on a week ago--several days ago--that took care of the concerns people had about title I and title II of the bill which deals with the resolution mechanisms. Senators Corker and Warner worked very hard on those two provisions of the bill, as other members of the committee did. I want to briefly describe why those provisions are important and why they should remain intact.

Of course, we voted as a Senate 93 to 5 in favor of the Shelby-Dodd amendment, codifying the perfections, as Senator Shelby described them, in those two titles.

I oppose the Sessions amendment to strike the language creating an orderly liquidation authority, language, as I said, that Senator Shelby and I crafted together in order to end the too-big-to-fail argument once and for all. Most nonbank financial firms, including large and complex ones, will go through the normal bankruptcy process if they fail, and they should. That is the presumption in the bill.

The new liquidation authority Senator Shelby and I crafted should be

used very rarely. It is a painful process to go through and would certainly not be the avenue of choice given the implications. We have put in some very high hurdles to trigger its use, including judicial review.

Moreover, the advance warning systems that we have included in our bill, and the tough new standards we impose on large financial companies, will put in place speed bumps so these companies slow down and become less risky and, therefore, avoid the very issue of bankruptcy or resolution. Early on we try to minimize those events from occurring.

When there is a financial crisis, however, bankruptcy may not be the best option. The experience of 2008, especially the bankruptcy of Lehman Brothers and its disastrous effects on our financial markets and our economy, has taught us we need a workable alternative to bankruptcy for the largest, most interconnected financial firms and that the alternative could not and should not be a bailout. Given the choices now, it is just bankruptcy or bailout. We tried to create an alternative under rare circumstances for a resolution mechanism.

Throughout 2009, the Banking Committee heard testimony from administration and other financial regulators, experts, stakeholders, and others who all agree the bankruptcy framework is poorly equipped to protect the Nation's financial stability if a very large and complex and interconnected financial firm goes under.

Why do we say that? It can be with a large financial firm that is interconnected there are many good, solid firms--it may be that a large interconnected firm will have an effect on some very solvent, well-run firms. Bankruptcy could bring all of these well-run companies down to their knees. None of us wants to be part of that. So we need an alternative other than just bailing out that firm when confronted with that kind of a choice.

If the only two choices are bankruptcy, which could take a lot of firms and businesses that are solid, well run, well managed, producing jobs, contributing to our economy--that is the alternative. Those firms then would be adversely and, unfortunately, affected through a bankruptcy process or bailout. Of course, no one wants to write a check for $700 billion again to bail out firms that are failing. The idea of a resolution mechanism under rare circumstances is the alternative choice which we collectively--Democrats and Republicans--after the long work of this committee believed was the alternative in our bill.

The Sessions amendment fails to recognize the fundamental difference between the new liquidation authority and bankruptcy. The new liquidation authority is intended to be an emergency exception to bankruptcy. The presumption, again, is bankruptcy. That is where we begin. But if under these rare circumstances that alternative would do more damage to the overall economy, despite our feelings about a mismanaged company, we need to have an alternative.

The new liquidation authority is intended to be an emergency exception to bankruptcy when necessary to protect the financial stability, the overall stability of the United States, and not to protect irresponsible creditors.

The Sessions amendment, like today's bankruptcy framework, is focused on protecting and repaying creditors of a failed financial firm. It does not provide the tools we need to protect taxpayers from the devastating effects of the next Lehman Brothers. That is why Senator Shelby and I sought to create a liquidation process that would provide for the orderly wind-down of large, complex financial institutions, while still forcing shareholders to be wiped out, culpable management to be fired, and creditors to bear losses, in addition to a prohibition against those very managers who caused the failure from being involved for years afterwards in the financial services sector of our economy.

That is a rough road--shareholders get wiped out, creditors suffer, management gets fired, and they are banned from being involved in financial services. That is tough medicine if, in fact, they go the resolution route under our bill. But we need to have at least some mechanism other than just the two terrible alternatives of bankruptcy, that could cause broader financial problems, or a bailout. This is why Senator Shelby and I sought to create this liquidation process.

Any payments under our bill to creditors above liquidation value will be clawed back, and large financial companies will be assessed, as necessary, to ensure that taxpayers do not lose a penny.

You may recall the debate we had about prepayment or postpayment. We had originally, at the suggestion of my Republican colleagues, a $50 billion upfront assessment on large institutions. Then there was a change of heart by many, and they said: No, you cannot have that out there because that looks like you are providing for a resolution mechanism rather than bankruptcy; the optics of that do not look good. I was never overly committed to that idea. The only reason I included it in the further draft of the bill is because I thought it brought Republican support to the legislation.

The irony is, some of the very people who were advocates of it one day changed their minds. So we took it out of the bill.

The thing I wanted to make sure of was that taxpayers would not be exposed. The House-passed legislation has $150 billion in a prepayment fund. Again, I heard my good friend from Massachusetts, the chairman of the House Financial Services Committee, Barney Frank, say he would like to take it out as well in light of some of the allegations made about the bill. We took that out. I know my colleague from Alabama referenced that and may not have been aware that was one of the provisions in the Shelby-Dodd amendment, to remove that prepayment fund created in the earlier draft of the bill.

Striking the orderly liquidation authority, as the Sessions amendment would, would do just the opposite of what the amendment's sponsors intend. It would ensure we face a repeat of the unacceptable choices between a disastrous bankruptcy where innocent, solvent, well-run companies could be caught in the vortex and drawn down and destroyed in the process or writing that big check that Americans are furious over. So we created this resolution authority to be used under very rare circumstances.

The Senate, of course, supported our proposal, the Shelby-Dodd approach, by a vote of 93 to 5. I urge my colleagues, both Democrats and Republicans, to reaffirm their support for ending the too-big-to- fail concept by rejecting the Sessions amendment.

I say that respectfully of my colleague of Alabama. He has been a longstanding member of the Judiciary Committee. He knows these issues well. And I understand his concerns. But I believe as Senator Leahy will speak to, either directly or indirectly, this would do great damage to this bill and expose us once again to that taxpayer bailout, which none of us wants whatsoever. Because if bankruptcy would cause greater harm for our economy than the failure of one company, then what are we left with if we reject that idea and we are back to the bailout scenario? None of us wants to be in that situation ever again.

I urge, when the vote occurs tomorrow, that we reject the Sessions amendment. Stick with what we have written in this bill--which occurred over many months, by the way. This was not drafted over a weekend, I can tell you that. We have gone back literally months trying to get this right and listen to literally hundreds of people who brought their expertise and knowledge of this process to the table. It was purely a bipartisan effort in our committee, along with others, to craft the first two titles of our bill.

I urge, again, the rejection of the Sessions amendment when it occurs.

Amendments Nos. 3989 and 3991

Mr. President, I ask unanimous consent that the Durbin and Franken amendments be considered withdrawn, and that the Durbin amendment No. 3989 and the Franken amendment No. 3991 be considered called up in their place.

Mr. President, I ask unanimous consent that the Senate now resume consideration of the Landrieu amendment No. 3956 and the Crapo amendment No. 3992; that the Landrieu amendment be agreed to and the motion to reconsider be laid upon the table; that the Crapo amendment, No. 3992, be modified with the changes at the desk; that the amendment, as modified, be considered and agreed to, and the motion to reconsider be made and laid upon the table.

Mr. President, again, I want to take a moment and express my gratitude to my colleagues. I want to thank Senator Landrieu. She was involved in a lot of this, so I want to thank her immensely for her contribution. She chairs the Small Business Committee of the Senate and she and my very good friend from Georgia, Johnny Isakson, crafted a very good amendment, which we just adopted. It is going to make our whole section dealing with underwriting a very important part of this bill, and I thank them for that.

I want to thank Senator Mike Crapo from Idaho, my colleague on the Banking Committee. He made a very constructive suggestion to this part of the bill. I want to thank his staff as well and the staff of Senator Landrieu, who did a very good job in working through the language this afternoon that allowed us to come to this conclusion. They both couldn't be here at this particular moment, late in the evening, so I am speaking on their behalves, but I thank them both.

Again, this is exactly what we are trying to achieve in this bill-- which I know is taking a lot of time on the floor of the Senate--with the contributions of Republicans and Democrats--people such as Johnny Isakson and Mike Crapo, Olympia Snowe, Susan Collins, and so many others who have contributed to this product. We are dealing with a very complex area but a critically needed one for our Nation.

We are getting closer and closer to final passage of this bill. We have more amendments to consider, but my hope is that in the next few days we can wrap up the remaining amendments and have our opportunity to vote--to debate on these matters and then get to the point where we can cast our ballots in favor of what I hope will be an overwhelming vote in favor of financial reform in this legislation.

Tomorrow, as I mentioned earlier, there will be some nine amendments, at least, that we have set up for debate. I will be looking for time agreements on them. For those who may be listening at this late hour in their respective offices, I would urge them to work with us on time agreements, if they want a decent amount of time, but please do not ask for exaggerated amounts of time. There are still many more amendments to consider.

We are going to be here on Friday. We won't have votes on Friday, but I will want to get to all these matters. There will be amendments voted on tomorrow, and additional amendments before we finish tomorrow evening, and then on Friday I will be here to listen to debate, maybe lay down a remaining amendment to be considered on Monday when we come back.

My hope is that by Tuesday, no later than Tuesday--at the max maybe Wednesday--we could have final passage on this bill. I know there are other matters the majority leader wants to handle, and I can't thank him enough for providing the kind of window that has allowed this Senate to operate without tabling motions. We have only had one. We haven't had any second-degree amendments on any amendment so far, and no filibusters involved at all on a very major piece of legislation.

As I said earlier today, all of us at one time or another talk to students in our respective States, and they ask us about how the Senate functions, and we usually describe exactly what has happened. The unfortunate part is that it rarely does happen in this way. We are not done yet, so I realize we have not completed the process. But this is how this institution was intended to operate. People have a right to offer their amendments, to be heard, to debate them, and then to vote on critical issues facing our country. I never thought a few weeks ago we might actually get to this point where we are engaging in the business of the Senate, offering amendments, debating them, trying to modify where we can to agree on how best to do this.

There are 100 of us here trying to craft a piece of legislation that affects 300 million of our fellow citizens in this Nation, not to mention others beyond our own shores because we are setting rules by which we are going to operate. My hope is that these rules will be harmonized with others around the world so we can avoid the kind of catastrophes occurring in Europe as I speak here, as well as the problems that have emerged in the Asian markets and elsewhere. So this is more than just an ordinary undertaking.

Yesterday, in speaking to the Chairman of the Federal Reserve Board, he notified me during one of our debates that the central bankers of Europe, because of the availability of technology, were literally watching and monitoring the debate here on the floor of the Senate about a critical issue as it was occurring. That is how the world has changed. Today, the actions we take here not only affect what happens in our own country but elsewhere as well. This is a major undertaking, and I can't begin to express my gratitude to my fellow colleagues for the manner in which they have conducted this debate.

My thanks to majority leader Harry Reid in particular. Only through the majority leader can you create an environment that allows this to happen. That is the leadership that Harry Reid has demonstrated over and over and over again in his stewardship as the majority leader of this body. Again, with all the other things he has to grapple with and deal with--many other issues to confront here--this is the kind of leadership the American people expect to see, and he is providing it for our country.

Again, I thank as well my colleague from Alabama, Senator Shelby, the ranking member, for his work and the staffs' work. Again I thank the floor staff and others in their respective offices.

Mr. President, I ask unanimous consent that the following article be printed in the Record.

Mr. President, I know this is beginning to be a lengthy debate

and process on the floor of the Senate to get through amendments. My colleague from Connecticut exhibits great patience to try to work through this. I know there are a lot of interests that have different views about this, and they come to the floor and they want this amendment or that. I understand all that. I know my colleague from Connecticut views this with the same seriousness of purpose as I do and understands that many of us not on the Banking Committee have not had the opportunity to be involved in the debate until now--until it comes to the floor of the Senate--and have not been able to offer amendments.

I think that represents the appetite in the Senate to be engaged and to understand what has caused the most devastating financial event for our country since the Great Depression--something that collapsed some $15 trillion in value for the American people, caused very substantial unemployment, dramatic losses in income, the loss of homes and has led to hopelessness and helplessness for many Americans.

What happened to cause that? Was this some sort of natural disaster? No, it wasn't a fire, a flood, a tornado, or an earthquake. It wasn't a natural disaster. This was made with human hands. This is a manmade disaster and, by the way, it could well have been predicted, in my judgment, and some of us did. Without pointing at myself necessarily, I said 11 years ago that I thought we were setting ourselves up for massive taxpayer bailouts. I will not show the charts again, but it is not surprising. We were going to modernize the financial system a decade ago in order to compete with the Europeans and to bring it into the modern age. Modernizing meant deciding let's deregulate everything. Let's not look at everything that is going on. The result is, a decade later, a very substantial collapse in our economic system.

Mr. President, I have been thinking about the work that has gone on in the last couple of weeks on the floor of the Senate. I came in early this morning to get something from the radio addresses of Franklin Delano Roosevelt in 1933 and 1934. The situation in this country, while different by many decades, is similar with respect to what caused a substantial problem in this country. Then it was the Great Depression.

Let me read, if I might, just a couple of excerpts of what then- President Franklin Delano Roosevelt said about our country and about what was needed to be done because it has, I think, significant application to today. Here is a quote from Franklin Delano Roosevelt on March 12 of 1933:

We had a bad banking situation. Some of our bankers had

shown themselves either incompetent or dishonest in their

handling of the people's funds. They had abused the money

entrusted to them in speculation and unwise loans. This was

of course not true in the vast majority of our banks but it

was true in enough of them to shock the people for a time

into a sense of insecurity and put them into a frame of mind

where they did not differentiate, but seemed to assume that

the acts of a comparative few had tainted them all. It was

the government's job to straighten out this situation and do

it as quickly as possible. And the job is being performed.

This was, again, from President Franklin Roosevelt in 1933. Quoting again, he says:

After all, there is an element in the readjustment of our

financial system more important than currency, more important

than gold, and that is the confidence of the people.

Confidence and courage are the essentials of success in

carrying out our plan. You people must have faith; you must

not be stampeded by rumors or guesses. Let us unite in

banishing fear. We have provided the machinery to restore our

financial system; it is up to you to support and make it

work.

He was talking about a time in the shadow of the Great Depression. On September 30, 1 year later, in his address to the Nation, Franklin Delano Roosevelt said:

The second step we have taken in the restoration of normal

business enterprise has been to clean up thoroughly

unwholesome conditions in the field of investment. In this we

have had the assistance from many bankers and businessmen,

most of whom recognize the past evils in the banking system,

in the sale of securities, in the deliberate encouragement of

stock gambling, in the sale of unsound mortgages and in many

other ways in which the public lost billions of dollars. They

saw that without changes in the policies and methods of

investment there could be no recovery of public confidence in

the security of savings.

Interesting. You could read that today, and it describes the task we have before us today. But this wasn't language of today. This was from 1933 and 1934. The thoroughly unwholesome conditions in the field of investment, in the sale of securities, in the deliberate encouragement of stock gambling, the sale of unsound mortgages. That is the year 2005, 2009. Yet Franklin Delano Roosevelt described it in 1934, and he put together a plan. That plan included Glass-Steagall and other things to protect this country; to say never again will we allow that to happen.

Then, a little over a decade ago, in this Chamber and in the White House, they said: We have to modernize our system. We have to get rid of all those protections from the Great Depression. They are old- fashioned. Let's dump them. So the Congress dumped them. I didn't support that. I vigorously opposed that. But they dumped them.

So the country had a very serious problem--the runup of a substantial amount of new exotic securities, things that people didn't understand very well--CDOs, securitization of almost anything somebody could securitize, getting fees from the sale of the transfer of securities, and then the development of something new called the credit default swap.

The credit default swap was a new approach. It was an insurance policy against a bond default. But then there was a synthetic CDO or a synthetic credit default swap, or what some called naked default swaps. That meant that you could buy one of these instruments back and forth without ever having an insurable interest in the instrument itself, just making a wager with someone else about what might or might not happen in the future.

During all of this time we watched a very substantial amount of activity, on Wall Street particularly, take place that I think has been pretty unwholesome for our country. This is an article of September 30, 2008, which talks about the money from Wall Street that is beyond the legal reach. It says there is $1.9 trillion of money that is run out of the New York metropolitan area that sits in the Cayman Islands--a secrecy jurisdiction. Another $1.5 trillion is lodged in four other secrecy jurisdictions.

Let me quote from this article by Robert Morgenthau in the Wall Street Journal on September 30, 2008.

Following the Great Depression, we bragged about a newly

installed safety net that was supposed to save us from such a

hard economic fall in the future. However, the Securities and

Exchange Commission, the Federal Reserve System, the

Comptroller of the Currency and others have ignored trillions

of dollars that have migrated to offshore jurisdictions that

are secretive in nature and outside the safety net--beyond

the reach of U.S. regulators.

Well, it is not surprising that at the same time that money was being hidden in other parts of the world by some of the same Wall Street interests that a massive amount of money was being paid one to another on Wall Street and in the investment banking area.

Just to cite a couple of these examples, I have a description from about a year and a half ago when Lehman Brothers went bankrupt. The Lehman Brothers bankruptcy followed Lehman Brothers Holdings agreeing to pay a total of more than $23 million to three executives leaving the securities firm just days before it collapsed.

The reason I point this out is there was so much money around for everybody--for everything--days before the collapse of Lehman Brothers. There was $23 million paid to three executives leaving the securities firm days before it collapsed. You wonder why. Does that make any sense? Does anybody think that is something that is worthy?

Here is a payment of $19 million to a man named Alan Fishman. He was the CEO of Washington Mutual, which was run right into the ditch and went belly up and had to be acquired by another company. Alan Fishman worked 3 weeks for Washington Mutual, and he got a severance deal of $19.1 million--$19.1 million.

In the heyday of executive compensation a couple of years ago on Wall Street, in 2007, the head of Merrill Lynch made $161 million. That was Stanley O'Neal. John Thain at Merrill Lynch made $83 million; Lloyd Blankfein of Goldman made $54 million; John Mack of Morgan Stanley made $41 million; James Dimon of

JPMorgan Chase made $29 million; and--well, the list goes on. Kenneth Lewis of Bank of America only made $20 million. He must be looking up at Stanley O'Neal's $161 million and asking: Where did I miss the boat?

But this kind of money was hanging around all of these issues and these firms, and it was, Katey, bar the door. We are making massive amounts of money and we are going to pay almost never before heard of sums to individuals for running these big companies--$150 million, $50 million, $83 million. So it is not surprising, then, that the American people have a pretty dim view of what was going on on Wall Street when we announce that what went on on Wall Street led to this dramatic economic devastation to our country.

By the way, the devastation doesn't apply to everybody. I just saw this morning that the unemployment rate among the higher income Americans is 3 percent. So they are not feeling the pinch so much. But in the bottom 20 percent of the American people, the unemployment rate is around 18 percent. So there are a whole lot of folks at the bottom of the economic ladder who are paying the price for this unbelievable behavior.

So the question is, What do we do about all this? What do we do to make sure that when we are done in the Congress on something called financial reform, the American people have some notion that we will have done the right things to prevent from happening again that which happened to us in the last couple of years?

The presentations I have made on the Senate floor have perhaps led people to think that I believe investment banks have no merit or no worth. That is simply not the case. I understand that our country and the ability to produce in our country through a productive sector needs financing and that financing would include a range of financing opportunities. You do need investment banks, you need commercial banks, you need venture capital firms, you need securities. I understand all of that.

But I also understand--it was a comedian, Mark Russell, who once described investment banks by saying: ``Investment banking is to productive enterprise like mud wrestling is to the performing arts.'' If ever that applied, it surely must apply now when we look back to see what has happened in the last decade in investment banking. If we do not fix it in this legislation, put a cork in it, and we leave this Chamber and this Congress and claim to have fixed it and have not done it, then shame on us.

We have a responsibility. Let me tell you what I think the responsibility is. It relates to a range of things that are not yet done. It relates to dealing with the issue of too big to fail. I know we had one vote, and we failed, unfortunately. There are other ways to do this. But if we have institutions that are too big to fail, that are so large that they cause moral hazard to this country should they fail, so large that they cause completely unacceptable risks of bringing the country's economy down should they fail--if we do not do something about that, we cannot claim ever that we have done something about this system. It is not about saying big is bad. It is about saying no-fault capitalism doesn't work if you allow financial institutions to become so large that their failure can bring down this country's economy. That is what the issue is, and that needs to be fixed.

It appears to me we are probably not on the way to fixing that, but hope still arises. For me, it is not a triumph of hope over expectation; it is a triumph of hope, believing it is still possible for us to do the things necessary to fix what we need to do.

I also think the set of issues, in addition to too big to fail, includes an amendment I will be offering banning naked credit default swaps, saying that if there are credit default swaps issued that have no insurable interest in bonds, then it seems to me that is just wagering and that can be done at our gambling centers in our country but ought not be done in the lobbies of banks. That is an amendment which is very important. If we don't fix this, we will leave this town saying we did financial reform but we did nothing about too big to fail and we did nothing about the binge of speculative activity in instruments that have no insurable interest in bonds, credit default swaps that have no insurable interest in bonds.

Mr. Pearlstein, who writes a column for the Washington Post, asked a question which led me to be interested in the question, Why should there be more insurance policies against bonds than there are bonds?

In any event, why should we, in our financial institutions, have people wagering about whether a bond will default when, in fact, they have no interest in the bond? We do not allow people to buy life insurance on someone else's life because they don't have an insurable interest. We don't allow someone to buy fire insurance on someone else's house because there is not an insurable interest. Yet we have trillions of dollars out there, called credit default swaps, making a wager on someone else's bond, whether someone else's bond will fail, despite the fact that they have no insurable interest in the bond. If we do not put a dagger in the heart of that kind of intense speculation that has caused a significant amount of these problems, then we will have, in my judgment, failed to have addressed the real causes and failed to have done what we should do to make sure this cannot happen again.

I believe my colleague from the State of Washington is going to offer a restoration of sorts of the old Glass-Steagall law, which I think makes sense. Others will offer legislation that would say to insured banks: You ought not be trading securities and derivatives on your own proprietary accounts. It makes a lot of sense to me. All of those are important.

I mentioned before that I wrote the cover story for the Washington Monthly magazine 15 years ago titled ``Very Risky Business.'' At that time, there was $16 trillion of notional value of derivatives, and I wrote the article saying it was very risky business because even then banks were beginning to trade derivatives on their own proprietary accounts. That is not what insured banking should be. That is far too risky and puts the taxpayer at risk.

Now we see that unemployment is at 9.9 percent. We are still trying to recover from this devastating recession. We are making some progress.

Wall Street is back on track for record profits. This is 5 months ago, now, from the New York Times. In a report released Tuesday, the comptroller of New York State said Wall Street profits in 2009 are on track to exceed the record set 3 years ago at the height of the credit bubble. He also talked about bonuses at six banks that he thought would exceed the $162 billion paid in 2007. By the way, fueling these record profits by these institutions is from the firm's own securities trading accounts, according to this story, as they borrow at near zero interest rates and put the money to work in the securities markets. It sounds as if nothing has changed. That is what helped cause this mess. Yet here we are, back again, and the question is, Who is healing? The big investment banks are healing.

Let me for a moment remind everyone how important regulation is. This bill has a lot of regulatory allowance--some instruction but a lot of it allowance that says to regulators: Here is your responsibility.

One of the key issues that has exacerbated this substantial economic collapse was something that happened in 2004, on April 28, in the basement of the Securities and Exchange Commission. On the afternoon of April 28, 2004, there were five members of the Securities and Exchange Commission who met in a basement hearing room to consider a request by the five biggest investment banks. They wanted an exemption for their brokerage units from the old regulation that limited the amount of debt they could take on. What they said is: We want to be able to unshackle billions of dollars now that we hold in reserve as cushions against losses on investments. If we could unshackle that money we have to hold in reserve against losses, we could use that to flow up to the parent company and we could enable it to invest in a fast-growing world of mortgage-backed securities and credit derivatives and so on.

The five investment banks that led the charge--one of them was Goldman Sachs, headed then by Henry Paulson, who 2 years later was Secretary of the Treasury and inherited the mess that

was in part created by it. They had 55 minutes of discussion that afternoon, and after 55 minutes of discussion, the Securities and Exchange Commission voted unanimously to allow these biggest banks in America to take on leverage, going from about 12 to 1 or so, to 33 to 1. In other words, for every dollar in equity, it could leverage about $33 in debt. By that notice in a basement hearing, with no press there at all--I think one reporter was there; it was barely reported--they set the stage for loading up dramatic amounts of debt in these institutions.

Now these institutions are, of course, very opposed to the amendment I am going to be offering here at some point, I hope, I expect, or I insist--one of the three--that would ban naked credit default swaps trading. They are very opposed to that. I understand why. They are making a lot of fees and profits as a result of this massive bubble of speculation in these kinds of securities. But I don't think we have any choice but to be taking on the center of the cause of this economic collapse in our country.

The amount of effort that has been made to water down some of the amendments that have been offered is troublesome to me. I think the legislation that came out of the Banking Committee is meritorious. It has value. I appreciate the work the committee did. But, as I said when I started, most Members of the Senate have not had a chance to weigh in on this, and there are some substantial improvements that can be made-- I hope should and will be made to the Banking Committee product. But the improvements will not be improvements that strengthen our ability to prevent what happened from ever happening again if the so- called improvements are diminishing the strength of this bill.

We need regulatory oversight. If we have learned one thing in the last decade, it is that you have to have regulators on the beat who take regulation seriously. You also have to decide to put a stop to the things that don't represent the kinds of business practices that give any strength to this country at all and, in fact, represent business practices that undermine this country's economy. That is why I believe it is critically important we continue to address the issues as I have just described--too big to fail and credit default swaps and related issues.

I am going to read, just for a moment, something from the November 5, 1999, New York Times article when Congress passed a new piece of legislation called financial modernization. This was written by Stephen Labaton. This is a quote, after the passage of the bill. I voted against it. I believed strongly then that it was a dangerous mistake for our country. It turns out it was even more dangerous than I thought.

The architects and others said:

Today, Congress voted to update the rules that have

governed the financial services industry since the Great

Depression and replaced them with a system for the 21st

century. This historic legislation will better enable

American companies to compete in the new economy.

Another quote--in fact, that was from the White House, by the way. That was from someone at Treasury.

This is from a Senator:

The world changes and we have to change with it.

We have a new century coming and we have a new opportunity

to dominate this century the way we dominated that century.

Glass-Steagall in the midst of the depression came at a time

when the thinking was that government was the answer. In this

era of prosperity, we decided that freedom is the answer.

Another Senator said:

If we don't pass this bill, we could find London or

Frankfurt or, years down the road, Shanghai becoming the

financial capital of the world. There are many reasons for

this bill but first and foremost is to ensure that U.S.

financial firms remain competitive.

The passage of that bill set this country up for the biggest fall since the Great Depression.

The question on the floor of the Senate is this: Are we going to pass a piece of legislation that has real strength in deciding that which caused this deepest recession since the Great Depression cannot be allowed to happen again? Are we going to pass a piece of legislation that has real regulation and real rules that work? Are we going to pass a piece of legislation that says too big to fail is too big, period? Are we going to pass a piece of legislation that pierces the balloon of speculation in instruments such as naked credit default swaps-- something that was not even in our language 20 years ago. Are we going to address the questions of the securitization of everything, in many cases just for the sake of being able to capture fees? Are we going to address the question effectively of rating agencies that gave AAA ratings to bonds that were worthless? Are we going to address all these questions or are we just going to pass a bill to say: We did it, good for us, this is success, only to find out 5 years later or 10 years later that we are right back in the same swamp?

I wish to simply say today that the American taxpayer has now been obligated--in addition to the joblessness and homelessness and other things visited on the American people and the loss of about $14 trillion or $15 trillion in value, the American taxpayer has been obligated to the tune of somewhere around $11 or $12 trillion lent, spent, or borrowed to interests that we do not now know because the Federal Reserve Board says: It is none of your business to whom we gave trillions of dollars.

Given that, given the economic catastrophe that has visited a lot of the American people, I think we owe them a piece of legislation here with amendments that improve it, a piece of legislation that allows all of us at the end of this day to say no, we didn't water it down, we strengthened it. We recognize the value of our financial institutions, but we don't recognize the value of financial institutions that run this country into the ground, pay $83 million in salaries, $20 million in bonuses, buy things they will never get from people who never had them and claim fees on both ends, and claim they have done something good for the country.

This country can do better than that. This is one of those times--I know this is not seen perhaps by some with the same passion as some of the other issues that get peoples' blood boiling, but I tell you, what we do here will long be remembered because it will have consequences, whether this country has a growing, strong economy for many years ahead, and whether we avoid economic collapse or a deep recession.

I watch every morning and read the stories about Greece and other countries that are in great difficulty. Our country is in some significant economic difficulty. We have sent people off to fight wars for 8, 9 years, not paid for one single penny of it. Unbelievable to me. Every single bit was borrowed and put on the debt.

Then we have got people who thumb their suspenders and talk about how awful the debt is. We have a trade deficit that is relentless and means we end up owing other countries, which will be paid with a lower standard of living in our country. In addition to those issues, we have got this issue of the near collapse of our economy by unbelievable speculation coming from the banking industry.

We have got to fix all of these things if we want a country that gives our children the same opportunities we had. We cannot fix it by glossing over things with a coat of light paint. This has to be fixed with real policies that tackle the central issues on what caused this collapse.

I am here and I am ready to offer my amendment. In fact, the sooner the better. I have been anxious to do that. I will stick around. As soon as I am told my amendment will be in order, I am going to offer it. I guess we will be here until we finish this debate and complain until I get to offer the amendment.

With that, I yield the floor. I will be hanging around.

Reserving the right to object, and I will not object, I understand the unanimous consent request is to set aside the pending amendment. Is that correct?

I will not object. Let me respond for a moment, if I might, to the Senator from Connecticut.

I have indicated I wish to offer an amendment at some point. I want to know if I am on the list.

Mr. President, the word ``promise'' actually made the day for me. So I will not object, and look forward to offering that amendment at the earliest opportunity.

Will the Senator yield for a clarification?

Mr. President, let me clarify that my position is to ban what are called naked or synthetic credit default swaps, not ban credit default swaps. Those with no insurable interest of any kind are considered naked credit default swaps. It appears to me that 70 to 80 percent of all credit default swaps are in that category; they have no insurable interest. So I did not want the Senator to think I want to ban credit default swaps. That is not the case. Naked credit default swaps, yes.

Mr. President, America was alarmed to learn that Times Square was closed for business because of the potential of a bomb threat. A vehicle was discovered with smoke coming out of it. Some alert people on the sidewalks and vendors called it to the attention of police, and they determined the contents of that vehicle at least included the crude elements that could have resulted in a bomb killing many innocent people. All they had to go on was the vehicle itself and a fleeting glimpse of the person who might have been responsible leaving, changing his shirt as he left that vehicle. It was a frightening situation where many innocent people who were visiting our largest city in America could have been killed just as on 9/11. What happened? Fifty-three hours later, our government arrested the prime suspect, the man who has conceded he was responsible for that vehicle in Times Square--53 hours.

I listened to some of the criticisms from those who come to the floor and say we should do this better, we should be more vigilant, we should change our approach. I would concede that we need to learn from every single incident how to make America safer, how to avoid those vehicles even being in Times Square in the first instance. But let's be honest-- to arrest the person responsible for it within 53 hours is an indication of some pretty good work by law enforcement and intelligence officials.

Then comes the argument about Miranda rights. Should we be treating terrorists as enemy combatants or as criminal defendants? Should they be sent to military commissions for trial or to our courts? Well, the fact is, the person involved in the Times Square bombing incident was an American citizen. He cannot be tried in a military commission under existing law. There is a recourse for him, and that is in the courts of America.

If he is to be tried in the courts, the ordinary process of due process suggests he will receive a Miranda warning. In this circumstance, after a number of hours of interrogation, the suspect was given his Miranda warnings. We hear them often on television. It didn't deter him from continuing to offer information literally for days to our law enforcement and security officials.

Many have come to the floor and suggested it is a bad policy for us to consider giving Miranda warnings to those suspected of terrorism. What they failed to note--and I have never heard one of them concede-- is this policy is a policy created by George W. Bush and his administration after 9/11. They decided it would be the basic standard when it comes to interrogating suspected terrorists, particularly those who are American citizens, that a Miranda warning would be given.

This past weekend, Attorney General Holder said he believes we should consider some other elements in terms of when the Miranda warnings would be given and when a person would be presented before a court. I think that is a reasonable challenge for us to look to. But remember that the last time the Congress tried to change basic Miranda warnings, a very conservative Supreme Court across the street said no. They said, in fact, that this is part of due process in the United States of America.

So let's approach this carefully. Let's try to take the politics out of it for a moment. Let's concede that the former Republican President made Miranda warnings part of his ordinary process in dealing with terrorists.

Let's also acknowledge that a lot of hard-working men and women, in the 53 hours after the discovery of that vehicle, did everything in their power to find the person responsible and were successful. Let's give them some credit. These are men and women who work night and day, virtually unheralded, who, in this instance, did an extraordinary job and should be acknowledged in a positive way and not in a negative way.

Health Care Reform

There has also been conversation on the floor this morning about the health care reform bill. Make no mistake, not a single Republican Senator voted for it. In fact, they virtually boycotted the efforts to build this legislation, to write this legislation. Given ample opportunities to produce their own amendments or a substitute bill, they did not. When they offered a few amendments, they turned out to be amendments primarily designed to protect health insurance companies for a program known as Medicare Advantage. So at the end of the day, only the Democrats voted for health care reform.

Immediately, we heard from the other side of the aisle and from many of their supporters around the United States: Repeal it. Get rid of it.

Well, the American people see it differently. If Republican Senators are going to come to the floor and talk about polls, they should acknowledge that the polls clearly show the American people believe health care reform should be given a chance.

I think the Senator from Kentucky was suggesting to us this morning that we need to pull the plug on health care right now and stop. So does that mean he wants to eliminate the small business tax credit included in health care reform to help businesses with fewer than 25 employees pay for health insurance premiums? Does that mean the Senator from Kentucky wants to eliminate the $250 to be given to those under Medicare who use the Medicare Part D prescription drug program to fill the so-called gap in coverage called the doughnut hole? Does he want to eliminate that? Does the Senator from Kentucky want to eliminate our efforts to move forward so that children up to the age of 26 will be covered by family plans while they are finishing college and looking for a job? Does he want to eliminate and repeal that? Is that what he is looking for? I hope not.

The suggestion that we can't revisit this bill--and we will revisit it in the future--is just plain wrong. I have said on the floor before that there are few perfect laws that have been written and not many by U.S. Senators. In this circumstance, we did our very best, working with the experts.

I ask unanimous consent for 5 additional minutes.

Thank you. I will be glad to concede the floor to one of my Republican colleagues if they come during this 5-minute period.

When we wrote the health care reform bill, we relied on the best experts we could find. We were dealing with one-sixth of the American economy, which is the sum total of the cost of health care in our Nation, and we did our very best to move forward. It would have been an easier task had we had the cooperation and joint efforts of the Republican side of the aisle, but they decided to step away and say no.

Secret Holds

The last point I wish to make is that we have reached a historic milestone in the Senate with the Executive Calendar. At this point, we have over 100 nominations to the Obama administration for positions, large and small, that have been held up by the other side of the aisle. I wish to salute Senator Claire McCaskill, Senator Sheldon Whitehouse, and a number of my colleagues who have come to the floor and challenged the fact that this calendar is glutted with over 100 nominees who can't be brought to the floor for a vote.

Now let's examine a historical parallel. At the same time in President George W. Bush's administration, there were 20 nominees being held. Now over 100 are being held. Overwhelmingly, these nominees have passed out of committee to the Senate floor with unanimous bipartisan votes or overwhelming bipartisan votes. They are not controversial. These men and women deserve an opportunity to have an up-or-down vote.

What is happening here is that these nominations are being held as bargaining chips for projects and for--I am not sure what. But it is unfair to these men and women who have said they will offer some time in their lives to public service and will go through the

rigors of being examined and questioned and then stand up and try to help make this a better Nation by serving in a government post. There is nothing wrong with that. Whether it is Republican or Democrat--and many of these are Republicans--they should have that opportunity.

I would suggest to the Republican side of the aisle, let's not use these good men and women of both political parties as bargaining chips for something else. Let's eliminate the so-called secret holds where Senators can, in fact, hold up these nominees without ever disclosing publicly that they are responsible. If they have a legitimate grievance against the nominee, make that grievance known publicly, argue it on the floor. But to hold up innocent people, to leave them stranded on the Executive Calendar for weeks and months is unfair to them and certainly unfair to this administration.

I see the Senator from Tennessee in the Chamber, and I yield the floor to my colleague from Tennessee.

I announce that the Senator from West Virginia (Mr. Byrd) is necessarily absent.

Mr. President, I suggest the absence of a quorum.

Madam President, I have an amendment which has been filed and is at the desk, and a modification of that amendment, which I wish to explain for a moment.

It is an amendment related to interchange fees. Interchange fees are the fees charged to commercial establishments which accept credit cards. So if I owned a restaurant and accepted Visa or MasterCard, when my customer, who has a bill, presents the credit card to pay for it, then I have to pay a percentage of that bill to the credit card company. That is called the interchange fee.

That is separate and apart from the customer's relationship with the credit card company. This is the relationship of the merchant, the retail establishment, the small business, with the credit card company. Unfortunately, over the years, small businesses across America have had little or no bargaining power with the major credit card companies. They impose interchange fees on these businesses, and if you speak to some of the small businesses in Illinois or across the Nation, you will find that many of them feel they are being treated unfairly.

Let me give you an example. About half of the transactions that take place now using plastic are with credit cards, and there is a fee charged--usually 1 or 2 percent of the actual amount that is charged to the credit card. It is understandable because the credit card company is creating this means of payment. It is also running the risk of default and collection, where someone does not pay off their credit card. So the fee is understandable because there is risk associated with it.

But now gaining in popularity is this so-called debit card, where a person directly draws money from their checking account to pay that same restaurant. Had that person chosen to pay by check--a written check--it would have been banked by the restaurant in their own bank, and drawn from the bank of the customer, with no fee associated with it. If the customer uses a debit card--which accomplishes the same thing without the actual check paper involved--the credit card/debit card companies, Visa, MasterCard, and others--charge similar fees to what they charge for credit card. Yet there is virtually no risk involved in a debit card.

So many of these retail establishments and small businesses across America have come and said: We are not opposed to paying a reasonable, proportional amount for the use of a debit card, for example, at our business, but we cannot even get to first base with Visa and MasterCard. They say: We are going to charge you what we are going to charge you--take it or leave it.

As a consequence, I have submitted this amendment. This amendment is on behalf of small businesses across the United States which have rallied behind this because of their concerns about interchange fees on their cost of doing business. It says we will use the same mechanism we used in credit card reform--a bill that was brought to the floor by Senator Dodd of the Senate Banking Committee, which called on the Federal Reserve to establish the appropriate fees and charges to business establishments for the use of credit cards--and that these fees and charges be reasonable and proportional when it comes to debit cards. I do not think that is unreasonable. Senator Dodd offered that as part of the original credit card reform when it came to customers using credit cards. I do not think it is unreasonable to apply it to the business establishments.

You would think there would be general support of this across the board, except from the credit card companies and the biggest banks. But it turns out there is opposition to this from the so-called independent community banks and credit unions.

We created an exemption in my amendment saying if you are a so-called independent community bank that has assets of less than $1 billion, you will not be affected by this--believing we took the lion's share, the vast majority of community banks, and exempted them with the $1 billion exemption. Regardless, the independent community banks again teamed up with the American Bankers Association and said: We are going to oppose it anyway, even if the majority of our members are not covered by it. And credit unions, which go lockstep with the so-called independent community banks when it comes to a lot of banking issues, said the same thing. So in an effort to reach a compromise here that will help Members come to the support of this amendment, I am going to modify my amendment to extend and enlarge the exemption to institutions of $10 billion or less.

Let me tell you what that means. With the modification--changing it from $1 billion to $10 billion--it will have a dramatic difference. With a $10 billion exemption, 99 percent of banks would be exempt. All but the very largest banks in America--the ones that have a controlling interest in establishing interchange fees, I might add--99 percent of banks would be exempt. And 99 percent of credit unions would be exempt. All but three credit unions in the United States have less than $10 billion. And 97 percent of thrift institutions would be exempt--19 thrift institutions across America.

When I have talked to my friends on both sides of the aisle, they have said: If you can find a way to resolve the opposition of the community banks and credit unions, then we are open to this. Many of them have said they believe small businesses and retail establishments are being treated unfairly and they wish to support this. But they wanted to make sure they did not harm local and community banks.

Well, I have gone from a $1 billion exemption to a $10 billion exemption. There are very few communities across America that have banks that will not be protected because of this enlargement of this exemption, and I urge my colleagues to consider that, and to also consider the other side of the equation. Think of the hundreds, if not thousands, of small businesses in your State that are being disadvantaged and treated unfairly with these interchange fees.

What we are asking for is to have an arbiter--in this case the Federal Reserve--determine whether the interchange fees, particularly for debit cards, are reasonable and proportional.

We also say you ought to allow a commercial establishment which accepts a credit card to establish a minimum amount which you can charge to a credit card. I went into Washington National Airport, standing at a news stand there, and was behind a woman who was charging 35 cents to a credit card. I said to the person at the cash register: Is that the lowest amount you have ever had charged to a credit card? She said: No. We had 25 cents charged one day.

If you look at the actual calculations of fees paid by that business for the use of that credit card, they lost money on that transaction. They did not make any money on that. By the time they paid the swiping fees and the interchange fees, at the end of the day, they made nothing. They could have lost money.

Is it unreasonable for a business to say: We are not going to accept credit cards for any purchase under $5 or $1? I do not think that is unreasonable since they are going to lose money in the process, and yet the credit card companies prohibit small businesses from even establishing those basic standards. They prohibit small businesses from saying: We will give you a discount on the price if you pay cash. Why? If we are truly going to have a competitive atmosphere and give small businesses in a struggling economy a fighting chance, why would we prohibit these things? Why would we give a monopoly--a virtual monopoly--situation here, where two major credit card companies can impose rules on small businesses which are so costly to them?

That is why I have submitted this amendment. It is not an easy amendment--I understand that--because we have some competition among friends here and Members will have to decide which they think is the just position. I hope they believe this amendment is. I hope they believe that small businesses--which currently have no bargaining power against these monopolies, such as Visa and MasterCard--deserve a voice in the process. I hope they believe that some of the unreasonable standards set by credit card companies and imposed on small businesses have to stop across America.

I cannot tell you how many glowing speeches are given in Congress on behalf of small businesses. We all know how much they mean to us in our communities and in our overall economy. Well, here is our chance. Senators will have a chance to vote on behalf of retail establishments and small businesses all across their States who have come to me, begging me to move forward on this amendment.

I have said--and I believe it is true--this is the first time anyone has offered an interchange fee amendment on the floor of the Senate or in the House of Representatives. The fact is, it has not been offered because it is controversial. Some people do not want to touch it: Stay away from it. Don't bring it up. Well, that is not fair to small businesses. They deserve for us to step forward, and to offer these amendments, and to make a policy choice.

When I tried to offer this amendment on the Credit Card Reform Act, they said: Wrong place. When I try to offer it on this bill related to banks and financial institutions, some have said: It is the wrong place.

I have concluded there is no right place. This is a good place because it relates to consumer protection, it relates to financial institutions, it relates to our economy and making sure it thrives, and thrives in a responsible way. That means making sure interchange fees are reasonable across the board.

This amendment is needed. It is a response to price fixing by Visa and MasterCard. Interchange fees are received by the card-issuing bank in a debit transaction. However, Visa and MasterCard--which control 80 percent of the debit market--set the debit interchange fee rates that apply to all banks within their networks. Every bank gets the same interchange fee rate regardless of how efficient they have been in conducting debit transactions.

Visa and MasterCard do not allow banks to compete with one another or negotiate with merchants over interchange rates, and there is no constraint on Visa's and MasterCard's ability to fix rates at unreasonable levels. VISA and MasterCard consistently raise interchange rates because the more interchange fees the banks receive, the more the banks will issue cards. Visa and MasterCard receive a fee each time a card is swiped, so rising interchange rates enrich them as well.

Visa and MasterCard incidentally have reduced debit card interchange fees in other countries while they have increased them in the United States. Let me repeat that. Visa and MasterCard have reduced debit interchange rates in other countries while they have increased them in the United States. Visa and MasterCard continue to raise U.S. interchange rates, which are already the highest in the world.

The General Accounting Office found that regulators in other countries have worked with VISA and MasterCard to voluntarily reduce their interchange rates. Just last month, VISA lowered many European debit card rates by 60 percent while increasing many U.S. debit card rates by 30 percent.

What can businesses do about it? Nothing--no bargaining power. So these American-based companies are cutting their charges in overseas markets and raising them at a time when we are facing one of the worst recessions in American history. They are making it tougher for that small business to survive. They are making it tougher for them to keep their employees at work. Is that the right thing to do when our economy is facing a recession? I don't think so.

I don't set an interchange fee rate in this law. Some have argued that we would reduce credit availability by regulating credit card interchange rates. However, the amendment's reasonable fee requirement only applies to debit cards; it doesn't apply to credit cards.

The Durbin reasonable debit fee requirement exempts small banks and credit unions with assets under $10 billion, which, as I say, includes 99 percent of all banks, credit unions, and thrift savings and loans across the United States.

This amendment would not enable merchants to discriminate against debit cards issued by small banks and credit unions. VISA and MasterCard contractually require merchants to accept all cards within their networks, and the amendment does not change that requirement. The amendment would not have the Federal Reserve set interchange prices. Under this amendment, the Fed would not set them. Instead, it would oversee the debit interchange fees set by card networks to ensure they are reasonable and proportional to cost.

It is the same standard which the Banking Committee and Senator Dodd offered when it came to credit card reform. It is not a radical notion. It is in the law already.

There is an argument some make that consumers benefit greatly from the current interchange fee structure. Let me tell my colleagues the reality. This statement is contradicted by statements from groups that represent consumer interests.

Ed Mierzwinski, who is the consumer program director at U.S. PIRG, testified before the House Judiciary Committee and said as follows:

The deceptive anticompetitive practices of the two credit

card associations VISA and MasterCard have injured consumers

and merchants for years. Interchange fees or hidden charges

are paid by all Americans, regardless of whether they use

credit, debit, checks, or cash. These fees impose the

greatest hardship on the most vulnerable customers: The

millions of American consumers without credit cards or

banking relationships. These consumers subsidize credit card

usage by paying inflated prices for many goods and service.

These prices are inflated by the billions of dollars of

anticompetitive interchange fees used to subsidize reward

programs.

The industry of credit cards also argues that merchants benefit from the

present interchange system. A 2009 GAO report found that merchants receive benefits from the existence of credit and debit card systems. It does not say those benefits are the result of the present interchange system. In fact, the same report starts with the title, ``Rising Interchange Fees Have Increased Costs for Merchants,'' citing numerous growing costs that the interchange fee structure imposes on merchants. For example, the report states:

Although accepting credit cards provides benefits,

merchants report card costs are increasing faster than their

ability to negotiate or lower these costs.

I would say basically if we are going to revitalize small business in America in retail establishments, if we are going to give them a fighting chance, we cannot ignore this any longer.

There are some who say: Withdraw this amendment. Wait for another day. Well, I have waited for a year and I don't want to wait anymore. I think we ought to go on the record. I think we ought to have the courage to stand up and say reasonable and proportional debit card rates that will be regulated by the Federal Reserve is not unreasonable; and secondly, that the anticompetitive practices which are imposed on small businesses and retailers across America have to come to an end.

Most of the people I talk to on the floor of the Senate understand this. I hope this modification I am making to my amendment--creating an exemption for banks with assets valued at lower than $10 billion--will make it clear that we are not trying to create any hardship on community banks and credit unions. Instead, we are going after the largest banks and credit card companies for what I consider to be unreasonable conduct when it comes to the treatment of small businesses and retail businesses as well.

I hope to call up this amendment either late today or tomorrow. I hope my colleagues will join me in standing up for small business. We give a lot of speeches about small businesses and retail businesses. This will give my colleagues a chance to vote for them on this interchange fee regulation reform.

I yield the floor and suggest the absence of a quorum.

I announce that the Senator from West Virginia (Mr. Byrd) and the Senator from West Virginia (Mr. Rockefeller) are necessarily absent.

I further announce that, if present and voting, the Senator from West Virginia (Mr. Rockefeller) would vote ``nay.''

Mr. President, I wish to call up amendment No. 3832 and ask for its immediate consideration.

I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. President, they say the proof is in the pudding. The proof is an ultimate test of an idea or an evaluation. It literally means you can show us a wonderful recipe and tell us about the fine ingredients, but we want to know what it tastes like in the end. The actual result is what is important. So I think the American people know that in the bill we are dealing with today, we are still too involved in the maneuvering of the dissolution of companies that fail. We create special procedures for larger companies than we do for routine companies throughout the country. The pudding tastes bad.

My colleagues tell us this bill has the right ingredients, but the ultimate result, I think, is to provide government-funded bailouts in some way or another, through another name, actually now called orderly liquidation authority. I understand the provisions are better perhaps than they were when the discussions began and are more rigorous in some ways. I still feel more needs to be done to create the kind of integrity and the consistency and the principled approach to dissolution of a failed corporation that good law requires.

The legislation before us provides the government with vast, sweeping regulatory authority. I know a lot of people in the country--and I respect my good friend, Senator Dodd. He is such a fabulous Senator and so knowledgeable about these areas. But I talked to my car dealers and they have to meet with State regulatory loan officers and they have always had to deal with State legislation and control and certain Federal rules apply. But what this legislation does is, it is one more example of an expansive mentality as far as fixing a discrete problem, which started out to be fixing Wall Street, too big to fail, and now we have a historic alteration of the respect we get for State and local government to manage lending matters. We have the Federal Government now doing that under this consumer title. I am not sure we have fully thought that through. I don't think it is necessary, frankly.

Some of the regulatory authority that was involved in controlling financial institutions that were part of the financial crisis we faced, I think, was

because this regulatory authority caused or failed to prevent the crisis. It may have even made it worse. Instead of ending too big to fail, this legislation, I am afraid, institutionalizes it.

Professor John Taylor, the author of the Taylor rule, which, because it was violated, probably helped precipitate this crisis. If his rule had been followed carefully by the Federal Reserve, I think we would have had a far less serious problem than we had. He is a professor of economics at Stanford University. He is well respected. He made this point clear in a recent editorial in the Wall Street Journal. This is what John B. Taylor, the Taylor rule author, observed:

The financial crisis of 2008 demonstrates why it is

dangerous for the orderly liquidation section of the Dodd

bill to institutionalize such a process by giving the

government even more discretion and power to take over

businesses.

He goes on to say:

The proposed liquidation process would have the unintended

consequence of increasing the incentive for creditors and

other counterparties to run whenever there is a rumor that

the government official is thinking about intervening.

He goes on to describe other reasons why he thinks the language as we have it is unwise.

Peter Wallison, former general counsel to the Treasury Department, voiced his strong opposition to the proposed legislation saying:

Not only does the Dodd bill establish too big to fail as a

national policy, but it makes the idea real by creating a

system for bailing out large financial companies if they get

into trouble. Of course, ``bailing out'' is not the phrase

used in the bill; the preferred language there is ``orderly

liquidation.''

So Mr. Wallison makes clear--I will not go on and quote all of his remarks, but he makes clear why he believes this is a dangerous institutionalization of special privileges for large companies. I think the Dodd amendment signals to creditors they will get a better deal if they lend to the big regulated firms, and this is what Mr. Wallison says:

They believe they will get a better deal if they lend to

the big regulated firms rather than lending to the small

competitors. The bill does this by making it possible for

creditors to be fully paid when a too-big-to-fail financial

firm is liquidated, even though this would not happen in

bankruptcy.

Mr. Wallison hits the nail on the head, I am afraid. Select creditors--those with good lobbyists or those otherwise deemed too big to fail--will definitely get a better deal under the backroom process of orderly liquidation than they would in bankruptcy.

Let me be clear. The unhealthy government connection to Wall Street can only be eliminated, I think, through the legitimate utilization of historic bankruptcy process. ``Orderly liquidation,'' as defined here, will not achieve the result.

When the legislation was first introduced, Senator Leahy wrote the Judicial Conference of the United States--that is the Chief Justice and his Judicial Conference group of judges there--and asked him for their views on the legislation. The Judicial Conference responded that the bill failed the ultimate test. They said:

This is a substantial change to bankruptcy law because it

would create a new structure within the bankruptcy courts and

remove a class of cases from the jurisdiction of the

Bankruptcy Code. The legislation, by assigning to the FDIC

the responsibility for resolving the affairs of an insolvent

firm, appears to provide a substitute for a bankruptcy

proceeding.

That is a significant statement. This is the Supreme Court, the Judicial Conference, giving us their insight into this.

The letter goes on to say:

This could be especially problematic if creditors have

changed position based on rulings in the course of the

bankruptcy proceeding. The legislation does not envision--

Let me continue to quote this:

The legislation does not envision objection, participation,

or input from the bankruptcy creditors whose rights will be

affected in the course of appointing the FDIC as a receiver.

In other words, the normal process by which creditors and others can participate, object, cross-examine, is cut short.

The letter goes on to say:

Indeed, the legislation proposes to deal with this petition

in a sealed manner--

Not in a public, open manner, where lawyers cross-examine witnesses under oath, but in a sealed manner, the Judicial Conference says.

It goes on to say:

Only the Secretary and the affected financial firm would be

noticed and given the opportunity of a hearing. The financial

position of affected creditors may have been changed within

the context of the firm's bankruptcy case in such a way that

the creditors' rights may have been changed dramatically.

They go on to say this could raise constitutional questions. They said:

Any resulting due process challenges--

They are talking about the due process clause of the U.S. Constitution--

would impose a significant burden on the courts to resolve

novel issues.

In addition, they go on to say this:

We note that petitions under this title involving financial

firms would be filed in a single judicial district.

Delaware.

The Judicial Conference favors distribution of cases in

other courts.

Well, I think the Judicial Conference is making clear one thing in its correspondence. Bankruptcy, with its rules and procedures, not orderly liquidation authority, is the best way to approach dissolving a financial institution. We are not talking about banks. Banks would be still contained within the FDIC. They have a long history of being able to resolve banks in financial trouble. But I think--I can only say I share the opinion of the Judicial Conference. I think it is shared by a number of presidents of the Federal Reserve banks.

In recent testimony on a panel before the Joint Economic Committee, Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, stated the following:

I believe the most credible way to do this would be to

amend the bankruptcy code to deal with nonbank financial

firms and bank holding companies. Expanding the bank

resolution process established under the FDIC Improvement Act

as the current Senate bill does would give regulators and

policymakers the opportunity to exercise a great deal of

discretion in a liquidation or restructuring to reward some

creditors and not others. A bankruptcy proceeding would

follow the rule of law and thus would be less susceptible to

manipulation by private parties or the political process.

So that is the opinion of the president of the Federal Reserve Bank of Philadelphia. Does anybody think that dissolution of GM and other companies and all the things they have gone through was not politically manipulated? Anybody who has closely followed it does, and that is one of the things that outraged Americans. They are angry that big companies got special procedures for their failure to pay their debts, where the average small company, mid-sized company, even large company in America would be subject to the rigors and the fairness and the order of established bankruptcy law.

So the president of the Federal Reserve of Philadelphia said it would be less susceptible to manipulation by private parties for the political process. Amen. That is true. You get a bankruptcy judge, he has a 14-year term. They are used to handling these cases, and they can handle them. Mr. Plosser goes on to say, limiting government choices and leaving resolutions to the rule of law and the court system, in my view, is the best way to end bailouts--limit unhealthy risk taking and extinguish the notion that some institutions are too big to fail. That is what the president of a Federal Reserve bank said. I could not agree more. That is why I have introduced the Bankruptcy Integrity and Accountability Act, which I believe we will be able to vote on tomorrow.

There is no greater legal system than the one we have in America. It is a system that is admired not only because it is efficient, in most instances, but because it is fundamentally fair. You know when you walk into a courtroom that you are going to get the same treatment as other parties, whether you are a mom-and-pop organization or big AIG. The amendment I have offered would provide that same type of security.

One issue that has been raised by a number of experts is a lack of confidence in the FDIC to adequately handle these kinds of dissolutions. I share those concerns. Professor Wallison stated:

The absence of any expertise in resolving failed nonbank

financial institutions anywhere in the Federal Government is

one strong reason for relying on bankruptcy for

most failures. If there is likely to be expertise anywhere in

resolving failed financial institutions, it would be in the

bankruptcy courts.

I agree. Bankruptcy as the first choice for disposing of a failed nonbank financial institution would avoid a number of problems. These are problems that are associated with creating a government resolution authority. Governments are, by nature, political. It would assure that the prebankruptcy creditors take losses of some kind, avoiding the moral hazard and maintaining market discipline. In other words, if you don't feel like and don't have to take a loss by an improvident investment, it encourages you to make more risky investments, creating danger of more improvident financial activities in the future. The rules will be known in advance under bankruptcy. So creditors will be aware of their rights as well as the risks.

Creditors will decide whether they believe a company has prospects to repay them, and it would outweigh the risk of throwing good money after bad in helping maintain the company in bankruptcy. Bankruptcy judges look forward and try to save companies. They stop litigation that can shut down a company. They give the company a chance to reorganize and succeed and pay all their creditors. That is always their goal. But good bankruptcy judges know from history that many companies can't be saved. The best thing to do is shut them down before they lose anymore money and distribute the remaining assets equally and fairly according to established rules of priority as part of the bankruptcy process. That is what bankruptcy is.

In the amendment I have offered, we make sure the necessary expertise for dissolving these institutions is available. We allow the Federal Stability Oversight Council, the proper functional regulator, the Federal Reserve, and the Department of Treasury to file legal briefs in the court if they need to to make sure their voice is heard concerning relevant issues. This would allow the court to gain valuable information and insight. We also concentrate Federal bankruptcy expertise by limiting venue in the cases to the 12 districts with the Federal Reserve Banks. This is something we vetted with professors and bankruptcy experts. Harvey Miller, the renowned bankruptcy expert, looked at this provision and told us he believes it is properly tailored to provide the necessary expertise to address these types of cases.

I believe it is something the Judicial Conference of the United States would agree is better than limiting it to just one court--a situation they raised as problematic. On substance, I think we can't overemphasize how the resolution authority fails the ultimate test.

Professor David Skeel wrote an opinion piece in the Wall Street Journal with Mr. Wallison on April 7 of this year, in which they asked this question:

Which system is more likely to eliminate the moral hazard

of too big to fail?

They concluded that bankruptcy was the answer. They posit:

In a bankruptcy, as in the Lehman case, the creditors

learned when they lend to weak companies, they have to be

careful. The Dodd bill would teach the opposite lesson.

Let me highlight for my colleagues what I believe this amendment does and why I think it is necessary.

First, the amendment protects against systemic risk by eliminating the moral hazard that arises when financial companies and their investors think the government will bail them out. Under the Dodd approach, the approach of this legislation, financial company management and shareholders could have an incentive to seek resolution authority, thus gaining access to taxpayer bailouts. Under the Bankruptcy Integrity and Accountability Act, which I have offered, the only option for insolvent companies would be through the bankruptcy process, and they can survive bankruptcy. But if they are not able to survive it, they should not survive it. That process would be either reorganization or liquidation.

There is a process for that to be established. Under this system, all costs of reorganizing or liquidating a company are paid by the private sector, by the failing company, and those who chose to do business with the failing company.

Thus, unlike under the Dodd bill, there will be no federally administered resolution authority with access to bailout funds, or borrowed money from the Treasury, Federal debt guarantees, or any other kinds of tool that politicians might access to bail out some politically empowered private company, and to avoid the day of reckoning that rightly should fall upon companies who can no longer operate effectively.

Under this bill, there will be no Federal Reserve section 13(3) authority with which the Fed can pump taxpayer money into firms to rescue them from insolvency.

The second way this amendment would reduce systemic risk is by protecting against the threat that derivatives contracts will cause one company's failure to cascade through the financial sector like falling dominoes. Under the current Bankruptcy Code, derivatives contracts are exempt from the automatic stay that prohibits the collection of debts outside the bankruptcy court. Virtually all other debts are stayed when the bankruptcy process occurs. As a result of this event, derivatives counterparties can demand collateral and satisfaction of the debt, and it can create a run on a failing companies' assets as more and more derivative counterparties demand their collateral. Because of the interconnectedness of financial firms and the derivatives holdings, a run on the failing firm's assets can cause failure to cascade through the financial system as party after party becomes exposed to succeeding demands on collateral. This is a problem that has been raised. This amendment would stop that danger by allowing debtors, with the consent of a new Federal Stability Oversight Council, to invoke the automatic bankruptcy stay against derivatives obligations when the facts show that the debtor's failure could genuinely trigger cascading systemic risk. This would alter bankruptcy law to deal with these large financial institutions, where derivatives can play a complicating factor, and this would give the kind of discretion I think would help avoid that.

Finally, the Bankruptcy Integrity and Accountability Act would reduce systemic risk because a new chapter 14 bankruptcy procedure will apply to all nonbank financial institutions regardless of the size. Under the act, everyone will get the same protection. Nobody will have access to special Washington favors. This, too, protects against systemic risk. Under the approach of the Dodd legislation, there will be special rules for those companies that are wealthy and powerful enough to be determined too big to fail. Those special rules will include a publicly funded and government-administered resolution authority that affords the financial firms the right to fail without facing under oath their creditors and without bearing the costs of the proceedings. Also included will be the right to access taxpayer funds for the payment of certain private debts of the firm.

This special system, created by the bill before us, would create incentives for smaller companies to consolidate until they, too, are too big to fail. As a result, risk would be concentrated even more so in a few hands that the failure of one company can threaten to bring down the entire financial system. In place of this created system under the Dodd legislation, a system that protects large companies more than all others, our amendment would create a fair and equal system for the failure of all financial institutions, regardless of their size. As a result, financial institutions would have no incentives to become larger, and thereby increasing the risk that one company's failure will cause the failure of the entire financial sector.

There is one critical aspect of the bankruptcy process that we can't overlook and cannot be overstated. When people loan money to or buy stock or buy bonds in a corporation, or otherwise provide credit, they have an expectation that if that company fails to prosper and is unable to pay all the debts the company owes, that the company at least will be hauled into bankruptcy court, and they will have an opportunity to present their claims and to receive whatever fair proportion of the money that is still left in the company as their payment.

It may be 10 cents on a dollar, or it may be 90 cents. They understand that

bankruptcy judges have the authority to allow the company to continue to operate, to stay or stop people from filing lawsuits against the company to collect debts, to allow the company a period of time to operate, to evaluate whether they can pay off more debtors by continuing to operate than shutting the company down. If a bankruptcy court sees the company is so badly in financial crisis that it is going to collapse anyway, the court can shut it down immediately before they can waste assets and rip off even more people. That is what a bankruptcy court does every day.

The Judicial Conference letter I referred to earlier notes that under the resolution process, some other problems might arise. They note this:

The legislation does not envision objection, participation,

or input from the bankruptcy creditors (whose rights will be

affected) in the course of appointing the FDIC receiver.

It does this in a way unlike the classical way that company officials have to respond when their companies fail. What happens? The creditors all gather. The bankruptcy petition is filed, voluntarily or involuntarily, by the creditors. They are hauled in by a Federal bankruptcy judge who has a 14-year term and specializes in bankruptcy matters. They are required to produce records and documents of the financial condition of the company. The CEO is called in to testify under oath. The bondholders, the stockholders, the creditors, secured and unsecured, the employees, and the workers all get to have lawyers, and they examine the witnesses who can be called. They can call their own witnesses and, in the result, you create a factual record that helps set the groundwork for the orderly priority setting of who is entitled to payment of the limited amount of money in the corporation.

This is what they do every day. This is what ought to happen. Executives prefer not to have to do that. They prefer, like AIG, to go over there and meet with the Federal Reserve, or with the Secretary of the Treasury, and sit down and wheel and deal and get $70 billion. And nobody is under oath, that I can see. None of this is done publicly, as it is in a bankruptcy proceeding. They get to continue to operate and have their fat salaries, when any other company would be out of there and would cease to exist.

This is the problem that upsets the American people, and they are right to be upset.

We do not need to provide special treatment for the people who created the financial crisis that has damaged this country for the next decade probably, and set off ramifications worldwide. I know a lot of this was systemic irresponsibility by a lot of people, but I have to say, the failure of these executives to manage their companies correctly--there are letters to this. They do not need to be provided a sweetheart process by which they can get money from the Treasury and keep their companies going and not be subjected to the same examination, the same requirement to produce documents and records to justify their existence that average corporations do. They need bankruptcy.

I believe America would be better if we do that. I believe our economy will be stronger and that there will be more certainty in the process. If they fail, they fail. If they loan money to a company that fails, they may lose some or all of it. That is just the way it is. It happens every day.

But some people on Wall Street convinced themselves and they convinced politicians and government officials that they were too big to fail. They were so large and were so important that they could not be treated like everybody else; they needed to be bailed out. The people who regulated them and the Secretary of the Treasury, a Wall Street maven himself, a Goldman Sachs guy, and others, met in secret and plotted this thing out and got us to pass legislation in Congress that said--my wife corrects me. She said: Quit saying ``got us'' when you voted against it. I voted against the legislation. Congress passed legislation to allow the Secretary of the Treasury to buy toxic mortgages and assets from bad banks that were in trouble--in a state of panic, if you want to know the truth.

What did they do? Ten days later they bought an insurance company, AIG. They put $70 billion in it, totally contrary to what we were told just a few days before and without the slightest hint of embarrassment.

The legislation we passed, the $700 billion TARP bailout, was the greatest abdication of congressional responsibility in the history of this Republic. We have never given one man--the Secretary of the Treasury--the power to deal with his friends and have $700 billion to deal with. It is an outrage really. That is why people are upset, and they have a right to be upset. I am upset.

All I am saying is, we have a regular process for dissolution of companies that get in trouble. If they cannot pay their bills, they ought to fail like any other company, and the big guys on Wall Street should not be given special treatment. This legislation will end bailouts and will put them in the same process that any corporation in America would be in if they failed to pay their debts in a responsible manner.

I urge my colleagues to consider the amendment. Remember that bankruptcy is a favored process by the Federal Reserve people, that the Judicial Conference of the United States Federal courts has raised questions about this legislation as it presently exists. I think the principled and appropriate way to deal with the dissolution of failed companies is through the bankruptcy process. Unlike orderly liquidation, bankruptcy passes the ultimate test. I urge my colleagues to support the amendment.

I yield the floor.

Mr. President, what is the current business before the Senate?

Mr. President, I ask unanimous consent that the pending amendments be set aside and I be allowed to call up my amendment No. 3816.

Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. President, first, let me thank the chairman. And he is exactly right, I would encourage all of those who have indicated to me they wish to speak on my amendment, from both sides of the aisle, to let us know, come down to the floor. We wish to dispose of this amendment as soon as possible. I am prepared to enter into any kind of reasonable time agreement as soon as we get an idea of exactly how many speakers there will be in order to accommodate those folks.

I am going to talk in detail about the amendment, but first I do want to respond to the Senator from North Dakota who makes some good points with which I agree. But when we talk about the elimination or not allowing credit default swaps, let me say what bothers me about that.

In 2000, when we passed the Commodities Futures Modernization Act, nobody envisioned that credit default swaps would mushroom as they did. The fact is that not only did they grow larger in number, they grew in dollar volume, and they grew in a way that certainly did participate in the collapse that occurred in 2008.

But the real problem with it is not that we had those products on the market but that the regulators did not have the power and authority and the tools to deal with those products, rather than thinking about eliminating a specific product, knowing these smart folks who are in this business in the financial industry are out there right now looking at this bill, and trying to figure out other products they can design that will be different from a credit default swap, but yet be as dangerous as what happened in 2008. We need to give the regulators the power and authority to look at these products and put 100 percent transparency in place. That is what I want to see, and that is what my chairman, Senator Lincoln, wants to see, and I think everybody in here agrees we ought to have full transparency.

Surely.

I understand that. My point is the same, though, that if we give the regulators the authority to regulate those products, then I think we can deal with it better that way than targeting specific products to be eliminated or banned.

Among the many complex issues this body deals with every day, there are few more complicated than the issue of derivatives. However, we should not let the complexity of the swaps market be an excuse for ignoring good public policy and ensuring that our markets are both safe as well as functional.

In the past couple of years, a lot of people have become acquainted with one particular type of derivative known as, as we have just talked about, a credit default swap or CDS, which permits one party to transfer the credit risk or bonds or syndicated bank loans to another party.

Since AIG was heavily involved in CDS, it seems simple enough to blame swaps generally for what went wrong in the system. However, that would be an inaccurate oversimplification, because the real situation is much more complicated. We need to distinguish between credit default swaps and the actual underlying assets represented by those swaps, in this case mortgage-backed securities or mortgages that were themselves the root of the problem.

There are so many other types of swaps that U.S. businesses rely on every day to mitigate just about any risk they face in the ordinary course of doing business. Before we make a big policy change that makes these over-the-counter products less desirable to market participants or require that these products trade only on an exchange type facility, we need to ask ourselves whether this will even address the underlying problem.

Why take a chance in these uncertain times to make legislative and regulatory changes that could possibly make things worse, potentially dry up more capital or force the cost of business going higher? This does not mean there is not room for improvement. That is why I have joined with several of my colleagues today in developing an amendment to apply strong and reasonable regulation to the derivatives markets.

Let me be clear. We share the desire to apply stronger safeguards in these markets to regulate swap market participants and to ensure that swap transactions are more closely monitored by the regulators. I am absolutely convinced that the market volatility and financial meltdown of the recent past makes the case for more market transparency.

How can we in the Congress be sure of the outcome of sweeping reforms without first properly identifying the exact cause of these problems? How can we identify the cause of the problem without authorizing and requiring more transparency through the collection of necessary data?

For this reason, I have worked with several of my colleagues to develop an amendment that would require all swap transactions be made known to the appropriate regulators so effective regulation can be applied where necessary.

Additionally, there will be public dissemination of prices and volumes of completed swap transactions in order that investors and other market participants might be assisted in marking existing swap positions to market, making informed decisions before executing future transactions, and assessing the quality of transactions they have executed.

Beyond requiring more transparency, I also believe we should provide the CFTC and the SEC with the necessary authorities to more properly regulate those market participants who are potentially contributing to the type of risk that jeopardizes our financial system: swap dealers, Fannie Mae, Freddie Mac, large hedge funds, and AIG-type entities.

Many may not even realize that swaps are statutorily excluded from the current regulatory oversight of both the CFTC and the SEC. That is right; current law does not provide for clear regulation of swap market participants. Our amendment would ensure that these market participants are fully regulated and that their swap positions are cleared through a fully regulated clearinghouse. This is a huge departure from current law.

Speaking of clearing, we need to determine how best to encourage the clearing of certain derivative products without jeopardizing either the use of these risk management tools or the sustainability of our clearinghouses. For that reason, our amendment would enable true end- users, those businesses that use swaps to hedge their risk, not for speculative purpose, but true hedging, to avoid an expensive mandate to clear their swaps.

These businesses had absolutely nothing to do with the financial crisis and should not be punished with increased costs and burdens. We certainly do not want to discourage them from managing their risk, especially not in the current economic environment.

Last Friday, the Department of Labor published their unemployment report for the month of April. Again, unemployment rose from 9.7 percent to 9.9 percent. In my State, it is in excess of 10 percent. Why would we subject U.S. companies to expensive mandates when we should be advancing policies that lessen their financial burdens so they can employ more people?

Why is Congress considering slapping an additional cost on them in the form of a clearing mandate? This does not make sense, when these individual companies are the true end-users of the products they are trading in, and they were absolutely not the cause of the financial meltdown. Those mandates should be targeted and in such a way to lessen the risks of those large financial institution swap dealers who are responsible for the bulk majority of all swap transactions and, therefore, contributing to systemic risk.

But a clearing mandate is not appropriate for businesses using swaps to manage their risks and keep their costs down. This is very simple. If their costs go up, they will either pass it along to consumers or stop managing their risk, and then they certainly cannot afford to hire more workers.

Our amendment has a more targeted clearing mandate designed to reach those who are actually responsible for this crisis we are in, Wall Street and not Main Street businesses.

The Senate will soon have the chance to vote on this substitute amendment on derivatives. I am looking forward to further debate on our amendment because it will highlight a handful of significant differences between the derivatives language in the Dodd-Lincoln amendment versus our amendment. I believe our approach on transparency, on clearing, on end users, on capital requirements, and on trading mandates is much more appropriate, much more reasonable, much more business friendly, and, frankly, much more secure. My amendment will ensure that Main Street businesses will still be able to appropriately use derivatives in hedging their daily business risks, while ensuring that appropriate regulatory standards are put into place for the institutions and transactions that contribute to systemic financial risk.

If Congress is truly interested in addressing the problem as opposed to politicizing a solution, we can no longer ignore the complexities of these markets. We must seek to understand the legitimate purposes these complex instruments serve for large and small businesses in each of our States. Unfortunately, the language currently before the Senate misses the mark when it comes to the appropriate regulation of derivatives. The underlying bill would have many unfortunate consequences--some intended, some unintended--resulting from applying complicated regulations too broadly and will subject our American businesses to more risk, not less.

Three consequences of the underlying bill on derivatives are these: One, the users will pay huge clearing fees and pass on those expenses to consumers; two, no longer will businesses use the derivatives market, and they will pass on the higher, unstable market costs to consumers; and three, these businesses, instead of using U.S. markets, will simply take their business offshore. As they do today, they will trade in the dark, and no U.S. regulator will ever see what they are doing. That is not right. That is not what any of us intend to see happen.

The fact is, if we pass the derivatives provisions in the underlying bill, there is going to be a significant number of end users who take their business offshore. That truly is unacceptable. Our amendment makes good business sense and good common sense.

We have received support for our amendment from a wide array of businesses. These are not banks that stand to make profits. These are individual users. I have a letter from the National Association of Manufacturers which states:

We have serious concerns that the current end-user

exemption in S. 3217 (and in the pending Dodd Substitute) is

not strong or clear enough. In addition, other provisions in

the derivatives title could effectively eliminate the

exemption for many companies and, in some cases, subject them

to capital and margin requirements or higher costs.

Conversely, the Chambliss/Shelby substitute includes a clear

and strong end-user exemption that appropriately exempts

businesses that use OTC derivatives to hedge their business

risk from the regulatory scheme applicable to swap dealers.

From the Coalition for Derivatives End-Users, we have the following: That my amendment would ``strike the right balance between bringing fundamental and needed reforms to the over-the-counter (OTC) derivatives market while also ensuring significant and burdensome new costs are not necessarily imposed on business end-users.''

Lastly, I have a letter signed by several energy supply groups which states that they ``remain concerned about the potential impact of the proposed financial reform legislation on end-users.'' They go on to say that:

Due to the broad definition of ``swap dealer,'' end users

may be ineligible for the end-user exemption if they engage

in hedging business risks in the ordinary course of business.

I ask unanimous consent that these respective letters be printed in the Record.

Mr. President, I have had numerous discussions with both the chairman of the Banking Committee as well as the ranking member and the chairman of the Ag Committee about this issue for weeks and months. I know we have the same goal in common: to ensure there is transparency in the marketplace and that we have regulators who will do the job we ask them to do. Frankly, I am not sure that was the case 5 years ago or even 2 years ago. But if we give these regulators the tools and if we give them the opportunity to look at every transaction, irrespective of whether it is going through a clearinghouse or whether it is over the counter, and they have the opportunity to review every large institution or every small institution that engages in these transactions and they also have the opportunity to look at the other side and see which companies are using these products or which entities are using them and they can then deal with those entities that become systemically risky--they didn't have that power and authority before, and we are going to give them that power and authority now--I have all the trust and confidence that they will use it in the right way and that with those tools and with that transparency and with the bringing of these trades out of the shadows and into the sunlight, we will be able to control the financial markets in a way that allows our end users, those who did not cause any of the problem and are not part of the problem, from being thrown into the same basket with those folks who did become systemically risky and caused the financial meltdown that occurred.

My amendment does that. It does it in the right way. I urge my colleagues to support the amendment.

I yield the floor.

Mr. President, let me extend the same courtesy to my chairman. She is my dear friend. We work very closely together on virtually every issue. It is extremely unusual for us to disagree on any major issue. She and her staff have been great to work with, as always. They have been very open. We have had an ongoing dialog. We just simply disagree about the way this issue needs to be dealt with.

Let me say that an indication of how complex this issue is and why this issue is so important and why we don't need to have our constituents expend money when they don't need to expend money that is going to be passed on to consumers of every single product virtually made in America is this: There are a lot of people who have gotten up on the other side and spoken about this amendment. I know they don't intend to get up here and make statements that are not correct. But frankly, that is what we have heard. All I can attribute that to is the fact that this is such a complex issue, that the folks who have been speaking about my amendment simply don't understand it.

Let me give some examples. We talk about large companies falling prey to derivatives. Large companies use derivatives in a very meaningful way that is advantageous to every single American customer. Everybody who buys something--I don't care whether it is an automobile, a widget, a drug--and every major manufacturer uses derivatives. They are very sophisticated individuals who deal in these products. They know what they are doing. They are not falling prey to the use of these products.

There have been a couple folks who have said we don't have transparency, that we ought to let these products come out of the shadows. Let me make clear--and I think the chairman will agree with me--100 percent of the transactions under our amendment would be out in the open. There would

be a clearing of about 85 to 90 percent of all derivatives contracts under our amendment. The others, the end users, the manufacturers, the energy companies that go out and not only borrow money but buy coal or buy natural gas and that want to have stability in their products, those individual end users would be exempt from the clearing requirement. But every single one of them would have to report every single contract to the CFTC or to the SEC, 100 percent transparency on every single derivative.

I don't know why folks can't understand that in our amendment because it is pretty plain. I think Senator Gregg did a good job of explaining exactly how that is done.

Somebody said they don't want to return to old-fashioned capitalism. If I am considered to be one who is promoting old-fashioned capitalism in my amendment, I plead guilty. Old-fashioned capitalism has made this country the strongest economy the world has ever seen. Old-fashioned capitalism has an alternative. It is called socialism. I do not believe in socialism. I believe, if somebody wants to work hard and generate money to make a better quality of life for themself and their family, they ought to have the opportunity to do so. That is what old-fashioned capitalism is all about.

I could go on and on giving examples of things that have been said that are out of context. Let's get down to the bottom line; that is, who supports the underlying bill? Who supports the Dodd-Lincoln bill? The simple answer is Wall Street. Why do I say that? At a hearing in the Government Relations Committee last week, Goldman Sachs was called to the Hill to testify before Senator Levin and Senator Coburn's committee. Senator Coburn asked a question directly of the Goldman Sachs agent and said: Do you support the underlying bill that is now being debated on the floor of the Senate? Without hesitation, he said: Yes. Why would they support it? They are going to make a lot of money off this underlying bill. Why do I say they are going to make a lot of money? Who is going to clear these contracts? They are going to be cleared by clearinghouses owned by Wall Street banks.

Under the underlying bill, there is another provision that has not even been talked about today: Transactions are required to be executed on what is called a swaps execution facility. It is a mini exchange. In addition to going to that swaps execution facility, that contract, after that, has to go to a clearinghouse. So what you have is a party who agrees with a manufacturer that they are going to enter into an agreement on a derivative for an interest rate, let's say. That entity that has put that deal together is going to charge a fee. They would do that anyway. That entity is also likely to be charged by the swaps execution facility where the contract is executed. They are going to charge another fee for doing that. Then they are going to have to go to a clearinghouse that is going to charge another fee.

So it is pretty easy to see why Wall Street likes this provision, likes the underlying bill, because they are going to make a lot of money in fees off these contracts.

The only other comment I wish to make, with reference to comments that have been made, is whether these end users leave the U.S. markets and go overseas. There has been contention made that is not going to happen. They are not going to do that. Well, they are. Other markets have already indicated they are not about to follow our lead. The London regulator has openly said they will not follow our lead. We have heard nothing out of the Europeans, nothing out of Singapore. Why haven't we? They are watching to see what we do. They are going to be soliciting U.S. customers to go to their markets because our constituents are not going to have to pay these huge fees in their countries that are required under this bill.

It only makes sense that if they can generate more money for their bottom line and they can sit in their office in New York City, Atlanta or Moultrie, GA, and execute a contract in Singapore, where they don't have to pay that fee, you better believe that is where they are going to go. They have no more risk. It is the same amount of risk. Is the CFTC or the SEC going to know they have done that? Absolutely not. It will not be reported to them.

I could go on and on. At the end of the day, if you want to see 100 percent transparency and you want to see the end users in this business who utilize these swaps and derivatives in a nonsystemically risky way continue to have access, then you need to support my amendment. If you listen to the manufacturers across America that know because they have used these products for decades and have done so in a safe way and a way that provides a cheaper product for their consumer, you need to support my amendment.

I ask for the yeas and nays.