Floor Statements

Will the Senator yield?

Mr. President, one of the arguments I have heard against the Senator's amendment--as the Senator from Illinois said, this is a replay of the TARP battle. I want to explore that for one moment with my friend from Louisiana.

Before I do, I must say about the Senator from Louisiana, her passion and commitment to small business, reflected in her chairmanship on the Small Business Committee--and I am honored to serve with her on it--has been nothing short of breathtaking. I thank her for that leadership.

On the TARP issue, those of us who voted for TARP have been criticized back home because it didn't result in a lot of credit flowing. We would have loved to have had the time so we could have taken some steps so we could have connected credit flow with what we were doing to try to save this economy from totally going under.

We did not have the time to do it at that time. We have been criticized, and to some extent I think fairly, for not connecting some kind of requirement on the part of banks that are being helped through TARP with some commitment to lend out that money, to get credit flowing again.

The issue we have heard more than anything about back home, I would say, in terms of businesses and why they are not adding jobs, is that even the businesses that have paid all their bills, that have folks out there who are willing to buy their products, cannot get the regular lines of credit that they have relied on, mainly because the assets that those credit lines have been based on have gone down in value, the way our homes have gone down in value.

So they have the same accounts. They have never missed payments they owe the banks. They have sales they can make. But in terms of the ratio that the banks follow because of the regulators, those banks are unwilling to extend the traditional line of credit because the assets of the companies have gone down in value, although their business sales have not gone down. So we have creditworthy businesses waiting for credit.

What this amendment does is--and I wish to ask the Senator if this is correct--this really is something--we are filling a gap TARP did not fill. A failure that TARP, I am afraid, legitimately is criticized for, we are trying and the Senator's amendment is trying to correct, to fill a gap which we did not fill in when we passed the TARP.

So there are incentives in this amendment to extend credit. That is the point of the amendment; that is, we will get credit flowing again. So the TARP reference, to me, is totally inappropriate. I wish to ask the Senator if that is correct.

One last thing. This is what our local banks have been pleading for.

I wish to thank the Senator for her leadership on so many other parts of this bill. This is a critical bill. It is a critical amendment that is now being offered.

We are at yet another moment in this ongoing economic crisis at which we have to choose, choose between taking action to help lift our country and its people, or failing to act to alleviate their struggles. Too often, in the face of opposition from many of our Republican colleagues, we have been delayed in making these choices. The legislation before us today is no exception: This bill has been on the Senate floor for 10 legislative days.

That is sad, because every day of delay on this bill has been another day that small businesses, businesses our Republican colleagues repeatedly commend as America's job-creation engines, lack the access to capital they need to continue to operate or grow. As the financial system recovers from the damage done by the greed and speculation of some on Wall Street, local banks that small businesses have depended on, and in many cases worked with for years, are not providing them with the capital to finance their inventories, meet their payrolls, operate their factories or add new products.

This legislation seeks to bridge that gap. If passed it will give thousands of American business owners a chance to keep current workers or hire new ones. It is the sort of thing we should rush to do in this economy.

Let me outline a few of the ways in which this legislation will help. This legislation would establish the State Small Business Credit Initiative, an effort that I have been working on for many months along with several of our colleagues here in the Senate, leaders in the House of Representatives, and the administration. Building on successful efforts in Michigan and other States, the initiative would provide crucial funding to State and local programs that expand capital access for small businesses.

These programs help businesses escape one of the traps that continues to hold back our economy: The fact that just as the recession has damaged the value of our homes, it has also damaged the value of the real estate, equipment and other items these businesses offer as collateral to secure loans, making it harder to get those loans and therefore harder to keep or hire workers, feeding a downward spiral that stunts growth.

This bill also includes a series of efforts to boost small-business lending that will create thousands of jobs without adding to the deficit. For instance, inclusion of the Small Business Job Creation and Access to Capital Act, which raises Small Business Administration loan limits, will increase small-business lending by as much as $5 billion. It also includes an Intermediary Lending Pilot Program, a proposal I offered which allows SBA to make loans to nonprofit intermediary lenders, who can then loan that money to growing businesses.

Other provisions of the bill will help more small businesses sell their products overseas or win government contracts, and provide much- needed assistance to SBA's women's business centers and microloan programs that help businesses in underserved communities.

The substitute amendment now before us does not include one provision which I support, but which hopefully we will now add. The Small Business Lending Fund would have provided $30 billion in capital support to the Nation's small banks. It is similar to the Bank on Our Communities Act that I and many others have supported.

Some of our colleagues objected to this provision, ostensibly on the grounds that it was a reprise of TARP. But unlike TARP, in which most of funds went to the largest institutions, this program targets the community banks that actually make the vast majority of small business loans. While many of the financial institutions receiving TARP funds failed to use that support to make the business loans needed to boost our economic recovery, this program's whole purpose would be to increase small-business lending. Community banks would be rewarded for increasing their small business lending, and penalized if they do not, This program would not cost taxpayers. Instead, it would raise approximately $1.1 billion. At a time when some in this chamber say the deficit is such a problem that we cannot even afford extended benefits for the jobless, why would we not support a program that would not only help create jobs, but reduce the deficit by $1.1 billion?

While I strongly support the Small Business Lending Fund, I believe it is an urgent priority to get small businesses the help they need. Even without the Small Business Lending Fund provision, this legislation represents a much-needed effort to provide more capital to businesses in need.

New access to an SBA loan or to support from a State capital-access program can be the difference between expanding or contracting, between growing or going out of business. These businesses and their workers should not have to wait for help any longer, and we can provide it, today, by approving this bill.

Mr. President, for weeks we have sought to continue extended emergency unemployment benefits. We must do this because, while our economic recovery has begun, it has a long way to go. Our economy is not yet generating enough jobs to put people back to work who are searching for work. The repercussions of the worst financial crisis in generations are still felt across our country.

And so to help Americans who have lost their jobs through no fault of their own, we have sought to continue these extended unemployment benefits. We have met opposition and delay. Yesterday, we finally broke through the Republican filibuster that was the source of that delay.

Now we have a chance to do what we should have done weeks ago. In State after State, thousands of people await our decision, including more than 70,000 in my State. We cannot give them back the weeks of anxiety our delays have caused. But we can act today. I urge my colleagues to support this measure and give struggling American families the help they need and deserve.

Mr. President, millions of Americans all across the country, and hundreds of thousands in my State, have lost their jobs. To soften the blow of those job losses, we seek to extend the emergency unemployment insurance benefits that many of these Americans receive. Since the beginning of this crisis, we have extended these benefits several times, but more recently, a Republican filibuster has kept us from doing so.

I hope we will finally clear the way to extend these benefits today, because the failure to do so has been deeply wrong. It has done great harm to millions of American families. Already coping with an economy that is not yet creating the jobs they need, these families must also cope with the fact that because of a Republican filibuster, Congress has failed to provide the help they need.

The arguments offered in opposition to this extension aren't just a matter of differing opinions. They are fictions. And based on these fictions, the opponents seek not just to block an extension of unemployment benefits for millions of jobless Americans, but to stop us from even holding a vote.

Some opponents tell us they oppose this extension because jobless benefits encourage workers to stay on unemployment instead of seeking work. In fact, the Bureau of Labor Statistics reported just last week that in May of this year, there were about 3.2 million job openings in the United States. There were at the same time roughly 15 million unemployed Americans. With nearly five jobless workers for every job opening, desire to work on the part of the American people is definitely not the problem. Instead of disparaging the work ethic of Americans, these members should help us get desperately needed aid to workers who lack not the desire to work, but the opportunity.

These opponents also tell us they oppose this extension because it will add to the deficit. This is an odd position to take after having supported proposals, such as the Bush tax cuts, that added far more to the deficit than this legislation would add. To account for this clear contradiction, they say that they do not believe those tax cuts added to the deficit. The Republican leader was quoted last week as saying, ``There's no evidence whatsoever that the Bush tax cuts actually diminished revenue.'' He went on to say that this is ``the view of virtually every Republican.''

Tax cuts decrease tax revenue. This is not debatable. The entire economic team from President Bush's White House will tell you so. Alan Viard, former chief economist of President' Bush's Council of Economic Advisers, has said, ``Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that.'' And according to the Congressional Budget Office, roughly half the increase in our deficits since 2001 is due to those tax cuts. By contrast, the unemployment extension would barely move the needle on our debt.

And what is the consequence of making these inaccurate arguments? It is millions of Americans dealing with tragedy on top of tragedy. Not only have they lost the jobs that provided a decent living for themselves and their families, but the benefits that could help them keep food on the table and help clothe their children are held up by politicians who fail to see that their justifications are fictional.

It is deeply frustrating and sad that so many of our colleagues do not see the need to help these families. It is disappointing that they justify their obstruction with clearly false arguments. And it is outrageous that they would oppose even our ability vote on this measure.

Michigan families who need us to act should not have to wait 1 more day for the help they need. Voting to approve this cloture motion is the only justifiable course.

Mr. President, I would like to announce for the information of the Senate and the public that the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs has

scheduled a hearing entitled, ``Social Security Disability Fraud: Case Studies in Federal Employees and Commercial Drivers Licenses.'' The Subcommittee hearing will focus on the findings of a Government Accountability Office Report, ``Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Disability Payments.'' Witnesses for the hearing will include The Honorable Michael J. Astrue, the Commissioner of the Social Security Administration, and Mr. Gregory D. Kutz, Managing Director of Forensic Audits and Special Investigations at the Government Accountability Office.

The Subcommittee hearing has been scheduled for Tuesday, July 27, 2010, at 9 a.m., in room 342 of the Dirksen Senate Office Building. For further information, please contact Elise Bean of the Permanent Subcommittee on Investigations.

Mr. President, Senator Merkley and I, as the principal authors of sections 619, 620, and 621 of the Dodd-Frank Act, thought it might be helpful to explain in some detail those sections, which are based on our bill, S. 3098, called the Protect Our Recovery

Through Oversight of Proprietary, PROP, Trading Act of 2010, and the subsequently filed Merkley-Levin Amendment, No. 4101, to the Dodd- Lincoln substitute, which was the basis of the provision adopted by the Conference Committee.

I yield the floor to my colleague, Senator Merkley.

I thank my colleague for the detailed explanation he has provided of sections 619 and 620, and fully concur in it. I would like to add our joint explanation of section 621, which addresses the blatant conflicts of interest in the underwriting of asset-backed securities highlighted in a hearing with Goldman Sachs before the Permanent Subcommittee on Investigations, which I chair.

The intent of section 621 is to prohibit underwriters, sponsors, and others who assemble asset-backed securities, from packaging and selling those securities and profiting from the securities' failures. This practice has been likened to selling someone a car with no brakes and then taking out a life insurance policy on the purchaser. In the asset- backed securities context, the sponsors and underwriters of the asset- backed securities are the parties who select and understand the underlying assets, and who are best positioned to design a security to succeed or fail. They, like the mechanic servicing a car, would know if the vehicle has been designed to fail. And so they must be prevented from securing handsome rewards for designing and selling malfunctioning vehicles that undermine the asset-backed securities markets. It is for that reason that we prohibit those entities from engaging in transactions that would involve or result in material conflicts of interest with the purchasers of their products.

Section 621 is not intended to limit the ability of an underwriter to support the value of a security in the aftermarket by providing liquidity and a ready two-sided market for it. Nor does it restrict a firm from creating a synthetic asset-backed security, which inherently contains both long and short positions with respect to securities it previously created, so long as the firm does not take the short position. But a firm that underwrites an asset-backed security would run afoul of the provision if it also takes the short position in a synthetic asset-backed security that references the same assets it created. In such an instance, even a disclosure to the purchaser of the underlying asset-backed security that the underwriter has or might in the future bet against the security will not cure the material conflict of interest.

We believe that the Securities and Exchange Commission has sufficient authority to define the contours of the rule in such a way as to remove the vast majority of conflicts of interest from these transactions, while also protecting the healthy functioning of our capital markets.

In conclusion, we would like to acknowledge all our supporters, co- sponsors, and advisers who assisted us greatly in bringing this legislation to fruition. From the time President Obama announced his support for the Volcker Rule, a diverse and collaborative effort has emerged, uniting community bankers to old school financiers to reformers. Senator Merkley and I further extend special thanks to the original cosponsors of the PROP Trading Act, Senators Ted Kaufman, Sherrod Brown, and Jeanne Shaheen, who have been with us since the beginning.

Senator Jack Reed and his staff did yeoman's work in advancing this cause. We further tip our hat to our tireless and vocal colleague, Senator Byron Dorgan, who opposed the repeal of Glass-Steagall and has been speaking about the risks from proprietary trading for a number of years. Above all, we pay tribute to the tremendous labors of Chairman Chris Dodd and his entire team and staff on the Senate Banking Committee, as well as the support of Chairman Barney Frank and Representative Paul Kanjorski. We extend our deep gratitude to our staffs, including the entire team and staff at the Permanent Subcommittee on Investigations, for their outstanding work. And last but not least, we highlight the visionary leadership of Paul Volcker and his staff. Without the support of all of them and many others, the Merkley-Levin language would not have been included in the Conference Report.

We believe this provision will stand the test of time. We hope that our regulators have learned with Congress that tearing down regulatory walls without erecting new ones undermines our financial stability and threatens economic growth. We have legislated to the best of our ability. It is now up to our regulators to fully and faithfully implement these strong provisions.

I yield the floor to Senator Merkley.

I thank the Senator, and I concur with his detailed explanations. His tireless efforts in putting these commonsense restrictions into law will help protect American families from reckless risk-taking that endangers our financial system and our economy.

The conflicts of interest provision under section 621 arises directly from the hearings and findings of our Permanent Subcommittee on Investigations, which dramatically showed how some firms were creating financial products, selling those products to their customers, and betting against those same products. This practice has been likened to selling someone a car with no brakes and then taking out a life insurance policy on the purchaser. In the asset-backed securities context, the sponsors and underwriters of the asset-backed securities are the parties who select and understand the underlying assets, and who are best positioned to design a security to succeed or fail. They, like the mechanic servicing a car, would know if the vehicle has been designed to fail. And so they must be prevented from securing handsome rewards for designing and selling malfunctioning vehicles that undermine the asset-backed securities markets. It is for that reason that we prohibit those entities from engaging in transactions that would involve or result in material conflicts of interest with the purchasers of their products.

First, I would like to address certain areas which we exclude from coverage. While a strong prohibition on material conflicts of interest is central to section 621, we recognize that underwriters are often asked to support issuances of asset-backed securities in the aftermarket by providing liquidity to the initial purchasers, which may mean buying and selling the securities for some time. That activity is consistent with the goal of supporting the offering, is not likely to pose a material conflict, and accordingly we are comfortable excluding it from the general prohibition. Similarly, market conditions change over time and may lead an underwriter to wish to sell the securities it holds. That is also not likely to pose a conflict. But regulators must act diligently to ensure that an underwriter is not making bets against the very financial products that it assembled and sold.

Second, I would like to address the role of disclosures in relations to conflicts of interest. In our view, disclosures alone may not cure these types of conflicts in all cases. Indeed, while a meaningful disclosure may alleviate the appearance of a material conflict of interest in some circumstances, in others, such as if the disclosures cannot be made to the appropriate party or because the disclosure is not sufficiently meaningful, disclosures are likely insufficient. Our intent is to provide the regulators with the authority and strong directive to stop the egregious practices, and not to allow for regulators to enable them to continue behind the fig leaf of vague, technically worded, fine print disclosures.

These provisions shall be interpreted strictly, and regulators are directed to use their authority to act decisively to protect our critical financial infrastructure from the risks and conflicts inherent in allowing banking entities and other large financial firms to engage in high risk proprietary trading and investing in hedge funds and private equity funds.

Mr. President, I would like to thank Chairman Dodd for his extraordinary dedication in shepherding this massive financial regulatory reform package through the Senate and the conference committee. This has been a long process, and he and his staff have been very able and supportive partners in this effort.

Mr. President, if there is no one on the minority side waiting to speak, I ask unanimous consent that I be allowed to speak for 4 minutes.

Mr. President, for too long, too many firms on Wall Street have had free rein to profit at the expense of their own clients, to engage in the riskiest sorts of speculation, to prosper from their risky bets when they pan out, and to have the taxpayers cover the losses when they do not pan out. For too long, there has been no cop on the beat on Wall Street.

That must end, and we can end it today by passing the Dodd-Frank bill. The legislation before us will rebuild the firewall between the worst high-risk excesses of Wall Street and the jobs and homes and futures of ordinary Americans.

The Permanent Subcommittee on Investigations, which I chair, spent 18 months and held four hearings investigating the causes of the financial crisis. The bill Senator Dodd and so many others have crafted will do much to rein in the problems we identified in our four hearings and during our investigation, and I greatly appreciate the recognition of the role of our work on the subcommittee in Senator Dodd's remarks last night.

This bill will prevent mortgage lenders such as Washington Mutual, the subject of our first hearing, from making ``liar loans'' to borrowers who cannot repay, from paying their salespeople more for selling loans with higher interest rates, and from unloading all the risk from their reckless loans on to the rest of the financial system.

This bill will dissolve the Office of Thrift Supervision, which looked the other way despite abundant evidence of Washington Mutual's abuses, as our second hearing showed.

This bill will bring new oversight and accountability to credit rating agencies, which, as our third hearing showed, issued inaccurate ratings that misled investors. Those ratings were paid for by the very same companies that produced the products being rated, which is a clear conflict of interest.

The bill before us will rein in the abusive practices of investment banks such as Goldman Sachs, the subject of our fourth hearing. It will sharply limit their risky proprietary trading. It will stop the egregious conflicts of interest that result when these firms package and sell investment products, often containing junk they want to dispose of, and then make a bundle betting against those very same products.

Those who claim this bill fails to rein in Wall Street cannot explain the massive amounts of effort and money Wall Street has spent to defeat this bill. If Wall Street likes this bill, it sure has a funny way of showing it.

The evidence from our investigation and from so many other sources is clear: We must put an officer back on the beat on Wall Street so the jobs, homes, and futures of Americans are not again destroyed by excessive greed. I commend Senator Dodd and his staff and all those who have brought us to this historic moment. More than anything else, it is the power of Senator Dodd's arguments and the deep respect for him among the Members of this body that have brought us to the finish line.

I yield the floor.

Mr. President, I thank my dear friend from Connecticut. He has made such an extraordinary contribution, not just to this bill but to this Senate over the years. I cannot say enough about him, his extraordinary integrity and passion that he brings to these subjects.

Senator Merkley, on the proprietary trading language, of course, as the Senator from Connecticut has already recognized, is in the lead there and has been an absolutely great partner and leader on that.

But I want to especially thank the Senator from Connecticut for his passion and for his--and I was very serious about the respect with which the Senator is held in this body. Without it, without that feeling about the Senator, as well as the cause the Senator espouses with others, obviously, we would not be where we are today.

Mr. President, last month, Mexican President Felipe Calderon addressed a joint session of Congress, highlighting the dangerous role that American-made firearms play in the violence currently plaguing both sides of the U.S.-Mexico border. President Calderon drew a link between the 2004 expiration of the U.S. federal assault weapons ban and a subsequent surge in violence in Mexico. In his speech, President Calderon urged Congress to reinstate a federal ban on assault weapons, a call I have long supported. By exploiting weak U.S. gun laws and corrupt gun sellers in the United States, Mexican drug gangs have amassed arsenals of military-style assault weapons. These guns have been used to kill thousands in Mexico and pose a grave and growing security threat to Americans north of the border.

Mexican law enforcement officials increasingly are being out-gunned by drug gangs bearing military-style assault weapons, .50 caliber sniper rifles and other high-powered weapons that originate in the United States. Using trace data from the Bureau of Alcohol, Tobacco, Firearms and Explosives, ATF, the U.S. Government Accountability Office, GAO, determined that from fiscal year 2004 to fiscal year 2008, over 20,000, or 87 percent, of firearms seized by Mexican authorities originated in the United States. Additionally, the GAO reported that the number of assault weapons within this total continues to grow. In fact, approximately 25 percent of the firearms seized by Mexican authorities in fiscal year 2008 were high-powered assault weapons, such as AR-15 and AK-type semi-automatic rifles.

However, the threat posed by assault weapons is not faced exclusively by law enforcement personnel in Mexico. Drug trafficking across the border into the United States has been increasingly accompanied by violence in the American Southwest, forcing police departments to combat criminals with military-style arsenals. Former Houston Police Chief Harold Hurtt acknowledged the AK-47 assault rifle has become the ``weapon of choice'' for major drug dealers, warring gangs and immigrant smugglers. ``The reality on the street is that many of these weapons are readily available,'' according to Hurtt, forcing the Houston Police Department to consistently upgrade its weaponry to match the firepower of criminals armed with assault weapons. Just last week, Jeffrey Kirkham, the Chief of Police in Nogales, Arizona, reported that Mexican drug cartels have made death threats against his department in response to a successful drug bust. Criminals armed with assault weapons are a direct threat to American law enforcement officials and the communities they protect.

Reauthorizing a Federal ban on assault weapons would help to reduce violence in Mexico and the United States. When the first federal assault weapons ban expired in 2004, 19 of the highest powered and most lethal firearms became legal to purchase, including semiautomatic weapons that incorporated bayonet mounts or grenade launchers. In the absence of a ban, these lethal weapons continue to stream across the Mexican border, arming criminals and placing border communities in grave danger. The reinstatement of a Federal assault weapons ban has the overwhelming support of the law enforcement community, and I look forward to working with my colleagues in the Senate toward that goal.

Mr. President, roughly 2 years ago, our Nation suffered a catastrophe. It was not a hurricane or an earthquake. It was no act of God. It was a man-made disaster, manufactured in the boiler rooms of unscrupulous mortgage lenders and the offices of pay-for-hire credit rating agencies, in the headquarters of sluggish regulators, and then vastly expanded in its negative impact in the boardrooms of Wall Street financial firms.

The financial crisis they all helped create has cost millions of Americans their jobs, their homes, and their financial security. It has endangered businesses large and small. It continues to weigh down our economy today. It required trillions of dollars of government aid just to keep the crisis from sliding into a depression.

Addressing the causes of this crisis, in an effort to ensure that it is not repeated, is our very serious obligation. We now have before us, months in the making, something that constitutes our best efforts to carry out that obligation. The legislation before us contains many important provisions.

But it is, in sum, an attempt to build a firewall between the worst high-risk excesses of Wall Street on the one hand and the jobs and homes and futures of ordinary Americans on the other. I strongly support the Dodd-Frank bill and encourage our colleagues to do the same.

Senator Dodd spoke at some length a few minutes ago about this bill. He said that he cannot legislate integrity, wisdom, passion, or competency. That is surely true. But without Senator Dodd's integrity, wisdom, passion, and competency, we would not be where we are today, on the threshold of making a generationally important reform of the financial community.

Senator Dodd made reference to the Permanent Subcommittee on Investigations, and the investigations which we held into the financial crisis. I have seen up close and personal and in detail the worst of those excesses. Our colleagues on the subcommittee, including my ranking member, Senator Coburn, my very active member on that subcommittee, Senator Kaufman, and others, we saw these excesses in four different hearings.

For over almost a year and a half, our subcommittee devoted our resources to examining some of the causes and consequences of the financial crisis. We issued dozens of subpoenas. We examined millions of pages of documents. We conducted over 100 interviews. We took more than 30 hours of testimony during those four public hearings.

Those hearings focused on the practices of risky mortgage lenders, using Washington Mutual, WaMu, as a case history. We focused in the second hearing on the failures of the regulators to rein in WaMu's risky practices, in a third hearing on the inaccurate risk assessments of credit rating agencies, and then in the fourth hearing on the egregious practices of some Wall Street investment banks using, as a case history, Goldman Sachs.

In each of those hearings, we learned important facts about how the financial industry and those tasked with

overseeing it failed in their obligations, plunging the Nation into crisis and a deep recession. I want to set out how the legislation before us addresses many of the lessons we learned in the subcommittee's investigation.

Our hearings began with a case study of Washington Mutual Bank, a $300 billion Seattle-based thrift, that, thanks to its reckless lending, became the largest bank failure in America's history. In the pursuit of higher and higher profits, WaMu's management turned its focus from traditional mortgage lending to high-risk subprime and adjustable-rate mortgage loans.

In doing so, it engaged in practices that endangered the bank, its borrowers, and the economy at large. It sold loans to borrowers that it knew or should have known would be unable to repay. It paid its salespeople more if they sold higher risk loans, with higher interest rates or other terms that made them more difficult to repay.

Internal audits repeatedly found high levels of fraud and abuse in the bank's loans. But business continued as usual. WaMu then dumped these risky loans into the financial system, selling them or packaging them into mortgage-backed securities that Wall Street eagerly scooped up, flooding the stream of commerce with toxic assets like a polluter dumping poison into a river.

WaMu collapsed in 2008, leaving behind a trail of shattered homeowners and investors. Its case history was emblematic of a whole host of irresponsible mortgage lenders that loaded up our mortgage markets with toxic securities.

The legislation before us does much to address these problems. A consumer financial protection bureau will bring new scrutiny to the practices of financial companies, providing important oversight that can end the kind of abusive and even fraudulent practices used by WaMu and other mortgage lenders.

Other provisions will require those who create mortgage-backed securities, such as WaMu, and the investment banks it used, to retain a portion of the risk of securities that are backed by those high-risk loans, such as subprime mortgages or option ARMs so that securitizers will not be able to offload all that risk onto the market and walk away from the losses that occur down the road.

Still another set of provisions in this bill ban so-called liar loans, which allowed WaMu and others to sell loans without any documentation of a borrower's income or ability to repay.

The bill also prohibits the practice of paying salespeople more for gouging homeowners with higher rates or other terms that make loans harder to repay. Each of those reforms addresses critical problems exposed in our subcommittee's hearings, which helped to build the legislative history supporting the need for this bill.

Most of the reforms also require implementing regulations. I hope that those writing the regulations will pay heed to the problems uncovered in our hearings and take the steps needed to protect our mortgage markets from future abuses.

WaMu might not have been able to engage in its worst practices for as long as it did had it been confronted by Federal regulators. Instead, our investigation found that the Office of Thrift Supervision, WaMu's primary regulators, was more a lapdog than a watchdog. Repeatedly its examiners identified enormous problems with the bank's lending and securitization operation. Yet higher-ups in the Office of Thrift Supervision failed to take appropriate action. When the Federal Deposit Insurance Corporation sought to address the obvious problems in WaMu, the Office of Thrift Supervision, OTS, erected roadblocks that prevented action.

Documents show that the head of OTS referred to Washington Mutual as their agency's constituent, perhaps reflecting an awareness that the country's largest thrift was also the OTS's largest single source of funding.

I am also afraid that comment calling Washington Mutual a constituent of its regulatory agency also ignored the obligation that should result from an agency being a fiduciary whose constituents are not the people they regulate but are the people of the United States of America.

Clearly, OTS has outlived its usefulness, and the legislation before us dissolves the OTS. In addition, a new Financial Stability Oversight Council will have broad authority to monitor individual financial institutions as well as the system at large to catch problem institutions such as WaMu and problematic practices such as high risk lending before they endanger the financial system as a whole.

Credit-rating agencies also failed their essential role in this crisis. Our investigation found these agencies, which supposedly supply expert and objective analysis of credit risk, used faulty risk models and assigned super-safe AAA ratings to products later revealed to be little better than junk. Paid by the Wall Street firms whose products they were supposed to objectively assess, they sought market share by working with these firms to ensure the high ratings needed to sell risky products to risk-averse investors such as pension funds and university endowments. They failed to account for overwhelming evidence that fraud was a major factor in a growing number of mortgage loans.

The Dodd-Frank bill sets up a new office in the Securities and Exchange Commission to oversee and examine the work of the credit- rating agencies. I pay tribute, by the way, to Senator Franken for the work he did in this area in the amendment he offered to the Senate. The Dodd-Frank bill requires the agencies to disclose their methodology and their track records. It allows investors to file private causes of action against such agencies that fail to thoroughly investigate products they rate.

The bill also tasks the SEC with examining the clear conflict of interest involved in Wall Street firms shopping for the highest rating among the various rating agencies. I am hopeful, at the end of the study, the SEC will adopt the approach taken in the Franken amendment that won bipartisan support in the Senate, and establish an intermediary that will separate the credit-rating firms from the investment banks that press them for high ratings in return for lucrative compensation. As part of their work, I hope the SEC will take an in-depth look at the documents and testimony in our subcommittee hearings that laid bear the conflicts of interest that undermine the accuracy of credit ratings.

Wall Street investment banks also played the major role in the crisis. Seeking ever higher profits, they aggressively marketed the mortgage-backed securities and exotic derivatives tied to the mortgage market that were at the heart of the crisis. Increasingly, those banks drew their profits not from helping client investors prosper but by trading for their own accounts, often in direct conflict with their clients' interests. Internal e-mails that the subcommittee disclosed showed Goldman Sachs repeatedly marketed mortgage-related financial instruments that it created and knew to be faulty, junk, and worse. After it did so, it then made the large bets against those very same instruments. Our investigation also showed Goldman Sachs made a large bet that the mortgage market as a whole was headed down, a bet it denies to this very day that it made, despite a mountain of evidence contained in the firm's own documents that it did so.

With Senator Merkley, I worked to address the outrageous conflicts of interest revealed in our hearings on investment banks. The Dodd-Frank bill makes important progress on this front. It sharply limits the risky proprietary trading that Goldman Sachs and other Wall Street firms used to rack up enormous profits while endangering the stability of the financial system.

While I wish the bill was more forceful in limiting these risky trades, especially in terms of limiting financial firm investments in hedge funds and private equity funds, the language in this bill will add substantial strength to the stability of the financial system.

In addition, the bill includes language to end the conflicts of interest revealed in our investigation of Goldman Sachs. No longer will financial firms be able to package and sell asset-backed products to investors and then bet against those same products. Those conflicts of interest will end, unless the regulators water down our strong language with weak enforcement.

The Dodd-Frank bill contains other much needed measures as well. It will

bring new transparency and accountability to the shadowy market in derivatives. It will protect taxpayers from the need to engage in the kind of multibillion-dollar bailouts required in the current crisis by allowing for an orderly resolution of failing financial firms. It empowers regulators to establish tough new capital requirements that make it harder for firms to become so big they endanger the stability of the system. It requires hedge funds to register with the SEC and provide information about their once-hidden operations. It also strengthens the process for shareholders to select corporate directors and to limit excessive executive pay.

We have seen all too clearly the consequences of lax regulation and tepid oversight, the consequences of assuming that Wall Street can police itself. That attitude has put millions of Americans in unemployment lines, has plastered foreclosure signs on millions of American homes, and has pumped billions of dollars of taxpayer money into Wall Street firms that happily profited from their risky bets and then leaned on the rest of us to bail them out when the bill came due.

I say to those colleagues who are considering voting against this bill: Knowing what our investigation and others have discovered, how can you oppose this effort to erect a wall between Wall Street's never- ending appetite for reckless risk and the rest of the American economy?

It is time to put the cop back on the beat on Wall Street. It is time to end Wall Street's ``heads we win, tails you lose'' game. It is time to prevent as best we can the next manmade disaster threatening our jobs, our homes, and our businesses. It is time to pass this major financial reform legislation, and I hope we will see a strong vote for it in the day ahead.

Mr. President, I rise to speak about a trip Senator Jack Reed and I recently took to Pakistan and Afghanistan. In Pakistan, we met with the Prime Minister, the Governor of the critical northern province that includes the Swat Valley, the Pakistani general who is commander of their Army's 11th Corps. In Afghanistan, we met in Kabul with General Petraeus, with Ambassador Eikenberry, with President Karzai, with many of his ministers.

Then, in Afghanistan, we traveled to Kandahar Province, where we met with General Carter, who is the commander of the ISAF forces, the Kandahar Governor and the city mayor of Kandahar. Then we met with the commander of the Afghan Army's 205th Corps, Major General Zazai.

One of the key things we saw, and something which is critically important to the success of this mission in Afghanistan, is that the Afghan Army be strengthened, take responsibility, primarily, for the security of the country, and lead operations which are joint operations between the Afghan Army and the coalition forces, including American forces.

That will be dramatized, that movement towards the shift of responsibility to the Afghans, where it belongs. A dramatic moment is going to take place later in July or early in August when, in a major operation in the area around Kandahar city, right in the heart of Taliban country, there is going to be a large number of forces that are Afghan forces, a large number of American forces, and from other countries, and it will be the Afghans who will be in the lead in that operation.

This is the Taliban's worst nightmare: facing an Afghan-led force that is going to clear them from control of the area. The Afghan people detest the Taliban, and they respect their own army. And our major goal and mission should be to build up that army, strengthen it sizewise and with equipment and training so it can take major security responsibility for that country. This is the path to success in Afghanistan.

Again, because of this planned operation, which is now announced, and because of a number of other steps which have been taken--a very significant number of positive steps in the last 6 months--I have some confidence we are on the way to a successful outcome in Afghanistan.

Afghanistan has made progress in a number of ways since my visit there in January.

The progress I refer to is toward the key goal of preventing Afghanistan from being dominated by a Taliban organization that would once again provide a haven for the international terrorist movement, al-Qaida.

To achieve that goal, Afghanistan must be able to take principal responsibility for its own security. We and other outsiders cannot secure Afghanistan, but we can help the Afghan security forces do so.

The building blocks to achieve that goal are present. The Afghan National Army, ANA, is respected by the people and the Taliban is despised and feared because of the terror they spread and threaten.

A capable, strong, large Afghan Army is the Taliban's worst nightmare because it means that the Taliban's propaganda that foreigners seek to dominate Afghanistan rings hollow. This is particularly true when Afghan troops are in the lead in joint operations with the troops of

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

Mr. President, I ask unanimous consent that on Thursday, July 15, following any leader time, the Senate then resume consideration of the conference report to accompany H.R. 4173, with the time until 11 a.m. equally divided and controlled between Senators Dodd and Shelby or their designees; with the 20 minutes prior to 11 a.m. divided as follows: 5 minutes each in the following order: Senators Shelby, Dodd, McConnell, and Reid; that at 11 a.m. the Senate proceed to vote on the motion to invoke cloture on the conference report.

Mr. President, I ask unanimous consent that the Senate

proceed to a period of morning business with Senators permitted to speak for up to 10 minutes each.

Mr. President, I ask unanimous consent that the Senate proceed to the following postal naming bills en bloc: Calendar Nos. 450, 451, and 452; H.R. 4861, H.R. 5051, and H.R. 5099.

I ask unanimous consent that the bills be read a third time and passed en bloc, the motions to reconsider be laid upon the table en bloc, with no intervening action or debate, and any statements relating to the bills be printed in the Record.

Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of Calendar No. 223, S. 1288.

Mr. President, I ask unanimous consent that the committee- reported substitute be agreed to; the bill, as amended, be read a third time and passed; the motions to reconsider be laid upon the table, with no intervening action or debate, and any statements related to the bill be printed in the Record.

Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of Calendar No. 433, S. 3372.

Mr. President, I ask unanimous consent that the bill be read a third time and passed, the motion to reconsider be laid upon the table, with no intervening action or debate, and any statements related to the bill be printed in the Record.

Mr. President, I understand that there is a bill at the desk. I ask for its first reading.

Mr. President, I ask for a second reading, and under the provisions of rule XIV, I object to my own request.