Floor Statements

Mr. President, under the previous order, the cloture vote on the substitute amendment will occur at 2 p.m. As a reminder, the filing deadline for second-degree amendments is 1 p.m. tomorrow.

If there is no further business to come before the Senate, I ask unanimous consent that it adjourn under the previous order.

Mr. President, I am pleased to cosponsor amendment No. 4016, introduced by Senator Mark Udall and Senator Lugar, to help provide Americans access to their credit score, an essential piece of personal financial information.

The way things stand now, the three primary credit bureaus charge people to gain access to their credit scores. Seven years ago, the 2003 Fair and Accurate Credit Transactions Act took a big step in the right direction by giving Americans access to their credit report once a year, on a no-cost, no-strings-attached basis, at each of the big three credit bureaus. But a credit report only goes so far. It is the credit score itself, not the report, that is so critical to the consumer when navigating our financial system, and free access to credit scores was not included in the 2003 act.

Credit score is often the single most important factor in obtaining a loan to buy a car or a house or in securing a credit card with a reasonable rate of interest. Credit scores can also play a key role in finding an apartment or purchasing a major household appliance. More and more, credit scores are also used by employers in the hiring process.

With so much riding on this number, it is essential that Americans be able to readily obtain their credit score, so they can evaluate whether it accurately reflects their credit risk. If the score is low, a consumer can evaluate the underlying credit information to see if there is an error in the data and what, if anything, they should do to correct an error. Consumers can also evaluate what steps they can take to improve their credit score by, for example, paying off debt or tearing up a credit card. To make those types of informed decisions, however, it is only fair for the consumer to know what all their creditors know--the credit score that has been electronically assigned to them by an impersonal, computer-driven credit bureau.

A credit score is calculated from a person's personal financial history as that history is captured in specific data points included in a credit report. We already know that the data in a credit report is often incomplete, out of date, or incorrect. We also know that the formulas used to produce credit scores from that data are complex, unpublished, and of uncertain predictive value.

The credit bureaus chum out profits by running people's personal financial information through their formulas. Then they sell the information to financial institutions, marketing companies, landlords, and others. The companies then turn around and sell the credit scores back to the consumers who otherwise can't find out what is being sent to multiple third parties about their credit status, without their ever having been informed about the score.

This whole setup is unfair. While credit scores serve a useful function in our financial system, fundamental fairness requires that people have ready access to this basic information about themselves-- information that is already being sold to their bank, their landlord, their employer, their government, and any other creditor willing to pay for it.

One more point. Right now, despite the efforts of Congress and the Federal

Trade Commission, some credit bureaus continue to engage in deceptive advertising of ostensibly ``free'' credit reports and scores that, in fact, require enrollment in a subscription credit monitoring service that charges a monthly fee, often $15. It is astonishing to me that some bureaus fight tooth and nail to avoid straightforward disclosures about the cost of their products and instead try to slip them in with deceptive offers of ``free'' credit scores or reports that are anything but. This is an issue we addressed in the credit card reform bill with new provisions to stop the deceptive advertising, and which the FTC is now working to implement. The credit bureaus have got to clean up their act.

What we can do today is pass the Udall-Lugar amendment, which would require that every time a consumer suffers an adverse event--such as a rejected loan--or receives materially less favorable terms--such as a high interest rate on a credit card--due to the consumer's credit score, the lender or potential lender would have to provide that credit score to the consumer. This requirement would enable people to find out what the credit bureaus are telling their creditors about their credit risk, whenever that information is used against them.

This amendment would help Americans take control of their credit histories, help restore fairness in the credit industry, and begin to close a gaping loophole that the credit bureaus have been exploiting for years. I commend Senator Udall for his leadership on this issue and encourage my colleagues to vote for it.

Will the Senator yield for a question?

How long does the Senator expect to take?

Does the Senator from Maine know how long Senator Pryor will take?

I thank the Senator.

Madam President, I come to the floor to support the amendment of the Senator Franken, amendment No. 3808, along with his cosponsors. This will address a major unresolved cause of the financial meltdown.

The cause which this amendment focuses on is the flawed and inaccurate credit ratings that labeled poor-quality mortgage-backed securities and high-risk collateralized debt obligations as AAA investments. AAA means they were on par, in the view of these rating agencies, with U.S. Treasurys. Investors from pension funds, to universities, municipalities, insurance companies, and more lost hundreds of billions of dollars, in part, because of these ratings.

How did the credit rating agencies get it so wrong? A big part of the answer--one that would be remedied by the Franken amendment--is the inherent conflict of interest that now permeates the credit rating industry. I am going to read from a few e-mails we uncovered and disclosed at our hearings. We had long hearings. We have been investigating this economic meltdown that we had--the financial meltdown--for about a year and a half. One of the four hearings we had was looking at the credit rating agencies--looking at Standard & Poor's, looking at Moody's--and looking through their documents, which we subpoenaed, literally, by the millions.

Listen to some of these e-mails, and we want to focus on what this conflict of interest is. If you want to get a feel for how it is that the credit rating agencies are being paid by the very people whose financial instruments they are doing the ratings of, listen to just a few of these e-mails which we got.

One Standard & Poor's analyst wrote that a ratings model that could have been released months before wasn't because we had to massage the subprime numbers; if ``we didn't have to massage the sub-prime . . . numbers to preserve market share.''

Inside Standard & Poor's you have their analysts saying we had to massage the numbers on this financial document. Why? Not because the rating required it or because the merits required it, but in order to preserve their market share they were massaging the subprime numbers.

Here is an e-mail from a UBS banker warning Standard & Poor's not to make it harder to get high credit ratings. This is a UBS banker, talking to the credit rating agency:

Heard you guys are revising your residential [mortgage

backed security] rating methodology. . . . Heard your ratings

could be 5 notches back of mo[o]dy's equivalent. This is

going to kill your [residential business]. It may force us

[UBS] to do moodyfitch only cdos.

The Standard & Poors manager who received the e-mail asked a colleague, ``[A]ny truth to this?'' The response:

We put out some criteria a couple of weeks ago that we will

begin to use for deals closing in July. . . . We certainly

did not intend to do anything to bump us off a significant

amount of deals.

They are worried about their deals. They are worried about their bottom line. The country worries about whether those AAA ratings are real.

Here is another example, called Vertical ABS. A major bank asks Standard & Poor's and Moody's to rate one of these financial instruments. The bank refused to cooperate with the analysts--so the bank is not working with the analysts at Standard & Poor's and Moody's to rate a CDO. One analyst now is complaining to another, inside of this credit rating agency.

Don't see why we have to tolerate lack of cooperation.

Deals likely not to perform.

``Deals likely not to perform,'' one analyst inside to another. That is Exhibit 94b, by the way, if anyone wants to look it up.

Despite the analyst's judgment that financial instrument, that CDO, was unlikely to perform, both Moody's and Standard & Poor's rated it, giving AAA ratings to the four top levels of that particular CDO. What happened? Six months later both agencies downgraded that financial instrument and it later collapsed.

One more example. In June 2007, a Moody's analyst sent an email to a Merrill Lynch banker stating that he could not finalize a rating until the issue of fees was resolved. The Merrill Lynch banker responded: ``We are okay with the revised fee schedule for this transaction. We are agreeing to this under the assumption that this will not be a precedent for any future deals and that you will work with us further on this transaction to try to get to some middle ground with respect to the ratings.'' Moody's assured the Merrill analyst that its deal analysis was independent from its fees, but it is clear as glass what is going on here. That is Exhibit 23 from our hearing.

It is past time to tackle the conflicts problem. This bill is the right legislation, and the Franken amendment takes the problem head on. It would direct the SEC to create a self-regulatory organization, a clearinghouse or SRO, to develop a method of assigning credit rating agencies to provide initial ratings to structured finance products. The entity would have the discretion to develop its own methodology for assignment--it could use a rotating system or a formula, just as long as the

issuer doesn't get to choose the rater. It wouldn't set prices or issue ratings, it would just act as an intermediary between issuers and raters. In addition, it could increase the number of assignments to a particular credit rating agency, based on that agency's past performance, or decrease assignments in the case of poor performance, creating a key incentive for accurate ratings.

The amendment would also permit issuers to go to whichever credit rating agency they wanted for second or third ratings.

I commend Senator Franken for this far-sighted effort to correct the conflicts problem. If we don't fix it now, we are going to be right back here with another financial crisis fueled by inaccurate, conflicts-ridden credit ratings.

I want to note that, while this amendment attacks the most important problem with CRAs, there are a number of other problems that also need to be addressed in the credit rating agency area. To me, the most important remaining problem is eliminating the current statutory ban that prevents real SEC oversight. This is what current law says right now in 15 U.S.C. section 78o-7(c)(2):

Notwithstanding any other provision of law, neither the

Commission nor any State (or political subdivision thereof)

may regulate the substance of credit ratings or the

procedures and methodologies by which any nationally

recognized statistical rating organization determines credit

ratings.

To me, that statutory ban against looking at the substance of a rating or the procedures or methodologies used to produce that rating is absurd. It ought to be eliminated. We can't give the SEC the responsibility for overseeing credit rating agencies and then prevent them from looking at the substance of a rating or the procedures or methodologies used to produce that rating.

I have introduced an amendment with Senator Kaufman that would eliminate that statutory provision and direct the SEC to set standards and exercise oversight of credit rating agency procedures and methodologies, including qualitative and quantitative data and models, to ensure that the ratings have a reasonable basis in fact and analysis. Given the overwhelming evidence at our hearing about basic flaws in the rating models, how the models were tweaked to help clients, and how the models were ignored when agencies wanted to inflate ratings, it defies common sense to prohibit the SEC from looking at the models and the procedures.

The Levin-Kaufman amendment would also preclude the credit rating agencies from relying on due diligence that they had reason to believe was wrong. Our investigation showed that the credit rating agencies knew that they were relying on bad information because of the rampant fraud and weak underwriting standards, and this led to bad ratings. Again, this is a commonsense fix, that we hope to offer later or have incorporated into a managers amendment.

In the meantime, I urge my colleagues to vote in support of the much- needed Franken amendment to eliminate the inherent conflicts of interest that now infest the credit rating industry.

I know the leader is trying to get on with votes, but I want to alert colleagues that our hearings, based on a 1\1/2\ year investigation, looked at one of the major causes of this collapse. One of the major causes was because our credit rating agencies were interested in their bottom lines instead of getting accurate ratings for the financial instruments, which our universities, our pension funds were buying.

The Franken amendment corrects it. It requires that this conflict of interest be ended. It does not just study it, it requires an end to the conflict of interest by allowing the Securities and Exchange Commission to identify an independent intermediary who will put a process in place to end this conflict of interest. I commend Senator Franken for his amendment.

Mr. President, I rise as a cosponsor in support of the Merkley-Klobuchar amendment to prohibit kickbacks to lenders who steer homeowners into bad mortgages.

The U.S. Senate Permanent Subcommittee on Investigations recently completed an 18-month investigation and a series of four hearings looking into some of the causes and consequences of the financial crisis. In our first hearing, the subcommittee examined the high-risk lending practices of Washington Mutual Bank, ``WaMu,'' which led to the largest U.S. bank failure of all time. WaMu was brought to the precipice of collapse, in large part, by irresponsible and abusive home lending practices such as steering homeowners into high-risk and high- cost loans, and failing to even verify borrower income when making those loans. The Merkley-Klobuchar amendment prohibits those practices, and would go a long way towards preventing the irresponsible behavior that led to the financial crisis.

In the years prior to its failure, WaMu routinely issued stated income and negatively amortizing loans, which undermined the safety and soundness of the bank and injected hundreds of billions of dollars of high-risk loans into the U.S. financial system. Stated income mortgage loans, sometimes called ``liar loans'' or ``no-doc'' loans, allow borrowers to write their income on a loan application, without offering proof such as a pay stub or W-2 form, and without lender verification. Stated income loans made up 90 percent of WaMu's home equity loans, 73 percent of its option arms, and 50 percent of its subprime loans. During our hearings on regulatory oversight of WaMu's high-risk lending, both regulators--the Office of Thrift Supervision and Federal Deposit Insurance Corporation--supported an end to stated income loans, and inspectors general from those same agencies also advocated that Congress consider doing so.

It's no surprise that WaMu loan originators were steering borrowers into high-risk, high-cost loans, because they were being paid more to do it. Wall Street had an appetite for high-risk loans, and so WaMu built a conveyor belt to churn them out. In order to generate the volume of high-risk loans needed to keep the conveyor belt running, WaMu had to convince people to take out high-risk loans, like Option ARMs, in lieu of low-risk fixed rate loans. WaMu paid loan originators and mortgage brokers much more for issuing these high-risk loans, and so the originators and brokers would do the convincing, and make the sales.

It is time to stop those dangerous lending practices, which had such disastrous consequences for the U.S. financial system, our economy, and American families.

The Merkley-Klobuchar amendment contains one clause that does concern me. The amendment explicitly allows loan personnel to be paid bonuses for loan volume. The recent financial crisis shows how dangerous loan volume incentives are--they encourage loan officers and mortgage brokers to issue as many loans as possible as quickly as possible, with the inevitable consequence being shoddy lending in which loan personnel cut corners and churn out loans to boost their compensation. Our hearing demonstrated how the bonuses paid by WaMu for loan volume and speed resulted in poor quality and even fraudulent loans. It is my hope that the regulators recognize the problem and interpret that provision to permit banks to assign bonuses for only a reasonable number of loans, and that those same bonuses also be made contingent on good quality lending. Regulators should interpret the provision in the context of the overall amendment whose clear aim is to prohibit shoddy lending practices and shut down the type of conveyor belt lending that dumped so many toxic loans into the marketplace.

The Merkley-Klobuchar amendment takes the steps needed to bar stated income loans. It doesn't go as far with respect to negatively amortizing loans, although it takes an important initial step. That step is requiring lenders to qualify borrowers for these loans by evaluating their ability to pay the highest interest rate that would be charged at any time during the first 5 years of the loan. While that is a good first step, I have introduced an amendment with Senator Kaufman that would go further and would effectively ban negatively amortizing loans because of their detrimental impact on the safety and soundness of individual financial institutions and the financial system as a whole.

WaMu's experience with neg am loans shows why these loans were so

dangerous to its operations. In 2006, more than 95 percent of WaMu's Option ARM borrowers made minimum payments, and, by the end of 2007, 84 percent of the total value of the Option ARMS in WaMu's portfolio were negatively amortizing. WaMu projected that negative amortization increased monthly mortgage payments for borrowers by 60 percent. Regulators found instances at its subprime originator, Long Beach Mortgage, of payment shock as high as 240 percent, where a loan payment jumped from $1,700 to $5,705 per month, with no data showing the borrower could afford the extra $4,000. Not surprisingly, the payment shock from much higher loan payments led to loan defaults by a large number of borrowers. According to the Treasury and FDIC Inspectors General, WaMu failed largely because of its high-risk loans. The subcommittee investigation found that these high-risk loans also contributed to the 2008 financial crisis, by loading up the financial system with toxic mortgages.

I am cosponsoring the Merkley-Klobuchar amendment because it would take the steps necessary to end stated income loans and lending practices that cause loan officers to steer borrowers to high-cost, high-risk loans.

Amendment No. 3759

Mr. President, it is with great honor that I recognize the 75th anniversary of the School of Social Work at Wayne State University. Since 1935, this fine institution has provided students in Michigan and across the Nation with the skills necessary to tackle some of the toughest challenges we face as a society. The theme of the anniversary celebration is ``Advancing Knowledge, Community Engagement,

and Social Justice,'' and it aptly characterizes the school's mission and legacy. The achievements of its many distinguished graduates and the impressive research the school has produced over the years have served to inform and improve public policy on a number of social welfare issues.

Located in the heart of metro Detroit, the School of Social Work's principal focus is on diverse urban populations. The school combines applied research with concrete field work to produce graduates who are highly skilled and ready to serve successfully in their chosen field. Under the leadership of Dr. Phyllis Ivory Vroom for nearly a decade, the School of Social Work is well positioned to address the increasingly complex problems on a city and state level and beyond.

Housed within the School of Social Work is the Center for Social Work Practice and Policy Research. This center, established in 2008, seeks to facilitate rigorous debate and to expand our understanding of the issues affecting disadvantaged individuals, families, and communities. The list of research topics is extensive, from health and human rights issues in the Middle East, to women's reproductive health in Africa, to substance abuse treatment and prevention within our own communities, to name only a few.

In recent years, the undergraduate degree program has gained prominence, ranking first in the nation among social work programs for the last four years by the Gourman Report. The graduate program also is highly regarded. The School of Social Work's graduation rate is among the highest in the university, which speaks to the commitment of the faculty and staff and the hard work and dedication of its student body.

I know my Senate colleagues join me in recognizing past and present faculty, staff, and alumni of the Wayne State University School of Social Work. These individuals have contributed mightily to the tremendous success of the school over the past 75 years. I look forward to another 75 years of inspired leadership and continued educational excellence.

Mr. President, I come to the Senate floor today to speak in support of a package of amendments to the financial reform bill that is a result of an investigation by the Permanent Subcommittee on Investigations, which I chair. I am submitting these amendments with the support of my colleague, Senator Kaufman, who is not only a member of the subcommittee but also sat with me through hours of subcommittee hearings over a period of 2 weeks to examine some of the causes and consequences of the crisis that nearly brought down our financial system, that necessitated billions of dollars in taxpayer money to arrest, and that was a principal cause of the worst recession in nearly a century.

We also are submitting the package as eight separate amendments to facilitate their consideration.

Over nearly a year and a half, our bipartisan investigation examined millions of pages of documents, conducted over 100 interviews, and culminated in four hearings during April, with over 2,500 pages of hearing exhibits and more than 30 hours of testimony. The American people, having suffered so much in this crisis and having had to pay so much of their hard-earned money to keep it from getting even worse, deserve to know what happened.

But more than establishing a record of what went wrong, we sought information to help keep us from repeating the same mistakes in the future. Like all of the subcommittee's investigations, our eye was on both establishing a factual record and on using that record to support legislation that would rebuild Main Street's defenses against the excesses of Wall Street.

The recklessness, lax oversight, and conflicts of interest our investigation has uncovered cry out for legislated reform. The hearings revealed that mortgage lenders such as Washington Mutual dumped hundreds of billions of dollars of high risk and sometimes fraudulent home loans into the U.S. financial system; banking regulators, such as the Office of Thrift Supervision, observed and understood the flaws and the risks, failed to stop them, and even impeded the examination efforts of the Federal Deposit Insurance Corporation; credit rating agencies, such as Moody's and Standard & Poor's, gave inflated ratings to risky structured finance products in an effort to keep market share and please their investment bank clients; and investment banks such as Goldman Sachs, assembled, marketed, and sold high risk mortgage-related products, while betting against the very products they created.

That is why I and Senator Kaufman have assembled a package of amendments to the financial regulatory reform bill now before the Senate. We believe these amendments would help stop the bad loans, misleading credit ratings, poor quality securitizations, and other problems we saw in our investigation, as well as slow down the existing revolving door for regulators. They are intended to strengthen an already strong bill that so many of our colleagues have worked so hard to bring to this point. Let me outline briefly what our amendments would accomplish.

Ban on Stated-Income and Negative Amortization Loans. First, in response to the hundreds of billions of dollars in high-risk mortgage loans that began this crisis and that were featured in our first hearing, our amendment would sharply limit two of the most dubious practices: stated-income loans and negatively amortizing loans. Stated- income loans, also known as ``liar loans,'' are ones in which lenders allow borrowers simply to state their income on the loan applications without any confirmation of the borrower's income or assets. Negative amortization loans

are loans in which lenders allow the borrowers, for a specified period of time, to pay less than the monthly amount needed to cover the interest, resulting in loan balances that increase rather than decrease over time, and then impose a much higher loan payment to make up for the earlier low payments. That leads to payment shock and loan defaults by a large number of borrowers.

Washington Mutual, which was the case history in our first hearing, used stated-income and negative amortization loans with disastrous results, leading to the largest bank failure in U.S. history. Stated- income loans made up 90 percent of its home equity loans, for example, and 70 percent of its option ARMs, adjustable-rate mortgages, which often are negatively amortizing. Because both types of loans default at much higher rates than traditional 30-year fixed rate mortgages, lenders such as Washington Mutual quickly sold them to remove the risk from their books. But those high-risk loans did not disappear; they were packaged into securities and sold to investors, spreading risk throughout the financial system. Eventually, when housing prices stopped rising and borrowers could not refinance their mortgages, the loans defaulted in record numbers, the securities plummeted in value, and the securitization market crashed. Our amendment would ensure that stated-income and negative amortization loans could not again be used to foist high-risk, poor quality loans off on investors in securitizations.

Skin in the Game Securitizations. Second, our amendment would strengthen an existing provision in the bill that requires financial firms to retain some of the risk of the mortgage-backed securities they assemble. Too often, lenders such as Washington Mutual and investment banks such as Goldman Sachs were in the business of packaging high-risk mortgages into structured financial instruments, slicing and dicing them in new ways, obtaining credit ratings indicating that portions of these instruments carried no more risk than Treasury securities but significantly higher returns, and then passing the risk to others, selling them to investors without retaining any risk on their books. In many cases, as our hearings showed, these financial institutions knew the products they had assembled were of dubious quality but were happy to sell them so long as they made a fee and knew that none of the risk could come back to harm them. This short-term pursuit of profits, with no concern for customers or for the toxic securities polluting the financial system, so damaged the securitization markets that they are still struggling to recover.

Our amendment would help stop these short-sighted and dangerous securitization practices by requiring financial institutions that securitize mortgages to keep some of their own skin in the game. It would build on an existing provision in the Dodd bill by requiring that securitizers keep an ownership interest in the securities they create. While the existing provision would require securitizers to keep a 5 percent interest in the securitization as a whole, it does not specify whether that 5 percent interest could be concentrated in a single portion, or tranche, of securities, such as the low-risk, supersenior tranche at the top or the high-risk equity tranche at the bottom, which is often what happened during the crisis. Our amendment would make it clear that the ownership interest would have to be distributed throughout the capital structure--not just in a single tranche--so that the securitizer's interests would be aligned with the interests of all levels of investors buying the securities and would give the securitizer a stake in the success of all of the tranches, not just one.

In addition, our amendment would make it clear that regulators could allow lenders to go below the 5 percent requirement only if they are including high-quality, low-risk assets in their securities, such as 30-year fixed rate mortgages. Inclusion of this low-risk standard in the provision allowing lenders to avoid the 5 percent requirement would create an enormous incentive for securitizers to use low-risk loans in their securitizations.

Gustafson Fix. Third, we would address the effects of a 1995 Supreme Court ruling in the Gustafson case that has left investors in private securities offerings without protection from material misstatements or omissions in the security's prospectus. The Gustafson ruling interpreted the securities laws as depriving purchasers in private offerings of the same protections against material misstatements or omissions that apply to public offerings. Our amendment would restore congressional intent and close that loophole.

FDIC Examination Authority. Fourth, we would strengthen protections for the Federal deposit insurance fund and against the need for taxpayer bailouts by enhancing the FDIC's authority to initiate bank exams and enforcement actions. Under our amendment, the FDIC's chairperson would have the authority to initiate an exam, authority that now rests solely with the FDIC's board, which is cumbersome and includes other regulators that can prevent FDIC from acting quickly. During the subcommittee's second hearing, documents and testimony showed how the Office of Thrift Supervision thwarted FDIC efforts to participate in examinations of Washington Mutual and take enforcement action to reduce the bank's unsustainable high-risk lending. The Federal agency charged with protecting the deposit insurance fund should not have to jump through hoops to look at bank records or stop unsafe or unsound practices. Our amendment would make it clear that the FDIC can act decisively and quickly to deal with endangered financial institutions before their failure threatens the FDIC insurance fund or the safety of the financial system.

Credit Rating Agencies. Fifth, our amendment would strengthen a host of provisions in the Dodd bill dealing with credit rating agencies. Credit rating agencies did not originate the bad loans or risky securities that led to the crisis. But their disastrously inaccurate ratings made those loans and securities easy to sell and helped spread risk throughout the financial system.

The subcommittee's third hearing showed a clear conflict of interest inherent in the credit rating agencies' business model: They are dependent for revenue upon the same financial firms whose products they are supposed to impartially rate. Our amendment would eliminate that conflict by requiring rating agencies to receive their fees through an intermediary to be established or designated by the SEC.

In addition, the amendment would strike the existing statutory ban that prohibits direct SEC oversight of the credit rating models, methodologies, and criteria that failed so catastrophically in this crisis, and would explicitly direct the SEC to oversee them. We would also require the agencies to rate as more risky products that, for example, lack past performance data; that are provided by an issuer with a history of issuing poorly performing instruments; that receive prior credit ratings already subject to downgrade; that consist of synthetic instruments in which no income is being contributed by actual assets; or that consist of instruments whose complexity or novelty make it difficult to reliably predict their performance. We would also build upon a Dodd provision requiring that certain information be provided about each credit rating issued by an agency, including a requirement that ratings come with an ``expiration date'' indicating whether they are intended to be effective for more or less than a year. We would also bar credit rating agencies from relying on due diligence reviews of financial products when the agencies have reason to believe that the due diligence is inadequate. Together, these provisions would help ensure that the SEC has the authority it needs to conduct vigorous and meaningful oversight of credit rating agencies, instead of the current system that provides for SEC oversight in theory but denies it in practice.

Restriction on Synthetic Asset-Backed Securities. Sixth, we would rein in the pernicious effects of synthetic asset-backed securities on the financial system. These securities contain no real assets. Their value is tied to the assets that they reference, but the securitizer and the investors need not, and often do not, have any economic interest in those assets. Too often, these instruments have amounted to nothing more than bets on whether a security or other asset would go up or down in value. Such transactions,

usually embodied in collateralized debt obligations, or CDOs, greatly magnified the damage that resulted when poor quality mortgage-backed securities defaulted and helped bring down storied financial firms such as Lehman Brothers and Bear Stearns.

Under our amendment, synthetic asset-backed securities that lack any substantial or material economic purpose other than speculation on the value or condition of referenced assets could no longer be sold. Wall Street firms that claim a synthetic asset-backed security has a substantial economic benefit apart from wagering on asset values will have an opportunity to prove those claims to the SEC. We must end the pollution of the U.S. financial system with these dangerous financial instruments that spread risk without adding anything of substance to the real economy.

Slowing the Revolving Door. Seventh, we would seek to slow down the revolving door between financial regulatory agencies and the financial sector by requiring a 1-year ``cooling off'' period before a Federal financial regulator could work for a financial institution he or she regulated. In 2005, we enacted a 1-year cooling off period for bank examiners, after Riggs Bank hired the bank examiner who used to oversee its operations and who took some questionable regulatory actions before switching his employment. That law has been on the books for 5 years, providing a healthy deterrent to bank examiners that get too close to the banks they regulate. Our amendment would expand this approach to all Federal financial regulators, from the Federal Reserve to the SEC to the CFTC to the new Consumer Financial Protection Bureau. It would prevent a regulator who participated personally and substantially in the regulation or oversight of a particular financial institution or took an enforcement action against a specific financial institution from taking a job with the same institution for at least a year.

Foreign Bank Anti-Tax Evasion Remedy. Finally, based upon a number of previous subcommittee investigations showing how some foreign banks have been deliberately assisting U.S. clients to evade U.S. taxes, our amendment would give the Treasury Department discretionary authority to take measures against foreign financial institutions or foreign jurisdictions that impede U.S. tax enforcement. Those measures include such actions as imposing additional recordkeeping requirements, refusing to honor credit cards issued by a foreign bank or, in the most extreme cases, prohibiting U.S. financial institutions from doing business with the offending foreign financial institution or jurisdiction. This provision would build upon a Patriot Act provision that has proven highly effective in stopping foreign banks from engaging in money laundering activities and would take the same approach in discouraging foreign banks from aiding or abetting tax evasion.

We offer this amendment in the hope of improving what is already a strong bill, either as a package or divided into its separate elements. It is not all that needs to be done--for example, I have joined with Senator Merkley in an amendment submitted to limit proprietary trading and conflicts of interest by financial institutions--additional problems examined during the subcommittee hearings. It is clear that the evidence revealed by the subcommittee's lengthy investigation and four hearings requires Congress to act now to protect Main Street from financial abuses that have so damaged our economy and American families.

Mr. President, for more than 20 years, a group called the Lord's Resistance Army, or LRA, has operated in central Africa, perpetrating some of the most horrific acts of violence one can envision. The LRA began as a rebel group saying it drew its guidance from the Ten Commandments, but in the two decades since it began, it has routinely violated those commandments in the most gruesome and unimaginable ways. Its continued campaign of violence calls out for Congress and the United States to act.

Recently the United Nations uncovered the latest of the LRA's violent acts, the rounding up and massacring of more than 100 innocent villagers in a remote part of the Democratic Republic of the Congo. The New York Times reported on May 1 that U.N. officials had learned of the massacre, which occurred in February. U.N. officials interviewed several witnesses, including one woman whose lips were cut off by LRA rebels, who told the woman she was talking too much.

The LRA's actions were described in brutally clear terms in a recent Human Rights Watch report entitled ``Trail of Death.'' In it Human Rights Watch investigators describe the typical tactics, techniques, and procedures of this terrible group of people:

The LRA used similar tactics in each village they attacked

during their four-day operation: they pretended to be

Congolese and Ugandan army soldiers on patrol, reassured

people in broken Lingala (the common language of northern

Congo) not to be afraid, and, once people had gathered,

captured their victims and tied them up. LRA combatants

specifically searched out areas where people might gather--

such as markets, churches, and water points--and repeatedly

asked those they encountered about the location of schools,

indicating that one of their objectives was to abduct

children. Those who were abducted, including many children

aged 10 to 15 years old, were tied up with ropes or metal

wire at the waist, often

in human chains of five to 15 people. They were made to carry

the goods the LRA had pillaged and then forced to march off

with them. Anyone who refused, walked too slowly, or who

tried to escape was killed. Children were not spared.

The LRA got its start in Uganda, where it has done and continues to do horrific damage. At one time, about 2 million Ugandans were displaced from their homes by LRA violence; the rebels massacred, mutilated and abducted civilians, and forced many into sexual servitude; and an estimated 66,000 Ugandan children were forced to fight for the group.

Uganda is still recovering from the LRA's campaign of violence. Having been forced out of Uganda, LRA bands have moved into neighboring nations, including Sudan, the Democratic Republic of the Congo, and the Central African Republic--countries already ravaged by man-made and natural disasters. As the latest report shows, it is still a grave threat. As John Holmes, the U.N. under secretary general for humanitarian affairs, put it, ``they are still capable of wreaking absolute havoc--and they still do.''

Because of the havoc the LRA has caused across central Africa, I am one of more than 60 Senators who have cosponsored S. 1067, the LRA Disarmament and Northern Uganda Recovery Act, introduced by Senators Feingold and Brownback. The act would require that within 6 months, the United States develop a comprehensive strategy for dealing with the LRA, including an outline of steps to protect the civilian population against LRA violence. The act would authorize funding to provide humanitarian assistance in areas affected by the LRA. And it would provide assistance for reconstruction and for promotion of justice and reconciliation in areas of Uganda recovering from the LRA's depredations.

This legislation would establish, as a matter of policy, a U.S. commitment to working with regional governments to end the conflict in Uganda and surrounding nations by providing support to multilateral efforts to protect civilians, apprehend top LRA leaders and disarm their followers; providing humanitarian assistance to relieve the immense suffering the LRA has caused; and supporting efforts to promote justice and reconciliation in the region affected by LRA violence.

We have delayed too long in enacting this legislation. The Senate passed this important legislation in March, and the House Foreign Affairs Committee favorably reported the bill to the full House last week. I am hopeful that the committee's approval signals the likelihood of approval by the full House soon. I hope our colleagues in the House will move swiftly to pass this legislation and send it to the President for his signature; to do anything less would be a failure to act with the urgency, and the humanity, that the LRA's campaign of terror demands.

Mr. President, I ask unanimous consent that a recent New York Times article on this incident be printed in the Record.

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

Mr. President, first, let me commend the Presiding Officer. Senator Merkley has been an avid leader in doing something significantly important to end the role of proprietary trading, which is something that helped create a housing bubble, expanded that bubble, and the bubble burst and helped to sink this economy. This amendment we are offering is aimed at trying to rein in the excesses of those proprietary trades. It does it in a way which makes a lot of sense. A lot of work went into it.

The Banking Committee, Senator Dodd, his staff, our staffs, and many other staffs and people outside of this body have worked very hard to make sure this will be a practical amendment. It is. I am proud to cosponsor it with the Presiding Officer, Senator Merkley, who has been such a great leader.

As recent hearings that I chaired at the Permanent Subcommittee on Investigations demonstrated, many things caused the financial crisis that started the recession that we are climbing out of. But up and down the financial system--upstream, from mortgage brokers hustling dubious mortgages, to Wall Street firms downstream that sliced and diced securities, betting on those risky mortgages--there were failures and mistakes piled on top of plain old-fashioned fraud.

At its heart, the financial crisis is a story of extreme greed and excessive risk. In the pursuit of ever larger profits, financial institutions took on ever-increasing risk while ignoring the danger that risk represented. When their bets failed and the risks came crashing down upon them, the financial system teetered on the brink of collapse. The economy plunged into what has become known as the great recession. Millions of Americans lost their jobs and homes, and taxpayers had to spend hundreds of billions of dollars to keep things from getting even worse. We cannot allow a repeat.

The bill from Senator Dodd is a huge step in avoiding that repeat. We simply must never again allow Wall Street firms seeking to boost their bottom lines, borrowing millions, or billions in this case, of dollars, making risky bets and risky trades, pocketing the winnings when their bets go well, and going to taxpayers for salvation when the bets go south. That is surely true of what is known as proprietary trading.

Too often, before and during the crisis and even today, financial institutions trade financial instruments often using large amounts of borrowed money to make risky bets for their own benefit, not on behalf of their clients.

Today, Senator Merkley and I, along with our cosponsors, are introducing an amendment to Senator Dodd's financial regulatory reform bill that seeks to limit the damage these proprietary transactions can inflict on our economy and end the conflicts of interest which too often accompany them.

I ask unanimous consent that Senator Jack Reed be added as a cosponsor of our amendment.

Proprietary trading brings high amounts of risk directly into the financial infrastructure and has repeatedly and severely damaged the financial system. It was a large part of the banking collapse of 1929, which is why Glass-Steagall restrictions separating investment banks from commercial banks were enacted. In 1998, as Glass- Steagall was being weakened, proprietary trading in complex derivatives left the major Wall Street banks facing billions in losses. The Federal Reserve organized the first massive bailout of a too big to fail nonbank, Long-Term Capital Management. And in our current crisis, proprietary trading in subprime securities and derivatives was the critical factor in the failure of major Wall Street firms in 2008.

By April 2008, the Nation's largest financial firms had suffered $230 billion in losses based on their proprietary trading. And by the end of 2008, the taxpayers were forced to put up hundreds of billions of dollars in TARP funds to avoid the collapse of our economy. Lehman Brothers is one example. In 1998, it had ``only'' $28 billion in proprietary holdings. By 2007, its proprietary holdings had soared to $313 billion. When the values of these holdings declined in 2007 and 2008, Lehman Brothers lost $32 billion, its losses exceeded its net worth, and by September 2008, the firm had collapsed in the largest bankruptcy in history.

Senator Merkley and I propose an amendment that addresses these issues in the following ways:

First, commercial banks and their affiliates would be barred from high-risk proprietary trading. The risk to the federal deposit fund is simply too great to allow commercial banks to gamble as they can today.

This prohibition will not inhibit these institutions from serving their customers. Our amendment expressly permits carefully specified client-based transactions. That means that banks, through their broker- dealer affiliates, could buy or sell securities and other instruments as requested by clients. Those affiliates can also, for example, act as underwriter for a client issuing new stocks or bonds, provided those transactions are not allowed to endanger the safety and soundness of the bank.

Second, we limit proprietary trades at the largest nonbank financial institutions. These institutions would be required to keep enough capital on hand to ensure that they, and not the taxpayers, would cover their trading losses. That would limit the size of their proprietary activities. The regulators overseeing the financial system would be tasked with specifying the capital levels these institutions would be required to maintain, as well as limits on the amount of proprietary trading they could do, in order to protect the stability of the system. These restrictions would address one of the chronic problems that led to the crisis, that of financial institutions borrowing heavily to make their risky trades by leveraging their own funds, and jeopardizing the entire financial system when their risks overcame their own funds.

Third, we would address one of the most dramatic findings of our subcommittee's recent hearings, that of firms betting against financial instruments they are assembling and selling. As our hearing on investment banks showed, Goldman Sachs assembled and sold mortgage- related financial instruments, then placed large bets, for the firm's own accounts, against those very same instruments. In one case highlighted at the hearing, involving risky mortgage-backed securities, a Goldman trader bragged in an email that, although the firm lost $2.5 million when the securities failed, Goldman made $5 million on a bet placed against those very same securities. The conflict of interest prohibition in our amendment is intended to prevent firms that assemble, underwrite, place or sponsor these instruments from making proprietary bets against those same instruments.

Assembling and selling financial instruments to its clients while betting against those same instruments did injury to Goldman's clients. The fact that the firm described these instruments, in its own emails, as ``junk,'' added insult to injury. This isn't market making, bringing together two customers, a buyer and a seller, as Goldman executives claimed during our hearing. This is Goldman Sachs acting as its own secret client, betting against its customers. When members of the subcommittee asked Goldman executives about that conflict of interest, they answered by saying that we just understand, that this is how business is done on Wall Street. We understand all too well how business has been done on Wall Street. And that is why we must end the self-dealing and put a cop back on the beat on Wall Street.

Our amendment would protect depositors and taxpayers from the risk of proprietary trading at commercial banks. It will protect taxpayers from the dilemma of having to pay for Wall Street's risky bets, or watch our financial system disintegrate. And it would protect investors and the financial system at large from the conflicts of interest that too often represent business as usual on Wall Street. It will strengthen protections already in place in the bill before us, and add new ones to guard the stability of a financial system on which our economy and American jobs depend.

Senator Merkley and I have worked closely with a number of colleagues, including Senator Dodd, as well as officials from the Treasury Department and the Securities and Exchange Commission, to ensure that our legislation would address the problems we seek to address without endangering legitimate market activity and activity on behalf of clients. It has been endorsed by former Federal Reserve Chairman Paul Volcker; business leaders such as John Reed, the former Chair and CEO of Citibank; and major organizations calling for real Wall Street reform, including the Independent Community Bankers of America, Americans for Financial Reform, and the AFL-CIO.

There is nothing wrong with Wall Street firms making a profit. What we oppose is the notion that in seeking such profit, these financial institutions can put depositors, clients, taxpayers, and the very safety of our financial system at risk. What we oppose is conflict of interest. I hope our colleagues will support these commonsense safeguards to strengthen the financial system and our economy.

I suggest the absence of a quorum.

Mr. President, I am delighted to recognize the Dossin Great Lakes Museum as it celebrates its 50th anniversary. This institution has graced the shores of Belle Isle, MI, since 1960, when the Dossin family generously helped to transform the deteriorating Maritime Museum into an enduring tribute to the Great Lakes. For

50 years, the Dossin Great Lakes Museum has offered visitors from across the state and beyond the opportunity to explore and experience firsthand much of our State's 300-year maritime narrative.

Michigan's rich history is inextricably linked to the Great Lakes. In fact, Michigan's name is derived from the Ojibwa word for ``large water,'' a root that speaks to the lakes' defining influence on our State's evolution. The lakes are integral to Michigan's social, cultural, and economic character. Native American tribes established trade routes through these inland seas, which European settlers, led by the French, relied on to develop a thriving fur trade beginning in the late 1600s. During the War of 1812, American and British soldiers fought to wrest control over these precious waterways. Today, the Great Lakes are a superhighway across which giant freighters glide. Some of these great ships have become the stuff of maritime legend, such as the famous Edmund Fitzgerald, whose tragic tale has captured the imagination of Michiganians for generations.

The Dossin Great Lakes Museum is a lens through which visitors can study and appreciate the tremendous importance of the Great Lakes. Its permanent exhibits include the enormous bow anchor of the Edmund Fitzgerald, the pilot house of the S.S. William Clay Ford, and one of the largest known collections of scale model ships in the world. Located on Belle Isle in the middle of the Detroit River, facing the Canadian shore, the Dossin Great Lakes Museum devotes many of its resources to explaining Detroit's prominent role in the rich international history of the Great Lakes. The museum's dedicated staff are committed to providing visitors with an exciting and educational experience, and to ensuring that residents of Michigan and visitors to our State continue to learn about the rich heritage of the Lakes.

For 50 years, this Detroit landmark has served an important role in illustrating Michigan's enduring ties to the Great Lakes. It offers the prospect of adventure and knowledge for those who walk through its doors, and its exhibits tell stories that transport visitors through three centuries of maritime history. I know my colleagues join me in congratulating all those affiliated with the Dossin Great Lakes Museum on its 50th anniversary and in wishing them the best for another 50 years of navigating the course of our history.

Madam President, I wish to start with a poem in honor of Ernie Harwell, who passed away yesterday. This is the way, for decade after decade, the great broadcaster of the Detroit Tigers started when the first game of the season came along.

For, lo, the winter is past,

The rain is over and gone;

The flowers appear on the Earth;

The time of the singing of birds is come,

And the voice of the turtle is heard in our land.

Well, for four decades a man named Ernie Harwell would recite those words. He would recite them at the beginning of the first baseball broadcast of spring training, and those are the words that would tell our people the long, cold winter was over.

Ernie was the radio voice of the Detroit Tigers for 42 years. During that time, there may have been no Michiganian more universally beloved. Our State mourns today at his passing yesterday evening, after a long battle with cancer. He fought that battle with the grace and good humor and the wisdom Michigan had come to expect and even depend on from a man we came to know and love.

This gentlemanly Georgian adopted our team and he adopted our State as his own, as did his family. His career would have been worthy had he done nothing more than bring us the sound of summer over the radio, recounting the Tigers' ups and downs with professionalism and wit, as he did for all those years.

Without making a show of it, Ernie Harwell taught us in his work and his life the value of kindness and respect. He taught us that in a city and a world too often divided, we could be united in joy at a great Al Kaline catch or a Lou Whitaker home run or a Mark Fidrych strikeout. He taught us not to let life pass us by, in his words, ``like the house by the side of the road.''

In 1981, when he was inducted into the Hall of Fame, Ernie told the assembled fans what baseball meant to him, and these were his words:

In baseball, democracy shines its clearest. The only race

that matters is the race to the bag. The creed is the

rulebook. Color merely something to distinguish one team's

uniform from another.

The was a lesson he taught us so well in everything he did in his life.

I will miss Ernie Harwell personally and deeply and fondly. All of us in Michigan will miss the sound of his voice telling us that the winter is past, that the Tigers had won a big game or that they would get another chance to win one tomorrow. We will miss his Georgia drawl, his humor, his humility, his quiet faith in God, and the goodness in the people he encountered. But we will carry in our hearts always our love for Ernie Harwell, our appreciation for his work, and the lessons that he gave us and left us and that we will pass on to our children and to our grandchildren.

Madam President, I yield the floor, and I suggest the absence of a quorum.

Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Records on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar that these nominations lie at the Secretary's desk for the information of Senators.

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

I ask unanimous consent to speak as in morning business for 3 minutes.

Madam President, I come to the floor to congratulate the students, faculty, staff, and parents at Kalamazoo Central High School in Kalamazoo, MI, who learned today that President Obama will deliver the commencement address for their high school next month. It is a tremendous honor to host a President, particularly this President. I am proud not only that Kalamazoo Central High has been accorded this honor but how the school earned it. More than 1,000 schools submitted applications for a competition called Race to the Top Commencement Challenge. This competition encouraged academic excellence and innovation. Evaluators narrowed the contestants down to six who were finalists. Public voting selected the final three, and the White House then announced today that the President had chosen Kalamazoo Central from those three finalists.

I am not going to make any claim that I am unbiased here, but I believe it is meaningful that this Michigan school represents what is possible for a large, urban public school, open to all students. Kalamazoo, similar to many communities in my State, is not without its challenges. The tough economic times have given public educators an extremely difficult task. Kalamazoo has had to cope with the effects of plant closings, corporate mergers, and downsizings that meant administrators have had to do more with less.

But the people of Kalamazoo have not allowed those challenges to stand in the way of excellence. Kalamazoo is the home of the Kalamazoo Promise. Every graduate of the Kalamazoo public schools is entitled to a scholarship covering a portion of their higher education costs at a Michigan public university, up to 100 percent for those who attended Kalamazoo schools from kindergarten through 12th grade. Since the Promise was established, thanks to the generosity of a small group of anonymous donors, more than 90 percent of Kalamazoo High graduates have gone on to college.

This commitment to quality education for all is nothing new to Kalamazoo. In 1873, a small group of property owners, convinced that they did not need to pay taxes to support a public high school, sued the Kalamazoo School Board. In the ``Kalamazoo Case,'' as it became known, the Michigan Supreme Court upheld the establishment of a public high school supported by tax dollars and open to all. The case settled, once and for all, the status of public education in Michigan and has been cited by courts throughout the country where public education has come under attack.

Today's announcement adds to the rich history of public education in Kalamazoo. It is a fitting honor for the students, educators, parents, and citizens of a community that has once again demonstrated its commitment to academic excellence.

I spoke after today's announcement with the principal of Kalamazoo Central High, Von Washington, and offered my congratulations. He told me the news brought cheers and excitement to the high school students and even a few tears as the word spread quickly throughout the entire Kalamazoo community--the justifiably proud community.

So we all look forward to President Obama's visit to Kalamazoo, and I know that a proud city and a proud school will offer both the best in hospitality and an example for other schools to follow.

I yield the floor.

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

Mr. President, yesterday, the Senate Permanent Subcommittee on Investigations, which I chair, held the fourth in our series of hearings to explore some of the causes and consequences of the financial crisis. These hearings are the culmination of nearly a year and a half of investigation.

The freezing of financial markets and the collapse of financial institutions that sparked our investigation are not just a matter of numbers on a balance sheet. These are numbers reflecting millions of Americans who lost their jobs, their homes, and their businesses in a recession that the housing crisis sparked, the worst economic decline since the Great Depression. Behind these numbers are American families who are still suffering the effects of a manmade economic catastrophe.

Our goal has been to construct a record of the facts in order to try to deepen public understanding of what went wrong, to inform a legislative debate about the need for financial reform, and to provide a foundation for building better defenses to protect Main Street from Wall Street.

Our first hearing, 3 or 4 weeks ago, dealt with the impact of high- risk mortgage lending. It focused on a case study, as our committee does, of Washington Mutual Bank, known as WaMu, a thrift whose leaders embarked on a reckless strategy to pursue higher profits by emphasizing high-risk loans. WaMu didn't just make loans that were likely to fail; these loans also created real hardships for the borrowers, as well as risk for the bank itself. What happened was there was basically a conveyor belt that fed those toxic loans into the financial system like a polluter dumping poison pollution into a river. That poison came packaged in mortgage-backed securities that WaMu sold to get the enormous risk of these mortgages off its own books and shifted to somebody else's.

Our second hearing examined how Federal regulators at the Office of Thrift Supervision watched and observed WaMu--saw the problems year after year--and did nothing to stop them. Regulation by the Office of Thrift Supervision that should have been conducted at arm's length was instead done arm-in-arm with WaMu.

The third hearing dealt with credit rating agencies. These are specific case

studies of Standard & Poor's and Moody's, the Nation's two largest credit raters. And while WaMu and other lenders--and WaMu wasn't alone by a long shot--dumped these bad loans, regulators failed to stop the behavior. Credit rating agencies were assuring everybody that the poisoned water was safe to drink. Triple A ratings were slapped on bottles of high-risk financial products. So that was the third hearing. We have to do something about the inherent conflict of interest that is involved when the credit rating agencies are paid by the people whose actual documents and whose transactions they are rating, putting labels of triple A, double A, what have you, on them. There is a built-in conflict of interest.

Yesterday's hearing explored the role of investment banks in the development of this crisis, and we focused on the period of 2007, when that housing bubble burst, of Goldman Sachs, one of the oldest firms on Wall Street. Goldman's documents made it very clear that it was betting against the housing market while it was aggressively selling investments in the housing market to its own clients. It was selling the clients high-risk, mortgage-backed securities and what they call CDOs, and synthetic CDOs, that it wanted to get off its books. They wanted to get securities off the books. They were reaching out with one hand to prospective buyers and saying: Here. But with the other hand they were betting against those same securities.

The bottom line is that what we have discovered in this investigation, and heard yesterday at our hearing, is that there is a conflict of interest too often between what was in Goldman's interest-- what was good for their bottom line--and what was in their clients' best interest.

These are deeply troubling findings. There not only was a collapse of a housing market, there was a collapse of values. Extreme greed is the thread that connects these events, starting with those mortgages that were sold out there in the State of Washington by Washington Mutual Bank; extreme greed that indeed involved the people who were supposed to be doing the credit rating, being paid and doing a lousy job of rating the financial instruments that pension funds and others they were buying, and the greed, of course, that was involved in Wall Street selling securitizing financial instruments which they believed were not good and that they were betting against at the same time they were selling them to their clients and customers.

What we have to do is build defenses against these kinds of excesses. I think most of us at the hearing--Democratic and Republican Senators on the Permanent Subcommittee on Investigations--saw the problems right from the beginning, upstream where the mortgages were created and downstream where they landed in Wall Street securities. We see the problems and Americans see the problems. We cannot understand, and Americans cannot understand, how a company can design and build a product and sell that product to its clients while at the same time they are betting that product will fail. It runs contrary to common sense--a kind of common ethics.

If you are going to sell somebody a pair of shoes, and you know or believe that pair of shoes is defective and you bet against that pair of shoes so that your profit is not just the profit you would make on the immediate sale of that pair of shoes, but when the pair of shoes fails there is, in some way, a profit that comes to you as well. When you are betting on the failure of the product and will make money from that bet when that product fails, most Americans, and I think most members of the committee--hopefully, maybe all of us--would say to ourselves: That kind of conflict of interest has got to be stopped.

That is not what the Wall Street folks were telling us yesterday is ``making a market,'' where you have someone who comes in and wants to sell something and somebody who wants to buy something and they are put together. That is ``making a market''--bringing a buyer and a seller together.

This is where the firm--the entity that is going to be benefitting is on one side of the deal--and that entity was Goldman Sachs. They actually, in some of these deals, were taking securities from their own inventory that they wanted to get rid of, packaging them into a financial instrument and selling that instrument to their customers. So far, so good, providing they disclose it is their own product they are selling. That is okay. But then they take what they call a short position. They take a bet. They make a bet against the very instrument they put together to sell to their customers.

That, to me, is incredible. They also are engaged--and a lot of people are engaged--in what we call these credit default swaps, which are nothing more than casino bets as to whether something will happen; where, for instance, people are betting that a particular stock will go up or down. Neither party owns the stock, if it is a so-called synthetic default swap. I bet that stock will go up, you bet it will go down. That is okay; if people want to bet on that, let them bet. But when the government ends up paying the winning bettor, now you have a problem. Where the company that is making those bets, or insuring those bets, as it was called in the case of AIG--supposed to be insuring those bets--is too big to fail--they have insured so many bets for so many companies and so many pension funds that if that private company fails, the economy is going to be terribly damaged as a result and we end up, as taxpayers, paying off those bets--that has got to be stopped as well. These are casino bets and we shouldn't be paying them.

I yield myself 5 additional minutes.

Now, throughout these hearings we see a lack of accountability. Executives of Washington Mutual make the reckless mortgage loans--not held accountable. Executives at Goldman Sachs and their company packaged many of these same loans that were toxic securities and then took a conflict-of-interest position on it--no accountability. Regulators, credit rating agencies that were supposed to check these excesses--no accountability. In each case, the senior leaders managed to avoid responsibility for their contribution to a crisis which has caused millions of Americans to lose their jobs or their homes or their businesses.

Others may fail to take responsibility for their actions, but we must exercise our accountability. We must act. I do not understand our Republican colleagues, knowing what they know about the crisis, knowing there is no real regulator on the beat on Wall Street, can vote against beginning a debate. We don't have a cop on the beat on Wall Street. We need a regulator there. We need credit rating agencies not involved in conflicts of interest which are inherent to the way they are now being paid. We need a banking regulator which acts; one that doesn't just observe and watch things going off track but acts, and has a responsibility to act as well.

The Dodd bill takes very significant steps relative to each of these areas. Whether it is the banking area, the regulator area, the credit rating area, there are some critical steps that are taken in the Dodd bill. There are some people who say they do not like portions of the Dodd bill. Okay, bring the bill to the floor and let's debate it. Let's legislate.

The legislative process is supposed to involve, sooner or later, a bill which comes to the floor and then is open to amendment and then debate. There are a lot of areas in this bill that can be strengthened. There are some areas in the bill that some people don't like and wish to strike. We have been on this bill now in committees of jurisdiction for months. There have been hearings in those committees. I think we know what the issues are.

There is no agreement on the resolution of this. There is no unanimous consent, obviously, as to exactly what reform should be put in place and how that should be written. But we can't always operate in the middle of a crisis by unanimous consent. At some point, where there are differences, we have to bring those difference to the floor and debate them and offer amendments on them and vote them up or down. That is our responsibility. It is not responsible--it is irresponsible--to block that process from taking place.

I think almost all of us say that we want reforms. But there are enough of

us who say we are not going to allow this to be debated unless we get our way that this has been stymied. The reform process has been thwarted by a filibuster here. It is wrong. And the remedies that are offered and can be debated and can be amended are essential to avoid a repeat of this disaster. These are complex issues. We all know that. But there has been a huge amount of debate, attention, and analysis on these issues. There are going to be differences on these issues, but the place to resolve differences finally is here on the floor.

Often we can resolve them before we get to the floor. Fine. But to stop a legislative process from taking place, it seems to me, is an irresponsible act when we are in the middle of a crisis and where the people of the United States want confidence that their legislators are addressing this crisis. So I would hope our Republican colleagues will allow this bill to come to the floor and to offer amendments.

There are many amendments that are going to be offered. Senator Merkley and I have an amendment which we believe will strengthen the bill, to give one example. That amendment has not yet been ``worked out'' with the sponsors of the bill. Hopefully, we can get them to agree to language which will allow for a stronger step to be taken in an area which we think involves a serious conflict of interest. But if we can't ``work it out in advance,'' okay. There is such a thing called an amendment. It is part of our rule book. You can offer amendments if you want to. You can't always work out things in a back room somewhere. I don't want to denigrate working out problems. I try to do it all the time, as chairman of the Armed Services Committee. I don't denigrate that process of working things out in advance. Lord knows, we work out most things in advance. But with a threat of this size, which requires us to act, and where there has been a good-faith effort to come to some kind of agreement in advance that proves not to be possible, for heaven's sake we have to legislate. We have to have an ability to move to the floor with a bill and to go through the legislative process with it. That is what has been thwarted. That is what has been denied us because we don't have 60 votes.

I hope our Republican colleagues will see the importance of this issue, the essential need for reform, and allow this bill to come to the floor and be legislated upon.

I yield the floor.

Mr. President, April 16 marked the 3-year anniversary of the deadliest shooting rampage in our Nation's history, a tragedy that took the lives of 32 Virginia Tech students and faculty members and wounded 17 more. In the aftermath of the shooting, investigations uncovered that the gunman, Seung-Hui Cho, was able to purchase two guns in violation of Federal law. Due to his history of mental illness, Mr. Cho was legally prohibited from purchasing these firearms. However, the transaction was not blocked because the State of Virginia had not provided his mental health records to the National Instant Criminal Background Check System, NICS. The Virginia Tech tragedy serves as a somber illustration of the importance of the NICS database containing accurate criminal history and mental health records of prohibited individuals.

The Virginia Tech shooting prompted the passage of the NICS Improvement Amendments Act of 2007, Public Law 110-180, which authorized funds to assist States and State courts in the automation of mental health and criminal records and in the transmittal of these records to the Federal NICS database. Unfortunately, due to budget constraints, some States still have not fully digitized their criminal history records, nor do they have the funds necessary to process the transfer of State records into NICS. According to the group Mayors Against Illegal Guns, the NICS database contains less than 20 percent of the mental health records it should. In addition, according to the Brady Campaign, NICS is missing 25 percent of the necessary felony conviction data from States. These gaps in needed records weaken the ability of current Federal law to stop firearms from getting into the hands of dangerous or potentially dangerous individuals.

It is essential that States and State courts have the resources needed to ensure that the Federal background check system contains comprehensive and up-to-date records. To that end, I recently joined seven of my colleagues in urging the Senate Appropriations Committee to include $325 million in the fiscal year 2011 Commerce, Justice, Science, and Related Agencies appropriations bill to fully implement the NICS Improvement Amendments Act. NICS is a powerful tool in the prevention of gun violence that deserves full congressional support.