Floor Statements

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I ask unanimous consent to speak as in morning business for up to 20 minutes.

Mr. President, it has only been 2 years since we had an extremely painful financial crisis that almost brought down our entire economy.

To try to address the root cause of the crisis, we are currently nearing completion of a long and arduous process to develop a comprehensive financial reform bill.

The world is watching to see how strong a bill this Congress will produce, and we need to show leadership. Yet I fear that instead of putting in place strong structural reforms as a model for other nations, we are deferring too much to the discretion of regulators who have failed in the past, and to international negotiations--currently underway in Basel, Switzerland--that have all too often resulted in global standards that were the lowest common denominators.

Capital flows easily across borders, and so the United States needs to provide leadership and then produce harmonized global standards. Instead, I fear we are doing the opposite. We have hollowed out our national response so that we can negotiate with a free hand on the global stage--after Congress showed the world that we lack the political resolve to impose hard measures.

This is why we have heard a common refrain that statutory requirements on capital or other prudential standards will tie regulators' hands during these international negotiations. We heard it before on the Brown-Kaufman amendment to restrict the size, leverage, and risk of our megabanks. Now we hear it on the Collins amendment.

Senator Collins's commonsense provision would ensure that bank holding companies and systemically significant nonbank financial institutions are subject to capital and leverage requirements as stringent as those that insured depository institutions face under existing prompt corrective action regulations. This provision would raise the capital bar for our largest financial institutions, requiring them to hold more committed and reliable forms of capital; namely, common equity and retained earnings. As my colleagues will recall, it passed by a voice vote during the Senate debate.

Now there is the threat that the Collins amendment might be eliminated for the sake of ``international negotiations.'' Mr. President, I fear this is a recipe for a global race to the bottom for two reasons: First, a tepid response by the United States may also undermine other countries' consideration of tough reform measures. For example, the U.K. is studying whether to break up their megabanks. But some in the U.K. have suggested that since the United States isn't taking this preemptive action, the U.K. would not do it either.

Second, some countries' regulators appear to be wedded to the status quo, and we are only reinforcing the impression that tough measures are not needed. Remarkably, only weeks before the European Government and the IMF cobbled together an almost $1 trillion bailout of European megabanks, one French Government official stated:

The situation is completely different here, and the system

that was in place has not worked badly and does not need to

be overhauled.

Regulators from Germany, France, and Japan, among others, are opposed to having a leverage requirement and a more strict definition of what constitutes capital.

Leaving aside the opposition of many countries to the very concept of a leverage capital requirement, there are those who still indicate that the quantitative requirement must be set through the Basel negotiations. In fact, Treasury Secretary Geithner said:

By the end of this year, we will negotiate an international

consensus on the new ratios.

Why does it strengthen our negotiating hand for the Congress to have failed to enact hard rules? Moreover, it is tougher to imagine how we can set a number on leverage when we don't even have an agreement on how to measure leverage, since the United States follows GAAP accounting standards while the rest of the world follows IFRS. It is unlikely we will have uniformity, or even harmonization of those rules, for many years--if we ever will at all. While the accounting standard issue is often overlooked, it should go without saying that it is a more basic and first-order problem.

Most important, for what are we negotiating? The history of international capital standards is that of colossal failures--Basel I, Basel II, and now Basel III. Instead, we have a sovereign banking failure and should be establishing a sovereign solution.

If other countries want to permit banks to become risky and fail-- such as what Europe may be facing due to the European debt crisis--let them learn the hard lessons America has already learned.

Let me briefly review the history of the Basel accords, which should stiffen the resolve of the conference negotiators to include measures that will prevent another financial crisis caused by U.S. megabanks.

The Basel I Accord was a crude apparatus that established numerical requirements for the amount of capital that banks need to set aside based upon how risky the assets on their balance sheets were perceived to be. Different types of loans and assets were lumped into risk buckets. Some received lower risk weights, while others received higher risk weights. However, those weightings were arbitrary determinations that did not even take into account basic risks--most notably credit risk--associated with loans and other financial assets that banks hold.

Under the Basel I system, a bond issued by a blue chip AAA company such as Johnson & Johnson would have had a much higher risk weight than a subprime stated-income loan, a loan to Greece, or a loan to Lehman Brothers. Not surprisingly, banks were able to easily game--or arbitrage--these capital requirements in a way that generally increased their risk profile. Banks were able to cherry-pick high-risk, and therefore, high-return assets that had low capital requirements because of the risk bucket in which they were placed. Banks also got around the Basel I requirements by shifting more assets off their balance sheets.

The Basel II Accord, which was agreed to in 2004, was the culmination of several years of negotiations. While it was intended to address the flaws of Basel I by making capital requirements more risk sensitive, it actually created bigger problems.

Most notably, the accord's complexity and sophistication masked a deregulatory philosophy that sought to make determinations on capital adequacy dependent on the judgments of rating agencies and, increasingly, the banks' own internal models. By outsourcing their regulatory responsibilities to the banks that they were supposed to regulate, bank regulators were making an implicit admission that the size and complexity of the megabanks had exceeded their comprehension.

Unfortunately, complex capital standards that rely upon banks' own internal models pose serious problems for any democratic nation that prizes accountability and transparency, such as the United States. In his book ``Banking on Basel,'' Federal Reserve

Governor Daniel Tarullo provides an exhaustive account of the Basel II capital accord that specifically questions the accord's decision to base capital standards on the internal ratings of banks. Tarullo indicates that the ``very complexity of the [accord's] approach gives banks more opportunities to manipulate, or make mistakes during, calculation of their capital ratios.''

Even more troubling, Governor Tarullo noted it would also be nearly impossible for any independent auditor or examiner to identify failures and forbearance on the part of regulators. To that point, he states ``it may be extremely difficult for an independent entity such as the Government Accountability Office to reconstruct the series of decisions and judgments that went into the creation and supervisory assessment of the credit risk model.'' Given that, how will we in Congress be able to hold either the megabanks or their regulators accountable?

By virtually all accounts, the Basel II Accord was a complete failure. The Basel Committee itself estimated that it reduced capital for some banks by as much as 29 percent, at a time in which regulators should have been ramping up capital and other prudential requirements upon banks.

By trying to tie capital requirements to so-called risked-based measurements, the Federal Reserve--the main driver of the Basel process--apparently hoped to eliminate the basic leverage requirement. In fact, former Fed Governor Susan Bies told banks that ``the leverage ratio down the road has got to disappear.'' Fortunately, despite the Fed's objections, Basel II has not been implemented in the United States, in large part due to concerns that it would disadvantage smaller community banks that did not have the resources and wherewithal to make investments in supposedly advanced risk models.

It was, however, applied to European banks. Unconstrained by a basic leverage capital ratio, many of these banks went on to arbitrage the Basel requirements by gorging on AAA-rated bonds backed by subprime mortgages, not to mention the sovereign debt of highly indebted Eurozone countries such as Greece and Spain. The result has been hundreds of billions of dollars of losses followed by both explicit and implicit bailouts by EU governments.

The accord was also effectively applied to investment banks such as Lehman Brothers and Goldman Sachs, which had precarious and explosive business models that utilized overnight funding to finance illiquid inventories of assets. These institutions were nominally regulated by the SEC, which had no track record to speak of with respect to ensuring the safety and soundness of financial institutions. The Commission allowed these investment banks to leverage a small base of capital over 40 times--I repeat, over 40 times--into asset holdings that, in some cases, exceeded $1 trillion.

Of course, in the wake of the most recent crisis, the same failed regulators now tell us that, this time, they have learned their lesson and will develop a new agreement that will address the deficiencies of the last one. But what reasons do we have for thinking that will be true?

Assistant Treasury Secretary Michael Barr notes that regulators are now pushing for new global capital standards that will be ``more robust, higher and better quality, less pro-cyclical, and include global agreement on a leverage ratio.'' But the megabanks are already developing new ways to arbitrage as well as weaken the global capital standards to which Secretary Barr refers. In other words, they are finding ways to gut and go around the rules before they are even finalized.

What is more, many of the regulators involved in the discussions inspire little confidence. Christian Noyer, the governor of the Bank of France and the new chairman of the Bank of International Settlements, the entity that oversees the Basel rulemaking process, indicated, that the new rules ``shouldn't undermine the business model of banks which have perfectly withstood the crisis.'' Given that the same Bank of International Settlements estimates that eurozone banks have two-thirds of the exposures to the most fiscally imperiled European countries-- Greece, Ireland, Portugal and Spain--it is not clear to which banks Governor Noyer is referring.

As the Financial Times notes, France, Germany and Japan are ``more attached to the preeminence of the current risk-based approach and wants the leverage ratio to have a much less important role in governing banks' balance sheets.'' In effect, they are pushing for the status quo of Basel II, which has been an unmitigated disaster. After the multiple trillions of dollars worth of public funds expended on megabank bailouts, it seems amazing that many regulators would like to maintain a system where the largest banks effectively regulate themselves.

But U.S. regulators are not immune to the defense of the existing regime. As the Wall Street Journal reports, ``some U.S. government officials are fighting what they view as an anti-American proposal that would prevent banks from counting as part of their capital cushion a specific type of security favored by U.S. banks known as a trust- preferred security.'' In other words, we have unnamed U.S. regulators that are fighting against Senator Collins' amendment in international negotiations.

The current state of international capital negotiations gives little comfort to those who would like to see fundamental structural reforms to address the problem of too big to fail.

I am in favor of international negotiations to harmonize financial regulatory standards. However, these negotiations should not preclude the Congress from setting statutory floors. They should never result in the abdication of our sovereign powers and responsibilities.

I, therefore, agree with the sage thoughts of former Federal Reserve Chairman Paul Volcker when he said that while ``good things may come out of the Basel process, ``it is not structural change.'' In his view, and in mine, we need to do both.

Instead of trusting our financial stability solely to unelected financial guardians, in this country and abroad, Congress should legislate structural and fundamental reforms that preemptively address the persistent problem of too big to fail. Senator Collins' provision is but one example of that. There is also Senator Lincoln's proposal to require swap dealers to be spun off and separately capitalized from insured depository institutions; a strong Volcker Rule ban on proprietary trading at banks, as proposed by Senators Merkley and Levin.

Without transparency and accountability, a democracy cannot function. That is why we still need the statutory standards on the leverage as well as the size of these megabanks. While some technocrats may say that they are blunt tools, I say that that is precisely the point. They will not only provide a sorely needed gut check that ensures that regulators do not miss the forest for the trees when assessing the capital adequacy of a financial institution, they will also provide a basic means to ensure accountability in the performance of government officials.

We cannot--we cannot--afford another meltdown and the American people--and, indeed, the rest of the world--are looking to Congress to take steps to ensure that that does not happen. By adopting these fundamental reforms and preemptive measures, Congress will go a long way towards protecting the American people from future bailouts. It will also be providing global leadership, demonstrating to the rest of the world that fundamental reform of our financial system does not rest upon the decisions of unelected technocrats whose grand designs brought our financial system to the brink.

Mr. President, I yield the floor.

Mr. President, I ask unanimous consent that the Committee on Agriculture, Nutrition, and Forestry be authorized to meet during the session of the Senate on June 16, 2010.

Mr. President, I ask unanimous consent that the Committee on Armed Services be authorized to meet during the session of the Senate on June 16, 2010, at 9 a.m.

Mr. President, I ask unanimous consent that the Committee on Energy and Natural Resources be authorized to meet during the session of the Senate to conduct a business meeting on June 16, 2010, at 11 a.m., in room SD-366 of the Dirksen Senate Office Building.

Mr. President, I ask unanimous consent that the Committee on Foreign Relations be authorized to meet during the session of the Senate on June 16, 2010, at 9:30 a.m., to hold a hearing entitled ``The New START Treaty (Treaty Doc. 111-5): Views from the Pentagon.''

Mr. President, I ask unanimous consent that the Committee on Veterans' Affairs be authorized to meet during the session of the Senate on June 16, 2010. The Committee will meet in room 418 of the Russell Senate Office Building beginning at 9:30 a.m.

Mr. President, I ask unanimous consent that the Special Committee on Aging be authorized to meet during the session of the Senate on June 16, 2010, from 2-5 p.m. in Dirksen 562 for the purpose of conducting a hearing.

Mr. President, I ask unanimous consent that the Committee on Homeland Security and Governmental Affairs' Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security be authorized to meet during the session of the Senate on June 16, 2010, at 3 p.m. to conduct a hearing entitled, ``The Gulf of Mexico Oil Spill: Ensuring a Financially Responsible Recovery.''

Mr. President, I ask unanimous consent that the Subcommittee on Public Lands and Forests be authorized to meet during the session of the Senate to conduct a hearing on June 16, 2010, at 2:30 p.m., in room SD-366 of the Dirksen Senate Office Building.

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

Madam President, I ask unanimous consent to speak as in morning business.

Madam President, I rise today once again to recognize some of our Nation's great Federal employees.

This week, the Trachtenberg School at the George Washington University announced the winners of the annual Arthur S. Flemming Awards. These distinguished awards for public service have been bestowed upon outstanding Federal employees for the past 61 years. The Flemming Awards recognize career Federal employees, both civilian and military, who have served between 3 and 15 years in government. Nominees come from across the many departments, agencies, and service branches. Notable winners include former Senators Elizabeth Dole and Daniel Patrick Moynihan, Defense Secretary Robert Gates, former Federal Reserve Chairman Paul Volcker, astronaut Neil Armstrong, among others.

The awards are named for Arthur S. Flemming, who had a long and exemplary career in public service which spanned from 1939 until his death in 1996. He served in a number of important roles, including Secretary of Health, Education, and Welfare under President Eisenhower.

Secretary Flemming also served on the U.S. Civil Service Commission under Presidents Roosevelt and Truman, the National Advisory Committee on the Peace Corps under Presidents Kennedy and Johnson, and as Chairman of the U.S. Commission on Civil Rights under Presidents Nixon, Ford, Carter, and Reagan. President Clinton awarded him the Medal of Freedom in 1994.

It is fitting that these awards, which were originally bestowed by the DC Jaycees, are named for Flemming. His lifetime of dedication to public service continues to inspire so many.

The Flemming Awards are divided into three categories: applied science, engineering, and mathematics; basic science; and managerial or legal achievement. These categories highlight some of the most outstanding and exciting accomplishments by our public servants who are helping to lead the way in scientific discovery, efficient public management, and upholding justice.

This year's medals in applied science, engineering, and mathematics were won by a trio of brilliant individuals who are keeping America at the forefront of STEM research.

Dr. Lynn Antonelli is leading the way in developing laser-based sensors for the Navy. The sensors she and her team created have found commercial and medical applications, in addition to providing our Navy vessels with extended optics and sensing underwater.

Dr. Steven Brown of the National Institute of Standards and Technology--or NIST--also works with light. He and his team have made great strides in the field of light measurement that have enabled more detailed environmental imaging of the Earth. His work is revolutionizing the ability to detect minute changes in the environment as a result of climate change.

Also winning the applied science, engineering, and mathematics award is Dr. John Kitching. John has been leading the world's top research program in atomic measurement. He and his team developed ultra- miniature devices that can improve the accuracy of GPS, telecommunications, and medical imaging. They even have important national security uses, including in the more accurate detection of chemical toxins.

The three Federal employees who won this year's award for basic science are pioneers on the cutting edge of science research.

Dr. Dietrich Leibfried is one of NIST's leading experts on quantum computing. This exciting field could lead to supercomputers faster and more powerful than the best ones we have today. Dietrich Leibfried is responsible for many innovations in quantum computing, including the successful demonstration of a simple, fully programmable quantum computer, the first step in a long-term effort to build supercomputers that can handle nationally important applications, such as weather prediction, secure data encryption, and developing new drugs.

The basic science award is also going to Dr. Shyam Sharan of the National Cancer Institute at the National Institutes of Health. He has developed a simple and reliable way to analyze genetic mutations that increase a patient's chances of developing breast cancer. This will help doctors identify those who have the highest risk of cancer and treat them preventively.

Sharing the award with them is Dr. Eite Tiesinga, who works at NIST on ultra-cold atoms. By manipulating these atoms, scientists can carefully tune the quantum gases that might one day power quantum computers. Eite is frequently asked by researchers around the world to consult on their measurements and findings, and his work on ultra-cold atoms has put the United States ahead in the race to achieve successful quantum computing.

Four outstanding public employees were chosen for this year's managerial and legal achievement medal.

Angela Clowers works at the Government Accountability Office, and she led the GAO's efforts to audit transportation investments made under the Recovery Act. Her careful analysis and testimony before Congress prompted the Department of Transportation to refocus some of its investments in order to stimulate additional job growth. Angela also led the GAO's audit of government assistance to the American auto industry under TARP.

Another who won this award is Dr. Marla Dowell of NIST'S laboratory in Boulder, CO. Marla leads the world's most comprehensive research program in laser metrology. She won this award for outstanding management skills and for leading a team that is developing lasers for highly accurate measurement of manufacturing equipment. This will have profound and positive effects on both defense programs and high-tech businesses.

Kana Enomoto won the award for a distinguished career working on mental health access. She served as a leader in this area in the aftermath of Hurricane Katrina through her work at the Substance Abuse and Mental Health Services Administration. Kana also spearheaded efforts to improve the agency's operations, human resource management, and other critical functions as the Acting Deputy Administrator.

The fourth winner of this award is Natalie Harrop of the Air Force Global Logistics Center in Utah. Natalie distinguished herself as a lead budget analyst for the Air Force's 748th Supply Chain Management Group. She revolutionized the group's financial management, and her new system is being implemented across the 448th Supply Chain Management Wing. It is saving hundreds of work hours and over $5 million.

These 10 men and women are not an exception, they are exemplary. They represent the norm of excellence of our civil service. They have achieved great things and now join the ranks of those who share the Arthur S. Flemming Award for their great contribution to our Nation.

I hope my colleagues will join me in congratulating the winners of the 2009 Arthur S. Flemming Awards and thanking them all for their service. They are all truly great Federal employees.

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

Madam President, I ask unanimous consent to speak as in morning business for 5 minutes.

Madam President, I enjoy it very much and I learn a lot every time the Senator from North Dakota gets up to speak. There is no one in this body who better states the issues I am concerned about than he does. This house in the Cayman Islands--maybe we should take a codel down there. Also, his comments on the gulf are absolutely right on point. Not only am I not disturbed, I enjoyed the opportunity to hear him speak once again.

In Praise of Judge Timothy Rice

Madam President, I rise today to recognize another of our Nation's great Federal employees.

Since first embarking on this series over a year ago, I have honored so many dedicated public employees from across the executive branch. I have shared the stories of some who work in the legislative branch as well. Today, it is my distinct privilege to highlight an outstanding public servant from the Federal judiciary.

Ever since the First Congress passed the Judiciary Act of 1789, one of the hallmarks of American life has been our fair and independent judicial system. Indeed, our courts have long been the envy of the world and a model for other nations.

It has been an honor to serve on the Judiciary Committee and to participate in the confirmation of Federal judges. Over the past year in office and in my many years of working as chief of staff for the former Judiciary chairman, Joe Biden, I have met so many highly qualified judges.

America's Federal judges have, at times, faced great danger. From those who served on the frontier in the 19th century to those who today face ever-increasing threats from angry litigants and others, Federal judges honor us all through selfless devotion to duty.

Although they come from diverse backgrounds, judges must all share a dedication to justice and the law. For so many, these are truly a passion. They don their robes each day inspired by the biblical pronouncement: ``justice, justice, you shall pursue.''

The great Federal employee I am honoring today serves as a magistrate judge for the district court for the Eastern District of Pennsylvania. That court falls under the jurisdiction of the Third Circuit, which also covers Delaware.

Judge Timothy Rice has been a Federal magistrate judge since 2005. Before coming to the bench, Tim spent 17 years working for the Justice Department as an assistant U.S. attorney. He served as chief of the Eastern District's financial crimes section from 1995-1997 and later as chief of the public corruption section from 1997-2002. In his last 3 years as an assistant U.S. attorney, Tim served as chief of the criminal division.

While obtaining his law degree magna cum laude from Temple University, he held the position of editor-in-chief of the Temple Law Review. After graduating he clerked for Judge Anthony Scirica of the Third Circuit Court of Appeals.

Before attending law school, Tim worked for 4 years as a news reporter for the Observer-Dispatch in Utica, NY.

Despite his busy schedule presiding over a wide range of criminal and civil matters, Tim makes time to give back to his community and his country. He has taught courses at the Temple University School of Law since 1990, and he was appointed last year by Chief Justice John Roberts to serve on the Advisory Committee on Federal Rules of Criminal Procedure of the U.S. Judicial Conference.

Tim volunteers his time with a number of charitable Catholic organizations, such as the St. Vincent De Paul Society and ResponseAbility. He also works with Philadelphia Reads, a literacy mentorship program for second grade students.

As a magistrate judge, Tim cofounded the Supervision to Aid Re-entry or ``STAR'' program to help reduce recidivism among ex-offenders. Not only has the 3-year-old STAR program helped dozens of ex-offenders make a smoother transition back into society, it has also saved the Federal prison system an estimated $380,000. With volunteers from the court system, the Philadelphia Bar Association, and area law schools, as well as support from local charitable organizations, the STAR program mentors ex-offenders to finish high school or college, find employment, and avoid a return to crime. Thanks in large part to Tim's commitment, energy, and vision, the STAR model is being replicated elsewhere around the country.

Tim and his wife Elaine have passed on a love of public service to their daughters, Meghan and Courtney, who work for the State Department and have been assigned to numerous overseas posts since 2005, including war-time service by both in Iraq. Their youngest daughter, Caitlin, just graduated from the College of Charleston.

Judge Timothy Rice is just one of hundreds of Federal judges across the Nation working day in and day out to fulfill the promise of our Constitution's preamble to ``establish justice'' throughout this land. I hope my colleagues will join me in thanking him and all those serving in the Federal judiciary for their tireless work to protect our lives and our liberties. They are all truly great Federal employees.

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

Mr. President, I ask unanimous consent to speak as in morning business.

Mr. President, one of my primary concerns in the debate on

Wall Street reform has been that we should not write legislation that turns all of the major reform proposals over to the regulators. Instead, we should follow on the footsteps of our forebears from the 1930s--those Senators of old who made the tough decisions and wrote bright-line laws which lasted for over 60 years, until they were repealed. I also argued that we should not depend on regulators who had not used powers they already possessed.

Instead, we passed a Senate bill that, in the area of bank regulation, primarily restates existing regulatory powers, provides some general directional authority, and leaves us with the hope that our present regulators will devise and enforce rules that prevent another financial crisis; that a systemic risk council of regulators will be able to detect early warning signals of impending financial instability; that the regulators will impose higher capital standards on systemically significant banks; that the regulators will be able to resolve failing institutions, and so on, and so on, and so on.

Yesterday, a third reason for writing laws and not turning to regulators was brought home to me. It relates to how the Securities and Exchange Commission is studying the incredibly unregulated growth of high-frequency trading.

I am deeply concerned by preliminary reports of the makeup of the SEC panels studying high-frequency trading after the ``flash crash'' of May 6. On that day, the Dow Jones fell almost 1,000 points, temporarily causing a $1 trillion drop in market value. I call on the SEC to make those panels more balanced by adding individuals from outside Wall Street who are truly sincere and knowledgeable about the further actions the SEC may need to take.

In just a few years' time, high-frequency trading has grown from just 30 percent to 70 percent of the daily trading volumes of stocks. These black box computers trade thousands of shares per second across more than 50 market centers with no real transparency--no real transparency--and therefore no effective regulation. If those ingredients--no transparency, no regulation--sound familiar, it might be because those are the same characteristics applied to over-the- counter derivatives.

My concern about the opaque and unregulated nature of high-frequency trading led me to write to SEC Chair Mary Schapiro last August 21, 2009, calling for a comprehensive review of market structure issues. I wrote:

The current market structure appears to be the consequence

of regulatory structures designed to increase efficiency and

thereby provide the greatest benefits to the highest volume

traders. The implications of the current system for buy-and-

hold investors have not been the subject of a thorough

analysis. I believe the SEC's rules have effectively placed

``increased liquidity'' as a value above fair execution of

trades for all investors.

On September 10, Chair Schapiro responded, saying she recognized the importance of standing up for the interests of long-term investors and would undertake a comprehensive review of market structure issues.

Because I had heard these concerns raised by credible voices, in a speech on September 14, 2009, I predicted some of the events of last May 6. At that time, I said:

Unlike specialists and traditional market-makers that are

regulated, some of these new high-frequency traders are

unregulated, though they are acting in a market-maker

capacity. If we experience another shock to the financial

system, will this new, and dominant, type of pseudo market

maker act in the interest of the markets when we really need

them? Will they step up and maintain a two-sided market, or

will they simply shut off the machines and walk away? Even

worse, will they seek even further profit and exacerbate the

downside?

On October 28, Senator Jack Reed convened a hearing in the securities subcommittee on these issues. He graciously asked me to testify at the hearing, where I said in my first statement:

First, we must avoid systemic risk to the markets. Our

recent history teaches us that when markets develop too

rapidly--when they are not transparent, effectively regulated

or fair--a breakdown can trigger a disaster.

On November 20, I sent a letter to Chairman Schapiro summarizing some of the hearing testimony and called on the Commission to acted quickly to ``tag'' high-frequency traders and address the systemic risk they pose. On December 3, Chairman Schapiro responded to my letter and wrote that the SEC would issue a concept release in January and put forth two rule proposals that would, respectively, impose tagging and disclosure requirements on high-frequency traders and address the risk of naked access arrangements.

In January, the SEC did indeed issue a concept release, as well as a proposed rule banning naked access arrangements. Unfortunately, it was months later--April 14--before the SEC finally issued the ``large trader'' rule requiring tagging of high-frequency traders. In that proposed rule, the SEC noted that the current data collection system is inadequate to recreate market events and unusual trading activity.

Now think about this. This was back on April 14, before the May 6 thing, and what she said was: In the proposed rule, the SEC noted that the current data collection system is inadequate to recreate market events and unusual trading activity. Is there any question why we don't know yet what happened on May 6?

Then, on May 6, the disaster struck that I and others were worried about. For 20 minutes, our stock market did not perform its central function: discovering prices by balancing buyers and sellers. And as the SEC has noted--both before and after the ``flash crash''--it indeed does not have the data to discover easily the causes of the market meltdown.

It is true that the SEC and CFTC have gone into overdrive since May 6. Indeed, the staffs and Commissioners of both agencies have worked heroically around the clock to try to recreate and study the unusual trading activity of that day. They have kicked into high gear and formed an advisory commission. They have quickly come together to propose two more possible rules: an industry-wide circuit breaker so that if we ever again have another market ``flash crash,'' we won't see absurd prices for some of our Nation's proudest company stocks, and also a long overdue proposal to have a consolidated audit trail across market centers that will finally provide regulators with access to the information they need to police manipulation, understand trading practices, and reconstruct unusual market activity in a timely manner.

After weeks of helpful action by the SEC--when the industry itself was helping the agencies to find band-aid solutions--now is not the time to see the SEC continue with rulemaking by Wall Street consensus.

We may need further action, probably against the interests of those who benefit from the current market design.

Further action only through industry-consensus is a prescription for no change.

This all brings me to why I became so concerned yesterday. As part of the Commission's ongoing market structure review, the SEC has decided to hold a roundtable discussion on June 2--good idea.

I have learned preliminary reports about the make-up of the high frequency trader panel.

Based on those reports, the panel is dramatically out of balance.

It appears as though it was chosen primarily to hear testimony that reinforces the top-line defenses of the current market structure--that high frequency trading provides liquidity and reduces spreads--rather than what it should be doing, a deep dive into the problems that caused severe market dislocation on May 6 and damaged our market's credibility.

I have called on the SEC to add more participants to give the panels some semblance of balance.

Frankly, I find the preliminary reports to be so stacked in favor of the entrenched money that has caused the very problems we seek to address that the panel itself stands as a symbolic failure of the regulators and regulatory system--that is, with the exception of a few brave souls who have been invited to critique the conventional industry wisdom.

Let me read from the comment letters and statements of five of the expected participants.

Not surprisingly, in comments to the SEC and members the industry made prior to the unusual volatility of May 6, each of these five participants reported that--contrary to the concerns I and others had expressed--they think the markets are running as smoothly as ever.

One of the expected panelists wrote:

[O]ver the past 18 months--since the height of the

financial crisis--the Commission has been very active with

rule making proposals. Nearly all of the issues that may have

contributed to diminishing investor confidence have been

addressed by Commission rule-making.

Ironic, after what happened on May 6.

That panelist also wrote:

We believe that the current national market system is

performing extremely well. For instance, the performance

during the 2008 financial crisis suggests that our equity

markets are resilient and robust even during times of stress

and dislocation.

Another expected participant wrote in an email sent widely that his exchange--

doesn't believe the equities markets are broken.

To the contrary, we would argue that the U.S. equity

markets were a shining model of reliability and healthy

function during what some are calling one of the most

challenging and difficult times in recent market history.

Another expected participant wrote:

Implementing any type of regulation that would limit the

tools or the effectiveness of automation available for use by

any class of investor in the name of ``fairness'' would turn

back the clock on the U.S. Equity market and undo years of

innovation and investment.

That is an interesting comment, because I have always believed that fairness was the hallmark and number one priority of U.S. markets. That is what people say. That is why people come to America. They don't come to invest in some casino game. Liquidity is important, but the key thing for our markets to be credible is fairness.

Another expected panelist sounded a similar note in a comment letter filed before May 6.

All market regulation should be evaluated with respect to

its impact on the liquidity and efficiency of equity markets

for the benefit of investors . . . For example, certain

short-term traders and high frequency traders provide

liquidity to the markets. Although some of these short-term

traders may differ at times in their goals and overall

position vis-a-vis other types of investors, we believe, on

the whole, that the liquidity they provide is beneficial to

the markets.

I agree with that statement. Liquidity is vital to the strength and stability of our markets.

But on May 6, liquidity vanished, as some of the short-term traders left the marketplace. And for those who didn't, we learned that the liquidity they provide was about 1/100th of an inch deep.

Finally, another panelist co-signed a letter stating:

We believe that any assessment of the current market

structure or the impacts of `high frequency trading' should

begin with the recognition that by virtually all measures,

the quality of the markets has never been better . . . .

The equity markets have also proven to be remarkably

resilient. Despite the significant stresses that occurred

during the recent financial crisis, U.S. equity markets

remained open, liquid and efficient every day, while other

less competitive and less transparent markets failed.

The SEC has picked one voice for the panel--Sal Arnuk of Themis Trading--who has been a vocal and intelligent critic of high frequency trading.

He has valiantly raised questions about market structure and the trading advantages that high frequency traders enjoy, but he is being asked to go up against six Wall Street insiders who will no doubt be primed to argue against his position.

People wonder why Americans have such little faith in Washington, DC. Talk about a stacked deck.

I am particularly concerned by the upcoming SEC roundtable on high frequency trading because it is reminiscent of the one that the SEC held last September on ``naked'' short selling.

Naked short selling occurs when a trader sells a financial instrument short without first borrowing it or even ensuring it can be borrowed. Just a reason on faith that it may be borrowed. What this means is traders can sell something they do not own or have not borrowed. Americans understand you cannot sell something you don't have.

After the SEC's repeal of the 70-year uptick rule in 2007, abusive short selling facilitated the sort of self-fulfilling bear raids on stocks that we saw during the financial crisis.

Since coming to office last year, I have highlighted this serious problem through a series of speeches and letters to the SEC. Along with seven other Senators, of both parties, I also called for pre-borrow requirements and centralized ``hard locate'' system solutions.

In response to those concerns, the SEC held a roundtable last September to examine these proposals.

Unfortunately, like the panel coming up, the panel was stacked with industry representatives even though the industry had done virtually nothing to address what had become a glaring problem.

Listen to the lineup: Goldman Sachs, State Street, and the Depository Trust & Clearing Corporation DTCC, among others, participated.

Not surprisingly, these panelists were resistant to the hard-locate requirement and other serious solutions, even while they generally acknowledged that there are bad actors who engage in naked short selling and don't comply with the current locate system.

DTCC even backed away from discussing the very proposal it had laid before the U.S. Senate.

I fear that an industry-stacked panel in the upcoming roundtable on high frequency trading will be more of the same and will once again dismiss fundamental reforms, ultimately leaving retail and long-term investors with half-measures or none at all.

Why? Because repeatedly we see that regulators are dependent almost exclusively for the information and evidence they receive about market problems on the very market participants they are supposed to be confronting about needed changes.

This is as true in other agencies--we filed the papers just last month and you can see it--like the agency charged with the oversight of oil drilling--as it is at the SEC.

The regulators are surrounded--indeed they consciously choose to surround themselves--by an echo chamber of industry players who are making literally billions of dollars under the current system.

Who speaks to the regulators on behalf of the average investor?

Who outside of the industry itself has access to the data that only the industry controls?

Who other than the market players who have invested so much of their capital into the very systems that profit and serve their own interests has the analytical capability to lead the SEC in a different direction?

We must have evidenced-based rules in our system, we are told.

But when all the evidence comes from Wall Street, who is going to stop Wall Street from once again pulling the wool over the SEC's eyes?

The events of May 6 demonstrate that technological developments have outpaced regulatory understanding. If we are to ensure our markets are safe from future failures--because the markets did fail their primary function on May 6th--regulators must catch up immediately.

Competition is critical in our markets and has led to many positive developments. But with competition, we also need good regulation. Just like we need referees on the field who will blow their whistles when the game becomes rigged. In football, we don't let the players make up the rules during the game.

So, we need action from our regulators, not negotiation. We need independent leadership by the SEC, not management by consensus with Wall Street.

Again, I call on the SEC to rebalance these panels. The Commission will never be able to catch up if it hears mostly from those who will fight to maintain the status quo.

The SEC must hear from those who speak for long-term investors and others who use our capital markets, not just from those who profit from high frequency trading.

The American people deserve no less.

I yield the floor.

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

Mr. President, I would like to speak as in morning business.

Mr. President, I rise to speak about the nomination of Elena Kagan to be Associate Justice of the Supreme Court of the United States.

Ms. Kagan is, without a doubt, an exceptionally well-qualified nominee. In every job she has held, including associate White House counsel, dean of the Harvard Law School, and Solicitor General, she has distinguished herself through her work ethic, intelligence, and integrity.

I was part of 10 confirmation hearings during my time with then- Senator Biden, and during that time, I witnessed Ms. Kagan's talents firsthand, when she served as special nominations counsel to the Judiciary Committee during the nomination of Justice Ginsburg in 1993.

She is also a woman of many ``firsts''--the first woman to serve as dean of Harvard Law School as well as the first to serve as Solicitor General. She now stands to be the fourth in history to serve on the Supreme Court. When she is confirmed, for the first time in history three women would take their seats on the Nation's highest Court.

I have consistently called on President Obama to nominate candidates to the bench who expand, and not contract, the breadth of experiences represented on the Supreme Court.

Every one of the current Justices came to the Court from the Federal appellate bench. While this experience can be valuable, I believe the Court should reflect a broader range of perspectives and experience.

Ms. Kagan brings valuable nonjudicial experience and a freshness of perspective that is currently lacking.

Prior judicial experience has never been, nor should it be, a pre- requisite to be a Supreme Court Justice. In the history of the Supreme Court, more than one-third of the Justices have had no prior judicial experience before nomination.

History further shows that a nominee's lack of judicial experience is no barrier to success as a Supreme Court Justice.

When Woodrow Wilson nominated Louis Brandeis in 1916, many objected on the ground that he had never served on the bench.

Over his 23-year career, however, Justice Brandeis proved to be one of the Court's greatest members. His opinions exemplify judicial restraint and his approach still resonates in our judicial thinking more than 70 years after his retirement.

This list of highly regarded Justices without prior judicial experience is not insignificant.

Felix Frankfurter, William Douglas, Robert Jackson, Byron White, Lewis Powell, Hugo Black, Harlan Fiske Stone, Earl Warren and William Rehnquist--they all became Justices without having previously been judges, yet we consider them to have had distinguished careers on the Supreme Court.

In fact, Justice Frankfurter wrote in 1957 about the irrelevance of prior judicial experience. He said:

One is entitled to say without qualification that the

correlation between prior judicial experience and fitness for

the functions of the Supreme Court is zero.

That is a point that some of my Republican colleagues have recognized when addressing the qualifications of other nominees.

Ms. Kagan's lack of prior judicial experience should not be a determining factor in assessing her qualifications to be a Justice.

Indeed, if significant prior experience as a judge were a prerequisite, where would that leave Justices like John Roberts and Clarence Thomas? Thomas had served on the DC Circuit for less than 16 months before his nomination, and Roberts for just over 2 years.

I have an insightful article on this subject by Joel Goldstein, published in the Kansas City Star. I ask unanimous consent it be printed in the Record.

Another attack on Elena Kagan, equally unjustifiable, focuses on military recruiting while she was dean at Harvard Law School.

Most of the charges about the Harvard Law recruiting ban are distortions. The university policy reflected a policy preference for nondiscrimination against gays, but Dean Kagan never denied military recruiters physical space at the law school or access to the student body.

Just as important, military veterans at Harvard have high praise for Kagan's role as dean.

In February 2009, several Iraq War veterans who graduated from Harvard Law School when she was dean wrote a letter to the Washington Times describing their ``appreciation for Miss Kagan's embrace of veterans on campus. During her time as dean, she has created an environment that is highly supportive of students who have served in the military.''

I was pleased to see this view echoed by our colleague from Massachusetts after his meeting with Solicitor General Kagan last week.

He said:

It was very clear to me after we spoke about it at length

that she is supportive of the men and women who are fighting

to protect us and very supportive of the military as a whole.

I do not feel that her judicial philosophy will be hurting

men and women who are serving.

The best answer to these charges comes from the nominee herself.

In 2007 while serving as dean of Harvard Law, she addressed cadets at West Point. She said:

I am in awe of your courage and your dedication, especially

in these times of great uncertainty and danger. I know how

much my security and freedom and indeed everything else I

value depend on all of you.

Addressing the controversy regarding the military recruiters she said:

I have been grieved in recent years to find your world and

mine, the U.S. military and U.S. law schools, at odds,

indeed, facing each other in court--on one issue. That issue

is the military's ``don't ask, don't tell'' policy. Law

schools, including mine, believe that employment

opportunities should extend to all their students, regardless

of their race or sex or sexual orientation. And I personally

believe that the exclusion of gays and lesbians from the

military is both unjust and unwise. I wish devoutly that

these Americans could join this noblest of all professions

and serve their country in this most important of all ways.

But I would regret very much if anyone thought that the

disagreement between American law schools and the

U.S. military extended beyond this single issue. It does not.

And I would regret still more if that disagreement created

any broader chasm between law schools and the military. It

must not. It must not because of what we, like all Americans,

owe to you.

In consulting with leadership, as well as with me and my colleagues on the Judiciary Committee, President Obama honored the Senate's advisory role in the selection process.

As the Senate process moves from advice to consent, I look forward to a confirmation process that is orderly and filled with an honest exchange of views, not partisan bickering.

The vote for a Justice of the U.S. Supreme Court is one of the most important votes a Senator can cast. That is because a Justice serves for a lifetime appointment and will continue to have an impact long after the vote is made.

Since her nomination, Solicitor General Kagan has already met with dozens of Senators and has many more meetings scheduled.

My meeting with her strengthened my belief that President Obama has selected a nominee with both impeccable credentials and a superior intellect. Her ability to bridge disagreement and find common ground among disparate voices, as well as her experience in all three branches of government, would be a tremendous asset on the current Court.

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

Mr. President, I rise today to voice my support for H.R. 4899, the Fiscal Year 2010 Supplemental Appropriations Act. This bill is critical to our future success in Iraq, Afghanistan, and Pakistan and also delivers much needed humanitarian aid to Haiti. Today, I wish to highlight how some of the provisions in this legislation support U.S. foreign policy goals, strengthen our military and civilian efforts, and defend against security threats around the world.

This bill does a great deal to support our ongoing counterinsurgency effort in Afghanistan. As General McChrystal has said, counterinsurgency is not an ``event,'' but rather, a ``process,'' and this supplemental provides the essential resources needed at each stage of the process.

First, the military must ``shape and clear'' in a military operation. The President made the bold decision in December that an additional 30,000 troops were needed in Afghanistan, and this bill fully funds the additional deployment. As we saw earlier this year in Marjah and will witness this summer in Kandahar, the U.S. military is partnering with the Afghan security forces for the ``clear and hold'' portion of counterinsurgency, and I am pleased this bill provides $2.6 billion to train and equip the Afghan security forces.

Next we must ``build,'' which requires a unity of effort between the military and civilian agencies and which is why this bill provides $1.48 billion to the State Department for continued reconstruction and law enforcement programs. As I have stated before, our goal is to transfer authority to the Afghans. For this, we must continue to train and mentor the Afghan Army, police, and civil servants, so they may assume greater responsibility to provide security and effective governance themselves.

On a recent trip to Afghanistan in March, I saw firsthand the improvements that have been made with the Afghan National Army, ANA, training program. Thanks to a recent pay raise for ANA recruits and intensified partnering with U.S. forces, we are on track to exceed the stated goal of 134,000 trained ANA by October. The additional resources in this bill will help ensure we stay on this positive trajectory for ANA training and mobilization.

Unfortunately, the same progress has not been realized in training the Afghan National Police, ANP. A lack of oversight, coupled with high rates of attrition, drug use, illiteracy, and widespread corruption have severely undermined our efforts to establish a credible police force.

I was appalled--appalled does not describe it--I was appalled to learn we have spent $6 billion on training the ANP in the past 9 years, with little to show for it. I have been in literally 60 to 100 meetings--before my three trips to Afghanistan, in Afghanistan, and my trips back. I have yet to hear anyone say anything good about the Afghan national police. It was not until I got on the Homeland Security Subcommittee that I found out we were spending $6 billion to train them. I would have been shocked if I had heard we were spending $100 million to train them. However, this is key to our success in Afghanistan, and I believe the administration is now fully aware of the problems that have become endemic to this program and is focused on eliminating them in the months ahead.

Funding in this bill will support efforts to get police training back on track, which is one of the most critical elements of our strategy in Afghanistan.

This bill also does a great deal to reinforce our partnership with Pakistan. After traveling three times in the past year to Pakistan, I cannot underscore enough the importance and strategic value of this partnership to our shared fight against violent extremism. This resonates at home today in the wake of the failed Times Square bombing and Faisal Shahzad's alleged ties to Pakistani extremists in Waziristan. In light of mutual security interests, we must continue to nurture our relationship with the Pakistani people and military, demonstrating our enduring long-term interest in the region.

Last year, Congress validated that commitment in the form of a 5- year, $7.5 billion economic aid package, otherwise known as the Kerry- Lugar bill, and in the past 2 years, we have invested over $1 billion in military aid in the Pakistan counterinsurgency capability fund. This bill reaffirms these commitments with $259 million to support ongoing programs to strengthen democratic governance, rule of law,

and social and economic services to improve the lives of the people of Pakistan. Of the total, $10 million would be provided for the Pakistani Civilian Assistance Program, $5 million for human rights programs, and $1.5 million to facilitate the implementation and oversight of USAID and Department of State programs.

This bill also provides $50 million for the purchase of helicopters for Pakistan which will be used to combat terrorist groups and other extremist organizations. I am hopeful that this level of commitment will help persuade the Pakistanis to redouble their efforts to address security concerns along the border with Afghanistan. I cannot emphasize enough the importance of Pakistan's contribution to the security situation in the tribal areas, especially as it pertains to targeting the Afghan Taliban--not just the Pakistani Taliban--including the Haqqani Network and Quetta Shura.

This bill also helps ensure a stable and secure Iraq in preparation for the drawdown of United States forces and complete withdrawal of combat troops by September. During my recent visit to the region, I was struck by the helicopter view of Baghdad at night. The glimmering lights of the city and the traffic looked similar to any city in the U.S. That sight illustrated the progress that has been made in Iraq and the enduring mutual commitment and partnership that has been created in recent years. As a means of reinforcing this commitment and continued progress, this bill provides an additional $1 billion for the Iraqi security forces fund. It also provides $650 million in additional economic and security assistance for Iraq which includes $450 million for the Iraqi police program.

These measures support the security framework in Iraq, which will provide Iraq's leaders with the stability they need to form a new government. With the election recount recently completed, the groundwork has been laid for Iraqi elected officials to work toward a common goal of establishing a government representative of the people of Iraq. While a functioning government should not just be cobbled together in the interest of time, it is important to note that a prolonged delay could create a power vacuum that may exacerbate ongoing security concerns. This bill reinforces and continues to build upon the security infrastructure that the Iraqis have created, and the goal of building and sustaining past success.

Finally, I am grateful this bill includes $3 million for the Voice of America's Creole language broadcasting in Haiti. The VOA Creole broadcasts include public service announcements from U.S. Government agencies, which have been so valuable in previous crises around the world, and have helped Haitians find loved ones, shelter, medical assistance, and aid, in the aftermath of the earthquake.

Since then, it has provided a vital service in helping them to find essential resources and assistance. VOA runs public safety and relief supply updates, as well as a call-in line to broadcast messages from families and friends of the injured and missing. The additional resources in this bill will help to sustain these critical public services, and I commend the VOA for its commitment and its great contribution to disaster relief globally, and especially in Haiti.

This bill reinforces our foreign policy goals and secures our interests at home and abroad. It also funds our Armed Forces which are deployed in harm's way, and supports the civilian diplomatic and development initiatives that are necessary to our efforts in Afghanistan, Pakistan, and Iraq. I thank the leadership for moving this bill forward, and I call on my colleagues to join me in supporting this supplemental.

I thank the Chair.

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

Mr. President, I ask unanimous consent to speak as in morning business.

Mr. President, we are about to go to a conference on the financial reform bill for Wall Street reform. I want to spend a few minutes to talk about some of the provisions that I think are extremely important to survive in conference.

What brought my attention to speak today is what is going on in Europe right now. You will hear people talk about this bill, and they will say: Well, there is no problem anymore. We have straightened out the mortgage problem. This all happened. Some kind of a typhoon came through here and wrecked the housing business. If we get that straightened out, we can move right on.

I do not see it that way. I do not look at it as some kind of natural disaster. Clearly, the housing bubble was a big part of it, but there were still systemic problems in our financial system which have been around for quite a while. If you go back and look at the 1929 Depression, in 1933, the Senate of the United States and the House and the President got together and we made rules and we made laws to correct it so it would never happen again. We passed a bill such as Glass-Steagall which basically said if you want to be a commercial bank, that is fine. But if you want to be a commercial bank, you cannot be an investment bank. We put in the uptick rule on short selling. We put in margin requirements. We created the FDIC. The Congress of the United States legislated because it was such a serious problem.

For 50, 60 years we did not have a major problem. We had problems, but not major problems. Think about before 1929. The 19th century was full of bank panics. What happened? Why did we go through 50 or 60 years without a problem?

I think when you look at it, you have to say we made some major mistakes during the late 1990s and into the 2000s in the way we carried on our business in the financial market. One by one, we stripped away these protections. It culminated in 1999 with the Graham-Leach-Bliley Act, which did away with Glass-Steagall. We allowed commercial banks to get into all kinds of businesses, all kinds of risky businesses. We allowed them to get into derivatives. Our regulators went home and said: Hey, look, we didn't need regulation. Let the free market work it out. Alan Greenspan and others were saying: Let the market work it out.

This was not just about housing. Housing is what set it off, but what really set it off was we basically said, we do not need any regulators. We decided to do play football, and we said: Do you know what. Those referees on our football field keep blowing the whistle. How can we keep playing when we have the referees blowing the whistle all the time, closing things down? Let's get these referees off the field and let the people play. We all know what happens in football, and we all saw what happened here.

What concerns me the most is--I think we have done some good things to deal with the housing market and eliminating the housing bubble-- what we see happening in Europe should send a real chill through the spine of everyone in this body. We have seen the EU and the IMF scramble to put together an almost $1 trillion emergency package to forestall a full-blown series of sovereign debt crises in one country after another. Sound familiar? Lehman Brothers, Bear Stearns, AIG, and on. Greece, Spain, Portugal. Sound familiar? We see what is happening there.

German and French banks alone have more than $900 billion in exposure to Greece and other vulnerable Euro countries, including Ireland, Portugal, and Spain. Meanwhile, our top five banks have an estimated $2.5 trillion in exposures to Europe.

On the front page of today's Wall Street Journal there is an article on how European banks are saddled with higher funding costs because of skepticism on whether the EU-IMF bailout plan will work.

I am a person who believes in the market. Look at what the market is saying. The market is saying: You are going to have to pay a higher funding cost. Do you know why? Because we are at risk. That is a sign. It is not for people to sit around. We are at risk. Just like right now, our major banks borrow at lower rates than every other bank in America because people believe 75 basis points or 80 basis points-- because people believe the market sends a clear message that they think those banks are still too big to fail. So this is an example of what is going on in Europe and why we must make sure the bill that comes out of conference is strong and why we must make sure we have done away with too big to fail.

There are five issues I wish to talk about on the floor and go over them. No. 1 is Merkley-Levin. People on the floor know that is a good amendment, the President of the United States. The Volcker rule: Folks have come to this floor and said the Volcker rule is already in this bill. Well, this bill says the Rocker rule is in here. The Volcker rule, as you will remember, says that commercial banks, banks, should not be involved in proprietary trading.

If you want to be a commercial bank, be a commercial bank. That is what we set up when we set up Glass-Steagall. We said be a commercial bank. That is going to be a low-risk business. You may not get as high a return if that is what you want to do, but do not get into these risky things, do not get into this investment banking. Basically, what this says is, do not get into the proprietary trading because proprietary trading can be risky. If you want to be a commercial bank, be a commercial bank. So what the present bill says is that it supports the Volcker rule. It says you can do proprietary trading, but then it sends it to the regulators, and says to the regulators, you can modify this.

First of all, what is the Congress of the United States doing saying to regulators, you can modify this? The buck stops here with us. We should lay down what the rules are. That is what we did in 1929. We passed laws. We made what the laws were. We do not turn them over to regulators. By the way, many of these regulators--not the people but the people who were in those positions--were the reason why we got to where we are today, because they are the ones who pulled the referees off the field.

So one of the things we should look at clearly coming out of this conference is a strong Volcker rule, not one that can be modified by the regulators, and that is basically the Merkley-Levin amendment.

The second thing is the provision by Senator Lincoln, the provision on swaps dealers. The conference report should include Senator Lincoln's provision to prohibit banks with swap dealers from receiving emergency Federal loans. Again, if you want to be a bank, be a bank. Do not get into these high-risk businesses.

By forcing megabanks to spin off their swap dealer into an affiliate or separate company, section 716 of the Senate bill would help restore the wall between the government-guaranteed part--the FDIC-insured part--of the financial system and those financial institutions, entities, that remain free to take on greater risk.

If you want to have risk, become an investment bank. Go into risky business. Do not do that with commercial banks. Do not be luring our commercial banks with up to, potentially, $2.5 trillion in exposure to Europe. How many derivatives? How much are they still in derivatives? That is what this is about. Let's get them out of the risky business of derivatives.

Allowing massive derivatives dealers to be housed within banks creates a moral hazard. Forcing banks to spin off large derivatives dealers would end this moral hazard and force swaps dealers to adequately price and capitalize the risks associated with these activities. Again, commercial banks should be commercial banks. They should not be in high-risk businesses.

Senator Collins' capital standards amendment. The conference report should include some form of the Collins

amendment to ensure that bank holding companies and systemically significant nonbank financial institutions are subject to capital and leverage requirements as stringent as those that insured depository institutions face under existing prompt corrective action regulations. That just makes good sense. Set up the same regulations.

This amendment would, therefore, raise the capital bar for our largest financial institutions, requiring them to hold more committed and reliable forms of capital, namely, common equity and retained earnings. This makes good sense.

Representative Kanjorski's systemic risk amendment. The conference report should include Representative Kanjorski's amendment to require the council, following consultation with applicable prudential regulators, to take action against a financial institution that poses a ``grave threat'' to U.S. financial stability. This just makes good sense.

These actions might include the imposition of enhanced capital and other prudential standards, activity restrictions, and the sale of assets or business lines, among others. This is what the regulators should be doing. Hence, this amendment gives regulators added tools and authority to impose strict standards and take preemptive actions against financial institutions that pose outsized risks to the overall system before a full-blown financial crisis occurs.

We cannot do what we have done before. We cannot say: Oh, everything is going great, and then one day wake up with this incredible hangover. We cannot wait for a full-blown financial crisis. That is key. Resolution is one thing--how to resolve it once you get there--but we have to spend our time on prevention to make sure this never happens again, we never get to that point.

Finally, Representative Speier's leverage amendment. The conference report should include Representative Speier's amendment to require the Federal Reserve to set a minimum leverage level of 15 to 1 on all systemically significant financial institutions. This is good financial practice.

A statutory leverage limit of this kind will ensure a capital floor for our largest banks and help ensure that regulators do not miss the forest for the trees as they calibrate risk-based capital standards.

These are five important pieces to the puzzle that we should include in this financial regulatory reform when it comes back from the conference. This is our way to assure that never again do millions of Americans find themselves out of work, millions of Americans find themselves without a house, and that American taxpayers never again-- never again--will have to bail out the large banks.

I yield the floor.

Madam President, I rise once again to recognize one of our Nation's great Federal employees.

This weekend, Americans will be observing Memorial Day, which also marks the unofficial start of summer. It is a tradition for families to gather at picnics and spend time together outdoors. Many will be visiting parks, trails, and historical sites administered by the National Park Service.

Every year, when Americans travel to our national parks--as many will do this weekend they often take for granted the outstanding work performed by National Park Service rangers.

The men and women who protect our National Park System and watch over the safety of its visitors come from diverse backgrounds, yet they share a dedication to public service and an abiding love for the land we all so cherish.

The parks they administer on our behalf showcase the diversity of our country's splendid natural geography. From Yellowstone to the Shenandoah, from the gates of the Arctic to the Great Smoky Mountains, these parks provide a refuge for wildlife and preserve our natural and cultural heritage.

The experience of visiting these parks is often awe-inspiring. Surely all who have ever stood at the rim of the Grand Canyon or at the foot of a giant California Redwood felt their majesty and the stirrings of tranquility they inspire.

These parks, trails, and historic sites are an excellent place to take children, where they can learn firsthand about nature and the importance of conservation.

This is why I have been working with Senator Carper to establish the first State national historical park in Delaware, which would preserve sites important to our State's colonial history. Currently, Delaware is the only State without a national park.

Indeed, our great national parks, with their pristine natural beauty and vast expanses of solitude, have stirred their souls of millions.

We have so much to learn from these parks, and so much to experience. True remain the words from Shakespeare, who wrote of the wilderness that in it we may ``find tongues in trees, books

in running brooks, sermons in stones, and good in every thing.''

Today, as my great Federal employee of the week, I have chosen to honor one of the dedicated rangers who keep visitors to our national parks safe, informed, and able to experience the parks' wonders.

Steve Shackleton has been a national park ranger for over a quarter- century. He began his service in the 1980s at the Grand Teton National Park in Wyoming, where he worked in the areas of search and rescue, emergency medicine, and law enforcement. During that time, he spent six summers fighting fires in California's Sierra National Forest.

Steve spent 14 years in Hawaii and Alaska working on resource protection management. He holds bachelor's and master's of science degrees in criminology from California State University in Fresno and a master's of public administration from the University of Alaska, Anchorage.

In the late 1990s, Steve came to Washington, where he spent 3 years working in the National Park Service's legislative office and undertaking a fellowship right here in the U.S. Senate. Afterward, Steve became the superintendent of the Pinnacles National Monument in California's central coast region.

From 2004-2005, he participated in the OPM's Federal Senior Executive Candidate Development Program, which included study at Harvard's Kennedy School of Government and Stanford's Graduate School of Business.

For the last 7 years, Steve served as the chief ranger at Yosemite National Park. In that role, he directed the park's programs in law enforcement, wilderness management, fire prevention, search and rescue, and remote medicine.

This February, Steve was asked to return to Washington, where he now serves as the National Park Service's Associate Director for Visitors and Resource Protection.

Steve's love of nature and America's natural heritage can be traced to his father, Lee Shackleton, who himself had a long career as a park ranger. Steve and his wife, Jane, have passed along this tradition of caring for nature to their daughter, Dana, who is studying veterinary medicine at the University of California, Davis.

I hope my colleagues will join me in recognizing the great work of Steve Shackleton and all of America's national park rangers. This summer, they will continue to watch over the safety of visitors and serve as their guides to the splendor of our national parks.

The men and women of the National Park Service are all truly great Federal employees.

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

I ask to speak as in morning business.

I rise today to speak once more about our Nation's great Federal employees.

The United States and our allies are engaged in an ongoing effort to disrupt and dismantle terrorist groups overseas. Every day, our troops act with great courage and commitment to take the fight to al-Qaida and its allies. Complementing their efforts are public servants who target individuals providing financial backing and other forms of support to terrorists overseas.

One of the key government officials leading that effort here in Washington is a great Federal employee at the Treasury Department.

Stuart Levey has served as the Under Secretary of the Treasury for Terrorism and Financial Intelligence since 2004. Appointed to the position by President Bush, he was asked to continue after President Obama took office as a testament to his effectiveness and unique abilities. Stuart has done an outstanding job cutting off the flow of money to terror groups and their sponsors, and support for his efforts crosses political divides.

Today, one of the leading state-sponsors of terrorism is Iran. While an array of unilateral and multilateral sanctions remain in place with regard to Iran, many foreign businesses, banks, and other entities do business with Iran, which helps the Iranian government finance its nuclear program and terrorist activities.

In 2006, Stuart adopted a new tactic to deal with this problem. Instead of focusing solely on government action, he began exploring opportunities for cooperation with the private sector and urging private sector institutions to take action.

In this regard, Stuart led an effort to convince foreign banks to cease conducting business with Iran until that country agreed to comply with international banking standards. By showing companies and banks that doing business in Iran has financial and diplomatic repercussions, he has convinced corporations to cut off business with Iran. All of this was done in addition to the more traditional strategies of adding Iranian banks to the U.S. terrorist list and imposing more stringent regulations on American financial institutions.

As Stuart's efforts took off, banks throughout the world--including in China and Muslim-majority countries--began cutting financial ties with Iran. Energy companies have been persuaded to avoid initiating deals to extract Iranian oil and gas, and such action has had far- reaching financial implications.

Our multilateral efforts against terrorism and nuclear nonproliferation have also been strengthened by Stuart's work.

At the Treasury Department, Stuart oversees the Office of Terrorist Finance and Financial Crime, the Office of Intelligence and Analysis, the Financial Crimes Enforcement Network, the Office of Foreign Assets Control, and the Treasury Executive Office of Asset Forfeiture. In his leadership of these offices, Stuart has shaped a new role for the Treasury Department as a key player in national security matters and decisions, ranging from Iran to North Korea.

Before coming to the Treasury Department, Stuart served as Principal Associate Deputy Attorney General at the Justice Department. There, he coordinated a number of the department's counterterrorism activities. He worked for several years in private practice before entering public service in 2001, and he holds undergraduate and law degrees from Harvard University.

I hope my colleagues will join me in thanking Stuart Levy for his achievements and wish him continued success in his efforts, which are ongoing. He and his colleagues working at the Treasury Department on counterterrorism and financial intelligence are deserving of both praise and recognition for all they do to keep Americans safe and to secure American interests, both domestically and abroad.

They are all truly great Federal employees.

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

Mr. President, I thank my neighbor across the hall from Wyoming. He is a gentleman, as always, and I appreciate it.

I just want to stand and say, from the beginning I have talked about one of the most important parts of this bill is that we make sure we separate commercial banking activities from investment banking activities. It is very important we have commercial banks that are safe, with deposits supported by the FDIC, but that they not be in risky business.

I just want to say, I agree with the Senator from Michigan and the Senator from Oregon that it is absolutely essential we have a vote on Merkley-Levin and find the will of the Senate on the fact that we should not have banks involved in proprietary betting, and that we go with what the President and former Fed Chairman Volcker said, and go with a bill that separates these and does not allow banks to be involved in proprietary trading. It is absolutely essential.

Again, I thank the Senator from Wyoming, a gentleman, as always.

Mr. President, I rise today, as I have many times this Congress, to talk about the role of fraud at the heart of the financial crisis.

I have previously discussed the urgent need for law enforcement to give high priority to the investigation and prosecution of financial fraud, and for Congress to provide law enforcement with the tools it needs to do so, including increased funding and stiffer sentences.

I was proud to work with Senator Leahy last year on the Fraud Enforcement and Recovery Act. I was proud to work again with Senator Leahy, as well as Senator Baucus, the leader, and many others to include key antifraud provisions in the health care legislation signed into law in March.

Last month, I, along with the other members of the Permanent Subcommittee on Investigations, my Senate colleagues, and Americans watching at home, were treated to a truly revelatory series of hearings chaired by Senator Levin.

Chairman Levin and his staff deserve high praise for their tenacity and diligence: Beginning in the fall of 2008 and culminating this spring, the chairman and his staff reviewed millions of pages of documents, conducted over 100 interviews, and consulted with dozens of experts.

Thanks to the Levin hearings, we now have a thorough accounting of what happened--and what went wrong.

Mortgage origination practices were rife with fraud, and bank management and bank regulators failed miserably in their oversight.

The practice of mortgage securitization allowed everyone in the financial industry to earn lucrative fees and commissions, even though banks knew that these securitized mortgages were filled with liar's loans and other fraudulent products that practically guaranteed their eventual collapse.

At all levels of the industry, compensation structures favored the riskiest loans and the most minimal oversight. As a result, underwriting standards were laughable. Banks didn't care that they were writing bad loans because they did not believe those loans would stay on their books.

The regulators and ratings agencies were totally captured by the banks, due in part to their absolute dependence on the banks for revenue. The Office of Thrift Supervision relied on Washington Mutual for 12-15 percent of its operating budget.

The credit ratings agencies gamed by investment banks, which had reverse engineered their models--bent over backwards to stamp AAA and other investment grade ratings on what was actually junk because they needed the fees.

Investment banks marketed synthetic CDOs, which they had permitted the ``big shorts'' to design so that they were most likely to fail, in some cases without disclosing that material information to their customers and despite their own inherent conflict of interest.

As long as the music played, there was plenty of money to go around. But when the music stopped, banks were bailed out and the American taxpayers were left without a chair.

Fixing the system requires an all out effort by the bank regulators, the FBI, the SEC, and the Justice Department. And Congress should not rest until in its oversight capacity we are convinced that a systemic, strategic and foundational approach to targeting and prosecuting fraud is well funded and well underway.

Bank regulators, especially, must execute a 180-degree cultural turn, assisting the FBI by providing roadmaps to the fraud that has occurred.

But we still need to do far more than just add more cops to the beat and ensure that they're looking in all the right places. We also need to realign incentives so that banks are encouraged to make sound loans, so that credit ratings agencies can dispense untainted evaluations of creditworthiness, and so regulators aren't beholden to those they regulate.

That is why I am proud to support Senator Levin's package of amendments. Each of the eight proposals in the package grows directly out of lessons learned through the Levin hearings.

The Levin-Kafuman package will restore regulatory independence by instituting a cooling off period for regulators--putting a stop to the revolving door between industry and regulator. The amendment will also guarantee that the FDIC as secondary regulator can never again be shut out of an examination by the primary regulator.

To realign bankers' incentives, the Levin-Kaufman package will require that anybody who securitizes a pool of loans must maintain at least a 5-percent stake in a representative sampling of those securities. Other risky lending practices would be banned outright, such as synthetic asset-backed securities, which have no purpose other than speculation.

Finally, the package will improve oversight and operation of the credit ratings agencies by prohibiting them from relying on faulty due diligence and by permitting the SEC to monitor and regulate the methodologies that the ratings agencies employ.

The Levin hearings also set in stark relief the untenable conflicts that rest at the heart of our financial system.

The Levin hearings focused on the residential housing market. But conflicts of interest permeate almost every corner of our capital markets, whether in the context of asset backed securities, or proprietary trading, or a broker selling private order flow into a private dark pool, or the prioritization of trades by a broker ahead of its clients.

We simply cannot leave it to the banks and the brokers to manage conflicts of interest in any way they see fit. If we can learn one thing from the financial crisis, surely, it is that.

Under current law, broker-dealers are not required to disclose conflicts of interest to their clients. They are not required to resolve conflicts in favor of their clients. They are not required to act in the best interests of their clients.

In fact, they are permitted to knowingly fleece their clients, provided the client is ``sophisticated'' enough and provided the broker has disclosed the requisite information about the product.

This must change. We can't expect a full economic recovery without restoring the public's trust in markets. This is why I support, and have cosponsored, two amendments that would impose a fiduciary duty on the part of broker-dealers to their customers, one sponsored by Senator Specter and the other by Senator Akaka.

Imposing such a duty would protect investors and improve the level of integrity in our capital markets. No longer would brokers like Goldman Sachs be able to withhold critical information about its conduct from clients and conceal fraud under the cover of caveat emptor.

Just as important, it would help address the widespread and understandable mistrust of the securitization process, which in turn makes capital more expensive and hinders recovery.

I also support Senator Specter's aiding and abetting amendment, which would reinstate an important deterrent to the sorts of fraud that contributed to our current financial crisis.

On March 15, 2010, I came to the Senate floor to discuss the Bankruptcy Examiner's report on Lehman Brothers and said--as many of us have suspected all along--that there was fraud at the heart of the financial crisis.

Lehman Brothers could not have accomplished this apparent fraud--the use of so-called Repo 105 transactions to ``window dress'' its balance sheet and mislead investors--without the help of its accounting firm.

And that is true of many sophisticated fraud schemes, where the advice or analysis of third parties enables or facilitates the fraud.

Those third parties were answerable to their victims in court, and therefore faced a real deterrent, at least until 1994. That year, in Central Bank of Denver v. First Interstate Bank of Denver, a divided Supreme Court rejected years of settled precedent and limited Federal law in this area to so-called ``primary violators.'' The Central Bank decision, like many others since, reflected the Court's probusiness bias. It also left the SEC alone to bring civil suits against aiders and abettors, and too often left victims holding the bag.

Regulators will fail. When they do, however, we must depend on professionals such as accountants and lawyers to acquit their roles as gatekeepers against accounting fraud, not to materially aid that fraud. One way

to make sure they learn their lesson this time around is to reinstitute the ability of victims to seek compensation from these fraud facilitators.

Senator Specter and I have worked hard to make sure that this amendment is narrowly drawn, ensuring that only truly culpable third parties are subject to liability.

The amendment allows suits only against those who have actual knowledge that their conduct is assisting another person to violate the Federal securities laws.

Until those who facilitate the fraud of others understand that they will be held accountable, whether criminally or civilly, we can't hope to change their behavior.

Finally, I want to mention a bipartisan package of antifraud measures that I have worked on with Chairman Leahy and Senators Grassley and Specter.

These measures will deter schemes that damage the economy and hurt hard-working Americans by increasing sentences for securities fraud and bank fraud. They will give prosecutors new tools to investigate and prosecute fraud cases and will foster vital cooperation between regulators and prosecutors. And they will extend important whistleblower protections.

Whistleblowers provide a vital early warning system to detect and expose fraud in the financial system. With the right protections, whistleblowers can help root out the kinds of massive Wall Street fraud that contributed to the current financial crisis.

As I have said before, this is ultimately a test of whether we have one justice system in this country or two. For our citizens to have faith in the rule of law, we must treat fraud on Wall Street like we treat fraud on Main Street. And for our economy to work for all Americans, investors must have faith in the honest and open functioning of our financial markets.

The amendments I have discussed today will promote both the rule of law and faith in the markets two cornerstones of our democracy.

I urge my colleagues to support these amendments.

Mr. President, today I will support the Wall Street Reform Act.

I applaud Chairman Chris Dodd and my colleagues for having crafted a bill that includes many provisions that I support, in particular the establishment of a consumer finance protection division and urgently needed reforms of the over-the-counter derivatives markets. These are legislative achievements that will significantly improve our financial system. I am also pleased that the bill bans stated income loans, which were a major source of fraud at the root of the crisis. I will be watching carefully to ensure the bill is not weakened in conference.

I remain deeply concerned, however, that when it comes to the stability and health of the U.S. financial markets and its institutions, much unfinished business remains. We must never rest in our efforts to prevent another financial crisis like that which occurred in 2007-08, which shattered the American economy and deeply harmed the lives of millions of our fellow Americans. Indeed, much work remains to be done so that we can restore the credibility of our financial markets and the rule of law on Wall Street, both of which are badly in need of repair.

Some of my concerns are rooted in shortcomings of the bill; others neither fell within the scope of the bill's ambitions nor were a part of the Senate debate; and still others fall legitimately on the shoulders of our regulatory and law enforcement agencies.

As for the bill, for the past 4 months I have addressed at length what I believe to be the central issue to preventing future financial crises: Passing laws that will stand for generations to ensure financial stability by separating speculative risky activities from the government-guaranteed portion of our financial industry, as well as by mandating limits on the size and leverage of our shadow banks.

Instead, the bill reshuffles existing regulatory powers that banking regulators already possessed--and failed to exercise in ways that would have prevented the financial crisis. It relies on regulatory discretion to decide limits on the size, leverage and activities of dangerously concentrated financial institutions. Rather than statutorily limit the size and risk of megabanks through limits on unstable nondeposit liabilities, rather than statutorily impose specific and higher leverage requirements on our largest banks, the bill simply hands the responsibility for regulating ``too big to fail'' banks back to the regulators. Moreover, it vests the hopes of the American taxpayers--who should never again be forced to step into the breach in a banking crisis--in a resolution authority limited by U.S. law, which I fear cannot possibly work to resolve large global institutions. I remain deeply concerned that it does not represent lasting and effective reform of our largest financial institutions, which I have said repeatedly have become too big to manage, too big to regulate and too big to fail.

In the next few years, chastened U.S. regulators may try their best to insist that U.S. megabanks not gorge themselves again on highly leveraged risky investments. But one need only look to Europe today to understand that, without additional preventive measures, bailouts lie in our future, too.

I predict Congress will one day revisit these issues, unfortunately in the wake of a future crisis in which average Americans again will be forced to come to Wall Street's rescue to fend off a possible depression. When that day arrives, Congress I expect will pass needed structural reforms, including a version of the Brown-Kaufman amendment preemptively to address the problem of dangerous financial concentration--and also a restoration of the Glass-Steagall separation of commercial and investment banking activities, the repeal of which in 1999 was one of this country's costliest mistakes.

There are other issues that this debate never addressed.

Naked Short Selling--We still have not restored the uptick rule, which worked for 70 years as a systemic check on predatory bear raids. We still have an unenforceable rule that fails to prevent naked short selling of stocks. I remain concerned that until we impose a pre-trade ``hard locate'' requirement, bank stocks in particular will remain vulnerable to predatory bear raids.

Market Structure issues--High frequency trading has echoes of the derivatives market: I have said repeatedly that whenever you have a lot of money pouring into a financial activity, markets that are changing dramatically, no transparency in those dark markets, and therefore no effective regulation, that is a prescription for disaster. That was the case in the over-the-counter derivatives market. And I believe the so- called flash crash of May 6 in our stock market revealed the fault lines that have long concerned me about the structure of our equity markets and how it has come to be dominated by high frequency traders. Congress cannot simply look backward at the last financial crisis; Congress and regulators alike must instead try also to look over the horizon and identify systemic risks before they occur.

As I wrote to the SEC on August 21, 2009, ``The current market structure appears to be a consequence of regulatory structures designed to increase efficiency and thereby provide the greatest benefits to the highest volume traders. The implications of the current system for buy- and-hold investors have not been the subject of a thorough analysis.'' Nine months later, our stock markets failed for 20 minutes to meet their essential function: discover the prices of securities by balancing buyers and sellers. Two weeks later, the SEC and CFTC still cannot say why, but the answer is no doubt wrapped up in the fact that in the past few years technology developments have moved us rapidly from an investor's to a trader's market. Our fragmented market of more than 50 market centers have become dominated by black-box algorithmic and high-frequency traders, and they are too opaque for our regulators to understand or to police.

Fannie Mae and Freddie Mac--My Republican colleagues are correct in pointing out that we must deal with the problems of Fannie Mae and Freddie Mac, which continue to siphon off billions in taxpayer funds. It is wrong and irresponsible to offer rash and unwise solutions, however. Almost all mortgage originations currently receive government support, whether from Fannie Mae or Freddie Mac or from the FHA. Lest there be any confusion, without this government backstop, our housing system and economy

could have collapsed. Solving these problems and developing a new mortgage finance system will take a great deal of thoughtful consideration, and I urge the Congress to begin this important work.

Finally, and perhaps of most concern, we simply must concentrate the needed resources and effort that will return the rule of law to Wall Street. The hearings of the Permanent Subcommittee on Investigations, chaired by Senator Carl Levin and in which I was proud to participate, revealed that the U.S. real estate boom was fueled in part by pervasive fraud within the mortgage-securitization-derivatives complex effectively at the heart of Wall Street. Congress in its oversight capacity must ensure that bank regulators, the Federal Bureau of Investigation, the Securities and Exchange Commission and the Justice Department are working together in a foundational, strategic, and coordinated fashion to ensure that every last perpetrator of fraud-- from the smallest mortgage broker to the senior-most executives of our most powerful Wall Street institutions--is thoroughly investigated and, where appropriate, brought to justice.

Mr. President, I am on the floor here incredibly disappointed by the decision by my friends across the aisle to block a vote on the Merkley-Levin Volcker rule amendment and the Dorgan amendment to ban naked credit default swaps.

We have had good comity on this bill. I think both sides have taken amendments for a vote they did not like based on how the vote turned out, where you have votes where a majority of the Republicans voted for an amendment they put forward and a majority of the Democrats voted against it or a vast majority of Democrats voted against it, but we allowed it to come to a vote.

I think we are getting late in the processing of the bill. It would have been nice if we could have gone through the whole process the way we started and the way we were in the middle and allowed these important issues to come up, especially issues as important as this one.

I want to praise Chairman Dodd--and I mean it--for an incredible piece of work and all my colleagues who have worked diligently on this bill. It has been incredible in holding this together. There are many provisions in this bill I strongly support.

However, there is one portion of the bill that many of my colleagues and I have discussed on the floor extensively, and that is the question of how we prevent systemic risks from manifesting themselves among our largest Wall Street banks--those that have been deemed too big, too big, too big to fail due to their tendency to engage in highly leveraged and extremely risky speculative trading activities.

As my colleagues know, Senator Brown and I, along with others, offered an amendment to tackle this problem directly and preemptively. The Brown-Kaufman amendment would have scaled down the size and risk of our megabanks through limits on leverage and on unstable nondeposit liabilities. While I am disappointed the amendment did not pass, I know the debate will persist as long as too-big-to-fail banks continue to exist. For as long as we still have banks so large they are too big to fail, they will pose mortal risks--mortal risks--to the American economy.

Within days of the Senate's consideration of Brown-Kaufman, we saw the EU and IMF scramble to put together an almost $1 trillion emergency package to forestall a full-blown series of sovereign debt crises throughout the continent. While ostensibly reported in the press as a rescue package for overleveraged and embattled sovereign nations such as Greece and Spain, it was actually a bailout of Europe's megabanks, not to mention our own. That is what it was about. It was about bailing out Europe's megabanks. German and French banks alone have more than $900 billion in exposure to Greece and other vulnerable Euro countries, including Ireland, Portugal, and Spain.

Meanwhile, our top five banks have an estimated $2.5 trillion in exposure to Europe. That is $2.5 trillion in exposure to Europe.

So long as we have too-big-to-fail institutions, we will continue to go through the ``doomsday'' cycles of booms, busts, and bailouts. There are two amendments left that address this critical question directly, two others that would help. I believe at least one of the two represents a critical test of whether we as a body are serious about curbing systemic risk. While I would prefer we pass the Cantwell-McCain

amendment, which would restore the Glass-Steagall Act's 60-years-long separation between commercial and investment banking activities--which I have spoken on the floor many times about--I believe very strongly that, at a minimum, we must pass the Merkley-Levin amendment that would ban proprietary trading activities by commercial banks.

This is not a radical amendment. After all, it is President Obama's proposal, which he has named the Volcker rule, after the most respected bank regulator in the last half century, former Federal Reserve Chairman Paul Volcker. It has been represented to us for many weeks that even the current version of the bill includes a mandatory imposition of the Volcker rule after a 6-month study. The Merkley-Levin amendment would remove any doubt about whether the new council could, after its review, recommend modifications to the rule.

Merkley-Levin, in my view, is where the rubber hits the road. It is a true test of whether the administration and the Congress are serious about imposing limitations on the activities of the government- guaranteed part of our financial system--in short, so that casino-like activities can no longer remain centered at the heart of too-big-to- fail institutions.

I also believe that a strong financial reform bill must retain the key provisions on too big to fail that are already in the bill, particularly Senator Lincoln's provision to prohibit banks with swap dealers from receiving emergency Federal loans, and an amendment to the bill, Senator Dorgan's amendment, which bans naked credit default swaps.

As I said, I am proud to support Senator Merkley's and Senator Levin's amendment to include a more robust version of the Volcker rule ban on proprietary trading within commercial banks in the bill.

Specifically, the amendment would bar banks and their affiliates from engaging in proprietary trading and from owning a hedge fund or private equity fund. To avoid regulatory arbitrage, it would also increase capital requirements on large nonbank financial institutions engaged in proprietary trading.

The Merkley-Levin amendment would minimize the potential procedural roadblocks to the Volcker rule contained in the current bill by specifically directing the regulators to develop rules to implement the Volcker rule restrictions. It would not give unnecessary discretion to the same regulators who have long had the authority to prohibit speculative activities at banks but never opted to do so.

I have heard some proposals call for so-called de minimis exceptions and other loopholes to a ban on proprietary trading at banks. Loopholes of this kind, however, undermine the very spirit of the Volcker rule and would allow banks that benefit from federally insured deposits and access to the Fed window to continue to engage in activities that are speculative in nature. Importantly, this amendment would also build upon the work of Senator Levin's Permanent Subcommittee on Investigations to address conflicts of interest within the modern investment banking model. The PSI subcommittee hearings, in which I had the privilege to participate, demonstrated how Wall Street firms sold clients securities without disclosing their financial interests in seeing such securities fail or perform poorly--basically betting against the very securities they were selling to their clients. Talk about a conflict of interest. This amendment would address this problem by prohibiting underwriters of an asset-backed security from engaging in transactions that create material conflicts of interest with respect to the securities being sold--something I think everyone, on observation, agrees should be the case.

I strongly urge my colleagues to support Merkley-Levin so we can say to the American people we have acted in Congress to prevent another crisis. I do not want to put my faith in a stability council of regulators detecting ``early warning signals'' of financial instability. I would rather we move our largest banks off of the San Andreas Fault of leverage and speculation on which they now sit.

I also support strongly Senators Cantwell's and McCain's amendment to break up the largest banks by reimposing the Glass-Steagall Act. Unless we break the megabanks apart, they will remain too large and interconnected for regulators effectively to control. Once the next inevitable financial crisis occurs and the contagion spreads too quickly for the government to believe that a failing firm won't take down others as well, the American taxpayer--the good old American taxpayer--will again be forced into the breach.

By statutorily splitting apart massive financial institutions that house both banking and security operations, we will both cut our megabanks down to reasonable and manageable sizes and rightfully limit government support to traditional banks. This worked for nearly 60 years and once again will ensure the soundness of commercial banks while placing risky bank investment activities far beyond any government safety net check.

If Congress fails to impose needed structural changes like Glass- Steagall, the same systemic risks to our financial system remain and grow bigger and bigger and bigger. When the next crisis occurs, however, the legislative pendulum will suddenly shift direction and will fall hard on Wall Street in the form of Glass-Steagall and far more Draconian reforms.

I also believe we must preserve section 716 of the current Senate bill. The provision included in the bill by Senate Agriculture Committee Chairman Lincoln would prohibit banks with swap dealers from receiving emergency assistance from the Federal Reserve or FDIC. By forcing megabanks to spin off their swap dealers into an affiliate or separate company, this section would help restore the wall between the government-guaranteed part of the financial system and those financial entities that remain free to take on greater risk.

It would also help address the enormous concentration of power among a few too-big-to-fail institutions. As has been quoted many times on this Senate floor over the last several weeks, the five largest banks-- Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, and Bank of America--control over 90 percent of the over-the-counter derivatives market. That is nine zero, 90 percent, our 5 largest banks. Yet there are those who say that forcing these megabanks to spin off their swap dealers to affiliates in only a few years' time would disrupt the derivatives market. The historical record shows repeatedly that financial institutions can adapt to regulatory changes quite quickly. Look at Goldman Sachs. Goldman Sachs has been a bank holding company for fewer than 2 years. Within that time, it has used its newly formed bank, which is just one-tenth the size of the overall holding company, to source the vast majority of its derivatives transactions. That is just in the last 2 years. Amazingly, Goldman Sachs has a $41 trillion derivatives book attached to a $91 billion bank. Do you have that? A $91 billion bank with a $41 trillion derivatives book attached to it.

Unfortunately, allowing massive derivatives dealers to be housed within banks creates moral hazard, a term often invoked by my conservative colleagues. This was true of AIG, which rented out its AAA rating and the financial strength of its insurance subsidiaries, to write credit default swap contracts that systemically underpriced risk. It is also true of dealer banks whose access to federally insured deposits and the government backstop of emergency lending allows them to underprice risk on swap contracts. Notably, this government subsidy allows these institutions to be lax in their collateral and margin requirements on derivatives transactions.

Some complain that requiring the megabanks to spin off their derivatives dealers would require these dealers to raise extra capital as affiliates. I say that is precisely the point. Housing a large derivatives dealer book in a bank, even a small one, allows these institutions to arbitrage capital requirements. Requiring them to spin off their dealer to a separate broker-dealer affiliate would appropriately require them to raise more capital based upon the riskiness of their derivatives book. This is good. Currently, these institutions are undercapitalized.

Yet Fed Chairman Bernanke claims:

Forcing these activities out of insured depository

institutions would weaken both financial stability and strong

prudential regulation derivative activities.

I beg to differ. Spinning off large derivatives dealers would force these institutions to adequately price and capitalize the risks associated with these activities. By ending the aforementioned moral hazard, we are only strengthening financial institutions. By requiring derivative dealers to hold capital commensurate with the risk of their business, we are only strengthening prudential regulation.

Meanwhile, FDIC Chair Bair states that derivatives:

do have legitimate and important functions as risk

management tools and ensure banks play an essential role in

providing market-making functions for these products.

Requiring banks to spin off their derivatives, however, would not preclude them from using derivatives as risk management tools or as products to service client needs. For example, if a client wanted to hedge the interest rate risk on a floating loan through a swap, the bank would still be able to execute that transaction. Senator Lincoln's provision doesn't ban banks from using derivatives. Instead, it says that it is inappropriate for a commercial bank to have an almost $80 trillion derivatives book, as some do.

Of course, anyone can come up with a reason for maintaining the status quo--of saying, for example, that Senator Lincoln's inspired solution simply goes too far. But after the crisis we just suffered, I would ask my colleagues to support these proposals which represent real reform and change. I would ask my colleagues to see the wisdom of building an enduring structure of laws instead of investing our hopes in unelected regulatory discretion. We have seen the effects of regulators neglecting their duties and banks left to self-regulation.

Instead of trusting our financial stability solely to unelected financial guardians, these amendments and provisions would all address preemptively the persistent problem of too big to fail. They all say speculative securities activity should not be covered by the government's deposit safety net. By reducing the size and scope of our largest banks, we will limit their risky behavior and minimize the possibility of one institution's failure causing an industrywide panic and a subsequent bailout of several failing megabanks.

By adopting these commonsense proposals, we can go a long way toward stabilizing our economy, restoring confidence in our market, and protecting the American people from a future bailout. America cannot afford another financial meltdown. The American people are looking to Congress to assure that it does not happen. We have a precious few remaining days on this bill to follow through on that commitment.

As I started out, I wish to commend Chairman Dodd and the committee for the excellent work they have done on this bill. I also commend Chairman Dodd for the fact that we have had such good comity and such good relations between both sides of the aisle on this bill. That is why I am so concerned about the decision by the other side to block the Merkley-Levin amendment. This is at the heart of this bill. If you had to look at one of the things that is very important and that everyone commends, it would be this amendment. We have voted for a lot of Republican amendments and accepted a lot of Republican amendments that Democrats were not in favor of. This seems like the wrong time in the process toward the end to do this.

I hope my friends on the other side of the aisle will rethink what we are doing and that we get a chance to vote, because it is absolutely essential to this bill that we have a vote on the Merkley-Levin amendment.

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

Mr. President, I rise today to mark National Stuttering Awareness Week.

Most of us take for granted the ability to speak comfortably and fluently. All we have to do is think of words, and they come out clearly. Introducing ourselves in meetings, holding conversations over the phone, ordering meals in restaurants--all of these are situations avoided by many people who stutter as a result of being self-conscious.

Approximately 3 million Americans stutter. Since President Ronald Reagan's proclamation in 1988, the second week in May has been observed as National Stuttering Awareness Week. It provides an opportunity for all of us--for all of us--to learn more about stuttering and ways to help those who stutter.

We have all encountered people who stutter. Contrary to popular misconception, stuttering is not a result of nervousness or emotional problems. It is not the fault of those who do it or of their families and friends. Stuttering is a speech disorder that is neurological and physiological. The cause to this day remains unknown, but a recent study indicates the likelihood that stuttering may be genetic.

While there is currently no cure, there are many treatment options available. Children usually begin stuttering between the ages of 2 and 5, and parents should not wait to seek treatment from a doctor or speech language pathologist. Early therapies have been shown to help reduce stuttering.

Those who continue to stutter in adulthood often face social and economic difficulties. Unfortunately, according to a 2009 study by the National Stuttering Association, 40 percent--40 percent--of adults and teenagers who stutter said they were denied a job or denied a promotion or denied a school opportunity as a result. Furthermore, 8 out of 10 children who stutter have reported being bullied and teased.

I am not just speaking about stuttering today because it is an important issue for so many Americans, and I am not just speaking about it because my friend and predecessor, Joe Biden, the Vice President, has shared his story--his incredible story--of overcoming stuttering. This is a personal issue for me because stuttering runs in my wife's family, and I have been around people who stutter for many years.

When my wife Lynne was a child, her parents took her to a therapist for her stuttering, who recommended immobilizing her right arm with a solid tube. At that time, the theory was that if she were forced to learn to write using her left hand instead of her right, she could somehow be distracted from her stuttering. Suffice it to say, the tube did not work. She is just one example of what stutterers have historically had to endure. Thankfully, today there are great treatment options available from licensed professionals.

I am glad--very, very glad--there are great organizations, such as the National Stuttering Association and others, that are raising awareness on this important issue. There are important steps all of us can take to help those who stutter feel more confident and comfortable speaking. I hope people will go out and learn more about what they can do themselves, especially if they know someone who stutters.

In recognition of National Stuttering Awareness Week, I have submitted a resolution to mark this observance. I am proud to say I am joined by 27 of my colleagues in sponsoring this resolution supporting the goals and ideals of National Stuttering Awareness Week 2010, and I thank them for their support. They include Senators Barrasso, Sherrod Brown, Burris, Cardin, Carper, Cantwell, Casey, Cornyn, Durbin, Enzi, Gregg, Hagan, Isakson, LeMieux, Levin, Mikulski, Pryor, Reed, Risch, Sessions, Shaheen, Snowe, Stabenow, Tester, Warner, Whitehouse, and Tom Udall.

Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. Res. 524, submitted earlier today.

Mr. President, I ask unanimous consent that the resolution be agreed to, the preamble be agreed to, the motions to reconsider be laid upon the table, with no intervening action or debate, and that any statements related to the resolution be printed in the Record.

Thank you, Mr. President. I yield the floor.

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

Madam President, I ask unanimous consent to speak as in morning business for up to 5 minutes.

Madam President, I rise today to speak once more about our Nation's great Federal employees.

Henry Clay once said:

Government is a trust, and the officers of the government

are trustees; and both the trust and trustees are created for

the benefit of the people.

Every dollar of the taxpayers' money that we in Congress spend on their behalf must be accounted for and every program rigorously audited to prevent waste and fraud. That job belongs to the tireless and persistent employees of the Government Accountability Office.

Since its founding in 1921, the GAO has been called ``the taxpayers' best friend.'' It is the people's watchdog, the home of over 3,000 Federal employees whose main task is to save the American people money by analyzing how public funds are spent. They make recommendations to Congress on how best to eliminate waste and make programs more efficient. If our elected officials have been entrusted to guard over public business, surely it is the men and women of the GAO who, in the words of the ancient adage, ``watch over the guardians.''

Today, I want to highlight the achievements of two outstanding employees of the GAO.

Cathleen Berrick has spent her whole career as a public servant. First in the Office of the Inspector General at the Pentagon and with the Air Force Audit Agency, and later with the Postal Service's Inspector General and the GAO, Cathleen has been at the forefront of ensuring the accountability of government for many years.

As a Managing Director at the GAO for Homeland Security and Justice, she has led comprehensive analyses of potential security vulnerabilities at the Transportation Security Agency and suggested key improvements.

In 2008, when assigned to review the plan for the TSA's Secure Flight Program, which screens air passengers against terrorist watch lists, Cathleen identified flaws and offered sound recommendations. She also conducted studies and authored reports recommending more oversight in how we secure our Nation's mass-transit systems and passenger rail.

Cathleen has testified before congressional committees over 20 times and has proven to be an expert resource for policymakers.

The second person whose story I will share is Cynthia Bascetta. Cynthia had worked for the GAO for 30 years when she was set to retire. However, the devastation wrought by Hurricane Katrina caused her to delay her retirement, and she decided to remain in public service.

As the GAO's Director for Health Care, Cynthia leads two major reviews of public health care infrastructure in New Orleans to ensure recovery funds are being spent wisely and for the greatest benefit. In her three decades of service at the GAO, she has fought to improve Federal disability policies, urged making HIV treatment and prevention a national priority, and recommended changes to Social Security that helped beneficiaries return to work without losing health care benefits.

One of the areas of focus throughout Cynthia's career has been improving care for our wounded veterans. She testified at the first congressional hearing to investigate the conditions at Walter Reed Medical Center, and her reviews were critical in understanding where changes needed to be made.

Since we passed the Recovery Act last year, the GAO has been preparing reports every 60 days on how funds are being used. Cynthia has been working recently as the GAO's State lead for Illinois, carefully reviewing every dollar from the Recovery Act being spent there.

Madam President, employees of the GAO continue to ensure government programs work for the American people. They remain ever-vigilant to ensure all of our public funds are spent wisely and carefully.

I hope my colleagues will join me in thanking Cathleen Berrick, Cynthia Bascetta, and all of the outstanding public servants at the Government Accountability Office for their service to our Nation. They are all truly great Federal employees.

Thank you, Madam President. I yield the floor.

Weekly.

Madam President, I thank the Senator from Connecticut. I thank him for what he does, and I wish to say to all the world, he is truly one of the great Federal employees. So I thank the Senator from Connecticut.

Madam President, I ask unanimous consent to speak as in morning business.

Madam President, the Senator from Virginia, as usual, is modest. He has explained a lot to me about the intricacies of this area, which is of great concern, and his knowledge on this is great. It is, I am finding, incredibly rewarding working with him on this issue. So I want to speak about that a little today and follow up on the remarks the Senator from Virginia made.

As Senator Warner said, last Thursday, for one of the few times since 24 stockbrokers first gathered under a Buttonwood tree in 1792, we had a stock market that for 20 minutes stopped performing its essential function--discovering the price of securities based on a balance between buyers and sellers. Our equities markets collapsed in a matter of minutes--liquidity dropped off, a deluge of sell orders overwhelmed the buyers, and the rug was pulled out from underneath millions of investors, plummeting the Dow Jones Industrial Average toward its biggest intraday loss in history--nearly 1,000 points.

Then, just as quickly, and inexplicably, the market reversed course, snapping back like a yo-yo, and recovered much of its lost ground, thank goodness. In the immediate aftermath, the world's focus turned to black-box computer trading, which relies upon electronic trading algorithms to execute thousands of orders in tiny fractions of a second. These high-frequency trading computer programs determine, with minimal, almost no human intervention, the timing, price, and quantity of orders.

It is too soon to know the myriad of factors that played into the week's meltdown, although it appears to be quite likely that we witnessed a real-time example of high-tech trading run wild or, in some cases, unplugged.

The cooperation between the SEC and the CFTC is critical to unraveling what happened in the futures and equities markets, and we should wait for their investigation and for all the facts to be discovered. It is also too soon to coalesce about Band-Aid solutions; that is, without also committing to dive deeper into structural problems and inherent conflicts of interest that are part of all our capital markets. The SEC still has not discovered or explained what triggered or accelerated the incident, but already the leaders of the exchanges have admitted that no one had previously thought to implement system-wide circuit breakers or adequately protect against the possibility of erroneous trades.

Yesterday, after the meeting with the leaders of six exchanges, the SEC released a statement saying:

As a first step, the parties agreed on a structural

framework, to be refined over the next day, for strengthening

circuit breakers and handling erroneous trades.

Madam President, that is fine--and I mean that is fine--but it is indeed, as the SEC said, only a first step. While it is true we should wait for information to come in before we reach any conclusions, there are many questions that must be carefully reviewed and answered. The first and most obvious is whether we have gone from too few market centers--it wasn't all that long ago we just had two, the New York Stock Exchange and NASDAQ--to too many, each with different standards and procedures for protecting investors and preserving market integrity.

We now have over 50 market centers, which has brought added competition. Competition is good. Today, algorithmic trading interests are wired against markets--equity, fixed income, futures, and options. The market is the network, and yet our regulators work in silos. Responsibilities are divided between the Securities and Exchange Commission and the CFTC. Within equity markets, we have several self- regulatory organizations setting rules--more silos: New York Stock Exchange, NASDAQ, FINRA, National Stock Exchange, and more. All too often, those rules have been watered down and eliminated in the absence of the SEC establishing these and other regulatory controls across equity markets.

We created a national market system, but we forgot to create a national regulatory and surveillance system to go along with it. We need--we absolutely have to have--a consolidated audit trail across all market centers, as Senator Schumer and others have raised. As FINRA Chairman Rick Ketchum admitted last October, regulators are looking at ``an incomplete picture of the market and knowing full well that this fractured approach does not work.''

That is quoting the chairman of FINRA, Rick Ketchum.

The second obvious question is, Why is it taking the SEC so long to reconstruct the unusual market activity of last Thursday? There is an answer to that--because there is no transparency. The Commission does not yet collect by rule the data it needs to officially reconstruct unusual market activity. Even though Congress gave the SEC ``large trader'' reporting authority in the Market Reform Act of 1990--that is 1990, after the SEC had difficulty in reconstructing market incidents in 1987 and 1989--the SEC has never used it.

The SEC proposed a large trader rule in 1991, received comments, reproposed in 1994, and then unfortunately never adopted it--this, even though the Commission acknowledges:

The current Electronic Blue Sheet system does not

efficiently collect large volumes of data in a timely manner

that allows the Commission to perform contemporaneous

analysis of the market events. Further, the data generated by

the EBS system does not include important information on the

time of the trade or the identity of the customer.

This is what the Commission acknowledges, that the data generated by the EBS system does not include important information--the time of the trade and the identity of the customer. How are you supposed to find out how something happened if you don't have data on the time of the trade or the identity of the customer?

Flash forward to 2009. To SEC Chairman Mary Schapiro's credit, and to her real credit, she began a process of studying market structure and high-frequency trading last October.

I have to say, however, the pace of the Commission's progress has been slow. Indeed, as many of my colleagues know, I have come to the floor repeatedly to call for a greater sense of urgency at the Commission.

For example, last year on September 23, I spoke on the Senate floor and asked about high frequency trading strategies:

Do these high-tech practices and their ballooning daily

volumes pose a systemic risk?

What do we really know about the cumulative effect of all

these changes on the stability of our capital markets?

In order to maximize speed of execution, many sponsored

access participants may neglect important pre-trade credit

and compliance checks that ensure faulty algorithms cannot

send out erroneous trades.

On November 20, 2009, I wrote a letter to SEC Chairman Mary Schapiro asserting:

[T]ransparency, disclosure and risk compliance requirements

on the trading activities of high frequency traders are

needed urgently. And while I was encouraged to hear that the

Commission may move sooner with its existing authority to

require ``tagging'' and reporting by ``large traders'' now

using high-frequency algorithms, I am concerned that the

Commission does not intend to issue a concept release on high

frequency trading until early next year, and that rule

proposals should not be expected before the summer of 2010-

2011. Given that the Commission under current procedures is

now blind to high frequency operations, the need for

immediate action should not wait until the Commission has

completed its comprehensive review.

In her response on December 3, Chairman Schapiro assured me the Commission was planning to issue a proposed ``large trader'' tagging rule the following month. That was back in December.

But it was not until months later, on April 14, that the Commission finally did so. While I understand these were incredible problems that faced the SEC because there was no real regulatory oversight for many years, and because of the many hurdles regulatory agencies face which slow them down--in particular the need to avoid unintended consequences--this process was clearly way beyond deliberative.

Given the deficiencies in the current data collection system that the SEC itself acknowledges and which Congress gave the SEC the authority to address in 1990, this delay is inexcusable.

The SEC must move aggressively to finalize the large trader rule and insist on fast-track implementation by the industry.

There are many other questions a deeper review should study.

Particularly the problem of high frequency programs which sell stock short without first locating the underlying shares or borrowing them in hope that their price will drop and they can buy those shares back--so- called naked short selling--before the required delivery date--at a lower price for a profit. Last Thursday, it appears that the computers went into overdrive spewing out sell orders, and in the critical 10 minute time period, I will bet my bottom dollar that many of those sell orders were short sales that did not first locate the stock.

Now as I have said repeatedly, there is nothing wrong with short selling, I have done it myself. But I have always had to borrow the stock first.

Last July, along with Johnny Isakson (R-GA) and six other Senators, we wrote the SEC demanding that short sales not be permitted unless the seller first obtains a ``hard locate'' of specified shares. But that proposal went nowhere, even though the SEC held a Roundtable last September to discuss the problems associated with naked short selling.

The larger point is these high frequency trading firms have assumed the role that specialists used to take. Some of them get the same benefits of specialists. They get to ignore short-selling locate rules. They get to step in front of other orders on the book legally. All because they provide liquidity, for which they are also paid.

Why should they have those advantages? Did some of them abandon their role of liquidity provider when the market needed them most, and instead use their advantages to disadvantage everyone else on the way down? Those questions must be answered.

Last September 14 I went to the Senate floor and spoke about the dangers of unregulated high-frequency trading, asking:

If we experience another shock to the financial system,

will this new, and dominant, type of pseudo market maker act

in the interest of the markets when we really need them?

Will they step up and maintain a two-sided market, or will

they simply shut off the machines and walk away?

Even worse, will they seek even further profit and

exacerbate the downside?

After Thursday's plunge, I am afraid my questions have been answered.

Instead of providing ``fair and orderly markets'' as some market makers are obligated to do, some of these unregulated players may have added to the chaos, while others simply unplugged their computers and suspended operations, reducing liquidity when the market needed it the very most.

Here is another related question: Was there manipulation involved on Thursday? More to the point, does the SEC even have the ability to detect illegal manipulation by high frequency algorithms?

We know the SEC doesn't have the data it needs. The large trader rule hopefully will fix that at some future date. Hopefully sooner before later.

There is also the question of whether the SEC has the internal analytical capability to use that data to police trading activities? I know this is something they want to do and we in Congress should help them get it as soon as possible.

I have been suggesting that once the SEC collects the data, it should mask the proprietary nature of the data and either No. 1 release it to the marketplace, or No. 2 to academics and private analytic firms under ``hold confidential'' agreements. I believe the SEC needs help in conducting analyses about whether high frequency trading practices are harmful to the interests of long-term investors.

Another question I have raised in the past is whether the SEC needs to impose industry-wide pre-trade operational risk controls, in order to prevent the incidents and magnitude of trading errors and the havoc they can cause.

After last Thursday, that one is starting to look easy.

Markets have always had operational risks, but it is clear that the proliferation of competing complex computer models has the potential to magnify and exacerbate these risks in ways that can fundamentally damage market integrity and confidence.

With computerized, high-frequency trading now responsible for an estimated 70 percent of daily trading volume, markets have come to rely upon these black-box systems for ample and consistent order flow.

Yet humans are simply unable to evaluate in real-time whether their trading models are working as intended.

Yet another question is whether our markets are still performing one of their best and most important functions: the constant and reliable channeling of capital through the public sale of company stock known as initial public offerings. According to a series of reports released last year by the accounting firm Grant Thornton, the answer is no, the IPO market in the United States ``has practically disappeared.''

The IPO market is where small and medium-size businesses go to get the capital they need to grow, to pass through the valley of death, to get on with what they have to do.

Without a doubt, there have been many causes of the sad state of America's IPO market. But one source of the problem might be the dominance of high frequency trading strategies designed to trade in the most active, highly liquid names, but with little support for small-cap stocks.

Our markets should work to best serve Americans--by reflecting changes in supply and demand and investors' assessments of stock fundamentals--not by encouraging a battle between algorithms looking to shave microseconds from their transactions in a few highly liquid names. As Dallas Mavericks' owner and long-time and very successful and knowledgeable investor Mark Cuban has recently asked: ``What business is Wall Street in? . . . [I]t is important for this country to push Wall Street back to the business of creating capital for businesses.''

There are other questions, as well, many involving conflicts of interest and the failures of some of the exchanges and market centers to fulfill their gatekeeper function as self-regulatory organizations.

Moving forward, I applaud Senator Dodd, the chairman of the Banking Committee, for calling for hearings to be chaired by Senator Jack Reed who is very knowledgeable in this area on the market's recent plunge and recovery. It could not be in better hands.

And I am also pleased that a number of market participants and regulators have recognized the need for regulations that will protect the markets from future periods of extreme and inexplicable volatility like last Thursday's.

I am concerned, however, that the SEC must not solely look for quick fixes and surface solutions. The events of May 6 call for a meaningful review of these structural issues, leading to reforms that truly protect investors and, really important, restore the credibility of our markets so they serve well their highest and best function.

That is why Congress, consistent with its oversight responsibilities, must direct regulators to study and report, in a timely manner, on what needs to be done to prevent another meltdown of this magnitude or one even worse. It is entirely appropriate for Congress to elaborate on the needed elements of a meaningful review, many of which I have outlined today.

Senator Mark Warner and I want to add language to the current Wall Street Reform Act that would do just that. Once that report to Congress is finished, only then can Congress either draft needed legislation or encourage new rules.

We all know that the challenge for regulators is to see beyond the horizon and to act preventively before financial crises hit. That is the key to everything we do around here. We have to look ahead.

This is always difficult, but especially so when markets are opaque and Wall Street interests resist even reasonable suggestions about needed reforms.

During the past 9 months, in response to my calls for transparency and an SEC review of high frequency trading, many voices on Wall Street praised the virtues of electronic trading--and almost none were interested in looking critically or even honestly for weaknesses or potential systemic risks. ``There is nothing wrong here.'' ``You shouldn't even look at this.'' That is all I was looking for and so many on

Wall Street said, ``No, nothing wrong here. We should not spend time on that.''

My staff has read through nearly a hundred comment letters submitted over a period of months from brokerage firms, consultants, exchanges, high frequency firms, and alternative trading systems. The vast, vast majority of those letters stated the markets have performed exceptionally, and just needed to be left alone. They all stated how things were fine and saw nothing amiss. Systemic risk? Not here.

Our exchanges--which by statute are required to ``prevent fraudulent and manipulative acts and practices'' and be the first line of regulatory review of trading practices--are now competing vigorously to attract high volume traders to maintain their profits. Yet in response to the SEC's concept release raising questions about market structure issues, sources of systemic risk and possible manipulation by high frequency traders, the CEO of BATS Exchange sent out a ``call to action'' for all high frequency trading firms, suggesting that they all file comment letters on common themes. ``The best defense is a good offense,'' he wrote.

His letter also said:

BATS doesn't believe the equities markets are broken. To

the contrary, we would argue that the US equity markets were

a shining model of reliability and healthy function during

what some are calling one of the most challenging and

difficult times in recent market history.

He went on to write:

Those outside the industry, who have differing opinions,

are likely to have a difficult time bringing forward

compelling arguments based on the lack of hard evidence.

I ask: Is this the attitude we want from those charged with protecting investors? Yes, when the markets are opaque and no one outside the industry has any data, when the exchange leadership itself stays on the offense, it is indeed difficult to offer hard evidence supporting a contrary view.

Then we read from a comment letter to the SEC written by the Securities Traders Association in the week before the meltdown. The week before the meltdown.

The equity markets are functioning properly, and there are

no signs of significant deficiencies or an inability to

perform their important functions.

Saying it does not make it so. Now the credibility of both markets is urgently in need of repair. But for that to happen, democracy must work in a way that permits timely reform of our most powerful financial institutions, and Wall Street must and should recognize its own long- term interests. The credibility of our markets is vitally at stake.

As I have said many times on this floor, what is important are two things that make this country great: democracy and our capital markets. If we let something happen to the credibility of our capital markets, we will have done a great disservice to our country now and to our grandchildren.

I will close my remarks today with the same words I used to conclude my floor speech last September 23, as they still ring true to me.

We cannot simply react to problems after they have

occurred. We need the information and resources to identify

problems before they arise and stop them in their tracks . .

. [We] cannot allow liquidity to trump transparency and

fairness, and we cannot permit the need for speed to blind us

to the potentially devastating risks inherent in effectively

unregulated transactions.

I thought I was right when I gave it on September 23. After what happened last Thursday, I feel it is even more appropriate.

I yield the floor.

Mr. President, I rise today to talk about progress and challenges in Afghanistan in light of President Karzai's visit to Washington this week. Last month, I returned from my third trip to Afghanistan, Pakistan, and Iraq as part of a codel with Senators Hagan and Reed. What stood out most from our trip was the quality, caliber, and courage of U.S. troops and civilians, who risk their lives every day to defend our national security interests in these two critical regions. I was humbled by the opportunity to thank them for their sacrifice and service and impressed by the progress which has been made.

At the same time, I was taken aback by the myriad of challenges that lie ahead, especially in Afghanistan. Chief among them is walking the tightrope required to balance our complex relationship with President Karzai. Partnership with President Karzai is required for success. He needs to work with the United States in both word and deed to promote economic development, build the Afghan security forces, combat extremists, tackle the drug trade, eliminate corruption, and improve systems of governance.

In Afghanistan, we have begun to successfully implement the strategy outlined by President Obama in December, as evidenced by ongoing operations against the Taliban, greater emphasis on subnational governance, and a renewed training and partnering effort with the Afghan Army and police. While much attention has been paid to the deployment of an additional 30,000 U.S. troops, it is clear that success in counterinsurgency requires far more than a large military footprint, as there is no purely military solution to this problem.

In order to meet our goals of ``shape, clear, hold, build, transfer,'' we must also have a strong and capable civilian presence to establish good governance; increase training of Afghan national security forces; and further improve cooperation with Pakistan, especially when it comes to securing the border and targeting the Afghan Taliban. Without these other elements of our broader counterinsurgency strategy, military success will not be sustained and authority cannot be transferred to the Afghans. And make no mistake-- the transfer of power is our ultimate goal, beginning with the President's announced conditions-based drawdown starting in July 2011.

While in Afghanistan in April, we met with President Karzai and gave suggestions of steps we thought he could take to lay the groundwork for a successful visit to Washington. We raised the issue of corruption, which, if left unaddressed, threatens to undermine nearly all other areas of progress. After all, counterinsurgency is not a struggle between the United States and the insurgents. It is a battle for legitimacy between the Afghan Government and the Taliban, and perceptions of corruption only further distance the Afghan Government from the population.

I am pleased that President Karzai has said many of the right things, starting with commitments made in his November inauguration speech. He has also recently issued a decree giving power to the High Office of Oversight and Anti-Corruption to investigate government corruption cases and has granted greater budgeting and implementation powers to provincial and district officials.

These are good first steps, but progress requires more than decrees and rhetoric. There is far more that must be done because--as I have said before--our best defense in Afghanistan is a strong, efficient, and accountable Afghan Government. In order to defeat an insurgency, there must be capable and transparent governance and not just in Kabul. Effective government must extend to the subnational level, where it can provide essential services and secure the population.

On my trip, I was encouraged to learn of district teams collaborating with trainers and mentors to strengthen systems of local governance, especially in Regional Commands South and East. In these areas, civilian officials are working at the provincial and district levels with their Afghan counterparts--especially those from the so-called ``line ministries'' of agriculture, education, health, security, and reconstruction and rural development--to provide basic services and improve the lives of Afghan citizens. They are implementing a system to strengthen the country from the bottom up, which will minimize the influence of the Taliban and marginalize its shadow governments. This was especially evident in Marjah, where we just concluded the first jointly planned and implemented U.S.-Afghan, civilian-military operation.

Last week, the Foreign Relations Committee held a hearing on the ``Meaning of Marjah'' to explore lessons learned as we look toward this summer's Kandahar offensive. While the clearing phase in Marjah was quick and decisive, we have now entered the ``hold and build'' stage, which presents a spectrum of new challenges. As BG John Nicholson noted in the hearing, ``The challenge here is to connect the people with their government, thereby creating a nexus between the citizens of Marjah and government officials.'' Thus far, a small group of Afghan civil servants is working with U.S. civilians to provide basic services, but more must be done. A sustained and effective government presence free from the stigma of corruption is an essential prerequisite to success not just in Marjah, but in all counterinsurgency operations.

This was evidenced by a recent community council meeting, or shura, attended by President Karzai and General McChrystal in Marjah. At the shura, members of the local population made it clear to President Karzai that the people surrounding him were contributing to the problem. They told him that corrupt government officials, such as the former chief of police, were creating reasons for the population to support the Taliban. It is my understanding that this event, which was followed by a similar experience in Kandahar, may have given President Karzai pause, as he realized that he must address the root causes of corruption in order to win over the population.

Corruption remains a large hurdle in this effort, but it is not the only one. We must also ensure there are enough civilians to partner with the Afghans. While I am pleased that the Obama administration has made this a priority, tripling the number of deployed civilians over the past year, it must continue to ensure that there are enough civilians outside of Kabul to engage with the population. It is remarkable that 13 U.S. Government agencies are now represented, and the recent civilian uplift has been the biggest since Vietnam. At the same time, 1,000 U.S. civilians with less than 400 outside of Kabul is simply not enough to partner with 100,000 U.S. troops and reach a population of 28 million.

We must also continue to focus on increased training for the Afghan national security forces so they can assume responsibility for securing the population. We are on track to reach at least 134,000 in the Afghan National Army, ANA, by October, and the quality of officers and recruits has risen in recent weeks. This is due in part to recent pay raises and increased effectiveness given intensified partnering with U.S. troops. I am pleased that nearly 90 percent of all units are now partnered, and large military operations--such as Marjah--were truly joint operations.

Unfortunately we have not yet seen the same levels of progress toward building the Afghan National Police, ANP, as we have with the army. In a Homeland Security and Governmental Affairs subcommittee hearing chaired by Senator McCaskill last month, we

discussed the range of problems that has hampered the growth and training of the ANP. I was appalled to hear that $6 billion has been spent to date on training contracts with very little to show for it. I understand the challenges of training a police force which is largely illiterate and suffering from high rates of attrition, but the answer is not to repeat the same mistakes or renew inefficient contracts.

The stakes are simply too high. We cannot afford for this training effort to be ineffective or approach police training as an ad hoc mission. We must demonstrate better oversight of this critical training program and ensure that our efforts result in the establishment of a qualified and committed Afghan police force. Moreover, we must consider building a stronger U.S. Government capacity to oversee future police training missions. As we look toward a future with fewer conventional threats and an increased number of insurgencies, there is no question that this capacity is needed to defend our security interests globally.

President Karzai is under enormous pressure to meet our high expectations and demands. In our recent meeting, we discussed our shared interest in a strong partnership and a productive visit to Washington. I understand that the pressure is growing as we focus on building subnational governance and as our military plans focus squarely on Kandahar, which is the home of the Taliban and an area where Karzai's family and tribe still exercise great influence.

I look forward to seeing President Karzai when he is here, and I hope to hear more about his plans to address corruption, improve governance, and enhance economic development. I hope he understands that the United States shares an enduring commitment to building a strong and sovereign Afghanistan, both in the near term and well into the future, so that our joint efforts now can benefit future generations.

Mr. President, I rise today, to celebrate National Lab Day. While today is the official National Lab Day kick-off, National Lab Day is much more than just one day. It is an ongoing effort to bring scientists and engineers into the classroom to conduct hands-on experiments with students.

Last November, President Obama launched the ``Educate to Innovate'' campaign to motivate and inspire students to excel in science, technology, engineering, and mathematics, or STEM, education. As part of this effort, President Obama announced the launch of National Lab Day and encouraged Americans to get involved. Created through a partnership between Federal agencies, foundations, professional societies, and other STEM-related organizations, support for National Lab Day grew quickly. Currently, projects are scheduled in every State, including over 1,000 schools.

I have spoken many times on the Senate floor about the importance of STEM education. I advocated for the inclusion of increased service opportunities for retired engineers and other STEM professionals in the Edward M. Kennedy Serve America Act. National Lab Day is an important step towards creating strong, long-term relationships between STEM professionals and educators.

Importantly, National Lab Day projects are teacher-driven. Teachers can register at the National Lab Day Web site and request funding or describe a project they would like to do with a STEM professional. Teachers can have STEM professionals help them assess, update, and repair current lab facilities and equipment, implement hands-on activities, conduct science fairs, mentor students, coordinate field trips, assist with lesson plans, and more.

Once teachers post their requests on the National Lab Day Web site, they will be matched with a list of local volunteers who have registered on the Web site. Volunteers need not only be STEM professionals, as university STEM students and other members of the community can sign up to help as well. Volunteers can browse teacher requests and will be notified of any matches to teacher requests that meet their interests.

A quick look at the projects posted on the Web site reveals intriguing titles such as VEX Robotics, Tech Genographics, Space--the Final Frontier, and Get Ahead--Design a Shed, to name a few. The Office of Science and Technology Policy blog recently highlighted a National Lab Day project that took place at East Side Community High School in Manhattan. With the recent major BP oilspill in the Gulf of Mexico, this particular lab was especially timely to students. A local college professor taught 10th graders how to clean and purify ``contaminated'' water made of tap water mixed with dirt, flour, salad dressing, and dish soap. This is exactly the type of hands-on experiment that National Lab Day promotes to expose young people to the real-world applications and wonders of STEM.

Support for National Lab Day is extensive. Key partners include: the National Science Teachers Association, American Chemical Society, MacArthur Foundation, Hidary Foundation, the National Institutes of Health, and the National Science Foundation. Additionally, more than 200 educational, scientific, and engineering organizations support National Lab Day, including such groups as the National Education Association and the Association for Women and Science.

National Institutes of Health Director Dr. Francis Collins is participating in National Lab Day by volunteering in a local District of Columbia school and he has encouraged NIH employees to get involved as well. American Society for Engineering Education President J.P. Mohsen is participating in National Lab Day and is encouraging other ASEE members nationwide to do the same in their local communities. First Lady Michelle Obama highlighted National Lab Day when she spoke to the team finalists at the National Science Bowl.

I have said many times that I believe the long-term vitality of our economy rests with our ability to use STEM to solve the major problems we face. Whether it is energy independence, climate change, life-saving cures for diseases, security challenges, or new solutions for transportation, STEM professionals are the world's problem solvers. Fortunately, young people today want to ``make a difference'' with their lives, but unfortunately, not enough of them see STEM as the way to do that.

National Lab Day will allow STEM professionals not only to share their unique skills and knowledge with educators and students, but it will also allow them to share the rewards of a career in STEM and the numerous ways that STEM professionals ``make a difference.'' National Lab Day, and the relationships it is fostering, will help inspire the next generation of scientists and engineers. I applaud the volunteers, teachers, associations, and agencies that are participating in National Lab Day--today and in the future.

Madam President, I also commend Chairman Dodd for his work on this bill. We have a good bill. I will be opposing the amendment presently on the Senate floor. We need a strong, independent consumer product finance protection agency. I have heard many different proposals to put the consumer product finance protection agency here, there, and everywhere. The problem with putting it in any institution like the FDIC or the Fed is that those institutions' No. 1 responsibility is, and should be, the safety and soundness of the banks and financial institutions they are regulating. That is their key charge.

I think the reason the Fed had a consumer product agency, which did not act to help consumers during the recent meltdown, was that they first were concerned about safety and soundness.

At the same time, we have to be very careful we don't put an undue burden on community banks. They were not involved in what happened. We should make sure while we are looking out for consumers that we don't overregulate these local banks.

We have a good bill. I think the too-big-to-fail part we are getting around to. The recent amendments on the resolution that if, in fact, the bank gets in trouble, we can resolve it, is a good approach. I am sure we will be talking about it more. It is a good approach to deal with the too-big part of too big to fail. We have not done enough on the too-big part of too big to fail.

Let me go over a chart that shows how big these banks have become. This is the average assets of our major banks relative to gross domestic product. If you look at this chart--and I encourage comments from my colleague, the Senator from Ohio. If you look at this chart, you will see that just about the time we removed Glass-Steagall, this chart went absolutely through the roof.

When you look at the concentration of the U.S. banking system, you see on this chart that is very similar to the first chart. It shows an exponential increase in concentration. This is not good for the country. This is not organic growth. I hear people say it is organic growth. This is growth from mergers. Neither chart includes the massive mergers that went on during 2008. This is through 2007. It doesn't show that Washington Mutual and Bear Stearns were consumed in JPMorgan Chase. It doesn't show the fact that Wachovia went into Wells Fargo, and Merrill Lynch went into Bank of America. It clearly shows that the incredible concentration just goes on.

Alan Greenspan made a number of decisions and statements while this was going on about how we should proceed during the 1990s and early 2000. He said himself that he thought self-regulation would work and was dismayed that it didn't. He came out with a couple statements recently that I was so incredibly surprised about.

He said this:

For years, the Federal Reserve had been concerned about the

ever-larger size of our financial institutions. Federal

research has been unable to find economies of scale in

banking beyond a modest-sized institution. A decade ago,

citing such evidence--

By the way, moderate size, according to Andrew Haldane, the executive director of financial stability for the Bank of England, is $100 billion. He said he can find no reason to have the need for economies of scale at banks larger than $100 billion. As you know, the present size of top banks are in the $2 trillion range, as high as $2 trillion.

Continuing to quote:

A decade ago, citing such evidence, I noted that megabanks

being formed by growth and consolidation are increasingly

complex entities that create the potential for unusually

large systemic risks in the national/international economy

should they fail. Regrettably, we did little to address the

problem.

I hear people now talking about: We can't undo this. We need big banks to compete internationally. Alan Greenspan is saying we don't need these for the economies.

Sure. I don't come at this from any other area except how important our capital markets are. I am a market guy. I think the two greatest things we have are democracy and our capital markets and the credibility of the markets. So when I want to find out what is going on in a financial area, I don't do a survey of 27 people. I say: What is the market telling us? That is the best way. What does the market tell us about what is going on?

What the market says is, if you are a big bank like one of these top banks--referring to the study I talked about yesterday--if you are one of the big banks, you get a 70 to 80 basis point advantage when you borrow money. You pay less than other people.

Absolutely. Obviously, that is a key point. I am surprised that more of our smaller banks aren't coming forward and saying this isn't fair. The market says it is not fair.

The second point is the too big to fail. You can argue that you are not too big to fail. But the market thinks you are, and I listen to the market. That is one of the important considerations. Unless people misunderstand--people say you want to destroy the banks, and the rest of that. But under our amendment, Citigroup would be reduced to the size it was in 2002.

Now, were they able to compete overseas and do all the things they had to do then? Goldman Sachs, which is now at about $850 billion, under the Brown-Kaufman amendment would be down to a more reasonable level of just above $300 billion or around $450 billion if Goldman exits the bank holding company structure. You may say that is a 50- percent decrease and that is going to hurt their opportunity. In 2003, they had $100 billion in assets. So all we are shrinking Goldman Sachs down to is 3 to 4\1/2\ times what they were in 2003.

This is not some draconian effort. The second point we have been focusing on is that we also limit risk. This is not about size; we limit risk. I recommend everybody to read the Washington Post today-- that is where I read it--about Jimmy Cayne, former CEO of Bear Stearns. He testified to the Financial Crisis Inquiry Commission that, in his opinion, as CEO of Bear Stearns, they failed because it was leveraged 40 times over its capital base--40 times over its capital base.

Brown-Kaufman would cap leverage at 16 times the capital base. What he is basically saying is that if Brown-Kaufman had been in effect, Bear Stearns would not have failed.

A lot of people have different opinions, but that is what he says. This is not just about size; this is about risk. What we are trying to do is target risk. These banks don't fail--banks are doing great now; profits are out the roof. You don't fail on a nice sunny day. You cannot sit here today and say no problem. That is why regulators don't do anything because, basically, banks are doing well.

Time and again, when we had hearings before the Permanent Subcommittee on Investigations, we heard from Washington Mutual and Goldman Sachs. They said they were doing so well. How can you make them change? The fact that they were doing so well by turning out mortgages that were absolutely doomed to fail is an indication that they should have moved in, but the regulators didn't.

I will not hold this out, but if you want to see what can happen under the worst case, look at Europe today. Look at the mess unfolding in Europe. Greece falters and that affects confidence in other countries such as Portugal, Spain, and Ireland. Europe and other banks have massive exposures to these countries. German and French banks carry a combined $119 billion in

exposure to Greek borrowers and more than $900 billion to Greece and other vulnerable Euro countries, including Ireland, Portugal, and Spain.

People say: How can we compete with those big banks? Remember, we are only reducing Citibank to its size in 2002. How can we compete with Europe? Why do we want to do that? Why do we want to go in with their megabanks and deal with the problems they have?

The Royal Bank of Scotland had a balance sheet basically 1\1/2\ times the size of the UK economy when it failed in the fall of 2008. See these numbers. It is 63 percent right now. Our six largest banks make up 63 percent of the GDP. The Royal Bank of Scotland's was 1\1/2\ times the size of the United Kingdom when it failed. People say the big banks didn't fail; it was the small banks that failed.

I keep hearing that J.P. Morgan and Bank of America did not fail. It was Washington Mutual. They say there is no correlation. Megabanks, such as Citigroup, only survived through massive capital infusions, regulatory forbearance, and Federal monetary easing. Even J.P. Morgan has benefited from not having to write down its second lien mortgages and commercial real estate.

The next thing they said when Washington Mutual failed was: How about that, that was a smaller bank. That was a big bank. The reason it went down is because we knew at the time when it failed that JPMorgan Chase would come in and grab it.

I ask the question: Who is going to bail out, if something goes wrong, JPMorgan Chase, Bank of America, or any of these six larger banks? Remember, going back to Citigroup, Citigroup essentially failed and had to be bailed out three times in the last 30 years: in 1982 because of the emerging market deck, 1989-1991 because of commercial real estate, and 2008-2009 because of residential real estate.

Exponentially.

According to Alan Greenspan.

We all agree the present bill is a good bill and has a good resolution authority that has been worked on for years. My basic concern is we need a little prevention in the mix.

As I said before, when people say we cannot compete overseas, do we want to go where the Royal Bank of Scotland went? The Royal Bank of Scotland was 1\1/2\ times the UK economy when it went down. Do we want to get into this mix in Europe? Is this the place we want to be with these banks facing the problems they are going to have right now, as we went through this earlier? Is this the place we want to be?

I think we go back to what Senator Dorgan was saying earlier, and I wish to add to that with a couple comments. Once again I quote Alan Greenspan. He said: ``Too big to fail, too big.'' ``Too big to fail, too big.''

The idea that we should turn this over to the regulators and let the regulators set the rates--that is the alternative. The alternative is to let the regulators do it. We have good regulators now. I think that is fine.

Remember several things. No. 1, the regulators did nothing. The regulators had the power to do most of what we are talking about. They did nothing in the past.

The second thing is, we could have a new President come in and adopt the same policy as before that self-regulation works, hire a bunch of regulators to go in there, such as a number of regulators we had in our regulatory agencies--they were not bad people. They were smart people. They just basically believed self-regulation works. To quote Alan Greenspan for the third time in this speech, he said: ``I really thought self-regulation would work. I'm dismayed that it didn't.''

We can have it come back. There are still people today who believe-- we hear it sometimes on the floor--we do not need these regulators. The example I use is a football game where somebody gets up and says: The referees keep blowing the whistle and stopping the play. Let's get the referees off the field and play football. That is what was going on around here.

As many of my colleagues on the other side point out, there was not enough oversight on these regulators. But you pull the football referees off the field, maybe the first pileup will not be bad, but by the time you get to the second and third pileup, I do not want to be in it.

I think we ought to go back to what our colleagues did in 1933, and we should regulate not for 5 years, 10 years, 15 years; we should regulate for generations. Much of the stuff in this bill does regulate for generations. We should put in the bill hardline, adopted by us to send a message for generations that this is not going to happen again. Bear Stearns is not going to be able to leverage up to 40 times their capital base. That is what we need to do. We need to legislate for generations.

Madam President, I yield the floor.