Floor Statements

Mr. President, I had the privilege of co-chairing the 58th Annual National Prayer Breakfast with Senator Klobuchar. I ask unanimous consent that a copy of the transcript of the 2010 National Prayer Breakfast proceedings be printed in the Congressional Record.

Mr. President, today I wish to honor two of my constituents on a very special and rare milestone. Later this month, Grace and Charles Mahony of Atlanta will celebrate their 50th wedding anniversary.

Avid skiers, Grace and Charles met at a ski club, and Charles proposed in Aspen, CO. They were married on June 18, 1960, at Saint Clement Roman Catholic Church in Dearborn, MI. As a result of their union, Grace and Charles have been blessed with three children, Patricia, Maureen, and Kevin as well as one grandchild, Olivia Grace Mahony.

It is a privilege to honor this tremendous milestone that embodies the profound love and commitment Grace and Charles have for one another. Their marriage is an inspiration to us all.

Madam President, I ask to be recognized for 2 minutes.

Madam President, in 1 minute I am going to ask for unanimous consent to withdraw amendment No. 4221, which is currently pending on the legislation before us. After discussions with the staff, it is my understanding that the appropriations included in FEMA in this emergency legislation will, in fact, be available to those States that have been approved for funds that did not get them in the last budget because funds ran out. If that is the case, the State of Georgia would, as my intent was, be recognized to be a beneficiary of that. Therefore, I ask unanimous consent that the Isakson amendment, No. 4221, be withdrawn.

I suggest the absence of a quorum.

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 President, I ask unanimous consent the order for the quorum call be rescinded.

Mr. President, I ask unanimous consent the pending business be set aside so I can call up Isakson amendment No. 4221.

This is a technical language amendment that references the FEMA money that is proposed in this legislation to ensure that Georgia is included in consideration of the dispersing of that funding based on the flood experience in 2009. That is all it does. It is a language amendment.

I ask it be considered, and I yield my time.

I make a point of order a quorum is not present.

Mr. President, I regret that I was unavoidably detained on May 24, 2010, and missed rollcall votes No. 163 and No. 164. I ask that the Record reflect that had I been present I would have voted as follows: rollcall vote No. 163, a Brownback motion to instruct conferees: ``yea''; rollcall vote No. 164, a Hutchison motion to instruct conferees: ``yea.''

Mr. President, I appreciate the distinguished majority whip. I voted with him last week on the interchange fees on debit cards. I thought it was a good amendment. But I have to take issue. Don't generically accuse those of us in this body of stonewalling a bill or more or less being interested in looking out for Wall Street or anybody else.

A little history lesson is due. First, what brought us into this recession was the subprime market, which the distinguished Senator mentioned, and the housing market. It happened because Members of this body and the body down the way, 13 years ago, began to direct Fannie Mae and Freddie Mac to include in their portfolios a portion of affordable housing loans which were the words for what became subprime loans.

Freddie Mac and Fannie Mae created the market that allowed Wall Street to go find capital and collect that capital, put a high premium on the capital, high interest rate, maybe 200 basis points over the going rate, but then make it a higher credit risk to lenders because that is the way credit works. What happened is, those loans became popular, and because of a government-sponsored entity that began the consumption of those loans, they proliferated. Those securities were sold around the world. When they collapsed, and we went all through that, it was a terrible collapse. But the root of this problem is that Freddie Mac and Fannie Mae were under the direction of the Congress as to what they should do in terms of the securities they owned. I am saying the Congress of the United States, not pointing fingers at any particular party.

With that being true--and I don't think anybody can dispute it--we have a financial reform bill before us that exempts Freddie Mac and Fannie Mae from reform. That doesn't make any sense. If you listen to the arguments to why they weren't there, it is because it was too hard.

These are hard times. Americans are having hard times. It is time we did the hard things. It is time we not try and politically label Members as friends of Wall Street or friends of Main Street. We are all Americans. It is our economy. It is not just part of the economy. I take issue with the labeling that takes place sometimes. Let's talk about the facts that are there, one way or another. Let's let the facts determine what we do.

I didn't vote for cloture because I don't think it is right to leave Freddie Mac and Fannie Mae outside the equation and incorporate every other business on Main Street and on Wall Street to the extent we have. It is right for us to take some of the blame in the Congress. A lot of this wouldn't have happened had we not directed the government- sponsored entities with which we had influence, and the implied full faith and credit of the taxpayers would be the consumers that would create the liquidity for subprime loans.

My only statement to the majority whip is this: I understand facts. The facts are that Freddie Mac and Fannie Mae started this. They are exempt from this piece of legislation. I, for one, take issue with that. We cannot reform and address the concerns that happened if we don't address the root of the problem.

I yield the floor.

I am happy to.

Will the Senator yield?

I appreciate his comment. That was my point. When I was listening to the Senator's speech, I got a little irritated. Then I realized I have probably done the same thing before too. I leaped over some facts that belong in the debate. The fact that the Congress directed Freddie and Fannie to own a percentage of their portfolio in subprime loans was the source of the capital that bought the first securities that created the subprime securities. I do not argue that there are not good things in this bill.

In fact, when the Senator was referring to the liar loans, it was the Isakson-Landrieu amendment that we

successfully added to this bill that defined that a qualified loan is to be exempt from risk potential because it requires income verification, requires an employer statement that the employee is hired, and it requires an income ratio that is sufficient to retire debt that is borrowed. I agree with the Senator.

My point was that when all of us make these remarks of what bills are and they are not, we ought to include all of the facts that are in there, not just a select few. I appreciate the Senator's comments. I was proud to be a part of his amendment.

The Senator and I might differ on points, but I defer to the Senator. I wish I had the control to control votes, but I don't. There were two on his side and two on ours. There are people with higher pay grades who were responsible for that. I wanted to make the point about what is, to me, a serious issue with regard to the bill and something that should be considered in the debate.

Mr. President, will the Senator yield for one comment?

First of all, my comments were directed specifically to the speech of the Senator from Illinois.

They were not a criticism of the chairman, first of all. I think the ranking member would certainly agree with that.

Second of all, there is some good news that was received today, thanks to the Senator's help, because I could not have done it if it were not for him. We had the tax credit we extended and ultimately passed, which terminated April 30. As to the numbers from the most recent month: the average sales price in the 20 top markets in America, for the first time in 36 months, went up by six-tenths of 1 percent. So the distinguished chairman deserves a lot of credit for that contribution as well.

I was just making sure there was a voice over here that reminded everybody of what got us in this to begin with in the context of the speech of the Senator from Illinois. It was never a criticism of the chairman of the committee.

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

Mr. President, I understand the body may, in a little bit, take up the Whitehouse amendment, and out of an abundance of caution, to be sure my statement is in the Record, I want to speak to that amendment for a second.

I have the greatest respect for the Senator from Rhode Island, Mr. Whitehouse, and all of his work. But the amendment he has proposed basically says that the usury rate to apply to any loan shall be the usury rate in the State, which will take us back to a period of time post 1982 or 1983, when interest rates went to 16 and three-quarters percent. And because usury rates in the United States were 8, 9, or 10 percent in most of the States, there was no money. Usury rates are the maximum ceiling that a loan can do.

Now we have South Dakota and Delaware where there are no usury rates. Most banks are chartered there and, therefore, interest rates on loans are negotiable and competitive. There are a lot of people in public life who think: Well, if you put a ceiling on interest rates, you are guaranteeing the consumer that they are not going to pay a high rate. What you are usually guaranteeing the consumer is, they are going to pay a fixed rate, which is whatever the government says is the usury rate. Floors set by government become ceilings, and ceilings by government become rates.

So I want to caution the body, in considering the Whitehouse amendment, to be very careful what you ask for. Because what you will do is you will put an end to credit in the housing business and in many other types of instruments in the United States, and you will have 50 different usury regimens in 50 different States. You will create a fixed-rate environment by the government, not by competition. What effectively happens is a rise in the cost of credit, a rise in the cost to the consumer, and in the end what I am sure is intended to be beneficial to the consumer will, in fact, cost the consumer more money and be disastrous to the expansion of credit in a time where there is very little credit as it is.

I would respectfully ask the body to consider what we went through in the mid-1980s and early 1980s with interest rates. We hope they will not go up again, but if they do, credit is more important than no credit at all, and usury rates can assure you have no credit at all and end up having the unintended consequence of having a negative impact on the economy.

I would oppose the Whitehouse amendment, should it come up tonight, and I hope the Members of the body will consider the history lesson from the early 1980s.

Mr. President, I yield back and suggest the absence of a quorum.

Mr. President, first, I appreciate the kind remarks of the Senator from Connecticut, the Senator from Louisiana, and the Senator from Virginia. I ask unanimous consent that Senator Grassley of Iowa be also added as a cosponsor.

The committee did a great job to ensure subprime loans would never be made again by requiring risk retention of 5 percent. The only problem is they have called it on all loans, which meant there would be no mortgage loans. You would not have subprime, you would not have good loans because you cannot make it work with a 5-percent risk retention. As I have cautioned all of my colleagues, in the 1980s when the savings and loan industry failed, they had 100 percent risk retention. Risk retention is not the cure-all to good lending; underwriting is.

The Senator from Louisiana and the other sponsors of this amendment are ensuring that people who have incomes that are verified, they will ensure that they have ratios that meet the tolerance levels for a qualified loan, meaning you are not borrowing more than you can pay back; they will ensure there is equity of 20 percent in every loan made, either through the downpayment being 20 percent or through whatever downpayment is made, having mortgage guarantee insurance on the amount above 80, and up to the downpayment, which is the way things used to work.

In other words, the underlying lender is never at risk for more than 80, more than 80 is made by the borrower, it is mortgage guarantee insurance, which means if there is a default, that insurance is paid immediately, which ensures you that you are making a better quality loan.

What Senator Landrieu has basically said is, we are not going where we make zero down, interest-only, all-day, stated-income, reversed amortization loans anymore. But we are going to make the good-old-days loan, where there is a downpayment, where there is skin in the game, where there is an income-to-debt ratio, and where the borrower is qualified to borrow the money they are borrowing.

The only risk retention that will be required is when someone is making a bad loan, which means people will stop making bad loans, which means this bill, with this amendment, will have truly addressed the heart and soul of what led to the failure of the housing market and ultimately the subprime securities in New York.

I appreciate the chairman's acceptance of the amendment. I commend Senator Landrieu as the original author of the amendment. I appreciate the time she offered me on the floor today.

Mr. President, in deference to the chairman, I will be brief. But I come because I feel compelled today because of the two amendments this body will be dealing with: one is the McCain amendment and another amendment later in the day dealing with underwriting. So I will save the remarks on that for when those amendments are pending.

I agree with Senator Chambliss, and I commend Senator McCain. I come from a lifetime in the real estate business. So what I talk about, I do understand its cause and effect in the marketplace. We cannot have responsible reform of financial services and leave out Freddie Mac and Fannie Mae.

One of the reasons that, along with Senator Conrad, I created the Financial Markets Crisis Commission--which is now meeting, by the way, and will report back at the end of December--is I knew there were pervasive and redundant failures in the system that brought about what became a cataclysmic collapse.

I understand the chairman has been under great pressure to bring this legislation forward, and I have great respect for the chairman and appreciate his work. I wish we had waited until the Financial Markets Crisis Commission reported, but we have not. So let me just for a second address Freddie and Fannie and the McCain amendment.

Freddie and Fannie filled the void the savings and loans created when they failed in the late 1980s. There are a lot of people who will hear this speech who will remember savings and loan days. Those were when savings and loans associations were chartered to make home loans. With the exception of FHA and VA, they basically made them all. There were a few players but not too many.

Those entities, by the way, those savings and loans, had 100 percent risk retention of every loan they made because their depositors put in money for the sole purpose of getting a preferred rate of interest and for mortgage loans to be made to generate the income. But they went under. They went under because of a lot of factors. One was the Federal Government changing in midstream the rules under which they operated which caused them to collapse.

Freddie and Fannie immediately filled that void. They did a great job for a long period of time by creating a secondary market for capital to be formed, put into mortgages, the mortgage be securitized, and the securities traded. It worked for a long time.

It worked, quite frankly, until a couple of things happened. One, until the government all of a sudden told Fannie it started having to own a certain percentage of what it called ``affordable loans,'' which later became known as subprime loans. In fact, Fannie Mae became the purchaser of record for the first subprime securities that were created to meet the congressional mandate to end up having these affordable loans, which made a market for those securities which subsequently were sold around the world.

So I wanted to commend the Senator from Arizona. What he brings before us is important. I do not know how we can leave Freddie and Fannie out and talk about real financial services reform in the United States of America. If anything, they need to be a critical part of it.

I recognize this legislation portends there will be a 2-year wind- down unless they improve. Then there will be a liquidation at some point in time. But let me tell you what is going to happen if nothing happens. At some point in time, Freddie and Fannie will have to be liquidated and a new entity will have to be created that will fill the void when that liquidation takes place. We are going to have the mortgage money in this country one way or another because America would not be America without it.

But we cannot tend to have a black hole and an entity that can be used for political purposes, or was used for political purposes, to create a market for securities that ultimately fails and breaks down the financial market.

I commend the Senator from Arizona. I associate myself with the remarks of the other Senator from Georgia. I thank the distinguished Banking Committee chairman for his time.

I yield back my time.

Mr. President, I thank the Senator from Tennessee. I commend the Senator from Tennessee who has worked tirelessly for months on this legislation but in particular has worked tirelessly on this particular amendment.

I rise to try and make my point as strongly as I can. This body, I know, always wants to do the right thing. We want to address the concerns that made the market begin to collapse 2 years ago. We want to restore confidence in real estate finance. We want to bring back the vibrant housing industry. We do not want to reincarnate subprime loans. And we ought to do one simple thing today: We ought to learn from history. I want to give everybody a small history lesson.

The underlying bill answers the question of better underwriting by putting risk retention as a requirement on a newly originated mortgage, a risk retention of 5 percent. The tier 1 minimum capital requirement of a nationally chartered bank is 8 percent. You are going to tell me the banks of America are going to reserve another 5 percent against the mortgages they originate? No, they are just not going to originate mortgages whatsoever.

Secondly, risk retention is no insurance for a better mortgage having been made. The fact is, in the late 1980s, the American savings and loan industry, which was chartered for the purpose of financing American homes, went under, and they had a 100-percent risk retention.

What causes bad lending is bad underwriting. Risk retention has nothing to do with it if you have bad underwriting or, as we had in late 2007, 2008, 2009, no underwriting at all.

First of all, Senator Corker's amendment is an outstanding amendment that strikes at the heart of the problem that got us here, while at the same time according the opportunity for the American finance industry to bring back competitive mortgage lending. If it is not FHA and it is not VA and it is not a Freddie Mac or Fannie Mae loan right now, you are not getting one. We do not have people in the market anymore because they are scared. There is no standard.

This brings us back to a standard of underwriting that is right. It recognizes somebody has a job, has an ability to pay, has reasonable credit, and has some skin in the game so they will pay that loan back. Historically, the default rate on the mortgage industry in the United States of America, outside the last 3 years, was around 1.2 percent to 1.4 percent--very little; in fact, probably the highest best risk investment an investor could make.

What happened was, when underwriting failed and we got into exotic instruments, when Congress told Freddie and Fannie to make affordable loans and they created market subprime loans, the genie got out of the bottle and everything failed.

I want to say to the body, if we let this bill pass with risk retention in it thinking we have done something, the only thing we will have accomplished is a total absence of mortgage money for the American home buyer and American real estate industry. That is a bad mistake.

Facts are stubborn things. If a guy has a job, makes a downpayment, he will repay his loan. If he does not, he might not.

Let's get back to the roots that got us to where we are as a great country. Let's restore home ownership and ability to finance it, but let's recognize the weakness was in underwriting. It was not in the retained risk of the originator.

I commend Senator Corker, Senator Shelby, Senator Gregg, Senator LeMieux, and the others who have worked on this issue. If this amendment fails, then this entire legislation fails in meeting the standard it set upon itself. That would be a tragedy and a mistake for the United States of America.

I yield to the distinguished Senator from New Hampshire.

Madam President, I rise for a second to talk about the financial services bill. I do want to say something in advance of that, and I am sorry Chairman Dodd is not on the floor.

This Friday is the last day Americans can go under contract on the first-time homebuyer tax credit and the move-up tax credit. I had the privilege of working with the banking chairman on that legislation in the fall of last year--and its extension--and I felt a sense of reward today when the announcement came out that for the first time in 36 months home values in the 20 test markets in the United States actually went up by six-tenths of 1 percent. That is not a lot of money, but it is the first time in 36 months. The chairman created an environment to allow that debate to take place, and this Senate voted 100 to 0 to pass it and the American people have benefited from it.

As I tell so many who call me, it is not going to be extended because credits such as that are designed to do what it has done; that is, to bring the marketplace back and hopefully stabilize values and move forward. I commend Senator Dodd for setting up the environment where that could take place.

That brings me to my point on the bill before us. Senator Feinstein did an excellent job of talking about Wall Street and some other people who certainly need to be held accountable where there wasn't any transparency, contributors to the problem, and the terrible problem the derivatives caused in the whole mess. But there is another story out there I wish to bring up, because when we do get to the debate on this bill, it is my hope we will truly have a debate and an amendment process because there are some things not in this 1,407-page bill that ought to be.

What I specifically want to talk about is Freddie Mac, Fannie Mae, Moody's, and Standard & Poor's. When the market began to collapse, a lot of those derivatives that were talked about were bets, one way or another, against the housing market, which in many ways had been overheated in America because of the approval of something known as a subprime mortgage. But the devil in those details that caused us so much problem is that there was originally no market for subprime mortgage. They were B, C, and D credits. They were downpayment assistance loans. They were higher risk loans by their definition, but they got securitized and two things happened: First, Moody's and Standard rated them as investment grade, AAA investment-grade securities; secondly, Freddie and Fannie, at the behest of the U.S. Government and its Congress--us--started buying those securities to meet the desire to have more affordable housing in America, a noble goal but a goal that was being achieved by loaning people money who could not pay it back, by loaning them the downpayment they didn't have, by not validating their credit, their employment or anything else.

So when this thing did collapse, when everything went down and went down fast, it was, in large measure, because Freddie and Fannie created the marketplace that started the buying of these securities around the world, these mortgage securities, No. 1. Equal with that is Moody's and Standard's rating them as investment grade when they obviously were not.

I would think that as we move toward a debate on this bill, when that time comes, and it will come, that it will be a bill that includes Freddie and Fannie and includes Moody's and Standard. I do understand there are some references to Moody's and Standard, but I will submit to you that the best accountability on Moody's and Standard is for them to be paid by the purchasers of the securities, not the creator of them, because then they are accountable to the people who actually get stuck holding the bag, not to the guy who created them and dumped them and ran, which is some of what Senator Feinstein was talking about.

I also wish to talk about the quality of lending. There are provisions in this bill that talk about shared risk and risk retention. There are provisions for a mortgage banker to retain 5 percent of the risk in a loan. That is a well-intended move, but as I said the other day on the floor and as I reminded people in this body, when the savings and loans collapsed, when the RTC, the Resolution Trust Corporation, was created--and that crisis cost the American people $\3/ 4\ trillion--savings and loans in America didn't have 5 percent of the risk, they had 100 percent of the risk. They made those loans with deposits they had of their depositors and they were paid back over time. But when we took away their preference for deposits on $10,000 or less against the banking industry, and when--because they began losing money--we allowed them to form service corporations and get into businesses they didn't know anything about, they finally collapsed and imploded with 100 percent risk, not just 5 percent.

So I would submit another thing that needs to be incorporated in this is for us to put in some underwriting standards--minimum standards--so anything that doesn't meet them has to be an insured mortgage by an MGIC or a PMI. We should go back to the good old days of the 1960s, 1970s, and 1980s, where you had to have a job and a verification to borrow money, where you had to get a credit report, where you didn't have a windshield appraisal, where an appraiser drove by on the street, but a legitimate appraisal, where they valued a property, and where you couldn't borrow money that would cause you to spend more than 25 or 30 percent on your monthly payment as a percentage of your gross income or a total of 38 percent on all debts you had, including that payment, for at least a year or more in duration.

The real estate industry, the housing industry in America, with those very standards--which were the standards of the 1960s, 1970s, and part of the 1980s--ended up having a vibrant housing market, with 65 percent home ownership--the largest of any country in the world. But when Wall Street got greedy, when our idea of forcing Freddie and Fannie to be purchasers of resort, when all those things were created, the rush came to make the mortgage, to sell the paper, to produce the income that the investor wanted, and the quality of the house, the qualification of the buyer, and the legitimacy of the loan came in question.

So I look forward to the point in time when we get to this debate that we will talk about three things: No. 1 is that Freddie Mac and Fannie Mae were, in fact, government-sponsored institutions and today are a lot more government sponsored than they ever were. No. 2, if we exempt them, we leave the potential and the temptation for them to be used as a dictated purchaser of certain kinds of paper that will get us right back into the same situation. If Moody's and Standard do not have an accountability to their rating standards, when something such as the subprime loans happen, we will be leaving open the opportunity for most of what happened that was the principal cause of the collapse to happen again. I think we have a responsibility not to do that.

I hope to become a part of a debate on that part of this legislation that closes the loophole, that takes away this idea that if you just have a 5-percent shared risk, it is a safe loan, and instead make sure the underwriting to the borrower is what we count on because, after all, that is going to be how the money is paid back. We know for a fact that Freddie and Fannie were a major part of the problem, and we know that lack of quality underwriting was a major contributor to the quality of the security. Somewhere it ought to be addressed. But in these 1,407 pages, to the best of my reading and looking, it is not. That is unfortunate and it is a mistake. I hope, when we get to the final debate, we will correct that error or else we will not have addressed a major contributor to the problem for our taxpayers and our voters and our citizens.

With that, I yield the floor.

If the Senator will yield, I thank the Senator for his good wishes. I always enjoy working with the distinguished former Governor, now Senator from Delaware, and I look forward to that moment where we are finding that 80 percent common ground.

Madam President, I rise at a propitious time because the majority and minority leaders addressed the pending bill that is coming out of the Banking Committee and their desire for the bill to be one that is amendable and debatable.

I am here to talk specifically about one facet of the financial crisis and one improvement that is to be made by this bill that needs to be carefully addressed to make sure we don't repeat a mistake made in the 1990s with the failure of the S&L industry.

I have a chart with me. We have heard a lot about mortgages. We all know if it weren't for FHA, if it weren't for VA insurance, if it weren't for the Fed doing Freddie and Fannie a favor, there would not be much mortgage money available right now. It has all run away from the United States because of the subprime crisis and, in fact, because people are nervous about what happened in the financial markets with subprime securities. During this crisis we have been in, beginning in 2005 and going on until now, in my State of Georgia--these numbers are specific to Georgia, but Georgia is the tenth largest State--we see here that of the mortgages in default, totally in default or in foreclosure, it got as high as 8.2 percent on what I refer to as qualified mortgages. Those are mortgages that were made to creditworthy people who had good underwriting standards. Those were good mortgages. Up to 8.2 percent or 1 in 10 of those, at its apex, were either delinquent or pending foreclosure. But 24.7 percent were what is known as subprime or nonqualified loans and were either in mortgage delinquency or in default, 3 to 1.

The reason I show this chart is it demonstrates where the problem happened, not just on Wall Street but on Main Street; that is, in chasing higher yields, in pushing toward a desire for greater home ownership, credit standards got lax, and loans became nonqualified loans that carried a higher interest rate but a much higher risk. It is acknowledged by me and by most, in terms of the housing crisis we have been in, that the largest precipitating factor was shoddy underwriting, loose credit, and subprime mortgages. The legislation coming out of the Banking Committee is going to create something known as shared risk or lender liability in terms of the making of mortgage loans. I will be the first to tell my colleagues, I am not on the Banking Committee. I haven't seen the final draft. What I will address is what I hope will happen, not what I know will happen.

What I hope the committee will understand is, in its requirement for shared risk, being that the maker of a mortgage retain 25 percent of that mortgage for its lifetime or until it is paid, is the significant amount of capital that is asked for an institution to reserve and a possible amount for a mortgage broker or a mortgage banker but not for an institutional lender. The problem is, there are no institutional lenders like savings and loans anymore. One should revisit what happened with the savings and loan crisis, the Resolution Trust Corporation, and the failure that took place in the late 1980s and late 1990s. In America in the 1970s and 1980s, most of the mortgages made were made by lenders who didn't share the risk. They had 100 percent of the risk. They were savings and loan associations that took deposits, paid a preferential rate of interest over banks by regulatory design to attract the capital, and they held the mortgage in portfolio until it was paid. That is not shared risk. That is total risk.

What were our foreclosure rates in the 1970s and 1980s up until the end of the 1990s? Very marginal, 1 to 2 percent, certainly not 8.2 percent, certainly not 24.7. What happened, though, in the savings and loan industry is, No. 1, the Federal Government took away the interest preference to pay between banks and S&Ls so capital flowed out of the S&Ls. No. 2, because S&Ls then needed to make more money on the internal portfolio, the government allowed savings and loans to create service corporations, which were subsidiaries, to deviate from their original charter and, instead of just making home loans, allowed them to make commercial loans and, in fact, become developers.

What happened? What happened is history. We got off our mission, because we got off the risk. Because we took our eye off the ball, the savings and loan industry across America failed. Congress had to create the Resolution Trust Corporation to dispose of the bad assets around the country and we went through, up until now, the most severe recession we have ever been through. But this one is worse. This one is more pervasive. This one was caused by a lot of financial irregularities and poor oversight on our part, as well as greed on the part of many lenders. My hope is, when we start fixing things with regard to mortgages, we will recognize that shared risk is not going to solve any problem, if 100 percent risk didn't solve it in the late 1980s. What is going to solve the problem is for us to have reasonable standards of required underwriting that are an insulator from institutions

making bad loans unless they take the risk.

I am suggesting that we define what is a qualified loan that would not be subject to shared risk and what is a loan that would be subject to it. For example, what would a qualified mortgage be? I was in this business for a long time. When I started in the business in the 1960s through mid-1980s, you could not borrow twice your annual income. You couldn't have a monthly payment higher than 25 percent of your take- home pay, and your total debts a year or longer could not exceed 33 percent of your gross income. That was reasonable underwriting. What were our foreclosure rates then: 2, 1.5, a high of 2.8 percent in the mid-1980s, but certainly not anything such as what we have in the 24.7 and the 8.2 percent.

What is a qualified loan is one that requires full documentation so you do have to have a job, so your boss verifies your job, so the credit agency actually verifies your credit so you actually have a downpayment, you don't have downpayment assistance or some ``now you see it, now you don't'' program--no interest-only loans. Everybody knows, you are not making an investment if you are not paying the debt service and only paying the principal. Interest-only loans were a bad idea whose time came and it went. It may be good for certain forms of commercial investment but not for residential.

No balloon payments. One of the biggest problems with these foreclosures was good people were loaned money with shoddy underwriting that had balloon payments in 3, 5, or 7 years. People didn't know what a balloon payment was. They thought it was something that flew in the air. A balloon payment is when the whole principle comes due all at once and you are subject to the ability to refinance. That is not a qualified loan; that is a high-risk game.

No negative amortization. That was a bad idea whose times came and went. Negative amortization meant you borrowed $100,000, but you made payments so at the end of the year you owed more, not less. That is a bad idea. That was predicated on rapid inflation or rapid appreciation which isn't always going to happen. And then requiring people to carry private mortgage insurance on their loans if they exceed 80 percent of the loan to value of the house, a normal underwriting standard until we got into the loosy-goosy time of the late 1990s and the decade of 2000 to 2010.

If we adopted in this legislation those parameters, to exempt lenders from shared participation, we would attract all the money like the good old days, then put the shared risk retention on those loans that are not well underwritten; make the mortgage broker or the investment banker hold 5 percent of an investment they sell because it didn't meet these qualifications, what would happen? They wouldn't do it, because they wouldn't hold the money. It would have prevented what has been alleged one of the brokerage houses did already. They would never short something and bet on it failing if they had a piece of it. They would only do it if you had a piece of it and they didn't.

It is important, when we get into this regulation or reregulation of the financial industry, that we also recognize we have some obligation to correct some of the mistakes the government made itself in the past that caused the problem in the S&Ls in the 1980s and with nonqualified mortgages in the 1990s.

What I am suggesting simply is, let's take those things that are tried and true, not things we think will work but things we know will work. Let's make them the gold standard. Let's make them the qualification for the attraction of money in mortgages to fund the homes of the American people. Then let's say to those who want to take a risky loan, let's say to those who want to have shoddy underwriting, let's say to those who want to make a quick return and get out before the dollar comes due, they will have to take the risk. Shared responsibility or shared risk is precisely right as an insurance policy to protect against that. But the unintended consequence of shared risk on a qualified, well underwritten loan is a higher interest rate for the consumer and less attraction of capital for individuals who form those loans to fund the housing purchases, which ultimately leads the government to do with Freddie and Fannie what it did before--force them to make loans they should not, force the government and taxpayers to be at risk in part on those loans and bring us back to another period like the S&L collapse or, later, like the financial market collapse of the last couple years. There will be another one in the future if we don't recognize the need to make qualified loans, well underwritten, do it as we did in the good old days when America flourished, foreclosure rates were low, and home ownership was within reach of 70 percent of the American people.

I yield the floor.

Mr. President, today I wish to honor Bobby Cox, who is a great Georgian, a great American, and a great friend, in the Record of the Senate. After 25 remarkable years as the manager of the Atlanta Braves, Bobby will retire at the end of the 2010 season.

Bobby began his career by spending five years in the Dodgers' farm system before being selected by the Chicago Cubs in the November 1964 Minor League draft. He was acquired by the Braves in 1966 and spent 1967 playing for Triple-A Richmond. Bobby was traded to the New York Yankees where he played third base in 1968 and 1969. He retired as a player at the age of 30, and it was the coaching career that followed that would make him a baseball legend.

Bobby returned to manage the Braves from 1978 to 1981. Although he left Atlanta in 1982 to lead the Toronto Blue Jays, it seems he couldn't quite get our fair city out of his system. After leading the Blue Jays to the American League East crown with a 99-62 finish in 1985, Bobby was named Major League Manager of the Year by the Baseball Writers Association of America, the Associated Press and the Sporting News. He returned to the Braves as general manager in October 1985 and oversaw a farm system that produced some of the greatest players in Braves history and laid the foundation for the success that was to come.

In 1990, Bobby decided to return to the dugout as manager of the Braves, and I'm sure glad he did. While the Braves finished in last place in 1990, Bobby turned it around with a first place finish in 1991. I still remember that epic World Series battle against the Minnesota Twins as if it were yesterday. While the Braves fell short in the World Series, 1991 was just the beginning of an epic run that included 14 straight division titles.

During his illustrious career on the bench, Bobby has been named Manager of the Year four times. He led the Braves to a World Series title in 1995, defeating the Cleveland Indians four games to two. On June 8, 2009, Bobby won his 2,000th victory with the Braves. He's only the fourth skipper in major-league history to claim 2,000 wins with one team. His fiery spirit has also allowed him to capture another title. Bobby holds the all-time record for most ejections.

It gives me a great deal of pleasure and it is a privilege to recognize Bobby Cox for his contributions to America's favorite pastime and America's team, the Atlanta Braves. Although he plans on advising the team in baseball operations after he steps down as manager, Bobby will be sorely missed on the bench and will remain in the hearts of Atlanta Braves fans forever.

Mr. President, I wish to honor in the Record of the Senate an honorable American and a great Georgian, Mr. Arthur E. Katz.

Arthur graduated from the U.S. Coast Guard Academy in 1963. In Vietnam, he served as the commanding officer, USCGC Point Cypress, a unit attached to Division 13, Coast Guard Squadron One, from December 1965 to September 1966. For his meritorious service, Arthur received the Bronze Star Medal, with Combat Distinguishing Device ``V''.

Arthur attended Rutgers University, where he earned a masters degree in business administration. He is a successful small business owner, and his commitment to volunteerism and community service is evident through his roles as past president of Temple Emanu-Els Board of Trustees and board member of the Marcus Jewish Community Center of Atlanta.

A longtime resident of Sandy Springs, GA, Arthur is an avid tennis player, fisherman, and a committed runner of the annual Peachtree Road Race. A dedicated and loving husband of 46 years, Arthur is the father of three daughters and is blessed with seven grandchildren.

On April 23, 2010, Arthur will be inducted to the Wall of Gallantry at the Coast Guard Academy in New London, CT. I cannot think of anyone more deserving of such an honor than this true champion of patriotism and a countryman, Arthur E. Katz.

Mr. President, I wish to honor in the Record of the Senate Terry Lindsey, who is a great Georgian, a great American, and a great citizen of Polk County. I honor Terry upon his retirement from Engineered Fabrics after 31 remarkable years and for his many contributions to the quality of life in Polk County, GA.

On March 31, 2010, Terry will retire from Engineered Fabrics Corporation in Rockmart, GA. He started with the company in 1979 as the manager of contract management, and he ends his impressive tenure as its vice president of marketing. I know he will be deeply missed by his colleagues at Engineered Fabrics, which is one of the largest employers in Rockmart.

In addition to his impressive career, Terry has a long history of community involvement in Polk County, where he is a well-respected and dedicated leader. Terry is a member of the Rotary and has been active in the Polk County Chamber of Commerce for a number of years. In particular, he has served as an inspiration and a role model to the young men and women in the chambers Youth Leadership committee.

Terry has been a familiar face during the Polk Chambers annual trip to Washington, DC, over the years. He has been instrumental in ensuring members of the Polk County delegation had the opportunity to come to Washington and discuss important issues affecting the community with the Georgia congressional delegation through his role as a host or sponsor of these Washington fly-ins.

It gives me a great deal of pleasure and it is a privilege to recognize on the floor of the Senate, Terry Lindsey for his service to Polk County and to our great State of Georgia. He and his wife Jean have earned the many happy years of retirement ahead of them.

Mr. President, I wish to honor in the Record of the Senate the life of a wonderful lady and a great Georgian, Mrs. Patricia Malone. Her commitment to the aviation industry spanned more than 50 years, affecting thousands of pilots through training standards.

Patricia ``Mother'' Malone began her introduction into aviation began during World War II when she was a link instrument training instructor for the U.S. Navy, training fighter pilots in instrument flight procedures. After the war, she was a civilian instructor for the U.S Air Force.

She went to work for Delta Air Lines in 1972 and moved her family from Quincy, MA, to Atlanta, GA. During her long career with Delta, she created the operations specification curriculum for the airline and served as the manager of certificate compliance by the time she retired in 1994.

Patricia affected countless numbers of aviators through her work in aeronautical charting, and she trained pilots from most of the major airlines as well as military pilots. She earned the nickname ``Mother'' Malone from her pilots because she did more than teach them instrument flying and FAA regulatory compliance; she was truly invested in the lives of those she taught.

During her retirement years she consulted with pilots and airline industry professionals as well as lending her time to volunteering in her community. She selflessly gave her time to the YWCA of Cobb County, the Delta Pioneer, American Business Womens Association, Goodwill Industries, the American Red Cross, and her local board of elections.

Patricia W. ``Mother'' Malone passed away on August 12, 2008, at the age of 84. She is survived by her daughters, Alison, Peggy and Tricia, nine grandchildren, and one great grandson.

This year, Patricia will be posthumously inducted into the Georgia Aviation Hall of Fame, and I cannot think of anyone more deserving of this honor. It is only right that her accomplishments are permanently enshrined in Georgia's aviation history.