Floor Statements

The following Senators are necessarily absent: the Senator from Georgia (Mr. Chambliss), the Senator from Oklahoma (Mr. Coburn), the Senator from Georgia (Mr. Isakson) and the Senator from Mississippi (Mr. Wicker).

The following Senators are necessarily absent: the Senator from Georgia (Mr. Chambliss), the Senator from Oklahoma (Mr. Coburn), the Senator from Georgia (Mr. Isakson) and the Senator from Mississippi (Mr. Wicker).

The following Senators are necessarily absent: the Senator from Georgia (Mr. Chambliss), the Senator from Oklahoma (Mr. Coburn), the Senator from Georgia (Mr. Isakson), and the Senator from Mississippi (Mr. Wicker).

The following Senators are necessarily absent: the Senator from Georgia (Mr. Chambliss), the Senator from Oklahoma (Mr. Coburn), the Senator from Georgia (Mr. Isakson), and the Senator from Mississippi (Mr. Wicker).

Madam President, in the final hours of debate on this bill, I think we should be asking ourselves why we started the whole exercise in the first place. What is the purpose of financial regulatory reform? I wish to address that for a moment this morning.

Presumably, we all agree the purpose should have been to tackle the problems that led to the financial crisis in the first place. That means serious reform must address root causes: most prominently, too big to fail--ending that and reining in the two government-sponsored enterprises, Fannie Mae and Freddie Mac, that had a lot to do with causing the problem in the first place. Amazingly, despite its size-- and this is the legislation--and all of the hype that has attended it, the bill before us fails to address these root causes.

Moreover, even though Main Street didn't cause the problem, the bill is so extensive in its regulatory reach, it creates new burdens on Main Street while continuing the recent pattern--and one, by the way, Americans are very fed up with--of using every crisis as an excuse to involve government in almost every sector and every aspect of American life.

Republicans had hoped that once the bill came to the Senate, improvements would be made and the final product would be less partisan. We offered amendments to improve the bill, but almost all of these have been defeated. Along the way, Democratic amendments have been adopted that actually make the bill worse.

I hoped the bill would be amended to actually end taxpayer-financed bailouts and the concept that companies can be too big to fail and that it would protect small businesses from the regulatory burdens imposed by the bill and protect the rights of privacy for people's financial information. But that didn't happen, so we are left with a bill that enshrines into law failed policies of the past, imposes a massive new bureaucracy on small businesses that had nothing to do with creating the financial crisis, and threatens jobs and our economic growth.

Today, let me address these three problems in a bit more detail-- first, too big to fail. The very first amendment offered by the majority purported to end too big to fail. While that sounds good, the amendment that passed won't accomplish the goal. The amendment has the effect only of declaring the intent of Congress. It does not actually prohibit taxpayer funds from being used to assist banks, and that is why I voted against it. It expresses a sentiment, but it is not actually operative.

As I will discuss, provisions remain in this bill that enshrine taxpayer bailouts forever, even after the removal of the $50 billion bailout fund. For instance, section 113 establishes a Financial Stability Oversight Council. This section would give the Federal Reserve the authority to prop up any nonbank financial company the council deems to be a potential threat to systemic stability.

The council would designate certain firms as ``systematically significant.'' Market participants would obviously interpret this to mean too big to fail. Therefore, the designations would increase moral hazard and perpetuate the very problem we are trying to fix. So a new government board based in Washington would decide which institutions get special treatment, giving unaccountable government officials tremendous authority to pick winners and losers, resulting in a competitive advantage for the winners.

What determines whether a nonbank financial institution is a threat to stability? Among other possible considerations, ``any other factors that the Council deems appropriate,'' according to the bill. Such broad authority would allow the council to protect and promote or to hamper firms based on whatever it deems appropriate--``any other factors.''

Section 1155 of the bill, entitled ``Emergency Financial Stabilization,'' also guarantees bailouts. Here, the FDIC would be allowed to create a new program of unlimited size to guarantee the obligations of depositories and holding companies with depositories. Since there is no requirement that a company that receives the guarantees and defaults on its obligations be taken into bankruptcy, the FDIC and Treasury could prop up whatever company they choose.

So this bill does not end too big to fail. If we had truly wanted to do that, we would have passed the Sessions amendment. This amendment would have struck the entire liquidation authority section from the bill and replaced it with a bankruptcy process for nonbank financial institutions. It also would have prohibited bailout authority and made needed adjustments so that a few provisions of the U.S. Bankruptcy Code to provide necessary flexibility to deal with the failure of large financial firms, such as Lehman Brothers, would work. In other words, it would have ended too big to fail.

The second area I mentioned was the government-sponsored enterprises. No debate on too big to fail would be complete without a discussion of Fannie Mae and Freddie Mac. These are the two government-sponsored enterprises given the authority to acquire mortgages. It seems to me almost unconscionable that this bill does not even attempt any reform of these two institutions given the fact they were a large part of the creation of the problem. And it is not because Republicans haven't tried. We have. The reckless behavior of these two institutions--by the way, institutions that have come to epitomize too big to fail--has surged through the entire commercial banking sector and our economy as a whole.

Let's recall how central these two government-sponsored enterprises were to the housing bubble and the ensuing collapse of that bubble. For years, Fannie and Freddie backed mortgages that were issued to too many people who could not really afford them. The two GSEs reaped enormous profits, while recklessly taking advantage of the government's intrinsic guarantee of purchasing trillions of dollars' worth of these bad mortgages, including all those made to risky subprime borrowers. This is the model that allowed Fannie and Freddie to inflate the subprime mortgage bubble. But when the housing market collapsed, the two GSEs were left with billions of dollars of bad debt. And guess who is on the hook for those billions. The American taxpayers.

These two institutions had their own dedicated regulator--the Office of Federal Housing Enterprise Oversight, or OFHEO. Republicans tried to give OFHEO more authority, Democrats objected, and so they allowed the situation to spiral out of control. The easy credit fueled rapidly rising homes prices. As prices rose, so, too, did the demand for even larger mortgages. So Fannie and Freddie looked for ways to make even more mortgage credit available to borrowers with a questionable ability to repay.

By 2008, the two GSEs had nearly $5 trillion in mortgages and mortgage-backed securities. They were overleveraged and too big to fail. It was a textbook example of moral hazard on a massive scale. I warned about it repeatedly.

Today, they hold a combined $8.1 trillion of total outstanding debt. Because the Federal Government has decided to cover this debt--by the way, even though there has never been a vote in the Congress to authorize this--both of these entities have recently asked taxpayers for billions more to cover their rapidly mounting losses. Recently, Freddie Mac announced it will need an additional taxpayer bailout of $10.6 billion, and that is after it lost $6.7 billion during the first quarter of this year. In 10 of the last 11 quarters, Freddie Mac has lost a total of $82 billion, which is twice the amount it earned over the previous 30 years. Fannie, too, just recently asked taxpayers for more money--$8.4 billion--to cover its soaring losses.

Since the Federal takeover of Fannie and Freddie, taxpayers have lost $145 billion propping them up--just two companies. And since the Treasury Secretary recently lifted the bailout cap, taxpayers are responsible for unlimited losses at these institutions.

The Associated Press summed up the situation succinctly. It wrote last week:

The rescue of Fannie Mae and sister company Freddie Mac is

turning out to be one of the most expensive after effects of

the financial meltdown.

So why not embrace real reform and relieve the taxpayers? We know some of our friends on the other side believe we have an obligation to trim Fannie's and Freddie's sails. Republicans offered three amendments, all of which attracted bipartisan support--one each from Senators McCain, Crapo and Ensign--that would have done exactly that. But they were all rejected by the majority.

The alternative side-by-side amendment that was adopted instead is meaningless. Rather than rein in Fannie and Freddie, this amendment really established that Congress will commission a study on conservatorship of the two GSEs from Treasury Secretary Timothy Geithner. As the Wall Street Journal asked in an editorial, if a study is so key to dealing with the GSEs, what has Mr. Geithner been doing in the last 17 months since the crisis? Let's also remember that it was Mr. Geithner's Treasury Department that lifted the $400 billion GSA bailout cap last Christmas Eve.

Let's be absolutely clear: Every day Fannie and Freddie remain in their current form is a day U.S. taxpayers are subsidizing their activities. This bill does nothing to change the status quo, and I think taxpayers deserve better.

The third area I wanted to mention is the so-called consumer protection and its effect on small businesses--this Bureau of Consumer Financial Protection. Well, small businesses across my home State of Arizona and, indeed, across the country are very worried about the intrusive new bureaucracy here intended for consumer protection. Of course, all of us support consumer protection. I don't know of anybody who doesn't. The question is how you do it and to whom it applies.

We create a lot more cost to consumers if we make the regulation so expensive and inefficient that consumers actually wind up paying more money than they would have otherwise. That is what has happened with the credit card legislation we previously passed, and it could happen with this legislation as well, thanks to a newly created Bureau of Consumer Financial Protection.

The bill establishes new restrictions on credit through so-called consumer protection provisions by limiting or reconfiguring credit options that are currently available to us. The bill gives the new bureau a budget of up to $650 million--an amount that is more than double what the FTC has requested for its economy-wide consumer protection activities. This money is to be spent as the director of the BCFP wishes, with no oversight or veto authority by Congress or the administration.

Moving regulatory authority for consumer protection to a new bureau with broad powers would add to an already complex layer of regulation these businesses are forced to navigate, creating uncertainty that would likely make it more difficult to comply with existing regulations.

My staff and I regularly hear from constituents who are trying to find ways to pay off their outstanding debts. I am concerned that duplicative regulation has the potential to have the unintended consequence of making it more difficult for individuals and families to manage their debts.

Moreover, the proposed consumer protections reach beyond credit cards, restricting the availability of all forms of credit. These reductions in credit also mean declines in job creation since many small business startups use things such as home equity debt and sometimes credit cards as their sources of funding. Obviously, this poses a serious threat to our economy.

A recent New York Post op-ed by Mark Calabria stated:

New restrictions on credit are likely to cost our economy

tens of thousands of jobs a year.

Of course, no one intends this result. No one wants to raise costs on small businesses. But that is the inevitable result of a policy that is written too broadly. That is one reason the Chamber of Commerce, for example, opposes this bill.

Some of my colleagues have suggested that the Bureau of Consumer Financial Protection would be significantly different from the Consumer Financial Protection Agency that was written into the House bill that passed last year. Well, I respectfully disagree. While the new bureau would not be officially independent, it would effectively function as an independent, stand-alone agency with rule-writing powers and enforcement authority; whereas, the Consumer Financial Protection Agency would be responsible for its own financing, this Bureau of Consumer Financial Protection would enjoy an automatic funding stream from the Federal Reserve. Given the close similarities between the two proposed consumer units, it is constructive to consult a study released last year by economists David Evans and Joshua Wright. After analyzing the Consumer Financial Protection Agency Act, they concluded it would ``most likely result in a significant reduction in the availability of credit to consumers.''

``A significant reduction in the availability of credit.'' Of course, that is not what the authors intend, but that would be the probable result.

In my view, the potentially serious costs of this Consumer Financial Protection Bureau do not justify its purported benefits. We all want to shield consumers from real abuses and exploitation, but this is not the right way to do it.

As the National Review recently editorialized, ``To the extent that existing consumer safeguards need strengthening, the task can be accomplished without launching a massive new bureaucracy that would negatively affect credit access and economic growth.''

In conclusion, I hope my colleagues will ask themselves this question: Why is it that the CEOs of large companies such as Goldman Sachs and Citigroup

favor this bill? The reason is simple: The legislation would entrench their privileged status. It would institutionalize the idea that certain big financial firms deserve preferential treatment by Federal regulators. These firms would be insulated from the negative effects of the new consumer protection bureaucracy. However, that bureaucracy would severely diminish credit access for small businesses and middle- class Americans.

What we have before us is a bill that is supported by Wall Street but opposed by the Chamber of Commerce, the Business Roundtable, and many others on Main Street.

For all these reasons that I have discussed and others, despite my strong desire to enact prudent financial reform, I cannot support this legislation. It does not effectively take on the fundamental problems that we all agree needed to be addressed.

I suggest the absence of a quorum.

Mr. President, I ask unanimous consent that the text of my remarks today to the National Policy Conference of The Nixon Center and The Richard Nixon Foundation be printed in the Record.

I ask for the yeas and nays.

The following Senator is necessarily absent: the Senator from Ohio (Mr. Voinovich).

The following Senator is necessarily absent: the Senator from Ohio (Mr. Voinovich).

Mr. President I, too, would like to address the Supreme Court nominee. I associate myself fully with the remarks of Senator McConnell, which raise an important point for us to consider. I will correct the record in a couple of situations because I think, as the debate unfolds, it is important for us to base our decisions on the same set of facts. These are not going to be particularly newsmaking or big surprises, but I think the record should be corrected.

I know our majority leader, for example, misspoke the other day in commenting about Justice Sandra Day O'Connor because there is some similarity--she being the first woman ever appointed to the Supreme Court. I wanted to make sure the record reflected the actual situation with respect to Justice O'Connor.

Leader Reid, I totally agreed with when he described her as ``one of my favorite Court Justices.'' He said it is ``not because she is a Republican but because she was a good judge.'' I subscribe to that as well.

He said:

She had run for public office. She served in the

legislature in Arizona. That is why she could identify with

many problems created by us legislators, and she could work

her way through that.

For the record, I wanted to indicate her experience on the bench as a judge, since it is not the case that she did not have prior judicial experience when nominated to the Supreme Court. She was actually appointed to the bench by our Democratic Governor at the time, Bruce Babbitt. She was on the court of appeals and on the superior court bench before that. She served on the Maricopa County Superior Court bench from 1975 to 1979, and in 1979 Governor Babbitt appointed her to serve on the Arizona Court of Appeals. So she had extensive experience, from 1975 through 1981, as a judge, including in an appellate capacity.

Prior to that time, as Leader Reid noted, she served in the Arizona State Legislature. In fact, she was the majority leader. She had an extensive legal career before that. She was a deputy county attorney. She was a civilian attorney. She was in the private practice of law. She was an assistant attorney general. Therefore, she had a very varied and rich experience both as a lawyer practicing law in regular situations in both criminal and civil context, as well as a trial court judge, which is great experience, I believe, and as an appellate court judge.

In many respects, it is almost a perfect resume for someone to demonstrate broad experience and who could understand what cases are all about when they come from Main Street, as opposed to some of the more high-profile cases that tend to come before the U.S. Supreme Court. By every measure, I think anybody would agree that her tenure on the Supreme Court reflected those values and the experience that she had when she came to the Court.

As I said, I know the majority leader simply misspoke when he suggested that she didn't have judicial experience. I did think it important to make that point.

Second point: There was a statement made on TV yesterday by some folks who were comparing Elena Kagan and Chief Justice John Roberts; in effect, that John Roberts only had 2 years on the appellate court, so they are pretty similar. In two respects that is not correct.

First, spending a couple a years on the court of appeals for the circuit court is extensive and important experience. It at least gave us an idea of how he approached judging. I think almost everybody in the Senate who voted on his confirmation understood that whatever his personal views were, he could clearly leave them behind and decide cases, as he referred to it, ``like an umpire calls the balls and strikes.'' That is one of the reasons he was overwhelmingly confirmed.

I also recall that Justice Roberts' prior legal experience represented numerous arguments before the courts of appeals and the U.S. Supreme Court. At the time of his confirmation, he had probably had more U.S. Supreme Court arguments than any other lawyer. So this was a lawyer experienced in appellate work and U.S. Supreme Court work.

In contrast--and this is not to take away from Ms. Kagan--the truth is, I don't think she ever tried a case or argued a case to an appellate court. She certainly hadn't argued before the Supreme Court until about 6 months ago in her capacity as Solicitor General. She has other positions in her background. She has been a law school teacher and a dean of a law school. But I submit that is hardly comparable to the litigation experience and, particularly, the appellate experience John Roberts had.

All I am suggesting is, when we make these comparisons to other people, we need to be accurate about it. It is taking away nothing from Elena Kagan, but she did not have the experience of Sandra Day O'Connor or John Roberts. That is something we have to deal with--something lacking in her record.

One other thing--and this is personal to me because my views were mischaracterized. I hope this will be seen as a favorable comment toward Elena Kagan. It was reported today by Al Hunt that I thought Elena Kagan was too young for the Supreme Court. No, I don't, and I never said that. He was wrong when he reported that.

I said she was relatively young for an appointment to the Supreme Court, and that is true. At this point, I think she is 49. She would be 50 if she is confirmed. That is a fine age to be on the U.S. Supreme Court. My point was, that means, assuming her health is good--and I believe it is--she could have many decades on the Court. That is all the more reason it is important that we know her approach to judging.

My only question about her judging has been whether she would leave her personal views behind as she approaches the decisions in cases that present two conflicting sides in adjudicating their dispute before the Court. It is not hard, when somebody has been an appellate court judge for years, to see how they approach judging and whether they can leave any of their personal views behind them.

Most judges can, and that is a great thing about our system. Occasionally, we find a judge who has a particular conservative or liberal bent, and it is pretty clear they have a hard time leaving their political views behind and that they tend to want to figure out how they would like a case to come out and then rationalize a way for it to come out that way. Any good lawyer or judge can probably find an argument to support a position. But that is not the way judging should occur.

My concern expressed about Elena Kagan is that there are a couple of things in her background that suggest that she might have a hard time leaving her political views behind and approaching cases, as Chief Justice Roberts said, as ``an umpire would call balls and strikes in a game.''

Remember, he was asked whether he would favor the little guy in a dispute or the big guy. He said if the law was on the little guy's side, he would favor the little guy but, if the law was on the big guy's side, he would favor the big guy.

Why is that important? We all know Lady Justice has on a blindfold, and there is a reason for that. The oath of office of a judge and our tradition in this country is for a judge to approach a case not based on how he wants that case to come out in his heart of hearts, not how he would write the law if he were a legislator but, rather, how he has to apply the law to the facts of that particular case.

Occasionally, a court will even say we do not necessarily like the way this case has to come out, and we invite the legislature to change the law. In fact, the Supreme Court did that in a bill which I sponsored recently. I regretted the way the case came out. I do not think the Court had to rule the way it did. But eight of the nine Justices believed that Congress had gone too far in prohibiting a certain kind of film-making activity called crush videos where usually a woman with high-heeled shoes is shown crushing a small animal to death.

That did not seem to me to be free speech, and it is something Congress could prohibit. But the Supreme Court disagreed. Eight of the nine Justices said: No, even though we do not necessarily like the way this case came out because we abhor that kind of thing, it is our view that the first amendment has to allow that kind of ``speech.''

Again, I disagree that it is speech, but I admire the Justices, both liberal and conservative, who decided they have to apply the law even though the result was not something they liked, and they invited the Congress to fix the law, giving us a little bit of instruction as to how we can do that.

I am working with colleagues in the House of Representatives to restructure the law so we can pass it again, overwhelmingly I am sure, and this time get it right within the first amendment because I do not, obviously, want to violate the first amendment.

The point here is that Justices can rule in ways that force them to make a decision even though they do not like the way the case comes out. Then the legislature, if it involves a law we have passed, can fix it. That is the way our system is supposed to work. Rather than--and I much prefer that even though, in effect, I lost the case. I would much rather that than the Justices say: We think these crush videos are terrible, and even though the first amendment probably protects it, we are going to try to craft an argument where we can declare this law valid because from a public policy standpoint, we think that is a better result. I am pleased they ruled against my bill by saying: No, we cannot do that. We have to adhere to the law, as we read it.

What I am going to be looking for in Elena Kagan is a judge who, despite her political views--and she has been candid about what they are and others have been candid as to what they are. One of her Harvard colleagues said her heart beats on the left. OK, I do not expect President Obama to appoint somebody whose heart beats on the right as mine does. He is going to appoint someone with his more liberal political views, and that is fine.

The question is: Can she then approach cases the same way the judges did in the Supreme Court case I just described where even though they did not like the result, they felt they had

to rule that way in order to remain consistent with their view of the first amendment.

There have been a couple of things in which her personal view clearly affected her judgment as, in this case, the dean of the Harvard Law School. The one case everybody is familiar with is she disagreed with the congressional policy on don't ask, don't tell. But instead of having a policy that said President Clinton, who signed the bill, was unwelcome on the Harvard campus or the Senators and Representatives who had passed the bill--by the way, it was a Democratic House and Senate-- that they were not welcome on the campus, she wrote at the time extensively that this was a discriminatory policy of the military and that, therefore, the military would not be allowed on campus to recruit, as were all other businesses.

Eventually, she had to change her position because the Solomon amendment said the university would not get any Federal funding, and they got about 15 percent of their funding from the Federal Government. They finally, after about a year, went back to the policy of allowing military recruiters on campus.

In my view, she not only mischaracterized the situation by calling it the military's discriminatory policy, when the military is obviously simply following the orders of their Commander in Chief, President Clinton, and the law passed by the Congress, but also she discriminated by not criticizing or denying entry onto the campus the people who had passed and signed the law into effect but instead discriminated against the military who at the time was fighting a war. That represents a misjudgment on her part based on, obviously, her personal convictions. It interfered with the job she was supposed to be doing at the time.

Would she apply that same kind of rationale when she sits on the U.S. Supreme Court? She obviously has strong personal views about this issue. How will she apply those personal views in cases of, let's say, ``the don't ask, don't tell policy that may come before her or some other policy that she believed discriminated against gays or homosexuals. She will have to somehow find a way to demonstrate to us that she will not allow those personal convictions to color her judgment on the Court. It might be kind of hard, given it did color her judgment in this previous situation.

More recently, she wrote to Members of the Senate deeply critical of a bill Senator Lindsey Graham and I had introduced and was eventually passed by the Senate and signed into law that provided a mechanism for dealing with the terrorists at Guantanamo Bay. We defined ``military combatants'' in this legislation. We provided for a determination of their status, for a review of that determination of status, by a direct appeal to the District of Columbia Circuit Court of Appeals.

Nothing like that had ever been done, where after determination of status as an enemy combatant, those people would be able to go directly to a Federal court--and not just any Federal court, the DC Circuit Court of Appeals, which is one step below the Supreme Court--to have that determination reviewed. That was not sufficient for her. She said: No, this was discriminatory; that they had to have a right to appeal to other Federal courts any sentencing or determination of guilt, if they stood trial in military commissions. That has never been the law. The Supreme Court has never said that is the law. Yet she compared what we did in that bill to the discriminatory and unlawful actions of a dictator.

I do not like to be called or compared to a dictator, and I can assure my colleagues Lindsey Graham, my colleague who was primarily responsible for drafting that legislation, very much had in mind the best way to deal with this situation from a legal standpoint, as well as to protect American citizens. He was not trying to enact policies similar to dictators'.

In addition to the language being quite injudicious, it seems to me it raises questions about whether if these kinds of questions were posed to her in the future she could lay aside what are obviously her strong personal convictions about this issue.

There are bound to be cases involving enemy combatants and others in this war on terror that will continue to come to the U.S. Supreme Court. Will she recuse herself from these cases because she has expressed strong personal views? That would seem to me to be appropriate, unless she could somehow demonstrate she can put all that behind her and decide these cases strictly on the law, irrespective of her personal prejudices.

I hope I am not perceived by these comments to have made a judgment about Elena Kagan. When I voted for her confirmation as Solicitor General, I said I thought she was well educated, very intelligent, very personable, and I wanted her to have a chance to do the job as Solicitor General. I had hoped she would remain in the position for a little bit longer than a year before being nominated for a position as prestigious as the U.S. Supreme Court. Nonetheless, I am firmly committed to examining her record as thoroughly as possible and then making a judgment based on that entire record.

Despite the fact I have raised two questions, I do not want that to be suggestive of any conclusion I have reached because I have not reached a conclusion. In fact, I am a little bit critical of my colleagues who have immediately reached a conclusion without even examining the record. There is something like 160,000 pages of documents in the Clinton Library relative to her record as a policy adviser in the Clinton White House. Obviously, some of her views will be reflected in those documents and I think it is important to see what they say.

It may well be that she represents a very tempered thought that is pragmatic and not overly ideological and which appears to suggest that in the position she held, she could lay aside her personal views and give good advice. It is quite possible that is what those records will reflect. It may also reflect something different.

Until I have the benefit of reviewing those documents and then talking with her personally and hearing her testify, it seems to me a bit premature to be making a judgment about whether she should be confirmed.

Again, I wanted the opportunity to reassure all of my colleagues that Sandra Day O'Connor, the first woman appointed to the Supreme Court, did, indeed, have a good judicial experience on the bench prior to her nomination. That is not an absolute requirement, in my view, because her colleague from Arizona on the Court for a while, Chief Justice Rehnquist, had not had judicial experience. Every other nominee in the last 40 years has. He had not. Nonetheless, he had extensive experience of over 20 years in law practice, both in the private law practice as well as the Department of Justice. So he, too, had a very long record from which one could judge whether his personal views could be set aside in judging cases.

That, at the end of the day, is the test that should apply to all nominees, should apply to Elena Kagan. I am sure my colleagues and I will have ample time to review the report, reflect on it, discuss it with her, and then come to our judgments as to whether she satisfies that judgment.

I suggest the absence of a quorum.

The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

Further, if present and voting, the Senator from Alaska (Ms. Murkowski) would have voted ``yea.''

The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

Further, if present and voting, the Senator from Alaska (Ms. Murkowski) would have voted ``yea.''

I ask for the yeas and nays.

Mr. President, I wish to briefly echo the sentiments of both Senators Sessions and Corker. They have both given a great deal of thought to the problems here.

These are not political issues that capture the imagination of either the news media or the American people, but they are very important, and they are both working to solve a difficult problem in a very reasonable way that recognizes the importance of the rule of law.

One of the great distinguishing characteristics of the United States versus some other countries, many other countries in the world, is that we follow a rule of law. It makes commercial dealings, and therefore expansion of our economy, so much easier when everyone knows what the rules are and they can plan based upon those rules.

One of the bodies of law that is most contributory to that is our Bankruptcy Code. For over a couple centuries, we have had a process and a set of rules that governs what happens when businesses can't pay their debts and have to go out of business or be reorganized. Those rules, in effect, set the rules of the road--the things people can count on both at the time a business gets into trouble but also far before that, when people are making decisions on whether to lend to or invest in a business.

They know, for example, if they are going to be a secured creditor of a business that, in the event something goes wrong, they will be quite high on the list of businesses that get paid. If they are an unsecured creditor, they are going to be lower on that list. They will probably get more for their lending because they are unsecured, but they will be lower on the list. So people can calibrate the kind of equity investment or lending they want to engage in based upon what they know the rules will be in the event something goes wrong.

If you do away with that and just say that in the event something goes wrong, a government bureaucracy--and I don't use that word pejoratively--a group of government employees in an agency are going to decide that something needs to be done and decide what that is and it is basically unconstrained by any set of rules and practices such as the Bankruptcy Code has provided, that is scary to folks. It is going to mean we will have less lending and capital formation for businesses because they are going to be uncertain about the rules of the road. Secondly, it is going to create the potential for unfairness and, frankly, poor decisions if companies do have to get unwound.

So what we are giving up by not adopting an amendment such as the Sessions amendment is certainty, predictability, and decades of understanding of what the law is in the event something such as this occurs.

What Senator Corker has said is also true; that these financial institutions may present some very unique circumstances, and some of them may be so large and so potentially affecting of other institutions that it may be that the relatively slow pace of bankruptcy--and I don't mean to suggest it is very slow--may mean that we need something more quickly to intervene and ensure that whatever happens with this particular business, it doesn't adversely affect others or that there may be other reasons to have a more immediate infusion of some intervention. I will put it that way.

It was for that reason that all of us supported the Dodd-Shelby compromise. Our view was, as Senator Corker said, it is better than the underlying bill, although I don't think it satisfied at least the three of us that it went far enough in creating these rules of predictability. The Sessions amendment, as has been described, does that.

I think Senator Corker has it exactly right; we are under no illusion this will replace the Dodd-Shelby compromise. In that respect, we have to just hope, in the further process of legislating on this bill, that compromise can be informed by additional debate and discussion and maybe improved. By supporting the bankruptcy-related amendment of Senator Sessions, what we are trying to do is to send the message that we compliment Senators Dodd and Shelby for what they did, but a little more dose of the predictability and certainty and judicial process of bankruptcy would be very welcomed in this process.

Therefore, to the extent that we can have a good vote on this amendment, perhaps they and others will look to other ways in which they can continue to modify this language for the very best result we can achieve. This is a very important issue. It deserves our very best attention.

I wished to compliment again both Senator Sessions and Senator Corker, two of the very thoughtful Members of this body, for the way they have approached this issue, without any political consideration but simply to try to make this process better, fairer, more predictable and, therefore, better for the businesses involved and for the economy of the United States.

Mr. President, as far as I know, there is no one else on our side wishing to speak; therefore, we can yield back time of the minority.

The following Senator is necessarily absent: the Senator from Texas (Mrs. Hutchison).

The following Senator is necessarily absent: the Senator from Texas (Mrs. Hutchison).

The following Senators are necessarily absent: the Senator from Oklahoma (Mr. Inhofe) and the Senator from Alaska (Ms. Murkowski).

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

Mr. President, as the debate over Wall Street enters a pivotal stage, we should ask ourselves, what is financial regulatory reform about? We all agree that one of the main objectives of the legislation is to ensure taxpayers will no longer be forced to bail out or subsidize financial institutions that engage in risky behavior. That means ending so-called too big to fail. Unfortunately, the legislation we are now considering does not mention the two institutions that have come to epitomize too big to fail. I am referring to the two government-sponsored enterprises, the so-called GSEs, Fannie Mae and Freddie Mac, which are currently in Federal conservatorship. The egregious behavior of these two institutions has rippled throughout the entire commercial banking sector and our economy as a whole.

Let's recall how central the two GSEs were to the housing bubble. Fannie and Freddie represent the dangers of what former American Enterprise Institute president Chris DeMuth has described as ``fusion enterprise,'' or the ``intermingling of politics and power with finance and commerce.'' This is a perverse business model that allows companies to reap enormous private profits while enjoying either implicit or explicit public backing. It is the model that enabled Fannie and Freddie to inflate the subprime mortgage bubble.

For years some of my colleagues and I have urged this Chamber to impose stronger regulations on Fannie and Freddie. As chairman of the Senate Republican Policy Committee, I authored several papers on the threats posed by the size of their mortgage-backed securities portfolios. I was particularly concerned that the government's implicit guarantee of these institutions permitted them to operate without adequate capital, to assume more risk than competing financial institutions, and to borrow at a below-market rate of interest. Of course, that is just what happened. Smaller companies got crushed while Fannie and Freddie engaged in increasingly risky lending with the backing of the Federal Government. Wall Street understood how it worked. So when Fannie and Freddie wanted these toxic loans, the mortgage markets would produce them. Between 2004 and 2007, Fannie and Freddie became the largest buyers of subprime and Alt-A mortgages. And although these two institutions had their own dedicated regulator, the Office of Federal Housing Enterprise Oversight still allowed the situation to spiral out of control. Fannie and Freddie made mortgages available to too many people who could not afford them. That easy credit fueled rapidly rising home prices. As prices rose, so did also the demand for even larger mortgages, so Fannie and Freddie looked for ways to make even more mortgage credit available to borrowers with a questionable ability to repay.

By 2008, the two GSEs held nearly $5 trillion in mortgages and mortgage-backed securities. They were overleveraged and too big to fail. It was a textbook example of moral hazard on a massive scale. ``Worst of all,'' M&T Bank CEO Robert Wilmers recently wrote in the Wall Street Journal, ``are the tracts of foreclosed homes left behind by households lured into inappropriate mortgages by the lax credit standards made possible by Fannie Mae and Freddie Mac.''

Congress would have done well to support a bill adopted by the Banking Committee in 2005 under then-Chairman Shelby. The bill would have established a new regulator for Fannie and Freddie and given that regulator authority to make sure the GSEs maintained adequate amounts of capital, had adequately liquidity and reserves, properly managed their interest rate risk, and controlled their asset investment portfolio growth. But the legislation was filibustered. Its opponents included then-Senator Obama.

As American Enterprise Institute scholar Peter Wallison, who has written extensively on this topic, concluded:

If legislation along the lines of the Senate committee's

bill had been enacted in that year, many, if not all, the

losses that Fannie and Freddie have suffered, and will suffer

in the future, might have been avoided.

But, of course, we didn't avoid that fate. And today, Fannie and Freddie continue to impose on the taxpayers while accruing massive debt. In fact, their total debt outstanding, the debt held on their balance sheets or as mortgage security guarantees, is an astounding $8.1 trillion. This is debt that is not reflected on the national balance sheet. Last Wednesday, Freddie Mac announced it will need an additional capital injection of $10.6 billion. That is from the taxpayers. That is after it lost $6.7 billion during the first quarter of this year. In 10 of the last 11 quarters, Freddie Mac has lost a total of $82 billion which is twice the amount it earned over the previous 30 years.

This morning it was reported that Fannie too has asked taxpayers for more money, $8.4 billion, to cover its soaring losses. The combined government loss for both companies now stands at $145 billion, according to the Associated Press. Where will this end? Weren't we supposed to end taxpayer liability for entities too big to fail?

The McCain amendment, which we will be voting on hopefully tomorrow, will provide us with another opportunity to target the problems caused by Fannie and Freddie. The McCain amendment would end the conservatorship within 2 years and place both companies into receivership if they are not viable. It would also reduce the companies' mortgage holdings over the next 3 years, reimpose restrictions on the size of the mortgages they can buy, and force them to pay State and local taxes just as private companies do.

As the Wall Street Journal editorialized Thursday:

If the housing giants are no longer subsidized, they will

become small enough to fail. That means they will stop

lending money to people who can't pay them back, and in turn,

they will stop endangering taxpayers. This is a genuine anti-

bailout vote.

They were referring to the McCain amendment.

Let's be clear. Every day Fannie and Freddie remain in their current form is a day U.S. taxpayers are subsidizing their activities. Financial regulatory reform must include a restructuring of Fannie Mae and Freddie Mac. That is why I urge my colleagues to support the McCain amendment tomorrow and end too big to fail.

I ask unanimous consent to have printed in the Record the Wall Street Journal editorial titled ``What About Fan and Fred Reform?'' by Robert G. Wilmers, to which I referred.

I suggest the absence of a quorum.

The following Senator is necessarily absent: the Senator from Utah (Mr. Bennett).

The following Senator is necessarily absent: the Senator from Utah (Mr. Bennett).