Floor Statements

The following Senators are necessarily absent: the Senator from Utah (Mr. Bennett), the Senator from Kentucky (Mr. Bunning), the Senator from South Carolina (Mr. DeMint), the Senator from Indiana (Mr. Lugar), and the Senator from Louisiana (Mr. Vitter).

Further, if present and voting, the Senator from Kentucky (Mr. Bunning) would have voted ``yea.''

The following Senators are necessarily absent: the Senator from Utah (Mr. Bennett), the Sentor from Kentucky (Mr. Bunning), the Senator from South Carolina (Mr. DeMint), the Senator from Indiana (Mr. Lugar), and the Senator from Louisiana (Mr. Vitter).

Further, if present and voting, the Senator from Kentucky (Mr. Bunning) would have voted ``yea.''

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

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

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

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

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, let me address the amendment which we are going to be taking up first, I gather, on the so-called financial regulatory reform bill, the Boxer amendment.

The Boxer amendment, as I understand it, is a declarative statement that taxpayers will not be responsible for any Wall Street bailouts. My understanding is that it is not a provision that would enforce itself or would in any way be enforceable in the legislation, but it certainly expresses a sentiment I assume every Senator would share. The problem, however, is not just the fact that we are concerned that taxpayers will be responsible for bailouts but the fact that bailouts will exist in any event and how that might affect people who have invested in or lent to an institution, what authority it would give the U.S. Government, and whether such a provision would apply as well to perhaps the biggest miscreants here: Fannie and Freddie, the two government-sponsored enterprises that hold the vast majority of the mortgages that are unsound or on less than strong financial footing--I will put it that way. So the question is not so much whether taxpayers' dollars will be used--though this amendment, while expressing a good sentiment, doesn't operatively prevent that--but just as much whether Wall Street will still be bailed out but in a different way. Will the appropriate policies and institutions that should be in place to prevent this be amended into the legislation?

If all we want to do is ensure failing institutions are liquidated, then of course we can have a bankruptcy regime, and many people believe that is the appropriate regime because it is a tradition of law. Everyone knows exactly how it works, where you stand, and it ordinarily has been successful in liquidating firms that cannot pay their obligations.

After the Lehman bankruptcy and the contagion effects which surrounded that, some believe bankruptcy wasn't really well suited to these kinds of large financial institutions, and it may well be that traditional bankruptcy would have to be modified in some respects in order to easily apply to the liquidation of a financial institution that large.

One of the things, though, we need to do in figuring out exactly what the right process should be is to make sure creditors aren't receiving special treatment--for example, the way they did when the auto companies were bailed out and when other firms were bailed out. Otherwise, we will actually be increasing moral hazard rather than decreasing it, which is, of course, part of the exercise here.

A government-compelled fund that takes money from successful firms and transfers it to a failed firm, for example, regardless of how you seek to justify it--as an assessment or a recruitment or a tax or whatever you might call it--is still a bailout. Ultimately, the question is not only who will pay for it but also, how does it scramble the obligations and the prioritization of obligations compared to what bankruptcy would do?

The people who bear the cost of propping up a failed firm, for example, have nothing to do with the fact that firm failed or with the poor decisions of that

firm. So if, instead of the American people, you are going to make other entities in its area--for example, a bank begins to fail, so you are going to make the other banks prop that bank back up. How is that fair to the shareholders or investors in the bank that has to do the propping up, or the groups of banks? They didn't have anything to do with the poor decisions made by the management of the failed firm, whereas you can argue that the lenders to the failed firm, the people who invested in the failed firm, and certainly the managers of the failed firm all had something to do with the direction the failed firm took. Because of that fact, the bankruptcy laws have set out priorities as to who ends up bearing the risk of the failure of that firm. The lenders and the investors in failing companies lose control of the money they invested, and whatever resources remain are channeled by the bankruptcy court into productive endeavors or to pay the people who have lent the money to the firm. That is exactly the opposite of what a government-sponsored fund does in transferring resources from a productive to unproductive purpose. Here, if it is not the taxpayers who fund it, then it is fellow banks, let's say, or fellow financial institutions--again, people who had nothing to do with the failure of the entity that is being acted upon.

Fortunately, there is a process that can address the problem of failing firms, that does move resources into more productive areas and at the same time holds those directly responsible for the mistakes accountable. There are different names for this and it can take different forms. One of them is called speed bankruptcy--in other words, a form of bankruptcy that recognizes that in certain institutions you are going to need to quickly take hold of them and, in order to prevent contagion in the market, shore up their financial situation so they cannot infect others and therefore cause a larger failure than just relates to that particular company.

We should describe bankruptcy, first of all, to appreciate what this does. A firm becomes insolvent when its liabilities--which could be payments to bondholders, it could be payments to suppliers, it could be repaying loans--are worth more than the assets the company has, assets such as land, capital, accounts, the value of intangibles, and even things like reputation.

Over the last couple of years, we have seen the collapse or near collapse of several well-known firms--for example, the GM and Chrysler auto companies, as I mentioned, Bear Stearns, AIG, the big insurance companies. We have also seen Fannie Mae and Freddie Mac, which are projected to be dependent on government assistance for the foreseeable future--and by government assistance, of course, ultimately we mean the taxpayers of this country. In the examples I cited above, the government response was in effect to prop up the failed firm with taxpayer funds.

This so-called speed bankruptcy and iterations of the idea would instead convert a portion of the existing longer term debt of the company into equity. There are a lot of benefits, as you can see, to such a proposal. For example, with a large, complex firm that is in financial trouble, a lengthy process could create the kind of uncertainty that would otherwise undermine the ability of the company to continue once it exits the resolution process and, as I said, could also infect others in these areas. A speed bankruptcy, on the other hand, would permit the firm to remain in operation, to keep running.

There is a paper that has been written on this that I think is very interesting. Garret Jones at the George Mason University Mercatus Center writes that this kind of proposal actually leaves bondholders with something of value so they are not entirely wiped out and retain the potential to make up for some of their losses if the equity shares they receive in lieu of their bonds once again gain value. Here is what he writes in this recent paper:

Friday's bondholders become Monday's new shareholders, and

the banking conglomerate can continue borrowing and lending

much as before, with little possibility of a short-run

crisis.

It is a little bit like debt or possession financing in a bankruptcy, but it matters where you get the financing, and in this case creditors of one kind become creditors of a different kind, trading, in this case, bond for equity in the firm.

Second, unlike government-sponsored bailouts, investors directly tied to the troubled firm bear the financial costs of the restructuring of the firm.

Third, since many of the bonds are publicly traded and are therefore liquid, the process would be entirely transparent, and the reason the process could occur so quickly is because of that conversion.

Fourth, a debt-to-equity conversion leaves deposits untouched, avoiding a potential run on the bank in the case of banks and financial institutions.

What steps and operations would be necessary to make this work?

First, an insolvent firm would be able to convert an amount of its long-term debt specified in advance into stock in order to recapitalize and strengthen the institution. Under such a proposal, regulators would first need to declare that the institution is the risk.

Second, the firm would need to breach a certain specified capital level to actually trigger the conversion. Once this process occurred, the restructured firm would emerge healthier, with less debt, with more equity, without any taxpayer money being used and without any money being used from other banks or other financial institutions.

For example, Pershing Square Capital Management released a proposal to convert $75 billion of Fannie Mae's $750 billion senior unsecured debt into equity. For every dollar of senior unsecured debt, the bondholder would receive 90 cents in new senior unsecured debt and 10 cents in value of new, common equity. As a result, the new Fannie could take advantage of its new capital. It has a dollar to expand its underwriting. It can utilize increased cash flow to absorb expected losses and, in the future, once conditions improve, to reduce its balance sheet by gradually selling some of the mortgage assets on its books.

John B. Taylor writes today in the Wall Street Journal how to avoid a bailout bill:

You do not prevent bailouts by giving the government more

power to intervene in a discretionary manner. You prevent

bailouts by . . . making it possible for failing firms to go

through bankruptcy without causing disruption to the

financial system and the economy.

Here is the summary of what I am saying. Most of us here do not want to see taxpayer bailouts of these firms that have made poor management decisions, have invested poorly, and have made mistakes for which taxpayers should not be responsible.

That is the genesis of the Boxer amendment. But for the Boxer amendment to be effective, two things will have to be done, and perhaps we will have suggestions on how to change it. It would have to be operational and enforceable. As I said, the amendment is oratory language--taxpayer funds should not be used for bailouts. We know that a sense-of-the-Senate resolution is nothing more than that, a sense of the Senate. It needs to have operational and enforcement language to have meaning. It is my understanding that this language doesn't.

Second, the real question is whether instead of a bailout, where government--I don't want to use the word bureaucrats--officials representing the U.S. Government in one, two, or three different entities could, on their own, with little direction in congressional legislation, determine that a firm now needs to be taken over or bailed out, and without very much legislative criteria to direct them as to how to do it, or the circumstances under which it should be done, could begin to unwind that firm, using taxpayer money that is later recouped or perhaps funding from a tax or an assessment on other banks, for example, to infuse capital to keep it from going out of business. This is a way in which bankruptcy would ordinarily work, except that bankruptcy works according to a set of rules and traditions that have been developed over a couple hundred years that everybody is familiar with, and which people took into account before they made investments in or lent money to a company in the first place. If they became a bondholder, they knew where the bondholders would be in the order of priority in the case of a bankruptcy. If it is secured, they would have one level of security, and if it is unsecured, they are going to be at the bottom of

the totem pole when it comes to distributing the assets of the bankruptcy. Lending is predicated upon their understanding of these well-known rules and principles.

Moreover, they understand that a judge will be in charge, and he will put people under oath and cause them to testify so that you know exactly what the assets are, and you can understand what it would take to keep the company running or, in the event it does have to be liquidated, how the funds would be disbursed. A trustee is appointed, who has a fiduciary responsibility, under the court rules, to manage how the company comes out of bankruptcy, or to ensure that the rules of bankruptcy and the judgment are carried out. That is the way a bankruptcy works. It is a proper way to unwind or liquidate most businesses in this country.

I think those who say these financial institutions are different, we need a different set of rules, first, have an obligation to tell us why. What is different about these entities that the bankruptcy laws simply don't work? What would cause them to have a different set of treatments? If there are some things--and I can think of a couple things that distinguish them--then how can we modify the bankruptcy rules in effect to take into account those differences? One deficit, one could posit, is the fact that a large financial firm could easily have an effect on others invested in or who they invest in and, therefore, in effect cause a domino effect in markets. That could happen very quickly. Therefore, when you see signs of a problem, you need to deal with that very quickly. That is where this idea of bankruptcy comes from. It doesn't take a government bureaucrat or a government entity set up for this purpose to figure out that is what needs to be done and how to do it. It can be done within the context of bankruptcy today or with relatively modest modifications in the Bankruptcy Code, we could make those changes.

The fear a lot of us have is that the people who are not elected or constrained by any particular power, except the limitations Congress imposes upon them--and in this bill those limitations are very general--those people could make decisions and put somebody into this process to decide who gets paid how much, without any reference necessarily, for example, to the Bankruptcy Code, who gets privileged and who isn't, and with whose money.

If you look at the example of the two auto companies, you find that labor unions were substantially privileged to the exclusion of other investors. A lot of people thought this was wrong. It was contrary to the way it would have evolved had they been in bankruptcy court. So what most folks would like to see is a process you can count on, that you have rules of law established over time in the bankruptcy law that enable you to rely upon them, and not some unspecified, unclear process that is run by some agency of the U.S. Government. While it is certainly a step forward to say that taxpayers should not be on the hook for this, it is not enough to say that, A, because that is not operational or enforced, but, B, because there are other ways to do it that represent a closer adherence to the rule of law that would be better at promoting investment or lending in the first instance, because of the clarity and predictability of the way the situation would be treated in the event of a bankruptcy; and finally, that people who are not responsible for the bad management decisions would not have any liability when that company is liquidated or comes out of bankruptcy operating again. Rather, the people who had been involved in the company in the first instance would bear that obligation.

This is just one idea--one of many--as an alternative to the specific provisions in the legislation. It is my hope that as we continue debate about this portion of the bill, we can come together on a set of principles that would adhere more closely to the rule of law established in the Bankruptcy Code to the concept that those responsible should be the ones who end up bearing the burden and that, in any event, as it appears most of us would agree, taxpayers should not be responsible for the decisions made by the management of a failing firm.

I wonder whether my colleagues want to speak. If not, I will suggest the absence of a quorum. The Senator from Illinois wishes to speak.

Madam President, reserving the right to object, I have no problem with either nomination. I understand they are in the process of being cleared by other Members. I believe that, while I have no specific problem, we want to allow all Senators to sign off before consent is granted.

Last week, I objected to some of the nominations to allow the two leaders to work their clearance process on the Executive Calendar. I understand that the two leaders worked to confirm four U.S. attorneys later today.

Under the circumstances, as to the specific request of my colleague, I object.

Madam President, I objected.

Madam President, reserving the right to object, let me explain this process. When a nomination is sought to be cleared by both sides, there is what is called a hotline. All offices receive a quick notice that a particular bill or nominee is being hotlined. If you have a question or a concern, you register that. It is registered as an objection until it can be cleared up. In many cases, it is cleared up very quickly--sometimes overnight. Sometimes the two leaders need to work out a process for it to be cleared. It is, in one sense, a hold.

As I said, I have no objection to these two people, so I am not holding them. I am objecting on behalf of the Republican leadership in order to enable the two leaders to clear both of these nominees; that is, to make sure there is no objection on either side, so they can both go forward. That is the basis for my objection.

If my colleague will yield first for a minute, I wish to make it clear that it is precisely on the basis that I stated that I am objecting this evening. I believe the two leaders will be able to clear the two specific nominees my colleague asked unanimous consent for tonight. It is truly a matter of the clearance process through the hotline. As a result, what I said is true. It is nothing more than that, to my knowledge.

I take all the other points my colleague made. As to my objection this evening, I prefer to have my colleague acknowledge that what I said is what I believe; namely, that this is a clearance process for the two leaders through the hotline and that it is my expectation that these nominees will be cleared through that process. It is simply not completed.

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

Madam President, let me begin, first of all, by complimenting my colleague from Kansas, who has been indefatigable in the argument and the cause that he was espousing just now. He has talked to all of us about this problem, and he has made it very clear this shouldn't be an intention within this legislation. We shouldn't be trying to expand the reach of a bill--that was supposed to deal with Wall Street--all the way to our local car dealers on Main Street. I appreciate the fact that sometimes legislation sweeps with too broad a brush, but this is something we can fix and we need to fix it.

In fact, it is not just the auto dealers. The National Federation of Independent Businesses, which bills itself as the voice of small business, and frequently does represent small business causes, has written a letter to us, on April 26, describing this unduly large reach of the legislation before us.

Madam President, I ask unanimous consent to have printed in the Record at the conclusion of my remarks the letter I have just referred to.

Madam President, another word about what is said in this letter. They point out the fact that the consumer protection part of the legislation goes far beyond protecting consumers from Wall Street. It essentially goes to anybody who lends money on an installment basis where you have more than four installment payments. Let me quote from the letter.

NFIB is concerned about the overly broad reach of the new

Consumer Financial Protection Bureau. Providing consumers

with clear and accurate financial information is an important

goal, but because of the reach of the Bureau's authority many

small businesses will find themselves subject to its

regulations. In addition to the many new and duplicative

regulatory burdens placed on community banks, the Bureau is

charged with regulating any retailer or merchant that

finances a purchase subject to a financing charge or written

payment plan with more than four payments. Many small

business retailers and merchants--such as medical

professionals, hardware, electronics, and jewelry stores--

struggling through the current economic climate would be

subject to these new regulations.

These small businesses had nothing to do with the Wall

Street meltdown and should not be faced with onerous new and

duplicative regulations because of a problem that they did

not cause.

The first concern I have with this legislation is this overbreadth in the consumer protections. Wall Street can take care of itself. It's fine to provide protections against Wall Street, but surely we can reach an agreement that we don't intend this legislation to reach into Main Street, to the extent it does. I would urge my colleagues to listen to the concerns expressed by the NFIB and let's try to deal with those concerns in a way that would enable us to be more supportive of the legislation.

The second point I would like to make has to do with the so-called too big to fail or taxpayer bailouts. There are different ways of talking about this. I find it interesting that some of my colleagues have apparently a great reverence for a pollster and wordsmith by the name of Frank Luntz. Frank Luntz is a person whom I know, and he is very good with words. He is a good pollster and so on. At one time, he apparently wrote a memo that suggested that one way to attack a bill such as the bill that is before us--I think my colleague, the chairman of the committee, has noted this memo was written by Luntz before there even was a bill--was to use bailout language. I haven't seen the memo, but I understand that is what it said.

No. 2, Republicans have used this bailout language; therefore, No. 3, we are blindly following Luntz. Well, if I suggested that to my professor in philosophy 101, I would get flunked out of the course for the basic failure in logic. This is a logic fallacy--something followed something else; therefore, it was because of it. The law that is the famous saying--post hoc ergo propter hoc--obviously, a fallacy.

So I defend those of my colleagues who have used language that may be somewhat similar to Luntz on the basis that just because they used the language didn't mean that Luntz caused them to use it. It may be Luntz figured out the same thing the rest of us figured out--this bill does not end taxpayer bailouts. That is the problem. Taxpayers are still on the hook.

I can understand the sensitivity of those who helped to write the bill who are subject to the criticism in this language. But the solution to it is obvious: Get the taxpayers out of this so they are no longer on the hook for any bailouts and then the argument will not last anymore, whether Luntz likes it or not. That could be done through a

process of negotiation. The bill was supposed to stop additional taxpayer liability. Let's make sure it does.

In this regard, I have to object a little to some of the pejorative language used by some Democratic Senators.

We have rhetoric about Republicans' motives. I am not going to suggest which Senators are talking about it, but one of them spoke specifically with respect to the Republican leader by name.

When you are questioning the motives of someone, suggesting the only reason they did it is because they read somebody's memo or because some lobbyist from Wall Street has been visiting them or suggesting it was because of campaign contributions, that gets very close to a violation of Senate rules. Senators can take responsible positions on bills irrespective of what a lobbyist might have said or somebody might have written in a memorandum.

I would like to have an honest debate about the bill rather than suggesting the motivations of Senators with respect to the positions they have taken.

One of my colleagues--in fact, it was the Senator from Illinois-- asked the question, with regard to the vote we are about to take here, What are Republicans afraid of? In effect, are we afraid of going to the bill and then having votes on amendments? Let me answer that question very specifically.

One thing at least I am concerned about is that we will not get to have votes on amendments. We were promised, in the health care debate, this 2,400- or 2,700-page bill, that we would get lots of amendments to try to deal with the concerns we had. I believe it was seven--after seven amendments, once the leader got his 60 votes, there were no more votes. There was no more amendment process. There was no more debate. At that point, cloture was filed, the vote was taken, and he had his 60 votes. End of discussion.

There is nothing to suggest that if we go to this bill, we are going to have a fair amendment process. If that were made very clear by the majority leader, by the distinguished chairman of the committee, and Republicans had some sense that we would fare better than we did during the health care debate, then that would be one thing. But with the experience of the health care debate behind us, I think you can understand why we would be a little bit wary of ``just trust us, go to the bill, and we will let you have all the amendments you want to try to fix the bill.'' That is the first point.

Let me get back just a little bit to this issue about the bailout because I made an assertion and I need to back it up.

I really don't think any of us want to continue to have taxpayers on the hook. But this is complicated, and it may well be that the continuing authority, for example, of the FDIC that is specifically written into the legislation, while not intended to result in taxpayers being on the hook, it nevertheless does.

Let me refer to a couple of articles. One is by a visiting professor, a Georgetown University business school professor, Phillip Swagel. The head of the article is ``Yes, It's a Bailout Bill.'' He says:

. . . [T]he discretion given to the government in the

Senate proposal opens the door to undesirable actions such as

allowing the administration to write checks to favored

parties. This concern is not theoretical: such mischief took

place in the bankruptcies of Chrysler and General Motors, as

the two auto companies were used as conduits to transfer

billions of dollars from TARP to the president's political

supporters.

He is talking there about labor unions.

A better approach would be a resolution regime centered on

bankruptcy.

There is a lot of debate about exactly how to do this liquidation process, unwinding process, quasi-bankruptcy process, and so on. There are a lot of good arguments. It is difficult to do, and I appreciate that the chairman of the Banking Committee has had to deal with a lot of different ideas from different Senators about how to do it, as well as a lot of columnists, and so on.

But it is a fact that under the existing legislation, there is still liability for taxpayers here that concerns some of us. We would like to see a genuine discussion about taking that out. If it is a concern of all of us and we all agree that should not be, let's have a little good faith here and get it out before we come to the floor and have to try an amendment where there are 41 Republicans, 59 people who organize with Democrats, and we are not at all assured of being able to get it out of the bill.

Here is another article. It is in the National Review Online, April 26. The article is entitled ``The Case Against the Dodd Bill.'' They make several points in here, but one of them is this resolution authority.

But the resolution authority designed by the Dodd bill

might actually create more moral hazard than it would

eliminate, because it would give the FDIC too much

flexibility in how it resolves a failed firm.

It goes on to say:

As structured, this authority would allow the Government to

bail out nonbank creditors, and worse, to play favorites

among them, just as we saw when the Obama administration

gift-wrapped large stakes in the automakers for its union

allies at the expense of secured creditors.

My point here is simply that there are a lot of people who have looked at this and have come to the conclusion, as I have, that the bill is not tightly enough written; that, as written, it has too much in it that would allow various Federal entities, including the FDIC, pretty unlimited authority to use taxpayer money to resolve or liquidate or deal with companies that are deemed necessary to deal with. I won't say ``too big to fail'' because allegedly we are eliminating that.

Surely we can get together and try to resolve this issue in a way that leaves no doubt that the ultimate conclusion is there is no more taxpayer liability. I think we would all like to see that. It is a legitimate debate to have, and I don't think we should criticize those of us who are raising these questions as somehow doing so because some lobbyist told us to. I don't care about the lobbyist or Wall Street here. What I care about is my constituent taxpayers being on the hook for a bailout of one of these entities or the creditors of these entities or the shareholders of these entities.

This is the final point I wish to make. This is like the Sherlock Holmes story of the dog that didn't bark. There is something missing from this legislation. If you look through the entire bill--and probably the biggest reason for the failure of our financial system was the fact that Fannie Mae and Freddie Mac were allowed to go whole hog, take on a bunch of bad loans, and end up with an implicit guarantee that ultimately became an explicit guarantee by the taxpayers of America. You won't find any resolution of that problem in this bill.

Why is it that, when everybody knows this problem began with a lot of loans being made to people who could not afford them--those loans then being acquired by Fannie and Freddie and then sold off in fancy, esoteric instruments on the market here--why is it that there is nothing in here about the risk of Fannie and Freddie and the risk they still pose? It is way north, apparently, of $400 billion--I have heard in the trillions of dollars--and this would be a taxpayer liability. If that is the case, shouldn't we be focusing reform on the entities that actually created the problem, Fannie Mae and Freddie Mac? Why isn't that being done?

The former chairman of the Banking Committee has explained. The Senator from Alabama, when he was chairman of the committee, tried to get more regulatory authority over Fannie and Freddie. Members of the then-minority, now-majority party stopped him and said: No, we don't need any more regulatory authority. I especially remember a quote from the chairman of the House banking committee that was especially colorful in this regard, that he thought we could give them a little bit more latitude here, that he didn't think any more regulation was necessary.

So the question is, If we knew there was a big problem a-brewing here, we didn't do anything about it at the time and after the fact discovered, of course, that is exactly what the problem was, why wouldn't we want to make sure that it will never happen again and that we somehow resolve the problem?

One of the answers given is that it is an awfully big problem to try to tackle. This is an awfully big bill. If we can reach into Main Street, to your local car dealer or dentist because your kid's orthodontia takes more than 4 months to pay on installments, surely we can

deal with Fannie and Freddie, the biggest culprits of all in this deal. Why aren't Fannie and Freddie dealt with here? Let's not think we will do that next time. I think it is pretty clear that whatever we do here, we are probably going to be stuck with for a long time, and the failure to deal with this is a glaring omission in the legislation.

Nor do I think that if we grant the motion to proceed to the bill and one of us offers an amendment to cover Fannie and Freddie, that it would fare too well in this body. I will not specifically ask the chairman of the committee or anybody else whether they would support such an amendment, but the reality is that it is unlikely this body would actually regulate Fannie and Freddie. That is a reason why some of us oppose the legislation.

Unless there is some ability to negotiate something in advance of the bill actually coming to the floor, with very little likelihood that it would be done on the floor, it seems to me that this is another reason why those of us who have opposed cloture have every basis for coming here and saying that until we get some satisfaction, some suggestion that this problem is going to be dealt with, why would we want to proceed to legislation which obviously isn't even going to fix the biggest part of the problem that was created in the first place? That is a third reason why I think at least up to now Republicans have said we are not prepared to go to this legislation.

Exhibit 1

National Federation

of Independent Business,

Washington, DC, April 26, 2010.

Dear Senator: On behalf of the National Federation of

Independent Business (NFIB), the nation's leading small

business advocacy organization, we urge the Senate to vote

against cloture on the motion to proceed to S. 3217, the

Restoring American Financial Stability Act of 2010. The

current bill is too far reaching and imposes major new costs

on small businesses.

After the near collapse of many financial firms and the

impact this had on the overall economy, small business

recognizes the need to ensure that our laws address the

problems that can arise from such excess and to protect the

broader economy from the failures of one sector. But these

changes to financial services industry should be focused on

the specific problems caused by Wall Street and the lessons

learned from these events. New laws that target industries

and businesses on Main Street that did not create the problem

would not solve the problems and potentially creates new

ones.

NFIB is concerned about the overly broad reach of the new

Consumer Financial Protection Bureau. Providing consumers

with clear and accurate financial information is an important

goal, but because of the reach of the Bureau's authority many

small businesses will find themselves subject to its

regulations. In addition to the many new and duplicative

regulatory burdens placed on community banks, the Bureau is

charged with regulating any retailer or merchant that

finances a purchase subject to a financing charge or a

written payment plan with more than four payments. Many small

business retailers and merchants--such as medical

professionals, hardware, electronics, and jewelry stores--

struggling through the current economic climate would be

subject to these new regulations.

These small businesses had nothing to do with the Wall

Street meltdown and should not be faced with onerous new and

duplicative regulations because of a problem they did not

cause. Further, as the most recent NFIB Small Business

Economic Trends (SBET) survey shows, small businesses

continue to struggle with lost sales and such regulations

could make these problems worse--stifling any potential small

business recovery. Placing more restrictions on the ability

to attract and keep customers to small businesses will

inhibit a strong recovery.

NFIB also has concerns with a provision in the bill that

reduces the pool of angel investors that can provide start-up

capital or invest in a small business. The provision sets

higher wage and asset minimum requirements on angel

investors, thus eliminating many highly qualified angel

investors from providing needed financing. This provision

would hamper the entrepreneurial opportunities for angel

investment opportunities for many small and start-up

businesses, thus adding another road block to finding

alternative capital financing when bank lending and other

sources of financing remains hard to get in this economy.

Small business still has not recovered from the economic

downturn and has paid the price for the bad decisions and

subsequent bailout of many large financial institutions.

Addressing problems in the financial services sector makes

sense, but such regulations should not overreach to include

small business or leave small business owners paying for the

excess of companies deemed too big to fail.

Thank you for taking into consideration our concerns, and

we ask the Senate to oppose the motion to proceed to the

current bill.

Sincerely,

Susan Eckerly,

Senior Vice President,

Public Policy.

Mr. President, might I inquire how much is remaining on our side?

There is 10\1/2\ minutes on our side? I will yield to the chairman of the committee for a moment.

What I might do is yield the floor and reserve the remainder of the Republican time. In that way, if one of my colleagues comes and I have to leave, that time will be remaining.

If I may respond very briefly, I appreciate the Senator's comments. I am sure the chairman would acknowledge the basis for some Republican concerns about the ability to offer, not an unlimited number of amendments for the purpose of filibustering the bill, but, rather, enough to try to solve what are perceived to be the problems of the bill.

Part of the problem is a lack of trust. There are some on the Democratic side who have said they believe the intent of the Republican leadership, or Republicans, is to filibuster this bill so there would be no bill. It is hard to prove a negative, but I do not know how many times Leader McConnell and I or Ranking Member Shelby have said that is not our intention. Everybody acknowledges that there is work to be done in the regulatory regimes that govern the trade in these very esoteric instruments, the derivatives and others, and regulating financial institutions and dealing with the problem when some of them become financially troubled. Everybody acknowledges the need to do that.

I firmly believe at the end of the day there will be legislation passed that deals with that. I do not think there is anything the minority could do, even if it wanted to, to stop legislation from ultimately passing. So to those colleagues on the other side who believe it is the Republicans' intent to stop the legislation, to have no legislation, all I can say is, yet one more time, that is not true.

I do not know of a single Republican who believes that, of a single Republican who does not want to see legislation. Nor do I believe this is analogous to health care in that there was a strictly partisan approach taken there. The lines were drawn, and we do not have to debate how we got there. The reality was, at the end of the day, Republicans were trying to do everything we could to stop the legislation, and the majority did everything within its power to ultimately get it passed.

That is not the same situation I see with this bill because, first of all, I think Members are a little closer than was the case on health care. Secondly, there has been at least a negotiating process between the chairman and the ranking member and others that has suggested ways to at least approach some of these problems.

Republicans are suffering under no illusions that with a 59-to-41 Senate lineup we should get 100 percent of the way or even 60 or 50 percent of the way. Senator Shelby has made it clear he understands he needs to compromise because the majority has more votes than the minority does, but to try to get at least a proportional or representative sample of Republican ideas in here.

Moreover, as my colleagues' conversations just revealed, there is a lot of overlap in intent. I do not think we intend the bill to reach into Main Street to the degree that some of us are concerned it still does. I do not think there is the intention to see taxpayers still on the hook to the extent some of us think the bill still does. And to the extent the chairman of the committee says there have to be ways to ensure that does not happen, and we can do that, I accept what he says in good faith. I also accept in good faith his view that amendments, within reason, should not be limited.

Again, there is no intent on the Republican side to filibuster the bill to prevent a vote from ever occurring. I do not think we would have that ability even if we wanted to do that. So we have to get over this problem of trust. Another way to do that is to lead by beginning to make a difference in the way that the--not the legislation is discussed, but the Senators are discussed, the motivations for different Senators.

It would be easy to come to the floor and talk about motivations. It would also be wrong. I think the leaders in the debate, starting with the leadership and then the chairman and ranking of the committee and on down, perhaps have had some responsibility to take the lead in making sure in the discussions on the merits of the bill--when I raise a particular issue, as the chairman just did, to say: Well, let me go to the language and see if I think we do have it already covered, rather than: I know why you are saying that, Senator from Arizona. You have some ill motive. The Senator would not say that. So perhaps we can begin to reach a better sense of trust where we can begin to work through these things in a much more constructive way by taking the leadership and getting a more civil conversation.

When I say that, I point to nobody in particular as in violation but rather point to myself and the other leadership as the place to start with setting that tone. All of these things could begin to build the trust that might enable us to begin to engage each other.

How time flies when you are having fun.

And to conclude a process that will be constructive and helpful to the American people.

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

May I ask my colleague, who has been down on the border fairly recently. He went to the Tucson sector which is a sector that has about half of all of the illegal immigration in the entire United States coming across; is that correct?

The point here is, the Tucson sector is one of two sectors in Arizona. It is maybe 60 percent of our

southern border. The Yuma sector may be the other 40 percent. The Tucson sector ends at the New Mexico border. We are talking about a couple of hundred miles, give or take--not that much area when we consider the entire, more than 2,000-mile border all the way from the Gulf of Mexico to the San Diego area. About one-tenth of the entire border area accounts for over half of all the illegal immigration. My colleague was there within the last month or so. I was down in the Yuma sector. The reason I mention these two sectors is that it is literally the tale of two approaches to immigration reform. As Senator McCain said, there is absolutely no doubt that application of the right principles and resources to the border can secure the border.

Let me give my experience in the Yuma sector and then ask my colleague to talk a little more about the Tucson sector. Those are the two sectors in Arizona. The Yuma sector has virtually eliminated illegal immigration. There is still substantial drug smuggling, and that is a lot of what they are focused on right now. How could this have happened? Mainly three things. First, they completed the fencing in that particular area. There are just a couple miles left to go, but they have 11 miles of very good, new double fencing in the urban area around Yuma and then vehicle barriers beyond that. There are some areas where it is even triple fenced. They have enough Border Patrol agents, though we have to be careful we don't take some from the Yuma sector to send over to Tucson where they need more, because it is a little bit like these wars abroad. Once you take the area, you need to have enough troops to hold the area or, when you leave, bad guys come back in. We need the Border Patrol there. If we could add some National Guard troops, as my colleague has recommended, it would absolutely be the final personnel solution. I can remember when the Guard was withdrawn and there was only one guardsman left in the Yuma sector, and they still stayed away. I am not even sure if he had his weapon with him. But let's put it this way: The bad guys on the other side of the border, whether it is the cartels or others, do not want to mess with the U.S. military. They won't. That is the reason my colleague, then- Governor Napolitano, and many others believe we need more National Guard on the border.

The third thing that brought illegal immigration in the Yuma sector almost to an end is called Operation Streamline. It is very simple. When you cross the border, you get thrown in jail. The first time it is for about 2 weeks; second time, 30 days. After that, it could be 60 days. The sheriffs tell us that about 17 percent of the people they apprehend are criminals in the United States or are wanted for crimes here. Obviously, that is the 17 percent you want to catch. You want to put them in jail. The rest of them want to come here for work. They can't work and make money while they are in jail. That is a huge disincentive for them to cross in that area. So what the Border Patrol and the Department of Justice did was to say, if you cross in this area, you go to jail. They stopped crossing in that area. They gradually expanded those areas until it finally covered the entire Yuma sector. Now illegal immigrant coyotes and cartel folks know that if they try to bring somebody across in the Yuma sector, immediately those people are going to jail. Then they will be going back home, so they don't try it anymore. As a result the statistics are, as Senator McCain pointed out, in the Tucson sector you had almost a quarter of a million people last year apprehended. Who knows how many more were not apprehended. How many in the Yuma sector? This year, 4,946 so far--from a quarter of a million almost to 4,000. It wasn't always so in the Yuma sector. In 2006, 118,000 were apprehended. The next year, it went down to 37,000. We could see a big impact. And then 8,000, 7,000, probably 5,000 this year. We can see the impact of the fencing. The personnel and Operation Streamline have made a huge difference.

Mr. President, I have made my point here. Senator McCain is absolutely right. If you want to do it, you can do it. You just have to apply the will and the resources. What worked in the Yuma sector could work in the Tucson sector, and almost all of those things are included in the 10-point proposal Senator McCain and I have made.

The following Senators are necessarily absent: the Senator from Utah (Mr. Bennett) and the Senator from Missouri (Mr. Bond).

The following Senators are necessarily absent: the Senator from Utah (Mr. Bennett), the Senator from Missouri (Mr. Bond), the Senator from Nevada (Mr. Ensign), the Senator from Nebraska (Mr. Johanns), the Senator from Arizona (Mr. Kyl), the Senator from Alaska (Ms. Murkowski), the Senator from Kansas (Mr. Roberts), the Senator from Ohio (Mr. Voinovich), and the Senator from Mississippi (Mr. Wicker).

The following Senator is necessarily absent: the Senator from South Carolina (Mr. DeMint).

Further, if present and voting, the Senator from South Carolina (Mr. DeMint) would have voted ``yea.''

The following Senators are necessarily absent: the Senator from Tennessee (Mr. Alexander), the Senator from Utah (Mr. Bennett), and the Senator from Nebraska (Mr. Johanns).

Further, if present and voting, the Senator from Tennessee (Mr. Alexander) would have voted ``yea.''

Mr. President, before I begin talking about this bill specifically, I wish to compliment Chairman Dodd for the hard work he has put into this matter. I believe it is important for us to reach a bipartisan consensus, and many of the things we just discussed are matters on which we can reach a consensus. That is the goal of Republicans.

I am concerned that there has been some politicization of this issue by many on the other side and, frankly, some in the administration. I know, for example, that Senator Chambliss, a Republican, and Senator Lincoln, a Democrat, worked very closely together and had virtually, I am told, reached an agreement on the derivative issue as it pertains to the jurisdiction of their Agriculture Committee, only to be told by the White House that was not acceptable and that Chairman Lincoln needed to go back and redo it the way they wanted it done. As a result, the bill was passed out of the Agriculture Committee on an almost partisan line. The same thing was true of the legislation that came out of the Banking Committee.

While Chairman Dodd is here, let me make this point. He suggested this morning that there are Republicans who support this bill, he knows, but that they are being told by Republican leadership that they can't support it. I want to make it clear that our leadership does not operate that way. One reason I know that is because I am one of our leadership. Our members of the Republican caucus think for themselves.

We came to a conclusion unanimously in the Republican conference that the partisan bill that came out of the Banking Committee--and it was partisan; it was written by Democrats, not Republicans, and it was passed on a party-line vote--that bill was not the way to move forward. It was partisan, it was flawed and, among other things, it would provide for perpetual bailouts and therefore didn't achieve the first goal of the legislation, which was to finally end the taxpayer bailouts.

So all 41 of us wrote to the leader and said we will not vote to proceed to that bill because it is a partisan bill. It would be better if we could work together in a bipartisan way to bring a bill to the floor of the Senate that represented not just Republican ideas but a combination of Democratic and Republican ideas that had been negotiated by the members of the Banking Committee, members of the Agriculture Committee, and others. That would ordinarily be the way we would take up a bill here on the Senate floor.

Having said that, I am still confident, based upon what Senator Shelby and other Republicans on the Banking Committee have said, that it is possible to reach a bipartisan consensus. I know Chairman Dodd and Senator Shelby have been working hard every day on various aspects of the bill to try to reach a conclusion.

The second point I wish to make is that one should not describe the bill that passed out of the Banking Committee as the end of the story, as a successful bill that is going to solve all of these problems. I do not think it will. It does not end taxpayer bailouts, for example, and at a minimum, it seems to me it ought to do that. So in just a few minutes here, I would like to describe some of the things that I think the bill should address and that I hope are being addressed in the bipartisan negotiations.

I am sure it is obvious that it is very difficult--once a bill comes to the floor and you have a chairman and leader supporting the bill, with 59 Senators on their side of the aisle, it is very hard to amend that bill. That is one reason Republicans would like to see a bill brought to the floor that already has bipartisan consensus, and then, yes, we can work our will on the bill and maybe amend it, maybe not, but at least we know it is not going to be a purely partisan proposition.

There has been much attention paid to the $50 billion fund that is created by this bill. While it is true that the financial institutions, of course, pay the money, supply the money that goes into that fund, we all know where the money eventually is paid--the costs are passed on to the consumers. But that is not the real problem because there are other funds, such as the FDIC fund, for example, which the banks obviously pass on to their consumers in order to have an ability to take care of their expenses to creditors should they not be able to do so.

But what this bill does is not just create this $50 billion fund but also continuing government obligations beyond that. It provides not an orderly bankruptcy type of procedure for the resolution of a failed company but, rather, an ad hoc procedure determined by bureaucrats who are not accountable to anybody and who can apply pretty much any rule they want to the winding down of the institution.

What does that do? Today--and frankly, it has been this way for two centuries--we have a series of laws that dictate what happens in the event of the failure of a company. Primarily, these are our bankruptcy laws. You know in advance what happens. If you are a company that cannot make it and you go bankrupt, there are two basic ways you can file bankruptcy, one in which you totally liquidate, the other in which you reorganize. In those two situations, the law provides for what happens to your creditors.

By definition, bankruptcy means you cannot pay all your debts. So who gets paid and who doesn't and how much and in what order--all of that is resolved by the bankruptcy laws and by

the laws built up as precedent applied in the bankruptcy courts. That is why you know--when you either lend money to an institution or you invest in it in equity investments, you have an idea of where you stand, where your loan or equity investment stands in the order of priority should the entity fail. For example, a secured creditor would be very high on the list. Security means you have something to fall back on to take from the company if they can't pay their debt to you. As a result, you can lend the money at a lower rate because you don't have to account for that risk when you lend the money. It is a good way for companies to borrow money. Granted, they have to have something that backs it up. Sometimes it is even the personal guarantee of the CEO of the company. But you get a pretty cheap loan if you do that because the lender knows he or she or it is going to get its money back. By the same token, if you need money pretty badly and don't have any more security, you might ask people to invest in your company or to borrow money on an unsecured basis. Well, you are going to get charged a higher rate of interest on that because there is more risk to the investor or to the lender. But in every case, they know where they stand in the event you can't make it or you fold.

What this bill does is substitute an unknown, untested process for the tried-and-true rules of bankruptcy. Nobody is suggesting there could not be some modification of the bankruptcy process or rules that might govern these particular institutions. They are unique institutions in some respects, and to the extent the rules should be tailored in order to fit these circumstances, they could be. But that is not what is done in this legislation. Instead, new entities are created and bureaucrats are allowed to decide when a company could destabilize the markets and therefore decide what to do about it. Their range of options is essentially unlimited. The bottom line is that taxpayers could end up being on the hook for the bailout. That is true with the FDIC, it is true with the Fed, and this legislation has specific language in it that provides for that.

There are those who say: Why don't we just get rid of this $50 billion fund, and then the problem will go away. No, that problem doesn't go away unless you correct the other language as well.

I will not try to substitute my judgment for that of others who say we need a $50 billion fund. I will say this: Creating that fund makes it more likely than less that risks will be taken and that therefore there will be instability in the market. I also suspect that those who have an implicit guarantee from the fund are more likely to receive credit, for example, at a lower rate because there is much of an assurance on the part of the lender or the equity investor that they will get their money back. So there are some downsides to having this fund.

But those aside, if you want to do away with the fund, OK. If you want to keep the fund, OK. But what you should not do is provide that beyond that, the taxpayers are on the hook. Here is the problem. Lehman Brothers, I am told, had well over $600 billion in liabilities, and a $50 billion fund does not go a long way toward resolving a $600 billion liability. In the case of Fannie Mae and Freddie Mac, which are not even dealt with in this legislation even though they were the prime causes of the problem--and by the way, that is a deficiency in the law that needs to be corrected. I hope these negotiations will provide something in that regard. But they have now created--it is about $6.3 trillion in obligations. Guess who is on the hook for those obligations. Congress never passed a law that said the taxpayers were going to be on the hook, but that is exactly the result of the actions taken by the bureaucrats who decide these matters now.

I do not want to create a perpetual situation where not Congress, not the courts, but bureaucrats--by the way, I do not use that term pejoratively. ``Government officials''--let's use that term. Unelected government officials, to whom we give the power, simply decide who gets bailed out, when, under what circumstances, who gets paid back, who doesn't get paid back, and how much it is going to cost the taxpayers. That, in essence, is what is provided for in this legislation.

So when folks say this is a bill we need to support because it ends too big to fail, that is wrong because it doesn't end too big to fail and taxpayers are still on the hook.

If those things are fixed, then my criticisms in this respect go away. But we have not heard from these negotiations that is being done. So I told my colleagues: Don't come to the floor and say this is a great bill, it solves all these problems, it ends too big to fail, and there is nothing wrong with it. There are some things wrong with it that need to be fixed. Let's do those things. I assume, on a bipartisan basis, if you just ask the abstract question of every 100 of the Senators, do you think we ought to end too big to fail, the answer would be yes. Ask our constituents--yes. Then we can get down to the nitty-gritty.

What about the language in the bill that says the FDIC ``will guarantee the obligations of banks'' under certain circumstances? That is language that has to be carefully either defined, limited, crabbed, or eliminated, or we are going to have taxpayers continuing to be on the hook for these obligations.

As I said, we haven't done anything to Fannie and Freddie in the legislation, and that is going to continue to mean a continuing taxpayer obligation as well.

As I said before, too, those firms, the ones deemed too big to fail, have an advantage over the smaller banks, the community banks. My colleague just mentioned those a moment ago. We just met with the community bank representatives in Arizona, and they fear this kind of provision will make them uncompetitive vis-a-vis the big boys. As a result, what we will eventually end up with is a few really big banks and maybe some that aren't, in kind of a medium-size operation, and almost all of the smaller banks having to go out of business because of this anticompetitiveness that will result from the legislation.

One of the other ways in which what I have been talking about occurs is through section 113, the so-called Financial Stability Oversight Council. This is one of the entities that allow for these backdoor bailouts. It gives the Federal Reserve the authority to prop up any nonbank company that the council, this new council, deems to be a potential threat to systemic stability in our economy. This is a board based in Washington. It decides which institutions get special treatment. It gives these bureaucrats tremendous latitude to pick winners and losers, again resulting in a competitive advantage and disadvantage. What determines whether a nonbank is a threat to stability? What are the criteria? Among other possible considerations, ``any other factors that the council deems appropriate.'' That is pretty much an open book--``any other factors that the council deems appropriate.'' I would think, if Congress is going to try to legislate in this very complex and difficult area, we would try to give pretty specific direction to the Federal authorities, to whom we give great power, as to how we want it exercised, and I don't think this meets the test--``any other factors that the council deems appropriate.'' Take that out of the bill. Let's have a bipartisan negotiation to do that. If somebody can demonstrate to me why that would have to be left in, then great, but these are the kinds of things that lead me to the conclusion that, no, we should not agree to consider the bill that came out of the Banking Committee on a purely partisan basis because there are problems in it.

Today, the Wall Street Journal says:

The Dodd bill allows too much discretion to federal

regulators to determine which firms to regulate and how,

which firms to rescue or close down, and which creditors to

reward and how. . . .

Exactly what I was just saying. It goes on to conclude:

The Dodd bill also extends the FDIC's resolution authority

(subject to other executive approval) beyond deposit-taking

institutions to any financial company deemed to be

systemically important. And it gives the FDIC the discretion

to discriminate among creditors as it judges who gets paid

what as part of a resolution. . . .Recall how the White House

exploited its authority under TARP to trash Chrysler's

creditors and give unions a better deal.

Now, that is not the only section. Section 1155 of the bill is entitled ``Emergency Financial Stabilization.'' This is another way in which the bill

guarantees bailouts and puts them into the law and leaves the taxpayers on the hook.

Under this section, the FDIC would be allowed to create a new program of unlimited size to guarantee the obligation of depositories and holding companies with depositories.

What does this mean since there is no requirement that a company that receives, guarantees, and defaults on its obligations be taken into an FDIC receivership, bankruptcy, or resolution? The FDIC and Treasury can prop up whatever company they choose. This authority can be exercised without congressional approval.

It is one of the reasons I have said I think there needs to be some element of bankruptcy or other process prior to the instigation of this particular kind of authority. We cannot say this bill ends taxpayer bailouts as long as we have all of those sections in it.

Finally, there is much said about consumer protection. Does anybody know anybody who does not favor consumer protection? I think we all do. There are questions about how to intelligently do it. We can create a lot more cost to consumers if we make the regulations so costly and inefficient that they end up paying more money than they would have otherwise. That is, I fear, what can happen here. It happened with the credit card legislation we passed. I think it is predicted that it can happen here as well.

It could easily happen with businesses we do not even intend to cover. I know I have heard from dental offices and car dealerships. When we think about Wall Street bailouts, we do not think about our next-door neighbor who sells cars, or maybe our neighbor who is a dentist. But if they have an installment plan where it takes 4 months-- where you can get up to 4 months to pay your bill to them, boom, you can be covered by provisions here. Then all of the consumer protections apply and so on.

Let's be careful that in an effort to make sure Wall Street handles its affairs properly that we do not impose conditions on Main Street, the folks we would like to see thrive, particularly in times of recession, in a way that would end up either causing them more expenses or, at worst, even making them uncompetitive with these so-called bigger guys.

Restraining credit is a big way to do this, requiring that they have to apply capital not to building their businesses but to somehow backing up their credit issuance, even though that is not the main part of their business.

Just quoting briefly from the New York Post:

New restrictions on credit . . . are likely to cost our

economy tens of thousands of jobs a year.

And:

Reductions in credit--

Which would result here--

means declines in job creation. Many small business start-ups

use home equity debt or credit cards as their source of

funding.

There is not a lot of home equity debt to be had these days. A lot of our homes are not mortgageable at the present time, so credit cards are maxed out and so on. Well, that is a difficult way to do it. But we have to make sure if small businesses are doing this that the credit flows are not stopped because of provisions of this bill.

In an op-ed in the New York Post today, Mark Calabria pointed out:

The bursting of the housing bubble largely eliminated the

first option.

That is the mortgaging of your home to get additional credit.

Now Washington is trying its best to kill the second.

That is the credit card provision.

[The Dodd bill's] proposed ``consumer protections'' would

reach beyond credit cards and restrict the availability of

all forms of credit, while raising costs.

Now, nobody intends this result. I do not think anybody in this body wants to impose additional costs, especially on smaller businesses or on startup businesses. It is simply an inevitable result of a policy that is written too broadly. We need to be careful how we do it. We need to ensure we do not write it so broadly that friends we want to protect are not adversely impacted.

They have been coming to my office. Folks you never dream of who would be covered by this act are coming in and saying: Here is how this bill could affect me. Please make sure it does not.

All I urge my colleagues on the other side of the aisle to do is, take these concerns on board--they are not partisan concerns--and make sure when these negotiations figure out how to amend the bill, that we take into consideration the things we are raising. They are not partisan concerns. They are concerns of everyday Americans, and we owe it to our constituents to think these things through and, if need be, change the bill.

I am sure even Senator Dodd would say the bill is not perfect. If there are things we need to see changed in it, then let's do that.

The last point has to do with another element of consumer protection. A lot of folks do business in more than one State. In fact, some of the larger companies do business in all States, and it is cost efficient for them if there is one rule, if there is one regulator, so that they do not have to, for example, figure out what every single State requires in terms of different consumer protections or notice or whatever it might be, and then have to comply with all 50 States, some of which may be contradictory, as well as a Federal regulator.

So up to now we have pretty much had a Federal regime that has preempted the State jurisdiction in some of these areas. Well, as I understand it, the legislation does away with a significant component of that and would allow the State regulators to impose individual requirements on these companies that are doing business throughout the United States. So we could have the anomalous situation where we have lots of different requirements.

Some of you have seen ads on TV. It says: Call now to get your $29.95 knife. If you call right now, you will get another one thrown in for free. Then the last 10 seconds of the ad has some guy reading in very fast language: Offer not valid in New Mexico, New York, Arizona, Tennessee, Oregon, and so on and so on. You cannot even follow what he is saying. But the reality is, there are a lot of different requirements.

So what we would like to try to do is have things be as uniform as possible to keep the costs down because the greater the costs, the more the cost to the consumer. Unfortunately, as I said, however, this bill creates a patchwork of regulatory regimes that expand the number of regulators by 50 in certain areas. As a result, it is going to be much more difficult to comply with and much more costly.

If we believe we understand what is necessary in consumer protections, then let's provide for it. If we think we do not, that we need to leave this to a lot of other regulators, then let's not try to make the rules ourselves. Just let them do it. But we should not do both.

In addition to that, the chairman talked about safety and soundness. This is a technical term that essentially has regulators requiring banks and other financial institutions to carry a certain amount of reserves so that if people want their money back out of the bank, the bank has enough money to give to them. No bank believes every day 100 percent of its deposits are going to be called back by its depositors. But they have to have a certain percentage of those funds on deposit so if you go and say: I want my money out of the bank, they have enough money to give it to you or, if they have loans go bad, they have enough to carry those loans, and so on. That is what the safety and soundness requirements of the regulators do. It is a good thing.

Those same people can also provide for consumer protections, and say: Look, we know the bank needs to reserve a certain amount of money, and we also know, consistent with that, they need to ensure the protection of their consumers in a certain way.

What is difficult is when we separate these two functions, as this legislation does, so we have one group saying to the bank here is what you have to do for safety and soundness purposes, and we have another totally independent group saying, we do not care anything about that, but here is what you have to do for consumer protection.

We can end up with duplicative, overlapping, costly, and sometimes even inconsistent requirements, all of which make it more difficult for these institutions to give a cheaper product, a better loan, a credit card with a lower interest rate, or whatever it may be.

I just urge my colleagues, everyone is for consumer protection. Everyone is

for safety and soundness. Let's try to do this in a way that does not impose such great burdens, especially on the smaller folks, that they are not able to be competitive and provide their consumers, about whom, after all, we should be mostly concerned, with the cheapest product that is backed by the safety and soundness of the institutions.

Incidentally, on this last point, some who are a little more cynical have said: Well, maybe this is being done for a more nefarious purpose. If every single attorney general in the country can go out and hire trial lawyers on a special contract to bring class action lawsuits because of a violation of State laws, then we have a brandnew cause of action for the trial lawyers to do even better than they have done in the past.

I am not going to suggest that is the motivation, but I am going to suggest that I see nothing in the bill that will prevent that. As long as that is a potential, then, Katey, bar the door.

So, again, there are many things in this legislation that are not partisan in terms of we all want to protect the same folks. But there are questions that have been raised that need to be dealt with. I think it would be far better to take the time, to have Republicans and Democrats sitting down and going through all of these issues carefully, writing up a bill on which they can agree, bring that bill to the floor so the rest of us can then look at it, and hopefully we would all say: Gee, that is a lot better product than we thought.

It is not exactly as I would have done it. It looks like there are some compromises in there, but after all, that is what the process is when we have little more than half of the body of one party and less than half of the other party. That is how we get things done.

I can assure you this and assure my colleagues on the other side, Republicans want to work with our Democratic friends to get a good bill that all of us can support and that will be good for our country.

I think if we can work in good faith toward that end, we will be much happier with the result than if it is the result of a partisan or a near-partisan vote in this body and likewise in the House of Representatives.

I thank my colleagues for their patience and am happy to yield the floor.

The PRESIDING OFFICER (Mr. Franken.) The Senator from Ohio is recognized.

The following Senators are necessarily absent: the Senator from Utah (Mr. Bennett) and the Senator from Nebraska (Mr. Johanns).

Reserving the right to object, might I ask my colleague to restate the request?

Mr. President, I appreciate my colleague restating the request. Reserving the right to object, and I will object, as I think my colleagues are aware, the two leaders have worked out a process for consideration of at least some of the judicial nominations. My understanding is, there is another agreement on at least one circuit court nomination that they are working out a time agreement on right now and that would occur, I presume, later this week. I think it is important to let the two leaders work out those agreements. As a result, reluctantly, I have to object to my colleague's request.

Mr. President, for the same reasons as noted earlier, I object.

Mr. President, I object.

Mr. President, for the same reasons stated before, I object.

Mr. President, I have no objection.

Reserving the right to object, I will make the same brief statement I made with Senator Whitehouse. Some of these nominees are subject to discussion between the two leaders, working out time agreements for their consideration--at least some of the court nominees.

Now, I don't know about this specific nominee. I would say that I have no secret holds on anyone, so this is not on my own behalf. But in order to preserve the deliberation between the two leaders, on behalf of the minority I would object.

Reserving the right to object, I am trying to follow the numbers as my colleague is going down through the unanimous consent requests, and I think my colleague skipped over the name of John J. Sullivan, of Maryland, Calendar No. 208, to be a member of the Federal Election Commission. Is there some objection on the other side or might we have an explanation as to why that name was skipped over?

I would be happy to object to that.

Mr. President, I object.

Mr. President, I object.

For reasons stated earlier, Mr. President, I object.

I object, Mr. President.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I object.

Mr. President, I suggest the absence of a quorum.

I ask for the yeas and nays.

The following Senators are necessarily absent: the Senator from Utah (Mr. Bennett) and the Senator from Oklahoma (Mr. Inhofe).