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Senate Proceeding 04-27-10 on Apr 27th, 2010 :: 0:01:10 to 0:12:30
Total video length: 4 hours 56 minutes Stream Tools: Stream Overview | Edit Time

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Judd Gregg

0:01:05 to 0:01:26( Edit History Discussion )

Judd Gregg: economy to be liquid and -- and produce credit, that there are as safe and as sound as possible while at the same time making sure that we do not overreact and create a situation where this market, which is so crucial country and especially to main street, which basically benefits from the credit which is

Judd Gregg

0:01:10 to 0:12:30( Edit History Discussion )
Speech By: Judd Gregg

Judd Gregg

0:01:27 to 0:01:48( Edit History Discussion )

Judd Gregg: generated by drif thifs, that that market -- derivatives, that that market doesn't excessively overcorrect due to regulation or that it doesn't go overseas, so that we lose today the fact that we are the center of capital and credit. we want to be the best place in the world to create capital and to create credit, and we should have a bill that accomplishes that. and i've been outlining concerns

Judd Gregg

0:01:49 to 0:02:09( Edit History Discussion )

Judd Gregg: i have in the derivatives area. section 106, i could highlight a number of other areas. for example, the immediacy with which derivatives are pushed from a cleinghouse into an exchange situation, which i don't think will work under this bill. i think basically you would end up contracting the market dramatically. but what i wanted to specifically speak to today were things that were left out of this bill that should be

Judd Gregg

0:02:10 to 0:02:30( Edit History Discussion )

Judd Gregg: addressed in order to make sure that we don't have occur again what happened in 2008, in september of 2008 on into the rest of that year. that tremendous trauma that our nation went through and is just now coming out of, and for some people is still a traa because they don't the worst trauma of all for somebody, that trauma was caused

Judd Gregg

0:02:31 to 0:02:53( Edit History Discussion )

Judd Gregg: by some very distinct and specific events occurring. a lot of them were the responsibility of the congress. i mean, if you want to look for who is the cause of the downturn and the crisis in the subprime market, you can look -- we can look at ourselv in the mer and say we were, to a large degree.

Judd Gregg

0:02:54 to 0:03:14( Edit History Discussion )

Judd Gregg: easy money was also a problem. but right i think at the center of the problem was the collapse of underwriting standards in this country. you know, it used to be up through the 1990's to get a loan on a home, you had to -- you couldn't get much more than 85% of the value of the home. had you to put some money down. and had you to be able to show

Judd Gregg

0:03:15 to 0:03:35( Edit History Discussion )

Judd Gregg: to the person who was lending you the money, the mortgagor, that you could pay it back, you could pay the money back. well, what happened when we went into this huge expansion of lending, which was driver large part by two things. one, the monetary policy of the

Judd Gregg

0:03:36 to 0:03:57( Edit History Discussion )

Judd Gregg: fed, which basically allowed for easy money to flow out there very quickly into the market. and, secondly, the congress. specifically insisting that everybody should be able to have a home whether they could afford it or not or whether the home was properly valued or not. those two factors led to an explosion in homeownership, equally led to an explosion in

Judd Gregg

0:03:58 to 0:04:19( Edit History Discussion )

Judd Gregg: mortgages which, first, did not meet the value of the underlying asset. and, in fact, in some instances were actually valued at more than the underlying asset, even at the time they were issued. but almost all these subprime mortgages presumed that there would always be an appreciation of real estate prices and, therefore, you could throand 100% and so the -- lend to 100% and at some point you'd be down to 90% or 85% of value that.

Judd Gregg

0:04:20 to 0:04:40( Edit History Discussion )

Judd Gregg: didn't happen, of course, went just the -- that didn't happen, of course, went just the opposite way. the value went down and so the mortgages went underwater to their basic value. and then secondly, it was -- the moneys that was lent to individuals who, because of the way they structured these loans for the first two or three years, could pay the interest o the mortgage payment, but as

Judd Gregg

0:04:41 to 0:05:03( Edit History Discussion )

Judd Gregg: soon as these loans reset realisti couldn't pay it. and everybody knew it when they did the loan. well, why -- why did people do that? why was there this collapse in underwriting standards? well, there are a lot of reasons reasons. i happen to think the -- probably the primary one was that we separated the owner of

Judd Gregg

0:05:04 to 0:05:24( Edit History Discussion )

Judd Gregg: the loan from the actual loa loan-making process and, therefore, the people originating loans weren't really interested in the underlying security. they weren't even interested whether the person could pay the money back. they were interested only in the fees ty were generating. 10 we had a collapse in the underwriting standards, and -- and what happened was we had an inverted pyramid where you had this person down here borrowing

Judd Gregg

0:05:25 to 0:05:45( Edit History Discussion )

Judd Gregg: money from this entity on a piece of property which wasn't worth what the value was that was being borrowed and the person who was borrowing the money couldn't pay the money back but nobody cared because that loan was then taken and sold and securitized and subdivided and syndicated and sometimes put into a synthetic instrument, or had a synthetic

Judd Gregg

0:05:46 to 0:06:06( Edit History Discussion )

Judd Gregg: instrument mirroring it, and sow had this one little loan down here at the bottom of the pyramid and this massive structure of churning of that loan on top of it. and the loan wouldn't support all that structure over it and it collapsed on us. in late 2008. so this bill, however, doesn't address that issue of underwriting standards in any

Judd Gregg

0:06:07 to 0:06:27( Edit History Discussion )

Judd Gregg: effective way. now, senator isakson and i have spoken about this on the floor a number of times and we're going to come up with a proposal -- i hope it can be bipartisan, should be bipartisan -- but it will significantlymprove this bill because it will put in place some underwriting standards that will make sense and we'll basically be going back to some underwriting standards that used to be in place back in the 1990's, not

Judd Gregg

0:06:28 to 0:06:49( Edit History Discussion )

Judd Gregg: origination of the loan but for the securitizer of the loan. and this is critical. i mean, if you're going to fix this problem -- and the purpose of our bill should be to fix the problem that created the crisis and make sure it doesn't occur again; that's the real goal -- then there should be spurned writing standards. secondish -- should be underwriting standards. second issue in this bill that's not addressed is fannie and freddie.

Judd Gregg

0:06:50 to 0:07:13( Edit History Discussion )

Judd Gregg: these two entities have trillions of dollars of outstanding liability, outstanding notes. and it is estimated that the taxpayer has a $400 billion to $500 billion -- that's half a trillion here because a lot of these notes aren't going to ever be

Judd Gregg

0:07:14 to 0:07:34( Edit History Discussion )

Judd Gregg: paid back. and still operating almost as if business as usual mind-set, pushing money out the door, pushing -- buying up bonds and notes and mortgages and doing it almost as if there's no end to the -- to the taxpayers'

Judd Gregg

0:07:35 to 0:07:55( Edit History Discussion )

Judd Gregg: pocketbook. in fact, we don't even put fannie and freddie on the federal balance sheet. we know, those companies, we know that the taxpayers are on the hook for this debt. $400 billion to $500 billion of debt that we're on the hook for. this bill doesn't address it.

Judd Gregg

0:07:56 to 0:08:16( Edit History Discussion )

Judd Gregg: it acts as if it doesn't even exist, and yet that was one of the primary drives of the economic -- drivers of the economic collapse of 2008, which we are all suffering from and have suffed from. so this bill should have at least a initial step int the arena of how we handle going to handle this issue of straightening out the g.s.e.'s,

Judd Gregg

0:08:17 to 0:08:39( Edit History Discussion )

Judd Gregg: as they're called. the first step is that we ought to bring their liabilities under our books so that we know, the taxpayers aren't being lied to, so that we're telling the truth to the american people as to how much it's going to cost to us straighten this out and we start thinking about how we're going to straighten it out. and yet this bill doesn't do that. so that's another place as republicans, and i think a to see this bill improved, and

Judd Gregg

0:08:40 to 0:09:00( Edit History Discussion )

Judd Gregg: that's why we're opposing going forward with the bill in its present form until we're allowed to participate in the negotiations on improving it. that's what this is all about. the third issue, of course, is the credit rating agencies. we know without any question that the credit rating agencies failed miserably and that people

Judd Gregg

0:09:01 to 0:09:21( Edit History Discussion )

Judd Gregg: relied on that -- on their information, their credit rating of very securities and that that's one of the primary drivers or one of the reasons that people were willing to buy a lot of the instruments we were floating around, because they believed genuinely that the credit rat said it was a aaa rated security, that they had done their due difficult dispense

Judd Gregg

0:09:22 to 0:09:43( Edit History Discussion )

Judd Gregg: that it was a aaa rated security. well, it turns out it wasn't in many instances. and as a result, sloppy underwriting again by people who were willing -- financial houses which were willing to buy these securitized products, the c.d.o.'s and products, they didn't do the heavy lifting of going in and

Judd Gregg

0:09:44 to 0:10:04( Edit History Discussion )

Judd Gregg: looking at the actual -- actual assets which were backing these products up. they relied on the rating agencies and the rating agencies didn't do the job either. and so we have this real serious issue with rating agencies, and that needs to be addressed. it's not effectively addressed in this bill. but you cannot correct the problems which created the 2008

Judd Gregg

0:10:05 to 0:10:25( Edit History Discussion )

Judd Gregg: cris and caused this very severe recession and put this country through this tremendous trauma unless you address that issue also underwriting standards, g.s.e.'s, credit rating agencies. and then the bill -- and so that's -- republicans are saying hey, let's look at that, let's try to fix that. that's why we don't want to go forward until we're brought to

Judd Gregg

0:10:26 to 0:10:47( Edit History Discussion )

Judd Gregg: the table and allowed to address that issue. another question: they filled this bill with all sorts of extraneous things that have nothing, absolutely nothing, to do with the -- with the housing cris and the -- and the economic melt down that followed. a lot of corporate governance rules that have been kicking

Judd Gregg

0:10:48 to 0:11:09( Edit History Discussion )

Judd Gregg: and that are the agenda of certain groups in the city who have a political agenda dealing with wanting to have control over corporations, a lot of it influenced by organized labor, they've been thrown into this bill willy-nilly.

Judd Gregg

0:11:10 to 0:11:30( Edit History Discussion )

Judd Gregg: they have nothing to do with the overarching issues that affect protecting the -- protecting the market and making -- and giving us a sound financial system, and yet they're in this bill. they shouldn't be in the bill. or if they are going to be in the bill, they should be significantly adjusted. so these are some of our concerns. you know, people ask: well, why

Judd Gregg

0:11:31 to 0:11:51( Edit History Discussion )

Judd Gregg: are -- why are -- why are the republicans not -- why are we stopping this bill at this point? because we want a better bill and we've got specific proposals for accomplishing that. we want language which does accomplish twail, tha too-big-to-fail, that ends that policy. we want language which makes the derivative market not only safe and not a systemic risk but

Judd Gregg

0:11:52 to 0:12:12( Edit History Discussion )

Judd Gregg: sound and a strong force for credit in this country. we better underwriting standards. we want language which addresses the issue of the g.s.e.'s. and we want language which addresses the failures of the credit rating agencies. and we don't want a lot extraneous language which is just simply brought along because the train was leaving

Judd Gregg

0:12:13 to 0:12:30( Edit History Discussion )

Judd Gregg: the station and thrown on it, and which, while in many instances in my mind at least, undermine rather than be a constructive force for a better financial system in this country. so that's what our concern is, and that's why we are continuing to insist that we be allowed to be at the table to negotiate these very critical issues on

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