Video archive of the US Congress

Senate Proceeding 04-27-10 on Apr 27th, 2010 :: 3:07:30 to 3:15:35
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Johnny Isakson

3:07:27 to 3:07:47( Edit History Discussion )

Johnny Isakson: i hope the republicans will. i hope we will debate and pass this bill. i i yield the floor. a the presiding officer: the senator from georgia. mr. isakson: madam president, i rise for a second to talk about the financial services bill. i do want to say something in advance of that, though.

Johnny Isakson

3:07:30 to 3:15:35( Edit History Discussion )
Speech By: Johnny Isakson

Johnny Isakson

3:07:48 to 3:08:10( Edit History Discussion )

Johnny Isakson: i'm sorry chairman dodd is not on the floor. this friday is the last day americans can gonder contract on the first-time home buyer tax credit and the moveup tax credit. i had the privilege of working with the banking chairman on that legislation in the fall of last year and its extension, and i felt a sense of reward today when the announcement came out

Johnny Isakson

3:08:11 to 3:08:31( Edit History Discussion )

Johnny Isakson: that for the first time in 36 months, homes in the 20 test markets the united states value actually went up by .6%. that's not a lot of money, but it's the first time in 36 months. the chairman created an environment to allow that debate to take place, and this senate voted 100-0 to pass it, and the american people have benefited

Johnny Isakson

3:08:32 to 3:08:52( Edit History Discussion )

Johnny Isakson: from it. as i tell so many who call me, it's not going to be extended because credits like that are designed to do what it has done, and that is bring the marketplace back, hopefully stabilize values and move forward. but i do want to talk about the -- and i commend senator dodd for setting an environment where that could take place, which brings me to my point on

Johnny Isakson

3:08:53 to 3:09:14( Edit History Discussion )

Johnny Isakson: the bill before us. senator feinstein did an excellent job of talking about wall street and some other people that certainly need to be held accountable where there wasn't any transparency, contributors to the problem and the difficult problem that derivatives caused in the whole mess, but there is another story out there i want to bring up because when we do get to debate on this bill, when we get to a point, it's my hope we really

Johnny Isakson

3:09:15 to 3:09:36( Edit History Discussion )

Johnny Isakson: are going to have a debate and an amendment process because there are some thingshat aren't in this 1,407-page bill that ought to be. what i specifically want to talk about is freddie mac, fannie mae, moody's and standard and poor's. you know, when the market began to collapse, a lot of those derivatives that were talked about were bets one way or the other against the housing market

Johnny Isakson

3:09:37 to 3:09:57( Edit History Discussion )

Johnny Isakson: which in many ways had been overheated in america because of the approval of something known as a subprime mortgage. but the devil in those details that caused us so much problem, there originally was no market for subprime mortgage. they were b, c and d credits. they were down payment assistance loans. they were higher risk loans by

Johnny Isakson

3:09:58 to 3:10:19( Edit History Discussion )

Johnny Isakson: their definition, but they got securitized, and two things happened. first moody's and standards rated them as investment grade, aaa investment grade bond or securities. secondly, freddie mac and fannie at the behest of the united states congress, us, started

Johnny Isakson

3:10:20 to 3:10:43( Edit History Discussion )

Johnny Isakson: buying those securities to mee the desire to have more affordable housing in america. a noble goal but a goal that was being achieved by loaning people money that could not pay it back, loaning them the down payment they didn't have, by not validating the credit, their employment or anything else. and so when this thing really did collapse, when everything went down and went down fast, it

Johnny Isakson

3:10:44 to 3:11:05( Edit History Discussion )

Johnny Isakson: was in large measure because freddie and fannie created the marketplace that started the buying of these securities around the world, these mortgage securities, number one, and equal with that is moody's and standard rated them as investment grade when they obviously were not. now, i would think that as we move towards a debate on this bill when that time comes and it

Johnny Isakson

3:11:06 to 3:11:27( Edit History Discussion )

Johnny Isakson: would come, that it would be a bill that included freddie mac and fannie and included moody's and standard. and i do understand there are some references to moody's standard, but i would submit the best accountability for moody's and standard is for them to be paid by the purchaser of securities, not the creator of them, because then they are accountable to the people who

Johnny Isakson

3:11:28 to 3:11:49( Edit History Discussion )

Johnny Isakson: actually get stuck holding the bag, not the guy who created them and then duched and run. which is some of the stuff that senator feinstein was talking about. i also want to talk about the quality of lending. there are provisions in this bill to talk about shared risk and risk retention. there are provisions for a mortgage banker to retain 5% of the risk in a loan.

Johnny Isakson

3:11:50 to 3:12:10( Edit History Discussion )

Johnny Isakson: that's a well-intended move, but as i said the other day on the floor and as i reminded people in this body, when the savings and loan collapsed, when the r.t.c., the resolution trust was created, when that crisis cost the american people three quarters of a trillion dollars, savings and loans in america

Johnny Isakson

3:12:11 to 3:12:32( Edit History Discussion )

Johnny Isakson: didn't have 5of the risk, they had hundred% -- they had 100% of the risk. they made those loans with deposits they had of their depositors and they were paid back over time. but when we took away their preference on deposits of $10,000 or less against the banking industry and when because they began losing money we allowed them to form service corporations and get into businesses they didn't know

Johnny Isakson

3:12:33 to 3:12:53( Edit History Discussion )

Johnny Isakson: anything about, they finally collapsed and imploded with hundred% risk, not just 5%. so i would submit that another thing that needs to be incorporated in this is for us to put some underwriting standards, minimum standards so that anything that doesn't meet them has to be an insured

Johnny Isakson

3:12:54 to 3:13:14( Edit History Discussion )

Johnny Isakson: mortgage by an mgic or a p.m.i. we ought to go back to the good old days of the 1960's, 1970's, and 1980's where you had to have a job and a verification to borrow money, where you had to get a credit report. where you didn'tave an appraiser drive by on the street

Johnny Isakson

3:13:15 to 3:13:35( Edit History Discussion )

Johnny Isakson: or you had a legitimate appraisal. where you couldn't spend 25% or 30% or more of your monthly payment as a percentage ofour gross income or a total of 38% on all debts you had, including that payment of at least a year or more in duration. the real estate industry, the housing industry, america, with those very standards which were the standards of the 1960's, 1970's and part of the 1980's

Johnny Isakson

3:13:36 to 3:13:56( Edit History Discussion )

Johnny Isakson: ended up having a vibrant housing market. 65% homeownership, the largest of any company in the world, but when the idea of wall street to get greedy, when our idea of forcing freddie and fannie to be purchasers of resort, the rush came to create the mortgage, to

Johnny Isakson

3:13:57 to 3:14:18( Edit History Discussion )

Johnny Isakson: sell the paper, to producehe income that the investor wanted, the quality of the house, the qualification of the buyer, the legitimacy of the loan came in question. so i look forward to a point in timehen we get to this debate that we'll talk about three things. number one is that freddie mac

Johnny Isakson

3:14:19 to 3:14:40( Edit History Discussion )

Johnny Isakson: freddie mac and fannie mae were, in fact, government-sponsored institutions and today are a lot more government sponsored than they ever were. secondly, if we exempt them, we leave the potential and the temptation for them to be used as a dictated purchaser of certain kinds of paper that get us right back in the same problem again. and if moody's and standard's do

Johnny Isakson

3:14:41 to 3:15:01( Edit History Discussion )

Johnny Isakson: not have an accountability to their rating standards when something happens like the subprime loans, then we are leaving open the opportunity for most of what happened that was the principal cause of the collapse to happen again. i think we not to do that. and i hope to become a part of a debate on that part of this

Johnny Isakson

3:15:02 to 3:15:22( Edit History Discussion )

Johnny Isakson: legislation that closes the loophole, that takes away this idea if you just have 5% shared risk, it's a safe loan, and instead make sure the underwriting to the borrower is what we count on, because after all that's going to be how the money is paid back. we know for a fact that freddie and fannie were a major part of the problem, and we know that

Johnny Isakson

3:15:23 to 3:15:35( Edit History Discussion )

Johnny Isakson: lack of quality underwriting was a major contrutor to the quality and the security. somewhere it ought to be addressed, but in these 1,407 pages, to the best of my reading and looking, it is not.

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