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Senate Proceeding on May 20th, 2010 :: 0:46:30 to 1:00:10
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Jon Kyl

0:46:27 to 0:46:48( Edit History Discussion )

Jon Kyl: protection standards. thank you very much, madam president. the presiding oicer: the senator from arizona. mr. kyl: thank you, madam president. in the final hours of debate on this asking ourselves why we started the whole exercise in the first place.

Jon Kyl

0:46:30 to 1:00:10( Edit History Discussion )
Speech By: Jon Kyl

Jon Kyl

0:46:49 to 0:47:09( Edit History Discussion )

Jon Kyl: what's the purpose of financial regulatory reform? i want to address that for just a moment here this morning. presumably, we all agree that the purpose should have been to tackle the problems that led to the financial crisis in the first place. that means serious reform must address root causes. most prominently, too big to fail. ending that and reigning in the

Jon Kyl

0:47:10 to 0:47:32( Edit History Discussion )

Jon Kyl: two government-sponsored enterprises, fannie mae and freddie mac that had a lot to do with causing the problem in the firs amazingly, despite its and this is the legislation, madam president -- despite its size and all of the hype that's attended it, the bill before us fails moreover, even though main street didn't cause the problem,

Jon Kyl

0:47:33 to 0:47:53( Edit History Discussion )

Jon Kyl: the bill is so extensive in its regulatory reach that it creates new burdens on main street while continuing the recent pattern -- one, by the way, that americans are very fed up with of using every crisis as an excuse to involve government in almost every sector and every aspect of american life. republicans had hoped t the bill came to the senate floor, i am improvements would

Jon Kyl

0:47:54 to 0:48:14( Edit History Discussion )

Jon Kyl: be made and the final product would be less partisan. we offered amendments to improve the bill but almost all of these have been defeated. along the way, democraty> amendments have been adopted that actually make the bill worse. i hope the bill would be amended to actually endwq taxpayer-financed bailouts and the concept that companies can be too big toail and that it would protect small businesses from the regulatory burdens

Jon Kyl

0:48:15 to 0:48:36( Edit History Discussion )

Jon Kyl: imposed by the bill and protect rights of privacy for people's financial information, but that didn't happen. and so we're left with a bill that enshrines into law failed policies of the past, imposes a massive new bureaucracy on small business that had nothing to do with creating the financial cris and threatens jobs in our economic growth.

Jon Kyl

0:48:37 to 0:48:57( Edit History Discussion )

Jon Kyl: today, let me just address these three problems in a bit more detail. first, too big to fail. the ver first amendment offered up by the majority purported to end too big to fail, but while that sounds good, the amendment which passed won't accomplish the goal. the amendment has the effect only of declaring the intent of congress. it does not actually prohibit taxpayer funds from being used to assist banks, and that's why

Jon Kyl

0:48:58 to 0:49:18( Edit History Discussion )

Jon Kyl: i voted against it. it expresses a sentiment but it is not actually operative. as i will discuss, provisions remain in this bill that enshrine taxpayer bailouts forever, even after the removal of the $50 billion so-called bailout fund. for instance, section 113 establishes a financial

Jon Kyl

0:49:19 to 0:49:40( Edit History Discussion )

Jon Kyl: stability oversight council. this section would give the federal reserve the authority to prop up any nonbank financial company that the council deems to be a potential threat to systemic stability. the council would designate certain firms as systemicall significant. market participants would obviously interpret this to mean too big to fail. therefore, the designations

Jon Kyl

0:49:41 to 0:50:01( Edit History Discussion )

Jon Kyl: would increase moral hazard and perpetuate the very problem that we're trying to fix. so a new government board based in washington would decide which institutions get special treatment, giving unaccountable government officials tremendous authority to pick winners and losers, resulting in a competitive advantage for the winners. what determines whether a

Jon Kyl

0:50:02 to 0:50:22( Edit History Discussion )

Jon Kyl: nonbank financial institution is a threat to stability? nong other possible considerions, quote -- "any deems appropriate, according to the bill. such broad authority would allow the council to protect and promote or to hamper firms based on whatever it deems appropriate." any other factors.

Jon Kyl

0:50:23 to 0:50:43( Edit History Discussion )

Jon Kyl: section 1155 of the bill entitled "emergency financial stabilization" also guarantees bailouts. here the fdic would be allowed to create a new program of unlimited size to guarantee the obligations of depositories and holding companies with depositories. since there is no requirement that a company that receives the guarantees and defaults on its

Jon Kyl

0:50:44 to 0:51:04( Edit History Discussion )

Jon Kyl: obligations be taken into bankruptcy, the fdic and treasury could prop up whatever company they choose. so this bill does not end too big to fail. if we had truly wanted to do that, we would have passed the sessions amendment. this amendment would have struck the entire liquidation authority section from the bill and replaced it with

Jon Kyl

0:51:05 to 0:51:25( Edit History Discussion )

Jon Kyl: process for nonbank financial institutions. it also would have prohibited bailout authority and made needed adjustments so that a few prisions of the u.s. bankruptcy code to provide necessary flexibility to deal with the failure of large financial firms such as lehman brothers would work. in other words, it would have ended too big to fail. now, the secondary i mentioned

Jon Kyl

0:51:26 to 0:51:46( Edit History Discussion )

Jon Kyl: was the government-sponsored enterprises. no debate on too big to fail would be complete without a discussion of fannie and freddie. these are the two government-sponsored enterprises giving the authority to acquire mortgages, and it seems to be almost unconscionable that this bill does not even attempt any reform of these two

Jon Kyl

0:51:47 to 0:52:08( Edit History Discussion )

Jon Kyl: institutions, given the fact that t the creation of the problem. now, it's not because republicans haven't we have. the reckless behavior of these two institutions -- by the way, institutions that have come to epitomize too big to fail -- has surged through the entire commercial banking sector and our economy as a whole. let's recall just how central

Jon Kyl

0:52:09 to 0:52:29( Edit History Discussion )

Jon Kyl: these two government-sponsored enterprises were to the housing bubble and the ensuing collapse of that bubble. for years, fannie and freddie-backed mortgages were issued to too many people who could not really afford them. the two g.s.e.'s reaped enormous profits while recklessly taking advantage of the government's implicit guarantee to purchase trillions of dollars' worth of

Jon Kyl

0:52:30 to 0:52:51( Edit History Discussion )

Jon Kyl: these bad mortgages, including all those made to risky so-called subprime borrowers. this is the model that enabled fannie and freddie to inflate the subprime mortgage bubble. but when the housing market collapsed, the two g.s.e.'s were left with billions of dollars of bad debt, and guess who is on the hook for those billions? the american

Jon Kyl

0:52:52 to 0:53:12( Edit History Discussion )

Jon Kyl: these two institutions had their own dedicated regulator, the office of federal housing enterprise oversight or ofheo. the democrats tried to give them more authority, democrats jected, so they allowed the situation to spiral out of control. the easy credit fueled rapidly rising home prices. as prices rose, so, too, did the demand for even larger

Jon Kyl

0:53:13 to 0:53:34( Edit History Discussion )

Jon Kyl: mortgages, so fannie and freddie looked for ways to make even more mortgage credit available to borrowers with a questionable ability to pay. by 2008, the two g.s.e.'s had nearly $5 trillion in mortgages and mortgage-backed securities. they were overleveraged and too big to fail. it was a textbook example of moral hazard on a massive scale.

Jon Kyl

0:53:35 to 0:53:57( Edit History Discussion )

Jon Kyl: i warned about it repeatedly. today they hold a combined $8.1 trillion of total outstanding debt. because the federal government has decided to debt -- by the way, even thoh there has never been a vote in the congress to authorize this -- both of these entities have recently asked taxpayers for billions more to cover their

Jon Kyl

0:53:58 to 0:54:19( Edit History Discussion )

Jon Kyl: rapidly mounting losses. recently, freddie announced it will needn additional taxpayer bailout of $10.6 billion, and that's after it lost $6.7 billion during the first quarter of this year. in ten of t last 11 quarters, freddie has lost a total of of $82 billion, which is twice the amount it earned over the previous 30 years.

Jon Kyl

0:54:20 to 0:54:42( Edit History Discussion )

Jon Kyl: fannie, too, just recently asked taxpayers for more money. $8.4 billion to cover its soaring losses. since the federal takeover of fannie and freddie, taxpayers have lost $145 billion propping them u just two companies. and since the recently lifted the bailout cap, taxpayers are responsible for

Jon Kyl

0:54:43 to 0:55:03( Edit History Discussion )

Jon Kyl: unlimited losses at these institutions. the associated press summedp the situation succinctly. it wrote last week -- "the rescue of fannie and sister company freddie mac is turning out to be one of the most expensive aftereffects of the financial meltdown." so w not embrace real reform and relieve the taxpayers?

Jon Kyl

0:55:04 to 0:55:24( Edit History Discussion )

Jon Kyl: we know some of our friends on the other side believe that we should have an obligation or that we do have an obligation to trim fannie and freddie's sails. republicans offered three amendments, all of which atrablted bipartisan -- attracted bipartisan support that would have done exactly that, but they were all rejected by the majority. the alternative side by side

Jon Kyl

0:55:25 to 0:55:46( Edit History Discussion )

Jon Kyl: amendment that was adopted instead is meaningless. rather than rein in fannie and freddie, this amendment merely established that congress will commission a study on conservatorship of the two g.s.e.'s from treasury secretary timothy geithner. as "the wall street journal" asked in an editorial, "if a study is so key to dealing with

Jon Kyl

0:55:47 to 0:56:08( Edit History Discussion )

Jon Kyl: the g.s.e.'s, what has mr. geithner been doing in the last 17 months since the crisis?" and let's also remember that it was mr. geithner's treasury department that lifted the $400 billion g.s.e. bailout cap lt christmas eve. let's b absolutely clear. every day that fannie and freddie remain in their current

Jon Kyl

0:56:09 to 0:56:31( Edit History Discussion )

Jon Kyl: form is a day that u.s. taxpayers are subsidizing their activities. this bill does nothing to change the status quo, and i think taxpayers deserve better. the third area that i wanted to mention is the so-called consumer protection and its effect on small businesses. this bureau of consumer financial protection. well, small businesses across my home state of arizona and indeed acrosshe country are very

Jon Kyl

0:56:32 to 0:56:52( Edit History Discussion )

Jon Kyl: worried about the intrusive new bureaucracy here that' intended for consumer protection. of course, all of us support consumer protection. i don't know of anybody that doesn't. the question is how you do it and to whom it applies. we create a lot more cost to consumers if we make the regulation so expensive and inefficient that consumers actually wind up paying more money than they would have otherwise.

Jon Kyl

0:56:53 to 0:57:14( Edit History Discussion )

Jon Kyl: that's what's happened with the credit card legislation that we previously passed, and it could happen with this legislation as well, thanks to a newly created bureau of consumer financial protection. the bill establishes new restrictions on credit through so-called consumer protection provisions by limiting or reconfiguring credit options that are currently available to us.

Jon Kyl

0:57:15 to 0:57:35( Edit History Discussion )

Jon Kyl: the bill gives the new bureau a budget of up to $650 million, an amount that's more than double what the f.t.c. has requested for its economywide consumer protection activities. this money is to be spent as the director of the bcfp wishes, with no oversight or veto authority by congress or the administration. moving regulatory authority for

Jon Kyl

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

Jon Kyl: consumer protection to a new bureau with broad powers would add to an already complex layer of regulation that these businesses are forced to naviga, creating uncertainty that would make it likely more difficult to comply with existing regulations. my staff and i regularly hear from constituents who are trying to find ways to pay off their outstanding debts.

Jon Kyl

0:57:58 to 0:58:19( Edit History Discussion )

Jon Kyl: i'm ccerned that duplicative regulation has the potential to have the unintended consequence of making it more difficult for individuals and families to manage their debts. moreover, the proposed consumer protections reach beyond credit cards, restricting the availability of all forms of credit. these reductions in credit also mean declines in job creation

Jon Kyl

0:58:20 to 0:58:40( Edit History Discussion )

Jon Kyl: since many small businesses -- business start-ups use things like home equity debt and sometimes credit cards as their sources of funding. obviously, this poses a serious threat to our economy. a recent "new york post" op-ed by mark callibria stated -- "new restrictions on credit are

Jon Kyl

0:58:41 to 0:59:02( Edit History Discussion )

Jon Kyl: likely to cost our economy tens of thousands of jobs a year." of course, no one intends this result. no one wants to raise costs on small business, but that is the inevitable result of a policy that is written too broadly. that's one reason why the chamber of commerce, for example, opposes this bill. some of my colleagues have

Jon Kyl

0:59:03 to 0:59:23( Edit History Discussion )

Jon Kyl: suggested that the bureau of consumer financial protection would be significantly different from the consumer financial protection agency that was written into the house bill that passed last year. well, i respectfully disagree. while the new bureau would not be officially independent, it would effectively function as an independent stand-alone agency

Jon Kyl

0:59:24 to 0:59:44( Edit History Discussion )

Jon Kyl: with rule-writing pows and enforcement authority. whereas the consumer financial protection agency would be responsible for its own financing, the bureau of consumer financial protection would enjoy an automatic funding stream from the federal reserve. given the close similarities between the two proposed consumer units, it's instructive to consult a study released last

Jon Kyl

0:59:45 to 1:00:06( Edit History Discussion )

Jon Kyl: year by economist david evans and joshua wrigh after analyzing the consumer financial protection agency act, they concluded that it would, in their words, "most likely result in a significant reduction in the availability of credit to consumers." end of quote. a significant reduction in the availablity of credit.

Jon Kyl

1:00:07 to 1:00:10( Edit History Discussion )

Jon Kyl: that's not what the author intends.

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