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Senate Proceeding 10-01-08 on Oct 1st, 2008 :: 3:55:46 to 4:11:44
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Robert Menendez

3:51:14 to 3:55:46( Edit History Discussion )
Speech By: Robert Menendez

Robert Menendez

3:55:35 to 3:55:46( Edit History Discussion )

Robert Menendez: be voting, "yes." madam president, i yield the floor. the presiding officer: the senator from connecticut. mr. dodd: madam president, i don't see a -- oh, senator shelby, of course, is here. you've

Richard Shelby

3:55:46 to 3:55:58( Edit History Discussion )

Richard Shelby: got the time. i'm sorry. the presiding officer: the senator from alabama. mr. shelby: madam president? i ask to be recognized to speak for up to 15 minutes and that my entire statement be made

Richard Shelby

3:55:46 to 4:11:44( Edit History Discussion )
Speech By: Richard Shelby

Richard Shelby

3:55:58 to 3:56:10( Edit History Discussion )

Richard Shelby: part of the record. the presiding officer: without objection. mr. shelby: madam president, the proposal before us tonight provides $700 billion to buy ill-liquid assets from financial institutions.

Richard Shelby

3:56:10 to 3:56:24( Edit History Discussion )

Richard Shelby: the stated goal of this scheme is to return confidence and liquidity to our credit markets. we did not get into this situatioin a matter of days, madam president, and we're not going to fix it with a piece

Richard Shelby

3:56:24 to 3:56:39( Edit History Discussion )

Richard Shelby: of legislation quickly cobbled together in the back rooms of the united states capitol. in fact, madam president, this crisis has been years in the making. over the last decade, trillions of dollars

Richard Shelby

3:56:39 to 3:56:53( Edit History Discussion )

Richard Shelby: were poured into our mortgage finance markets, often at the direction of well-intended but albeit ill-conceived government programs. at first, the money-backed conventional mortgages with standard down

Richard Shelby

3:56:53 to 3:57:10( Edit History Discussion )

Richard Shelby: payments and properly verified incomes. over te, the number of home buyers that met conventional loan requirements dwindled. in order fuel the upward spiral, mortgage products became more exotic, requiring

Richard Shelby

3:57:10 to 3:57:22( Edit History Discussion )

Richard Shelby: less of borrowers and involving more risk. eventually, economic reality caught up with us. housing prices stalled and tn began falling. many who bought homes with unconventional loans were unable to afford

Richard Shelby

3:57:22 to 3:57:31( Edit History Discussion )

Richard Shelby: their rising payments because home values were dropping -- payments. because home values were dropping, they were unable to refinance and delinquency rates skyrocketed. this trend has not yet abated,

Richard Shelby

3:57:31 to 3:57:50( Edit History Discussion )

Richard Shelby: madam president. madam president, i have been a member of the senate banking committee for over 20 years. in fact, 22 years. when i joined the committee, the savings-and-loan crisis was just beginning to

Richard Shelby

3:57:50 to 3:58:07( Edit History Discussion )

Richard Shelby: unfold. and i just want to take a few minutes to remind my colleagues that it took nearly ten years, five congresses, three administrations until the -- that smaller, more contained crisis which cost taxpayers

Richard Shelby

3:58:07 to 3:58:17( Edit History Discussion )

Richard Shelby: nearly -- hundreds of billions of dollars was finally resolved. personally, i learned a few sordid lessons from that experience sitting on that committee with my friend, senator dodd. i came to

Richard Shelby

3:58:17 to 3:58:34( Edit History Discussion )

Richard Shelby: understand that bank management, bank capital and sound regulatory policy does make a major difference. what i learned then has guided me ever since. for example, in 1995, i opposed the expansion of

Richard Shelby

3:58:34 to 3:58:50( Edit History Discussion )

Richard Shelby: the community reinvestment act, c.r.a., and the loosening of loan underwriting standards. my concerns were based on the simple fact that credit cannot be safely extended on any basis other than risk.

Richard Shelby

3:58:50 to 3:59:05( Edit History Discussion )

Richard Shelby: and risk cannot be mitigated through social engineering. the appropriate allocation of credit is not political, it's based on merit. the c.r.a. was an attempt to get around this inescapable fact and it

Richard Shelby

3:59:05 to 3:59:21( Edit History Discussion )

Richard Shelby: failed. i remind my colleagues tonight of this as we prepare to buy assets backed by the very same mortgages borne of this flawed policy. madam president, the free market didn't fail. the federal

Richard Shelby

3:59:21 to 3:59:39( Edit History Discussion )

Richard Shelby: policies that created a false market did. in 1999, i opposed the financial modernization bill. i did not think it provides a sufficient regulatory structure to oversee the financial system that it created.

Richard Shelby

3:59:39 to 3:59:51( Edit History Discussion )

Richard Shelby: this was gramm-leach-bliley, you will know. in 2001, i became concerned about banking regulators' efforts to modernize bank calculating standards through what is known as boswell 2. while it's very important

Richard Shelby

3:59:51 to 4:00:04( Edit History Discussion )

Richard Shelby: to update these standards, it appeared to me and others on the banking committee, democrats and republicans, that modernization was focused more on reducing bank capital levels than improving bank capital

Richard Shelby

4:00:04 to 4:00:19( Edit History Discussion )

Richard Shelby: standards. i spent nearly five years on the banking committee trying to ensure, madam president, that regulators produced balanced capital requiremes that focused on safety and soundness, not the wishes

Richard Shelby

4:00:19 to 4:00:32( Edit History Discussion )

Richard Shelby: of the banking industry itself. when i became chairman of the banking committee in 2003, i immediately became concerned with the financial health and the regulatory structure of the government-sponsored

Richard Shelby

4:00:32 to 4:00:48( Edit History Discussion )

Richard Shelby: enterprises fannie mae and freddie mac. i did not think that the entities had sufficient capital, management controls or regulatory oversight. i and others on the committee at was with me were troubled

Richard Shelby

4:00:48 to 4:01:02( Edit History Discussion )

Richard Shelby: about their size, because their combined portfolios then amounted to nearly $2 trillion. in response to these concerns, we tried to pass tough g.s.e. reform. unfortunately, those efforts were rebuffed

Richard Shelby

4:01:02 to 4:01:17( Edit History Discussion )

Richard Shelby: by the democrats on the banking committee and on the floor of the senate. soon after, the g.s.e.'s won't a nearly trillion-dollar subprime and alternate-a mortgage-backed security spree. madam president,

Richard Shelby

4:01:17 to 4:01:30( Edit History Discussion )

Richard Shelby: $1 trillion, again. fannie and freddie's greatest allies were those that advocated, and at times demanded, that the g.s.e.'s continue to facilitate subprime and alternate-a borrowing. as long as they

Richard Shelby

4:01:30 to 4:01:47( Edit History Discussion )

Richard Shelby: complied, real regular laying was dead. the symbionic relationship in turn fueled an already overheated market to grow even hotter. as the driving force in mortgage finance, the g.s.e.'s purchasing

Richard Shelby

4:01:47 to 4:01:58( Edit History Discussion )

Richard Shelby: effort also broke down when scant underwriting standards remained in the marketplace. many, if not most, of the toxic's -- toxic's that's this taxpayer funded bailout is going to buy, were regulated

Richard Shelby

4:01:58 to 4:02:09( Edit History Discussion )

Richard Shelby: by the g. sevment e. and facilitated by their supporters right here in congress. madam president, over the last five years, we've also become very concerned about the regulatory oversite of credit rating

Richard Shelby

4:02:09 to 4:02:23( Edit History Discussion )

Richard Shelby: agencies whose ratings were crucial to getting securities sold. when we looked at the system in place, we realized that it was dominated by two companies and that the regulatory structure provided no real

Richard Shelby

4:02:23 to 4:02:38( Edit History Discussion )

Richard Shelby: oversight and actually prevented competitors from entering the market. considering that the value investors placed on the ratings, i recognized that immediate legislative action was necessary to address the shortcomings

Richard Shelby

4:02:38 to 4:02:50( Edit History Discussion )

Richard Shelby: of the oversight regime. we took that action and the president signed it into law in 2006. but unfortunately, madam president, it now appears even that effort came too late. the rating agencies provided

Richard Shelby

4:02:50 to 4:03:06( Edit History Discussion )

Richard Shelby: investment grade ratings on securities worth hundreds of billions of dollars. a large percentage of those ratings have since been downgraded, some have been declared worthless. i remind my colleagues

Richard Shelby

4:03:06 to 4:03:23( Edit History Discussion )

Richard Shelby: tonight that those downgraded securities also happen to make up the troubled assets that are now the focus of this bailout too. finally, madam president, in 2007, last year, i publicly questioned

Richard Shelby

4:03:23 to 4:03:36( Edit History Discussion )

Richard Shelby: the adequacy of the securities and exchange commission consolidated supervisory entity program. this nonstatutory program was put in place by the s.e.c. to allow the five big investment banks to meet

Richard Shelby

4:03:36 to 4:03:49( Edit History Discussion )

Richard Shelby: european regulatory standards without having to submit to the federal reserve supervision as provided in the financial modernization act. it also allowed the investment banks -- most of them are gone now

Richard Shelby

4:03:49 to 4:04:03( Edit History Discussion )

Richard Shelby: -- reduce their capital requirements. because i already thought that the 1999 act did not provide adequate supervision, i was troubled that the investment banks continued to chafe even at this minimal

Richard Shelby

4:04:03 to 4:04:17( Edit History Discussion )

Richard Shelby: supervision. with their trillions of dollars in assets, global operations and hundreds of thousands of employees, they were content to be -- quote -- "regulated" by a program with a staff of less than 20

Richard Shelby

4:04:17 to 4:04:30( Edit History Discussion )

Richard Shelby: people and they vigorously lobbied the banking committee to keep it that way. these concerns crystallized when democrats marked up legislation that would not only have codified the s.e.c.'s regulatory

Richard Shelby

4:04:30 to 4:04:44( Edit History Discussion )

Richard Shelby: concoction but also would have expanded the powers of investment banks, allowing them access to taxpayer-insured funds through ownership of insured depositoryies. i requested that the banking committee

Richard Shelby

4:04:44 to 4:04:58( Edit History Discussion )

Richard Shelby: hold hearings to examine the structure in greater detail before we ratified that which the s.e.c. created through regulatory fiat. mr. president, once again, we did not. instead, my colleagues on

Richard Shelby

4:04:58 to 4:05:14( Edit History Discussion )

Richard Shelby: the other side of the aisle voted not only to codify the c.s.e. program but also to expand it. my republican colleagues voted to reject it unanimously and argued for additional committee action.

4:05:14 to 4:05:24( Edit History Discussion )

today, as we speak, the c.s.e. program is gone because owb major investment banks have either gone bankrupt, merged or become that which they fought so hard to avoid: bank holding companies supervised

4:05:24 to 4:05:38( Edit History Discussion )

by the federal reserve. madam president, i would like to point out to my colleagues that a large number of the assets that will be purchased under the paulson plan were either originated or held

4:05:38 to 4:05:54( Edit History Discussion )

by bear stearns, lehman brothers, merrill lynch, morgan stanley, or goldman sachs. they were all once regulated under the s.e.c.'s c.s.e. program. madam president, we did not get to where we are

Richard Shelby

4:05:54 to 4:06:05( Edit History Discussion )

Richard Shelby: today by accident. it's a path that we chose. my warnings about the risk of basing credit decisions on well-intended social mandates rather than sound, fact-based underwriting were dismissed. my concerns

Richard Shelby

4:06:05 to 4:06:21( Edit History Discussion )

Richard Shelby: about the inadequacy of the regulatory structure out in place in the financial modernization legislation went unacknowledged. my efforts to ensure bank capital standards were designed to ensure

Richard Shelby

4:06:21 to 4:06:37( Edit History Discussion )

Richard Shelby: safety and soundness rather than industry concerns were largely conducted alone. when i urged focus on the s.e.c.'s consolidated supervisory entities program, a lot of my democratic colleagues

Richard Shelby

4:06:37 to 4:06:50( Edit History Discussion )

Richard Shelby: ignored me and my colleagues and instead voted to ratify and expand the program. whether we attempted to pass meaningful g.s.e. reforms, madam president, we were repeatedly stopped, as i said. as often

Richard Shelby

4:06:50 to 4:07:03( Edit History Discussion )

Richard Shelby: as i have argued that we needed to address systemic risk in the financial markets. our advice has been dismissed and my concerns have proven to be fully justified. i'm now -- i now tonight have

Richard Shelby

4:07:03 to 4:07:17( Edit History Discussion )

Richard Shelby: serious concerns about the bailout package we're preparing to pass. i have no illusion about the vote. my foremost concern is the manner in which we're attempting to address the problem. the paulson plan

Richard Shelby

4:07:17 to 4:07:29( Edit History Discussion )

Richard Shelby: focuses on a single problem basically, ill-liquid assets held throughout the financial system, mainly by a lot of major banks, including foreign banks. i believe we have a number of interrelated programs

Richard Shelby

4:07:29 to 4:07:41( Edit History Discussion )

Richard Shelby: -- problems that need to be addressed in order of their significance. we have not even made an effort to determine the range of problems, let alone establish a coordinated plan to address them. with that

Richard Shelby

4:07:41 to 4:07:54( Edit History Discussion )

Richard Shelby: in mind, madam president, i would like to point out what this unprecedented piece of legislation would do. this legislation is now a long and complex bill. my colleagues have tried to include a range of taxpayer

Richard Shelby

4:07:54 to 4:08:05( Edit History Discussion )

Richard Shelby: protections and oversight provisions. i commend those efforts, but there are limits on what they can achieve. for example, the bill does not require, madam president, that taxpayer losses be repaid

Richard Shelby

4:08:05 to 4:08:17( Edit History Discussion )

Richard Shelby: by its beneficiaries. it only directs the president to present a legislative proposal to recoup such losses from the financial services industry. a lot of luck. this is something that the president could

Richard Shelby

4:08:17 to 4:08:34( Edit History Discussion )

Richard Shelby: do even twhowt legislation -- even without this legislation. furthermore, there is no guarantee that the beneficiaries of the program will ever pay. the newest addition to the bill is a precipitous increase

Richard Shelby

4:08:34 to 4:08:47( Edit History Discussion )

Richard Shelby: in deposit insurance coverage from $100,000 $250,000. madam president, we're about to more than double the exposure of the already depleted deposit insurance fund and, by extension, the american taxpayer

4:08:47 to 4:09:01( Edit History Discussion )

on a whim. it's not paid for. i want to remind my colleagues that the track record for overnight increases in deposit insurance is not pretty. in 1980, congress increased deposit insurance coverage

Richard Shelby

4:09:01 to 4:09:16( Edit History Discussion )

Richard Shelby: for all accounts from $40,000 to $100,000 without the benefit of hearings or open discussion. at that time, proponents argued such a change was necessary to stabilize the banking industry, just like

Richard Shelby

4:09:16 to 4:09:28( Edit History Discussion )

Richard Shelby: tonight. what followed was a massive bailout of the savings-and-loan industry to the tune of billions of dollars. this time around, we're proposing a 150% increase when the deposit insurance fund is already

Richard Shelby

4:09:28 to 4:09:45( Edit History Discussion )

Richard Shelby: stressed and in need of recapitalization. at a time when the fdic problem bank list is growing and more failures -- probably a hundred or more -- are anticipated, this higher deposit insurance coverage

Richard Shelby

4:09:45 to 4:09:54( Edit History Discussion )

Richard Shelby: will increase the fdic's expected payments for failed insurance government others -- depositories, failed banks. these will be passed on in the form of higher banking premiums will instead be placed

Richard Shelby

4:09:54 to 4:10:08( Edit History Discussion )

Richard Shelby: directly on the american taxpayer. let's also be realistic here tonight. this measure is intended to address the concerns of those who handle large transaction accounts such as corporate treasury

Richard Shelby

4:10:08 to 4:10:22( Edit History Discussion )

Richard Shelby: deposits. it does nothing for the average american. let's also be clear what this means for taxpayers. if on the front end the $700 billion bailout is not enough to shore things up -- i hope it is,

Richard Shelby

4:10:22 to 4:10:33( Edit History Discussion )

Richard Shelby: but i doubt it is -- rest assured there will now be more insurance on the back end should banks begin to fail. more problems, more running to the treasury. the american taxpayer will pay both coming

Richard Shelby

4:10:33 to 4:10:45( Edit History Discussion )

Richard Shelby: and going. madam president, while i generally do not support bailing out corporations or individuals, if we're going to get into the bailout business, which i hoped we wouldn't, then funds should be

Richard Shelby

4:10:45 to 4:11:03( Edit History Discussion )

Richard Shelby: directed to individuals that are stressed by their mortgages as well. the -- i ask unanimous consent for two additional minutes. the presiding officer: without objection. mr. shelby: these provisions

Richard Shelby

4:11:03 to 4:11:18( Edit History Discussion )

Richard Shelby: in these -- in this bill for individual homeowners is inconsequential compared to the the $700 billion going to wall street. madam president, as i said, i'm no advocate of bailouts, i voted against the chrysler

Richard Shelby

4:11:18 to 4:11:30( Edit History Discussion )

Richard Shelby: bailout. i cannot say that i would support a bailout in any instances. it would be greater if it was subjected to greater scrutiny and perhaps went down a different road. that said, i agree that we need

Richard Shelby

4:11:30 to 4:11:44( Edit History Discussion )

Richard Shelby: to do something to address the current liquidity crisis in the current marketplace. my greatest concern is that we have not spent any time determining the best response. there are many well-informed people

Christopher Dodd

4:11:44 to 4:11:58( Edit History Discussion )

Christopher Dodd: who argued that we have not. this morning a nobel prize winning economist indicated that using a reverse auction program here to buy distressed assets to buy from financial institutions, was not

Christopher Dodd

4:11:44 to 4:13:07( Edit History Discussion )
Speech By: Christopher Dodd

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