this underwriting amendment. i put that in there because i think most people looked at this looked at the dodd proposal on 5% retention on securitization and realized that that created a problem not a solution. and so i actually did that to draw people to our amendment. but since i had a number of democrats my friends, on the other side of the aisle come up and say that they would have supported it without striking the risk retention, i have now refiled that amendment okay? and i have filed ÷ -- and i have filed that amendment. i'm now asking, let's have some standard underwrieling procedures in this country so now that i've refiled that amendment, if it was the issue of risk retention on the securitization piece that kept you from coming onto this amendment, i've refiled it, and now i'm seeking on the other side of the aisle -- i'm seeking some cosponsors of this amendment.

we had some great cosponsors this last time, senator gregg lemieux, coburn and brown senator shelby also supported this amendment. we had johnny isakson from atlanta. he knows more about real estate lending probably understand that anybody here, who spoke on behalf of this amendment. but again to hear my friends on the other side of the aisle say you know, i would have done this but, you know that risk-retention piece you had in there regarding securitization, it kept me from t so now i have a clean amendment that does nothing in that regard. it leaves that in place. but, again it puts in place these underwriting standard. i had numbers of democrats come up and say look, i agree with you. we ought to at least 5% now. as a matter of fact, i i think we ought to have more. because i want everybody in this body to have the opportunity to vote for a good amendment a sound amendment, an amendment that really takes us away from the way we've been going in this

country, which is we want to make sure that everybody is entitled no it no longer is the american dream that someone owns a home; it is an american entitlement. nobody saves. i shouldn't have said that. we've moved away from requiring that people save and show discipline to own homes. we've made it now so that, according to an amendment that passed earlier today -- the presiding officer put it in place, and i certainly respect what he tried to do with that. but in essence what we did in that amendment was say look, what you can to, to have proper underwriting is you can borrow and pay over time. we'll let you put the down payment into the cost of the loan and borrow it, pay it back over time. so mr. president, i thank you for the opportunity to speak today, because i have again -- so many friends on the other side of the aisle came up and

said "corker, i would have supported your amendment but it had that one phrase in it about risk refengs. kings-- about risk retention." i've taken it out. i see my friends oner side friends on the other side of the aisle smiling. i'm looking forthe it income. they'll haveir income, will to see that pay the loa my sen realsterscome to today, my f any because they want to mako to on co if soow i'm offering for help with this. mr. president, i yield t . durbin: sena ders. and printed in the record.tion?. president mr. president, on behalf of senator bingaman i ask unanimous the privilege of the floor be granted to kevin eyler, a fellow on the committee of natural presourcessources for the

pendency of s. 3217 and any votes thereupon. the presiding officer: without objection. mr. durbin: thank you. and i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

mr. barrasso: mr. president? the presiding officer: the senator wyoming. mr. barrasso: thank you, mr. president. i ask that the quorum call be vitiated. the presiding officer: without objection. mr. barrasso: thank you, mr. president. mr. president, i come to the floor today -- and the republican leader has already addressed you and this body to discuss the issues of health care in this country about new revelations, in information that has come forth in terms of the specifics of the cost of the health care bill that has been signed into law. the costs that far exceed what was ever anticipated. and so i come to the floor as someone who's practiced medicine in wyoming for 25 years

orthopedic surgeon taking care of families all across the state of wyoming was also a medical director of the wyoming health fairs, tndz it is a -- and it is a program provided low-cost health screenings to people all across the state of wyoming. this gave people the opportunity to keep down the cost of their medical care. so i come to the floor today with a second opinion my second opinion as a physician, a practicing physician taking care of patients, and it is a second opinion about the health care law. today i come to the floor because the goal of the health care bill is truly to improve quality and improve access and get the cost of care down. those are the things that i think all of the senate wanted to sl achieved. -- to have achieved. but having seen this bill that's been passed into law signed into law, i believe that this bill is going to be bad for patients bad for our providers our nurses and doctors who take care of those patients, and bad for our payers, the american people, the people who are going

to foot the bill for this health care bill. i believe that this bill fundamentally, as it has been passed into law is going to result in higher costs for patients it's going to result in less access to care for people all across america and it's going to result in unsustainable spending. mr. president, at a time when we're running record deficits. so i think about things that the president said when he was not just running for office but as president. he said the plan i am aannouncing tonight -- he said this to a joint session of congress. "the plan i'm announcing tonight will slow the growth of health care costs for our families, for ow businesses and for our government." but in fact the chief actuary for medicare and medicaid said that the president was wrong said that the cost of care will actually go up by $311 billion through 2019, and now the revelation yesterday from the congressional budget office is that when you take a look at some of the things that hadn't

been scored, as they say costs out, it is going to add another $115 billion on top of that. the president said, if you like your health care plan, you'll be ail to keep your health care plan period. he said -- he actually said the word "period." he said, "no one will take it away period." mo matter what period. but the congressional budget office and the chief actuary for medicare and medicaid says that 14 million americans will lose their employer-sponsored health coverage under the new law. so today mr. president i come up to the floor to also mention that recently the secretary of health and human services, kathleen sebelius, had an epiphany about the doctor shortage in america. last week she said, a nationwide primary care physician shortage had to be addressed before over 30 million americans get access to subsidized health insurance

coverage. and this is her quote. she said, "how are we going to be ready when we already have a shortage in too many parts of the country?" well, this shortage should not have been a surprise to the secretary of health and human services. the american association of medical colleges tells us, at the current graduation and training rates, we are facing a shortage of 150,000 doctors in the next 15 years. over the past year, medical experts warned congress -- warned this body, warned the administration -- that any health reform bill should tackle the issue of physician shortages. but instead of helping doctors the new law actually discourages the next generation from becoming doctors. this new bill cuts payments for doctors and cuts payments for patients on medicare, and it doesn't include enough money to train new doctors.

i believe it was intentional. mr. president, maybe the secretary -- maybe the obama administration maybe democrats in congress should have paid attention to the experts before jamming this health care law down the throats of the american people. maybe they should have heeded the calls that i heard from medical professionals all across wyoming pands across the country: slow down. let's get it right. but, no, they didn't. and now the american people are stuck with a law that costs too much doesn't solve america's doctor shortage, doesn't even address it, and doesn't deliver good care for patients. now, mr. president this should not have been a surprise to the secretary, because "the wall street journal" actually over a month ago says, "medical schools can't keep up. as ranks of insured expand, the

nation faces a shortage of 150,000 doctors." it says "a shortage of primary care physicians could mean more limited access to health care and longer wait times." and if what about the training of doctors? right here, now, the secretary apparently has just realized this, but it's been in print for well over a month. "doctors' groups and medical schools had hoped that the new health care law passed in march would increase the number of funded residency slots." youyou know, where they train family doctors. "but such a provision didn't make it into the final bill. the drld" -- now over a trillion-dollar bill. are we going to train doctors? no, they left it out. and then what about hospitals? well here it is. "the wall street journal," "hospitals your honor the knife." "new york city system aims to cut 2,600 more jobs as state

funding drops." and not enough doctors? well all you have to do is go to "the new york times." "more doctors giving up private clinics." that's the end of it. so why would so many doctors behave this way? well let's look at "congress daily" just this past week, may 4. "latest c.b.o. figures show higher doc fix price tag." that's to pay for doctors for the doctor bill. of course it was left out of the health care bill. how can we have a national health care law that fails to address training doctors and paying for doctors? it is astonishing mr. president. it says that "scheduled cuts take effect june 1, an option outlined friday by c. b.-to-freeze medicare payment rates which under the new figures would cost $275.8 billion through 2020. an amazing amount because physician payment rates for medicare are expected to be cut

21% on june 1." so that's what we're looking at now and, mr. president that's why today i come to the floor giving my doctor's second opinion because it is time to repeal this legislation and to replace it with legislation that delivers more personal responsibility and more opportunities for individual patients. we need a patient-centered health care bill, one that provides individual incentives, such as premium breaks for people that behave in a way that encourages healthy behavior and gets down the risk factors that increase the cost of care, that allows people to take their health insurance with them when they switch jobs, that gives people who buy their own health insurance the same tax relief that's available to people who get their insurance through work that allows americans to buy health insurance across state lines, that deals with lawsuit

abuse and that allows smogs small businesses to join together in order to offer health insurance to their employees. these are the things, mr. president, that will work to get down the cost of care and deliver higher quality of care to the american people. mr. president, they are not in the health care bill as ifed the senate that passed the house and was signed into law enforcement and that is why mr. president today, once again, in light of this brand-new information on the increased cost and the final realization that the secretary of health and human services now says gee, we don't have enough doctors to cover the situation it is time to repeal this bill and replace it with what we know will work for the american people. thank you mr. president, i yield the floor. a senator: mr. president? the presiding officer: the senator from virginia. mr. webb: mr. president, i rise to speak on an amendment that i introduced amendment numbered 3736. this amendment i know, has caused some concerns in

different places, both in the political process and in the financial sector. i believe it is a very fair, carefully drawn amendment and it's a fulfillment of a promise that i made when i voted in favor of the tarp funding on october 1, 2008, when i stated that i would do everything i could to make sure, first of all, that we look at appropriate executive compensation issues. secondly, that we would work to reregulate the financial sector, which we are doing with this bill thankfully. thirdly, that we would invest the american taxpayers in the upside of the economy when it started to come back because it was the american taxpayers' funding of our -- rebuilding our economy that made this happen, not the funding of the banking system. and this bill simply says that

if you receive -- or this amendment simply says that if you receive $5 billion or more from the tarp program and if you were a couple of other companies like fannie mae and freddie mac who received significant federal funding in this bailout that any compensation that you received in 2009 that is above your basic compensation and above an initial $400,000 bonus should be shared with the taxpayers who made this possible. this is not a clawback. it's not retroactive. it's moneys earned in 2009 which came in -- which were paid out in 2010. it's not ongoing. it's a one-shot proposition. it affects only 13 companies. and from the executives in those 13 companies it's estimated that the american taxpayers would be reunion rated to the extent of -- remunerated to the extent of $3.5 billion

to $10 billion. i believe this is very fair, but at the same time i understand, based on discussions with leadership that there may be a constitutional point of order that would preclude consideration of this amendment on this particular piece of legislation. so i would like to take this opportunity, mr. president to inquire of chairman dodd through the chair whether that is his understanding as well. mr. dodd: mr. president? the presiding officer: the senator from connecticut. mr. dodd: first let me thank my friend and colleague from virginia. he is exactly right. under the constitution of the united states, all revenue-originating measures must originate in the other body the house of representatives. the senator from virginia, despite his amendment which i agree with, it's what they call a blue slip. an amendment is offered here that would impact on the revenue code and it's originated over here, it's subject to an objection, what they call a blue

slip. it doesn't go to the merits of the amendment. it just goes to the question of the constitutionality of such a proposal where revenue is affected those matters must begin in the house. i -- i would just say to my colleague from virginia that there will be opportunities i'm sure with revenue measures that will be coming from the house for our consideration at the appropriate time to raise this amendment again. i, for one am attracted very much to the amendment and what he is proposing and would hope that he would -- at another point here, and i presume that opportunity will rise in the next couple of months, because i gather revenue measures that will be coming over here, that we would have another chance to address this issue. i appreciate his consideration in this matter and look forward to working with him on this question when we have the next opportunity to do so. it's my understanding that the amendment would suffer from that constitutional question at this -- at this point. mr. webb: through the chair i would thank the chairman for this clarification and i -- the last thing i want to do in a

bill this complex is to tie up the senate in procedural votes rather than votes of substance. even if i -- even if this poured were raised, it's -- this point of order were raised, it is my understanding there would be a mandatory vote which would tie us up. so i am not going to call up this amendment and i very much appreciate what the chairman said about the possibility that it be allowed a vote on other appropriate legislation being considered here in the senate, as i previously stated. i believe this is a matter of very eminent fairness. it would be for the body to vote on it. i just would like to have that vote. with that, i yield the floor. mr. dodd: i thank my colleague. mr. president? the presiding officer: the senator from connecticut. mr. dodd: while we are waiting there are two pending amendments which i believe we can voice vote, with but there may be a second-degree amendment offered to one of these amendments.

it's the first time a second-degree amendment has been offered to one of these amendments. we have tried to give everyone a fair chance to air their ideas. we have had no tabling motions no filibusters, at least none declared, on the bill at this point. nonetheless, senators have a right to offer second-degree amendments if they want to. it's just i would hope we avoided it up to now and having considered quite a few proposals here in the senate. i count about 15, 16, at least on my list of amendments on the democratic side that members would like to be given the opportunity to raise. i can't speak exactly as to the number on the other side, but it's not a large number. our republican colleagues, at least based on the list i have seen it's about six or seven or eight. i may be off a little bit on that count but it's not a large number of amendments. here we are again it's 12:30 almost 12:30 we're sort of sitting here. we will potentially go into a quorum call. i am hearing again my colleagues say well, we have got to stay on

this bill, don't get off it. i'm prepared to stay here and work. you can't work when numbers won't come -- when members won't come over and at least allow us to vote up and down on roll call amendments. on saturday, i submitted to my good friend from alabama senator shelby and his staff a list of technical amendments as well as some bipartisan amendments and others that i thought were noncontroversial that we could make part of a manager's amendment. you could only have a manager's amendment where you get consent to do so. obviously, any of the objections to any of the suggestions i sent over on saturday would exclude them from a manager's amendment. but it is now wednesday and i have yet to hear back whether we accept or reject or want to add to that package of amendments. that would help tremendously to clean out a lot of issues that i believe there is consensus on. i make the plea, i made it privately, i will make it publicly. at some point the leader will say there is enough on the bill. we try to go back and forth in

an orderly fashion so the members will have a chance on either side of this so-called political divide which i wish didn't exist and even in this chamber for people to offer amendments. in dead time like this, the clock is ticking. we have no votes on this friday. we won't be in on saturday or sunday. we would like to move on, i know to other issues. we have taken a lot of time on this bill. i'm a strong advocate of doing that to prove this body can in fact function. we can consider each other's ideas, modify them, vote for them vote against them, but to do what we tell every high school class or elementary school class that we talk to as senators about how the united states senate functions. i think we're proving we can do that on this bill despite the significance of it. the first time in almost 100 years of reforming the financial structure of our nation. and my hope is we'll continue and finish it without having to get involved in procedural motions that would deprive some people of being heard with their idea.

whether you like it or don't, at least have the opportunity to come up. and i'm trying to orchestrate our votes in a way that relate to the matters we're dealing with. it doesn't always work perfectly, but it's what every manager who has ever managed a bill here tries to do in a way. i know there are members that i have that are frustrated they haven't been able to be heard yet on their ideas and i want to give them the opportunity to do so. when you get delays like this where the time could be filled on considering these matters it -- it sets us back from the goal of having a bill be completed in this congress where all members had a chance to be heard, that we were able to tackle a significant issue and come to a conclusion about it. there are those who think we can't do that any longer here. i believe we can and we're proving it in the last couple of weeks. that's not after two weeks of a good spirited, civil partisan, in some cases debate, but civil debate. let us complete the work as we have begun. so my plea to my colleagues, particularly on the minority side right now is please respond to these requests so we

have some idea of what can be excepted -- accepted, what needs to be modified and what will not be accepted so we can actually move to the legislation. with that, i move to the absence of a quorum. oh my colleague is here. i didn't see you. i yield the floor. mrs. lincoln: mr. president? the presiding officer: the senator from arkansas. mr. lincoln: thank you. i want to add my compliments and my gratitude toward chairman dodd for his unbelievable patience his hard work, the hard work of his staff in really trying to come up with a good consensus, finding common ground here where we can move forward and really address the economic crisis that has hit this country and deal with the consequences that we have seen and certainly the ideas we know exist to be able to solve the problems and move forward put our economy back on track put people back to work, making sure that we're rebuilding our country in a way that is going to be sustainable with a good financial regulatory

reform initiative that's going to be meaningful. so i just applaud his effort and his patience in what he is doing and working with everyone and certainly add my efforts to trying to work together with others to make sure that we can move this bill as expeditiously as possible, obviously with the consideration he has given to everyone's concerns and their desire to really make it a better bill. mr. dodd: mr. president if my colleague from arkansas would yield for just a minute, i want to thank the senator from arkansas. she is the chairperson of the agriculture committee, which is a huge undertaking. every state is affected by decisions made in that committee, even small states in new england. actually contrary to what many people think actually have agricultural interest. maybe not to the extent of oregon and arkansas, but we have them. so i'm very, very grateful to her and the members of her committee for the work that they have engaged in here. we are truly fortunate to have the senator from arkansas in the position she is in, making the kind of decisions leading providing valuable contributions, not only for this particular effort. we have worked a lot of issues

over the years together, and she is a great advocate of her state, but i would also say she is a great advocate for our country. that's qualities we hope people bring. we have an obligation to keep an eye out for what happens in our home states, but in doing so to keep an eye out for our country. striking that balance is the challenge that we all face from one time or another. no one does it as well as the senator from arkansas, striking the balance. i have heard that word about arkansans over and over again during her tenure here. she is as tenacious a fighter that any state has ever had in my 30 years here. but she is also mindful that arkansas like connecticut lives in a country and we all have to be mindful of each other's interests. striking that balance has been invaluable in this debate. i didn't want the moment to pass without thanking her immensely and her staff and others for the contributions they have made. mrs. lincoln: i thank the senator from connecticut and am grateful to him for his comments and again grateful for his patience and perseverance in

getting something done that is really meaningful to all americans. i know arkansans are clamoring for it and i know others across the nation are. i would just say to the work of the agriculture committee for all americans who enjoy nutrition that comes from the hard-working farm families across this country who produce the safest, most abundant and affordable supply of food and fiber, we all have a little bit at stake in that agriculture committee and we appreciate so much working with the senator from connecticut. chairman dodd has done a tremendous job. mr. president, i -- this week -- and i come to the floor here to talk about something just a little bit different. this week, my home state of arkansas marks a somber milestone. since september 11, 2001, 100 service men and women with ties to arkansas have given their life to help defend our freedoms in this great country. i rise today to honor their ultimate sacrifice on behalf of our nation.

it is also with great sadness that i pay tribute to the family of lance corporal richard r. petty, 21 years of age of fayetteville arkansas. lance corporal penny was killed may 6 while supporting combat operations in hell mutual fund fund -- in helmond province in afghanistan, making him our state's 100th man or woman who have given his life to help defend our freedom. along with all arkansans, i am grateful for corporal penny's service and the sacrifice of all our military service members and their families. more than 11,000 arkansans on active duty and more than 10,000 arkansas reservists have served in iraq or afghanistan since september 11 2001. these men and women have shown question courage and perseverance through the most difficult of times. my father and both of my grandfathers served as

infantrymen. they served our nation in uniform and taught me from an early age about the sacrifices our troops and their families make to keep our nation free. as neighbors as arkansans and as americans, it is incumbent upon us to do everything we can to honor their service and to provide for them and their families, not only when they are in harm's way but also when they return home. while it is important to honor those who have served our country in uniform with words we must also honor them with our actions. i've consistently supported initiatives that expand the benefits our service members and veterans have earned earned and deserved. during these important economic times, it's even more important mr. president, that we don't shortchange these heroes and their families. that's why i've offered several bills on behalf of arkansas

military service members veterans and their families. in doing so, i have focused on a number of priorities including requiring more accessible health care for guardsmen and reservists so that they can maintain the medical readiness required to fulfill their missions. also ensuring that future g.i. benefits for members of the national guard and reserve keep pace with the national average cost of tuition and allowing beneficiaries of the post-9/11g.i. bill to use their g.i. benefits more flexibly, to develop skills that are critical to our work force and our economy and their reentrance into the workplace. also addressing inequities in survivor benefits for military families. with more than 600,000 courageous men and women who have returned from combat in iraq and afghanistan and with thousands more on the way mental health care is an issue

that also deserves more attention. i visited injured service members at walter reed and in arkansas and witnessed firsthand that more and more of our troops are affected by service-connected mental health issues, such as traumatic brain injury and post-traumatic stress disorder. to address this issue madam president, i've introduced legislation to ensure that our troops receive proper mental health assessment before and after they enter a conflict zone. the issue of mental health, madam president, does not just affect our troops. with more national guard and reserves from our rural communities serving abroad families have expressed concerns to me about the impact increased military deployments have on our children and particularly their children. and whether schools have sufficient resources to meet these challenges. to meet these concerns,

madam president, i've also introduced legislation to increase the number of school counselors, school social workers and school psychiatrists and psychologists in high-need school districts, many of which are located in our rural areas all across this great nation. all of our veterans, from the greatest generation to vietnam war veterans to the new generation of service members in the middle east and across the globe all of our veterans have sacrificed greatly on behalf of our country. although the challenges and needs of veterans have changed over time one thing remains constant. it is the responsibility of our nation to provide the tools necessary to care for our country's returning service members and honor the commitment our nation made when we sent them into harm's way in the first place. our grateful nation, madam president, will not forget

them. when their military service is complete, it is the least that we can do for those whom we owe so much. thank you madam president, and i will yield the floor. mr. warner are: madam president? the presiding officer: --mr. warner: madam president, i want to thank the senator from arkansas for her statement today about the folks not only from arkansas but from across country, from virginia, from delaware from north carolina. and i wasn't planning on speaking. i'm only going to speak very briefly because my friend, the senator from delaware, is going to speak much more extensively on this issue. but many of us who've -- who have the opportunity to preside 6 have heard, i know me particular on monday afternoons, have heard the senator the senator from delaware come down on a regular basis for months on what until

last thursday was a pretty esoteric issue an issue that, as somebody who's spent 20 years around the finance sector before i got into politics full-time an issue that i thought i might have some knowledge out but candid as the senator from delaware started talking about high-frequency trading colocation sponsored access, flash trading these were whole realm of new terms they actually actually -- that actually even make derivatives look simple. but the senator from delaware sounded an early warning signal that the massive amounts of investments that had been made by certain firms to try to get what appears to be a fractional milisecond advantage in the trading process might come back and haunt us all. last thursday afternoon we saw potentially -- and we still don't know and the regulators i know were up testifying on the hill tuesday to the house

side -- but we saw what could have been the first warning shot across the bow of what could be the next systemic risk crisis when the stock markets in the united states lost over a trillion dollars of value in a dramatic downsweep of about 16 to 20 minutes. the market recovered. almost a week later we still don't know the real cause. and i don't think we can blame the regulators. i've had conversations with the head of the s.e.c. and she acknowledges that keeping up with the technology and having the oversight for all this proliferation of new exchanges electronic exchanges many that didn't even exist a few years back. i think most investors probably think they trade on the new york stock exchange, the american stock exchange or the nasdaq. they don't realize that the majority of trades are now on electronic exchanges they probably never even heard of. and the senator from delaware has consistently raised this

issue and whether it's simply additional speed limits, whether it's system brakes whether it is trying to make sure there's not unfair advantage that is being created. these are all issues that we need to come back to, and i just to want personally, as i'm proud of the fact that the senator from delaware and i contacted the chairman of the banking committee, we've spoken out he's been the leader on this issue, i've been proud to follow his lead. i know he's going to speak more about this issue today and i'm sure in the coming weeks. and i don't have all the knowledge, i don't i don't know the right answer yet but i just do know in my gut that i think the senator from delaware is on to something here that we all need to make sure that we take a better examination of. the last thing the market needs right now particularly for that small-time investor is some sense that somebody on wall street is getting even one further advantage through the use of technology.

or that there's not appropriate system brakes in the event of a mistake made. so i yield the floor and want to commend my friend, the senator from delaware, and look forward to working with him and the chairman of the banking committee, who's that said we will -- that the committee will be taking up this issue on something that i think we all need to take heed of to make sure that in this very important legislation that chairman dodd is working on, that we not only make sure we fix the last crisis but we potentially get ahead on the next crisis. with that, madam chairman, i yield the floor. mr. kaufman: thank you. madam president? the presiding officer: the senator from dell debt. mr. kaufman: i'd ask to speak has in if morning business. the presiding officer: without objection. mr. kaufman: i really -- the senator from virginia, as usual is modest. it is -- he is -- he has explained a lot to me about the intricacies of this area which is of great concern and his knowledge on this is -- is great and he is i am finding it incredibly rewarding working with him on this issue.

so i would like to speak about that a little bit today and really follow up on the remarks that the senator from virginia made. as he said last thursday for one of the few times since 24 stockbrokers first gathered under a buttonwood tree in 1792, we had a stock market that for 20 minutes stopped performing its essential function: discovering the prices of securities based on a balance between buyers and sellers. our equity markets collapsed in a matter of minutes. liquidity dropped off a deluge of sell orders overwhelmed the buyers and the rug was pulled out from underneath millions -- millions -- of investors. plummeting the dow jones industrial average towards its biggest intraday loss in history history, nearly 1,000 points. then just as quickly and inexplicably, the market reversed course, snapped back

like a yo-yo and recovered much of its lost ground. thank goodness. in the immediate aftermath the world's focus turned to black box computer trading which relies upon electronic trading alogrithms to execute thousands of orders in tiny fractions of a second. these high-frequency trading computer programs determine with minimal almost no human intervention, the timing, price and quantity of orders. madam president, it's too soon to know the myriad factors that played into last week's meltdown, though it appears to be quite likely that we witnessed a realtime example of high-tech trading run wild or in some cases unplugged. the cooperation between the s.e.c. and the cftc is critical to unraveling what happened in the futures and equities markets and we should wait -- we should wait for their investigation and

for all the facts to be discovered. it's also too soon to coaless about band-aid solutions. band-aid solutions that is, without also deffing deeper into the structural problems and the inherit problems that part of all of our capital markets. the s.e.c. has still not discovered or explained what triggered or accelerated the incident, but already the leaders of the exchanges have admitted that no one had previously thought to implement systems wide circuit breakers or adequately protect against the possibility of erroneous trades. yesterday after meeting with the leaders of six exchanges the s.e.c. released a statement saying -- and i quote -- "as a first step, the parties agreed on a structural framework to be refined over the next day for strengthening circuit breakers and handling erroneous trades." madam president that is fine and i mean that is fine but it

is indeed, as the s.e.c. said, only a first step. while it's true that we must wait for information to come in before we reach any conclusions there are many questions that must be carefully reviewed and answered. the first and most obvious is whether we have gone from too few market centers -- it twhacht long ago when we just had two -- it wasn't that long ago when we just had two the new york stock exchange and the nasdaq -- to too many, each with different dispanders procedures for protecting investors and preserving market integrity. we now have over 50 market centers which has brought added competition. competition's good. today alogrithm and trading interests are wired across markets, equity, fixed income, futures and options. the market is the network and yet our regulators work in silos. responsibilities are divided between the securities and exchange commission and the cftc

cftc. within equity markets, we have multiple self-regulatory commissions setting rules more silos, new york stock exchange, finra, national stock exchange and more. all too often, those rules have been watered down and eliminated in the absence of the s.e.c. establishing these and other regulatory controls across equity markets. we created a national market system but we forgot to create a national regulatory and surveillance system to go along with it. we need, we absolutely have to have a consolidated audit trail across all market centers as senator schumer and others have raised. as finra chairman rich ketcham admitted last october regulators are looking at -- and i quote -- "an incomplete pick picture of the market and knowing full well that this fractured approach does not work work." that's -- that's quoting chairman of the finra rick

ketcham. the second obvious question is: why is it taking the s.e.c. so long to reconstruct the unusual market activity of last thursday? and there's an answer to that. because there is no transparency transparency. the mission does not yet collect by rule the data it needs to officially to reconstruct unusual market activity. even though congress gave the s.e.c. large trade and reporting authority in the market reform act of 1990 -- that's 1990 -- after the s.e.c. had difficulty in reconstructing market incidents in 18987 and 1989 -- 1987 and 1989, the s.e.c. has never used it. the s.e.c. proposed a large trader rule in 1991 received comments to be proposed in 1994 and then, unfortunately never adopted it. this is even though the commission acknowledges -- and i quote -- "the current electronic blue slip system does not efficiently collect large

volumes of data in a timely manner that allows the commission to perform contemporaneous analysis of market events. further, the data generated by the e.b.s. system does not include important information on the time of the trade or the identity of the customer." this is what the commissi -- this is what the commission acknowledges that the data generated by the e.b.s. system does not include important information, the time of the trade, and the identity of the customer. how are you supposed to find out how something happens if you don't have data on the time of the trade or the identity of the customer? flash forward to 2009. the s.e.c. commissioner -- chairman mary schapiro's credit and to her real credit she began a process of studying high-frequency trading last october. i have to say however the pace of the commission's progress has been slow, indeed as many of my colleagues know, i have come to

the the floor repeatedly to call for a greater sense of urgency. for example, last year, september 23, i spoke on the senate floor and asked about high-frequency trading strategies. and i quote from that september 23 2009, speech. "to these high-tech practices and the about ballooning daily volumes pose a systemic risk?" question number one. "what do rewe willly know about the cumulative effect of all of these changes on the stability of our capital markets? in order to maximize speefd execution, many sponsored access participants may neglect important pretrade credit and compliance checks that ensure faultial algorithms cannot set out erroneous trades." that was my quote. on november 20, 2009, i wrote a letter to the s.e.c. chair mary schapiro asserting that "transparency, disclosure, and risk compliance requirements ojt

trading activities of high-frequency traders are needed urgently. "that was last october -- november. while he was encouraged to hear that the commission may soon move sooner than its existing authority to require tagging and reporting by large traders now using high-frequencial gore ridgealgorithms,i am truly concerned that the commission does not intend to issue a concept release on high-frequency trading until early next year. and that rule proposal should not be expected before the summer of 2010-2011. given that, the commission under current sproars now blind to high-frequency trading operations. the need for immediate action should not wait until the commission has completed its comprehensive review." end quote. in her response on december 3 chairman shapiro assured me that the commission was planning to issue a trading tagger rule last

month. that was back in december. my letter to the chair was in november 20 of last year. and i was concerned that we would not have a concept released until early this year and i was concerned that the rule proposal would not be expected before the summer of this year. in response, on december 3 chairman shapiro assured mae that the charitable contribution was planning to issue a larger trader tagging rule in the following month. that was in december. she e-assured me she was going to issue a larger tagging rule the next month. it wasi understand and i really don't -- these are incredible problems that face the s.e.c. because of the fact that there was no real regulatory oversight for so many years. i understand the many hurdles regulatory agencies face which slow them down, in particular the need to avoid unintended consequences. this process was clearly way

beyond that. given the deficiencies in the current data collection the s.e.c. itself acknowledges, and which congress gave the s.e.c. the authority to address in 19 the 90, the delay is inexcusable. the s.e.c. must move aggressively to finalize the large trader rule and insist on fast-track implementation by industry. there are many other questions a deeper review should study, if i particular lig the problem of high-frequency programs that sell stock short without first locating the underlying shares or borrowing them in hope that their price will drop and they can buy the shares back. so-called naked short selling. before the required delivery date at a lower price for a profit. last thursday it appears that the computers went into overdrive spewing out sell orders in the critical ten-minute time period. i will bet my bottom dollar that many of these sell orders were

short sales and did not first locate the stock. now, i've said repeat thely on this floor and everywhere i speak, there is nothing weren't with selling short. i have done it myself. but i've always had to borrow stock when i did it. last july, along with senator johnny isakson, republican from georgia, and six other senators, we wrote the securities and exchange commission demanding that short sales not be permitted unless the seller first obtains a hard locate of the specified shares. but that proposal went no with even though the s.e.c. shelled a round table last september to discuss the problems associated with knack short selling. the larger point is these high-frequency trading firms have assumed the role that specialists used to take. some of them get the same benefits as specialists. they get to ignore short selling locate rules. they get to step in front of other orders on the book legally.

all because they provide liquidity for which they are also paid. why should they have those advantages? did some of them abandon their role of liquidity provider when the market needed them most and instead use to it to disadvantage everybody else on the way down the market? these questions must be answered. last september 14, i went to the senate floor and spoke about the dangers of unregulated high-frequency trading, asking -- and i quote -- "if we experience another shock to the financial system, will this new and dominant type of pseudomarket maker act in the interest of the markets when we really they'd them? will they step up and maintain a two-sided market or will they simply shut off the machines and walk away? even worse," i said last september, "will they seek even further profit and exacerbate the down side?" unquote. after thursdays plunge, i am

aafraid my questions have been answered. instead of providing fair and orderly markets as some market makers are obligated to do, some of those unregulated players may have added to the chaos while others simply unplugged their computers and suspended operations reducing liquidity when the market needed it the very most. here's another related question: was there manipulation involved in thursday? more to the point does the s.e.c. even have the ability to detect illegal manipulation by high-frequency algorithms? well, we know the s.e.c. doesn't have the data it needs. i've already talked about that. the large trader rule hopefully will fix sol of that at some future date. hopefully sooner before later. there's also a questions of whether the s.e.c. has the internal analytical ability to police activities? i know this is something they want to do. we should help them get it as

soon as pofnlt i have been suggesting that once the s.e.c. collects the data, it should mask the proprietary nature of the data and eerkts one trillions to the marketplace or two to academics and private analytical firms under hold confidence deny shall agreements. another question i raised in the past is whether the s.e.c. needs to impose operational risk controls in order to prevent the incidence and magnitude of trading errors and the havoc they can cause. after thus last thursday, that one is starting to look very, very easy. markets have always had operational risks but it's clear that the proliferation of competing -- of complex computer models has the potential to magnify those risks in ways that can fundamentally damage market

integrity and cftd. with computerized high-frequency trading now responsible for an estimated 70% of daily trading volume, the markets have come to rely upon these black box systems for ample and consistent orderly flow. yet they are simply unable to evaluate in real time whether their trading models are working as intended. yet another question, madam president, is whether our markets are still performing one of their best and most important functions their best and most important function, and that is the constant and reliable channeling of capital through the public sale of company stock known as initial public offerings? that's why we need the markets to provide capital. can people still go in and get initial public offerings? according to a series of reports reports released last year by an accounting firm, the answer is no. the i.p.o. market of the united states and i quote "has

practically disappeared." the i.p.o. markets is a market where small and medium-sized businesses go to get the capital they need in order to grow, to pass through the valley of death to get ton what we have to do. without a doubt, there have been many causes of the sad state of america's i.p.o. market but one source of the problem might be the dominance of high-frequency trading strategies designed to trade the most active and highly liquid names but with little support for small stocks that make this country go. our markets should work to best serve americans by reflecting changes of supply and demand. not by encourage a battle between algorithms looking to share microseconds from their transactions in a few highly liquid names. as dallas mavericks owner and

longtime investor and very successful and knowledgeable investorinvestor recently stated, "what business is wall street in? it is important for this country to push wall street back to the business of creating capital for businesses." there are other questions as well, madam president many involving conflicts of interest and the fail iewfers some of the exchanges and market centers to fulfill their gate keeping function as self-regulatory organizations. moving foorksd i applaud senator dodd the chairman of the banking committee, for calling for hearings to be chaired by senator jack reed, who is very, very knowledgeable in this area on the's recent plunge and recovery. could not be in better hand. i'm also pleased that a number of market participants and regulators have recognized the need for regulations that will protect the markets from future periods of extreme and i explicable volatility like last thursday. i am concerned however that the s.e.c. must not solely look

for quick fixes and surface solutions. the events of may 6 call for a meaningful review of these structural issues issues leading to reforms that truly protect investors and really, really important restore the credibility of our markets so they serve well their highest and best function. that is why congress, consistent with its oversight responsibilities must direct reergts to stud and report -- regulators to study and report in a fipplely manner on what needs tock dong to prevent another meltdown of this magnitude or one even worse. it is entirely appropriate for congress to elaborate on the needed elements of a meaningful review, many of which i've outlined today. madam president senator mark warner and i want to add language to the current wall street reform act. it would do just that. once that report to congress is finished only then can congress either draft needed legislation or encourage new rules. we all know that the challenge for regulators is to see beyond

the horizon and to act preventively before financial crises hit. that's the key to everything we do around here. we've got to look ahead in this complex problems we have and do prevention, not wait until something happens. but this is always difficult but especially so when markets are as opaque and wall street interests resist even reasonable suggestions about needed reforms. during the past nine months, in response to my call for transparency an s.e.c. visa view of high-frequency trading many voices on wall street, many many, praised the issues of electronic trading and almost none were interested in looking critically or honestly for weakness of system risk. there's nothing wrong here. you shouldn't even look at this. that's what i was calling for. not regulation, just look at that time. and so many people reported back from wall street, no, no ... no no, nothing wrong here.

we shouldn't spend time on that. madam president -- mr. president, my staff has read through nearly 100 comment letters submitted over a period of months from brokerage firms consultants, exchanges high-frequency firms and alternative training systems. 100 letters. the vast, vast majority of those letters stated, the markets have reformed exceptionally and just needed to be left alone. they all stated how things were fine. we see nothing in this. systemic risk? not here. our exchairntion which by statute are required to -- quote -- "prevent fraudulent and manipulative acts and practices" -- unquote -- and be the first line of regulatory review and trading frass practices are now competing vigorously to atract high-volume traders to main their profits. yet in response to the s.e.c.'s concept release raising questions about market structure issues sources of systemic risk and possibly manipulation of

high-frequency traders the c.e.o. sent salt a call to action for all high-frequency trading firms suggesting that they all file comment letters on common themes. quote -- "the best defense is a good foonsz." unquote, that's what he wrote. he also said, "batz doesn't believe the equity markets are broken. the equity markets are a shining model of function during which some are calling the most challenging time in recent economic history." he went on to write -- "those outside the industry who have differing opinions are likely to have a difficult time bringing forward compelling arguments based on the lack of hard evidence." i ask, is this the attitude we want from those charged with protecting investors? yes, when the markets are opaque and no one outside the industry has any data, when the exchange

leadership itself stays on the offense, it is indeed difficult to order -- to offer hard evidence supporting a contrary view. and let me read from a comment letter to the s.e.c. written by the security traders association in the week before the meltdown, the week before the meltdown." the equity markets are functioning properly and there are no signs of significant deficiencies or an inability to perform their important functions." saying it, madam president does not make it so. and now the credibility of both markets is urgently in need of repair. but for that to happen, democracy must work in a way that permits timely reform of our most powerful financial institutions and wall street must and really should recognize its own long-term interests the

credibility of our markets are vitally at stake. and as i have said many times on this floor, what is really important, the two things that make this country great is democracy and our capital markets. and if we let something happen to the credibility of our capital markets, we will have done a great disservice to our country now and to our grandchildren. madam president i will close my remarks today with the same words i used to conclude my floor speech last september 23, as they still ring true to me, and i quote -- "we cannot simply react to problems after they have occurred. we need the information resources to identify problems before they arise and stop them in their tracks.

we cannot allow liquidity to trump transparency and fairness, and we cannot permit the need for speed to blind us to the potential devastating risks inherent in effective unregulated transactions. i thought i was right when i gave it on september 23. after what happened last thursday i feel it's even more appropriate. madam president, i yield the floor. mr. brown: madam president? the presiding officer: the senator from ohio. mr. brown: thank you, madam president. i appreciate the leadership of my colleague from delaware who understands this wall street reform perhaps better than anybody in the senate and has particularly led the charge on working to -- when too big to fail meaning too big, that the size of banks in this country

the six largest banks' assets 15 years ago were only 17% of g.d.p. today the assets of the six largest banks total 63% of gross domestic product. we know that too big to fail really is too big and i appreciate the work senator kaufman has done on that. madam president we know what a financial meltdown looks like. it means pensions shattered it means homes lost, college plans delayed or even abandoned. it means good-paying jobs lost, it means middle-class security undermine. two years after the financial collapse in march 2010, there were 655,000 unemployed ohioans. ohio's unemployment rate today is 11%. three of the largest banks slashed their s.b.a. lending by 86% from 2008 to 2009. in ohio, small business s.b.a. loans df backed loans went from

4,200 of them in 2007 to 2100 of them in 2009. wall street's casino gambling with the housing markets has caused nearly 90,000 foreclosures in ohio just in the year 2009. the average median sales price of existing single family homes across eight of ohio's metropolitan markets plunged by an average of 16% from 2007 to 2009. so why are my colleagues on the other side of the aisle trying to maintain the regulatory environment that allowed wall street to squander middle-class wealth and security? it makes me incredulous to think that there are people in this institution and a number of them who want to continue the way it's always done, who think that wall street doesn't need further regulation. they were the same people that in the bush years pushed for deregulation and then president bush assisted his republican friends by -- by putting more

pro-bank pro-wall street bank regulators in place to regulate after already weakening the regulations. neither republicans nor democrats should be starting this debate, should be starting the legislative process by thinking well, what's best for wall street and then by working backwards to see which consumer protections wall street can live with. that's not how you start this debate. you don't say well, we -- we have got to just decide can these consumer -- can wall street live with these protections, are these protections okay? does wall street approve of these protections before we do them? that's not the way we should be legislating. we should be starting with what will protect middle-class families from another devastating economic blow, and we should then move forward to put those protections in place. it really should, madam president, be as simple as that. my democratic colleagues are fighting for the strongest possible measures to hold wall street accountable. i hope my republican colleagues

resist the temptation, a temptation that they usually succumb to to water down reform and carve out loopholes for the special interests. that has been the problem, madam president, all along. the power of the bank lobby here, the power of wall street in the house of representatives in the united states senate is -- the bias that so many have that well, wall street didn't really do that badly. we should water down this reform we should carve out loopholes so wall street can continue doing business the way they did. it's time instead, madam president, to act on behalf of the people we serve not wall street firms. too many, too many of my colleagues across the aisle simply put are putting wall street before main street. madam president the first step towards the financial recovery is protecting american families that rely on credit cards to meet their financial obligations or mortgages to finance their dream of homeownership. let's not forget that the kindling for this fire that became the global financial crisis was a pile of exploding

mortgages. if we allow lenders of all types to continue preying upon hard-working americans then we're setting ourselves up for another disaster. this time it was securitized mortgages. next time it could be student loans or it could be credit card debt or it could be commercial real estate or it could be the junk bond market. who can say for sure? that's why the independent consumer protection bureau in this legislation is essential. it will create for the first time an entity dedicated to protecting the interests of middle-class americans against the greed and the recklessness of wall street. we need a watchdog to make sure wall street gamblers and their lobbyists don't trample the american dream as a means of feeding their own greed. beyond establishing this agency, an agency tasked with protecting the interests of middle-class families, we have an opportunity to do much more to protect american families. we should adopt an amendment offered by senator whitehouse, cosponsored by my colleague

sitting nearby on the floor senator casey a number of bipartisan amendments that would empower states to protect their citizens from unfair credit card interest rates. 32 years ago the supreme court decision marquette decision, it's the most -- perhaps the most important decision -- supreme court decision that americans don't know about. it overruled the consumer protections, so-called usury rates, interest rates of the -- among the 50 states. so, in other words the state of pennsylvania, the state of north carolina the presiding officer's state or my state of ohio if their legislature enacted an 18% usury rate or a 16% usury rate, that's the rate -- the top rate at which lenders could charge customers those rates were overturned by the supreme court decision because the supreme court decided wherever -- it doesn't matter where the customer is, whether the customer is in charlotte or harrisburg or cleveland or columbus.

it mattered where the bank was. basically what that meant was bank after bank after bank located their operations in a state with -- with very high usury rates or no usury rates at all. therefore, a customer in akron or a customer in toledo or mansfield or springfield or xenia, in having a credit card with a bank in south dakota paid much much higher interest rates even though ohio set its interest rates much lower. usury rates i quoted today in a presentation earlier, usury rates were established by the bible in exodus 12, i believe. the bible says clearly that usury rates the usurious interest rates aimed at the poor and aimed really at everybody simply shouldn't stand. yet by this supreme court decision in 1978, the court ruled that whatever -- that we would basically outsource our interest rate, our consumer

protections to the lowest common denominator state. if south dakota particularly has no usury rates or no limit or high limit on their interest rates, it means a credit card holder in lima, ohio, or troy, ohio or springbury, ohio, is paying the high interest rates even though the ohio legislature has acted against their doing that. so the whitehouse-casey whitehouse-casey-sanders-brown amendment gives the decision back to the states for making the interest rates. for too long as this supreme court decision indicates and the lack of response from congress indicates, washington has been looking out for the megabanks. some of my colleagues are still saying that these banks' interests are more important than protecting the american public. this bill would not even allow the consumer protection bureaus to set rules regarding credit card interest rates. meanwhile, these rates are inexplicably going through the roof at the same time the banks are again enjoying record low

borrowing costs. it makes no sense. we report, madam president, to the american public not to high-risk business models. the next element of the financial collapse came, madam president, when wall street bundled toxic mortgages into untested products like mortgage-backed securities and collateralized debt obligations and synthetic c.d.o.'s and credit default swaps. many of these new products, products that almost nobody understands were unregulated derivatives sold in over the counter markets with no oversight or transparency. as a member of both the banking and the agriculture committee i want to commend the chairs of each of those committees for their work in creating a derivatives title a regulation of derivatives that will provide much-needed oversight to the $210 trillion, $210 trillion. that's 210 trillion-dollar derivatives market. at the same time we have balanced the needs of

manufacturers in dayton and youngstown and toledo who use those products appropriately and that wasn't where the problem was to limit their business with. this bill will provide for financial stability by requiring banks to put capital behind their trades. it uses transparency and accountability to prevent wall street banks from taking advantage of their business customers, and it reduces speculation that fuels bubbles in markets like natural gas and mortgages. i want to single out chairman lincoln's proposal to separate derivatives operations from commercial banks. it's the right thing to do. it's because the megabanks' speculation is detracting from their primary job lending. over the last six quarters, megabanks have decreased their consumer and small business lending. at the three biggest banks lending under the s.b.a.'s 7-a program, the primary s.b.a. program to help start up existing small businesses, lending under that program declined 86% from two years ago

to last year and doesn't appear to be getting a lot better this year. over the same period, banks' securities holdings increased by 23%. what does that mean? it means rather than investing in a local manufacturing company, a foundry or alcoa in cleveland or smaller companies in -- a fastener company in bedford or companies manufacturing companies, instead of investing in those their security holdings increased. that's where their capital went. that wasn't productive for our country. it may have been profitable for the banks but it doesn't work to get our economy back in gear. taxpayer-funded assistance from the fdic and the fed should not be going to support a bank's gambling. it should be supporting sound economic growth. in an ideal world we would treat derivatives products like all other investment products and trade them on exchanges. this is a strong bill

particularly now that we have adopted senator cantwell's antimanipulation amendment. we're finally going to impose some order and allow sunlight into what has been completely and is currently a dark and opaque market. lastly madam president i'd like to talk for a moment about too-big-to-fail. the financial ingredient of the financial crisis came when massive, interconnected wall street banks and investment houses like a.i.g. and citigroup and others gorged themselves on risky derivatives backed by predatory mortgages. whether thesewhen these bets went bad the u.s. government decided these banks were too-big-to-fail and the u.s. taxpayer was forced to settle their hundreds of billions of dollars in obligations. these too-big-to-fail banks are getting even bigger. right now the five biggest banks control 97% of all u.s. derivatives. for the first time, madam president, we're going to have a process to liquidate these large failing -- these large financial institutions if they fail. such a system was lacking at the time the giant investment banks

like lehman brothers and bear sterns and merrill lynch were in financial peril due to overleveraging due to investments in toxic investment. but as my colleagues well know by now, i believe the bill should be strengthened to make absolutely certain there are no more meltdowns and no more bailouts. i'd like to put in effect stronger safeguards against behemoth banks that control so much of the nation's wealth that they could single-handedly send our economy spiraling downward. too-big-to-fail, in fact, means too big. and while this is mostly about about -- about risk that these banks took and might take in the future, it's also about size. when 15 years ago as i mentioned before the assets of the six largest banks in our country combined were 17% of g.d.p. and today the six banks' total assets make up 63% of g.d.p., you know that too-big-to-fail is also simply too big. it's crucial we consider and adopt an amendment offered by senators merkley and levin to

ban proprietary trading. too many wall street banks got rich at the expense of the clients they were supposed to be serving in and the american families whose homes have been taken from them. it's equally important that we consider and adopt the amendment offered by senators cantwell and mccain to reimpose the glass-steagall wall between commercial and investment banking. and we should pass senator dorgan's amendment giving the systemic risk council the authority to spin off parts of large cross-border financial institutions. after two years after millions of jobs lost, after millions of homes foreclosed upon, we're attempting to put in place rules that might prevent the next crisis. we shouldn't dilute this critical piece of legislation with amendments that coddle wall street. too many of my colleagues republican colleagues, are still trying to do that inserting amendments in this bill that choose wall street over main street. it's important that this legislation move forward. it's important that all of us fight to choose main street over

wall street. so this works for findley ohio, and warren, ohio, and bel aire, ohio and tip city, ohio, communities that have been hit hard by the greed and recklessness of wall street banks. it's pretty clear madam president. i yield the floor. a senator: madam president? the presiding officer: the senator from pennsylvania. mr. casey: thank you madam president. madam president, i rise to speak about an amendment that i will be -- have introduced and will be noferg this debate de -- will be offering in this debate. i ask consent to call up amendment 3878 to --

let me revise that consent request. i'll ask to speak in this period about amendment number 3878. the presiding officer: without objection. mr. casey: the reason i rise to speak about this amendment is we're in the midst right now of the worst recession the worst economic climate since the 1930's. that's irrefutable. there's no dispute about that. we've had record job loss. more than 15 million americans out of work. in pennsylvania, some 582,000 people out of work with the unemployment rate hitting 9% in our state. i know a lot of other states have had double digits of unemployment rates for a long time. we're at 9% but 9% is still more than 580,000 people out of work.

there are -- there are a number of ways to measure the horrific consequences of this recession. all those individuals out of work, all those families destroyed and communities destroyed 8 trillion -- by one estimate $8 trillion of wealth lost by americans. you can attribute $100,000 per family of a negative impact due to what has happened on wall street. so in the midst of all that a number of people in the senate have worked very hard to try to put in place new strategies to create jobs to help us continue to recover. the rove bill is still being -- the impact, i should say is still being felt. we are recovering. economic growth has picked up. job growth has improved substantially. but we still have a long way to g. and yet despite that -- but we still have a long way to go. and yet despite that, we still

have people here in washington that don't seem to get it. they seem to want to continue to protect wall street time after time when a -- an amendment comes up, when this legislation comes up on the restoring financial stability act when that has been presented here in the senate there's still some people who want to protect wall street. and the choice is very clear. there's no middle ground here. it's very clear and the american people know it. you can either through this process, protect wall street and let them do what they've been doing for years: destroying lives in america because of high-risk practices allowing these scheme artists -- and that's a charitable way of describing people that commit fraud -- or at least engage in practices that make a very small sliver of the american people on wall street in this case very, very wealthy creating more billionaires -- a handful of billionaires at the expense of tens and tens of millions of americans who lost their job

their home or in some cases both and -- and are in the process of trying to dig out of that and rebuild their lives. so you're on one side or the other in this debate. you're either for wall street or you're for the reforms that will at long last begin to hold wall street accountable. it's essential to our economy that we pass this legislation because if we don't, we'll be right back to where we were with no commonsense rules in place wall street doing virtually what they want do to make money no matter what are the consequences downstream, so to speak, with regard to those who lose their jobs their homes and, by dwirntiondefinition, their hopes and their dreams. so we have to put in place new strategies not only to create jobs but also to reduce the deficit, and we can't do that unless we take affirmative steps to hold wall street accountable and to give some measure of

protection to families acroz across the country who for too long have been at the -- have been at the other end of the bargain so to speak. they lose their house they lose their job, wall street wins. they lose $100,000 on average per family, wall street wins -- wall street wins very big. one of the things that should be in place is at least the examination of something that was discussed at the g-20 conference back in september the fall last year in pittsburgh pittsburgh, where the leaders of the 20 largest economies came together and talked about our financial crisis which, of course is an international crisis. it's not. it's not something limited to the united states. and recently the european parliament took the first step by passing a resolution supporting a study on a

financial transaction tax, a fee fee, as some would call t. the -- some would call it. the resolution specifically called for an in-depth study that would provide deckal recommendations on how such a fee should be structured across the -- technical recommendations on how such a fee should be structured across the euro zone. the study proposed here in my amendment mirrors the european study and positions the united states to have an informed debate about the issue. this study is very simple but can have a tremendous impact on our economy because of what we'll learn from it. the study would examine the implementation of a transaction fee on all security-based transactions including swaps and security-based swaps except for those that are hedging or mitigating somehow risk. it would also -- also included in these transactions would be stock and debt instruments. here's what the study would assess. and, again, this is not the

imposition of a transaction fee this is the study of the imposition of a transaction fee or the implementation thereof. the study would assess first past uses of such fees what's happened in the recent past and our experience with this, other countries who have -- have tried this other experts who have weighed in. obviously the advantages and disadvantages of this kind of a fee, the potential to raise revenue. we hear a lot of talk in this chamber in the senate about reducing the deficit. let's reduce the deficit. well it's going to be pretty difficult to do that in the current environment unless you have new revenue. one of the ways to have new revenue in place is to have a transaction fee. but again this amendment would simply require the study -- the study -- of a transaction fee. next the -- the result of the amendment the implementation of the study itself would be the impact on financial markets

which is something we have to consider and weigh and analyze and the impact on risky investment behavior. well, i think we might know the answer to that generally with a transaction fee in place, i think it's probably less likely, in my judgment that a financial institution would -- would engage in the kind of risky reckless, irresponsible and in some cases illegal behavior that they have engaged in which has cost the average american family $100,000 per family because of what they did on wall street over a number of years. now, this study that i'm calling for in the amendment would be open to public comment would be conducted by the securities and exchange commission and the commodities future trading commission in coordination with the department of the treasury. i think it's very important to have those three agencies parts

of our government involves in reviewing this. it's not just going to be farmed out to some think tank where it can be criticized because it lands on one side of the political divide or another. it's going to be conducted if we get this in place conducted by the securities and exchange commission and the commodities future trading commission two agencies with substantial experience and expertise about this kind of a fee a transaction fee. and also working in coordination with the treasury department. very important to have those agencies involved instead of just having a study done by any group out there that has some and in many cases limited expertise. given the dramatic costs of the recession on our economy which i just outlined, the horrific and really destabilizing job loss that we've had not to mention the world economic downturn we

need a -- we need to be proactive and thoughtful and analytical, i would say in assessing a transaction fee and the positive impact it can have on reducing the deficit and creating jobs. and for those who will weigh in against this i'd ask them, how -- where's the other revenue that you're going to need to reduce the deficit or at least to allocate part of the revenue that we generate to reduce the deficit? and what are you going to do about job creation? and if you're not doing some work on both of those you're really not too concerned about where the economy's going because if we're going to fully recover and then grow and sustain growth over time, we need job creation and we need to reduce the deficit. now, predictably, we have --

i've just received a letter today -- or recently, i should say, from the chamber of commerce who've come out the -- out against the study of a transaction fee. in my judgment, entirely predictable that the chamber of commerce of the united states of america is against this. i'll leave -- i'll leave it to them to -- to -- to make their case. but this is falling into, unfortunately -- i hope it doesn't, i hope it has bipartisan and broad support which i think eventually it will will -- but unfortunately for the chamber of commerce, they're doing what they always do, they are trying to protect wall street. and this is -- this is a -- this is a debate on this -- the study of a transaction fee but in the larger debate as well, it's very simple. there are two places to be here: protecting wall street or standing up for reform. i think the chamber of commerce has just weighed in on the side of wall street. and they're going to have to answer to all of the small

businesses in pennsylvania, for example and across the country and even larger businesses but especially small businesses who have been devastated by what's been happening on wall street. and the idea that the chamber of commerce is coming out against the study -- the study the analysis of a transaction fee is really disturbing, and it -- it -- it tells you a lot about -- it tells you a lot about where they stand in this debate. so i know where the american people are. they want reform, and they want it now. and they don't want it watered down, they don't want the bill gutted with amendments, and they want to have information that they should variety to expect on the effect of a transaction fee -- good, bad or indifferent. they should have that information. and what the american people don't want is the chamber of

commerce or any other organization standing between wall street and what's been happening there and reform. so, i would urge the leadership of the chamber of commerce to go back take another look at this, take another look at what -- what is the harm of having a study conducted by the securities and exchange commission and the commodities future trading commission, in conjunction with the united states department of treasury? i don't care what year it is, i don't care what administration it is. those three parts of our government should have the right and should be instructed by the congress to study something that has potential significant potential, to lower the deficit or help us lower the deficit and to create jobs. but to have the usual knee-jerk political reaction that the

chamber of commerce and others will have is really not in the best interests of the american people and is not helping in any way the debate we're having here on the floor of the united states senate. so for the chamber folks or for their allies, real simple, folks: you got two choices. you can stand here and protect with all your might the practices on wall street, the fraud, the manipulation, the scheme artistry that put use in this ditch that we're in right now. or you can be for reform. you got a choice to make. it is very simple. there's no middle ground here. i would hope that the members of the united states senate would take a closer look at this than apparently the chamber has. and stand up for the american people. show at long last that we're not going to allow wall street to destroy more lives. we're not going to allow wall

street to allow an adverse impact of $100,000 per family to transpire again. that we're going to at long last provide real reform for the american people and hold wall street accountable to the abusive practices they engage in, for the dishonesty and fraud and sometimes criminal conduct they engage in. so it is about time that the groups who are opposing reform -- and of course the chamber has been opposing lots of reform lately; we won't go into all of it -- but i would hope that the chamber of commerce would make it very clear where they stand in this debate, because when they come out against proposals like this, they stand to protect wall street at the expense of the american people. and with that, i would yield the floor. mr. durbin: madam president? the presiding officer: the senator from illinois. mr. durbin: madam president, i

have an amendment which has been filed and is at the desk, and a modification of that amendment which i would like to explain for a moment mere. it is an amendment related to interchange fees. interchange fees are the fees charged to commercial establishments which accept credit cards. so if i owned a restaurant and accepted visa or mastercard when my customer, who has a bill, presented the credit card to pay for it, then i have to pay a percentage of that bill to the credit card company and that is called the interchange fee. now, that's separate hand apart from the customer's relationship with the credit card company. this is the relationship of the merchant the retail establishment, the small business to the credit card company. unfortunately, over the years small businesses across america have had little or no bargaining power with the major credit card

companies. they impose interchange fees on these businesses, and if you speak to some of the small businesses in illinois or across the nation, you will find that many of them feel that they are being treated unfairly. let me give you an example. about half of the transactions that take place now using plastic are with credit cards. and there is a fee charged usually 1% or 2% of the actual amount that is charged to the credit card. it's understandable because the credit card company is creating this means of payment. it is also running the risk of default in collection where someone doesn't pay off their credit card. so the fee is understandable, because there's risk associated with it. but now gaining in popularity is the so-called debit card where the person directly draws money from their checking dot pay the same restaurant. had the american chosen to pay by a written check it would be

been banged by the restaurant in their own bank, drawn from the bank of the customer with no fee associated with it. if the customer uses a debit card which a accomplishes the same thing without the check involved the credit card companies charge similar fees for what they charge for credit cards. and yet there is virtually no risk involved in a debit card. so many of these retail establishments and small businesses have come and said, we're not opposed to paying a reasonable proportional amount for the use of a debit card, elogy, at our business -- a debit carksd for card, for example at our business. but we can't even get to first base with our credit card companies. this amendment is on behalf of small businesses across the united states which have rallied behind this because of their concerns about interchange fees on their cost of doing business.

and it says that we will use the same mechanism that we used in credit card reform -- a bill that was brought to the floor by senator dodd of the senate banking committee-- -- which called on the federal troughs establish the appropriate fees to business establishments for the use of credit card and that's these fees and charges be reasonable. i don't think that is unreasonable. senator dodd offered that as part of the original credit card reform when it came to customers using credit cards. i don't think its a un -- i don't think it's unreasonable to apply it to the businesses. you'd think there would be agreement to this t turns out there is opposition from the so-called independent community banks and credit unions. we created an exemption in my amendment saying that if you are

a so-called independent -- in quliewr so-called independent community bank has assets less than $1 billion you will not be affected by this, believing that we took the lion's share of the vast number of community banks and exempted them. regardless the independent community banks again teamed up with the american bankers association, said we're going to oppose it anyway even if the majority of our members are not covered by it and credit unions which go lock step with the independent community banks when it comes to a lot of banking issues said the same thing. so in earchts to reach -- so in an effort to reach a compromise here that will help members come to the support of this amendment, i am going to modify my amendment to extend and enlarge the exemption to institutions of $10 billion or less. now, let me tell you what that means. with the modification, changing it from $1 billion to $10 billion, it'll have a dramatic

difference. at a $10 billion exemption 99% of banks would be exempt. all but the very largest banks in america, the ones that have a controlling interest in establishing interchange fees, i might add all but 99% of banks -- i should say 99% of banks would be exempt. 99% of credit unions would be exemed. all but three credit unions in the united states have less than $10 billion. and 97% of thrift institutions would be exempt. 19 thrift institutions across america. so when i've talked to my friends on both sides they've said, if you can find a way to resolve the opposition at the community banks and credit unions then we're open to this. many of them have said they believe that small businesses and retail establishments are being treated unfairly, and they would like to support this. but they wanted to make sure

that they didn't harm local and community banks. well i've grone a $1 billion -- i've gone from a $1 billion exemption to a $10 billion exemption. i urge my colleagues to consider that and to also consider the other side of the equation. think of the hundreds if not thousands of small businesses in your state that are being disadvantaged and treated unfairly with these interchange fees. what we're asking for is to have an arbiter -- in this case the federal reserve -- determine whether or not the interchange fees particularly for debit cards, are reasonable and proportional. we also say that you ought to allow a comergts establishment which accepts a -- a commercial establishment which accepts a credit card to establish a minimum amount which you can charge to a credit card. i went into washington national airport, standing at a newsstand there and was behind a woman who

was charging 35 cents to a credit card. and i said to the person at the cash register, is that the lowest amount you've ever had charged to a credit card? she said, no, we had 25 cents charged one day. if you look at the actual calculations of fees paid by that business for the use of that credit card, they lost money on that transaction. they didn't make any money on that. by the time they paid the swiping fees and the interchange fees, at the end of the day they made nothing. they could have lost money. is it unreasonable for a business to say we're not going to accept credit cards for any purchase under $5 or $1? i don't think that's unreasonable since they're going to lose money in the process. and yet the credit card companies prohibit small businesses from even establishing those basic standards. they prohibit small businesses from saying, we will give you a discount on the price if you pay cash. why? if we're truly going to have a

competitive atmosphere and give small businesses in a struggling economy a fighting chance, why would we prohibit these things? why would we give a monopoly -- where two major credit cards can impose rules on small businesses which are so costly to them? that's why i've introduced this amendment. it's not an easy amendment. i understand it, because we have some competition among friends here. and members will have to decide which they think is the just position. i hope they believe this amendment is. i hope they believe that small businesses which currently have no bargaining power against these monopolies like visa and mastercarksd deserve a voice in the process. i hope they believe that some of the unreasonable standards set by credit cards and imposed on small businesses have to stop across america. i can't tell you how many glowing speeches are given in congress on behalf of small businesses. we all know how much they mean to us in our communities and in our overall economy.

well here's our commie chance. senators will have chance to vote on behalf of retail establishments and small businesses all across their states who have come to me begging me to move forward on this amendment. now i have said and i believe it's triewrks this is the true, this is the first time that anyone has hoferredz an interchange amendment -- has offered an interchange fee on amendment on the floor of the senate. some people don't want to touch it. that isn't fair to small businesses. they deserve for us to step forward and to offer these amendments and to really make a policy choice. when i tried to offer this amendment on a credit card reform act, they said, wrong place. when i tried to offer it on this bill related to banks and financial institutions, some have said, ah you it's the wrong place. i've concluded there is no right place. this is a good place because it relates to consumer protection. it relates to financial

institutions. if relates to our economy -- it relates to our economy and making sure it thrives and thrives in a responsible way. understand that means making sure that interchange -- and that means that make sure interchange fees are reasonable across the board. this amendment is needed. it is a response to price-fixing by visa and mastercard. interchange fees are received by the card-issuing bank in a debit transaction. however, visa and mast er carksd which control 80% of the debit market set the debit interchange fee rates that apply to all banks within their networks. every bank gets the same interchange fee rate regardless of how efficient they have been in conducting debit transactions. visa and mastercard do not allow banks to compete with one another or negotiator with merchants over interchange rates and floss constraint on visa and mastercard's ability to fix rates at unreasonable levels. visa and mastercard consistently raise interchange rates because the more interchange that the

banks received the more banks will issue cards. visas have a and -- visa and mastercard receive a fee each time the card is swiped so rising interest rates enrich them as well. visa and mastercard incidentally have reduced debit card interchange fees in other countries while they have increased them in the united states. let me repeat that. visa and mastercard have reduced debit interchange rates in other countries while they have increased them in the united states. visa and mastercard continue to raise u.s. interchange rates which are already the highest in the world. the general accounting office found that regulators and other countries have worked with visa and mastercard to voluntarily reduce their interchange rates. just last month visa lowered many european debit card rates by 60% while increasing many u.s. debit card rates by 30%. what can the business do about

it? nothing, no bargaining power. so these american based companies are cutting their charges in overseas markets and raising them at a time we're facing one of the worst recessions in american history. they are making it tougher for that small business to survive. they are making it tougher for them to keep their employees at work. is that the right thing to do when our economy is facing recession? i don't think so. now, i don't set an interchange fee rate in this law. some have argued that we would reduce credit availability by regulating credit card interchange rates. however, the amendment's reasonable fee requirement only applies to debit cards. it doesn't apply to credit cards. 9 durbin reasonable debit fee requirement -- the deutsch reasonable debit fee requirement exempts small banks and credit unions with assets under $10 billion, which as i say includes 99% of all banks credit unions, and thrift

savings and loans across the united states. this amendment would not enable merchants to discriminate against debit cards issued by small banks and credit unions. visa and mastercard contractually require all merchants to accept all cards within their networks and the amendment does not change that requirement. the amendment would not have the federal reserve set interchange prices. under this amendment the fed would not set them. instead, it would oversee the debt interchange fees charged by card networks to be sure they are reasonable and proportional to cost. it's the same standard which the banking committee and senator dodd offered when it came to credit card reform. it is not a radical notion. it's in the law already. there is an argument some make that consumers benefit greatly from the current interchange fee structure. let me tell you the reality. this statement is contradicted by statements from groups that represent consumer interest. ed wisniski, the consumer

program director, testified before the house judiciary committee and said as follows -- "the deceptive and anticompetitive practices of the two credit card soarkz, visa and mastercard have injured consumers for years. interchange fees are hidden charges paid by all americans regardless of whether they use credit debit checks or cash. these fees impose the greatest hardship on the most vulnerable customers, the millions of american consumers without credit cards or banking relationships. these consumers subsidize credit card usage by paying inflated prices for many goods and services. these prices are inflated by the billions of dollars of anticompetitive interchange fees used to subsidize reward programs. the industry of credit cards also argues that merchants benefit from the present interchange system. a 2009 g.a.o. report found that merchants receive benefits from the existence of credit and debit card systems. it does not say that those benefits are the result of the present interchange system. in fact, the same report starts

with the title "rising interchange fees have increased costs for merchants," citing numerous growing costs that the interchange fee structure impose on merchants. for example the report states although accepting credit cards provide benefits, merchants report card costs are increasing faster than their ability to negotiate or lower these costs. i would say basically that if we are going to revitalize small business in america and retail establishments, if we're going to give them a fighting chance, we cannot ignore this any longer. there are some who say withdraw this amendment wait for another day. well, i have waited for a year and i don't want to wait any longer. i think we ought to go on the record. we ought to have the courage to stand up and say reasonable and proportional debit card rates that will be regulated by the federal reserve are not unreasonable. and secondly, that the anticompetitive practices which are imposed on small businesses and retailers across america have to come to an end.

most of the people i talk to on the floor understand this. i hope that this modification i am making in my amendment creating a bank exemption of banks with assets valued at lower than $10 billion will make it clear that we are not trying to create any hardship on community banks and credit unions. instead, we are going after the largest banks and credit card companies for what i consider to be unreasonable conduct when it comes to the treatment of small businesses and retail businesses as well. i hope to call this amendment either late today or tomorrow. i hope my colleagues will join me in standing up for small business. we give a lot of speeches about small businesses and retail businesses. i will give my colleagues a chance to vote for them on this interchange fee regulation reform. madam president, i yield the floor and suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

jiervetionz quorum call:

a senator: mr. president? the presiding officer: the senator from idaho is recognized. mr. crapo: mr. president, i ask unanimous consent that the quorum call be lifted. the presiding officer: without objection, so ordered.

mr. crapo: thank you. mr. president, i call for the regular order with respect to the landrieu amendment. the presiding officer: the amendment is now pending. mr. crapo: thank you mr. president. i call up a second-degree amendment which is at the desk. the presiding officer: the clerk will report. the clerk: the senator from idaho, mr. crapo i -- mr. dodd: we're temporarily laying aside the snowe-landrieu? which is the pending amendment? the presiding officer: the landrieu amendment 3956 is now pending. mr. dodd: and that is landrieu-isakson? the presiding officer: the clerk will report the amendment. the clerk: the senator from idaho, mr. crapo proposes an amendment numbered 3992 to amendment numbered 3956. on page 1 of the amendment strike line 3 and all that follows. mr. crapo: mr. president, i ask unanimous consent that we dispense with further reading of the amendment. the presiding officer: without objection, so ordered. mr. crapo: thank you. mr. president, this is a second-degree amendment to the

landrieu-isakson amendment. it is not a competing amendment it is an amendment to add additional provisions. i support the material in the landrieu-isakson amendment which deals with the -- the home real estate mortgage market. this amendment adds further provisions in the same section of the bill to deal with risk retention issues relating to the commercial real estate market and other asset classes. according to market analysts and financial regulators, the provisions aimed at the securitized credit market in this bill will undoubtedly impact the access for credit for millions of american consumers and businesses. the reforms are aimed at the residential and subprime market and i'm quite concerned that they have not been carefully examined for all other markets. additionally, they have not been reviewed in the context of other moving parts outside the bill, such as changing accounting standards and capital requirements and other regulatory mandates. when combined, these significant changes create a huge amount of

uncertainty in the market which today serves as one of the greatest impediments to new and private lending and investing. the stakes are high. as treasury secretary geithner has stressed, no financial recovery plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses, large and small. yet the totality of regulatory and accounting changes impact the future viability of these markets. in fact, both market participants and financial regulators agree that the outcome is unclear in the short term and the long term. warning signs are there and cannot be ignored after comments by the fed the o.c.c., the fdic and the international monetary fund among others. as such, we must very carefully examine any new mandates to determine the most appropriate and direct way to strengthen our lending markets and to better serve consumers and businesses

while avoiding negative complications. such reforms are very important and it's critical that we get them right. this middle-ground approach has two basic components. first, because skin in the game is important and can come in many forms the proposed language improves the existing framework using the current language and construct in the dodd bill and it requires the regulators to examine and consider equally which method of skin in the game is most appropriate: a percentage recension, underwriting standards, strong standardized and disclosed representations and warranties other methods such as the third-party retention for commercial-backed mortgage securities in the minnick-bean amendment that was passed in the house unanimously or the like? second, it clarifies existing language in the bill that requires reforms to be considered bias set class. urn the landrieu amendment the

regulators shall create the qualified mortgage framework important to the residential market. under this amendment the regulators shall consider the appropriate forms of retention by asset class and type of loan as well as risk profile associated with it. this would include allowing regulators to consider using and strengthening a third-party retention framework that is important to commercial mortgage-backed securities and the commercial real estate market participants. ultimately, we think such an overall amendment is important because it comprehensively addresses all asset classes and helps us to have a better format for approaching risk retention. what the amendment does is take the exclusive focus off of just one form of risk retention and allows the regulator to evaluate the best approach to address risk retention by asset class. this still includes a percent

retention, if necessary, as well as underwriting standards that actually get at the heart of loans and even strong and uniform representations and warranties which are important to the investors such as pension funds mutual funds and endowments. who fuel the lending and securitized credit markets. the amendment simply gives important direction to the regulators on structuring reforms by asset class. this is critical in the context of conflicting rules and proposed -- and proposals aimed at these markets, some of which prejudge or disregard the house and senate language in this area. most important when taken with the landrieu amendment it would address and encourage well underwritten loans including qualified mortgage framework loans as included in the landrieu amendment, as well as the uniqueness of very different markets from the residential markets, such as commercial real estate auto loans, student loans and et cetera. and by avoiding a single asset

carveout for just residential it simply allows the regulators to customize the skin-in-the-game rules for all assets classes particularly ones that were not a root cause of the systemic risk we recently faced. this protects consumers and businesses that are struggling today to get access to credit. without reinventing the wheel on the dodd bill, this approach uses the dodd structure to provide important reforms while avoiding negative complications on capital liquidity and credit availability particularly in the commercial real estate market which faces challenges and has a very different structure. such an approach is crucial for business and consumer credit and for overall economic recovery. and for that reason, it is supported by lenders of all sizes in all markets. commercial borrowers who have been active on this issue investors who fuel lending and are seeking certainty and confidence and others. lastly, some of

lastly some of the language in this bill, particular related to the mortgage market passes the house unanimously as offered by representatives adler moore campbell and miller. i urge all of my completion to accept this amendment as an addition to the landrieu-isakson amendment, not as a change of it. to address more than simply the issues dealing with the residential real estate market but also and most importantly the commercial real estate market and other asset classes. thank you mr. president. the presiding officer: the senator from connecticut iscognized. mr. dodd: mr. president, first of all let me acknowledge the contribution of senator crapo to the banking committee efforts and not endorsing this bill as it presently reads he's been a valuable member of the committee for a number of years. he appreciate his input his

thoughts ideas are always constructive in any debate that we have. i thank him for that. and, i've asked my staff to meet with yours to try and clear up some things because i'd like to be in a position where we could accept the amendment. i'm not trying to prejudice one over the other. we'd like to keep some risk retention or good underwriting standards so that the choice is there. we're not trying to impose both. i would just say, i know the staffs are talking. but on page 2 of the amendment -- and it would be, i guess beginning somewhere around line 18. in the paragraphs "i" beginning "retention of," then it lists three paragraphs and possibly a fourth. but we're looking for some clarity on the meaning of the value of securities sold to inseferltses or the interest of the sellers in revolving assets. those two particularly, some clarification on what that actually means. it seems vague to us as to how that would apply. rather than rush this along

we'd like to take a few minutes and see if we can come to some resolution of that and then possibly accept that -- senator landrieu will have to come over, because it is her amendment that we're amending. so let's take a few minutes and look at this and how we might work on it together and if we can come to a conclusion, i would be prepared to support the senator's -- i am not trying to distinguish real estate from commercial. they are different transactions, obviously, but the point is the same. we had elike to so amake sure that securitization -- which i think the senator was correct on -- securitization has become a pejorative but if done well, it expands opportunities tremendously in created liquidity, making resources more available for more loans home sales and the like, provided there's sound underwriting principles involved so we're not getting ourselves into trouble again. that's the reason, mr. president, that we've had

these insince tense on strong underwriting standards. and risk retension -- that if you've got some equity in all of this you'll be more careful about what goes out the door and become securitized. i am not interested in having risk retension so we don't end up where we were discovering that a lot of these assets that got securitized or instruments that did ended up being worthless, even worse than worthless in some cases because of the problems they caused. so again i respect where my colleague is coming from on this. if we could just spend a few minutes and try and resolve some of this, then maybe we could come to om agreement. that would be my hope. so, mr. president, in the absence of senator landrieu yet arriving, i'd note the absence of a quorum. mr. crapo: mr. president? mr. dodd: oh, i'm sorry. the presiding officer: the snr is recognized. mr. crapo: we're both trying to get at the same thing here and i believe we can work out

the questions with regard to the language here so that we can move forward in a fashion that will help us to address these problems, to make sure that the ultimate objective which we all agree on, namely, making sure that we have confidence in the quality of the assets that are backed or utilized in securitization is achieved. and so i welcome that opportunity and will look forward to working with you. mr. dodd: mr. president, i'd note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

h quorum call: quorum call: mr. dodd: mr. president? the presiding officer: the senator from connensent the call of the quorum be rescinded. the presiding officer: without objection, so ordered. mr. dodd: i'd like to ask unanimous consent to temporarily lay aside the isakson amendment. the presiding officer: is there objection? without objection, so ordered. mr. dodd: i believe we're prepared to have a voice vote on the snowe-landrieu amendment which is the pending amendment if i'm not mistaken. the presiding officer: the question is on amendment 3918. if there is no further debate, all those in favor say aye. all those opposed say no. the ayes appear to have it. the ayes do have it. the amendment's agreed to.

mr. dodd: mr. president, i move to reconsider and lay that on the table. the presiding officer: without objection. mr. dodd: let me once again thank senator snowe and senator landrieu for their very valuable contribution to this bill in more clearly defining and making it abundantly clear that merchants and retailers are not included as financial services or financial products company not to be covered by the consumer financial product bureau. i'm very appreciative of both of them for their contribution. and with that, mr. president i see my colleague from north dakota is here. and i know we're -- let me just yield the floor. mr. dorgan: mr. president? the presiding officer: the senator from north dakota is recognized. mr. dorgan: mr. president i know that this is beginning to be a lengthy debate and process

on the floor of the senate to get through amendments. my colleague from connecticut exhibits great patience to try to work through this. and i know there are a lot of interests that have different views about this. they come to the floor and want this amendment or that. i understand all thafrplt i know my colleague from connecticut views this with the same seriousness as i do and understand many of us not on the banking committee have not had the opportunity to be involved in the debate until now until it comes to the floor of the senate, and not been able to offer amendments. that i think represents the appetite here. to be engaged to understand what has caused the most significant financial event devastating financial event for our country the most significant since the great depression, something that collapsed some $15 trillion in value for the american people, caused very substantial unemployment, dramatic losses in

income, loss of jobs and homes and hopelessness and helplessness all these things that accompany the deepest recession since the 1930's. what happened to cause that? was this some sort of natural disaster? no, it wasn't a fire, a flood a tornado or earthquake. it wasn't a natural disaster. this was made with human hands. this is a manmade disaster. by the way could well have been predicted, in my judgment. some of us did without pointing at myself necessarily i said 11 years ago that i thought we were setting ourselves up for massive taxpayer bailouts. i won't show the charts again. but it is not surprising that we were going to modernize the financial system a decade ago in order to compete with the europeans and to bring it into the modern age. modernizing meant deciding let's

deregulate everything. let's not look at what's going on. and the result is a decade later a very substantial collapse in our economic system. now, mr. president, i was thinking about this discussion today and the work that's gone on in the last couple of weeks on the floor of the senate. and i was looking this morning -- i came in early this morning because i was thinking about this. i looked to get something from the radio addresses of franklin delano roosevelt in 1933 and 1934. and the situation in this country, while different by many many decades is similar with respect to what caused a substantial problem in this country. then it was the great depression. but let me read, if i might just a couple of excerpts of what then-president franklin delano roosevelt said about our country and about what was needed to be done.

because it has, i think significant application to today. here's franklin delano roosevelt, march 12 of 1933. he says -- quote -- "we had a bad banking situation. some of our bankers had shown themselves either incompetent or dishonest in their handling of the people's funds. they abused the money entrusted to them in speculation and unwise loans." this was, of course, not true for the vast majority of the banks, but it was true in enough of them to shock the people for a time into a sense of insecurity and put them into a frame of mind where they did not differentiate but seemed to assume the acts of a comparative few tainted them all. it was the government's job to straighten out this situation and do it as quickly as possible. and the job is being performed." this again from president franklin roosevelt in 1933. after all -- i'm quoting. he says "after all there is an element in the readjustment of

our financial system more important than currency, more important than gold, and that is the confidence of the american people. confidence and courage are the essentials of success in carrying out our plan. you people must have faith," he said. "you must not be stampeded by rumors or guesses. let us unite at banishing fear. we've provided the machinery to restore our financial system. it's up to you to support and to make it work." he was talking about a time in the shadow of the great depression. he talks about on september 30, one year later in his address to the nation, franklin delano roosevelt -- quote -- "the second step we have taken in the restoration of normal business enterprise is to clean up the thoroughly unwholesome conditions in the field of investment. in this, we've had the assistance of many bankers and businessmen, most of whom recognize the past evils of the banking system in the sale of securities, in the deliberate encouragement of stock gambling, in the sale of unsound mortgages

and in many other ways in which the public lost billions of dollars. they saw that without changes in the policies and methods of investment, there could be no recovery of public confidence in the security of savings. you could raoetd that today and -- read that today and it describes the task we have before us today. this wasn't today. this was 1933 and 1934. the thoroughly unwholesome conditions in the field of investment, in the sale of securities and deliberate encouragement of stock gambling, the sale of unsound mortgages. that's the year 2005, 2009. and yet, franklin delano roosevelt described it in 1934. and he put together a plan, and that plan included glass-steagall and other things to protect this country and say never again will we allow that

to happen. and then a decade ago in this chamber and in the white house they said we've got to modernize our system. we've got to get rid of all those protections from the great depression. they are old-fashioned. let's dump them. and so the congress dumped them. i didn't support them. i vigorously opposed it. but they dumped them. and so the country had a very serious problem. the run-up of a substantial amount of new exotic securities, things that people didn't understand very well. c.d.o.'s securitization of almost anything somebody could securitize, getting fees from the sale of transfer of securities. and then the development of something new called the credit default swap. and the credit default swap was a new approach. it was an insurance policy against a bond default. but then there was a synthetic c.d.o. or the synthetic credit default swap or what some called

naked default swaps. that meant you could buy one of these instruments back and forth without ever having an insurable interest in the instrument itself, just making a wager with someone else about what might or might not happen in the future. all of this time we have watched a very substantial amount of activity on wall street particularly take place that i think has been pretty unwholesome for our country. this is an article of september 30 2008; talks about the money from wall street that's beyond the legal reach. it says "there's $1.9 trillion of money that has run out of the new york metropolitan area that sits in the cayman islands a secrecy jurisdiction. another $1.5 trillion is lodged in four other secrecy jurisdictions. said following the great

depression" i'm quoting from an article by robert morganthal, "wall street journal," september 30 2008. "following the great depression, we bragged about a newly installed safety net that was supposed to save us from such a hard economic fall in the future. but the securities and exchange commission the federal reserve system the comptroller of the currency and others have ignored trillions of dollars that i have migrated to offshore jurisdictions, secretive in nature outside the safety net beyond the reach of u.s. regulators." well it's not surprising that at the same time that money was being hidden in other parts of the world by some of the same wall street interests that a massive amount of money was being paid one to another on wall street and in the investment banking area. just to cite a couple of these examples, i have a description

of about a year and a half ago when lehman brothers went bankrupt. the lehman brothers bankruptcy was just followed by lehman brothers holdings agreed to pay a total of more than $23 million to three executives, leaving the securities firm why you have the days before it collapse -- just days before it collapsed. the reason i point that out is there was so much money around for everybody for everything, days before the collapse $23 million was paid to three executives leaving the security firm days before it collapsed. you wonder why. does that make any sense? anybody think that is something that is worthy? here is a payment of $19 million to a man named alan fishman. he was the c.e.o. of washington mutual, which was run right into the ditch and went belly up and

had to be acquired by another company. alan fishman worked three weeks for washington mutual, and he got a severance of $19.1 million. $19.1 million. and in the heyday a couple of years ago on wall street, executive compensation was -- well the head of merrill lynch in 2007 made $161 million. john thane at merrill lynch -- that was stanley o'neill by the way. john thane made $83 million. lloyd blankfein of goldman made $54 million. john mack, morgan stanley made $41 million. jamie diamond made $29 million of j.p. morgan chase. kenneth lewis bank of america

made $20 million. he must be looking up at stanley o'neill's $161 million and asking where did i miss the boat? this kind of money was around all these firms, it was katie bar the money we're going to pay almost never heard of before sums for individuals running these big companies. $150 million $50 million $83 million. well it's not surprising then that the american people have a view of what was going on on wall street that is a pretty dim view. we now understand that what went on on wall street really led to this dramatic economic devastation to our country. by the way the devastation doesn't apply to everybody. i just saw this morning that the unemployment rate among the higher-income americans is 3%.

unemployment among the higher-income americans is 3%. so they're not feeling the pinch so much. but in the bottom 20% of the american people, the unemployment rate is around 18%. so it's a whole lot of folks at the bottom of the economic ladder that are paying the price for this unbelievable behavior. the question is: what do we do about all this? and what do we do to make sure that when we are done here in the congress on something called financial reform, the american people have some notion that we've done the right things that will prevent that which happened to us in the last couple of years from ever happening again. the presentations i have made i'm sure perhaps lead people to think that i believe investment banking has no merit or no

worth. that is simply not the case. i understand that our country and the ability to produce in our country through a productive sector needs financing and that financing would include a range of financing opportunities. you do need investment banks you need commercial banks. you need venture capital firms. you need securities. i understand all of that. but i also understand, there was a comedian, mark russell who once described investment banks by saying investment banking is to productive enterprise like mud wrestling is to the performing arts. if ever that applied it surely must apply now if we look back and see what happened in the last decade in investment banking. and if we don't in this piece of legislation, fix it, put a cork in it, if we don't fix it and we leave this chamber and this congress and claim to have fixed it and have not done it, then shame on us. we have a responsibility here.

and let me tell you what i think the responsibility is, it relates to a range of things that are not yet done. it relates to dealing with the issue of too big to fail. i know we had one vote and we'll failed unfortunately. there are other ways to do this. but if we have institutions that are too big to fail, that is so large that they cause moral hazard to this country should they fail, so large they cause completely unacceptable risks of bringing the country's economy down if they fail, if we don't doing something about that, we cannot claim ever that we've done something about this system. it's not about saying big is bad. it is about saying that no fault capitalism doesn't work if you allow financial institutions to become so large that their failure can bring down this country's economy. that's what the issue is and that needs to be fixed. and it appears to me we are probably not on the way to fixing that.

but hope still arises. for me it's not a triumph of hope over expectation it is a triumph of hope to believe it is still possible for us to do the things necessary to fix what we need to do. i also think that the -- the set of issues in addition to too big to fail include an amendment that i'll be offering banning naked credit default swaps. saying if there are credit default swaps being issued that have no insurable issue in bonds, then it seems to me that's just wagering, and that can be done at our gambling centers in our country but ought not to be done in the lobbies of banks. and that's an amendment that's very important. if we don't fix this -- if we don't fix this, we'll leave this town saying we did financial reform but we did nothing about too big to fail and we did nothing about the binge of speculative activity in instruments that had no

insurable interest in bonds credit default swaps that have no insurable interest in bonds. mr. pearlstein, who writes a column for "the washington post", asked the question, which led me to be interested in the question, "why should there be more insurance policies against bonds than there are bonds?" and, in any event why should we in our financial institutions have people wagering about whether a bond will default when in fact, they have no interest in the bond? we don't allow people to buy life insurance on someone else's life because they don't have an insurable interest. we don't allow someone to buy fire insurance on someone else's house because there's not an insurable interest. and, yet we have trillions and trillions an trillions of dollars out there called credit default swaps making a wager on someone else's bond -- whether someone else's bond will fail despite the fact that they have no insurable interest in the bond. if we don't put a dagger in the

heart of that kind of intent speculation that has caused a significant amount of these problems, then we will have, in my judgment, failed to address the real causes, and fail to have -- to have done what we should do to make sure this cannot happen again. my colleague from the state of washington i believe is going to offer a restoration of sorts of -- of the old glass-steagall law, which i think makes sense. others will offer legislation that would say to insured banks that you ought not be trading securities and derivatives on your own pro pry parry accounts -- proprietary accounts. makes sense to me. all of those are important. i mentioned before i wrote the cover story for the washington monthly magazine 15 years ago entitled "very ricky business," and at that time there were

were $15 trillion in negotiable derivatives. i wrote even then banks were beginning to trade derivatives on their proprietary accounts. that's not what insured banking should be. that is far too risky and puts the taxpayer at risk. now we see that unemployment is at 9.9%. while we're still trying to recover from this devastating recession, we're making some progress that wall street is back on track for record profits. this is four months ago -- five months ago now from "the new york times". in a report released tuesday the comptroller of new york state said that wall street profits for 2009 are on track to exceed the record set three years ago at the height of the credit bubble. and he also talked about bonuses at six banks he thought would exceed the $162 billion paid in

2007. and fueling the gains by the way, fueling these record profits by these institutions is from the firm's own security's trading accounts. according to this story as they borrow at zero interest rates and put the money to work in the securities markets. it sounds like nothing has changed. that's what helped cause this mess. and, yet here we are back again, and the question is: who's healing? the big investment banks are healing. now, let me just, for a moment, remind everyone how important regulation is here. this bill has a lot of regulatory allowance. some instruction but a lot of it allowance that says to regulators, all right here area your responsibility. one of the key issues that has

exacerbated this substantial economic collapse was something that happened in 2004 on april 28th, in the basement of the securities and exchange commission. in the afternoon of ape 28, 2004 there were five members of the securities exchange commission met in a basement hearing room to consider a request by the five biggest investment banks. they wanted an exemption for their brokerage units from the old regulation that limited amount of debt they could take on. what they said is, we want to be able to unshackle millions of dollars -- billions of dollars rather now that we hold in reserve as cushions as losses on investments. if we could unshackle that money that we hold in reserve against losses we could use that to flow up to the parent company and we could enable it to invest in the fast-growing world of

mortgage-backed securities and credit derivatives and so on. the five investment banks that led the charge, one of them was goldman sachs headed by then henry paulson who two years later was secretary of the treasury and inherited the mess that was in part created by it. they had 55 minutes of discussion that afternoon and after 55 minutes of discussion, the securities exchange commission voted unanimously that allowed these biggest banks in america to take on leverage from -- to about 12-1 to 33-1. in other words, for every dollar in equity, it could leverage about $33 in debt. and so by that notice in a basement hearing with no press there at all i mean, i think

one reporter was there. it was barely reported. they set the stage for loading up dramatic amounts of debt in these institutions. and now these institutions are of course, very opposed to the amendment that i'm going to be offering here at some appropriate point i hope -- well i expect -- or i insist, one of the three -- that would ban naked credit default swaps trading. they are very opposed to that. i understand why they're make a lot of fees an profits as a result of this massive bubble of speculation on these kinds of securities. but i don't think we have any choice but to be taking on the center of the cause of this economic collapse in our country. now, mr. president the -- the amount of effort that's been

made here to water down some of the amendments that have been offered is -- is troublesome to me. i think the legislation that came out of the banking committee is -- is meritorious. it has value and i appreciate the work that the committee did. but as i said when i started most members of the senate have not had a chance to weigh in on this and there are some substantial improvements that can be made. i hope should and will be made to the banking committee product. but the improvements will not be improvements that strengthen our ability to prevent what happened from ever happening again if the improvements -- so-called improvements are diminishing the strength of this bill. we need regulatory oversight. if we haven't learned one thing in the last decade, it is that you've got to have regulators on the beat that take regulation seriously. and you also have to decide to put a stop to the things that

don't represent the kind of business practices that give any strength of this country at all and, in fact, represent business practices that can undermine this country's economy. that's why i think it's critically important that we continue to address the issues, as i've just described, too big to fail and -- and credit default swaps and related issues. now, i'm going to read just for a moment something from the november 5 1999, "new york times" article when congress passed a new piece of legislation called financial modernization. this was written by steve lavaton, steven lavaton. today, after the passage of the bill i voted against it, i thought strongly then it was a dangerous mistake for our country. it turns out it was even more dangerous than i thought. the architects and other said,

today congress voted to update the rules that govern the financial industry since great depression and replace them with a system for the 21st century. this historic legislation will better enable american companies to compete in the new economy. another quote -- in fact, that was from the white house from someone at treasury. this is from a senator "the world changes and we have to change with it. we have a new century coming and we have a new opportunity to dominate that century the way that we dominated that century glass-steagall came at a time when it was thought that government was the answer, in this era of prosperity we decided that freedom is the answer. another senator said, if we don't pass this bill we could find london or frankfurt or shanghai becoming the financial capital of the world. first and foremost we must ensure that american financial firms remain competitive.

this set this country up for the biggest fall since the great depression. are we going to pass a piece of legislation that has real strength in deciding that which caused this deepest recession since great depression cannot be allowed to happen again. are we going to pass a piece of legislation that has real regulation and real rules that work? are we going to pass a piece of regulation that says too big to fail is too big period? are we going to pass a piece of legislation that pierces the balloon of speculation in instruments such as naked credit default swaps something that wasn't even in our language 20 years ago? are we going to address the question of the securitization of everything, in many cases just for the sake of being able to capture fees? are we going to address the question effectively of rating agencies that gave triple -- aaa ratings to bonds that were worthness are we going to address all of these questions or are we going to pass a bill to say we did it, good for us, this is success only to find

out five years later or 10 years later we're right back in the same swamp? so, mr. president i -- i wanted to simply say today that the american taxpayer has now been obligated, in addition to the joblessness and homelessness and other things visited on the american people and the loss of about $14 trillion or $15 trillion in value the american taxpayer has been obligated somewhere to the tune of $11 to $12 trillion lent, spent, or borrowed to interest that we don't now know because the federal reserve board says it's none of your business who we gave trillions of dollars to. i think given that -- given the economic catastrophe that has visited a lot of the american people, i think we owe them a piece of legislation here with amendments that improve it, a piece of legislation that allows all of us at the end of this day

to say no, we didn't water it down, we strengthened it. we recognized the value of our financial institutions but we don't recognize the value of financial institutions that run this country into the ground, pay $83 million in salaries, $20 million in bonuses, buy things they will never get from people who never had it and claim fees on both ends and claim they have done something good for the country. this country can do better than that. this is one of those times -- i know this is not seen perhaps by some with the same passion as some of the other issues that get people's blood boiling but i tell you what we do here will long be remembered because it will have consequences on whether this country has a growing, strong economy for many years ahead and whether we avoid an economic collapse or a deep recession. mr. president, i watch every morning and read the stories about greece and other countries that are in great difficulty.

our country -- our country is in some significant economic difficulty. we have sent people off to fight wars now for eight nine years not paid for one single penny of it not one penny. it's unbelievable to me. every single bit was borrowed and put on the debt. then we have people that thumb their suspenders and talk about how awful the debt is. we have got a trade deficit that is relentless. it means we end up owing other countries which will be paid with a lower standard of living in our country. in addition to those issues, we have got this issue of a near collapse of our economy by unbelievable speculation coming from the banking industry. we have got to fix all of these things if we want a country that gives our children the same opportunities we had. we can't fix it just by glossing things over with a coat of light paint. this has to be fixed with real policies that tackle the central issues on what caused this collapse. so i'm here and i'm ready to

offer my amendment. in fact, the sooner the better. i have been anxious to do that. i will stick around, and as soon as i am told my amendment will be in order i'm going to offer it and if not i guess i will just be here until we finish this debate and then complain until i get to offer the amendment. so mr. president, with that, i will yield the floor and be hanging around. i yield the floor. a senator: mr. president? the presiding officer: the senator from georgia is recognized. mr. chambliss: mr. president what's the current business before the senate? the presiding officer: the crapo amendment to the landrieu amendment is the pending question. mr. chambliss: i would ask unanimous consent that the pending amendment be set aside and that i be allowed to call up my amendment numbered 3816. the presiding officer: is there objection? mr. dodd: reserving the right to object and i won't object at all. i have chatted with my friend,

senator chambliss as well. i know he is going -- he is inquiring among his members as is my colleague from arkansas as well about a time agreement on the chambliss amendment. my hope would be that it wouldn't take too long. i know that's the plea of every manager, majority, minority leader. if they can inquire as soon as possible on time. there are several other amendments tonight. i think mr. president we'll be able to deal with, some of which won't require any roll call votes at all. but obviously members like to get some sense of when votes will occur. i'm not trying to suggest we truncate anything here. i know my colleagues agree we node to find a time agreement so i just need to make that plea to vote the chairman an the ranking member of the committee. and with that, i have no objection. mr. dorgan: mr. president reserving the right to object, and i will not object. i understand the senator -- the unanimous consent request is to set aside the pending amendment is that correct? the presiding officer: that's correct. mr. dorgan: i will not object, but let me observe just for a moment if i might to the senator

from connecticut. i had indicated i would like to offer an amendment at some point. i want to know if i'm on the list. mr. dodd: i say to my good friend he is on the list and we'll try to get to that amendment as soon as we can. i promise him that. mr. dorgan: mr. president the word "promise" actually made the day for me, so i will -- i will not object and look forward to offering that amendment at the earliest opportunity. mr. dodd: i thank my colleague. the presiding officer: without objection, so ordered. the clerk will report. the clerk: the senator from georgia, mr. chambliss for himself and others proposes an amendment numbered 3816 to amendment numbered 3739. mr. chambliss: mr. president, i would ask unanimous consent that further reading of the amendment be dispensed with. the presiding officer: without objection. mr. chambliss: mr. president first of all let me thank the chairman and he is exactly right. i would encourage all of those who have indicated to me they would like to speak on my amendment from both sides of the aisle to let us know, come down to the floor.

we would like to dispose of this amendment as soon as possible. i'm prepared to enter into any kind of reasonable time agreement as soon as we get an idea of exactly how many speakers there will be and in order to accommodate those folks. mr. president, i'm going to talk in detail about the amendment but, first of all i do want to respond to the senator from north dakota who makes some good points that i agree with, but when we talk about the elimination or the not allowing credit default swaps let me just say what bothers me about that. in 2000, when we passed the commodities futures modernization act nobody envisioned that credit default swaps would mushroom like they did, and the fact of the matter is that not only did they grow larger in number, they grew in dollar volume and they grew in a

way that certainly did participate in the collapse that occurred in 2008. but the real problem with it is not that we had those products on the market, but that the regulators didn't have the power and the authority and the tools to deal with those products. rather than thinking about eliminating a certain product knowing that these smart folks who are in this business, in the financial industry of this country, are out there right now looking at this bill and trying to figure out other products that they can design that will be different from a credit default swap and come forward with that but yet be just as dangerous as what happened in 2008 that we need to give the regulators the power and authority to look at these products and poot that 100%

transparency in place that i want to see and that my chairman senator lincoln wants to see and everybody in here agrees we ought to have. mr. dorgan: mr. president, would the senator yield for a clarification? mr. chambliss: sure. mr. dorgan: let me clarify my position is to ban what are naked or credit clarification defaults. those with no insureddable interest of any kind are considered naked credit default swaps. it appears to me 70% to 80% of all credit default swaps are in that category. i didn't want the senator to think that i wanted to ban credit default swaps. that's not the case. naked credit default swaps yes. mr. chambliss: i understand that. my point is the same, though, that if we give the regulators the authority to regulate those that's what will happen because that product is not a product that has been a benefit that we're going to be talking about as we continue to debate this, but if the regulators have the authority to stop that product

from coming to market, then i think we can deal with it better that way than targeting specific products to be eliminated or banned. mr. president, among the many complex issues that this body deals with every day, there are few more complicated than the issue of derivatives. however, we should not let the complexity of the swaps market be an excuse for ignoring good public policy and insuring that our markets are both safe as well as functional. in the past couple of years a lot of people have become equated with one particular type of derivative known as, as we have just talked about a credit default swap or c.d.s. which permits one party to transfer the credit risk or bonds or syndicated bank loans to another party. since a.i.g. was heavily involved in c.d.s., it seems simple enough to just blame swaps generally for what went

wrong in the system. however, that would be an inaccurate oversimplification because the real situation is much more complicated. we need to distinguish between credit default swaps and the actual underlying assets represented by these swaps. in this case, mortgage-backed securities on mortgages that were themselves the root of the problem. there are so many other types of swaps that u.s. businesses rely on every day to mitigate just about any risk they face in the ordinary course of doing business. before we make a big policy change that makes these over-the-counter products less desirable to market participants or require that these products trade only on an exchange type facility, we need to ask ourselves whether this will even address the underlying problem. why take a chance in these uncertain times to make legislative and regulatory changes that could possibly make

things worse potentially dry out more capital or force the cost of business going higher. this does not mean that there isn't room for improvement and that is why i join with several of my colleagues today in developing an amendment to apply strong and reasonable regulation to the derivatives markets. let me be clear. we share a desire to apply stronger safeguards in these markets, to regulate swap market participants and to ensure that swap transactions are more closely monitored by the regulators. i am absolutely convinced that the market volatility and financial meltdown of recent -- of the recent past makes the case for more market transparency. how can we and the congress be sure of the outcome of sweeping reforms without first properly identifying the exact cause of these problems, and how can we identify the cause of the problem without authorizing and

requiring more transparency through the collection of necessary data? for this reason, i have worked with several of my colleagues to develop an amendment that would require that all swap transactions be made known to the appropriate regulator so that effective regulation can be applied where necessary. additionally, there will be public dissemination of prices and volumes of completed swap transactions in order that investors and other market participants might be assisted in marking existing swap positions to market, making informed decisions before executing future transactions, and assessing the quality of transacks they have executed. beyond requiring more transparency i also believe that we should provide the cftc and the s.e.c. with the necessary authorities to more appropriately regulate those market carp ants who are potentially contributing to the type of risk that jeopardizes

our financial system. swap dealers, fannie mae freddie mac large hedge funds and a.i.g.-type entities. many may not even realize that swaps are statutorily excluded from the current regulatory oversight of both the cftc and the s.e.c. that's right. current law does not provide for clear regulation of swap market participants. our amendment would ensure that these market participants are fully regulated and that their swap positions are cleared through a fully regulated clearinghouse. this is a huge departure from current law. speaking of clearing, we need to determine how best to encourage the clearing of certain derivative products without jeopardizing either the use of these risk management tools or the sustainability of our clearing houses. for that reason, our amendment would enable true end users

those businesses who use swaps to hedge their risk, not for speculative purposes, but true hedging to avoid an expensive mandate to clear their swaps. these businesses had absolutely nothing to do with the financial crisis and should not be punished with increased costs and burdens. we certainly do not want to discourage them from managing their risk, especially not in the current economic environment. just last friday, the department of labor published their unemployment report for the month of april and again unemployment rose from 9.7% to 9.9%. in my state it's in excess of 10%. why would we subject u.s. companies to expensive mandates when we should be advancing policies that lessen their financial burdens so that they can employ more people? why is congress considering slapping an additional cost on

them in the form of a clearing mandate? this just doesn't make sense when these individual companies are the true end users of the products that they are trading in and they were absolutely not the cause of the financial meltdown. these mandates should be targeted in such a way to lessen the risks of those large financial institutions swap dealers who are responsible for the bulk majority of all swap transactions and therefore contributing to systemic risk. but a clearing mandate is not appropriate for businesses using swaps to manage their risks and keep their costs down. this is very simple. if their costs go up, they will either pass it along to consumers or stop managing their risk and then they certainly cannot afford to hire more workers. so our amendment has a more targeted clearing mandate designed to reach those who are

actually responsible for this crisis that we're in. wall street and not main street businesses. the senate will soon have the chance to vote on this substitute amendment on derivatives. i'm looking forward to further debate on our amendment because i think it will highlight a handful of significant differences between the derivatives language in the dodd-lincoln amendment versus our amendment. i believe that our approach on transparency on clearing, on end users on capital requirements and on trading mandates are much more appropriate, much more reasonable much more business friendly and frankly much more secure. my amendment will ensure that main street businesses will still be able to appropriately use derivatives in hedging their daily business risks while ensuring that appropriate regulatory standards are put into place for the institutions and transactions that contribute to the systemic financial risk.

if congress is truly interested in addressing the problem as opposed to politicizing a solution, we can no longer ignore the complexities of these markets. we must seek to understand the legitimate purposes these complex instruments serve for large and small businesses in each of our states. unfortunately, the language currently before the senate misses the mark when it comes to the appropriate regulation of derivatives. the underlying bill will have many unfortunate consequences, some intended, some unintended, resulting from applying complicated regulations too broadly and will subject our american businesses to more risks, not less. three consequences of the underlying bill on derivatives are this. one, the users will play huge clearing fees and pass on those expenses to consumers.

two, no longer will businesses use derivatives -- the derivatives market and they will pass on the higher, unstable market costs to consumers. and third these businesses, instead of using u.s. clearinghouses or u.s. markets will simply take their products offshore and just as they do today, they will trade in the dark and no u.s. regulator will ever see what they're doing. that's not right. that's not what any of us intend to see happen. but the fact is that if we pass the derivatives provisions in the underlying bill, there are going to be a significant number of end users who take their business offshore. that truly is unacceptable. our amendment makes good business sense and good common sense. mr. president, we have received support on our amendment from a wide array of businesses around

the country. these aren't banks that stand to make profits. these are individual users. i have a letter from the national association of manufacturers which states -- and i quote -- "we have serious concerns that the current end user exemption in s. 3217 and in the pending dodd substitute is not strong or clear enough. in addition, other provisions in the derivatives title could effectively eliminate the exemption for many companies and in some cases subject them to capital and margin requirements or higher costs. conversely, the chambliss-shelby substitute includes a clear and strong end user exemption that appropriately exempts businesses that use o.t.c. derivatives to hedge their business risks from the regulatory scheme applicable to swap dealers. from the coalition of derivative end user, we have the following

that my amendment would strike the right balance between bringing fundamental and needed reforms to the over-the-counter derivatives market while also ensuring significant and burdensome new costs are not necessarily imposed on business end users. lastly, i have another letter signed by several energy supply groups that they remain concerned about the potential impact of the proposed financial reform legislation on end users. they go on to say that due to the broad combination of swap dealer end users may be ineligible for the end user exemption if they engage in hedging business risk in the ordinary course of business. and i would ask unanimous consent mr. president that these respective letters be entered into the record. the presiding officer: without objection. mr. chambliss: mr. president, i would close at this point just by saying that, you know, i've

had numerous discussions with both the chairman of the banking committee as well as the ranking member of the banking committee and the chairman of the ag committee about this issue for weeks and months, and i know that we have the same goal in common and that's to ensure that there's transparency in the market place and that we have regulators who are going to do the job that we ask them to do. and, frankly i'm not sure that was the case five years ago or even two years ago. but if we give these regulators the tools and if we give them the opportunity to look at every transaction irrespective of whether it's clear -- going through a clearinghouse or whether it's over the counter and they have opportunity to review every large institution or every small institution that engages in these transactions and they also have the opportunity to look at the other

side and see which companies are using these -- these products or which entities are using them and they can then deal with those entities that become systemically risky. they didn't have that power and authority before. we're going to give them that power and authority now. and i have all the trust and confidence that they will use it in the right way and that with those tools and with that transparency and with the bringing of these trades out of the shadows and into the sunlight then we'll be able to control the financial markets in a way that allow our end users those who did not cause any of the problem and are not part of the problem from being thrown into the same basket with those folks who did abuse the system and those that did become systemically risky and caused the financial meltdown that occurred. my amendment does that and it

does it in the right way and i would urge my colleagues to support the amendment. and with that, i would yield the floor. mrs. lincoln: mr. president? the presiding officer: the senator from arkansas. mrs. lincoln: we women don't have pockets so this doesn't fit. of[laughter] mr. president, i rise today with great respect for my colleague from georgia my ranking member on the ag committee and all of his attempts and ideas of how to make our economy stronger and better but i do rise today to speak in opposition to the chambliss amendment. and, again as i said, with the greatest respect for my colleague from georgia the ranking member. he and i and our respective staffs spent civil months developing -- spent several months developing draft legislation in the agriculture committee. i'm unbelievably to him and to

his staff as well as my staff. we've made progress and in the end accomplished i think 80% to 90% of what is now the dodd-lincoln substitute. but as with all policy decisions, some tough choices needed to be made. senator chambliss and i simply could not resolve our final differences. we ran out of time basically in the committee. but let me be clear, as chairman of the agriculture committee i made the decision to move forward with a strong reform bill a bill that was voted out of my committee on a bipartisan vote. and i know to my colleagues, the agriculture committee derivatives title is the only legislation to gain bipartisan support in this debate and we want to strive to continue in that vain and to work in a bipartisan way to get to a good resolution of something that's going to be beneficial to this nation, to our economy and that's going to gain the respect of americans who have suffered from this financial crisis.

unfortunately, the amendment being considered today from senator chambliss and some of my republican colleagues does not in my opinion contain the essential reforms required to ensure the stability of our markets. it creates loopholes and fails to bring the transparency and accountability that americans are demanding of us at this juncture. this amendment would be detrimental to our me and to our markets. the derivative title of the dodd-lincoln bill is strong reform. our bill provides necessary transparency and accountability to our shattered financial markets and regulatory system. today this derivatives market is completely in the dark with no, i repeat, no regulation, mr. president, no oversight and no public disclosure. the dodd-lincoln bill will bring a completely unregulated market into the light of day for the first time ever.

but it's important to point out it is not regulation for regulation's sake. the steps we have taken in this bill have meaningful issues in terms of what they are dealing with. it maintains a narrow end user exemption, appropriate restraints on the regulators, where necessary and provisions that recognize we are competing in a global financial marketplace. many have commented about what might happen in these markets in moving markets overseas, and i'll address that in a moment. but i think that all americans are certainly demanding good, sound marketplaces and i think people globally are clamoring for those same types of sound marketplaces. and the facts speak for themselves. the chambliss amendment does not meet the test of what our markets require. it is a stark reminder that if

we do not act boldly in the face of the near collapse of our economy tragic wall street abuses and abysmal regulatory failures, we will all suffer the consequences. i have a number of concerns with the chambliss amendment. clearing and trading -- exchange trading. clearing and exchange trading are at the heart of reform. mitigating risk, reducing leverage, and forcing accountability on the derivatives marketplace. this amendment would remove the underlying bill's mandatory exchange trading requirement and removes the mandatory clearing provisions. this is just not acceptable. we understand and know from our experience with the futures market what the clearing does and the stability that it brings to the marketplace. it is absolutely essential. this amendment removes real

price transparency to the public. the dodd-lincoln bill provides realtime price transparency to the public and to the regulators. without real transparency, the markets won't function and the regulators can't do their jobs. that realtime 100% transspearns -- transparency is what moves those exchanges into the public, that is so necessary that we bring that stability to the marketplace. information is power mr. president, and this amendment will keep this power in the hands of those on wall street instead of giving it to main street. we have watched as these selected few on wall street have maintained their grip on these dark markets and on this information. and what have they done with it? they have benefited themselves. it has not produced the kind of benefit across this great country that people in communities in places like

arkansas and other -- other states across our nation could really see the benefit of that information because we had no access to it. shedding sunlight on that, that sunlight which is the disinfectant we need in wall street, is going to be critically important to making sure we are a success and ensuring that that transparency is here is part of what we have done in the dodd-lincoln bill. if we do not capture the a.i.g.'s of the world we cannot claim to have real reform. this amendment would miss many of the largest and riskiest players but narrowly -- by narrowly defining both swap dealer and major swap participant by identifying too many market participants. more so, this amendment requires less of the largest riskiest market participants. they will have fewer business conduct standards fewer record keeping requirements, and fewer

regulatory core principles to follow. this amendment also, mr. president, weakens the capital standards in the underlying bill. customized bilateral over-the-counter transactions are less safe than those that are cleared and exchange traded. there's no way to get around that. we should expect more capital to back up those transactions those riskier transactions not allowing the -- the -- the obligation to rest on the taxpayers or on the depositors in these banking institutions. but this substitute misses that opportunity in terms of making sure that those riskier tools and those riskier transactions are required to have greater capital and -- backing them as well as greater regulation which is appropriate for their expanded risky nature. and i would jus

-- and i would just say to the comments of those that have said this is going to be pushed into other markets into other countries, i would just say, the american people are demanding stability, consumers are demanding stability in our marketplaces. why should we think that other places are any different particularly as we have seen what has happened in these other countries? we can seize this as an opportunity to be a leader globally, global any this world to create sounder markets stronger markets not just for us but for the global economy which we're such an enormous part of now and will continue to be in the 21st century. i would prefer to see us seizing that opportunity to be a leader in those global economic markets, and i think we should, with a good, strong, stable bill that will be recognized by both markets as well as consumers. this amendment also delays

implementation of regulatory reform for at least a year. mr. president, the american people are demanding real reforms, and why we would want to delay implementation is really beyond me. the time is now. people are wondering why it's taken us this long already. -- to take these actions, and i think it's clear that we must get started. this amendment removes an important provision that would require swap dealers to put the financial interest of state and local governments retirement plans, pensions, university endowments and retirees before its own. the stories of abuse in this area are alarming and need to be addressed. jefferson county, alabama is one of the starkest examples we have. jefferson county was taken advantage of by wall street and is now on the edge of bankruptcy. in part, because of a $3 billion derivatives deal on bonds that

went wrong. without any responsibility to those entities, we will continue to see these types of circumstances perpetuated and we've got to stop that. this amendment creates loopholes and broadly defines hedging. we cannot have a situation mr. president, where the exemptions swallow the rule. under this amendment few will end up being regulated and we will be back in business as usual, and i just think that we cannot allow that to happen. the dodd-lincoln bill gives regulators spliceregulators explicit authority to -- the chambliss amendment would remove that authority. the chambliss amendment also fails to require registered entities like swap repositories or swap execution facilities to have chief compliance officers.

allowing theseent toys avoid regulatory -- allowing these entities to avoid regulatory compliance and endangering main street investments. this amendment removes an important whistle-blower program for commodities markets. it removes the bill's additional stronger antimanipulation authorities. the amendment also removes important authority for the regulators to close loopholes and strip key antievasion language that would allow the regulators to go after anyone who tries evade the law. this amendment arbitrarily moves jurisdictional lines and removes more than 30 years of good-faith agreements between regulators, ignoring the expertise of individual agencies and jeopardizing the ability of regulators to act quickly. this is a dangerous path, mr. president, to go down for

the ranking member of the ag committee and i hope that well be able -- we believe able to stop this amendment and continue to work in a way that will bring about the kind of solid regulation transparency, and oversight that needs to be in this bill. finally, the dodd-lincoln bill includes important conflict of interest provisions that would allow the regulators to ensthiewr no market participant unduly influence or monopolize the market. whatwhat does the chambliss amendment do with this provision? it would eliminate it, in effect handing more power over to wall street. mr. president, these changes are simply an effort to weaken the bill and riddle it with loopholes. i understand many of my colleagues are being pressured to take this path, but we must forge ahead and enact meaningful meaningful reform. the american people deserve no

less. they have seen what this financial crisis has done to them. in middle america where they have seen their savings for their children's college funds their retirement funds other things that have been put at risk because of risky businesses and risky deals that have happened in a small group of wall street banks that have chosen basically to take those risks with, unfortunately the liability filing -- falling on the depositors as well as the taxpayers. the same claim and worn-out catch-all defenses of unintended consequences or driving business overseas have been used for decades, mr. president as reasons to wing weaken financial reform efforts. and critics are using the very same arguments again today.

we're here, mr. president to tackle complicated problems and find real solutions meaningful solutions that will again bring the kind of competence to the marketplace and consumers that we need, to be able to restrengthen our nation and our marketplaces and our economy to create the jobs that all americans want to see and to set the example globally of what good strong regulations and solid markets can do in terms of growing the global economy. we certainly shouldn't squander the opportunity for historic reform nor support any efforts to weaken it. therefore, mr. president, i intend to vote "no" on this amendment, and i respectfully encourage my colleagues to do the same. now, mr. president, i know that i have other colleagues on our side that want to speak on this amendment, and i know that there are others on the republican side. i would encourage all of our

colleagues to come to the floor and take the opportunity to speak on this amendment. i know chairman dodd is anxious to move the bill, as well as others and we've got a great opportunity here to visit about -- and debate this important portion of the bill and encourage my colleagues to do that. so, thank you mr. president. and i would yield the floor. a senator: mr. president? the presiding officer: the senator mr. enzi: mr. president once again we're debating a comprehensive bill. this one of course is only 1,407 pages, as opposed to 2,00 pages that did -- as opposed to 2,700 pages that did health care. this doesn't affect everybody just everybody everybody. this could have been three separate bills and we could have put a lot more effort into getting it right if it were three bills instead of one. i mean, this is one that takes care of the problem with big banks, there's another were un one that provides consumer protection that people are going to be stunned at to find out that

every single transaction practically that they can make can be controlled by a new board that has no oversight. they get to write their own rules and has an unlimited budget. but the piece we're talking about right now has been labeled "derivatives." and i keep thinking that maybe it's been labeled "derivatives requests" so that the american public wouldn't know what what we're talking b i am geeing rise in strong support of senator cham bliss effort to improve this derivatives section of the bill. but i'm disappointed that senator chambliss is even required to offer his amendment. senators lincoln and chambliss were well on their way toward moving a bipartisan package for the derivatives market. this is the market used to hedge against risk. if we make a mistake in dealing with it, businesses will suffer, students will suffer, farmers and ranchers will suffer, many businesses want to flock a price, so they hedge their risk. they make a long-term commitment

to purchase something at a particular price so they have certainty and avoid the visk that the price will choing -- and avoid the risk that the plies will chaifnlgt many airlines use this to lock in long-term fuel prices they can rely on. that's a derivative. that contract can be bought and sold as the market changes again to take an acceptable risk. sometimes i think we call it a derivative so the american people will be confused and won't pay attention. senators lincoln and chambliss are on the verge of putting together a key piece of financial renorm in a -- reform in a bipartisan fashion. the white house intervened in negotiations. they urged an end to bipartisan negotiations. they pushed the bill further to the left and we're now faced with a product that will make it harder for american companies to obtain capital or to assure future purchase prices for essential products. this will drive some american

jobs overseas and perhaps entire businesses as well. it's disappointing that this is becoming commonplace in the senate. during the health care reform debate i worked with five other members of the finance committee hon a comprehensive health care package. we were making progress on a bipartisan bill when the majority with the guidance of the white house decided to go it alone. decided that was better politically. now we're having a debate about the future of the financial industry. we're working working to protect our future economy from future collapse. the white house is interested in scoring some more political points. it's an election year. these are election-year politics it's woivment and i'm disappointed it's becoming the norm. the white house believes they can win political points on this issue because the word "derivatives" is something of a bogeyman. people hear that word and they assume it is a group of wall

street bankers plotting how to increase their end-of-the-year bonuses. my constituents are told by fearmongers on the left that derivatives are risky transactions and are miss led moo believing that there's nothing about derivatives that's useful to ordinary businesses. the facts don't support those claims. derivatives are by their very nature measures to help limit risk. it's hedging the bet. the vast majority of fortune 500 companies and many smaller companies are involved in the derivatives market. employee pension funds are involved in the derivatives market. the agriculture derivatives market is one of the oldest and most established financial markets in the united states because agriculture can be an inherently risky business, unless you lock in a favorable price. producers are at the mercy of the weather transportation networks varying input costs and the global supply of agricultural commodities.

these unique market conditions mean that, without risk management markets fluctuate wildly. i think it could be helpful to those listening to the debate to try to make clear how these transactions actually work. oftentimes in business the greatest potential for profit involves the greatest rick. it only makes sense that i would have greater potential to make money if i invest in a start-up company than if i invest in a treasury bond or an old established company. it's also more likely that i will lose money with my investment if i invest in that start-up company. i may want to limit the chance that i will lose all my money. i want to figure out a way to lessen my risk. another company may believe that my investment was good and so i will essentially sell them some of my investment in the start-up company along with my chance for maximum profit. in order to have money to invest

in more stable treasury bonds and less profit, hedging my bet. the entity who facilitates that sale is a swaps or derivatives dealer and they play an important role by helping find willing buyers and sellers help companies limit exposure to hedge the risk. now, the goal of this legislation should be regulating the market in a way that ensures companies, individuals and other entities can have access to as much money for investment to create jobs as possible. at the same time we create a situation where we will never again be forced to bail out the biggest banks and where we never allow another a.i.g. to occur. i'm not convinced that the bill, as written addresses the concerns. although i feel confident the bill will lead to less access to money for businesses, at a time when our economy is struggling. in my home state i'm hearing

from the energy industry and from the agricultural groups that the bill has the potential to treat companies who are trying to limit risks as major banks. although the bill does provide an end-user exemption, it is unclear if companies can avoid being misclassified as a swap dealer or major swap participant and, if they are misclassified they lewis their end user exemption. the chambliss amendment clarifies the end-user exemption to ensure that bonafide hedging transactions, including those used by a wheat grower in wyoming or a power company in the midwest remain regulated in a reasonable fashion. now, one of the difficulties with the way we're doing things here with most of the work being done on the snroor that you can't take the glimmering of an idea out of one and the glim he of an idea out of another and put it together and have a good amendment, plus there's all this pressure that the party line

should be protected. that's not what this amendment is trying to do. this is trying to make a bona fide change to it. it has to be done in a more global way than we'd like to do, but we're limited on the number of amendments we get to do. there's already talk about how we need to close this debate out. i know of dozens of amendments that are out there that people feel are good changes to this bill that make it a working bill that we probably will not get to debate. in a meeting yesterday with federal reserve chairman ben bernanke the chairman emphasized that what has become known as section 106 provisions remain problematic. in the current version of the legislation, the provisions have been moved to section 716 and require that swap business be conducted in affiliate separate from the fdic-insured banks. bernanke didn't think that this section was nearly ready to go, and i suspect the fdic folks don't either. although the idea appears to make sense on its outset, the

provisions will further predues access to investment money to create jobs as banks are required to hold additional money in the related businesses to limit credit exposure. instead of using the capital at the bank to limit credit exposure, they're forced to have a second pot of money that they'll be unable to lend. now, the provision will result in less investment money entering the market. it will lead to further consolidation of the market because fewer institutions will be able to meet the credit risk requirements and it will increase costs to end users. putting on my hat as the ranking member of the health, education labor, and pensions committee the chambliss amendment also helps resolve a concern that pension and retirement plans have with the lincoln-dodd substitute. many people do not realize that pension plans dislike big fluctuations in the market. private pension plans invest for the long term and would prefer

to have steady, long-term growth rather than invest in a volatile market which could cause a company's pension obligation payments to skyrocket when the market falls. pension plans enter into swap agreements and derivative contracts to hedge price fluctuations and to keep risk at a minimum. for example pension plans use these contracts to make sure they don't have too high of an interest rate that may be unsustainable or too low of an interest rate that would give too low of a rate of return that would not provide enough phopb to pay -- money to pay pensions as they come due. even the pension benefit guaranty corporation pbgc, uses swaps derivative contracts to dampen swings. recently 401(k) plans and individual raoeurplt accounts -- retirement accounts have been

using stable value funds to offer a very stable and steady increase of earnings. these stable value funds are stable because of the use of swap contracts again because they make sure that the underlying investments don't go too high and don't go too low. originally senator dodd's language in the banking committee-reported bill may have caused pension and retirement plans to register as major swap providers. this, of course, would not work because the regulation and registration requirements may have run afoul of pension requirements for solvency. senator lincoln tried to remedy this but her solution was to place the swap dealers on the spot by requiring special duties for just touching a swap contract for a pension plan. i believe that senator chambliss' amendment strikes the right balance. pension plans are not trying to create a market in swaps. nor are they trying to use swaps

to game the markets. pension plans that use swaps assure pension funds will be there when needed for the people retiring and the approach taken by the chambliss amendment allows that to happen. the chambliss amendment is a far superior effort to the bill we have on the floor. at one time i was confident that we would be seeing a bipartisan workable lincoln-chambliss provision. it's unfortunate that the white house got involved, pushed this bill to the left and is now pushing us to pass some sort of financial reform legislation any sort at this stage at the expense of passing a strong workable bill. congress needs to stop this kind of a "shoot first ask questions later" approach or as we call it in wyoming the ready fire venom approach that may never hit the target. i hope my colleagues can support the chambliss amendment or at least get together and cover the kinds of things we talked about that are a major problem with

the bill. this is a third of what we're talking about and this is going to have the potential to ruin a lot of things for individuals working americans. we don't want that to happen. i ask you to support the chambliss amendment. i yield the floor. mr. president, i think that senator dodd was expecting to speak next. the presiding officer: the senator from connecticut. mr. dodd: mr. president let me begin by expressing my gratitude to senator lincoln of arkansas and senator chambliss of georgia and the members of their committee for the tremendous work -fplgt in fact, there -- for the tremendous work. there is some overlap. a couple of members of the banking committee are also members of the ag committee.

i know how hard they've worked on what is such a critically important piece of legislation. it's probably an area which a lot of people are not terribly familiar with. it's a lot of the language we use in describing this area of the bill is, sounds pretty foreign to a lot of people, but it is terribly important we get this right for the reasons i'll try to briefly explain in the few minutes this afternoon. for many americans who aren't necessarily experts on our financial system, this is one of the most confusing parts of our work but it's also incredibly, incredibly important in terms of our overall reform of the financial system. i'm sure this has already been described by the senator from arkansas and the senator from georgia. but if not let me just -- i'd just be repeating it. what is a derivative, this fancy word a derivative. in simple terms it's a bet a wager.

an important wager but nonetheless a wager a. wager placed on the future value on something either in the form of protection against changes of the value of that instrument or a way to make some money offer of that thing. it's a legitimate operation provided it's done properly. there's nothing inherently wrong with derivatives, in fact they play an important role. if used responsibly they are tremendously important. many have heard about the candy makers, we hear this all the time, who are able to keep their costs stable as a production company through are the use of derivatives. if you're an end user, as they're called, and your costs depend upon future prices as a commodity such as sugar, that is a way to stabilize those costs and provide some certainty to that particular company. or the future protection of interest rates could have a huge impact on the cost of a product and the success or well-being of a company as well.

derivatives can serve as a form of insurance against an unexpected price in either the price of a product or interest rates as well. but the problem is, is this: as companies have come up with new and innovative ways to use derivatives -- and they have -- much of this activity has taken place in the shadow economy where there is little sunlight at all as to what these instruments are and how they affect the overall economy of our country. they operate outside the supervision of any regulator. and that's where the problems come. not in derivatives themselves, but how they are perceived how they are seen. and that is how one night in september of 2008 i found myself along with several other members of this body, in a room not far from where this chamber exists listening to the chairman of the federal reserve bank, mr. benjamin bernanke and treasury secretary hank paulson as they explained what had happened to a.i.g., the largest

insurance company in the world and what would need to happen to fix the problems posed by the activities that that company was involved in. just as some international corporations create shell companies in the cayman islands to avoid tax responsibilities, a.i.g. created a subsidiary called a.i.g. financial products to sell complex and risky products. and it was thus able to take advantage of the fact that there was no regulatory requirement that a.i.g. hold enough capital to cover its exposure to these products. meanwhile, because a.i.g. was rated triple-a by the rating agencies as a company their counterparties didn't demand much in the way of collateral or margin. essentially a.i.g. guaranteed other people's bets. that is, these counterparties -- goldman sachs societe general

sperbgs a frank bank -- a french bank. a.i.g. was able to do so without anyone knowing how many of these guarantees they actually sold. as we now know, they sold trillions of dollars worth. when it turned up that a.i.g. couldn't pay our government or more sadly the american taxpayer was left holding the bag. they were faced -- we were faced as a country with the unprecedented and unpleasant taxpayer bailout to prevent this shocking failure for bringing down our whole economy or melting down as we were warned. to make the problem worse we now know a.i.g. wasn't alone. unregulated derivatives also helped to mask the credit worthiness of nonfinancial users such as the government of greece. we all know about that in the last few days and the problems created in europe as a result of that problem with their own ultimate or eventual detriment

as we now know. hedge funds like long-term capital management, energy companies like enron and concerns like procter & gamble and a wide arrest rave governments at home -- wide array of governments have all fallen prey to the derivatives market. the solution, i think is becoming obvious to put an end to risky uncovered bets that leave taxpayers and our financial system as vulnerable as it has been. that's why capital and margin requirements imposed either by regulators or by central clearinghouses are so critically important to this area of our economy. chairman bernanke of the federal reserve described margin requirements -- and i quote him -- as an appropriate cost of protecting against counterparty risks. the sad truth is, mr. president this solution has been obvious for some time. you don't need just the events of the last couple of years to understand this problem. you can go back 16 years ago

mr. president. that time in 1994, the general accounting office produced a report entitled "financial derivatives: actions needed to protect the financial system." at the time of their report, the general accounting office determined that the size of the derivatives market was $12.1 trillion. not an insignificant amount in 1994. the report described risks arising from the interconnected relationships between dealers of derivatives and end users, not to mention the rapid growth and increasing complexity of derivatives abgivities. because the relationship -- activities. because the relationship between the major derivative dealers and users and the exchange traded markets were so close the failure of any one part of the system could prove devastating to our entire financial system. this we knew in 1994, 16 years ago. that was their report. by 2008, 16 years later the

derivatives market had gone from about $12.1 trillion that i mentioned a few minutes ago to an astonishing $600 trillion in 16 years. and in a rehraeutd story, it had gone almost -- related story it had gone almost entirely underground. each time the congress had a chance to act they chose a legislative path that created even more loopholes more opportunities for these risks to migrate to unregulated pockets of our economy. in 2000, the year 2000, the congress passed a commodities future modernization act which to a large extent explicitly exempted over-the- counter derivatives from regulation by the cftc and the s.e.c. so whereas in 1998, 41% of tkreufrbgts were traded in the -- be derivatives were traded in the shadows by 2008 there was almost a 20% increase in ten years.

es cameyr. pre wup more and more ways -- came up with more ways to take bigger risks with fewer safeguards and less supervision. that of course, as we now have learned is a recipe for disaster and it is disaster what we've got. that is why senator lincoln senator jack reed of rhode island, senator judd gregg saxby chambliss and others of our colleagues have worked so hard over these last number of months to bring the derivatives market out of the shadows and into the sunlight where they belong. that is why the derivatives language in this bill is so critically critically important if we're going to live up to our descriptions of this bill as a major reform of the financial markets in our country. for the first time in our nation over-the- counter derivatives would be regulated by the securities and exchange commission and the commodities future trading commission. it includes the banking committee's tough requirements for central clearing, exchange

trading, capital margin reporting that are critical to reducing systemic risk and ensuring that taxpayers won't have to clean up the mess resulting from another a.i.g. implosion. i know the financial sector lobbyists don't like these rules. in fact, over 1,000 corporate lobbyists have flooded this town this body, in fact, in an attempt to water these proposals down. but joe deer, who is the chief investment officer of the retirement system said, every firm has reasons why its contracts are exceptional and should trade privately. in reality most derivatives contracts are standardized or standardizeable and could change on exchanges. end of quote. thanks to the work of senator blanch lincoln and the agriculture committee commercial end users have been carefulfully exempted from these

new rules. so companies like the candy makers, like i talked about at the start of these remarks can keep hedging these risks. the market will become safer and less expensive because the new rules for big players the swap dealers and major participants. those big players the v.i.p. in the casino will have to register with the f.t.c. and cftc and -- every single transaction, mr. president, will be reported through a clearing house or trade repository or directly to a regulator. the s.e.c. and the cftc would have enhanced authority to police these markets for fraud manipulation and abuse. those don't sound like radical ideas to me. those are commonsense proposals that i think most americans can understand even if they don't appreciate the express tis of these instruments. the combination of these new

regulatory tools will do the following: it will provide market participants and investors with a lot more confidence during times of crisis. taxpayers with protection against the need to pay for mistakes made by companies. derivative users with more -- will be provided with more price transparency and liquidity and regulators, of course, with more information about the risk to our system. instead of an underground gambling club, derivatives will be traded and well regulated in transparent markets with rules that must be followed and safety provisions that must be respected. everyone is a winner with this. derivatives are valuable and important. and we need to have them out there to help our economy grow. why should some of these ideas be so frightening to people? it seems to me if we do exactly what we're talking about here, everyone is a winner in the entire chain. particularly the derivative users will have much more clarity. regulators and taxpayers get

protected against abuses that will occur if we don't step in and try and provide what's being proposed with this legislation. i, for one welcome these improvements. now, unfortunately again this is a debate back and forth. despite a lot of hard work between members of this body to come to some common answers there are differences that emerge here in this debate. the substitute being offered by my friend from nostalgia has no requirement -- from georgia has no requirement for transparent trading. it loosens capital requirements on the large wall street firms. that's a huge mistake in my view after what we've gone through in this country that we practically -- that would would practically beg for another a.i.g. the clearance requirements to only those trades that take place between the very largest firms providing a blanket carveout to other financial firms and letting our markets continue to operate without the

transparency and regulation that i think is so critically important. unfortunately this is status quo. there are some improvementsism acknowledge that. but we have an opportunity now to really make a difference with the proposals made by the ag committee. the status quo a system in which companies that you never heard of take risks they can't back up in markets that no one can even see. but when they collapse, as they inevitably will, mr. president -- again one of the things that we said over and over again in this bill, we're not going to stop the next economic crisis. we're going to have them. the question is, do we have the fools place to minimize collapses when they occur? and that's what we're trying to do with this bill? this does not even with the ag committee proposals i can't imagine, i think i'm speaking for her when i say this, there's -- we want to minimize that when it happens so it doesn't migrate into the rest of the economy. and so what we're looking here

is to minimize that kind of chaos that can occur when some company collapses for reasons unrelated to this as we saw with a.i.g. when they fell, of course the price the country paid was vastly in excess of one company having difficulty and taxpayers were put on the hook to fill the capital holds when they occurred. this has got to stop and all of us know that. this market needs oversight an regulation. it needs to exist as well, if our economies are to grow, jobs are going to be created. it has been 18 months, mr. president, since a.i.g. proved that once and for all i believe. it is time to bring this trail of destruction to an end and take the steps necessary to allow this market to operate for people to make these kind of investments, to hedge against the kind of problems that emerge down the road for them so they don't end up collapsing for reasons unrelated to their own difficulties. that's why hedge something important, that's why derivatives are important. but also these safeguards need to be in place if everyone is

going to be a winner as a result of what we tried achieve with this legislation. i know there's some debates about various aspects of this. and i look forward to that discussion. but my hope is that we will reject this particular proposal, with all due respect to it, adopt what has been proposed by the ag committee and consider if there some -- if there are some additional changes to be worked on here, but in the mean time it seems we ought to vote on this proposal and move on to other aspects of the legislation. and, with that, mr. president i yield the floor and i see my friend from nebraska here and my friend from rhode island. so i'll let them flip a coin. mr. johanns: mr. president? the presiding officer: the senator from nebraska. mr. johanns: mr. president i rise today to support the chambliss-shelby derivative substitute. and i'm very pleased to indicate that i'm a sponsor of that amendment. there's no doubt about it when you're talking about derivatives, you're really

talking about contractual obligations that are as complicated as any financial instrument in our system. so going about trying to figure out how best to regulate them is no easy task. i think that's acknowledged on both sides. both the banking and the ag committees have wrestled with what's the best approach to regulating a market that to date has willie been somewhat unregulated, to say the least. i regret to say that the current derivatives title that is in the bill that is being debated, if you really study it, is overregulation 101. i worry about the host of unintended consequences that will beset our economy if it passes in its current form. it's not accidental, mr. president, that there's been article after article pointing out how much heart burn there is

on -- heartburn there is on both sides of the aisle relative to the current proposal that is being debated. the chambliss-shelby derivative substitute really is a sensible approach. i've talked to dozens and dozens of those impacted and i have to tell you that they are very concerned about the downside impact on our economy. they say it's unnecessary with the new robust clearing regimen that is in place yet, this bill the dodd bill, has an exchange requirement. why would we not enact meaningful clearinghouse regulations and then add another layer on top of that. additionally i worry about the trickle-down effects for community banks that hedge their interest rate risk with large banks.

mr. president i come from the state of nebraska. i don't even think there's a wall street in the state of nebraska. we are basically small community banks -- and i've had some of our smallest banks warn me about the dangers of this dodd proposal. if these large institutions are banned from engaging in swaps as the dodd bill would do, who will work with the community banks to keep interest rates low for our farmers our ranchers, our small businesses? furthermore banning banks from engaging in derivatives isn't going to stop the practice. you see we don't pass laws here for the world. we pass laws here for the united states. all we are going to end up doing here is sending this this $600 trillion market out of

this country. in fact, i had a small community banker in my office recently who said to me -- he said, mike, these products are absolutely essential to what i do. if they are forced to another part of the world we will be forced to acquire that product from another part of the world. driving this activity back into the dark, which is really what we would do if that were to happen and actually increasing our risk and putting it in an economic climate outside of the united states is really a meltdown recipe. the underlying bill treats farm credit institutions like the big wall street firms. it doesn't exempt them from coming up with costly capital and margin requirements. now, does anybody believe for a second that that isn't going to hurt farmers farmers and ranchers

and the cost of their loans? i was the former secretary of agriculture. please believe me you can't do this and not expect to have a very negative consequence on farmers and ranchers and small businesses. farm credit institutions are farmers and farm coop tifs have nothing to do -- cooperatives have nothing to do with this financial meltdown, yet they're being dragged down with the ship. and, finally certain trades are just simply so unique, but so necessary and so specialized that the clearing requirements just simply don't work. that doesn't mean they shouldn't be transparent. that doesn't mean they shouldn't be disclosed. but we should recognize the uniqueness of that situation. why punish these trades that may pose no systemic risk by imposing higher capital

requirements? yet, that's what the dodd bill does. the bill before us has the potential to have very negative impacts on our economy. it's simply an overreach. and i am not the only one here today, mr. president that has serious concerns. the whitehouse, the federal reserve, former federal reserve chairman paul volcker, and the chair of the fdic, have raised similar concerns relative to this approach. april 30 2010, sheila baird says this and i quote -- "if all derivatives market making activities were moved outside of bank holding companies most of the activity would no doubt continue but unless regulated and in more highly leveraged venues." unquote.

federal reserve staff in a memo say this and i'm quoting again "the prohibition would not promote financial stability or strong credential regulations of derivative or derivative dealers would have serious consequences for the competitiveness of the u.s. financial institutions and would be highly disruptive and costly both for banks and customers." unquote. my point exactly. and then, finally chairman volcker also expressed concerns with the derivatives title of this bill. -- quote -- "the provision derivatives by commercial banks to their customers in the usual course of a banking relationship should not be prohibited." unquote. i worry, mr. president that at some point the senators are going to come to the floor and

pass this mess and we're going to be stuck with it. the shelby-chambliss amendment is a thoughtful and it's a reasonable approach. it will increase transparency and government oversight of the derivatives market. you do what we are proposing here with this dodd bill. you will push derivatives right back into the shadows. they will be unregulated and they will occur in another part of the world and we will bear the risk and the cost of that. these individuals simply use derivatives, these people that i'm talking about farmers ranchers farmers co-ops to protects themselves from risk. they are not wall street inspectors. what this proposal from the shelby-chambliss approach does is it simply says let's use

common sense when it comes to the derivatives market. it brings the current unregulated, over-the-counter derivatives market into the light where transparency is paramount. this is an enormous departure from current law. in fact, it's a 180-degree change. it attempts to bring swap trades onto a clearing platform. yet it also recognizes that companies across our country use these complex products as part of their activity, their business activity every day to protect themselves from unreasonable risk. look who is supporting this proposal. this approach has gained the support of the national association of manufacturers. that can hardly be claimed to be wall street insiders. the alternative recognizes the negative consequences businesses would face with too rigid a law.

those dangers are obvious -- loss of jobs, jobs moving overseas constriction in liquidity, lack of credit, higher interest rates for farmers in my state and higher farm input costs. it also distinguishes that these businesses were not part of the economic meltdown. they are not the a.i.g.'s of the world. instead, they are the companies that use derivatives to manage their finances, to keep down their costs to control interest rate fluctuations, to manage currency volatility and other risk mitigation tools. you know, the recent crisis revealed how inadequate our oversight of derivatives was and just how complex this area is. but if we adopt this blanket approach on the rhetoric of punishing wall street, what you

will really do is punish our farmers, our ranchers, our small business people. you will punish the people who are working this area by literally eliminating their jobs. i want to say thank you to senators chambliss and shelby. they understand what's at stake here. this is a reasonable approach, an approach that i'm glad to support. with that, mr. president, i yield the floor. a senator: mr. president? the presiding officer: the senator from rhode island. mr. reed: mr. president i rise today to urge my colleagues to reject the proposal by senators shelby and chambliss. it is well intentioned. it is designed as other proposals are to try to provide some appropriate regulation to a very complex and complicated area of financial transactions derivatives. like my colleagues, i have spent some time trying to understand

this area, and the only major point i can make is that in concept, derivatives are simple. essentially, it's a contract that derives its value from a reference to another entity like soybeans or mortgages. that's where the simplicity stops. these financial interests are incredibly complicated and they have been made more so by very sophisticated financial engineers on wall street. what we have recognized for the last several months is we have to take an appropriate step to regulate their sale in the united states and frankly influence the worldwide sale and use of derivatives. the dodd amendment the dodd-lincoln proposal in this bill is, i think not only a principle but an effective way to deal with the issue of the sale and use of derivatives. they start off with the premise

which is fundamental. we need transparency in the marketplace. there was no transparency in the marketplace when it came to derivatives. very sophisticated products. senator levin held hearings which brought forth individuals from wall street, from goldman. and frankly, if you listen to the hearings, even they didn't understand the products that they were selling. complicated, deduced created by ph.d.'s in mathematics using supercomputers. we need transparency. people have to know what they are selling. apparently some people on wall street didn't even know what they were selling but certainly consumers have to know what they are buying. so transparency is the key. the way you arrive at it, in my view is the way that this underlying legislation that chairman dodd has sponsored along with chairman lincoln does. first, it establishes the requirement that all derivative

attractions -- transactions, particularly over-the-counter transactions be reported to a registry so that regulators will have a sense of where the market is moving in terms of specific products. second, there is a requirement that you clear these products. clearing is absolutely critical because an over-the-counter transaction is bilateral in nature. it is someone dealing directly with another party. and so what you have there is the danger of counterparty risk. the fact that one side of the transaction can't perform. they go bankrupt. they don't have the resources. they miscalculated tremendously as to the nature of this transaction. and in those bilateral situations the danger for counterparty risk is significant. to minimize that, you put it on a clearing platform. you put a party between the two parties of the contract who will assess collateral and margin and do it in a systematic way. and these transactions on a clearing platform will be more

transparent and there will be reduced risk between counterparts. that is, i think a sensible and at this point nondebatable point because the chambliss proposal has a clearing party aspect to it clearing platform aspect. but the next step and i think it's an essential step is to move to a trading platform because there you further reduce and manage counterparty risk because it's not just an intermediary clearinghouse that's handled in the risk. it's participation in a market. it's individuals who broker deals and comment by and leave. it's at the heart of price discovery. because the key aspect in all of these discussions is what is this instrument worth? it is worth is hundred or-- it

is worth $100 or $2. if i'm betting it's worth $5 or or $6 and it's $100 i lose. this is not a sort of esoteric point. it goes right to the nature of our markets price discovery. that's why we all claim markets are the best form of economic transaction, because in a market, you know the price and if you can meet the price you can make the transaction. now, one of the things that's implied in the marketplace though in econ 101 is perfect information. buyers and sellers each know what it costs. one of the problems with the derivatives markets is information is asymmetric, it's skewed. it's dramatically skewed to the wall street insiders who designed these products. that was one of the lessons from the goldman sachs. who knew what these things were?

they didn't even know, but they knew a lot more than the people they were selling it to. we have to reduce that asymmetric nature, and the best place to do that is not simply clearing a product having someone say well, you have to have this much margin if you want to participate but actually trade the product. again, this is not an academic issue. let me paraphrase a story from michael lewis' book about the last several months, called "the big short." on february 21 2007, the market began to trade at an index of collateralized debt obligations. they called it the cabx. for the first time, everyone in the marketplace could actually see on a screen what these c.d.o.'s were worth what someone was willing to pay for them. no longer were they waiting on just the dealer, the wall street

insider saying oh, no, these are great, buy them. they're terrific, buy them. there was a price. the price confirmed a simple thesis in a way that as lewis says no amount of compensation with market insiders could ever have. after the first day of trading those bonds those aaa bonds closed at 49.25 from a par value of 100. they lost more than half their value in one day of trading. there was now this huge disconnect, and i quote -- "with one hand, the wall street firms were selling low-interest, rate-bearing aa-rated c.d.o.'s at par or 100. with the other they were trading this index composed of those very same bonds for 49 cents on the dollar. in a flurry of emails, their salespeople, the salespeople at

morgan stanley and deutsche bank tried to explain to their clients that they should not deduce anything about the value of these bets against some c.d.o.'s and the prices on these new publicly traded subprime c.d.o.'s." it was all very complicated. trading illustrates the real value of products. so when the shelby-chambliss proposal says we're not going to trade these what they are saying is business as usual. let's let those folks on wall street tell us what they are worth. tell it to the banks the small community banks tell it to the farmers, tell it to all those business men and women and the national association of manufacturers. this is what's worse. this is what it's worth. they won't have to explain the fact that a market might rate it half of what their claim of the value was. so if we really want to reform what's happening on wall street, we're not going to abandon the requirement to trade as many products as we can trade.

now, i will admit some products are so unique that a trading market might not be established but the presumption the presumption by wall street -- in fact i think the head of j.p. morgan said approximately 70% of the derivatives could be clear and probably a significant fraction of that could be traded -- traded. if you want efficient markets reject the chambliss proposal, support the dodd proposal. now, there is another aspect of this, the bill, and that's section 106 which does not deal with the mechanics of trading derivatives as much as who can do it. can it be in a bank, can it be in a -- it must be separated. now, there there is discussion about different approaches. senator levin and senator merkley have an approach that bars proprietary trading that would move that type of trading out of the bank but still leave traditional hedging for clients

within the bank. that's part of the debate. that's still i think a seriously significant open question. in my mind, there is absolutely no question but to accept the chambliss-shelby approach to bar trading, to not require it is the wrong way to proceed. now, there is another issue here too and that goes to the nature of these o.t.c., over-the-counter contracts. that issue is, well, some of them could be cleared but some are so unique they can't. so it goes to the exemptions for end users. within the dodd bill and they have made a -- i think a successful attempt to separate those over-the-counter transactions which have an economic rationale. it's an airliner hedging their fuel prices, and they have done it in a way which makes sure that this is not a loophole for the sophisticated financial

engineer to exploit but a way in which business can continue to conduct their operations. the exceptions in the shelby-chambliss bill are much too large. in fact, i think this is a drafting error but as i read the amendment it could be read as only requiring clearing of swaps between two counterparties under common ownership within the same company which essentially means there is no requirement whatsoever. i don't think that's what the sponsors proposed, but that's what the language says. at least as i read it. so if you want huge loopholes to begin this process support this amendment. if you want to maintain, i think, well-structured exemptions for the economic use of derivatives, that is incorporated within the underlying dodd-lincoln bill, and it makes a great deal of sense to me. there are issues here that i think we have to be conscious of

and we can still debate within the allocation responsibilities between regulatory authorities with respect to these derivatives. that's an issue that i think is still understanding. there are amendments on the floor to deal with that. but the underlying architecture of derivative regulation has been accomplished by the individuals in the underlying dodd and lincoln bill. again, we have learned a lot i think we should have learned a bit of collective humility about the ability to deal with these complicated products, and so we have to build in multiple lines of defense if you will. simply requiring a registry, reporting to a central location. when you make an o.t.c. contract that's good but not sufficient. requiring that the majority of

these instruments be cleared unless they have an economic value or they are so unique that the clearing would be inappropriate, that's a step forward, too but insufficient. it's only when you put together the entire spectrum of reporting clearing and trading appropriately traded derivatives do you have the full pan play of of -- panoply of president clintons that we need to deal with these complicated parts today, and frankly, there is a sense that we haven't seen nothing yet. the sophistication, the ingenuity of the financial engineers may be in abeyance for the moment but it will return. and we need these multiple lines of defense. there's another point i want to make which is -- which will lead into the discussion of -- of section 716 now and that is we have to recognize when we're

building this new structure it, too, has weaknesses. one of the most significant weaknesses is that in a clearing platform, if there is not full transparency and if the clearing platform clearing authority isn't adept at setting margin requirements and collateral, there is a danger that that platform becomes a source of systematic risk. they misjudge. and these platforms are dealing with notional values of trillions of dollars. and if they misjudge by a little bit, you could have a significant situation in which they're not able to meet the responsibility. once again, i think that's a strong argument for not a single or double line of defense but a triple line of defense with respect to trading also. and there's -- there's i think another point here too is that if there's trading and price

discovery, they'll have a much, much better idea of what the product is really worth ask they'll be able to set marge -- worth and they'll be able to set margin and collateral much more adequately. there is, i think many issues that have to be dealt with as we proceed through this markup and on to the conference i hope but i -- in my mind, clearly the superior vehicle to pursue those and -- is the language incorporated in the dodd bill, and i would urge all of my colleagues to reject the amendment by the gentleman from georgi and i yield the floor. mrs. lincoln: mr. president? the presiding officer: the senator from arkansas. mrs. lincoln: mr. president i just rise to compliment my colleague from rhode island and thank him for his hard work. he and his staff have done a tremendous job on the banking committee and on this particular issue and it's been a pleasure to work with he and his staff and certainly to see the good work that they have done. and i just want him to know i'm

grateful to him for his hard work in helping us come up with a good package. i yield the floor. a senator: mr. president? the presiding officer: the senator from alabama. mr. shelby: mr. president a key part of the bill that we're considering is title 7 which we all know addresses the regulation of the over-the-counter o.t.c., we call them, derivatives markets. while there's still debate regarding the causes of the financial crisis, there's no debate that the lack of transparency in the o.t.c. derivatives market was a contributing factor to the financial debacle. when lehman brothers failed, there were press reports that banks and other large financial institutions had written credit default swaps become c.d.a.'s on lehman brothers that could potentially result in a $360 billion in cash payouts. as it turned out though, the

number was less than $6 billion, but a lot of needless anxiety preceded the realization that the cash payouts on lehman brothers' c.d.s. contracts were manageable. the regulators simple did simply did not have the information mr. president, they needed to know about the magnitude of the problems to they faced. limited regulatory information also played, mr. president a role in the demise of a.i.g. it's worth remembering that a.i.g.'s problems arose both in its regulated insurance subsidiaries, which were exposed to the troubled subprime mortgage market through their securities lending programs, and in its financial products unit which sold credit default protection for subprime mortgage products and other customized derivative products. a.i.g.'s financial products

unit, on the strength of its credit rating, built up an extremely large one-sided book of swaps transactions. the contractors were written in such a way that when a.i.g.'s credit rating was downgraded, a.i.g., you'll remember, was forced to post collateral on all these transactions. regulators at that time did not have the flow of information about o.t.c. derivatives transactions to see this problem building. and without this information they obviously could not take steps to address the problem. mr. president, i believe that the a.i.g. bailout and the lehman brothers failure provided us with one simple lesson that should serve as the basic test for any o.t.c. derivatives legislation proposal. the lesson is, i believe that prudential and market regulators must mr. president, must have the tools to properly oversee

o.t.c. swaps markets. the lack of transparency regarding counterparty exposures and the lack of adequate regulatory tools made it difficult for regulators to respond quickly and effectively to the financial crisis 18 months ago. unfortunately, mr. president the lincoln-dodd derivatives bill fails that most basic test. the lincoln-dodd bill does not provide regulators with access to the information they need to do their job. it requires all other regulators to go through the commodity futures trading commission to get information. it gives only begrudging access to the securities and exchange commission the s.e.c., to data about the swaps markets and thus limits the s.e.c.'s ability to get the information that it needs to oversee the securities markets. much of this bill reads more like a jurisdictional power grab

to some of us than an honest attempt to ensure that all the relevant regulators have the information and the authority that they need to do their jobs. the link lincoln-dodd bill contains a number of other fatal flaws, i believe. for example key provisions in one title directly contradict key provisions in other titles and also in the current law. one provision in the lincoln-dodd bill that's gotten a lot of attention that's a prohibition on federal assistance to any -- quote -- "swaps entity" which includes entities that do not handle any swaps. all clearinghouses, regardless of whether they handle swaps would be precluded from receiving federal assistance in this bill which is interpreted to include access to the federal reserve's discount window. this provision contradicts language in title 8 which empowers the federal reserve to grant discount window access to

clearinghouses. also, the bill imposes a fiduciary duty on dealers when their counterparties are pension plans, endowment funds and municipalities. as understood in the current law, pension plans cannot engage in transactions with entities with which they have a fiduciary relationship. the proposed regulatory framework also poses new risks to the system. for example mr. president the bill as currently written anticipates generally imposing a clearing mandate on most market participants as soon as clearinghouse -- a clearinghouse will accept a swap for clearing. for-profit clearinghouses will have an incentive to clear as many swaps as possible. if they do not properly assess and collect margin for risk associated with these products or do not have sufficient operational capacity, an

unanticipated event in the market could topple a clearinghouse and send devastating shock waives throughout the rest -- shock waves throughout the rest of the system. we witnessed that for a few minimum fits last week. this bill is also anticompetitive because it further concentrates business within existing dealers. the prohibitions on federal assistance including fdic insurance to swap entities, means that neighborhood banks will be unable to hedge their own interest rate risk, let alone offer swaps to customers who need to hedge their risks. bank dealers are given preferential treatment with respect to both capital and margin requirements. another disadvantage in the bill for nonbank dealers is even the commercial aspects of their business will be subject mr. president, to bank-like capital requirements, which is unprecedented -- which is an

unprecedented expansion of bank-like regulation to the nonfinancial corporations. nonbank dealers may simply exit the derivatives business and leave the swaps business more concentrated among a few large wall street dealers which is not a good result from a competitive or systemic risk standpoint. mr. president, the so-called end user exemption contained in this bill i believe is illusory. main street corporations that buy swaps in the ordinary course of business to hedge their own business risk will be subject to the same regulatory treatment as well street banks. this means manufacturing firms power companies even beer producers will be required to hold massive amounts of cash and other collateral simply to engage in risk management. this will work, i believe as an antistimulus plan to pull resources out of the economy hurt growth and slow job creation. it will also lead to price

increases and price volatility. mr. president, for my colleagues interested in increasing their constituents' cooling costs in the summer or heating costs next winter for those interested in seeing the price of orange juice, cereal, light bulbs medicine, office supplies, building materials cars and computers rise and for those who would like to make the overall cost of living for all americans to go up and the prospect of getting a job go down the dodd-lincoln bill is for you. finally, i believe this bill is unworkable as it's now written. the derivatives title is one piece of this legislation that will be tested every day. the bill would make massive changes in a huge market in 180 days without the usual notice and comment rule-making period that allows for broad public output -- input at this time.

neither agency, mr. president has the staff that it needs to write or implement the rules at this time. there will be enormous operational challenges for the s.e.c. and the cftc as they gear up to monitor and receive data on all swap transactions for which there is no data repository. companies all across the united states will face operational legal, and financial challenges as they strive to come into compliance with record keeping reporting, capital margin, clearing and business conduct requirements. mr. president, don't just take my word for it check yourself. take the words of a recent bloomberg article which was aptly titled "how hard to fathom derivatives ruly merged in the u.s." or take the words of the national association of manufacturers which warned that the end user exemption is not strong or clear enough.

in addition, other provisions in the derivatives title could effectively eliminate the exemption for many companies and in some cases subject them to capital and margin requirements or higher costs. or take the words of a well-respected lawyer in a memo to his clients which contained the following criticism of the lincoln-dodd bill: "ordinarily," he said, "in writing with with regard to a proposed law the expected role of the law firm lawyer is to provide a description rather than commentary. in the case of the lincoln-dodd bill the law firm lawyer very well-respected attempting a noncommittal description must confront the following problems. one, the lincoln-dodd bill substance is inconsistent with its stated purpose. two, mr. president it would give a degree of discretionary power to the u.s. government that is far out of 9 ordinary. 9 -- out of the order.

three, the lincoln-dodd bill is loosely drafted as i've mentioned earlier to in even its key provisions. four it would make for radical changes in the financial system that seem not to have been considered or were part of the problem. five the lincoln-dodd bill, he says, would likely motivate institutions to move jobs to europe damaging the u.s. economy and particularly the northeastern financial center economy. and six it would discourage banks, capital market and real estate lending in the united states by increasing their risk. and, seven the lincoln-dodd bill would hurt banks' profitability at a time when they're struggling. or take the words mr. president, of an industry representative who urged us to change a certain provision that would prevent pension plans and government agencies from getting the services they need and another provision that could

force purchasers of swaps into deals with less credit worthy counterparties. or, take the actions of my colleagues on the other side of the aisle. while some of -- several of them have privately admitted that they fear the wrath of the administration for speaking out publicly against the lincoln-dodd derivatives bill, their actions speak louder than their silence. they're apparently hard at work, we know that, behind closed doors trying to make earmarks, last-minute changes to that flawed bill. or mr. president, take the words of my colleague from connecticut, senator dodd, who i have a lot of respect for, the chairman of the banking committee. he was quoted earlier this week saying -- and i quote -- "we still have work to do on the derivatives. there's no question. we've also -- we have a always known that. so a lot of people are spending a lot time trying to come to some common points on this." end quote. mr. president, i agree with the committee chairman. the derivative title needs a lot

more work. fortunately, that work has already been done. the substitute derivatives bill that we offer is amendment number 3816, the over-the-counter swaps markets transparency and accountability act of 2010. this amendment was crafted and cosponsored by several members of the agriculture and banking committees. the substitute derivatives bill is a bipartisan product. the bill is built from the framework of the chambliss-lincoln bipartisan process. it also incorporates key concepts from the graying-reed -- from the gregg-reed bipartisan working group to hammer out real derivatives reform. the substitute derivatives bill is also a multiderivative product. my colleague from georgia and i appreciate the input from the agriculture and banking committees as well as the important input from the judiciary committee on provisions that strengthen

protections for customers' funds in the event of a counterparty bankruptcy. the derivatives substitute amendment addresses five key areas of reform: introducing regulatory transparency and regulatory authority over the o.t.c. swaps markets, mandating clearing for wall street dealers rkz minute icing threats to the financial security of the united states,; preserving main street's ability to hedge their business risks; ans improving public transparency. mr. president, i will briefly explain each of the five areas of reform. first we address regulatory transparency and regulatory reform. we must, i believe repeal the statutory provisions that prohibit regulators from overseeing the o.t.c. swaps markets and give them access to the information they need so they can do their job. secondly we mandate in our

bill in our amendment clearing for wall street dealers. we must encourage the clearing of derivatives transactions among wall street dealers and dealer-like firms in well-regulated clearinghouses. this will account for a combined 80% to 90% of all o.t.c. derivatives transactions. third, mr. president we minimize threats to the financial stability of the united states. we must prevent the concentration of inadequately hedged risk in individual firms or central clearinghouses. and, fourth, mr. president we preserve economically beneficial hedging for main street businesses. mr. president, i believe we must ensure that so-called corporate end users can continue to hedge their unique business risks through customized derivatives. main street businesses do not pose any threat to the financial stability of the united states. in fact, prudent use of

derivatives for hedging makes their businesses, the financial system and the economy safer. the prudent use of derivatives enables businesses to protect themselves from changes in interest rates, swrings in foreign currency, exchange rates, and the changing prices for raw materials that i'm -- that all of our manufacturers use. if businesses in america are not able to use derivatives or if the cost of using drives derivatives increases they may choose to move operations overseas or curtail business operations, which will mean the loss of jobs when we really need jobs. mr. president, if they must refrain from hedging their risk, prices will go up for all of our consumers -- all of us. fifth, we improve in this amendment public transparency. without mandating that swap trades must occur on an exchange we must direct regulators to provide investors

and other market participants with information about recently executed transactions for the purposes of helping them to mark existing swap positions to market. make informed decisions before executing future transactions and assess the quality of transaction that they have executed. the lincoln-dodd derivatives title does not achieve these reform objectives but, in fact, threatens to stymie real reform. mr. president, the substitute derivatives amendment that we offer represents a change in course from the lincoln-dodd bill. the substitute amendment is a strong bill that offers real reform. this is why the national association of manufacturers has indicated that all votes related to the chambliss-shelby substitute amendment including procedural motions may be considered for designation as key manufacturing votes in this congress. i think it's important to

american business that we adopt this substitute. ms. cantwell: mr. president? the presiding officer: the senator washington. ms. cantwell: mr. president, i rise to speak in opposition to the chambliss substitute amendment and to ask my colleagues to think about this substitute in a pretty significant way because it dramatically changes the underlying bill. in fact, i almost want to ask my colleagues on the other side of the aisle if they are serious if they're serious that this is the proposal that they are going to put before us in response to the catastrophe that we have seen on wall street. i know we've been on the floor and wheef a lot of history with this starting in 2001, and i remember -- i think it must have been 20002 oar 2003 when we tried to regulate derivatives then after the enron crisis and one of my colleagues on other side of the aisle literally

said we can't regulate derivatives. we don't know enough about them. and so what lessons have we learned since this catastrophe? well, i can tell you this: we were wrong to say that we can't understand derivatives because our lack of misunderstanding or not paying attention has led us to the catastrophe that we're in today. and for the other side of the aisle to say we can't even propose exchange trading that's like saying the stock market should make changes in options and stock without being on an exchange. that would that would be like the president and i swapping back and forth microsoft or starbucks stock and selling it to other people and having none of the trades, basically being reported. now, why would we tolerate that for the stock market and yet we're saying, somehow it's okay for derivatives this product that has become this

unbelievable $600 trillion market, to operate in the dark? and the other side doesn't even want to have exchange trading? i just -- i -- i'm -- i can't believe that. i can't believe that somebody would even propose that. now, i know some people are going to say that they have clearing. but the clearing requirements of this legislation only cover 60% of -- would leave 60% of the market uncovered so we're talking about not having the product on exchange and not having a lot of it cleared. so the two primary principles of learning the mistakes of the last 10 years are basically going unnoticed unaccounted for on the other side of the aisle. but let's go back to how we got in this situation because we used to have a thraw basically said yes let's protect consumers. and we had transparency in trades. that was reporting to the cftc. we had on the books capital

requirements. we had speculation limits, we had antifraud and antimanipulation laws. we had trader licensing and registration. and public exchange trading. so yes we actually had it right. we had it right. we had some tools in place. we had an oversight agency that was supposed to do this job. all of these things that protected the investments of millions of people and made the functionality of people who legitimately had to hedge -- like farmers or airline industries -- rules of the road so they weren't taken to the cleaners or the price wasn't artificially driven through the roof. but what happened to these things? well, what happened to these things is in 2000 somebody came out here on the senate floor and basically 7:30 on a friday night stuck into an over 2,000-page bill a little exemption that said don't regulate these derivatives. that's what happened. what happened in the marketplace is that derivatives were really

a very small business, only a few hundred billion dollars, as you can see in 1999. it was kind of an uninteresting little manchet but we ended up deregulating them and since then in this short period of time it turned into a $7 $700 trillion manchet how do you go from that period of time to thdz 700 trillion? you go because we made it a dark market. we basically said you don't have to have the rules of the road or the regulation or the oversight sore the basic things that make this a functioning market. and so what happened? well we had no transparency, in a requirements to keep records. that means you didn't have to be able to prove to the cftc exactly what you were doing in the market. that way you couldn't actually prove fraud because you didn't know what anybody was doing because nobody had to keep

records. it's like bernie madoff on steroids. we had no large trader reporting on the one hand no speculation limits. the reason you have things on an exchange is because when an exchange sees that somebody is making the market or too large of a position, and oftentimes across several exchanges, you have a regulator who can dmom and say, you know what? we have speculation limits and you can't do that much trade ago because you were driving the market. so after that, we had no speculation limits. we had no capital requirements. and we had this high risk of manipulation and excessive speculation. so that's what we did. and a lot of people thought, well, you know what? i wasn't here but i know a lot of people said, you know, this is going to revolutionize things derivatives are going to be the wave of the future, it's going to help news our financial markets and the amount of liquidity. everything is going to be great. some people said, don't worry about this. don't worry about this because they aren't going to be a very big resource, and they're going

to be very small. it's only gb to be a few people that are going to trade back and forth. don't worry about it. well just shoid the chart. it turned into ads 700 trillion industry. and it was big a big opportunity for people to make a lot of money without the oversight. so now where are we today? have we learned the lessons of this catastrophe? have we? it's not to say that it isn't hard to be ahead of the smartest guys on wall street. i will say mr. president, it's very hard. that's why you have to have bright lines because otherwise people do come up with new tools -- i saw it with enron in my state; i've seen in now with derivatives; there'll be something else. and unless we have rules of the road, then there will be people who will try to continue to have opaque markets and drive trading.

but our underlying proposal by the chair of the agriculture committee and this underlying bill working with the chair of the banking committee has the rules of the road. the other side of the aisle is proposing a substitute that would take those away. this is clear. if you have unregulated trading none of these things happen. if you have exchange trading this is what the american public gets protected with: transparent pricing, real-time trade monitoring transparent valuation, speculation limits, and public transparency. that's what this underlying bill does and that's what the amendment is trying to get rid of. they want this to be blank over here. they want this to be blank. they don't want those things to have to be met. now, how could you possibly propose that after what we just went through? you had prior to 2000 regulation things were working

fine. you have afterwards a major catastrophe, and these are fundamentals that we have behind all of our markets and exchange trading. so why would you let one thing off the hook? i'll never forget the day that one of the former cftc staff came and testified before the energy committee and said to our committee, do you know that hamburger in america has more regulation on it than energy futures? and i thought he couldn't be serious. but he was right. futures of beef have reporting requirements, had to have transparency and r