and gensler, is to institute stock by stock circuit breakers marketwide, in a centralized way. and i saw the movie about a couple of weeks ago, fun movie if you want to say, it is calles eagle i. i don't know if you saw the movie, but if you get a chance, very interesting. it just simply points out what i happens in concentrate and putting so much control into a computer. s . . what i want to ask each of you because apparently as i hear your testimony, particularly the new york stock exchange have said that you have circuit breakers.

the complaint was that maybe that moved too slow. so as we debate this issue of circuit breakers, i want each of is there anything we have to fear here? is there ano element of freedom that takes out of the free enterprise system the freedom of the market exchange? let us be very clear. t is there anything we have to o fear if this is the solution of putting this much control in a stop by stop marketwide one central location of a circuit breaker? >> well, if i could address that. in two parts. mr. chairman. i think the issue for us is that technology in and of it's of self is a tool. it's a tool used by market participants and i think usedloy very effectively by market participants. we view the functioning of our market and its continuous operation as one of the envies of the world and generally with the exception of that 17-minute period, on may 6, it functionswl

extraordinarily well. and i would argue, even during that period of time, our technology functioned well, but the market participants that were on our market experienced antime absence of liquidity, sot we're really concerned about here is when our markets become dysfunctional and i think what the chairman is proposing and what we have discussed as exchanges, is not puttings centralized control over theat t marketwide stock by stockopos circuit breakers, but adoptings similar rules, so that we all have the same standard rules for with a stock gets bought. we each have our own technologyo we will continue to operate our technology from one another,sa with the oversight of thelt s.e.c., so i don't think we are talking about aed central compr that is going to control this. s i think what we're talking about is a coordination of our rule sets with one another of when ai marketwide stock by stock call t should be called.al a >> i think we would agreement with mr. knoll, which is information is transmitted totok the market faster and faster an

when events happen, it just ripples through the market, it'e on cnbc within seconds and thee, fact that trading is speeding up every day, means that the markew reacts faster. i think hall this is -- all this is really designed to do is cause a quick pause to make sur. everybody understands what's happening and asssembles a liquidity, so we don't hit ae t down pocket like we did before. all of us are strong believers in the market and we compete with each other aggressively and threat we canike agree on principles like the circuitte breakers, which makes the market far better for investors, because in the end, if we don't have a market that investors believe in, if they feel like it's a rigged game, they're not going to invest their money,e no it's going to harm all these things. >> i think you asked an interesting question, which isfo what about technology. what will eventually consume us which is what i heard your question to be and what are we doing besides putting circuit

breakers inil placel to make sue events like this don't happen wa again. there is more to it than just circuit breakers, sir. there is preexecution, there's multiple technology vendors yout have to go to, but then you have to get to what's the most important in my opinion. you have to have an experienced risk management team, you have to have a deep regulatory department within your institution, to make certain that all of these transactions are done legitimately and your technology team can work with your management team and your risk management parameters to make certain that these d computers don't go out of mel control. >> in fact, that's my point. i know my time is up here, but u that is a very serious point, because if we're going to coordinate this, there has to be some mechanism that triggers ito and i think that was the failure in the new york stock exchange. you have a circuit breaker there, and apparently, it did not work, because of something with the trigger, is that correct? >> mr. skwrao: no, that's not correct actually. our circuit breaker is triggered

perfectly well. the problem istrig that in theau current u.s. market regulations, the other venues don't have to obey us when we are i a circuit breaker mode, so it worked perfectly well for our market and for any other markets that observed our circuit breaker, however, it clearly shows a market, ifanr another market doesn't have to follow that circuit breaker, so that's why we've agreed on market wide circuit breakers, or but i would agree with mr. duffy, that this doesn't end the conversation. we have to continually look at ways to safeguard the market, tu make sure the technology is doing what it's supposed to doing and that we don't go downo this path. >> >> my final point on this and i'll be finished.ake if we go with this circuit wide circuit breaker, marketwide, stock by stock, from each of you very quickly, is there any downside, is there anything we have to worry about if we go this way? >> well, i think very quickly, on that point, i think the onlyi

downside is the true pricet, discove could be interfered dis with, -- discovery could be interfered with, so it's p important as we develop the circuitwide stock breakers, that buyers and sellers are able to find each other in an efficient and fair fashion, but we aren't otherwise closing off price discovery inadvertently, because the impact of closing it off will affect itself with the stock starts to trade again and you'll have this cascading effect as opposed to true pricel discovery. >> i do believe that mr. noll is correct, but i also believey. price discovery is done during the -- you do need to discover price over a period of time and let everybody participate, so i hear what he's saying, but at the same time, i don'tssio completely agree with that. >> all right. >> i think it's incumbent upon ' us to build the circuit breakert in a way to help the market function properly, goth through the auction process, which is

what's supposed to happen and give the market a chance to a pause and establish the right price. i think mr. noll is right, if wn don't do a good job of it, we'll be in the same place we were, but it's incumbent on us to make the market work that way. >> thanks to the committee for m my indulgence. >> mr. duffy, in your testimony, and you talked about the stop price logic, so you also highlight a number of risk management controls used at cme in addition to the circuit breaker rules. specifically, would you walk through the difference betweene the circuit breakers and the stop price logic employed at cme? >> sure.iffe circuit breakers, as we all them know, were coordinated with they few fewer exchanges, there's a 10%, 20%, 30% circuit breakers depending on what time of day it

happened. so the first half of the day up to 1:30 p.m., it's 10%, then it goes to 20% an goes to 30% of the market, the market is closed all day, what the stop functionality that we have deployed at cme group i is if or market goes up or down, in ay roughly if you use the gro equivalent price of the s&poes index, it's a half of 1%. if you cannot find liquidity to fill that order in a half of 1%, it stops for 5 seconds, allows the market to take a breath, to seek liquidity. if it cannot seek liquidity in that 5 second period, it will halt another 5 seconds and seek the liquidity again. so that's the way the stop logic functionality works and then obviously, we have the circuitue breakers in place also. >> and what happened on thursday then, that stabilized the market activity? >> there's no question, congresswoman, we brought these charges for a purpose, bus they absolutely make sense and you can see that the stop logic>> t

worked, that the futures market, stop logic kicked in, people had an opportunity to assemble liquidity, and the market started to go the other direction and we led that direction, so i think ouro functionality worked flawlessly. >> you say the functionality is not available in the securities market, is there some -- is it just because they don't use it -- >> to be perfectly honest with i you, this is pat entrepreneured technology by cme group and i'm certain that we would be happy without a cost to give it to th, securities exchanges, if this made the whole system better. >> so it can work for really any individual stocks or -- >> we do believe it could. >> ok.le then i'd like to ask the other gentleman, mr. noll, and mr. mr. lebowitz, would you consider using this, do you think this would be available? >> so i think we would consider all options, but on the other y hand, right now, we actually have a circuit breaker, the

functionality of which works.e the problem is it's not market wide. so the llearies are similar, ins terms of what we do if the stock moves a certain amount if a certain amount of thyme and thai amount is gauged by how mucht liquidity in the stock and whati the stock price is. it triggers a slow quote, in which case we take some amount of time to attract liquidity anu unwind the low quote, so it's very similar to what the cme does, except theirs is fully automated, just triggered by time. our involves dmmidit involvemeno unwind it. now each exchange, we will figure out a way, mr. noll will figure out a way for nasdaq, we will discuss the rules fordm implementing, but essentially in the end, the stock circuit breakers will be similar to the stop losses that mr. did you have if i have has explained. >> except that it's not now? it didn't work on thursday. >> no, i disagree.s m >> ok. >> so they actually worked in the new york stock exchange

market. the failure was that not hall the markets were obeying them,e. so what we need to do is just implement them, whether we implement his version, mr. duffy's version or a slightly different version, because securities do trade slightly differently. we'll figure that out, but this is really, as mr. noll said, it's an implementation issuetly, from a technology standpoint, because we have agreed essentially on a framework for going forward with that. >> so in other words, for it to work, it has to be implemented across all market venues. >> what will most likely happen, the listing venue, so in the case of nyc listed stock, in the case of nasdaq listed stock, nasdaq will enlist the stop loss trigger and the other stocks will have to obey it. >> i agree. that's where we'll end up.ave >> mr. noll, i'm sorry. >> i think that's where we'll end up, where the listing venue

will determine when a stock should be halted across the market and all the other listing venues will obey that. >> how long do you think this will take to work that out?stoc >> i think the rule said or at least an understanding of the functionality will probably take ofce over the next couple days. this is the te on outside framework in which we should operate the marketwide stock by stock framework in. the actual implementation i think is still subject to all of us revisiting our technology and revisiting how long it will take us to implement that. >> i think we're going to haveni answers. we paul have this as a high priority item. stockowy as the new york exchange, we would throw out using our system and having everybody obey that, the circuit breakers that are now in place, we recognize that that's not amenable to most market participants. >> thank you. yield back. >> the gentleman from indiana, mr. carson. >> thank you, mr. chairman. question for mr. duffy. even though no one had answersa. on may 6, cme took the unusual step of commenting on individuae

participation in its markets when it denied citigroup may have executed an irregularon trade. first, how was cme able duringpa that frantic day to absolve of citigroup of any involvement ant how do you recognize cme's policy of not commenting on market participation?he >> congressman, that's a gray question and it was a very difficult situation for us at because you have toarke realize we're working onipan realtime when the situation happening, with the rumors that somebody from citigroup entered in a $16 million action and instead entered $16 billion, we knew balls of the systems we that that was categorically false. we could put citibank's inventory, that they did on cme group on a realtime basis within moments. we tradition family would not ever make statements like that because of the situation the banks have been in. was the prudentd thing to do on citibank's behalf

and actually on behalf of the taxpayer, since they own such a big portion of citigroup, went thought it was the right thing to do to make a statement to make sure that the rumor went ws away.ma >> mr. lebowitz, although the cause of the may 6 volatility spike has yet to be determined, do preliminary investigations indicate flaws in the current regulatory framework, and also, can regulatory improvements, whether at the s.e.c. or cftz or exchange levels prevent whatws could essentially be an extraordinary technological glitch. >> i think what we recognized s the lackprov of marketwide circt breakers that everyone owe base is clearly on a stock by stock basis, is clearly a failure t among hour markets to workn together properly and create the right market environment. ito think the s.e.c. review will highlight other areas where wetn feel regulation is lacking, maybe there's not enough rig surveillance. i think many of us believe at this point, centralized

surveillance is critical in this market. you know, to be honest, i feel sorry for the s.e.c. staff, that's had to assemble from 40ci different venues the amount ofma data they've done and they've done amazing work if doing it, but we need to not be in thiseml situation going forward and i think we're committed and i know mr. noll's group is committed to working with the s.e.c.'s group to make that happen. >> and lastly, mr. chairman, mr. noll, can you please give us a rundown of the decision makino process that resulted in the cancellation of almost 300 grades of stocks and exchange traded funds? r >> sure. i'd be happy to do that. well, first of all, i think it's important to note that this wasn a multiexchange decision, so all the marketplaces participated i the decision to break the trades that occurred in that period of time between 2:40 p.m. and 3:00 p.m., so it was not one market making the decision on behalf of all others. it wasea allk markets in consultation with one another.oc and i think we were -- we were governed by two things that3:00 influenced our decision making process there. the first one was, when in fac did the markets become

disorderly as opposed to orderly. so if you look at some of thet timing of sales and some of the the trades that occurred during that period of time, their fall, even though it was drastic and fast is what we would call orderly. in other words, they were walking down thehat order books step by step in the way they were supposed to happen. it was only testif at the very m where we started to se see anomalous prints. a line where we were addressing the anomalous prints and not the order by order trading that was going on and we were very cognitive of what i would call the moral hazard problem which is that people should bear the consequences of their action.ng we didn't know who was going to win or lose by drawing the line where we did, but we were suremw below that line, we were capturing the bulk of the anomalous trade, but above thatr line, people's behavior, theywee bear some consequences of that, so whether they won or lost during that period ofan time, tb should bear that consequence for being a market participant, so we were very cognizant not tocos

award people for bad behavior, but saver people from what we ba consider to be an anomalous failure of the market hat that particular time. >> thank you. b mr. chairman, i yield back.rom >> the gentleman from indiana. i'm sorry, illinois, my apologies. >> it's close. ry, illinois. >> close. mr. duffy, on page 1 of your testimony, you state that, quote, the most significant equity interest futures contract traded on the cme exchanges is the e-mini futures contract. >> yes, sir. >> and also in 2009, the average daily volume for the e-mini s&p futures contract was $2,275,000

and you continue that on page 2. you discuss the trading period from 1:00 and 2:00 central standard time. your analysis of the trading activity indicates that the e-mini s&p futures contract was nat the triggering event. i heard reports than the e-mini contract led the sell-off of the dow. can you walk us through what happens with the e mini and your thoughts on what may have been the true triggering of that? >> i think we have heard a lot about different events in the marketplace leading up to the time coming into question. the volume in the e mini was heavy. this is not usual. e-mini is about four times the amount of the spider contract. at that particular time, we traded about ten times the volume.

so we traded the most highly liquid product. as i said earlier, futures contracts by design, they're indicators of people's potential view point on what they think is going to happen so they're traditionally leaders up and down the marketplace, and again, our markets operating within all the protocols of cme's systems so we didn't have any fat finger issue. we were confident of that. the market was moving rapidly, at the same tie, there were a lot of macroeconomic events happening. it was unusual activity. it happens and happened quickly, but we didn't bust trades. we looked at some of the algorithimate traders in question here. they were more liquidity providers at the time in question. they were not aggressor s or taking the market. they were leading the market because of the nature of the product, sir.

and then as you can see, our stop logic worked, and the list of stocks kept going down for whatever reason, that's still yet to be explained why they went to the prices they did. we did not trigger which would have been a stop trickt for the c cme would have been a 20% circuit breaker, and we were roughly about 9.5% at the lowest point in the s&p contract, sir. >> let me ask you an unrelated question because something obviously, well, maybe not obviously, but apparently something spooked the market. anything to do with the problem in greece? or worldwide activity, or inaboi inability what is going on with regard to the euro? do you see any connection or is it just coincidence? >> i have seen a lot of high

volatility, sir, especially coming into that day. all those events were on the front page. i'm sure they had a contributing factor to the market conditions that led to the precipitous downfall, and we saw a couple stocks trading at a penny that were $40 stocks. so one was probably wondering what was going on in the marketplace. >> mr. noll, would you like to comment on the last question could you turn on your mike and pull it closer to you? >> on the volatility in the marketplace at that time? >> yes t doesn't have to be a precise answer. >> i don't think we have a precise answer, and i'm not sure if we'll ever get a precise answer as to the notcher of the root cause of the uncertainty in the marketplace. what i think is very clear is we saw an increasing amount of volatility on the days leading up to may 6th. we saw a spike in all the measurements of volatility. the day of may 6 was already a volatile day before the events

here happened. it was already a severe down day. it was also the third day in a row of down equity markets. i think when we hit these air pockets or this confluence of events, if i can call it that, we were in a position where there was a massive downdraft in the market play, when we recovered from, but nonetheless, i think it's important for us to address the causes and to prevent that from happening going forward.leibovitz. >> i think the gentleman to my left has hit it right. it was a spook market, i think you even used that term. the markets became choppy. it's likely some news out of europe may have gotten people selling, but the behavior you saw, selling stocks down to a penny, that not permissible behavior. that's a market structure failure that we have incumbent upon us to correct. on the other hand, markets are allowed to sell off in a resinable way, so if investors were afraid of greece and the

euro and anything else that was going on, they should be selling the market off. what we're really addressing is is it happening in a reasonable and orderly way? are investors being disadvantaged by events trancepiring on the exchange? it would be hard to justify to a retail investor that he sold a stock at a penny. that has to be addressed. the fact that something triggers a sell-off, if we can't find an actual cause, meaning a trader, and there's so many rumors and that's part of we live with that every day in our market. the rumors gets translated so quickly that we have to deal with it. >> could i ask one more question. thank you. your answers -- your answers take into consideration or are based on the fact there wasn't anybody out there who, quote, made a killing that day, is that correct? there's no bad person out there or somebody you can say look at what he or she or they did as a

group that caused this? >> i mean, i think the investigations and the looking at the evidence will take place over the next couple days and weeks until all the determinations are made of everyone's behavior, whether it was good or bad or within the rules or not within the rules. as of dood in the nasdaq market, we have not seen anything that would suggest to us anybody was behaving in an inappropriate fashion. >> i would quite the option of making a quikilling. if they followed the market down, chances are they got hurt badly. the market snap back and they sold way below where the market ended up. while retail investors and others volfollows them down, they didn't make a killing. >> congressman? >> i agree with both of these gentlemen. i have not heard anything extraordinary. then again, it's a sensitive topic and we'll let our

regulatory departments address that. >> thank you. >> thank you, sir. now we'll hear from the gentleman from new jersey. >> just with one last question, and i appreciate all the time here. your on board with the circuit breaker idea, and spent a lot of time on it. and mr. duffy you mentioned what your system is as far as the 20%. >> our system on the circuit breaker, it's the way it works today, it goes down roughly a half percentage of what the s&p contract is today. if it doesn't have the liquidity to fill the number of contracts buy or sell, it will halt for five seconds and try to attract that liquidity. if it doesn't do it, it will halt another five seconds to try to atrath the liquidity. >> when you're meeting with the chairmen in the next few days

come up with uniformity on the issue, is there a lower level that you'll say this is not a realistic level? there are rumors that say you're looking of bands of 2% or so that would be too restrictive for individual stocks and what have you. what is the appropriate level? >> i think we're still engaged in that effort of determining the appropriate level. i happen to share your concern that we not draw the bands too tightly. >> what is that? >> i think 2% is too tight. i think what we saw on thursday is the lrp functionality going off at 2% levels which caused dislocations in the marketplace. perhaps unintentionally, but none the less, caused dislocations while other markets provided liquidity at that level. as larry had suggested earlier, we need to agree on what the right, appropriate levels are. i don't think 2% is the right level. we tend to believe it should be 10%. i think it's still a moving

target for all of us. >> i would agree with mr. noll 100%. we use for our lrp is relatively tight bands. proctor & gamble is about 2%. the intent is to continue trading and get it going relatively quickly. for this, we want to use broader bands because we want it marketwide. >> i want to make one market, the 10%, 20%, and 30% which the gentlemen are referring to can be narrowed, but if you narrow those percentages, what is more important then is to narrow the timeframe that the market is closed because they will be seeking liquidity at other venues. if you narrow the time to 5:15, and whatever you want to come up with, you can't be closed for an hour or all day. you narrow those time windows and narrow the bantdz and it will work out for everybody. >> i think it's a great point on a stock by stock basis. we're talking about a couple

minutes at most. on a market wide basis as we narrow the market bands, we narrow the timeframe for the close so it's not as long as in the past. >> you could bring in overseas trade. >> exactly. >> thank you, mr. garrett. i want to thank each of you, mr. leibovitz, mr. noll, mr. duffy, and also chairman shapiro and chairman ginsler for your excellent, superb, and well-presented witnesses and your testimony today on this very critical issue. as we move to make sure we maintain the strongest investor confidence in our financial markets and in our investor trading. thank you again very, very much for coming before our committee and helping us with this. the chair notes that some members they have additional questions for the panel which they may wish to submit in writing.

the hearing will remain open for 30 day for members submit written questions to the witnesses and to place their responses in the record. before we adjourn, the following will be made part of the record of the hearing. the written statements of bart children, commodities trading commission, it's so ordered the panel is dismissed and this hearing is adjourned. >> wally take you live now >> we'll take you live to the u.s. senate, where members return to work on the financial regulations bill we expect debate on several amendments this morning, including one offered by pennsylvania democrat arlen specter and would allow civil liability against those who aid in civil lights fraud.

majority leader reed has expressed home the measure can be completed by the end of the week, but that might slip over into next week. live now to the floor of the u.s. senate here on c-span2. will lead the senate in prayer.

the chaplain: let us pray. eternal lord god, the source of our strength, we acknowledge our dependence on you. direct our senators in all their ways, opening and closing the doors of their lives with your providential wisdom. watch over their loved ones and deliver them from evil. equip and strengthen our lawmakers for their difficult work, as they drink deeply from the hidden streams of your grace. lord, give them the courage to stand

up and speak out in defense of truth, as you provide them with the ability to discern your will. fill the wells of their souls with your strength and their intellects with fresh inspiration. we pray in your righteous name. amen. the presiding officer: please join me in reciting the pledge of allegiance to the flag. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. the presiding officer: the

clerk will read a communication to the senate. the clerk: washington d.c., may 13, 2010. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable kirsten e. gillibrand, a senator from the state of new york, to perform the duties of the chair. signed: robert c. byrd, presidet pro tempore. mr. reid: madam president? the presiding officer: the majority leader. mr. reid: i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

mr. reid: madam president? the presiding officer: the majority leader. mr. reid: i ask unanimous consent the call of the quorum be terminated. the presiding officer: without objection. mr. reid: following any leader remarks, the senate will resume consideration of the wall street reform legislation. we have eight amendments that are pending. today we'll tiffin to work through these -- we'll continue to work through these amendments to the bill and senators should expect roll call votes to occur throughout the day. we're having a special caucus today, we democrats, to talk about issue. the senate will, therefore, be in recess from 1:00 until 2:00 p.m. today. i have had conversations earlier this week with the republican leader about this and other

issues, and i'll talk to him again before the caucus. madam president, i had the opportunity a few years ago to ride with two police officers. it was a specialized unit that had been established with the las vegas metropolitan police department on drunk drivers. i learned so much. it was really a good experience for me. things that i really simply didn't know existed. for example, if you see a car with no lights on, it's nighttime, there's a 50% chance that's a drunk driver. you see a car making a wide sweep around a corner very slowly, a good chance it's a drunk driver. and they have other things that they look for. as we paroled the streets watching for these drunk -- as we paroled the streets watching for drunk drivers, i was struck

how openly they talked about the dangers they face every day. having myself been a police officer and never talking about dangers because we didn't have many, this was something that was really an eye-opener for me. more modern-day police officers, it is an inherent part of their jobs, a part of their families' lives that they never get used to -- these families. every day in every city and town around the country, brave men and women, all of whom volunteer to serve their communities, put themselves in danger to protect us: their friends, their neighbors, and so many that they'll never even know exist or meet. they take that risk to give us peace of mind in our everyday activities. on police week we recognize those who made the ultimate sacrifice, those who have given their lives in the line of duty. this evening they'll be honored at a candle light vigil. their names will be added to the

memorial alongside their families who celebrate their dedication and remember their sacrifice. four of those names belong to las vegas policemen who were killed last year. this morning i had the chance to meet with their families. we met during breakfast. they, of course, are some of the strongest nevadans i ever met. officer daniel leach was a career corrections officer. he began his shift last november 21 by picking up prisoners. he was going to take them from clark county detention center to las vegas. but before he could get not far from my home in searchlight, -fs involved in a vicious two-vehicle accident and was killed instantly. officer leach was 49 years old, spent his last 25 years of his life as a las vegas police officer. he survived his wife whom i met

this morning, two children, his parents, one brother, one sister. before trevor nelton was an officer in the las vegas metropolitan police department, he proudly held the honored title of united states marine. his nine years in the marine corps included service in the elite presidential guard unit where he protected president george w. bush. last november 19, two days before officer leach was killed, officer nelson was shot and killed by three gang members who broke into his garage and attempted to rob him and his family. officer ne leton was 30 years old. he left behind a wife, two young children, his parents and a brother. nearly as everyone called him when he was on patrol late one

wednesday night when a car turned in front of him. officer batelle was also a marine and tragically died as a las vegas police officer at age 30. officer battelle swerved to avoid another car while he was driving. he died early the next morning. he of course was on to a call that he received. he is survived by his parents and brother. last friday marked one year since officer james manor responded to his last kaufplt it was in the -- call. it was in the same community where he grew up. while responding to a domestic abuse call, a pickup driver failed to yield to him, and his police vehicle going as fast as he could to respond to that dispute. a collision occurred, and james manor was killed. he was known as jamie.

he had ten brothers and sisters. even more whom he considered brothers and sisters who served on the police force with him. his siblings, his mother and large extended family will tell his young daughter jayla, whom i met this morning -- a buell little eight-year-old -- a beautiful little eight-year-old girl -- they'll tell her and the rest of the family who he was. they'll tell jaylaa how tkpwraeupblgs her father -- how courageous her father was. this wall is a living reminder of some of our most selfless citizens. this year we'll add to the wall the name of nevadans whom we'll recognize belatedly. uriah gregory, a skwaeuler from virginia citi -- a jailer from virginia city during its heyday was killed by two prisoners in

1866. arthur st. clair was a constable father of two. and george reklef, was killed at the same taoeufplt charles lewis was killed by a thief in 1929. george washington kotant, a constable died in a car accident in 1937. hugh gallagher sr., a deputy sheriff in virginia city who died on duty in 1948. ronald haskell, a narcotics agent in carson city died on duty in 1975. richard wilson, a sergeant, who died after apprehending a suspect in 1994. these men were killed a long time ago, one almost 150 years ago when nevada had been a state for only two years. it doesn't matter the time.

we can never forget their sacrifices. every day we should thank those who wake up on otherwise unremarkable mornings and head out to work with the job simply to keep us safe. today we thank and honor the courageous nevadans who on one unforgettable night never came home. the presiding officer: under the previous order, the leadership time iseserved. under the previous order, the senate will resume consideration of senate bill 3217, which the clerk will report. the clerk: calendar number 349, s. 3217, a bill to promote the financial stability of the united states by improving accountability and transparency in the financial system, and so forth and for other purposes. mr. specter: madam president? the presiding officer: the senator from pennsylvania. mr. specter: madam president? the presiding officer: the senator from pennsylvania. mr. specter: madam president, i have sought recognition to ask

cosponsors of the pending bill who wish to present an argument to come to the floor as early as practical. the pending amendment involves reinstating a civil cause of action against aiders and abettors. the law up until 1995, with a supreme court decision, provided that aiders and abettors were liable for damages for those who had been defrauded in securities transactions, and we all know the massive problems caused by wall street operations with many allegations of fraud. and in our effort to reform wall street, this is a very important provision. traditionally, people who have

been injured lost money as a result of fraud, have had a civil right of action to go into a civil court. and the law had been uniform that under the securities acts, those cases could be brought. there have been two supreme court decisions which have modified that, requiring that this act change the decisions of the supreme court of the united states, which we have the authority to do, not decided on constitutional grounds, but decided on grounds of statutory interpretation. congress has the plenary power to make that modification. i've offered the amendment and argued it briefly and will discuss it further a little later this morning. i offered it on behalf of senator reed of rhode island, senator kaufman, senator durbin, senator harkin, senator leahy, senator levin, senator menendez, senator whitehouse, senator

feingold, senator franken. i just want to let all the cosponsors know that the matter is now on the floor. and if they care to support the arguments, now would be the time to come to the floor. i see other colleagues waiting for recognition, so i yield the floor. mr. wyden: madam president? the presiding officer: the senator from oregon.

mr. wyden: i would note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

a senator: madam president? the presiding officer: the senator from oregon. mr. wyden: madam president, i would like to lift the quorum at this point and talk for -- the presiding officer: without objection. mr. wyden: i'm going to talk for about five minutes on the effort to finally, once and for all, eliminate secret holds in the united states senate. senator grassley, my partner in this effort for a decade also will speak. and then two colleagues on are side, part of this coalition, senator whitehouse and senator bennett, who have done very good work, along with senator grassley, senator inhofe, senator collins, been part of a bipartisan coalition, will take just a few minutes. let me also express my appreciation to the chairman of the committee, senator dodd and senator durbin and others who have been so helpful. madam president, this bipartisan

amendment will abolish the secret hold in the united states senate which, in my view, is a violation, an indefensible violation of the public's right to know. with a secret hold, any united states senator can block a piece of legislation or a nomination in secret simply by telling the leader of their party of their desire. this means that one person, without any public disclosure whatsoever, can keep the american people from even getting a peek at what is public business. when asked why he robbed banks, willie sutton said that's where the money is. in the united states senate, secret holds are where the power is. with a secret hold, one of the most powerful tools the united states senator has to effect the

lives of our people, can be exercised anonomously. in 2007, the senate sought to eliminate secret holds, but since then big loopholes have been developed to keep too much senate business in the dark, away from the public. this bipartisan amendment closes those loopholes. with this bipartisan proposal, every single hold in the united states senate will have an owner who is public within two days. and it is an amendment that will be enforced. here's how it would work colleagues: if a senator puts a hold on a bill or nomination, they're required to submit a written notice in the "congressional record" within two days. when that bill or nomination comes to the floor and any senator objects to its consideration on the grounds of a hold, one of two things will

happen. either the senator placing the secret hold will have their name publicly released or the senator who objects on their behalf will own that hold, and then that individual will have their name published in in the congressionl calendar. for the first time there would be both public accountability and peer pressure on those trying to keep senate business behind closed doors. the bipartisan proposal includes two additional reforms. first, the proposal eliminates the ability that a senator has today to lift a hold before the current six-day period expires and never have it disclosed. this has been a huge abuse. it has allowed a senator to do business in secret and never have it reported. with the new proposal, if a senator places a hold, even for a day, even for a minute, that hold is going to be disclosed. second, the proposal makes it

harder for a group of senators to place revolving holds on a nomination or a bill. i particularly want to thank senator whitehouse who has highlighted this question of revolving holds in his past comments on the floor. with the six-daytime period, a group of senators can literally pass a hold from one colleague to another and never have it disclosed. by requiring all holds to be made public, it will be much more difficult to find new senators to place revolving holds. so, madam president, what this comes down to is the question of whether public business ought to actually be done in public. and it seems to me if it is important enough for a united states senator to say that they're making this a priority, it ought to be a public matter and not be something that is decided in the shadows away from the public and unaccountable in

terms of decision making here in the senate. i want to thank my colleagues. this has been part of a bipartisan coalition, and no one has put more time into this cause than my friend from iowa, senator grassley. i also want to thank senator mccaskill, who has prosecuted this cause of accountability and openness relentlessly. she and senator warner, senator whitehouse, senator bennett, senator inhofe, senator collins; i could go on. but finally, there is a desire in the united states senate to eliminate secret holds once and for all. i close with this. i don't think that one out of 100 people in this country have any idea what a secret hold is, and most probably think it's some kind of hair spray. but it is in fact one of the most powerful tools in our democracy. it is being used to keep what is

public business from the eyes of the american people, and it's got to change. so, madam president, i want to yield time to my colleague, senator grassley, senator whitehouse and senator bennett, and also thank chairman dodd and senator shelby for indulging us at this time. chairman dodd, it seems to me when you have done so much good in terms of arguing for openness and accountability on wall street, this is the perfect time to say we ought to have that here in the united states senate. that's what we're going to do today on a bipartisan basis. i thank my colleagues, and, madam president, i yield the floor. mr. grassley: madam president? the presiding officer: the senator from iowa. mr. grassley: thank you, madam president. and i thank senator wyden for his leadership and working together with me and now other senators over a long period of time. i think he referred to maybe ten years we've been struggling to

get to what we're finally getting today. in the past we thought we had some victories and they turned out to be hollow victories. maybe a little more openness but largely ineffective. maybe now we'll finally be able to accomplish an effective openness here in the united states senate on one of the most powerful tools that a senator has. i think it gives hope to the fact that if you're right, eventually right wins out here, even in the united states senate. and a long struggle does pay. i think we are bringing simply common sense to a process here in the united states senate. it is, as my friend from oregon said, transparency. and with transparency we have accountability. the amendment that senator wyden and i have offered would restore the prohibition on secret holds that the senate voted for

overwhelmingly in a previous congress, 109th congress, and make it even more robust. because i said that those turned out to be largely not very effective. at that time, in the 109th congress, our measure passed as an amendment to the ethics reform bill by a vote of 84-13. that bill never became law, but the never congress passed then what's referred to, the title of the legislation, the honest leadership and open government act. our provision was also originally included in that bill. ironically, as i've alluded to, in a move that reflected neither honest leadership or open government, our provisions were altered substantially. i might say too substantially behind closed doors before we had final passage. the current provisions essentially say that it's okay to keep a hold anonymous until six days after someone asks

unanimous consent to proceed to a bill or a nominee. i'm not going to explain how that process works out, but it can be summed up in the word that it's a very ineffective sort of transparency, hardly doing any good whatsoever. so now the amendment that's before us says that senators must go public from the moment they place a hold on. perhaps i should take the opportunity to address what a hold is all about. a hold arises out of the right of all senators to withhold their consent when unanimous consent is asked. it goes without saying that any senator has a right to object to a unanimous consent request that the senator does not support because it's not unanimous unless, obviously, we all support it. in the old days, when senators

conducted much of their daily business from the desk here on the senate floor, it was a simple matter to stand up and say "i object" when necessary. and of course that senator was immediately identified. now, since most senators spend so much time off the senate floor in committee hearings, meeting with constituents and other sort of obligations that we have, we have tended to rely upon the majority and minority leaders to protect our rights and prerogatives as individual senators, asking them to object on our behalf. just as any senator has the right to stand up on the senate floor and say "i object," it's perfectly legitimate to ask another senator to object on our behalf if we cannot make it to the floor when consent is requested. by that same token, it would be illegitimate, not to mention

impossible, for a senator to stand up on the senate floor and object anonomously. senators have no inherent right to have others object on their behalf and keep their identity secret. if a senator has a legitimate reason to object to proceeding to a bill or nominee, then he or she ought to have the guts to do so publicly. i believe that this is part of expanding the principle of open government. the public's business ought to be public. lack of transparency in public policy process leads to cynicism and distrust of public officials and, quite honestly, less accountability. i would maintain that the use of secret, with emphasis upon the adjective "secret" holds damages public confidence in the institutions of the senate. the public's business ought to be done in public.

period. i have made it my practice to put a statement in the record when i have placed a hold on a nominee or a bill for now over a decade. and i can tell you that that is no burt what sever -- no burden whatsoever and it hasn't hurt me in any way whatsoever to let my colleagues know and the public know for the last decade that chuck grassley, senator grassley had a hold on a bill and why i had that hold on a bill or a nominee. our amendment then -- the one before us -- would make it crystal clear that holds are to be public. senators placing a hold must get a statement in the record within two days, and they must give permission to their leaders at that time that they place a hold to object in their name. also, if a senator objects on behalf of another senator but refuses to name the senator he's objecting for and that senator

doesn't come forward within those two days, the objecting senator will be listed as having that hold, owning that hold. so i want to make it clear that we do not come to this lightly. we have tried other paths to accomplish our goal. i said those other paths have turned out to be largely ineffective. we sought the advice and assistance of several majority and minority leaders over the last decade, and we twice tried informal policies issued jointly by two leaders in 1999 and 2003, but those turned out to be as flimsy as the sheet of paper they were written on. so working with two former leaders -- senator lott and byrd -- we crafted the policy that i mentioned earlier that the senate adopted by a vote of 84-13, which was later gutted. it is this policy with some improvements; in fact, some very

needed improvements that we are introducing today. it is important that the senate have the opportunity to speak on this issue as a body, and i look forward to this vote and finally having a true victory against secrecy. i yield the floor. mr. mcconnell: madam president? madam president? the presiding officer: the republican leader. mr. mcconnell: i'm going to proceed for a few moments on my leader time. the presiding officer: without objection. mr. mcconnell: madam president, all across the country this week, americans will honor the law enforcement officers who keep our towns and communities safe and pay solemn tribute to those who have lost their lives in the line of duty. national police week is a time to thank all of those whose service preserves the rule of law at great risk to themselves. i'd like to pay special tribute to one of those heroes today: officer brian j.durman. officer durman was a 27-year-old decorated lexington, kentucky, police officer and a veteran of the u.s. air force and he was

tragically the first lech -- lech sin ton -- lexington police officer to die in the line of duty in over 20 years. he was responding to a noise complaint when he was struck by a car and killed. he leaves behind his wife brandy and their four-year-old son, brayden. brian durman weupbt to paul dunbar high school. after graduation in 2001 he enlisted with th

is for administering lifesaving c.p.r. to a woman in emergency -- in a medical emergency in two separate instances, brian received a lifesaeufrg award and the -- lifesaving award and the exceptional service award. his family will be presented with these awards as a small reminder that, as his mother puts it, brian died doing something that he loved. so during this national police week, as we remember our police officers and their families, we also remember the loved ones officer durman leaves behind:

his wife brandy, his son brayden, his mother margaret, his sisters mow "newsweek," michelle wise -- mow -- his brother, his brother-in-law robert fletcher and many other family members and friends. brandy will always have a fond memory of a recent christmas when brian and brayden received toy dart guns. father and son spent much of the day playing with their new toys. i found about 50 darts in the christmas tree, brandy says. they were in the sink, in the bath tub. the day after officer durman's death, plex ton police officers -- lexington police officers wore black bands as a tribute to their fallen brother, a reminder of the hazards of the job each and every police officer in kentucky and across the country face every day. the senate has the deepest admiration and respect for police officers in every

community in the nation. we recognize theirs is both an honorable job and a tkaeufpbgous one. -- dangerous one. we recognize they bravely risk their lives for ours. i appreciate all they do. madam president, i yield the floor. the presiding officer: the senator from texas. mr. cornyn: there are a number of senators on the floor who want to speak on unrelated matters. i'd like to speak on the underlying bill. at this point i would defer -- i believe senator whitehouse, maybe senator mccaskill, maybe senator bennett wants to speak on the hold issue. i would just merely ask that we alternate back and forth after the next speaker speaks on whatever subject they want to, i be allowed to speak on the underlying bill and then go back to the other side of the aisle. mr. dodd: madam president, let me make a suggestion if i can to my friend from texas, as i understand it, the three colleagues over here are going

to speak two or three minutes a piece. the cumulative time of all senators might be about six or seven minutes, eight minutes. i know you have a longer statement to make on senator sessions' amendment. mr. cornyn: i would be glad to defer to them under those circumstances and then be asked to be recognized following those six or seven minutes. a senator: mr. president, -- mr. wyden: if you'd yield for a question, i think it is something that can save time. you have been very gracious to allow us this opportunity to do this. you've noted senator whitehouse, senator mccaskill, senator bennett are all going to speak. i think that would allow us to just set up a time later for the vote, when we would have to formally offer it. would that be acceptable to you? mr. dodd: i can't agree to anything at this point. i can talk to the leadership about that. mr. wyden: it is acceptable to the leader. mr. dodd: i'm not in the position to give you that consent. that's something you've got to go through the leadership on. let's get the speeches done so

we can get back on the bill. a senator: madam president? the presiding officer: the senator from rhode island. mr. whitehouse: i want to congratulate senator wyden and senator grassley for their long effort to eliminate the secret hold in this body. they thought they had succeeded in 2007 with a mechanism that would scrub secret holds and make them public after six days, but it turns out that a number of our colleagues on the other side discovered a loophole in the rule, whether it's called the old switch rao or revolving -- switch-a-roo, they found a way to defeat the purpose of a rule voted for by 84 members of the senate on a strong bipartisan basis. that is why we are back here today. i want to add to the role of honor on this subject, claire mccaskill, who has done the lion's share of the work of shepherding in some cases 100

stalled nominees, blockaded on the executive calendar through those 207-year procedures so that we could get to the point of proving that there were in fact secret holds, and that despite the rule, hold laundering was taking place. and the rule was not being put into effect, and holds were being kept secret. i suppose an asterisk on the role of honor should go to senator coburn, who is the one senator on the republican side who had the courage to stand up and disclose his actual holds. everybody else went to some other senator and said "i don't want my name on this. would you please take my hold over so that i can avoid the rule, keep my hold and have no accountability?" perhaps, madam president, there once was a reason for a secret hold, for this kind of business to be done in the dark, in the shadows and anonomously. but i think history and common

sense tell us that deeds that are done in the dark are not usually ones that we are proud of. and certainly the experience of the last few months has shown that if there ever was a legitimate use for secret holds, that purpose has evaporated. it has evaporated under the pressure of block nominees numbering in some cases over 100, a systematic approach, a systematic attempt to disable this administration's ability to govern by systematically opposing nominees irrespective of the merits, opposing nominees who came out of committee in a bipartisan fashion, opposing nominees who came out of committee with zero opposing votes, with senators raising objections to nominees who they voted for in committee. there is clearly something more going on than a sincere concern

about an individual nominee. finally, this effort to what i call hold launder and to avoid the rule that 84 senators stood up and voted for, that puts nothing more than put your hold in the light of day shows the 2007 rule has been ineffective and it is time for a change. so with continuing gratitude to senator wyden and to senator grassley and to all those who supported us on this, and particularly to senator mccaskill for her relentless pressure on the floor making this actually happen, i yield the floor. a senator: madam president? the presiding officer: the senator from colorado. mr. bennet: madam president, i'm joining my colleagues today in support of the effort that senator wyden and senator grassley have led to end the corrosive practice of the secret hold. this is a reform that is needed and cannot wait. i've been in washington for only about a year, but it didn't take

that long to realize our government needs to fundamentally change the way it does business. coloradoans deserves a government that works for them. they're tired of the petty partnership in washington. they want their elected officials to listen and address that dare-to-day concerns. i cannot think of a worst example of this dysfunction than the secret hold. it is undemocratic and it's hurting our economy. quite a few of us in the senate, the chairman and i, have young daughters, young kids that are familiar with the ups and downs of a long car ride heading on vacation. the first hour always seems to go pretty well, full of excitement about where everybody's headed. but it isn't long before that excitement turns to restlessness and that restlessness turns to secretly doing everything they can to bother their siblings just for the sake of doing it. every time you turn around they stop and smile and claim their innocence. it never occurred to me -- it

never occurred to me -- that that experience would actually prepare me to come to the united states senate. countless nominations make their way to the board. senators make speeches about the importance of doing the country's business, appearing motivated to get the job done. to get the american people's work done. but when the cameras are off, they use the secret hold to bring this progress to a stop. since i've been here, i've seen nominees and bipartisan legislation held up for weeks only to pass with 97 or 98 votes all to score political points and waste the american people's time and the american people's money. earlier this year, we spent months working to reform health care. we spent a lot of time in the chairman's leadership trying to fix wall street. mr. president -- madam president, it's past time we fixed the way washington worked as well. congress must stop living under a glass dome.

the wyden-grassley amendment is simple. it requires any senator seeking to hold up the nation's business to publicly announce his or her hold. all holds should be in writing, made public for the other 99 of us, and most important, for the american people so they can render their own judgment. and while i support this amendment, i have legislation that would go even further. my secret legislation would not only end secret holds as this one does, but also require any hold be bipartisan or else it expires after two legislative days. all holds, public or private would expire in 3 days, at that point the pending legislation would be considered on the senate floor. the senate was designed to be the greatest deliberative body on the floor. let's have a debate and put an end to prevent the secretive attempts to prevent debate. i want to thank senators grassley and wyden for their leadership. i also want to recognize the great work that our colleague

from missouri, claire mccaskill has done bringing this legislation to this point. and, with that, madam president, i yield the floor. a senator: madam president? the presiding officer: the senator from missouri. mrs. mccaskill: first, let me say how grateful i am to senator cornyn for his patience. i will try to be very, very brief. i know he is waiting to address the underlying bill. i think that's everything that's been said -- that needs to be said has been said. i do -- i'll be interested in this vote. because there are a group of people right now that voted for a rule that simply said you've got to disclose your secret holds if a certain procedure takes place. and there's a bunch of people that voted for that that aren't doing it. i don't know how that computes. -- computes in the mind of a united states senate. i don't know how you vote for a rule that requires you to

disclose and then you knowingly continue to keep a hold secret. i had a colleague tell me the other day that they had talked to a colleague across the aisle about a couple of judges that they desperately wanted to get released from the land of secret holds, and this colleague visited with a republican about it and the republican told her, well, the leader says he's got to get something for it. you've got to get something for it? have we come to that? did you get to hold on to someone who's life is in limbo to be a united states district judge until you get something for it? it's not the way the american people want us to operate around here. and i -- i know that senator grassley and senator wyden have toiled in this field for a long time. i appreciate their efforts. i appreciate all my colleagues who have been helpful in bringing this to the attention of the american people. we now have 60 senators who

signed a letter who said that they will never engage in secret holds and they want them completely abolished. the wyden-grassley approach is almost as good as ever. it is a narrow window and i pray it would work. i had been wildly optimistic it would work when i voted on the rule in 2007. i thought, well, this is all it's going to take. i'm not as optimistic, frankly, right now. i think games may still be played. i think we'll have to get to 67 names on that letter. i think the american people are going to have to rise up with their pitch forks and say, enough already, stop this incredibly bad habit of thinking you can hold up nominations because you feel like it and never have to own it. so i encourage everyone to vote for the wyden-grassley amendment. i appreciate senator cornyn's patience. i look to a vote on this and i want to find out who is secretly

holding right now that votes for this amendment and how do they reconcile those two things? thank you, madam president. the presiding officer: the senator from texas. mr. cornyn: thank you, madam president. madam president, i want to speak on the underlying -- underlying bill. particularly on the sessions amendment to the bill. but let me precede that with general comments. i'm concerned when i read in the most recent publication of kwr-gs national affairs" comments from the inspector general of the tarp program that was appointed to oversee that program that's now gotten completely out of control, but more to the point here, what he says is what's happened since september 2008 is we've seen further consolidation of the banking industry. and actually he has said that what has happened is things have actually gotten worse as a

result of the several mergers that have actually made banks larger. and the implicit guarantee of moral hazard that we're not going to let these large institutions fail, which have contributed to them engaging in more and more risky conduct. the problem about too big to fail and these large institutions, particularly large banks with assets of over $100 billion, is that they could actually borrow money cheaper than community banks in texas or new york or in connecticut or elsewhere, and that they actually -- it represents a $34 billion subsidy to the largest 18 banks in america, because this bill does nothing to eliminate the concept of too big to fail. indeed, in many ways it makes it

worse. it institutionalizes the concept. i want to address specifically the provisions in the dodd bill, the underlying bill which have to do with how do you deal with these large financial institutions if they get into trouble. now, the dodd bill, the underlying bill empowers the federal deposit insurance corporation, which previously has had no experience dealing with investment banks or other companies that engage in financial transactions other than depository banks. but this bill allows the federal deposit insurance corporation to seize a vast range of financial companies based on nothing more than their impression that the institution is in -- quote -- "danger of default." of course we know that one of the reasons why we've gotten into this mess, why wall street

has gotten into the shape it's gotten into is because either regulators were too close to the people they were supposed to regulate or they were asleep at the switch. and empower the federal deposit insurance corporation now to take on this new role as megaregulator and the resolution authority that it literally is going to have to run these businesses, if the fdic takes them over, something they're not prepared to do, something they've never done before, it will actually encourage management at the institutions that are subject to this new expanded authority of the fdic to foster stronger relationships with the regulators further entangling the government with the fabric of the united states private sector. this underlying legislation creates a resolution scheme for large complex financial institutions that allows the fdic to serve in multiple

capacities it wants: as corporate management, as creditor to the corporation and referee of the liquidation process. there is no question that in the underlying bill that there are going to be enormous conflicts of interest on the part of the government agency itself when it's required to wear this many hats at the same time. the bill, underlying bill also provides the government, and here specifically the fdic, the authority to discriminate among creditors of the same class. all you have to do is look at what happened when the federal government took over general motors and you saw the government's $15 billion gift to labor unions, to the disadvantaged of the -- to the disadvantage of the bondholders. this is the same sort of abuse that has propagated and continued under the underlying

resolution authority in the bill, and it needs to be fixed. it needs to be changed. this underlying legislation also forces companies that are financially sound and that have done nothing wrong to contribute to a fund to bail out organizations and institutions -- i should say companies that have been irresponsible and done exactly the wrong thing. and i must say that i really wonder why we are rushing through this legislation so fast when the very commission that congress has created to report back to us, the financial crisis inquiry commission, is not supposed to report until december. so in a very complex and complicated area like financial regulatory reform, we're going to be denied the very report that congress commission, that's due in december that will tell

us hopefully how to get this done and get it done right. so i think it's a terrible mistake for us to give the fdic this incredible authority and discretion which really will just alter the relationship again between the private sector and government. we've seen a tendency over the last year and a half to grow government and to basically burden the private sector in ways that cause many people to wonder whether we are still committed to a free enterprise system or whether we're going to have one government takeover after another. this legislation, particularly this resolution authority, represents something that will provide for more government intervention in the private sector without making sure that too big to fail comes to an end.

but i want to talk specifically about the sessions amendment, as i said, because what the sessions amendment does is restores the rule of law to the resolution authority that would be granted under this bill. because under american bankruptcy law, we have an adversarial process. we have judges who are independent. we have a requirement that when you walk into court, in bankruptcy court, you actually have to swear under oath, under the penalty of perjury that what you are saying is the truth, the whole truth, and nothing but the truth so help you god. but i don't know why we should allow these big financial institutions that are covered by the resolution authority under the dodd bill, under the underlying bill a special set of rules. why shouldn't they be forced to operate under the same rules, bankruptcy rules that apply to every business that gets in financial trouble all across

america today? many scholars and policy analysts have argued convincingly that bankruptcy reform would be the most effective action congress could take to protect against future financial panics and bailouts. there is one note i would make of the lehman brothers bankruptcy. as the chair knows and my colleagues know, there was a voluminous report written by the court-appointed examiner who dissected the lehman brothers bankruptcy for reasons why lehman brothers failed. this is a 2,209-page examiner's report which documents accounting gimmicks that were used to hide the extent of layman's indebtedness which were not node to the securities and exchange commission because the securities and exchange commission took the position it

didn't have jurisdiction to do this very sort of regulation and very sort of oversight that may have detected this and prevented the meltdown at lehman brothers and all across wall street. amazingly, richard fold, the chief executive of lehman brothers, said that when he was confronted with the examiner's report documenting the various maneuvers, including one known as repo 105 transactions, he said he had no knowledge of the accounting maneuvers that were used to take some of the financial obligations of lehman brothers off its books. so i would just ask my colleagues, don't we want this sort of transparency and accountability that comes only out of a bankruptcy-type resolution authority, don't we want that kind of information so we can hold the people who were responsible for these huge meltdowns of our financial system, so we can hold them accountable?

i would say we must insist on that kind of accountability. but, unfortunately, under the authority given to the fdic to conduct this resolution under the dodd bill, there will be no sort of report by court-appointed examiners like exposed lehman brothers accounting gimmicks and the complete abdication of responsibility of the chief executive officer for not knowing exactly what kind of accounting transactions were taking place which hid a lot of their liabilities not only from him, but also from examiners. we won't have that kind of information. that's another reason why i believe that bankruptcy provides a far superior way of handling this resolution rather than giving fdic sort of fdic on steroids power to make these decisions without the kind of transparency and accountability that we need.

recently in "wall street journal," a couple of professors wrote, "if there were a silver bullet in financial reform, legislation would have been enacted a long time ago. but there isn't. removing the special treatment of derivatives in bankruptcy comes close to it. it could provide the basis for a sensible compromise on derivatives legislation while also addressing the bailout problem." and that's exactly what the sessions amendment does. with a small tweak of bankruptcy law, we can assure that everyone's going to have to play by the same rules and that when any financial institution goes bankrupt, that the automatic stay which protects the court's jurisdiction to be able to sort out the creditors and debtors, that that stay can be used in an appropriate way to deal with derivatives contracts.

currently derivatives contracts are exempted from the automatic stay, which creates a very dangerous risk of a run on the bankrupts derivatives book which could have a cascading effect exacerbating systemic risk. but the sessions amendment provides for timely court supervision over any stay on derivatives contracts. other than that, the bankruptcy code would apply as it does every day in bankruptcy courts across this country involving businesses both large and small. so this legislation -- this amendment, the sessions amendment, i think, provides a much more transparent, much greater accountability, much more certainty and certainly hopes restore the rule of law to an otherwise discretionary authority over a federal agency that's never exercised this kind of authority before, one that has the danger, very real danger

of perpetuating the kind of picking of winners and losers we saw in the g.m. bankruptcy where the bondholders who were supposed to be among the most secure creditors, if not the most secure, were forced to take a significant loss in favor of unions who happened to be more active political players in the political process. so i would urge my colleagues to support the sessions amendment which makes bankruptcy a preferable alternative to dealing with future failures of financial institutions. madam president, i yield the floor. the presiding officer: the senator from nevada. mr. ensign: madam president, we are venturing down a dangerous path that threatens to put the economic future of our country in jeopardy. when the housing market

collapsed, the government stepped in with a blank check to bail out the nation's largest mortgage giants: fannie mae and freddie mac. when the automakers started to feel the pinch of a downward economic turn, again the government stepped in. taxpayer money in hand and bailed them out. when the giants of the financial market started to see their bank accounts soar below zero, again the united states government stepped in to bail them out, allowing them to sidestep the pain of their financial mismanagement. pain that was then passed on to hard-working americans, many of them whom are barely scraping by during these difficult economic times. this pain was certainly not felt by the managers of these institutions when they received skporb tapbt bonuses -- exorbitant bonuses despite their bad peformance. this country has witnessed bailout after bailout after

bailout, and yet not one piece of legislation has passed this body that would establish protections for taxpayers to ensure that we do not remain on the hook for bailing out these institutions every single time that they mismanage themselves. unfortunately, this financial reform bill that we have before us continues this trend. last week i offered an amendment that would have restricted the size of fannie mae and freddie mac so that they would not continue to be too big to fail. my amendment was defeated largely along party lines. senator mccain offered an amendment this week that would have reduced the size of fannie mae and freddie while moving to let them stand on their own so that the government gets out of the business of subsidizing mortgages. again, his amendment was defeated largely along party lines. today we have another chance to listen to the american people

and to stop the bailouts of these mismanaged corporations. senator sessions' amendment of which i'm a cosponsor will do this by taking away the bailout option to instead force these companies to declare bankruptcy. this amendment will produce a clear set of rules which will create certainty in the marketplace rather than continuing the precedents set during the crisis where the government was allowed to pick winners and losers. this is not the first time that i fought against these bailouts. in 2008, when we were debating the bailout of the automakers, i offered an amendment along with senator shelby that would have required the big three to file chapter 11 bankruptcy. and at that time i argued that this was the best way to ensure that the automakers emerged in the future as skefrl companies. i --

and would have protected the employees of these automakers by keeping politicses out of the process by eliminating the need for an auto czar. unfortunately the government stepped in and, with the exception of ford, decided to bail them out. i thought that this was wrong at the time and i still feel like this was -- it was the wrong thing to do. while we cannot erase the decision of the past that led to the bailouts of the automakers, fannie and freddie and the financial firms, we can correct course to ensure that the american taxpayers get off the hook for bailing out these industries in the future by forcing them to file bankruptcy should they mismanage their finances again in the future. madam president, the reality is that when americans mismanage their funds or are unable to stay afloat under mounting debt, they file bankruptcy. i'm sure that many would rather have the government step in and

pay off their debt. but this is simply an unsustainable option. the same argument can be made for bailouts of financial firms. bailout after bailout footed by the taxpayers will force our already debt laden country into further debt that we cannot afford to crawl out from under. and we are already rapidly approaching this reality. these bailouts do not incentivize these institutions to minimize the risk. instead they go as far as to privatize the profits while socializing the risks of their losses. senator sessions amendment offers hard-working americans a reprieve from footing another financial sector bailout. but he also discourages these companies from continuing the irresponsible practices that got them into trouble in the first

place. under the financial bill that we are currently debating, the government will continue to pick winners and losers and the taxpayer will continue to foot the bill unless we adopt senator sessions amendment. this amendment would make these companies utilize an enhanced bankruptcy process which would ensure that the costs are covered by the financial institutions and their creditors, not the taxpayer. the amendment creates a new chapter 14 in the bankruptcy code that we -- that will utilize many of the tenets in the chapter 11 bankruptcy organization, but will be for the specific use of the big financial institutions. this addition to the bankruptcy code creates a new pathway to limit the cascading spread of risk and panic throughout the financial system. and ensures the more orderly

winddown of these financial institutions insulated from bailouts and political influence. senator session's amendment delivers much-needed transparency, accountability, stability and due process through the use of bankruptcy courts and the expertise that we have in bankruptcy courts. further, to protect the taxpayers it specifically denies the federal government to take over firms, dictate the terms of the reorganization or liquidation and support them with federal bailouts. this amendment guarantees real reform that will result in real stability. this is what the american people are asking us to do. they are asking us to make sure that they are not the ones responsible for bailing out this financial giants who make poor business decisions. the american people are working

hard to weather through these tough economic times. and we owe them much more than legislation that will continue to allow the government to pick winners an losers and -- and losers and will allow too big to fail to continue. this is a program -- this is a system that allows companies to take their profits private while putting the risks into the social fabric of our country, in other words, where the taxpayer continues these bailouts. madam president, i hope we adopt the sessions amendment. unfortunately, almost every good amendment that's been offered to this wall street bill has been defeated largely along party lines. this is a bill -- this is an amendment that will actually stop too big to fail. it is a responsible amendment. i hope that we can finally adopt a good amendment to this bill. madam president, i yield the floor.

the presiding officer: the clerk will call the roll. quorum call: mr. specter: madam president? the presiding officer: the senator from pennsylvania. mr. specter: madam president, i ask consent that further proceedings under the quorum call be terminated. the presiding officer: without objection. mr. specter: madam president, i have sought recognition to comment further about the

pending amendment to make tort feesers under the securities act liable for civil damages. that is, those people engage in fraudulent conduct. we have had a deep recession with millions of people have lost their jobs, enormous financial losses, and many con tensions of fraud in one's practice for being responsible for that conduct. and in this act we are seeking to reform wall street and the practice has been -- the law have been for decades that under the securities act someone who was cheated and defrauded by people who practiced under the

securities act could sue them and that would involve aiders and abettors and people in the chain beyond the principle would be responsible. i offered an amendment on behalf of myself and senators reed of rhode island, kaufman, durbin, harkin, leahy, levin, menendez, whitehouse, franken, feingold, and merkley to reinstate the law as it had been prior to the decision of the supreme court. the supreme court has held that aiders and abettors are not libel and that there's a requirement that the defendant must have made the representation directly to the person buying or selling the securities which is a sharp reversal from what the law had been. it is unheard of -- to have

criminal liability under the criminal code for aiding and abetting, but not to have liability under the civil claims. it is a much higher standard to prove criminal culpability to put somebody in jail than it is to establish a claim for monetary damages. but that is where we find the law and we find people really in urgent need of this kind of standing to recover their damages, but also to have this procedure serve as a deterrent to wall street fraud. the issue was si singtly summard by judge gerald lynch in revka v. -- it is perhaps dismaying that participants in a fraud

enter scheme who may have create -- there are acome polices and there are acome polices. afterall in the criminal context when the godfather orders a hit, he is only an accomplice to murder one, whose counsels, demands, produces or procures, but he is nevertheless libel for the commission of the crime. likewise some civil accomplices are implicated in the wrongful conduct. close quote. so that you have aiders and abettors, there have to be people who are participant in the fraud. it simply is not a one-person operation. and yesterday i put into the record the impact of these civil suits in financial recoveries

compared to the lesser amounts which can be collected by the s.e.c. illustrative of that were two cases, enron, where the s.e.c. recovered $450 million and the litigants -- private litigants recovered $703 billion. in the worldcom case the s.e.c. recovered $750 million, the private litigants recovere recovered $6.85 billion. so there is a -- an enormous difference. this is a subject that i've had a deep concern about going back to my law school days when i wrote a comment for the yale law journal on the subject about the importance of private prosecutions. and private actions have been

very important, damages under our antitrust laws, very, very important under -- under our securities laws. in 1995, we restricted the scope of discovery and i urge the president -- urged the president at that time to veto the bill, just a very brief personal story. i was in my condo late one night, 10:30, quarter to 11:00, i got a call from the whitehouse. and the -- from the white house. and the president came on the line and said, do you have a few minutes to let me read my veto message. i had more than a few minutes. i was very interested in the president's veto message. but the law, nonetheless, notwithstanding the veto, the law was modified. there is other litigation pending to open up the scope of -- of pleading.

federal rules of civil procedure have traditionally been what we call notice pleading, that is what the -- to put the defendants on notice as to the claim. and then under the discovery proceedings, the party is then entitled to probe into the records of the defendant because these are all transactions within the sole control and possession of the defendant on almost -- on almost all circumstances. when the -- the supreme court of the united states was considering taking the stoneridge case, i wrote president bush a letter on august 3, 2007, urging him to allow the solicitor general to respond to the request to the securities exchange commission for the solicitor general to argue the case.

and the solicitor general was precluded from doing so. and stoneridge came down with a very restricted holding that the -- that the people responsible had to make direct representations to the person buying or selling the securities, which is an unrealistic and unreasonable standard. and it backed up the prior decision of the supreme court in tphaoeupbd 95 -- 1995 in central bank of denver which eliminated aiders and abettors from responsibility. this is a very important bill. i did compliment the distinguished chairman for his very effective work on it. and i do believe it is fair and accurate to say that this is one of the most important provisions of this bill. i thank the chair and yield the floor. mr. dorgan: madam president?

the presiding officer: the senator from north dakota. mr. dorgan: madam president, i wanted to note during this discussion some commentary this week about something that is quite extraordinary. we saw news reports this week about a perfect game that was pitched in the major leagues recently by a pitcher for the oakland athletics named brayden. in all of the history of baseball, it was the 19th perfect game ever pitched. but it's not the only perfect thing that happened recently. we have news reports now that the four biggest banks in america have scored a perfect 61-day run, never having lost money in 61 days. that's like a perfect game, batting 1,000. it's all of those things.

how is it that the four largest banks in the country could for the first quarter of the year make money every single day? is the system rigged? a columnist named jonathan well pointed out if you managed a highly managed diversified fund, become so skilled at it that you had a 70% probability of winning on any given trading day, that the prospect of you winning 63 times in a row would be about 1 in 5.7 billion. now, even if you had a 95% chance of winning every day because you were so skilled at picking all the right investments, you'd have about a 3.9% chance of doing it in 63 straight trading days. and yet, four of the largest

banks in america -- goldman sachs, j.p. morgan chase, bank of america and citi -- scored a perfect game. how does that happen? does it happen because the federal reserve board loans them money at near zero interest rate and then they invest in ten-year treasuries at 3.8%, and that's how you make profits every single day? is that a rigged game? can everybody do that? if everybody can do that, i've got a sure-fire way here for everybody to make mome. you get to pwor -- to make money. you get to borrow from the federal reserve board for near nothing and then you can invest it in 3.8% ten-year treasury notes. now, it's interesting, this relates to something else we've been trying to do for awhile. we've been trying to get information about how much money the federal reserve board is

lending these banks and at what rate. we know it's at near zero rate, but we don't know how much and to whom. the federal reserve board be has been told by two federal courts, "you have a responsibility to tell the american people and the congress who got your money and what the terms were and how much." and the federal reserve board has said, "we don't intend to tell anybody." they now appealed it to a third federal court. i have led the effort in letters to the fed chairman saying you have a responsibility here. but now this latest evidence tells us how this game is played. isn't it interesting and isn't it pathetic that at a time when so many people wake up this morning jobless, so many people are still losing money on their homes, on their assets, losing hope and losing confidence in the future of this economy that at the very top of the heap some of the same firms that caused the problems that threw this country into the deepest recession since the great depression now announced that

they're pitching perfect games every single day. they're batting 1,000 and peufbg perfect games -- and pitching perfect games. why? it appears to me it's not about lending money to help restore america and help those that want to expand by providing capital. it appears they are once again doing things they used to do except they understand that this time they can't fail. they borrow money from the fed at near zero interest rates, invested in ten-year treasury notes at 3.8%. that's about as close to guaranteed income you can get, but it is not guaranteed income for all of the american people. it's just for the folks at the very top of the chain: the biggest financial firms. again let me say every time i come to the tphraorbgs i don't have a beef -- tphraorbgs i don't have a beef -- every time i come to the floor, i don't have a beef against the biggest financial firms but we don't need them trail. and we don't need to be feeding

them with a strategy that says you get to go to a window at the fed, invest at almost nothing. we'll give you a guaranteed annual income. i just wanted to make note, it is too often little known and it is seldom really raising much concern among anybody these days that all of this is happening. i think it's scandalous. i just wanted to mention again it seems to me worth mentioning that the only perfect game that's going on around here was not by a pitcher named brayden, but it's by some of the biggest financial institutions in the country that are not only fully recovered but have guaranteed income opportunities every single day. every single day while a lot of the american people are trying to figure out how am i going to pay the rent? how am i going to find another job? madam president, i've come to the floor because i want to

indulge my -- i shouldn't say indulge. i wonder if the senator from connecticut will indulge me for a moment. i've spoken to the senator, and i recognize that doing what he is doing is perhaps a cross between a migraine headache and a root canal. this is tough business out here, hour after hour after hour and day after day. i respect that. i've been on the floor with a piece of legislation last year that took forever and really did try my patience. kudos to my colleague from connecticut. i respect the difficult job he has. i have had an amendment along with senator kaufman, senator levin, cantwell, feingold, sanders and so on; dorgan amendment number 44088. i ask unanimous consent to set aside the pending amendment and call this amendment up.

i don't intend to proceed with it. i just want to get it pending and would proceed with debate at any time it's convenient. i would like to ask if he would give me the opportunity to at least call it up, get it pending and then we will proceed at a pace and at a time that would be convenient to the manager of the bill. mr. dodd: let me say, first of all, mr. president, i appreciate my colleague from north dakota's inquiry. all i'm trying to do in this -- and, again, everyone can do that. i suppose there are about 60 amendments and we can have everybody's amendment called up and so we end up with 60 amendments pending around the place. it adds to the difficulty of sorting it out because obviously it takes consent to withdraw amendments, modify amendments, do all sorts of things. it seems harmless enough to do so; it just complicates the job when you try to sequence events because obviously then it takes consent to do different things, at which point all sorts of different reasons, people can have motivations on why not to give consent, including people may oppose the amendment for reasons they want the amendment

pending. so i'll be very candid with my friend from north dakota, it complicates my job, but obviously i don't want to cause anyone diskph-frbt in the process. -- discomfort in the process. they all have amendments they want to bring up. my job is to orchestrate in a way so amendments can be brought up, discussed and debated. my concern is we end up with this flood that everyone else comes over and say why not give everyone the same courtesy and we end up with chaos. it happens to be a pretty good bill at this juncture. more work needs to be done. there is no guarantee that because we're in a good spot right now and heading, i think, towards a good conclusion to this bill that there are those who like to see it loose. i know that. there are 1,000 lobbyists that have been hired just to oppose this piece of legislation, the underlying bill before us. they're here in town and will use every mechanism and vehicle available to them to throw this off tracks. and they're very smart. they don't just get paid well; they're bright and they know how to do this.

many of them worked in these buildings for years. they know how the place operates and they know consent to bring up an amendment, lay it aside, pending. they know what unanimous consent means in this body. any one member here can object. it does add difficulties to the management of a bill to have an unlimited amount of amendments brought up and pending, of which you try to go through and orchestrate an outcome that gets us to a reasonable conclusion where people have an opportunity to debate their amendments. i know what i'm in for once this starts. and we run the risk, i'll say very blunt on the record -- if we start this process, which i'm fearful will be the case, we run the risk of losing this bill. that's the reality. i don't want to engage in -- this is not hyperbole. i've been here for 30 years and i've watched what can happen. when you've got this many opponents, opponents of this bill who are determined to throw this bill off track -- stop too big to fail, consumer protection, sunlight on derivatives, all these efforts, including what my colleague from

north dakota wishes to achieve, there are people who will use every means available to destroy this legislation. we only have a a couple days left and then we'll move on to other bills. senator shelby and i are doing our best to accommodate all of our colleagues. we've had no tabling motions, no filibusters on this bill. we've dealt with some 20 or 30 amendments already. so we're moving through it. we're getting to everyone along the way. again, my colleagues want to go this route, i understand it. but i would be less than honest if i said does it help or hurt the effort, candidly, having everyone coming over and demanding they be in line hurts. mr. dorgan: let me say my purpose here is not to add to the burdens of the senator from connecticut, who is prying to get a bill through the congress -- who is trying to get a bill through the congress and signed by the president. i understand that. i think i tried to, in my opening comments, be pretty

complimentary of the work and understanding of the work. i agree there are times when there is a straw that breaks the camel's back. i also think this camel can carry a bit more. what i would like, i think the senator from connecticut would agree that i have been to this floor a fair number of times, spoken with some passion and some vigor on things that i care a lot about. it's not as if i came out of a closet someplace here in the cloakroom and started talking about the issue that i intend to offer an amendment on. what i would like to do with the consent of the senator from connecticut is ask the pending amendment be set aside. i make a unanimous consent request and ask consent the pending amendment be set aside and call up amendment number 4408. the presiding officer: is there objection? mr. dodd: reserving the right to object, and i'll make the case begin, there are unlimited members who would like to be in line, and i understand that. i just warn my colleagues, no amendment, in my view, is more important than the underlying bill. and understand if we go this route and i end up with every

member coming over and making that request -- and there are many more who want to do that -- once this starts, then my ability here to get us to the conclusion of a good bill is at risk. and so, i'm going to object, madam president, at this point. mr. dorgan: madam president? the presiding officer: objection is heard. mr. dorgan: madam president, let me say that i, unfortunately when i last evening saw the note on the desk in front of us which said "no further roll call votes," i had another event and i left the chamber because there were no further votes and i went to the other event. i discovered later even as i was leaving the chamber that there were three amendments at that point made in order. there were i believe two republican amendments and one democratic amendment that was noticed. i think the chairman indicated that they would be the next amendments. that's the basis on which i left this chamber. when i came back this morning, i understand that a fair number of other amendments had been called up. the pending amendment had been set aside and other amendments had been called up. i don't know how many.

i think four or six amendments perhaps beyond the three. and i was unaware that opportunities like that would have existed last evening. and i think as one member of the senate who has spent a considerable amount of time on this floor on this issue, had i been aware last evening that the gate was open just a bit to be able to get an amendment pending that i've talked about many times on this floor, i would have been here last evening. i wasn't aware of that, and that's the basis on which i came this morning at 11:00. i hope the senator from connecticut would not object. i know he just has. i would hope he would rethink that. he has every right as chairman to decide to manage this bill as he wishes. we can't have 100 managers for this bill. the chairman has done a lot of work to bring the bill to the floor. on the other hand, this issue is not some ordinary issue. this country will live with the consequences of this bill perhaps for a decade, perhaps more. perhaps less than a decade if we don't do the right things and we suffer another economic near collapse; we'll have another bill on the floor for those who

are here in two years or five years. but i want -- what i want is financial reform to be done, done well, done right. i was going to say to the senator from connecticut, the amendment that i have offered is an amendment that i think is very important. i don't have any idea whether we have the votes for it. but i do think it is one of those pieces that is essential, critical in fact, in order to address the financial difficulties going forward. if we don't pierce this unbelievable building bubble of speculation that has caused a significant part of our problems, we will not have addressed the real issues of financial reform. the issue of naked credit default swaps, those are newly created instruments by which people make wagers with one another with no insurable interest on any side of the security. if we don't put a dagger in the heart of that kind of activity, and that's not, by the way, shutting down, as my colleague from georgia wanted to say

yesterday, shutting down the use of credit default swaps, it's just shutting down one portion of them. by wait, the largest portion, it appears to me, that it is a flat out gambling device. so i hope that we can address these issues. i think i've been respectful with respect to the chairman of the committee. and i would say to the -- the chairman of the committee that if i'm allowed to set this amendment aside and offer amendment 4008, set the pending amendment aside, that when called up, i will certainly be willing to have a reasonably short time period for its debate. that kind of cooperation, i think, is also very important in the construct of trying to get this bill done. it's -- it's an amendment that really should have a lengthier debate. when i left the floor yesterday, the senator from georgia had an amendment, and i think it was, i don't know, 2 1/2 hours later that we had a vote. this amendment is, in my

judgment, much more consequential than that. but i'm willing, if we can at least get a pending when the senator from connecticut believes that it's appropriate to debate, i'm willing at that point to engage in an agreement on a short time frame. mr. dodd: let me say, here's the point i'm trying to make here. as i have any number of colleagues here who would like to do the same thing. all of whom feel strongly about their amendment. i'm not arguing about the substance of the amendment. at the conclusion of the block of each votes, i have no problem trying to sequence those amendments. i'm faced with the problem, what do i say to the next compleeg who -- colleague who makes a similar plea to me? and the following one and the following one? i can't manage this if we do it this way. anyone can manage that request. i'm not trying to pick on anyone. i'm trying to deal with these according lymph we can vote here

short -- accordingly. we can vote on shortly on the amendments, senator durbin has an amendment, trying to get time agreements and so forth is part of the management of this. , so again, there's no plot to deprive anyone of an amendment, but at some point, what's the point of having someone sit in this chair if we come over an offer amendments and get in line somehow and we have 60 amendments taking unanimous consent at some point to drop, that becomes a problem as far as managerial capacity. my colleague will get to the best of my ability the chance to have that amendment come up and have a chance to debate it thoroughly. not one minute or two minutes or three minutes. i ask him respectfully to give me a chance to do that so i don't open up the door here. so i can't say to the next senator making a similar compassionate request, that we can't move forward. that's the only request that i make. mr. dorgan: i'm not

unsympathetic to the work that the senator from connecticut is doing. it is the case that i, certainly as one senator, see amendments being offered again and again by senators from the banking committee that had -- you know, they had a pretty good shot at this for a good long while before it came to the floor and those of us who don't serve on that committee just want an opportunity to get amendments pending and up. mr. dodd: the next three amendments, durbin, franken are not members of the banking committee. mr. dorgan: i only opening -- i've been here a fair amount. if the senator would object now, he has the right to object. but i will be back. and if i'm in the next tranche, the senator from connecticut announces, that's fine, then i'll be able to offer an amendment. but between now and then, i guess i'd like to understand how the system is going to work because i will continue to come and ask consent to be able to offer this amendment. and when we do debate it, i will

have a real debate because i think this is the heart and soul of trying to the shut down a system that is unbelievable speculation in this economy that poses great danger to the economy. by the way, i might, madam president, point out, you know, the -- we should not always assume that we're in safe territory here on all of these issues. i mean, you probably saw the news this morning. last month's federal budget deficit is $83 billion. take a look at what the trade deficit is. i just mentioned, by the way, in the midst of all of this the biggest financial institutions in the country are batting 1,000 every single day they make a profit with what i think looks like a ring system. this bill is very important. i want the senator from connecticut to succeed. if we don't pass a financial reform bill, the people have a right to look at congress and say, what are you doing there? what are you doing? not just any bill. a bill that actually addresses the heart of the issues that caused the near economic collapse in this country.

that's what we need to have done at the end of this bill. so that's what brings me to the floor. i'm sorry that i can't get this pending at the moment. but as governor schwarzenegger said in a previous life, i'll be back, and soon. the presiding officer: the senator from south carolina. mr. demint: thank you, madam president. i'd like to speak in favor of the sessions bankruptcy amendment. this is critical to the current financial debate because one of the big issues in this whole debate is whether or not we treat some companies -- some banks differently than others. the current bankruptcy laws in this country create a predictable rule of law system. there's really no arbitrary or political decision making when a company can't pay its bills, it

can ask for bankruptcy protection to restructure or to liquidate in some kind of controlled fashion. this is what is meant by justice is blind. our courts, our legal system, our political system does not get involved with deciding which companies have to be liquidated, have to go through bankruptcy. during our current financial meltdown, our government decided to pick winners and losers, to bailout some companies, some banks, and not others. this underlying financial regulation bill makes that system permanent. essentially throwing out the rule of law and allowing the political system, the bureaucratic system to decide which companies need to be treated differently while others

have to go through the bankruptcy process. the sessions amendment would the key treet all companies the same -- the session amendment would treat all companies the same and allow an orderly restructuring or liquidation of banks regardless of how big they are to be treated the same way. the current package that we're voting on, the underlying bill, abandons the rule of law. it suspends free market principles, and it perpetuates this whole idea that there's some companies that are too big to fail, that have to be treated differently, and it even expands that arbitrary system by giving the fdic the ability to pick companies that they think might fail and -- and to actually seize them if they're meeting certain standards of criteria. so the market doesn't decide which company is failing

anymore. this becomes a political system which sets up corruption and political meddling as part of our financial system. there's no reason that we can't have special bankruptcy courts to deal with large banking institutions so that their failure does not take down our whole financial system. this idea that some people here in washington are going to look up at wall street or anywhere in the country and decide, well, this company is too big to fail, it has to be treated differently, while this company goes through a traditional bankruptcy process. that puts us right back where we are now. where people in the government can arbitrarily take taxpayer money, bailout one company, maybe its their political friends and supporters or maybe they don't bailout the companies that are their political

enemies. this makes no sense to make these bold promises to the american people that we're going to end too big to fail when this bill actually makes it permanent. i encourage my colleagues to consider the sessions amendment because it would take us back to a rule of law system that's predictable, that let's every company, every bank know that if they can't pay their bills, if they have to go through a predetermined system, not ones that decided by bureaucrats at the last minute based on criteria that could change at any moment. let's gets this right. the underlying bill will not do what we promised. the session amendment will move us in a right direction to keep our promises to the american people. thank you, madam president, and i yield back and note the absence of a quorum. the presiding officermr. franke?

the presiding officer: will the senator withhold his point of order? will the senator withhold his point of order? mr. demint: i'm sorry, senator, i will withhold my quorum. mr. franken: thank you. the presiding officer: the senator from minnesota. mr. franken: madam president, before i begin, let me just say how thankful i am that senator dodd has worked with us to get my amendment to a vote. i know how hard he's been working on this bill and how precious floor time is during this debate. madam president, last week i proposed an amendment with senator schumer, bill nelson to reform our nation's credit rating industry, senators

grassley, levin, wyden and begich have joined my amendment as cosponsors. senator grassley, of course, is the ranking member of the finance committee and a senior member of the budget committee. senator levin led the permanent subcommittee on investigation which revealed some of the credit rating industry's worst abuses. senator kaufman has also been a leading critic of the rating agencies, pointing out how these agencies kept aaa ratings -- quote -- "rolling off the assembly line despite consistent and increasing indication that's they were totally unwarranted. and senators durbin, harkin, an klobuchar have long established themselves as voices on behalf of consumers. over 20 of my colleagues cosponsored my amendment, including senior members of the finance and banking comoissments

since i have filed this amendment, i've come to the floor several times to explain the different aspects of it. now that this amendment is up for -- or will be up for a vote, i want to step back and summarize it. i want to underscore the scope of this problem and i want to explain how this amendment is a simple investor-based solution to the problem. here it is in a nut shel. there is -- in a nutshell. there is a staggering conflict of interest aflecting the -- affecting the credit rating issue. the way it works now, issuers of security are paying for their credit ratings. they shop around for their ratings. selecting those agencies that tend to offer them the best ratings and threatening to stay away from rating agencies that are too tough on them. and because of this, the credit rating agencies are issuing ratings that are orders of

magnitude higher than they should be. we know this from the -- from the record. we know this from the p.s.i. release of e-mails that this was the case. this conflict of interest has cost american investors and pensioners billions and billions of dollars because supposedly risk-free investments have failed or been downgraded to junk status. my amendment will correct that conflict of interest by having an independent third party assigned the credit rating agency that conduction the initial rating for newly issued complex financial products. my amendment puts investors in charge, not the government. let's take this from the top. right now when a bank issues

a -- a product, it gets a credit rating and gets a couple of credit ratings before they sell their product. but the problem is they don't get the rating from an independent agency. they don't get them from someone who has a real interest in being accurate. rather, issuing banks currently get their credit ratings from rating agencies that they hire. they hire them and they pay them upwards of $1 million per transaction. now, you don't have to be adam smith to guess what's happened here. as with any other financial transaction, the issuers, the buyers of credit ratings shopped around for the ratings, and when they go to a credit rating agency and the credit rating agency didn't give them the rating they wanted, they wouldn't hire them the next

time. so the credit rating agencies responded in kind. they changed their algorithms for rating the products when the ratings they produced were too low and thus repeatedly overrated terrible securities. now, this isn't a hypothetical. the permanent subcommittee on investigations, senator levin's committee, uncovered pages upon pages of emails confirming that this is exactly what happened. but i think the numbers explain it the best. we know this. of all the subprime mortgage-backed securities issued in 2006 and 2007, they received a aaa rating over 90% have since been downgraded to junk status. now, credit ratings will counter that the downgrading of aaa bonds to junk status occurred because of the unpredictable

collapse of the housing market. two points here. the p.s.i. memos, the emails that were released showed that the credit rating agency knew what was happening. there is -- here is an email. in 2006, -- this is from one of the standard and poor's executives. this is like another banking crisis potentially looming. there is an executive who said that they wished they could go public with the lost figures they were seeing. this is 2006. and said it may be too much of a powder keg. and there is emails where they are saying we better increase our -- our credit, the ratings so we keep getting business. now, these were the guys who got it. admittedly, there were guys who

didn't get it in the credit rating agencies, but there is an old sinclair quote, which is you can't get a man to understand something that his salary depends on him not understanding. so because of the inherent conflict of interest, which is if i give a good rating to these subprime mortgage-backed securities, i'm going to make a lot of money. there is a lot of money here. my salary depends on my not getting what's happening. and that all emanates from the conflict of interest. that's what i'm going after here. that's why they either ignored what they were seeing in 2006, or if they got it, they didn't say anything about it, so some

were maybe less than completely getting it and others who got it were corrupt. and it was all for the same reason, because of this conflict of interest. now, these downgrades didn't just result in major losses to wall street. they resulted in multibillion-dollar losses to millions of americans, especially pension holders. health benefits lost a billion dollars. pensioners in ohio lost half a billion dollars. the same story is repeated all across the country. this is people's retirement money. this wasn't people buying yachts, staying the night at the waldorf. this is their retirement money. so i -- this was the problem, the conflict of interest. now, let me tell you how our amendment addresses this

problem. my amendment would call for a new clearinghouse regulated by the s.e.c. to assign issuers to a credit rating agency that will give them their first-rating on complex financial products. they would be assigned. that means that an issuer will no longer be able to shop around for a rating, won't be able to pressure a rating agency into giving a good score in exchange for future business. over time, the clearinghouse will monitor the ratings that these agencies give out and refine its method of assignments. it can reward agencies that are more accurate and give us -- and give fewer assignments to those that are less accurate. it will incentivize accuracy. imagine that. in doing so, it will give smaller agencies a chance to get

into the action. standard and poor's, moody and fitch did about 94% of the business. the other agencies will get a chance because what is rewarded is accuracy. by making these simple changes -- and it's a very simple change. it's a third party -- the amendment will eliminate the fundamental conflict of interest at the core, at the core of this problem. some people are going to tell you that this is a government take overof the -- takeover of the credit rating industries. that is patently 100% false. the clearinghouse will not issue a single rating. the clearinghouse isn't going to tell credit rating agencies how to determine their ratings. in fact, every single rating that an agency gives after being assigned the security will have a disclaimer that says this is not a government-approved rating. moreover, the clearinghouse will be run by investors like

managers of pension funds and managers of university endowments. okay. there is not a single seat on this board that would be reserved for a government official. moreover, while the initial board members are named by the s.e.c. after the initial appointments, the board itself will choose its future members. there will be a representative from the rating agencies, there will be a representative from the banks, but a majority will be investors. but this makes sense. theywe will be putting the peopn charge where the people are actually buying the securities. you pay the price when the securities prove to be significantly overrated. so let me repeat that. we're putting the buyers of securities, not the government in charge. okay. the clearinghouse will be an independent self-regulatory organization that operates with oversight for -- from the s.e.c.

just like the financial industry regulatory authority or finra. finally, this board won't act as an intermediary for every credit rating issue. it will only assign an agency to do the initial rating, the first-rating that an issuer receives. the issuer is then free to seek as many other credit ratings as it wants from whomever it wants, as most issuers currently do. i am merely proposing that at least one rating and the initial rating from the issuer be free from the conflicts of interest inherent in an issuer pays system. this initial rating will then serve as a check against any possible inflation and subsequent ratings. now, you may also have heard that there are alternatives of proposals that would eliminate

any requirement of reliance upon a credit rating issue by an nsro. senator lemieux, my good colleague from florida, will be offering a side by side on this amendment. now, my only problem with this is that this approach ignores the reality that ratings will by necessity just continue and will always play a role in our economy. investors will still rely on them, even if the statutes don't mandate it. and senator lemieux's approach does absolutely nothing to tackle the conflicts of interest or address the current oligopoly, i believe, both of which would surely assist under this approach, especially the conflict of interest. so there is nothing in senator

lemieux's approach that i understand is contradictory at all to what i'm doing, and so if a member would like to vote for senator lemieux's side by side, it would be fine. and you have to determine for yourself the value of that. i am just saying that it doesn't get at the heart of the matter, which is the conflict of interest. the issuer actually paying the rating agency for the rating. now, with the hel crafted a measure that isn't liberal or conservative. it isn't moderate. it's not on any spectrum. it just makes sense.

it's common sense. this is like the solving of venue -- of forum shopping, forum shopping in courts. it just -- it's an elegant solution. and i can say that because i didn't think of it. this is -- this is some professors in academia thought of that, and i guess the chief economist at patton boggs. it's just a simple, elegant idea. that's why -- so it isn't conservative, it isn't liberal. it's just common sense. that's why senator wicker has embraced this, senator grassley has embraced this amendment. it's just plain common sense. that's why senators levin and johnson and murray and durbin and whitehouse and brown and

bingaman, casey, sanders, kaufman, harkin, klobuchar, wyden and begich also support the amendment, and that's why americans for finance reform support it. that's why the consumers union supports it, the teamsters, the national association of consumer advocates, public citizen, seiu. a number of other national organizations stand behind this amendment. and that's why, as i said, leading economists in academia and private industry support this amendment. in fact, as i was saying, the chief economist at patton boggs, dr. david rayboy who first developed similar proposals is squarely behind this. and that's why independent, smaller rating agencies have come out in support of this amendment, and that's why this amendment cannot wait. i urge colleagues on both sides of the aisle to vote in favor of

this amendment. i thank madam president and i believe my good colleague from florida, who is -- who has the side by side, which i say in no way conflicts, i don't believe, with this amendment is -- i yield the floor to him. a senator: madam president? the presiding officer: the senator from florida. mr. lemieux: i ask unanimous consent to temporarily set aside the pending amendment so i may call up amendment 3774 as modified. the presiding officer: is there an objection? without an objection, the clerk will report the amendment. the clerk: the senator from florida, mr. lemieux, proposes an amendment numbered 3774 as modified to -- mr. lemieux: i ask unanimous consent to dispense with further reading of the amendment. the presiding officer: without objection. mr. lemieux: i come to the floor today to talk about this important issue that my friend from minnesota has brought forth, and i congratulate him on the work that he has done.

we know that one of the main reasons why we had our financial debacle in 2008 was that credit agencies failed to do their job. they put aaa stamps of approval on products that deserve no such stamp, and the investing world relied upon the fact that these rating agencies were supposed to do their job and they failed to do their job. so like when you read "consumer reports" and you believe that they are giving objective information and a good accounting of how a product is or isn't safe or not safe, the investing world thought that fitch and moody's and s&p 500 and the others had done their job and done due diligence. i thank my friend from minnesota. he is focused on one of the main reasons we had our financial dough backal. unfortunately, mr. president, much of what's in this 1,409-page bill doesn't go after what caused the debacle in 2008.

we don't feel with fannie and freddie. we didn't pass underwriting methods in the corker amendment. but we have a chance to address the issue of the rating agencies. because but for their failure to do their job, we may not have had this debacle that destroyed, as some estimate, $600 trillion worth of wealth. now, where i differ with my friend from minnesota is i don't think he has gone far enough. i appreciate his efforts to go after conflicts of interest. i believe there are conflicts of interest. you cannot have the people whose products you rate pay you. he's right about that. but i would go further. my amendment writes these organizations out of law. why should we reward them and allow them to continue to have what, in effect, is a government-sponsored monopoly? federal law says that creditworthiness will be

determined by these rating agencies. why should we reward them by allowing them to continue in any fashion to have the sanction and permission and basically a monopoly granted by federal law? that doesn't make any sense to me. so what -- the amendment that i'm proposing, and, again, it is not, as my friend from minnesota, inconsistent with his amendment. and i believe there will be members vote for his amendment and for my amendment. i'm glad we're both focused on addressing this issue. but what my amendment will do is take away this sanctioned monopoly that holds out these rating agencies as the entities that determine what's creditworthy. now, certainly rating agencies will still exist but there will be more rating agencies involved. plus, banks themselves will have to do the due diligence to convince the fdic or whomever their regulator is, that the bonds they hold on their books are creditworthy. you know, in a way, we're looking here and saying the astrology that we relied upon in

the past didn't work. let's have some new and better astrology. the rating agencies don't work. did they work because they had -- did they not work because they had a conflict of interest? perhaps. did they not work because they're incompetent independent of that conflict of interest? perhaps. what i do i hope goes and achieves both goals. they will not be paid by these same investment banks if they're not -- no longer written into law, i believe. plus, if they're no longer written into law, there will have to be something in the marketplace that people can rely upon when you have to make your case to your federal regulator, that these instruments are creditworthy. someone's going to have to do their homework. my friend from minnesota is exactly right that the damage that was done in the marketplace was done in large part because of our reliance upon these rating agencies. the "wall street journal" on april 21 said, "when the government ordains" -- and that's an important word --

"ordains moody's and standard & poor's as official arbiters of risk, the damage can be catastrophic because so many people rely upon them." so let's stop ordaining them. why are we going to reward bad behavior? now, like my friend from minnesota who has gotten his language from professors and others, the language that we've worked on, it's not a conservative idea, it's not a democratic idea. in fact, it is almost exactly the same as the language that barney frank put forward on the house side. so you have a liberal democrat and a conservative republican here working to the same end. so let's not just go halfway, let's go all the way. let make sure these raig agencies don't get rewarded for bad -- rating agencies don't get rewarded for bad behavior. this takes time to implement. there's a two-year period in

this amendment for this to tame effect. that's important so banks can beef up their staff to make sure they have the staff to do the due diligence, to do the home works to prove the creditworthiness. they have to do the homework tonight rely on these three rating agencies. but i believe the measure has to go the further measure. and while i congratulate my friend from minnesota for tackling this issue and while i also don't think our two measures are inconsistent, i believe that the amendment i'm proposing, which is almost exactly stick to the language of barnie frank over on the house side, is the right answer to really get us of us off this ordaination of these rating agencies. madam president, i yield the floor. a senator: madam president? the presiding officer: the senator from new york. mr. schumer: thank you, madam president. and i rise in strong support of the franken amendment. first, i want to praise my colleague from minnesota for the

great job that he has done on this amendment. this makes -- is going to make a huge difference. it strengthens the section that's already in senator dodd's fine bill where senator reed, jack reed, did great work, and now it goes a little further. but particularly i thank my colleague from minnesota for offering it really gets at the heart of the conflict of interest. you know, we can go around the conflict of interest. we can shine a mirror -- a light on the conflict of interest. but unless you get the heart of it, you're not going to undo the problem. and the senator from minnesota does that, and i really praise him for his fine work. i think if this amendment passes, it's going to be one of the lasting contributions and one of the most significant contributions to prevent a future crisis from happening. now, the nobel economist joseph seeinstieglitz said -- quote --i view the rating agencies as one of the key culprits. they were the party that

performed the alchemy that converted the securities from f rated to a rated. the banks could not have done what they did without the complicity of the rating agencies." credit rating agencies played an important role, an unfortunate and important role, in what led up to the financial crisis. they adopted questionable practices intended to win over clients and capture greater market share, ignoring the true credit quality of the complex securities at the heart of the market meltdown. they neglected their own internal controls and developed a coziness with clients. and because rating the complicated structured finance products brought in more money to these agencies, they raced each other to the bottom, competing for clients by inflating ratings. and because the clients had an incentive sell products with the highest ratings to investors, the rating agencies would give them advice on how to structure their products to score aaa.

this race to the bottom give -- be the easiest, quickest and least disputaticous to give a aaa rating is one of the major culprits of the financial crisis that we are seeing. the conflict of interest ridden interest helped bring our economy to its knees. to provide one example, 93% of aaa-rated subprime mortgage-backed securities issued in 2006 have been downgraded to junk status. is that incredible, madam president? 93% went from aaa to junk stat status. that's not an accident, and, frankly, that doesn't just happen because people made mistakes. there was something more pernicious at work, which was conflict of interest. that's the fundamental problem. the 93% of the securities that rating agencies were

concluded -- concluded were of the highest quality, least risky investments in just two years, they became worthless. many, many people lost money. some were big investors. some were small investors. some were large, large banks and institutions and some were pension funds that had the savings of millions of hard-working americans. everyone suffered because of what the credit rating agencies did. this bill that we're debating this week makes important strides in holding the rating agencies accountable to their credit quality assessments. once again, i want to commend senator dodd, our able chairman, as well as senator jack reed, our able subcommittee chairman of securities, for the immense work they did in this area and requiring the creation of an office of credit rating agencies at the s.e.c., disclosing of rating methodologies, prohibiting compliance officers from working on ratings methodologies or sales, a new liability provision and rating analysts -- the fact that rating

analysts must pass qualifying exams all helps. but as i said, the provision that senator frank scene offering -- and i'm proud to cosponsor -- goes to the heart of the conflict of interest. it doesn't go around the edges of the conflict of interest, but a dagger at the heart. and that's why this amendment, what it does, it would break that inherent conflict by having a third party, a neutral third party step inbetween. the issuers will no longer be able to choose a rating agency and directly influence what kind of ratings they get. the amendment establishes a board of highly knowledgeable and experienced people, a majority of whom will be from the investor industry, the pension funds, the municipalities, the retail investors who got clobbered in this financial crisis because the rating agencies were getting paid by the issuer and had an incentive to issue the best rating possible.

how the heck -- this is a little digression but i can't -- how the heck no-doc loans got aaa ratings over and over and over, packages of no-doc loans. what does that mean to the average? it means they never asked you if you could afford to pay the mortgage. and they got aaa ratings, aaa credit ratings. what was going on? and why didn't anyone catch it? well, the dodd part and the reed part of the amendment will catch it but the franken part of the amendment will prevent it by having a noninterested party make a rating. the amendment establishes -- the franken amendment establishes a board of highly knowledgeable and experienced people, as i said. they have to submit their products to be rated to the board, and like a wheel, the board will choose a rating agency for each product. when i say a wheel, it's like a

wheel, it comes up randomly. and where did we -- where did senator franken -- and i talked with him about this so i know -- where did we come up with this idea? this is what we do to prevent forum shopping, bias of judges. when you go to the southern district in new york and you have a case, they -- it's a wheel, and you get a judge randomly. in the past, we have found that there were even conflicts of interest in the judiciary because you get to choose your own judge. just as the issuer now gets to choose its own credit rating agency. the wheel makes it random, you don't choose them. and that is a big, huge step forward. the board will also monitor the performance of these ratings and ensure that the rating agencies are qualified to rate the product. the model will motivate agencies to develop and gain the right expertise and methodologies so they can become eligible to rate different classes of structured finance products.

and the smaller rating agencies and investor paid agencies will have a level playing field to compete against the big three. the proposal has a broad range of bipartisan support, and i greatly appreciate not only senator franken's outstanding work on this issue but the cosponsorship of senators nelson, whitehouse, brown, murray, meshly, bingaman, lautenberg, shaheen, casey, sanders, johnson, durbin, harkin, and, thank you, our republican friends, senators wicker and grassley. so i hope we'll get unanimous support for this amendment. i hope we won't leave out any major provisions. i hope we won't modify it or weaken it. let's stick to this amendment. it's modest and thoughtful and goes to the heart of what helped cause the financial crisis, the inherent conflict of interest in the way credit rating agencies worked. i yield the floor.

mr. dodd: ma dodd: madam presid? the presiding officer: the senator from connecticut. mr. dodd: well, let me -- i was going to address the underlying question here, but i know my colleague from maine wants to be heard on a different amendment. let me just say briefly here, and i appreciate the comments and i appreciate the efforts of senator franken in this regard. i was going to just briefly say there are 40 pages of our bill exclusively dedicated to rating agencies. we spent an inordinate amount of time on the rating agency question. it is a complex issue and the source of a lot of discomfort. there's a headline in one of the national newspapers this morning talking about the rating agencies and the -- the problems that they have posed in giving ratings to products that were vastly -- worth vastly less than their claims. very briefly, under the bill, under the underlying bill, the s.e.c. will have a new office of

credit rating agencies to regulate and promote accuracy in ratings staffed with experts structured -- in structured municipal debt and finance. the office's only examination staff will conduct annual inspections and essential findings that will be available to the public. the s.e.c., the securities and exchange commission, will have expanded authority to suspend registration of agencies that consistently produce ratings without integrity. they'll have more authority to sanction rating agencies that violate the law, including penalties for management for failure to supervise employees who break the law. the bill imposes tough, new requirements on credit rating agencies. the credit rating agency boards are subject to new rules for independence. rating analysts must be separated from those who sell the firm's services. agencies must publicly disclose what they materially change -- when they materially change their procedures or methoding onologies or make -- methodologies or make significant errors and update their credit rat