Spencer Bachus

Mr. BACHUS

Mr. BACHUS. Madam Speaker, on July 14, 2010, I missed rollcall votes 437, 438 and 439 while visiting with World War II veterans from my district at the National World War II Memorial as part of the Birmingham Honor Flight program. Had I been present, I would have voted ``nay'' on Nos. 437 and 438 and voted ``yea'' on No. 439.

Mr. BACHUS

Mr. BACHUS. This bill has good in it. It really does. It has enhanced consumer protection similar to what the Federal Reserve has enacted. It has greater transparency and disclosure. In the field of derivatives, it has provisions to prevent companies like British Petroleum from manipulating the market, as they did last year. But there's a lot of bad in this bill, and there's a lot of ugly. I'm going to talk about the bad when I address the bill. And the bad is some capital requirements on companies that could cost a trillion dollars. And that's a greater amount than the two stimuluses put together. That could cost hundreds of thousands of jobs. But right now I want to talk about the ugly. And the ugly is the bailout of creditors and counterparties. This is a Wall Street bailout bill, make no mistake about it. This bill says that the FDIC can lend to a failing company. Now this is a company that is failing. They can't meet their obligations. You loan a failing company money. You can purchase the assets. This is the government purchasing the assets of the largest financial companies in America. They can take a security interest in the assets. They can guarantee the obligations of the firm. We did that with Fannie and Freddie. We told the Chinese bondholders, We'll pay you a hundred cents on the dollar. And with AIG we did the same thing. We told the European banks, we told Goldman and Morgan, We'll pay these credit swaps off at a hundred percent. They can do that under this bill. They can bail out creditors and counterparties. And they can even sell and transfer to the FDIC the assets of a failing firm. Now how do they do that? Well, they have to borrow money. You can't buy something for free. You can't guarantee things without money. Under the House bill, you can borrow 90 percent of the fair value of the failed firm's total consolidated assets. You're going to borrow. In other words, the government, the taxpayers, are going to borrow 90 percent of that amount. What are we talking about? Potentially, with just the largest six companies in America--Bank of America, Morgan Chase, Citi, Wells Fargo, Goldman Sachs, Morgan Stanley, the so-called Wall Street banks, most of which, including Goldman Sachs, have said, We like this provision. It's a great provision. The Federal Government can borrow for those six firms $8.5 trillion. Yet we've not asked, Where are you going to borrow this money from? Are you going to go back to the Chinese? What will it cost? How will it affect the FDIC when the taxpayers borrow this kind of money? How will it affect our ability to pay the depositors that we have guaranteed those obligations? How will it affect our ability to meet our commitments today, Medicare, Medicaid, Social Security? How will it impact the deficit? What will it do to interest rates? Is there an exit strategy? The largest bailout which is not addressed in this bill, the largest bailout in the history of this country was of Fannie and Freddie. We still haven't gotten out of that. In August of 2008, every Republican in this body said, Reform them before you bail them out. We've bailed them out. We guaranteed $400 billion of their assets over our protest. And then last December 31, the President guaranteed all their obligations; and just this week, we hear that that could amount to $1 trillion. A trillions dollars there, $2 trillion here, $2 trillion here, $2 trillion here, $1 trillion here, almost $1 trillion there. How do we do it? How do the taxpayers get paid back?

Mr. BACHUS

Mr. BACHUS. Mr. Speaker, at this time I yield 2 minutes to the gentleman from Georgia (Mr. Price), the chairman of the Republican Study Committee.

Mr. BACHUS. I yield 2 minutes to the gentleman from Virginia (Mr. Cantor), the Republican whip.

Mr. BACHUS. I yield myself 15 seconds. Mr. Speaker, I don't think you would go to a funeral home and lend the corpse money. So I don't know why you would lend money to a failing firm. You ought to just go ahead and put them in bankruptcy like we want to do. Mr. Speaker, at this time I yield 3 minutes to the gentlelady from Illinois who's the chairman of the Financial Services Oversight Committee (Mrs. Biggert).

Mr. BACHUS. At this time I yield 4 minutes to the gentleman from California (Mr. Royce), a senior member of the committee.

Mr. BACHUS. Mr. Speaker, at this time I yield 5 minutes to the gentleman from Texas (Mr. Hensarling), the ranking member on the Financial Institutions Subcommittee.

Mr. BACHUS. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I hear two people that I know are leaders of the majority; and they each, Mr. Hoyer and Ms. Pelosi, I know they appear to be sincere when they say that never again will the American people be asked to bail out those on Wall Street who made reckless deals; no longer will the taxpayer be put on the hook. Yet there is an inconvenient truth here for my Democratic friends, and that is the clear wording of the bill. I mean I think it is elementary that before we pass legislation that we read it. I would not repeat this except that my colleagues in the majority continue to say time after time after time that there is no bailout, and there is. There is an AIG-style bailout. Now, AIG cannot be saved under this legislation. In fact, we changed that, and we both insisted in a bipartisan way that the AIGs of today will not survive. They will not survive under this bill. AIG, under this bill--and in bipartisan way we agree--failed. We say we put the AIGs into bankruptcy, and they are resolved in that way. My Democrat colleagues say that an AIG-like failing company will be put in an FDIC supervised resolution authority. Now, Mr. Frank is correct when he says, Wait a minute. Wait a minute. This only occurs when these firms are being placed in liquidation. They are being liquidated. Well, now, I agree with him, but is there no bailout of anyone on Wall Street? Well, of course there is. It is a very expensive bailout. In the Dodd-Frank bill, it is section 204D(1-6). I mean, go write this down. Go and read it. It says that the FDIC can, one, lend to a failing firm; two, purchase the assets of a failing firm; three, guarantee the obligation of a failing firm; four, take a security interest in the assets of a failing firm; five, and/or sell the assets that the FDIC has acquired from the failing firm. Why would you lend a failing firm money? I keep asking that. The second thing is: Where is the bailout fund in this bill? There is no bailout fund in this bill. There is $19 billion that is assessed towards community banks. They are FDIC assessments that are raised, which are about $9 billion, and there is the TARP program that ended 3 months sooner than it should have. We were told somehow, because we were not going to start any new programs in that 3 months, that somehow--hocus-pocus--it saves us about $10 billion. It is hocus- pocus because you cannot spend the money on the new programs in this bill and then turn around and suddenly pull out of a hat that same money and give it back to the taxpayers. It just doesn't happen. Also, Speaker Pelosi may forget that one of the first signs of trouble was not in September of 2008 but in July of 2008 when we suddenly realized that Fannie and Freddie were insolvent and that many of our banks, almost all of our banks, had major positions in their shares. Why did they have major positions in the shares of Fannie and Freddie? They lost all of that money because the government had said, If you'll invest in that, we'll give you a special rating, and we'll count it as the same as treasuries. It disappeared overnight. Now, that was in July, not in September. Banks took a hit on that. The Democrats said at that time--and the Bush administration and Secretary Paulson--we've got to give $400 billion to Fannie and Freddie because, in 1999, under the Clinton administration, you said let's loan to people with poor credit; let's loan to people without much of a downpayment. Republicans and Democrats both rushed to use this as a source of cheap money, and it failed. Republicans said--and still say and say as this bill is on the floor--wait a minute. You're going to reform these companies before you pour taxpayer dollars in them. Every Republican in the House voted, no, we will not give them taxpayer money until they are reformed and there is a plan to liquidate them. The chairman says we need to liquidate them. What about Fannie and Freddie? Why aren't we liquidating them? We're not. The biggest bailout that we've had is of Fannie and Freddie. Who did we bail out? Did we bail out the banks that had shares? No, we bailed out the Chinese bondholders. Secretary Paulson said, You know what? The Chinese might not lend us any money. Let me tell you that we'll sure need the Chinese to lend us money if this bill passes, because there is a derivatives section in here. Now, we have a letter that Chairman Peterson produced, which said this doesn't affect end users, but it's a letter. The truth is we were in conference last week when we fought this out, and we voted for an exemption for end users. The Democrats voted against one. We've been told in the past 48 hours, 72 hours, by groups like the International Swap and Derivatives Association that this bill will cost businesses $1 trillion. $1 trillion. That is capital. It doesn't matter whether they trade on the derivatives or if someone does it for them. Someone has to post that capital, and that goes through and is an expense for that commercial company. If you take $1 trillion out of the economy suddenly, sure, you are going to have a crisis like this bill anticipates. This bill says, if there is such a crisis, then a receiver is appointed. Chairman Frank keeps saying, A receiver is appointed. A receiver is appointed. That's right. That receiver, after 30 days, is authorized to borrow 90 percent of the fair value of the failing companies. Chairman Frank, that is $8.5 trillion. That money is not in this bill. There is not even $10 billion in this bill for this type of resolution. So you have to go to the banks or you have to go to the financial companies or you're going to get it after the fact. If they're failing, how are they going to pay it? I want to close with a positive. The 320 Members of this House who took a stand can take a stand in just a few minutes. Collin Peterson, Chairman Peterson, said that there are no requirements that end users post margins. We all agree that, if they had to, it would be $1 trillion out of these companies. $1 trillion, according to Joe Biden, will produce 700,000 to 1.4 million jobs and will produce as many as 200,000 jobs a month. So that is the hit to this economy if this does apply to end users. So we have a motion to recommit. First, it says there is an exemption on end users. Now, you have said that there is one, and you have this letter from Chairman Dodd and Blanche Lincoln saying there is one, so that's half of it. So you'd vote for that because you're saying it's in there. Secondly, there is the Federal audit. We need the taxpayers to demand--and the voters are demanding--of Mr. Hoyer transparency at the Fed. They are spending trillions of dollars. They are committing trillions of dollars. Let's have this audit of the Fed. Mr. Speaker, the American people are sick and tired of back room deals and secret manipulations of the economy to benefit political cronies at the expense of taxpayers. The voters and taxpayers are demanding transparency and accountability and they will not be pacified with false promises or misdirection. Calling a bank tax an ``assessment'' fools no one, especially the voters. That's why I will be offering a motion to recommit at the conclusion of this debate that will replace the weak Federal Reserve Audit in the conference report with a robust provision patterned after a bill co- sponsored by 320 members of this House when it was offered by Congressman Paul. Taxpayers want to see for themselves what their government is doing with their money. And that includes specifically the Federal Reserve, an institution that has unfettered powers and whose errors of judgment were a contributing cause of the financial crisis. Monetary policy fueled the credit boom and bust cycle. The Fed needs to be held accountable for any mistakes it has made in the past and any it may be making now. Failing to hold the Fed accountable increases the likelihood of those mistakes being repeated in the future, and exposes taxpayers to an unacceptable level of risk. The American people support a full audit of the Federal Reserve System to achieve the level of transparency needed to protect taxpayer dollars and ensure accountability. With each taxpayer dollar it committed during the financial crisis, the Fed assured the American people they would not take losses. American taxpayers deserve more than the central bank's assurances; they deserve proof. A full audit of the Federal Reserve System is the only way to create the openness that a democratic society like ours demands. The second element of the Motion to Recommit attempts to correct one of the most damaging aspects of this bill and that is saying a lot because there are a number of seriously misguided provisions in this legislation. Several items in the conference report will impact companies' ability to create jobs. It has been reported that BP and Enron have tried to manipulate markets using derivatives but we do not need any new law to regulate that kind of illegal activity. It is already illegal. We do need regulators to enforce the rules. The lack of an end user exemption for commercial companies in the derivatives title will pull an estimated one trillion dollars of resources from job creation and investment. Coincidentally, the combined stimulus packages enacted in the last two years also amounts to about one trillion dollars. Vice President Biden told us on June 2nd that the Obama stimulus package alone would result in the creation of between 700,000 and 1.4 million jobs in the remainder of 2010. Under the vice president's logic, diverting one trillion dollars from productive commercial business capital could presumably destroy up to 1.4 million jobs. Instead of allocating precious resources to hire more people or increase wages, commercial companies will have to post capital every time they enter into a derivatives contract to hedge against legitimate business risk. If this legislation--supposedly intended to regulate the financial services industry--is enacted, capital requirements will force non- financial companies to abandon legitimate hedging strategies and accept excessive volatility at a cost that will ultimately be borne by their customers and employees. Margin requirements for ``end-users'' are not a new issue for Members of the House. Chairman Frank tried to insert an amendment in the House bill last December which would have explicitly allowed regulators to set margin requirements for end-users. It failed overwhelmingly, by a vote of 150 to 280. Withdrawing a trillion dollars from the private sector could well sow the seeds of the next crisis because it could destabilize the financial system, possibly triggering another vicious cycle of government bailouts to correct the results of bad government policy. The House should ensure that the potential economic harm in these derivative provisions is avoided by approving this Motion to Recommit and sending this defective legislation back to the conference to be rewritten.

Mr. BACHUS. Yes.

Mr. BACHUS. Mr. Speaker, on that I demand the yeas and nays. Parliamentary Inquiry

Mr. BACHUS. When I say they shouldn't bail out the creditors and counterparties, I don't care whether they are in receivership or not. They should not bail them out, period.

Mr. BACHUS. At this time, I yield 3 minutes to the gentleman from Texas (Mr. Smith), the ranking member of the Judiciary.

Mr. BACHUS. Mr. Speaker, I yield 2 minutes to the gentleman from Missouri (Mr. Blunt).

Mr. BACHUS. Mr. Speaker, I yield myself 5 minutes. Mr. Speaker, today I would like to address the good, the bad, and the ugly in this bill. The good: There is consumer protection. There is more disclosure and transparency. There are some bipartisan provisions in this bill that add a whistleblower office to the SEC. But the bad and the ugly far outweigh those. In total, this bill is a massive intrusion of Federal Government into the lives of every American. It is the financial services equivalent of ObamaCare, the government takeover of our health care system. If finally enacted, it will move us further toward a managed economy, with the Federal Government's making decisions that have been and should stay in the hands of individuals and private businesses. For instance, it will make the compensation of every employee of a financial firm subject to rules set by a government overseer. Can you imagine anything as basic as what an employer pays an employee controlled by a Federal bureaucrat in Washington? It will even apply to clerical employees. Government regulators will be empowered to seize and break up even healthy firms they decide are systemic risks and to even appoint new management to run these private companies. As I said on the floor earlier today, this bill will institutionalize AIG-type bailouts of creditors and counterparties, and it will saddle taxpayers with the losses resulting from out-of-control risk-taking by Wall Street institutions--gamblers. My colleagues on the other side of the aisle will tell you this bill does not include a bailout fund. They are wrong. As I explained earlier, here it is, laid out. You can lend money to a failing company. Now, how do you get money back from a failing company? You can purchase their assets. You can guarantee their obligations. You can sell or transfer their assets. It is there. What does this cost? As I explained earlier, the FDIC can borrow up to 90 percent of a firm's assets. That's $2 trillion in the case of Bank of America alone. They could borrow $2.1 trillion in that case alone. That is a bailout fund, period. Not only will it make bailouts permanent, but it will empower government employees to go around settled bankruptcy law in so-called ``resolutions,'' done behind closed doors, with unequal treatment of creditors at the whim of politically influenced government officials. This has already happened. A financial firm's ability to survive a crisis like the one we went through 2 years ago will depend, as it did then, on whether its CEO can get the President of the New York Fed on the phone on a Saturday night, as one firm did. Friendships and being well-connected should not determine the success or failure of private enterprises. Finally, it imposes an $11 billion tax disguised as an FDIC assessment. To fund this new government spending, they tax Main Street banks and financial institutions. They raise their FDIC premiums even though those premiums would go to bail out Wall Street firms and not to save depositors, as the system was designed to do. Mr. Speaker, if you voted against this bill on the floor, if you voted against it in committee, you need to vote against it again, because it is even worse than when it came out of the House. We have seen the anger and frustration generated by the injustice of too-big-to-fail bailouts. We have seen the folly of implied guarantees as with Fannie and Freddie. We have seen, time after time, the failure of government-run schemes to create jobs and to grow the real economy. Nevertheless, here the majority party is again, doing the same thing over and over, blindly hoping that, suddenly, this time, they will get a different result. Well, you're right. The American people are demanding a different result, and in a series of recent elections, they have told incumbents to go home and to spend their own money, not theirs--not the taxpayers'. In conclusion, if you choose to bail out the creditors and counterparties of the big Wall Street firms or to loan them money when they get in trouble, don't expect the voters to bail you out come November. I reserve the balance of my time.

Mr. BACHUS. Will the gentleman yield?

Mr. BACHUS. At this time I yield 3 minutes to the gentleman from Indiana (Mr. Pence). (Mr. PENCE asked and was given permission to revise and extend his remarks.)

Mr. BACHUS. At this time, Mr. Speaker, I yield 2 minutes to the ranking member of the Subcommittee on International Monetary Policy and Trade, the gentleman from California (Mr. Gary G. Miller).

Mr. BACHUS. I yield 2 minutes to the gentleman from California (Mr. McCarthy).

Mr. BACHUS. I yield 2 minutes to the gentleman from Florida (Mr. Putnam).

Mr. BACHUS. Mr. Speaker, at this time I yield 4 minutes to the gentleman from California (Mr. Issa), the ranking member of Oversight and Government Reform. (Mr. ISSA asked and was given permission to revise and extend his remarks.)

Mr. BACHUS. Mr. Speaker, at this time I yield 3 minutes to the gentleman from Texas (Mr. Paul), the ranking member of the Domestic Monetary Policy Committee. (Mr. PAUL asked and was given permission to revise and extend his remarks.)

Mr. BACHUS. Mr. Speaker, I yield 7 minutes to the gentleman from Oklahoma (Mr. Lucas), who is the ranking member of the Agriculture Committee, to then yield time to his members.

Mr. BACHUS. Mr. Speaker, can I inquire as to the time left on both sides?

Mr. BACHUS. At this time I yield 2 minutes to the gentleman from New Jersey (Mr. Garrett), who is the ranking member of the Capital Markets Subcommittee.

Mr. BACHUS. Mr. Speaker, I yield the gentleman 1\1/2\ additional minutes.