Christopher Dodd

Mr. DODD

Mr. DODD. Mr. President, I thank Senator Bond. He is the initiator of the idea. Others joined with him. It is, again, a strong contribution to this bill. I see my colleagues from Indiana, Kansas, and Maryland. I yield the floor.

Mr. DODD. I, too, wish to make a comment, but before I do, I think the pending business before the Senate and the request consent is the Bond amendment. Has that been adopted? I urge the question, if I can.

Mr. DODD. I move to reconsider and lay that motion on the table. The motion to lay on the table was agreed to. Amendment No. 4050

Mr. DODD. Mr. President, I would like to make a few comments on the two proposals. One is, I say to my good friend from Illinois, Senator Shelby and I have agreed to ac- cept the Brownback-Cardin--Cardin-Brownback-Durbin amendment. I am not sure who the principal authors are. Maybe we can do that on a voice vote. We submitted that as part of the managers' amendment but, given the pace of the managers' amendment, it may be necessary to deal with that separately. But I thank my colleagues for that. I commend my good friends, Senator Cardin and Senator Lugar from Indiana, once again. He has taken a leadership role. I am struck by the fact that just a little while ago we adopted the Cornyn amendment. The Cornyn amendment puts restraints on the IMF's ability to accept that in some very poor countries they are going to have to repay their IMF obligations. That amendment needs some work. But having adopted that amendment almost unanimously it is now critically important we adopt this amendment, in my view, because it complements, in a sense, the Cornyn amendment. Many of these people living in poor countries have little ability--despite being mineral and resource rich--to accumulate the wealth so they can avoid having to have IMF assistance to bail them out or give them assistance during difficult times. If we are truly interested in the language of the Cornyn amendment, then we must complement it, in my view, by accepting the Cardin-Lugar amendment because it goes beyond just the Congo. Despite the good work being done on that amendment, this goes beyond that. So I thank Senators Cardin and Lugar for their important bipartisan amendment requiring additional disclosure to millions of investors who are making decisions about investing in the extractive industries-- mainly oil, natural gas, and mining--around the world. And I thank them for modifying the original amendment to streamline the reporting requirements, adapt as far as practicable the voluntary Extractive Industries Transparency Initiative disclosure standards, and make other changes to ease implementation. We have a similar but more targeted amendment from Senator Brownback, Senator Durbin, and Senator Cardin, I think, focused on the Congo and adjoining countries, since mining operations there have for years helped fuel the brutally violent militias that have caused so much damage and heartbreak, and killed so many in that strife-torn region. Given the ongoing emergency in the Congo, I am glad that Senator Shelby and I have been able to work out an agreement to adopt this Congo amendment. This amendment by Senator Cardin is much broader, and is designed to impose a new international transparency standard on companies listed and traded on US exchanges who are active in the oil and gas and mining industries. Senator Cardin and Senator Lugar have focused on these industries because in many places, especially in Africa, they involve unique exposures to country- and industry-specific risks--including reputational risks, tax and regulatory risks, expropriation risks, and others--as they conduct business operations in countries where governance and accountability systems are rudimentary, at best--and where corruption, secrecy and a lack of transparency regarding public finance are pervasive. Those risks are heightened by the very large multi-year investments that are required of this industry, their need to gain access to natural resources, and the often compelling national security considerations tied to the products developed by this industry. In the last few decades many American investors have begun to consider more seriously the ethical and socially responsible implications of their investments, and this amendment is a part of that larger effort. It is also a part of broader international effort to combat corruption, poverty, hunger and disease throughout Africa, Asia and Central America by providing a mechanism to ensure greater transparency for the many ways in which sometimes corrupt and authoritarian governments in these regions take in huge revenue flows from oil and gas producers or mining companies, and then fail to adequately meet the needs of their own vulnerable populations with social spending funded by the income from those projects. Let me remind my colleagues of the scale of this problem. A recent report by the Senate Foreign Relations Committee under the leadership of Senator Lugar and Senator Kerry concluded that 3.5 billion people live in countries rich in extractive natural resources such as oil, gas, minerals and timber. With good governance and transparency, these resources can generate vast sums to foster growth and reduce poverty. Instead, many of these countries have weak governance and administrative systems, so the revenues have often served to actually worsen corruption and generate violent conflict. It is known as the ``resource curse,'' or the ``petroleum and poverty paradox,'' where countries with huge revenue flows from energy development also frequently have some of the highest rates of poverty, corruption and violence. Where is all that money going? This amendment, the Lugar-Cardin Amendment, is a first step toward addressing that issue by setting a new international standard for disclosure. I hope that other nations, and those in charge of major exchanges in London, Hong Kong and elsewhere, would follow our lead on this. There is some indication of interest there, especially in the British Parliament. The amendment would require companies to better account for the risks associated with such investments by disclosing basic information about payments to governments. I believe that many Americans--including investors and other stakeholders in these firms--would consider this kind of information material and relevant to their decisions about whether or not to invest, or whether to divest their current holdings, from firms engaged in this sort of activity. On its face this interest appears not to rise to the level of materiality for investors that currently governs the disclosure requirements of public companies under Federal securities laws. That is a question we may want to look at more closely in the Banking Committee. There are also questions about the precedent this would set for Congress to require disclosures usually considered to be non-material. Currently, nearly thirty countries are participants in a voluntary program designed to increase transparency called the EITI. That is an important initiative, and I applaud it. Strengthening America's leadership in the program, with broad new requirements for greater disclosure by resource extractive companies operating around the world, would be an important step. Senators Cardin and Lugar have modified his amendment to base some of the reporting on the standards which have evolved within this initiative, supported by many oil, energy and mining companies, and many countries. I am not persuaded by the arguments some make that this would weaken the EITI and make some nations less prone to participate in it. To the contrary, I believe it would strengthen the initiative. And I believe those who have worked closely within EITI agree. Because we have not yet been able to hold hearings on this measure this year--something which I had hoped to do in the Banking Committee once we had completed this historic financial reform measure--I am not sure we have all the precise details and the language exactly right, but the thrust is exactly right and, therefore, in my view, the amendment by Senators Cardin and Lugar ought to be adopted. We can work on the details, if we have to, later on, but we should not miss this opportunity provided by this legislation to make this historic contribution to something that not only benefits investors here at home but might make a huge difference in the wealth and opportunity in these countries. Again, in some ways I didn't plan it this way, but the fact we have adopted the Cornyn amendment dealing with the International Monetary Fund--now, if you wanted to make a difference in all that, this amendment I think does all that. I thank my two colleagues--Senator Cardin, who is relatively new to this institution but has brought a history of his interest in this subject matter. Of course, my 30 years with Senator Lugar have been among the most joyous of the relationships I have had in this body. He never ceases to amaze me in his commitment, his energy, and his passion on these issues, and we are a richer and better country because of his participation in these debates over many years. Again, I am delighted to be associated with him in an effort such as this. I urge my colleagues tomorrow, either on voice vote or recorded vote, to adopt the Cardin-Lugar amendment. I would like to add Senators Baucus, and I believe I have, Senator Tester, as cosponsors of the Bond-Dodd, et al., amendment, No. 4056. I yield the floor.

Mr. DODD. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. DODD. Mr. President, I ask for the yeas and nays on the Cardin- Lugar amendment.

Mr. DODD. Mr. President, I ask unanimous consent that after a period of morning business on Tuesday, May 18, the Senate resume consideration of S. 3217, and there be 30 minutes for debate with respect to the Gregg amendment No. 4051 prior to a vote, with the time equally divided and controlled between Senators Dodd and Gregg or their designees; that upon the use or yielding back of time, the Senate proceed to vote in relation to the amendment, with no amendment in order to the amendment prior to the vote; that the Gregg amendment be subject to an affirmative 60-vote threshold, and if the amendment achieves that threshold, then it be agreed to, and the motion to reconsider be laid upon the table; that if it does not achieve that threshold, then it be withdrawn.

Mr. DODD. Mr. President, I ask unanimous consent that the amendment by Senator Corker of Tennessee on preemption be in order, and that the side-by-side amendment offered by Senator Carper be in order.

Mr. DODD. I ask unanimous consent that the order for the quorum call be rescinded.

Mr. DODD. Mr. President, I understand I have 2 minutes; is that correct?

Mr. DODD. Let me be brief.

Mr. DODD. Mr. President, I suggest the absence of a quorum.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. Res. 533, submitted early today.

Mr. DODD. Mr. President, I ask unanimous consent that the resolution be agreed to, the preamble be agreed to, the motions to reconsider be laid upon the table, with no intervening action or debate, and that any statements related to the resolution be printed in the Record.

Mr. DODD

Mr. DODD. Mr. President, under the previous order, there will be at least one rollcall vote at approximately 11:45 a.m. That will be in relation to the Gregg amendment No. 4051.

Mr. DODD

Mr. DODD. Mr. President, if there is no further business to come before the Senate, I ask unanimous consent that it adjourn under the previous order.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that when the Senate completes its business today, it adjourn until 10 a.m. on Tuesday, May 18; that following the prayer and the pledge, the Journal of proceedings be approved to date, the morning hour be deemed expired, the time for the two leaders be reserved for their use later in the day, and the Senate proceed to a period of morning business for 1 hour, with Senators permitted to speak therein for up to 10 minutes each, with the time equally divided and controlled between the two leaders or their designees, with the majority controlling the first half and the Republicans controlling the final half; that following morning business, the Senate resume consideration of S. 3217, Wall Street reform, as provided under the previous order; that the Senate recess from 12:30 until 2:15 p.m. for the weekly caucus luncheons; that the filing deadline for first-degree amendments be 12 noon tomorrow. Finally, I ask unanimous consent that the mandatory quorums under rule XXII be waived.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Senate proceed to a period of morning business, with Senators permitted to speak therein for up to 10 minutes each.

Mr. DODD

Mr. DODD. Mr. President, this is not a unanimous consent request I am making, but just based on the conversations we have had between the majority and the minority in preparation for votes next week--I know Members will be interested about possible votes--there will be votes, we are hoping and planning, on Monday evening, I think it is fair to say, at sometime around 5:30 p.m. At least the amendments I think we can have some votes on Monday evening involve the amendment of Senator Udall of Colorado, dealing with credit scores; the amendment of Senator Cornyn of Texas, dealing with the International Monetary Fund, the IMF; the amendment of Senator Rockefeller and Senator Hutchison, dealing with the Federal Trade Commission; the amendment of Senator Bond, Senator Warner, and myself, dealing with angel investors as well. Those are four amendments we may have recorded votes on. Some may be voice votes, but those are four we think we can have votes on, on Monday evening. So we are planning to have votes.

Mr. DODD. Mr. President, I support the amendment offered by Senator Collins, amendment No. 3879, and thank the Senator from Maine for her efforts to protect the financial stability of the United States and safeguard the financial security of families in her State of Maine, my State of Connecticut, and all across America. Her amendment complements the provisions in my bill, S. 3217, that strengthen capital standards for large, interconnected financial companies. Under S. 3217, the Federal Reserve must impose heightened standards for leverage and risk- based capital on large bank holding companies and on nonbank financial companies supervised by the Federal Reserve. These tougher standards will serve as speed bumps to keep financial companies from growing too large and risky and threatening the nation's financial stability. The Collins amendment, endorsed by FDIC Chairman Sheila Bair, would prevent regulators from weakening risk-based capital and leverage standards now in effect. It effectively sets a floor for such standards going forward that would apply to all banks, bank holding companies, and nonbank financial companies supervised by the Federal Reserve. The Collins amendment also reinforces the bill's requirement that capital for large, interconnected financial companies should reflect the risks that their failure may pose to financial stability. As Chairman Bair noted, bank holding companies are supposed to serve as a source of strength for the banks they own. But during the financial crisis, many large bank holding companies became a source of weakness and ultimately required Federal support. The crisis also revealed how dangerously overleveraged many large investment banks and other nonbank financial companies were. The Collins amendment and provisions of S. 3217 will help to ensure that the largest, most interconnected financial companies maintain a robust level of capital and to eliminate gaps in capital standards between banks and other financial companies that could undermine the financial stability of the United States. Again, I thank my colleague from Maine, Senator Collins, for her valuable contribution to the collective, bipartisan effort here in the United States Senate to reform Wall Street and protect American families. I yield the floor and suggest the absence of a quorum.

Mr. DODD. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. DODD. Mr. President, I want to share some thoughts, if I can for a couple of minutes, on one of the proposals that will be coming up, I think, next week on the bill. Again, I want to express my gratitude to all of our colleagues for the way in which this debate has been conducted. Contrary to what many people may think about the Senate, we are capable of having a full- throated debate, one filled with emotion and passion about strongly held views, and yet also respect each other to allow for the debate to go forward and amendments to be considered and voted up and down. I think we have done that now some 33 or 34 times over the last 6 or 7 legislative days. I know there is much more to be done in the coming days before we conclude our consideration of the Wall Street reform bill. But it is a reflection of how this institution can operate and how we should operate, in my view, on a matter of this import. So it is not only important about what we are doing in terms of reforming the financial system of our Nation, but I would argue in a way history may never record it as such, but also how we conducted this debate on an important issue. It may not make the headlines, but it is very important for the integrity of this institution and as a model for how important comprehensive legislation can be handled. I know it is cumbersome. I know it can take a long time. There are delays that occur during consideration of matters in the Senate. But that is as it was intended by our forefathers, in a sense, to have an institution where there would be the ample opportunity for debate, including unlimited debate by any one single Member, contrary to the other Chamber that comprises the Congress where they are limited to 5 minutes, and the majority rules allow for matters and insists upon the majority prevailing. In this institution the rules favor the minority, including a minority of one that can engage in extended debate. So we are different in this institution and with good reason. If they had wanted a unicameral system of one body, where just majority rules would prevail every time, they would have created it. In fact, they tried to. But I take some pride in the fact that it was two Senators from Connecticut, Oliver Ellsworth and Roger Sherman, who in the consideration of the Constitutional Convention--when all was about to fail over a contest between large States and small States; they were fearful that large States, having the dominant number of members in the Halls of Congress, would be overwhelmed and their interests be disregarded because they did not have the votes to counter it--so Oliver Ellsworth and Roger Sherman came up with the idea of creating a bicameral system, one wherein one body's membership would be made up based on population, the size of the State, the number of seats it would hold, and this body, regardless of our size, would have equal representation. So the smallest of our States, States such as Wyoming with a few hundred thousand people, has two Senators. The State of California, with millions of people, has two Senators. So regardless of size, regardless of economic influence or other matters, we are all coequals, at least as far as our States are represented and the opportunity as well for minority voices to be heard, not overwhelmed with the tyranny of the majority which can happen. So there is a value to the existence of the Senate, and we are slower to act. It can be frustrating, as my colleague and Presiding Officer has come to appreciate, and as a former Speaker of his own State legislative body, I know he appreciates how difficult that can be as a leader in trying to move business and product along so that matters can be considered. So I say all of that as a backdrop because in recent years, recent months, in fact, we have been bogged down, frustrated. There has been a lot of obstructionism that has gone on to prohibit us to move forward on important matters. But at least in this case, up to now at this point anyway, we have conducted this debate on financial reform in a way that I think our forbearers would have appreciated. Members have had ample opportunity. The rules are still there for them to use to make sure they can be heard in these matters. But, again, I emphasis that while the subject matter of our consideration certainly is tremendously important, the means and the manner by which we have conducted debate also has value. It is with that backdrop that I want to again thank my colleagues, Democrats and Republicans. I thank majority leader Harry Reid because without his insistence as the leader, this could not happen. I think the fact that he has demonstrated as a leader the ability to move this institution in a way that allows for equal participation and debate is a great tribute to the leadership he has demonstrated as majority leader of the Senate over many years now. This morning I would like to concentrate, if I could, on one subject matter, as I mentioned, that will probably come up in the next few days when we reconvene at the first part of next week. That has to do with a very important part of this bill, one in which the Presiding Officer has demonstrated great interest, and I have a tremendous amount of interest in as well. It deals with the issue of establishing, for the first time in our Nation's history, an actual bureau, a division, that is designed specifically to protect individual consumers from what can happen to them when financial matters put them in a desperate condition, whether it be on credit cards, home sales, all sorts of other financial activities. There has been no place that actually consumers' interests are paramount. There are seven agencies in the Federal Government that have divisions that deal with consumer protection. But the history has been one of either malfeasance, inaction, uninterest or lack of interest. What we are creating is a place where the dominant principal, sole interest will be to watch for consumer interests. One of the debates we are going to have is whether a major area of financial interest will be exempted from the consideration of the Consumer Financial Protection Bureau, and that is in the area of financing an automobile. I know this has been one of the most heavily lobbied parts of the whole Wall Street reform bill. I certainly understand that many of us know our auto dealers back home make important contributions to our communities. I said in my remarks the other day, I have worked very closely with the car dealers of my State over recent past years and months. We have had major debates about the automobile industry and the rights of auto dealers, the cash for clunkers bill, to try to increase sales, which is something I was deeply involved in to try to make it possible for our automobile dealers and manufacturers to get back on their feet. So I take a back seat to no one in my concern and care about the work they do, the economic vitality they provide for our community, the jobs that get created as a result of their efforts. My debate and argument is not with the auto dealers; it is over the financing of automobiles and how that occurs, and whether consumers are going to be protected in what for most Americans is the second largest purchase any of us ever make. Our home, if we have one, is the most important. Then, secondly, is the purchase of an automobile. Most Americans, other than having a 401(k) for retirement, do not deal with the stockbrokers every day, are not buying or trading or engaging in sophisticated financial instruments. That is limited to a few of the 300 million in our population. But you only need to get up in the morning and head off to work, and you know that everybody needs an automobile--one might argue maybe too many. But, nonetheless, that is a separate debate. So that purchase of an automobile is critically important to people. It is a critical part of our economy. But it is over the financing of automobiles, in certain areas, that I have great concern and do not want to see consumers disadvantaged. So it is in that spirit that my support and admiration for people who work in that sector of our economy, to say to you today that those responsible corporate citizens, small businesses, have nothing to fear from this legislation whatsoever. They conduct their business admirably, ethically, morally. They treat their customers as if they were members of their family. That is the overwhelming majority of people who engage in the sale of automobiles. But like all statutes and laws, they are not designed necessarily for the majority of people who operate within the law and act and operate ethically and morally. We also understand there are those who take advantage of people, and so we craft legislation to protect all of us against those abuses that can occur. As President Obama said on April 22: Unless your business model depends on bilking people, there is little to fear with this legislation at all. In fact, there is nothing to fear. In a challenge to this Congress, Michael Hayden, from the Military Officers Association of America, said to us the following: You have an opportunity to do something about unscrupulous auto dealers. The above-board firms should not have a problem with the Consumer Financial Product Protection Bureau. They should not, and let me explain why briefly this morning. First, the Wall Street reform legislation as being considered by the Senate has gone more than halfway to meet the concerns originally raised by financing of automobiles. The bill, and let me enumerate, eliminates assessments on the auto dealers. Unlike other financial institutions, there are no assessments on auto dealers. The Brownback amendment would prohibit assessments. The underlying bill already does that. There is no reason for that provision in the amendment of my colleague from Kansas. The bill further eliminates the authority of the bureau of financial protection to examine and enforce new rules on auto dealers. State authorities and the Federal Trade Commission will continue as they have to perform this role. Thirdly, as a result of our bill, the only impact the consumer bureau will have on auto dealers is through rule writing. It is crucial that auto dealers, in the financing of autos, play by the same rules as their competitors do in communities all across our country. One has to ask: What could be more reasonable than that? There are a variety of places people can go to finance an automobile. You can go to a credit union; you can go to your community bank. There may be other means by which you can finance. Why should we disadvantage those institutions in a community at the expense of one other who is seeking exemption from these rules? That brings me to the second point. The legislation we have written creates a level playing field among auto dealers, community banks, credit unions, and others. This will empower consumers to shop effectively for the best financing available as they see it. They ought to have that opportunity, not fearing that if they go to one financial service provider or another, the rules apply in one case and do not in another. That disadvantages all consumers in this country who want to be able to shop effectively. How many times have we seen that ad: When providers of financial services have to compete, consumers win? If they have to compete on a level playing field, then we are going to make it possible for people to get the best value that is available to them. Consumers should be treated the same regardless of whether they get a loan from an auto dealer, a credit union, a community bank, or anyone else for that matter who is engaged in the financial products and service industry. Community banks and credit unions should not be forced to live under more stringent rules for making auto loans than do auto dealers. Just imagine, in small communities, where on the same street you might have a community bank, a credit union, and an automobile dealer that is financing automobiles. Why should there be a disparity in terms of the protections consumers get depending upon which door they walk through on that Main Street: walk into the credit union, walk into the community bank, or walk into the auto dealer who is financing. Why should that last place be treated differently than the other two when it comes to financing? That is at the heart of what our bill is trying to do. That is what makes it especially important that car salesmen follow the same rules and provide customers with clear, transparent, easy- to-understand information, so those consumers, those who are also our neighbors, are empowered to make smart financial choices for themselves and their families without having to worry about hidden markups that can cost them hundreds of dollars over the course of paying off a loan. Let me emphasize again what I said at the outset. The overwhelming majority of auto dealers play by the rules. Again, I am not talking about the vast majority that do this but the unscrupulous ones, those who engage in ripping off people and are doing everything they can to get away with it. That is what the legislation is designed to deal with. This is the way the marketplace is supposed to work, where people can shop fairly, knowing the rules apply to everyone equally, and there is competition to provide higher quality products and services and better prices. A strong consumer bureau will be good for responsible auto dealers as well. If the Brownback amendment wins, Wall Street wins, and those responsible dealers will lose. Let me explain why this is true. If auto dealers are carved out of this bill, as the Brownback amendment would do, it means we are essentially exempting Wall Street- funded auto dealers and putting credit unions and community banks at a disadvantage. It means Wall Street will continue to incentivize auto dealers to offer bad, overpriced loans that make it impossible for responsible dealers to compete. We have seen this time and time again in every market. The bad money pushes out the good money. The responsible players who play by the rules are undercut by the sharp dealers who cut corners. Furthermore, a strong consumer bureau will restore America's faith in auto dealers and the loans they make. Responsible auto dealers ought to welcome this. What happens when we have this kind of uneven playing field? Unfortunately, we have seen many cases where people, particularly those serving in the military, have been the victims of shady auto dealers' financing practices. Let me share some of the many stories I have heard, and I know my colleagues have as well. A recent news story describes five young men and women in uniform at Fort Riley, KS who were conned into paying for phantom options on vehicles they bought from a local auto dealer. In other words, they were charged for options on their cars they never received. According to their lawyer, despite having decent credit scores, these young men and women in uniform were ending up paying interest on their car loans averaging almost 18 percent. Yesterday I told a story that appeared in the New York Times of Matthew Garcia, a 25-year-old Army specialist who was recently subjected to a trick called ``yo-yo financing'' by an unscrupulous car dealer, just as he was preparing to deploy to Afghanistan. Specialist Garcia, stationed at Fort Hood, TX, bought an automobile at a used car lot and signed up for a loan at 19.9 percent interest rate. That is not even the biggest abuse, however, believe it or not. The problem came when he drove the car home. The auto dealer called him up several days later to say the financing contract had actually fallen through and demanded an additional $2,500 in cash. To make sure he paid up, the dealer blocked the soldier's car so he could not leave. In North Carolina, SGT Diann Traina, who works in military intelligence/psychology, purchased a used BMW from a dealership near Fort Bragg. The dealer who sold Sergeant Traina the car never provided her with the registration and, in fact, did not have title to the car. Sergeant Traina got to drive the BMW for 1 week before she was deployed to Iraq. Then it was repossessed. Through no fault of her own, she now has a repossession on her credit rating, her credit. In addition, the lender insists she has to pay $10,800 that is still owed on the car. She is married. She and her spouse have been without the use of a vehicle for a long time but are still being pressured to pay for it. Sergeant Traina later learned that the dealer where she brought her automobile had sold numerous cars to military personnel, even though it didn't own them. The North Carolina Attorney General eventually sued the dealership, and it has subsequently gone out of business. This story is a classic example of predatory auto lending, where the dealer is clearly culpable and the military member had no way of knowing in advance that the dealer was selling automobiles and originating loans for vehicles it did not own. This type of practice is actually fairly common among unscrupulous auto dealers who finance, particularly, around military bases. Some go in and out of business repeatedly, reopening under different names each time, leaving many customers in the lurch. Regrettably, this kind of abuse of lending to members of the military and their families is far too common. Holly Petraeus, who directs a better business program for military families, noted at a press conference yesterday that auto lending to the military needs oversight, because: Sadly, many of [those in the military] end up paying far more for those cars than they should. That is why The Military Coalition, a consortium of over 30 nationally prominent military and veterans organizations representing more than 5.5 million current and former servicemembers and their families, opposes the Brownback amendment. We talk all the time about protecting and defending and standing up for our men and women in uniform, many of whom are in Iraq and Afghanistan in harm's way. Yet we are about to pass legislation that would exempt automobile financing dealers from the very people we try to protect. I am not making up these quotes and these numbers. When we have that many organizations expressing their opposition to this amendment, Members ought to take note. Again, I emphasize--I know my language here is talking about auto dealers in a generic way. I emphasize over and over, the overwhelming majority do a good job, a fair job, an ethical and moral job, but they would tell us themselves how they can be disadvantaged by those unscrupulous dealers who take advantage, particularly of the young men and women in the military. The coalition includes such groups as the Veterans of Foreign Wars, the National Guard Association, Military Officers Association, the Military Order of the Purple Heart, and many others which oppose the Brownback amendment. I am taking advantage of this time today to tell my colleagues, please pay attention to this. I know we care about our auto dealers. I know they have been lobbying heavily. But they should not receive an exemption in the financing area that can put so many people at a disadvantage. The coalition, in fact, sent me a letter. I wish to read a little from the letter. I quote: The most significant financial obligation for the majority of servicemembers is auto financing. Including the auto dealer financing . . . in the financial reform bill will provide greater protections for our servicemembers and their families. The letter goes on: Providing a carve-out for auto dealers does just the opposite--it will allow unscrupulous dealers to continue to take advantage of servicemembers and their families. Clifford Stanley, Under Secretary of Defense, said in a letter to the assistant Secretary of the Treasury Michael Barr that the Department of Defense ``would welcome and encourage the [Consumer Financial Protection Bureau] protections provided to Servicemembers and their families with regard to unscrupulous automobile . . . financing practice.'' Secretary Stanley cites the ``bait and switch'' financing, falsification of loan applications, failure to pay off liens on trade- in vehicles, ``packing'' loans with items whose price bears little if any relationship to the real cost, and discriminatory lending as the kinds of problems members of our Armed Forces and their families face when dealing with financing their automobiles with car dealers. In fact, Secretary Stanley reports that 72 percent of counselors and attorneys surveyed have cited problems with auto dealer abuses in the past 6 months alone. This is not my list of abuses. This is the Under Secretary of Defense in a letter. Two days ago Senator Jack Reed and Senator Scott Brown of Massachusetts offered an amendment to create an office of military liaison within the consumer protection bureau. That amendment carried 98 to 1. Only one colleague voted against providing an office within the Consumer Financial Protection Bureau with the kind of protections the Secretary of Defense is talking about in his letter. The amendment carried by a vote of 98 to 1 because Members recognize that our service men and women deserve protection from these shady financial service providers, including, of course, the major abuser, the very group that our colleague from Kansas wants to exempt from this legislation. A crucial part of providing this protection is coverage of auto dealers. Yesterday I received a letter from the Secretary of the Army John McHugh. Secretary McHugh makes the point that auto dealers are often ``the most significant financial obligations of our soldiers-- particularly within the junior enlisted grades . . . '' If we carve out auto dealers--the businesses that make the loans that are ``the most significant financial obligations of our soldiers,'' in the words of the Secretary of the Army--why did we vote to create the military liaison office in the first place? If we pass the Brownback amendment and carve it out of our legislation, we will have gutted the very office of military liaison before it even gets off the ground. Yesterday the Senator from Kansas made the point that we ought to regulate the people who are making the loans, not simply the people who are processing the paperwork. I agree. By that standard, we should defeat the Brownback amendment because, in fact, the auto dealers are the legal lenders. It isn't the financing company. The legal lender is the automobile dealer who engages in financing of automobiles. Auto dealers finance cars in much the same way mortgage brokers and bankers finance mortgages. They shop among a number of wholesale lenders, often on Wall Street, and they steer buyers into higher interest rates than those borrowers would otherwise qualify for. In exchange, the auto dealers who get this kind of financing get the equivalent of a yield spread premium or a backend payment. The higher the interest rate they can get the borrower to agree to, particularly service men and women, the higher the payment the auto dealer receives from the Wall Street financing firm. The incentive is to get the customer to pay as much as possible. That is the way they get rewarded financially. This is not the way the market should work, whether it is for a young soldier, a first responder, or a single mother working hard to raise her family. Let me read the court testimony of a former auto dealer finance and insurance manager from Tennessee about how the process works. Again, this is a former auto dealer finance and insurance manager in court testimony. I am quoting: The standard industry practice is to prepare financing documents so that the customer is not alerted in any manner that the person with whom he is dealing has the ability to control the customer's price of credit. Let me explain that. The dealer ``has the ability to control the customer's price of credit.'' He continues: This allows the finance arranger to present himself as the ally of the customer, which further relaxes and disarms the customer. . . . The nature of the transaction creates the perfect opportunity for a dealer to obtain a large kickback from an unsuspecting customer by subjectively inflating the interest rates. What better evidence could we have than someone in court testimony engaged in the very business telling us exactly how it operates? Again, the Brownback amendment would basically exempt that person from the rules of consumer financial bureau. What does this remind us of? It reminds me exactly of the mortgage broker I described a few days ago, who is taught and encouraged in training sessions to convince the borrower that he is their financial adviser while profiting from steering the customer into the more expensive loans. Let me go back and read the quote from the witness, the former auto dealer finance manager: This allows the finance arranger to present himself as the ally of the customer. . . . Tell me what difference there is between that and the unscrupulous broker who tries to convince a borrower that ``I am your financial adviser''? It is exactly the same kind of abuse. So the mortgage broker, without any regulations, gets away with it. If we adopt this amendment, it will allow the automobile finance dealer to get away with it as well. We ought not to allow that to happen in this legislation. Moreover, there is a history of discrimination in auto dealer financing. For example, African-American borrowers were charged more than 2.5 times the amount in subjective rate markups compared to majority White populations, after controlling for creditworthiness. And similar disparities were found for Hispanics. These abuses have been curbed temporarily as a result of a series of court orders and consent decrees. However, these consent decrees expire, and they will shortly. Finally, the Brownback amendment is simply unworkable and would create a duplicative bureaucracy. The amendment leaves rule writing under the Truth in Lending Act with the Federal Reserve for auto dealers loans only. All other Truth in Lending Act rules will be written by the consumer bureau. That means the Fed will have to maintain a separate bureaucracy to write rules for this one sector of the lending industry--not the legal, responsible entity, the auto dealer--while the consumer bureau writes the Truth in Lending Act rules for everyone else. Frankly, that makes no sense whatsoever. One of the things we are trying to do is to get rid of unnecessary burdensome paperwork and duplication. Several weeks ago, when the debate on this Wall Street reform bill first started, I told my colleagues about the Luntz memo, which lays out a strategy for attacking real Wall Street reform. Well, let me read to my colleagues one thing from the Luntz memo I happen to agree with, and it is the following--I quote from the memo: The public is angriest about lobbyist loopholes. Part of the perception that Washington cannot do anything right is the belief that lobbyists write most of the bills. The American people are tired of add-ons, earmarks, and backroom deals--but they are mad as hell at ``lobbyist loopholes.'' What is one of the loopholes that Mr. Luntz's memo refers to specifically? Car dealers--the very lobbyist loophole the Brownback amendment would create. The memo, in fact, warns specifically about this amendment we may be asked to vote on because it has been so heavily lobbied by those who would take advantage, unfortunately, of people. Finally, I would like to read to my colleagues a statement on this amendment that the White House released yesterday from the President of the United States. The President says: Throughout the debate on Wall Street reform, I have urged members of the Senate to fight the efforts of special interests and their lobbyists to weaken consumer protections. An amendment that the Senate will soon consider would do exactly that, undermining strong consumer protections with a special loophole for auto dealer-lenders. This amendment would carve out a special exemption for these lenders that would allow them to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise. This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers. Unfortunately, countless families-- particularly military families--have been the target of these deceptive practices. Claims by opponents of reform that this legislation unfairly targets auto dealers are simply mistaken. The fact is, auto dealer-lenders make nearly 80 percent of the automobile loans in our country, and these lenders should be subject to the same standards as any local or community bank that provides loans. Auto dealer-lenders offering transparent and fair financing products to their customers should welcome these reforms, which will make their competitors who don't play by the rules compete on a level playing field. The President concludes by saying: We simply cannot let lobbyist-inspired loopholes and special carve-outs weaken real reform that will empower American families. I urge the Senate to continue to defeat the efforts of special interests to weaken protections for all American consumers. I further note that while I have emphasized what happens among the 5.5 million of our service men and women and how they are treated in overwhelming cases and that I do not recall another time the Department of Defense and military organizations have gotten involved in a debate such as this--normally, they get involved in debates involving the armed services of our Nation, national security issues, but the fact that they have gone out of their way to communicate to me and every other Member of this body about their concerns over the Brownback amendment ought to set off alarm bells to each and every one of us. Rare is it, indeed, when the Secretary of the Army or the Secretary of Defense or military associations, such as the Veterans of Foreign Wars and others, write to Members of Congress about something such as this. Yet they feel so strongly about it that they are urging us not to succumb to the temptations of carving out this second most important financial arrangement that most Americans ever engage in: the purchase of the automobiles they need. I would also point out that among the Better Business Bureau statistics, the single largest number of complaints--and the number hovers around 70 percent nationwide--aside from the military side, come in the area of automobile dealer financing arrangements; that is, almost 75 percent of all complaints are in this one area. What more information do you need to have about whether we ought to keep this section of the bill intact to make sure they are not going to be exempt from these kinds of activities? So when the amendment comes up, I will speak further about this. But I wished to remind my colleagues particularly of the information we are receiving from our military organizations, from the military at the Pentagon, and others about how important this issue is. I noticed the other day there were votes in the other body to increase the pay of our military men and women and I applaud that and agree with that. We have taken steps. Jim Webb, our colleague from Virginia, recently got passed a bill of rights for our veterans, which we all applauded and supported. As I said, the other day Jack Reed and Scott Brown of Massachusetts, by a vote of 98 to 1, got passed an amendment that creates within this bureau the only special section of this bureau designated to protect a class of our citizenry--one designed to protect our men and women in uniform. It is the only one. We do not have a section for the elderly or for students or for anyone else. The only class we protected by a vote of 98 to 1 is our military. For, particularly, our junior age military, they do not own homes yet. They are too young. They are 18-, 19-, 20-, 21-year-olds. Their largest purchase is in the automobile area. What an irony it would be to have adopted an amendment to create a special division within the consumer protection area to protect our men and women in uniform--we are told by the Defense Department the single largest area of abuse of these young men and women is in automobile financing--and yet we are about, next week, to exempt it from this bill. I cannot believe that will happen. I am hopeful my colleagues, as much as we respect our friend from Kansas--and I do. Senator Brownback and I are very good friends. We work together. In fact, on several provisions of the bill, he and I support the same ideas. But on this one, I passionately disagree with what he is trying to do. I think it is a carve-out. It is a loophole. There are 1,000 lobbyists in this town doing everything they can to gut one provision after another in this bill. Millions of dollars are being paid for them to walk the halls of these buildings to do everything they can to gut this kind of legislation. What a tragedy it would be that on the cusp of adopting this legislation, for the first time establishing a national Consumer Financial Protection Bureau in our Nation, that we would carve out an area that affects the very young people who are sitting in harm's way in Afghanistan, Iraq, and elsewhere around the world. My hope is we would not let that happen. With that, I yield the floor and suggest the absence of a quorum.

Mr. DODD. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Senate proceed to a period of morning business, with Senators permitted to speak therein for up to 10 minutes each.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of Calendar No. 234, H.R. 2711.