Christopher Dodd

Mr. DODD

Mr. DODD. I am not in a position to give that consent. That is something that has to go through leadership. Let's get the speeches done so we can get back on the bill.

Mr. DODD. Let me say first, I appreciate my colleague from North Dakota's inquiry. All I am trying to do in this--and, again, everyone can do that. I suppose there are about 60 amendments, and if we can have everyone's amendment called up, 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, to modify amendments, do all sorts of things. So while it seems harmless enough to do so, it complicates the job, which is to sequence events, because obviously then it takes consent to do different things, at which point, for all sorts of different reasons, people can have motivations on why not to give consent, including people who may oppose the amendment, for reasons they want the amendment pending. So I will be very candid with my friend from North Dakota, it complicates my job. But, obviously, I do not want to cause anyone discomfort in the process. They all have amendments they want to bring up, and my job here is to try and orchestrate in a way so that amendments can be brought up, be discussed and debated. My concern is that we end up with sort of this flood. Then everyone comes over, why not give everyone else the same courtesy along the way. If we do, then we end up potentially with chaos, on what happens to be a pretty good bill, I think at this juncture. More work needs to be done, I will be the first to acknowledge and admit that. But there is no guarantee that because we are in a good spot right now and heading, I think, toward a good conclusion of this bill--there are those who frankly would like to see it lose. I know that. There are thousands of lobbyists who have been hired to oppose this piece of legislation, the underlying bill that is before us. They are here in town and will use every mechanism and vehicle available to them to throw this off track. They are very smart. They do not just get paid well, they are bright, and they know how to do this. Many of them, in fact, worked up in these buildings for years. So they know how the place operates. They know a consent to bring up an amendment is, lay it aside, and pending, and they know what unanimous consent means in this body. Any one Member here can object. So it does add difficulties to the management of the bill to have an unlimited amount of amendments brought up and pending, of which you then try to go through and orchestrate an outcome here that gets us to a reasonable conclusion where people are given an opportunity to debate their amendments. So, again, I know what I am in for once this starts. We run the risk, I will say--I am very blunt on the Record. If we start this process, which I am fearful will be the case, we run the risk of losing this bill. That is the reality. This is not hyperbole. I have been here for 30 years, and I have watched what can happen. When you have got this many opponents, the opponents of this bill who are determined to throw this bill off track, to stop too big to fail, consumer protection, from getting the kind of sunlight on derivatives, all of those issues, including what my colleague from North Dakota wishes to achieve, there are people who will use every means available to destroy this piece of legislation. We only have a couple of days left, maybe, and then we are going to move on to other bills. I urge my colleagues here--Senator Shelby and I are doing our best to try and accommodate all of our colleagues. We have had no tabling motions, we have had no filibusters on this bill, we have dealt with literally I do not know many amendments, I think some 20 or 30 amendments already. So we are moving through it and we are getting to everyone who is along the way. So, again, if 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 come over and demanding they be in line hurts.

Mr. DODD. Madam President, I was going to address the underlying question here, but I know my colleague from Maine wishes to be heard on a different amendment. Let me say briefly that I appreciate the comments and I appreciate the efforts of Senator Franken in this regard. Forty pages of our bill are exclusively dedicated to rating agencies. We spent an inordinate amount of time on the rating agency question. This is a complex issue and the source of a lot of discomfort. There is a headline in one of the national newspapers this morning that talks about the rating agencies and the problems they have posed in giving ratings to products that were worth vastly less than their claims. Very briefly, on the underlying bill, the SEC will have a new office of credit ratings to regulate and promote accuracy in ratings, staffed with experts in structured, corporate, and municipal debt finance. The office's own examination staff will conduct annual inspections, and the essential findings will be available to the public. The SEC will have expanded authority to suspend the registration of agencies that consistently produce ratings without integrity. It will have more authority to sanction ratings 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. Ratings agency boards are subject to new rules for independence. Ratings analysts must be separated from those who sell the firm's services. Agencies must publicly disclose when they materially change their procedures or methodologies or make significant errors and update their credit ratings accordingly. Agencies must establish strong internal controls for following procedures and methodologies and have these attested to by their CEO to the SEC. The agencies must establish hotlines for whistleblowers and complaints, retain complaints about the firm's work for regulators to examine. Compliance officers must submit annual compliance reports to the SEC. They are required to consider credible information they received from sources other than the issuers in making the ratings, rather than relying on the--basing ratings only on the issuer's representations. Investors are empowered. The agencies must disclose more about their ratings assumptions, limitations, risks, accuracy, and factors that might lead to change in ratings. Agencies must disclose their track record of ratings in a way that is in compliance so that users can compare ratings for accuracy across different agencies. It also will have the benefit of having new pleading standards so when private suits are brought, they will be able to have actions brought against these rating agencies. The issuer or underwriters of any asset-backed security shall make available any due diligence reports, and on and on. The point I want to make is we have spent a lot of time on this issue. A lot of work went into this issue. My colleague from Minnesota has what I think is a good and sound idea. Here is my concern as chairman of the committee. I do not know what the implications are because we have had no real examination of having the wheel about which my friend from New York talked. Not all rating agencies are equal. There ought to be more of them. There are smaller ones out there that ought to be able to grow in their competency and do things. But there are companies of different sizes and needs, and merely changing a rating agency based on an arbitrary choice without considering whether the rating agency can do the job is my concern. I like the idea because what it does do is get away from the conflict of interest. That is as it presently exists. Here is the quandary we have: Right now, the company that seeks the rating agency pays the rating agency. Obviously, on its face, you have a problem. If I am buying a service from you--and by the way, I would like to get a AAA rating--I have a pretty good chance of getting it whether I deserve it or not. The alternative idea, somebody said, is why don't you have the buyers of the rating agency? There is a similar problem. They might like to have a DDD rating to lower the value. So you have a conflict on either side of this question that is difficult and difficult to resolve. Compound the problem with the fact that the rating agencies, as presently construed, prior to our language in this bill, basically rely on the information from the very purchase of the rating agency to determine whether it is a good product. There is no due diligence done by the rating agency. Our bill changes all of that. It is with a great deal of reluctance--as I said to my colleague from Minnesota, I was prepared to take a good study of this; in fact, language that would recommend the SEC and others--the SEC has authority under existing law to deal with conflicts of interest. They have the power to do it. Whether they do it is another matter. That is always the issue with a regulator. I am concerned what this means. I say that respectfully to the author. He has worked hard on this amendment. There are a lot of good ideas in it. I am just uneasy about what the implications can be. I would be remiss if I did not express that as chairman of the committee having spent hours listening to the debate back and forth. On the amendment offered by our colleague from Florida, there is a different set of issues I have, but I also have to express my opposition to that amendment. The reason is because very simply we know that credit ratings are far from the perfect measure. We know that. We wrestled with this. I agree that the markets may place too much reliance on credit ratings. But the way to address the problem is not to simply repeal the safety and soundness provisions of the law. That is what he is asking us to do. While I have problems with the present system and we made major inroads on how to address that in ways we thought made some sense, the idea of the Senator from Florida that because we are not happy with the present structure--although I think the bill before us does an awful lot in 40 pages to deal with how this is to be accomplished--he repeals all of it. Someone may have a better idea out there, but to get rid of what we have, leaving a vacant space, in a sense, is not my view of the way this ought to be addressed. Congress could not simply repeal safety and soundness laws without careful prior study of the impact on the markets. That is what we are doing with the LeMieux amendment. Our bill sets out a process by which overreliance on these rating agencies can be reduced without creating risk throughout the financial system. That is my concern. Stripping everything out of safety and soundness in this area does not get you safety and soundness. With regard to both amendments, I am more attracted to the amendment offered by Senator Franken, and I like the idea of where he is going. I just do not know whether it is sound. Again, it is the kind of thing I wish to see examined--and that is not to suggest he has not done that-- where you take the time and go through the process. It is with some reluctance that I express my opposition to both amendments and urge my colleagues to review, if they care to, the 40 pages of effort we have made in our bill. Jack Reed of Rhode Island deserves a lot of credit for having worked particularly hard on the rating issue in our committee and the subcommittee dealing with securities. We think we have a strong bill in these areas. I would be the first to say it is far from perfect, but we did our best to find a way to get far greater responsibility and accountability out of the credit rating agencies. There is a great concern here that accountability and responsibility needs to be taken into consideration. As I said, our bill has 40 pages of safeguards to strengthen the SEC, empower investors, and to make rating agencies far more responsible and accountable. Madam President, I yield the floor.

Mr. DODD. Madam President, if I may make a suggestion to my friend from Texas, as I understand, my colleagues are going to speak 2 or 3 minutes apiece. So the cumulative time of all three Senators will be about 6 or 8 minutes. I know the Senator from Texas has a longer statement to make on Senator Sessions's amendment.

Mr. DODD. Madam President, let me say to my colleague, I have any number of colleagues who would like to be doing the same thing. All of them believe strongly in their amendments. I am not arguing about the substance of the amendment. At the conclusion of last evening, we tried to establish a sequence. I have no problem putting my colleague's amendment in the next tranche. My problem is, what do I say to the next colleague who wants to do the same thing? At what point do I say: I can't manage this if we are going to do it this way. Anyone can make a request, and I am trying to deal with these requests as they come forward and put it together in a way that allows us to go forward. We will vote shortly on the Sessions amendment, a Franken amendment. Senator Durbin has an amendment I would like to have called up. Trying to get time agreements is the art of management of legislation. I do not want to deprive anyone of offering an amendment. But at some point--what is the point of having someone sit in this chair if we just all come over and offer amendments and get in line somehow and then we have 60 amendments? Taking unanimous consent at some point to drop that creates a problem in terms of managerial capacity. My colleague will get, to the best of my ability, a chance to have his amendment come up and, hopefully, an adequate amount of time to debate it. I respectfully ask him to give me a chance so I don't end up opening the door to the next Senator making a similar passionate request. At some point we have to put a stop to this so I can manage the bill and go forward. That is all I am saying.

Mr. DODD. The next three amendments--those of Senators Durbin, Specter, and Franken--are not offered by members of the committee.

Mr. DODD

Mr. DODD. Mr. President, how much time remains?

Mr. DODD. I will not use all of 12 minutes. I will take a few minutes. I spoke last evening about my friend's amendment, and it wasn't to a packed Chamber, I can tell you, at 8 o'clock last night. But I am sure the Senators all received copies of it or listened to it intently as you were dozing off last evening. Let me, first of all, thank Jeff Sessions. He is a good pal and friend, and we have worked together on a number of issues. Senator Corker, who is on the floor as well, in many ways--both Bob Corker and Mark Warner of Virginia--is as much the coauthor of the very section we are talking about as anyone in this Chamber. He spent a lot of hours trying to put this together. But here is the quandary with the Sessions amendment. One of the things we have tried to avoid is, of course, getting back to too big to fail. The presumption of our bill is bankruptcy. Clearly, we want to get people into bankruptcy, if they deserve to be there. If they deserve to fail, they should fail. The problem is, when you end up pushing some large, highly complex entity into bankruptcy, it can have the unintended collateral damage effect of affecting otherwise solvent, good companies that are well managed, well run, and who employ a lot of people and are doing a good job. When these highly complex entities are shoved into bankruptcy, there can be collateral damage and other companies can suffer. I am shorthanding this, in a way. So the idea was, on some rare occasions, and hopefully they are very rare, when that possibility occurs and you have to go through a number of hoops to get to that conclusion, that we would have a mechanism for a resolution, a winding down of that entity, to avoid the kind of collateral damage that could cause if bankruptcy were the only option for those complex entities. What you are faced with, if the Sessions amendment is adopted, is right back where we were in the fall of 2008 where the choices are bankruptcy or bailout, in a sense, where bankruptcy would pose, as Lehman Brothers potentially did, as we saw, a lot of collateral damage because there was not a wind-down resolution mechanism. Whether it should have been used in that particular fact situation, I don't want to try to make that case. That is not my point, not making my case. But let's say it is a Lehman Brothers-like situation where we would all agree that company ought to be put out of its misery, but to go through traditional bankruptcy would have the collateral effect of taking a lot of other people with it in the process who do not deserve to go down, not to mention the jobs and the impact on the economy. Senator Corker, Senator Warner, and others obviously working with it, came up with this. They listened to a lot of people. Again, no one ever knows if you have this exactly right. We talked about all the things. We had exactly right what we want to do. We know what we want the outcome to be. Whether we did it right so it will work exactly as we planned we will never know until the first case pops up and determines whether what we put in place achieves its goal. But in the absence of that, we are right back where we were. If someone said to me: What is the most critical part of this bill-- that is a hard thing to ask someone who has been involved in a lot of it, but if you said: We are only going to let you keep one section of this bill; you are going to have to get rid of everything else; which section would you keep, Senator, this is what I would keep because this is what exposed the American taxpayer to that $700 billion check they had to write because we didn't have an alternative in place to deal with moments like that. Hopefully, they rarely come. There were a lot of events that led up to it that we tried to deal with in this bill as well, including the underwriting standards and all sorts of things to minimize ever getting to that point where you have to make that decision. But we have all been around long enough to know they can happen, and when they happen again, what will be our answer? We had an option out there, but we got rid of it. America, you have to make a choice. A lot of other people are going to suffer unnecessarily, but bankruptcy is the only choice to go. We would look back and say: Why didn't we put in place some alternative mechanism in those most rare occasions where some alternative other than bankruptcy should be in place? That is the shorthand version of a lot of conversation, a lot of talk over a lot of months to this point. Senator Leahy, the chairman of the Judiciary Committee, opposes the amendment. Other members of the committee may agree with Senator Sessions. I don't want to suggest this is necessarily broad dissent, one side or the other. But this is as critical as it gets on this bill. I say to my colleagues, there are a lot of amendments being offered, and frankly I might be against them or for them. If they are excluded or included, I might be disappointed one way or the other. If we get rid of this, I don't know how in good conscience you can walk out of the Chamber and look the American taxpayer in the eye and say again: We have now protected you against too big to fail. For those reasons, I urge the rejection of the Sessions amendment, and I say that respectfully of a good friend. I yield back the remainder of my time.

Mr. DODD. I have to ask for the yeas and nays under the order, don't I?

Mr. DODD. I will be glad to yield. Instead of yielding my time, let me yield 2 minutes to my friend from Tennessee.

Mr. DODD. Mr. President, I ask unanimous consent that the pending amendment be set aside so that I may call up Senator Wyden's amendment No. 4019 and Senator Thune's amendment No. 3987.

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

Mr. DODD. Mr. President, I am going to be very brief. Our staff has been very patient all week. You only get to see them when the cameras pull back and we are in a quorum call. The wonderful floor staff people do a remarkable job. Our reporters of debates here do a terrific job reporting the words of every Senator who has spoken. I am grateful to them. I briefly say, Mr. President, we have now, I think, done some 30, 35 amendments on this bill. We have been at this for a couple of weeks. The legislative days, I think, are 6 working days--maybe 7, which doesn't seem like much, but it is an awful lot. Important amendments have been debated, accepted, and rejected on both sides of the aisle. I was determined at the outset to prove not only that we can pass important legislation, but that we can do it with a strong dose of civility in the process, and that while we have strong views and we speak, as I do from time to time, with some degree of emotion and passion about things I care deeply about, that should in no way be a reflection of my feelings for my colleagues. We have allowed a lack of civility in recent years, which makes it more difficult to get our jobs done. We didn't get elected here to let those emotions dominate our jobs on behalf of the people who sent us here. In the last couple of weeks, we have produced a good bill, a stronger bill, but in a way the American people can take pride in how their Senate is operating. I am grateful to all my colleagues and the staffs and others who make it possible for us to do this. These people are knowledgeable about what needs to be done to work out language that allows us to move forward. They don't get mentioned or talked about, and they don't give speeches, but they play an integral and important role in how this institution works. Amendment No. 3758 to Amendment No. 3739

Mr. DODD. Mr. President, I ask unanimous consent that the pending amendment be set aside, and on behalf of Senator Rockefeller, I call up amendment No. 3758 and ask that once it is reported by number, it be set aside.

Mr. DODD. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Senate proceed to a period for the transaction of morning business, with Senators permitted to speak 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. 296, H.R. 714, the Virgin Islands National Park.

Mr. DODD

Mr. DODD. Mr. President, I commend my colleagues for their work on this amendment. But, as I have stated, I believe it will fuel, and not limit, the type of charter shopping in search of the most lax regulator that we have seen in this past crisis. The Hutchinson amendment would preserve the status quo by allowing the Federal Reserve to continue regulating about 845 State banks that are members of the Federal Reserve System out of a total of approximately 6,000 State banks. This is a tremendous shame. Over the last 2 years, I sat through 80 hearings, listening to witnesses discuss the failings of the Fed--the failure of the agency to write rules protecting consumers, the failure of the agency to regulate derivatives, and its failure to properly supervise holding companies. In response to these hearings, I initially introduced a bill that would have both streamlined our bank regulatory system and stopped banks from being able to engage in regulatory arbitrage. It would have consolidated the bank supervisory functions of four regulatory agencies--the OCC, the OTS, the FDIC, and the Fed--and would have created a single new agency to supervise banks. In other words, it would have taken the Fed out of the business of bank supervision entirely. I ended up modifying this proposal in response to concerns raised by my colleagues, but the bill that we passed out of committee still consolidates bank regulatory functions in a clear and logical way. It eliminates the OTS, and gives supervision of all federally chartered depositories to the OCC, and all State-chartered depositories, including both State member and nonmember banks, to the FDIC. And small holding companies and their banks are supervised by a single regulator. We looked into how these companies are structured and determined that in most cases these holding companies are just shells and their primary assets are just simply banks. In these circumstances, it just makes no sense to have a separate holding company regulator. So, under the bill, small national banks and their holding companies are regulated by the OCC. And small State-chartered banks and their holding companies are regulated by the FDIC. Meanwhile, the bill requires the Fed to focus on several key areas-- its monetary policy role, and its role as lender of last resort. It also expands the Fed's reach into areas that compliment these central bank functions. The bill gives the Fed supervision of bank holding companies with $50 billion in assets and over, and the supervision of other nonbank financial companies if the failure of these companies would pose a risk to the U.S. financial stability. The Fed is given the responsibility to establish heightened prudential standards for these companies, including tougher capital and liquidity requires. And, the bill gives the Fed additional authority to regulate the payments system. But apparently this isn't enough. One of the main arguments the Fed makes for retaining this authority is that it needs a window into the workings of small banks in order to formulate monetary policy. I say to my colleagues--this is a red herring. Take a look at the Fed's Beige Book. The Fed is able to collect information about a variety of sectors in the economy--about manufacturing, real estate, the energy sector, and the agricultural sector without direct regulation in these areas. And by law, the Fed can already gather any information it wants from any depository institution--whether it regulates that institution or not. Let me read from the relevant parts of the law: The Board of Governors of the Federal Reserve System shall be authorized and empowered . . . to require any depository institution specified in this paragraph to make, at such intervals as the Board may prescribe, such reports of its liabilities and assets as the Board may determine to be necessary or desirable to enable the Board to discharge its responsibility to monitor and control monetary and credit aggregates. [12 USC 248(a).] The Fed also is arguing that it needs to be the regulator of all holding companies so that it can respond effectively in the event of a regional crisis. I ask my colleagues--do we need a regulator that can respond effectively in the event of a regional crisis or that can effectively prevent the next crisis from occurring? I would like to point out the possible downside of allowing the Fed to continue supervising State member banks. Let me play this out. The agency that regulates this country's largest national banks is the Office of the Comptroller of the Currency, which is a bureau of the Treasury Department. The OCC is funded through assessments on the banks that it regulates. By contrast, the FDIC and the Fed use revenues from their other operations to pay for their supervisory activities and don't charge their banks for examinations. State banks are examined by State authorities every other year, but the States do not charge as much as the OCC. So, it is much cheaper to be a State bank. I fear that the very largest national banks will have tremendous incentives to become State member banks so that they will have a single Federal regulator--the Federal Reserve. This will concentrate enormous power in the Federal Reserve System--an agency that the financial crisis has shown is already stretched too thin with its many and varied responsibilities. This could also result in increased regulatory arbitrage. Since the OCC depends on assessments from the banks it regulates to fund its operations, the agency may go to great lengths to keep its banks from converting to State charters. We have seen what happens when depository institutions exploit these weaknesses in our bank regulatory system and when agencies compromise their supervisory integrity to maintain companies within their domain. If this happens, we could have another race to the bottom--just like the competition and regulatory arbitrage that lead to the financial crisis. Some will argue that my fears are unfounded, but I remain concerned about the unintended consequences that will flow from the Fed's continued regulation of State member banks. And therefore I oppose the Hutchison amendment.

Mr. DODD. I thank my colleague from Tennessee. He has been a positive, constructive Member of this effort before us, but I oppose his amendment for two reasons. First of all, it creates a very bright line of mandating 5 percent. Every nonprofit, all FHA mortgages would be subject to that rule, which would exclude an awful lot. The Merkley-Klobuchar amendment we just adopted establishes underwriting standards. Further, what the Corker amendment does is it strips out the skin in the game. One of the things we learned is that brokers and mortgage dealers had no skin in the game. They were selling off these items and they didn't care what was in it because they were being paid. Under an amendment we will adopt after the Corker amendment is considered--the Isakson-Landrieu amendment--we will set a standard allowing for the option of that skin in the game, which I think strengthens the bill even further, and I appreciate Senator Isakson and Senator Landrieu offering that idea to this bill that will come right after this. For those reasons, I urge my colleagues, respectfully, to reject the Corker amendment. I yield back.

Mr. DODD. Mr. President, I move to reconsider the vote and I move to lay that motion on the table. The motion to lay on the table was agreed to. Amendment No. 3759, as Modified

Mr. DODD. Mr. President, I yield my time. Unless someone wants to speak in opposition, I oppose the amendment but I am not going to speak against it.

Mr. DODD. Mr. President, I ask for the yeas and nays.

Mr. DODD. Mr. President, I move to reconsider that vote and lay that motion upon the table. The motion to lay upon the table was agreed to.

Mr. DODD. Mr. President, what I wish to do at this juncture, if we could, is we have an amendment being offered by our colleague from Louisiana, Senator Landrieu, and our colleague from Georgia, Senator Isakson. I believe if they take 10 minutes or so, we could do it on a voice vote. I support and, in fact, I am a cosponsor of their amendment. I think it strengthens our bill tremendously. I want to thank my colleague from Georgia very much, who has forgotten more about real estate than most of us will ever know, having spent a good separate part of his life involved in the business. We have worked together on a lot of issues over the last couple of years related to real estate. I thank him for his contribution, as well as my dear friend from Louisiana. I yield the floor to them.

Mr. DODD. Mr. President, I thank both of my colleagues, not only for their work on this particular amendment but for the way they have approached the bill. They have been tremendously constructive in offering very solid ideas. This is one amendment that does a great deal of service to the legislation. As the Senator from Maine pointed out, it was certainly always our intent not to include retailers and merchants under the auspices of the consumer financial product safety commission. The language they have now offered and on which they worked so hard makes that abundantly clear. The word ``significantly'' clearly is an opaque word. No matter how much I tried to make clear what my intentions were with that language, this amendment strengthens it tremendously. As I have said, this was never intended to affect Main Street merchants. I am delighted that the National Federation of Independent Business, along with the American Dental Association and the American Association of Orthodontists, is now in support, because they were two groups about which it was unclear whether they would be included. As a result of what we have been able to craft, with the leadership of Senators Snowe and Landrieu, we now have their support. I thank them.